SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
-----
Exchange Act of 1934
For the quarterly period ended February 28, 1999 or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission file number 0-16169
HARDING LAWSON ASSOCIATES GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 68-0132062
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7655 Redwood Boulevard
Novato, California 94945
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 892-0821
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
At April 5, 1999 the registrant had issued and outstanding an aggregate of
4,918,122 shares of its common stock.
<PAGE>
INDEX
HARDING LAWSON ASSOCIATES GROUP, INC.
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
February 28, 1999 (Unaudited) and
May 31, 1998.......................................................3
Condensed Consolidated Statements of Income -
Three and Nine Months Ended February 28, 1999 and
February 28, 1998 (Unaudited)......................................4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended February 28, 1999 and
February 28, 1998 (Unaudited).....................................5
Notes to Condensed Consolidated Financial Statements
February 28, 1999 (Unaudited)......................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................13
SIGNATURES .................................................................14
EXHIBIT INDEX ...............................................................15
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
February 28, 1999 May 31, 1998
- ----------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $12,560 $15,118
Accounts receivable 33,619 28,976
Unbilled work in progress 13,205 13,863
Less allowances for receivables and unbilled work (2,332) (1,836)
Prepaid expenses 944 1,196
Deferred income taxes 2,966 2,708
- ----------------------------------------------------------------------------------------------------------------
Total current assets 60,962 60,025
- ----------------------------------------------------------------------------------------------------------------
Equipment 26,973 24,892
Less accumulated depreciation (21,289) (19,571)
- ----------------------------------------------------------------------------------------------------------------
Net equipment 5,684 5,321
- ----------------------------------------------------------------------------------------------------------------
Deposits and other assets 11,476 11,272
- ----------------------------------------------------------------------------------------------------------------
Total assets $78,122 $76,618
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,779 $6,381
Accrued expenses 6,094 5,350
Accrued compensation 7,137 7,794
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,164 5,352
Income taxes payable 620 468
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 26,794 25,345
Other liabilities 994 1,084
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 27,788 26,429
- ----------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Minority interest in subsidiaries 380 401
- ----------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock--$.01 par value;
authorized shares 1,000,000;
issued and outstanding--none
Common stock--$.01 par value
authorized shares 10,000,000;
issued and outstanding--4,883,122
and 5,009,018 at February 28,1999
and May 31, 1998, respectively 49 50
Additional paid-in capital 17,542 18,891
Retained earnings 32,625 31,059
Foreign currency translation adjustment (262) (212)
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 49,954 49,788
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $78,122 $76,618
================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
February 28, February 28,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross revenue $ 41,326 $ 28,040 $121,466 $ 93,486
Less: Cost of outside services 15,031 8,959 40,693 31,444
- ----------------------------------------------------------------------------------------------------------------
Net revenue 26,295 19,081 80,773 62,042
- ----------------------------------------------------------------------------------------------------------------
Costs and expenses:
Payroll and benefits 18,148 13,250 55,771 41,759
General expenses 7,594 5,629 22,683 17,489
- ----------------------------------------------------------------------------------------------------------------
Total costs and expenses 25,742 18,879 78,454 59,248
- ----------------------------------------------------------------------------------------------------------------
Operating income 553 202 2,319 2,794
Interest in loss of unconsolidated
subsidiaries -- -- -- (50)
Interest income, net 130 277 349 784
- ----------------------------------------------------------------------------------------------------------------
Income before provision for income taxes
and minority interest 683 479 2,668 3,528
Provision for income taxes 287 168 1,123 1,450
Minority interest (18) 57 (21) 13
- ----------------------------------------------------------------------------------------------------------------
Net income $ 414 $ 254 $ 1,566 $ 2,065
================================================================================================================
Basic net income per share $ 0.09 $ 0.05 $ 0.32 $ 0.41
================================================================================================================
Shares used in computing basic net
income per share 4,815 4,986 4,844 5,016
================================================================================================================
Diluted net income per share $ 0.09 $ 0.05 $ 0.32 $ 0.41
================================================================================================================
Shares used in computing diluted net
income per share 4,830 5,142 4,890 5,097
================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HARDING LAWSON ASSOCIATES GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended February 28,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,566 $2,065
Adjustments to reconcile net income to net cash provided by in operating
activities:
Depreciation and amortization 2,426 1,899
Net (increase)/decrease in current assets (2,633) 3,738
Net increase/(decrease) in current liabilities 1,185 (3,135)
Other (decrease) (150) (249)
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,394 4,318
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of equipment, net (1,460) (1,738)
Investment in acquisition (1,020) --
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES (2,480) (1,738)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 280 348
Repurchase of common stock (2,702) (405)
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN
FINANCING ACTIVITIES (2,422) (57)
- ----------------------------------------------------------------------------------------------------------------
Effect of foreign currency translation (50) (123)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,558) 2,400
Cash and cash equivalents
at beginning of period 15,118 24,464
- ----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $12,560 $26,864
================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
February 28, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
without audit by Harding Lawson Associates Group, Inc., (the "Company") in
accordance with generally accepted accounting principles for interim financial
statements and pursuant to the rules of the Securities and Exchange Commission
for Form 10-Q. Certain information and footnotes required by generally accepted
accounting principles for complete financial statements have been omitted. It is
the opinion of management that all adjustments considered necessary for a fair
presentation have been included, and that all such adjustments are of a normal
and recurring nature. For further information, refer to the audited financial
statements and footnotes included in the Company's Annual Report on Form 10-K
dated May 31, 1998. Reclassification of certain balances for the fiscal year
ended May 31, 1998 have been made to conform to the February 28, 1999
presentation.
NOTE 2: COMMITMENTS AND CONTINGENCIES
The Company is currently subject to certain claims and lawsuits arising in the
ordinary course of its business. In the opinion of management, adequate
provision has been made for all known liabilities that are currently expected to
result from these claims and lawsuits, and in the aggregate such claims are not
expected to have a material effect on the financial position of the Company. The
estimates used in establishing these provisions could differ from actual
results. Should these provisions change significantly, the effect on operations
for any quarterly or annual reporting period could be material.
NOTE 3: NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Statement of Financial Accounting Standards No. 131 ("SFAS
131"), "Disclosures about Segments of an Enterprise and Related Information",
was issued and is effective for the year ending May 31, 1999. This Statement
establishes standards for reporting information about operating segments in
annual and interim financial statements. The Company is currently assessing the
impact of SFAS 131 on its financial reporting.
In June 1997, the Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income", was issued and is effective for fiscal
year 1999. SFAS 130 establishes rules for the reporting of comprehensive income
and its components in financial statements. At present, comprehensive income for
the Company includes net income and translation adjustments on foreign currency.
Comprehensive income for the nine months ending February 28 is as follows:
Nine months ending February 28,
1999 1998
Net income $1,566 $2,065
Foreign currency translation adjustment (50) (123)
------ ------
Comprehensive income $1,516 $1,942
====== ======
<PAGE>
NOTE 4: ACQUISITIONS
On May 8, 1998, the Company acquired all outstanding shares of ABB Environmental
Services, Inc., a consulting and engineering firm, from ABB Services, Inc. Total
consideration of $12 million, excluding transaction costs, was paid entirely in
cash. The acquisition was accounted for using the purchase method and
accordingly, the purchase price was allocated to the assets and liabilities
acquired based upon their fair market value. The excess of purchase price of the
acquisition over the fair market value of the net assets acquired was recorded
as goodwill. The goodwill will be amortized on a straight-line basis over 20
years.
The following table presents summarized unaudited pro forma operating results
assuming the Company had acquired ABB Environmental Services, Inc. ("ABB ES") on
June 1, 1997 (in thousands except per share data):
Three months ended Nine months ended
February 28, 1998 February 28, 1998
Net revenue $ 27,554 $ 89,229
Income before income taxes 828 5,621
Net income 460 3,300
Basic net income per share $ 0.09 $ 0.66
Shares used in computing basic
net income per share 4,986 5,016
Diluted net income per share $ 0.09 $ 0.65
Shares used in computing diluted
net income per share 5,142 5,097
On December 18, 1998, the Company acquired Regional Engineers, Planners &
Surveyors, Inc., ("REPS") located in Florida. Total consideration, excluding
transaction costs, was $1.2 million in cash and shares of common stock of the
Company. The acquisition was accounted for using the purchase method and
accordingly, the purchase price was allocated to the assets and liabilities
acquired based upon their fair market value. The excess of purchase price of the
acquisition over the fair market value of the net assets acquired was recorded
as goodwill. Goodwill of $697 will be amortized on a straight-line basis over 15
years. The results of REPS' operations from the date of acquisition were
included in the Company's consolidated financial statements. Had the acquisition
taken place on June 1, 1998, the Company's 1999 results of operations for the
nine months ended February 28, 1999 would not have been materially different.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward Looking Statements
The statements in this report that are forward-looking are based on current
expectations, and actual results may differ materially. The forward-looking
statements include those regarding the level of future purchases of fixed
assets, the possible impact of current and future claims against the Company
based upon negligence and other theories of liability, the possibility of the
Company making acquisitions during the next 12 to 18 months and the impact of
becoming Year 2000 compliant. Forward-looking statements involve numerous risks
and uncertainties that could cause actual results to differ materially,
including, but not limited to, the possibilities that the demand for the
Company's services may decline as a result of possible changes in general and
industry specific economic conditions and the effects of competitive services
and pricing; one or more current or future claims made against the Company may
result in substantial liabilities; and such other risks and uncertainties as are
described in reports and other documents filed by the Company from time to time
with the Securities and Exchange Commission.
Results of Operations
(In thousands, except share data)
The following table sets forth, for the periods indicated, (i) the percentage
that certain items in the condensed consolidated income statements of the
Company bear to net revenues, and (ii) the percentage increase (decrease) in
dollar amount of such items from year to year.
<TABLE>
<CAPTION>
Percentage of Net Revenue Percentage
Three Months Ended Nine Months Ended Increase/(Decrease)
February 28, February 28, February 28,
Three Months Nine Months
1999 1998 1999 1998 1999 vs 1998 1999 vs 1998
---- ---- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0% 37.8% 30.2%
Costs and expenses
Payroll and benefits 69.0 69.4 69.0 67.3 37.0 33.6
General expenses 28.9 29.5 28.1 28.2 34.9 29.7
Operating income/margin 2.1 1.1 2.9 4.5 173.8 (17.0)
Interest income, net and
interest in loss of uncon-
solidated subsidiaries 0.5 1.5 0.4 1.2 (53.1) (52.5)
Income before income taxes
and minority interest 2.6 2.5 3.3 5.7 42.4 (24.4)
Provision for income taxes
and minority interest 1.0 1.2 1.4 2.4 19.3 (24.7)
Net income 1.6 1.3 1.9 3.3 63.0 (24.2)
</TABLE>
<PAGE>
Third Quarter Comparison for Fiscal Years 1999 and 1998
Net revenue for the fiscal quarter ended February 28, 1999 totaled $26,295, an
increase of 37.8% from net revenue of $19,081 for the third quarter of the prior
fiscal year. The increase in net revenue was primarily attributable to the
acquisition of ABB ES. Net revenue would have been 4.6% lower than the third
quarter of the prior year had the acquisition of ABB ES occurred on June 1,
1997. The decline in net revenue for ABB ES for the period was 25.2% compared
with the prior year due primarily to the wind down of a large federal project.
Excluding the acquisition, net revenue was 2.3% higher than the same period last
year. This was primarily due to a 4.1% increase in revenue from domestic
industrial contracts, offset by a 0.6% decline from public sector contracts and
a 28.0% decline in net revenue from international operations. The decline in
public sector net revenue was due to a 19.8% decrease in revenue from federal
contracts, offset by a 24.3% increase in revenue from state and local contracts.
Net revenue increased in the third quarter due to higher demand for the
Company's services, partially offset by lower prices compared to the same period
in the prior year.
For the Company, net revenue from public sector contracts accounted for 41.8% of
total net revenue compared to 37.7% in the prior year. Net revenue from domestic
industrial clients accounted for 54.7% of total net revenue compared to 55.7% in
the prior year. Net revenue from international operations for the fiscal quarter
ended February 28, 1999 was $911 or 3.5% of total net revenue compared to $1,266
or 6.6% of total net revenue in the same quarter of the prior fiscal year.
A significant portion of the services provided by the Company to its public
sector clients are performed under a relatively small number of larger contracts
compared to private sector clients. Similar to situations that have occurred in
the past few years, some of these public sector contracts will be substantially
completed during fiscal 1999 and 2000. The Company has been awarded certain
contracts that potentially could offset revenue that will be lost under nearly
completed contracts. However, if the Company is unsuccessful in realizing the
full potential of these contracts or winning new contracts, or if funding delays
are experienced on previously awarded federal contracts, a material decline in
revenue could result.
Operating income was $553 in the third quarter of fiscal 1999, an increase of
173.8% from $202 for the same period in fiscal 1998. Operating margin increased
to 2.1% of net revenue in the current quarter compared to 1.1% in the third
quarter of fiscal 1998. The increase in operating income and margin was
primarily due to the higher net revenue discussed above, partially offset by
higher payroll costs and general expenses. Excluding the operating results from
the ABB ES acquisition, operating income would have decreased by $595 from the
prior year resulting in a negative margin of 2.0%. The decrease in operating
income resulted from both higher payroll costs and indirect expenses. The higher
indirect expenses were primarily due to the write-down of excess premise leases
and, to a lesser extent, external consulting and bad debt expenses.
Net interest income for the third quarter ended February 28, 1999 was $130
compared to $277 in the third quarter of the prior year, a decrease of 53.1% due
primarily to a $13.3 million decrease in the average cash balance compared to
the third quarter of last year. The decrease in cash was due primarily to cash
utilized in the acquisition of ABB ES and REPS and to the repurchase of more
common stock by the Company than in the prior year.
The effective tax rate was 42.0% for the third quarter of fiscal 1999 and was
35.1% in the third quarter of fiscal 1998. The increase in the effective tax
rate was attributable to the fact that the prior year's quarter benefited from
the recognition of tax losses from the international operations for which the
tax benefits had not previously been recorded.
Net income for the quarter was $414 compared with $254 in the third quarter of
fiscal 1998, an increase of 63%. Basic and diluted earnings per share were $0.09
on 4,815 and 4,830 weighted average shares outstanding, respectively, compared
to $0.05 per share on 4,986 and 5,142 weighted average shares outstanding,
respectively, in the same period last year. The decrease in the weighted average
diluted shares outstanding was primarily due to the decrease in the price per
share of the Company's common stock, resulting in a decrease in share
equivalents used in the per share calculation.
Nine Month Comparison for Fiscal Years 1999 and 1998
Net revenue for the nine months ended February 28, 1999 was $80,773, an increase
of 30.2% from net revenue for the nine months ended February 28, 1998 of
$62,042. The increase in net revenue was due primarily to the acquisition of ABB
ES. Net revenue would have been 9.5% lower than net revenue for the nine months
of the prior year had the ABB ES acquisition occurred on June 1, 1997.
Excluding the acquisition, net revenue was 4.2% lower than the same period in
the prior year. Net revenue from the public sector and international operations
declined by 14.1% and 32.0%, respectively, which was partially offset by a 3.4%
increase in net revenue from domestic industrial sector clients. Net revenue
increased in the first nine months of fiscal 1999 due to higher demand for the
Company's services, partially offset by lower prices compared to the same period
in the prior year.
Operating income was $2,319, a decrease of 17.0% from operating income of $2,794
for the nine months ended February 28, 1998. The operating margin decreased to
2.9% from 4.5% a year ago. The lower operating income and margin were due
primarily to higher payroll costs and indirect expenses. The higher indirect
expenses resulted charges associated with a severance agreement negotiated with
the Company's former Chief Executive Officer and the related search and
recruitment costs for a successor, and charges related to the write-down of
excess premise leases.
Net interest income for the nine months ended February 28, 1999 was $349, a
decrease of 55.5% from net interest income of $784 for the same period of the
prior fiscal year. The decrease was primarily due to a $12.8 million decrease in
the average cash balance compared to the prior year.
The effective tax rate for the nine months ended February 28, 1999 was 42.1% and
for the nine months ended February 28, 1998 was 41.1%.
Net income for the nine months was $1,566, a decrease of 24.2% from net income
of $2,065 for the nine month period in the prior year. Basic and diluted
earnings per share were $0.32 on 4,844 and 4,890 weighted average shares
outstanding, respectively, compared to $0.41 on 5,016 and 5,097 weighted average
shares outstanding, respectively, in the first nine month period of the prior
year. The decrease in weighted average diluted shares outstanding was primarily
due to the decrease in the price per share of the Company's common stock,
resulting in a decrease in share equivalents used in the per share calculation.
Liquidity and Capital Resources
For the nine months ended February 28, 1999, net cash provided by operations was
$2,394 compared to $4,318 for the first nine months of the prior year. The
decrease in cash provided by operations was primarily due to an increase in days
sales outstanding in the Company's receivables in the current fiscal year
compared to the prior fiscal year.
The Company made net capital expenditures of $1,460 in the first nine months of
fiscal 1999 compared to net capital expenditures of $1,738 in the first nine
months of the prior year. The Company anticipates that its capital expenditures,
excluding acquisitions, for the current fiscal year will be approximately the
same as those incurred in the prior fiscal year. The Company, in December 1998,
expended $1 million in cash in the acquisition of REPS.
On March 7, 1996 the Board of Directors of the Company approved a Common Stock
Repurchase Program ("1996 Program") that authorized the Company to purchase up
to a maximum of 500,000 shares of stock on the open market for the purpose of
funding the Company's various employee stock programs. The Company repurchased
310,000 shares during the first nine months of fiscal 1999 at an average price
of $8.72 compared to 46,300 shares repurchased at an average price of $8.75
during the first nine months of fiscal 1998. There are 4,500 shares which remain
available to be repurchased under the 1996 Program. On September 25, 1998, the
Board authorized management to repurchase up to 500,000 shares over the next
four years.
The Company is a consulting engineering services firm engaged in providing
environmental, infrastructure, geotechnical and construction related services
and encounters potential liability, including claims for errors and omissions,
resulting from construction defects, construction cost overruns, environmental
or other damage in the normal course of business. The Company is party to
lawsuits and is aware of potential exposure related to certain claims. In the
opinion of management, adequate provision has been made for all known
liabilities that are currently expected to result from these matters, and in the
aggregate, such claims are not expected to have a material impact on the
financial position and liquidity of the Company. Currently, the Company is
provided a $10 million per occurrence, $15 million aggregate contractor's
operations and professional services insurance policy through an unrelated,
rated carrier. The Company also maintains a general liability insurance policy
with an unrelated, rated carrier.
At February 28, 1999 the Company had cash on hand and cash equivalents of
$12,560. The Company has a $20 million revolving credit line agreement that
expires in November 2000. At February 28, 1999 and 1998, the Company had no
borrowings outstanding under its line of credit leaving $20 million available to
the Company. Borrowings were available to the Company at an interest rate of
5.0% at February 28, 1999 and 5.7% at May 31, 1998. The Company is in compliance
with all covenants pertaining to the credit line agreement.
The Company believes that its available cash and cash equivalents, as well as
cash generated from operations and its available credit line, will be sufficient
to meet the Company's cash requirements for the balance of the fiscal year. The
Company intends to actively continue its search for acquisitions to expand its
geographical representation and enhance its technical capabilities. The Company
expects to utilize a portion of its liquidity over the next 12 to 18 months for
capital expenditures, including acquisitions and investments in aligned
businesses.
Year 2000 Compliance
Overview
Computer systems and software have historically been coded to accept only two
digit entries for the year. Consequently, on January 1, 2000, as well as on
other significant dates, errors may occur. If computers cannot properly
distinguish between the years 1900 and 2000, computers may shutdown or perform
incorrect calculations.
Scope & Status
The Company has taken seriously the potential risks of the Year 2000 issue and
has devoted resources company-wide to address the issue. In late 1997, the
Company established a Year 2000 Project Team ("Project Team"). The Project Team
was established to address the following key components related to the Year 2000
issue:
o Information applications, including the Company's project management and
accounting systems o Computer hardware, software, operating systems and net-
work infrastructure including telecommunications systems
o Facility and administrative systems
o Digital systems and devices with embedded processors installed on client
projects
o Major suppliers and customers' systems
During the second quarter of fiscal 1999, the Company completed the upgrade of
its major information technology system (a project management and accounting
system). This version of the third party business application is warranted as
Year 2000 compliant. The Company will perform specific Year 2000 compliance
testing of this system in the first quarter of its next fiscal year which
commences on June 1, 1999.
The Company is conducting an inventory and assessment of its hardware and
software for Year 2000 compliance. It expects to complete this inventory and
assessment by May 31, 1999. Other network and infrastructure upgrades of
equipment and software are scheduled as part of normal business operations.
Facility and administrative systems that support the Company (such as telephone,
security systems, etc.) are also being assessed for Year 2000 compliance and
required upgrades to such hardware and software are being prioritized for
resolution. The assessment and remediation of the Company's facility and
administrative systems is scheduled to be completed prior to December 31, 1999.
The Company considers risks in these areas to be minimal. Contingency plans will
be developed if the Company determines that compliance is not likely to occur.
The Company has undertaken an analysis of its vendors and suppliers to determine
potential areas of risk with regard to their failure to achieve Year 2000
compliance. Written requests have been sent to appropriate vendors and suppliers
to determine their Year 2000 readiness. Evaluation of the responses to those
requests will determine future verification procedures. The Company is currently
inventorying and contacting vendors of software and equipment such vendors have
supplied under contracts or relationships with its clients. Contingency plans
will also be developed as appropriate to address any potential problems that may
be identified.
Costs
The costs associated with Year 2000 compliance have not been material and
generally fall within normally anticipated operating and capital spending. The
Company currently estimates the costs of becoming Year 2000 compliant will not
be material to the financial position of the Company. Although the Company does
not currently anticipate the costs of Year 2000 compliance to be material, it
cannot ensure Year 2000 compliance by third parties.
Risks
The upgrade of the Company's project management and accounting systems to a Year
2000 compliant version mitigates the risk that the Company would be unable to
maintain accurate client records and billings. Technical infrastructure at
client sites could cause potential interruption in services provided by those
clients. The Company's efforts to evaluate and remediate software and equipment
supplied to its clients will mitigate such potential service interruptions.
The Company cannot predict with accuracy the extent to which its vendors and
clients will become compliant. The resulting effects on the Company's financial
position could be adversely affected if major vendors or clients do not operate
into and beyond the change in the millennium. The Company believes that the
completion of its Year 2000 Project as scheduled will significantly reduce the
possibility of significant interruptions to its normal business operations;
however, no assurances can be given.
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following exhibits are furnished along with this
Form 10-Q Quarterly Report for the period ended
February 28, 1999:
Exhibit No. 10.12 Employment Agreement, dated
March 19, 1999, for Robert L. Costello, Jr.
Exhibit No. 10.13 Executive Retention Agreement, dated
February 17, 1999, for Claude Corvino
Exhibit No. 10.14 Executive Retention Agreement, dated
February 17, 1999, for Arthur C. Riese
Exhibit No. 10.15 Executive Retention Agreement, dated
February 17, 1999, for Gregory A. Thornton
Exhibit No. 11 Computation of Per Share Earnings
Exhibit No. 27 Financial Data Schedule
b. Reports on Form 8-K
Subsequent to the fiscal quarter ended February 28,
1999, the Company filed a Current Report on Form 8-K,
dated March 26, 1999, describing changes in executive
officers of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARDING LAWSON ASSOCIATES GROUP, INC.
Date: April 8, 1999 /s/ Gregory A. Thornton
-------------------------------------------
Gregory A. Thornton
Vice President and Chief Financial Officer
(Principal Executive and Accounting Officer)
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
EXHIBIT INDEX
Exhibit No.
10.12 Employment Agreement dated March 19, 1999 for Robert L. Costello, Jr.
10.13 Executive Retention Agreement dated February 17, 1999 for
Claude Corvino
10.14 Executive Retention Agreement dated February 17, 1999 for
Arthur C. Riese
10.15 Executive Retention Agreement dated February 17, 1999 for
Gregory A. Thornton
11 Computation of Per Share Earnings
27 Financial Data Schedule
EMPLOYMENT CONTRACT
THIS EMPLOYMENT AGREEMENT is between Robert L. Costello, Jr. (hereafter
called "Employee") and HARDING LAWSON ASSOCIATES GROUP, INC., a Delaware
corporation (hereafter called the "Company").
Recitals
The Company desires to hire Employee as its Chief Executive Officer and
appoint him to the Board of Directors as a Director. Accordingly, the Company
desires assurances of the continued association and services of Employee, and is
therefore willing to engage his services on the terms and conditions set forth
below. Employee desires to continue in the employ of the Company and is willing
to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above Recitals and the mutual
promises and conditions in this Agreement, IT IS AGREED AS FOLLOWS:
1. Term of Employment. Subject to earlier termination as provided in
this Agreement, Employee shall be employed for a term of three (3) years,
beginning March 19, 1999. The term of this Agreement may be renewed or extended
in writing by mutual agreement for succeeding terms of from one (1) to three (3)
years each.
2. Duties of Employee. Employee shall serve the Company in the
capacities of Director and Chief Executive Officer and shall use his best
efforts to perform all of the customary duties of a person employed in those
positions, and such other duties as may from time to time be reasonably
requested by the Board of Directors. While serving in these capacities, Employee
shall do and perform all services, acts or things necessary or advisable to
manage and conduct the business of the Company, subject always to the authority
and policies set by the Board of Directors.
3. Change of Control.
(a) A First Year Change of Control will be deemed to occur upon the
happening of either of the following events, but only if such event takes place
prior to March 19, 2000: (1) the acquisition, directly or indirectly, by any
unaffiliated "person" (as such term is used in section 13(d) and 14 (d) of the
Securities Exchange Act of 1934, as amended) of beneficial ownership of thirty
percent (30%) or more of the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors, provided that a Change of Control for the purpose of either Section
3(a) or Section 3(b) of this Agreement shall not be deemed to have occurred by
reason of the formation or combining of a group of shareholders who are
otherwise unaffiliated for the purpose of making recommendations to the Board of
Directors, or (2) Continuing Directors cease to constitute at least a majority
of the Board of Directors. If a First Year Change of Control occurs and if
within six months of the First Year Change of Control the Employee's employment
is terminated by the Company or any parent or successor of the Company without
cause or the Employee terminates his employment based upon a material reduction
of his duties or responsibilities under this Agreement, (1) Employee shall be
entitled to a lump sum bonus payment of Four Hundred Twenty-Seven Thousand Five
Hundred Dollars ($427,500), an amount equal to One Hundred Fifty percent (150%)
of Employee's initial Base Salary and (2) the stock options described in Section
13 shall vest immediately. "Continuing Directors" as used herein shall mean the
directors of the Company in office on March 19, 1999 and any directors whose
nominations or selections are approved by a majority of the Continuing Directors
in office at the time of such nominations or selections.
(b) In addition, if a First Year Change of Control occurs, the Employee
shall receive Two Hundred Fifty Thousand Dollars ($250,000) if (1) the First
Year Change of Control occurs as a result of a transaction that results in the
Company's Common Stock no longer being publicly traded and if the closing sale
price of the Company's Common Stock as reported in the Wall Street Journal
exceeds Ten Dollars ($10) per share on the last day on which the Company's
Common Stock was publicly traded prior to the closing of such transaction or (2)
the First Year Change of Control does not result in the Company's Common Stock
no longer being publicly traded and the average closing sale price of the
Company's Common Stock as reported in the Wall Street Journal exceeds Ten
Dollars ($10) per share, as adjusted, for any fifteen (15) consecutive trading
days during the ninety (90) calendar day period immediately following the date
on which the Change of Control occurs. Such payment shall be made within ninety
(90) days of the date on which the Company's Common Stock price becomes
determinable under the provisions of the preceding sentence.
(c) A Future Change of Control will be deemed to occur upon the
happening of either of the events defined in the first sentence of Section 3(a)
above on or after March 19, 2000. If a Future Change of Control occurs and if
within six months of the Future Year Change of Control the Employee's employment
is terminated by the Company or any parent or successor of the Company without
cause or the Employee terminates his employment based upon a material reduction
of his duties or responsibilities under this Agreement, (1) Employee shall be
entitled to a lump sum bonus payment of One Hundred Fifty percent (150%) of
Employee's then-current Base Salary and (2) the stock options described in
Section 13 shall vest immediately.
(d) Notwithstanding the foregoing, a Change of Control will not be
deemed to have occurred in any transaction or acquisition in which the Employee
leads or will hold more than a 0.5% equity interest in the surviving company.
(e) If any payments are made to Employee under this Section, Employee
shall not be entitled to any payments under Sections 4 or 6 hereof.
(f) Certain Additional Payments. If any payments, distributions or
other benefits by or from the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payment required under this Section 3(f) (collectively, the "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
or any interest or penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive from the Company an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Employee of all taxes
(including, without limitation, any income and employment taxes and any interest
and penalties imposed with respect thereto) and the Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment. All calculations required by this
Section 3(f) shall be performed by the independent auditors retained by the
Company most recently prior to the Change of Control (the "Auditors"), based on
information supplied by the Company and the Employee. All fees and expenses of
the Auditors shall be paid by the Company.
4. Change of Duties. If the Board of Directors materially reduces
Employee's duties or responsibilities under this Agreement, Employee, at his
option, may terminate this Agreement prior to the conclusion of the term of
employment. In that event, subject to the provisions of Section 3(e), Employee
shall be entitled to receive, as severance pay, the amounts set forth in Section
6. In the event of such termination, the provisions of Sections 16 through 20
shall nevertheless remain in full force and effect unless specifically waived in
writing by the Company.
5. Termination Without Cause. This Agreement is subject to termination
at the option of the Company without cause, subject to the provisions of Section
6 hereof governing compensation after termination. In the event of termination
without cause by the Company, the provisions of Sections 16 through 20 shall
nevertheless remain in full force and effect unless specifically waived in
writing by the Company.
6. Compensation After Termination Without Cause. If this Agreement is
terminated without cause by the Company, Employee shall receive those employee
benefits and compensation which shall have accrued prior to such termination and
shall receive as severance pay the sum of Two Hundred percent (200%) of
Employee's then-current Base Salary, subject to the provisions of Section 3(e)
and to the Employee's executing on behalf of the Company a satisfactory release
of any and all claims against the Company in the form attached hereto as Exhibit
A. All amounts payable as severance pay shall be payable in the same
installments as if Employee were still employed by the Company. In addition, the
Company will continue to pay the cost of maintaining the health insurance
coverage then being provided by the Company to the Employee for a period of one
year after termination.
Except as provided in this Agreement, after termination of this
Agreement (whether with or without cause, by death or disability, by resignation
or by mutual consent), the Company shall not have any duty or obligation to
continue to provide, at the Company's expense, any of Employee's benefits,
including but not limited to life and disability insurance (provided, however,
that to the extent allowable under the Company's plans the Employee can continue
such coverage at his expense); nor shall the Company be required to pay Employee
any severance pay (except any accrued vacation balance) in addition to that set
forth herein. The voluntary and temporary continuation of any benefits by the
Company shall not create an obligation to continue such benefits for any length
of time after termination, and any such continuance beyond termination shall be
in the absolute discretion of the Board of Directors.
It is not the intent of this Section 6 to reduce any fully vested
benefits to which Employee is otherwise entitled under any insurance policy,
salary deferral plan, deferred bonus plan or similar plan. Employee's benefits
under such plans shall be governed by the provisions of those plans. Employee's
benefits under any policy of insurance shall be governed by the terms of the
policy.
7. Termination for Cause.
(a) The Company reserves the right to terminate this Agreement at any
time if Employee willfully breaches or unjustifiably neglects the duties which
he is required to perform under the terms of this Agreement or commits material
acts of dishonesty, discloses confidential information, is guilty of gross
carelessness, professional negligence, misconduct, fraud or misrepresentation or
commits other acts that would prevent the effective performance of his duties,
or acts in a negligent way that has a direct, substantial, and adverse effect on
the Company's reputation or profitability; or fails or refuses to perform the
reasonable duties of the Chief Executive Officer, after 30 days' notice by the
Company, during which thirty (30) day period Employee shall have the opportunity
to cure said failure or refusal to perform reasonable duties.
(b) The Company may, at its option, immediately terminate this
Agreement for the reasons stated in this Section by giving written notice of
termination to Employee without prejudice to any other remedy to which the
Company may be entitled, either at law, in equity or under this Agreement.
(c) Upon termination for cause, Employee shall be entitled to receive
only those employment benefits and compensation which shall have accrued prior
to such termination, and shall not be entitled to receiveseverance compensation,
or any other or further compensation; however, it is not the intent of this
Section to reduce any fully vested benefits to which Employee is otherwise
entitled under any insurance policy, salary deferral plan, stock option plan,
deferred bonus plan or similar plan. Employee's benefits under such plans shall
be governed by the provisions of those plans. Employee's benefits under any
policy of insurance shall be governed by the terms of the policy.
(d) In the event of termination for cause, all the provisions of
Sections 16 through 20 hereof shall survive such termination and continue in
full force and effect.
8. Termination on Death or Disability. In the event of Employee's
death, this Agreement shall terminate on the last day of the calendar month
after the month in which his death occurs.
In the event of Employee's disability, this Agreement shall terminate
at the discretion of the Board of Directors, subject, however, to the provisions
of Sections 16 through 20 hereof, which shall survive such termination and
continue in full force and effect.
In the event of Employee's death or permanent disability as determined
by the Board of Directors, Employee shall be entitled to receive only those
employment benefits and compensation which shall have accrued prior to such
death or disability and shall not be entitled to receive severance compensation,
or any other or further compensation.
For purposes of this Agreement, disability shall mean a mental or
physical disease or injury that substantially impairs or prevents the ability of
Employee to perform normal services for the benefit of the Company or any
affiliated Company and which can reasonably be expected to be of long, continued
or indefinite duration. The disability of Employee shall be reasonably
determined by the Board of Directors, upon the basis of such evidence as the
Board deems necessary and desirable.
In the event that the Board of Directors chooses (at least initially)
not to terminate this Agreement because of disability, then to the extent that
Employee receives payments from any Company-maintained disability insurance
policy during the period in which the Company is obligated to make salary
payments under this Agreement, the Company shall be relieved of the obligation
to make such basic salary payments to Employee to the extent of the amounts so
received by Employee.
9. Dedication of Services. Employee agrees that while Employee is
employed by the Company, during normal business hours Employee shall devote
Employee's entire productive time, ability and attention to the business of the
Company. Employee further agrees that during the term of this Agreement or any
extension thereof, Employee will not, without the Company's prior written
consent, engage in any other business activities, except personal investments.
The foregoing shall not preclude Employee from engaging in appropriate civic,
charitable or religious activities.
10. Place of Employment. Unless the parties agree otherwise in writing,
during the employment term Employee shall perform the services he is required to
perform under this Agreement at the Company's headquarters, which are presently
in Novato, California. The Company may from time to time require Employee to
travel temporarily to other locations on Company business.
11. Salary. The Company shall pay a base salary to Employee at the rate
of $285,000 per year, payable in equal monthly or bi-monthly installments.
Employee's base salary shall be subject to review annually by the Board of
Directors, but Employee's salary shall not be reduced below the base salary set
forth in this Agreement.
12. Incentive Compensation. In addition to the base salary provided for
above, Employee will be eligible to participate in an incentive compensation
plan containing performance goals set by the Company. The target bonus will be
50% of base salary if specific goals which have been approved by the Board of
Directors are achieved. In addition, a formula will be developed and approved by
the Board which will allow the bonus to reach 100% of base salary for meeting
goals that exceed the goal set for the target bonus. Such bonus shall be paid
upon the completion of the fiscal year-end audit.
13. Stock Options and Stock Purchases. Employee will receive on the
commencement of his employment on March 19, 1999 non-qualified stock options
covering Two Hundred Thousand (200,000) shares of the Company's Common Stock.
The options on One Hundred Thousand (100,000) of such shares shall be granted
pursuant to a stock option agreement in the form of Exhibit B hereto and shall
be exercisable at the exercise price equal to the closing sale price of the
Company's Common Stock as reported in the Wall Street Journal as of the date on
which Employee's employment with the Company commences (hereafter, "the Market
Rate Options"); the other One Hundred Thousand (100,000) options shall be
granted pursuant to a stock option agreement in the form of Exhibit C hereto and
shall be exercisable at the exercise price of Ten Dollars ($10) per share
(hereafter, "the $10 Options"). The options shall expire on March 18, 2009, or
if earlier, 30 days after the date on which Employee's employment terminates or,
in the event of Employee's death or permanent disability as determined by the
Board of Directors, twelve (12) months after such death or disability is
determined. Subject to the provisions of Section 3 hereof, the options shall
vest and become exercisable according to the following schedule: On and after
March 18, 2001, 50% of the Market Rate Options and 50% of the $10 Options shall
become exercisable; on and after March 18, 2002, an additional 25% of the Market
Rate Options and an additional 25% of the $10 Options shall become exercisable
and on and after March 18, 2003, the balance of the Market Rate Options and the
$10 Options shall become exercisable. If the exercise price of the Market Rate
Options, as determined above, exceeds six dollars ($6) per share, then the
number of Market Rate Options (rounded off to the next whole share) granted to
the Employee on March 19, 1999 shall be determined by multiplying 100,000 by the
result obtained under the following formula: 4 /(10 minus the exercise price of
the option). Notwithstanding the result obtained by applying the foregoing
formula, the number of Market Rate Options shall not exceed 130,000.
At the commencement of Employee's employment on March 19, 1999, the
Employee shall purchase Thirty-Five Thousand (35,000) shares of Common Stock
under the Company's Key Executive Stock Ownership Program at a price equal to
the closing sale price of the Company's common stock as reported in the Wall
Street Journal on the date on which the Employee's employment with the Company
commences, to be paid for by a full recourse note providing for annual interest
equal to the lowest rate allowed under the Internal Revenue Service's imputed
interest rules. At the end of each calendar year, if the Employee is then
employed by the Company, the amount of the then-accrued interest shall be
forgiven, and the interest shall become taxable to Employee as compensation. The
loan shall be secured by the Thirty-Five Thousand (35,000) shares of stock,
which shall be pledged to the Company. The amount borrowed and secured by the
note shall be repaid to the Company by the Employee over ten (10) years, with a
mandatory principal reduction of at least ten percent (10%) per annum of the
original balance. Such principal payments shall commence on January 1, 2001. If
Employee is terminated with cause, the entire balance of the note, principal and
interest, will become due and owing immediately. If Employee voluntarily resigns
or is terminated without cause, or if termination is the result of death or
disability, Employee shall repay the entire amount of the loan, principal and
interest, within ninety (90) days of such termination.
14. Additional Benefits. During his employment hereunder, Employee
shall be entitled to receive all other benefits of employment generally
available to the Company's other management executives as he becomes eligible
for them, including group health and life insurance benefits, and the right to
participate in the salary deferral plan. Regardless of the vacation periods
available to other management employees, Employee shall be entitled to four (4)
weeks' paid vacation per year.
15. Expenses. During his employment hereunder, the Company shall
reimburse Employee for reasonable out-of-pocket expenses incurred in connection
with the Company's business, including travel expenses, food and lodging while
away from home, subject to such policies as the Company may from time to time
reasonably establish for its other employees. The Company shall reimburse
Employee for all reasonable costs associated with Employee's relocation to the
greater Bay Area and Employee shall receive a lump sum payment of Twenty-Five
Thousand Dollars ($25,000) to cover incidental expenses associated with that
relocation. To the extent that the expense reimbursements under this Section are
included in Employee's income for purposes of federal and state taxes, the
Company shall increase such reimbursement: (1) by an amount sufficient to
provide for the payment of such taxes and (2) by an amount sufficient to provide
for the payment of taxes on such taxes, but not by any additional amount
16. Return of Documents. On termination of employment for any reason,
Employee will promptly return to the Company all documents and other materials
relating to the Company's business, together with all copies thereof, including
but not limited to Company reports, job files, operating manuals, technical
blueprints or plans, business forecasts, market summaries, proposals, job notes
and customer lists, and any other files or documents that could reasonably be
construed to be of value to the Company.
17. No Solicitation of Customers or Employees.
(a) Employee agrees that all clients of the Company for which Employee
provides services during Employee's employment, and all prospective Company
clients as described below, are solely the clients of the Company and not of the
Employee. Employee agrees that if his employment terminates, except in the case
of any First Year or Future Change of Control, he will not, for a period of one
(1) year after the date of such termination, either directly or indirectly,
solicit business, as to products or services competitive with those of the
Company, from any of the Company's clients or prospective clients as described
below. For purposes of this Section, the term "prospective clients" shall mean
clients from whom Employee and/or Company has actively solicited business within
one (1) year prior to Employee's termination.
(b) Employee agrees that the Company has invested substantial time and
effort and resources in assembling, training and managing its present staff of
personnel, which constitutes a significant asset of the Company. Accordingly,
Employee agrees that, both while employed and for a period of one (1) year after
termination of employment, Employee will not directly or indirectly induce or
solicit or encourage any of the Company's employees to leave their employment
with the Company.
18. Disclosure of Confidential Client Information Prohibited. In the
course of his employment, Employee will have access to confidential records and
data pertaining to the Company's clients and to the relationship between these
clients and the Company. Employee agrees that such information is considered
secret and is disclosed to Employee in confidence. In consideration of this
access to this confidential information, Employee agrees that he shall not,
directly or indirectly, disclose or use any such information, except as required
in the course of his employment by the Company, until such information otherwise
becomes public knowledge.
19. Disclosure of Confidential Company Information Prohibited. Employee
agrees that he will regard and preserve as confidential and will not divulge to
unauthorized persons, or use or permit persons who are under his direction or
supervision to divulge or use, for any purposes other than those related to the
business of the Company, either during or after the term of this Agreement, any
information, matter or thing of a secret, confidential or private nature
connected with the business of the Company, or any of its suppliers, customer or
affiliates, without the written consent of the Board of Directors, until such
time as such information otherwise becomes public knowledge. Included within the
meaning of the foregoing are matters of a technical nature, such as know-how,
formulae, computer programs, software and documentation, secret processes or
machines, inventions and research projects; and matters of a business nature
such as information about costs, profits, markets, sales, customers, suppliers
and employees (including salary, evaluation and other personnel data), and plans
for further development; and any other information of a similar nature to the
extent not available to the public.
20. Company's Ownership of Intangibles. All processes, techniques,
trade secrets, computer programs or applications, formulae, inventions,
copyrights, trademarks and other intangible rights that may be conceived or
developed by Employee, either alone or with others, during the term of
Employee's employment (hereafter "work products"), whether or not conceived or
developed during Employee's working hours, whether or not reduced to writing,
and with respect to which the equipment, supplies, facilities, premises or
property of the Company were used, or that relate to the business of the Company
or the Company's actual or demonstrable and anticipated research and
development, or that result from any work performed by Employee for or on behalf
of the Company, shall be the sole property of the Company.
Employee acknowledges and agrees that all such work products
shall be the sole property of the Company, and Employee hereby assigns to the
Company Employee's entire right and interest in all such work products. Employee
shall execute all documents, including patent applications and assignments,
required by the Company to establish the Company's rights under this Section;
provided, however, that such assignment does not apply to any invention which
qualifies fully under the provisions of Section 2870 of the California Labor
Code.
21. Effect of Combination or Dissolution. This Agreement shall not be
terminated by the Company's voluntary or involuntary dissolution or by any
merger in which the Company is not the surviving or resulting corporation, or on
any transfer of all or substantially all of the Company's assets. In the event
of any such merger or transfer of assets, the provisions of this Agreement shall
be binding on and inure to the benefit of Employee and the surviving business
entity or the business entity to which such assets shall be transferred.
22. Employment Rights. Nothing in this Agreement shall be deemed to
constitute a lifetime employment contract between Employee and the Company, and
nothing contained herein shall be deemed to give Employee any right to be
retained in the employment of the Company beyond the term of this Agreement,
subject to provisions on earlier termination. This Agreement shall in no way
serve to enlarge or extend the employment rights or obligations of Employee
beyond those under California law, except as expressly stated herein.
23. Notices. Any notice to the Company required or permitted under this
Agreement shall be given in writing to the Company, either by personal service
or by registered or certified mail, postage prepaid, addressed to the attention
of the Chairman of the Board, as its then principal place of business, which at
this time is 7655 Redwood Boulevard, Novato, California 94945. Any such notice
to Employee shall be given in a like manner and, if mailed, shall be addressed
to Employee at his home address then shown on the Company's records. For the
purpose of determining compliance with any time limit in this Agreement, a
notice shall be deemed to have been duly given (a) on the date of service, if
served personally on the party to whom notice is to be given, or (b) on the
second business day after mailing, if mailed to the party to whom the notice is
to be given in the manner provided in this Section.
24. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or breach of this Agreement, shall be settled by arbitration in
accordance with the Arbitration Rules of the American Arbitration Association
relating to employment disputes, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction. Each party shall
pay the fees of his own attorney, and the expenses of his witnesses and all
other expenses connected with presenting his case. Other costs of the
arbitration, including the cost of any record or transcript of the arbitration,
administrative fees and all other fees and costs, shall be borne equally by the
parties.
25. Injunction. Notwithstanding the foregoing Section concerning
arbitration, in addition to other remedies provided by law or this Agreement,
the Company shall have the right to obtain injunctive relief against the breach
of any or all the provisions of Sections 16 through and including 20 of this
Agreement by Employee. In the event that injunctive relief is sought by the
Company pursuant to this Section, any other claims by the Company arising from
or relating to this Agreement, or the breach of this Agreement, may, at the
option of the Company, be asserted in the same action.
26. Integration. This Agreement contains the entire agreement between
the parties and supersedes all prior oral and written agreements,
understandings, commitments and practices between the parties, including all
prior employment agreements, whether or not fully performed by Employee before
the date of this Agreement. No amendments to this Agreement may be made except
by a writing signed by both parties.
27. Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, it shall nevertheless remain in full force and
effect in all other circumstances.
28. Choice of Law. The formation, construction and performance of this
Agreement shall be construed in accordance with the laws of the State of
California.
COMPANY:
HARDING LAWSON ASSOCIATES GROUP, INC.,
a Delaware corporation
By: /s/ D. K. Stager
Date: 3-10-99 Donald K. Stager
Chairman of the Compensation Committee
HARDING LAWSON ASSOCIATES GROUP, INC.,
a Delaware corporation
By: /s/ Gregory A. Thornton
Date: 3-10-99 Gregory A. Thornton
Chief Executive Officer and
Chief Financial Officer
/s/ Robert L.Costello, Jr.
Date: 3-19-99 Robert L. Costello, Jr.
EXECUTIVE RETENTION AGREEMENT
This Agreement between Claude Corvino (you) and Harding Lawson
Associates Group Inc. (Company) have been entered into as of February 17, 1999.
This Agreement promises you severance benefits if, following a Change of
Control, a Potential Change in Control or a Change of Management, (referred to
collectively hereafter as the "Change") you are terminated without Cause or
resign for Good Reason during the Term of this Agreement. Capitalized terms are
defined in the last section of this Agreement.
1. Purpose
The Company considers a sound and vital management team to be
essential. Management personnel who become concerned about the possibility that
the Company may undergo a Change in Control or a Change in Management may
terminate employment or become distracted. Accordingly, the Board has determined
that appropriate steps should be taken to minimize the distraction executives
may suffer from the possibility of a Change in Control or Management. One step
is to enter into this Agreement with you.
2. Your Promise
If one or more of the events set forth in section 3 below occur during
the Term of this Agreement, you promise not to resign for at least 12 full
calendar months except as follows: (a) you may resign if you are given Good
Reason to do so; and (b) you may terminate employment on account of retirement
on or after attaining age 65 or because you become unable to work due to serious
illness or injury.
3. Events That Trigger Severance Benefits
(a) Termination After a Change in Management
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Management has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(b) Termination After a Change in Control
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Control has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(c) Termination After a Potential Change in Control
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement and within twelve months after a Potential
Change in Control has occurred but before a Change in Control actually occurs,
your employment is terminated by the Company without Cause or you resign for
Good Reason, but only if either: (i) you are terminated at the direction of a
Person who has entered into an agreement with the Company that will result in a
Change in Control; or (ii) the event constituting Good Reason occurs at the
direction of such Person.
(d) Successor Fails To Assume This Agreement
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement, a successor to the Company fails to assume
this Agreement, as provided in Section 13(a).
4. Events That Do Not Trigger Severance Benefits
You will not be entitled to Severance Benefits if your employment ends
because you are terminated for Cause or on account of Disability or because you
resign without Good Reason, retire, or die. Except as provided in Section 3(c),
you will not be entitled to Severance Benefits while you remain protected by
this Agreement and remain employed by the Company, its affiliates, or their
successors.
5. Termination Procedures
If you are terminated by the Company after the Change and during the
Term of this Agreement, you will receive written notice of your termination If
you are being terminated for Cause, your notice of termination will include a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board (at a meeting of the Board called
and held for the purpose of considering your termination (after reasonable
notice to you and an opportunity for you and your counsel to be heard before the
Board)) finding that, in the good faith opinion of the Board, Cause for your
termination exists and specifying the basis for that opinion in detail.
6. Severance Benefits
(a) In General
If you become entitled to Severance Benefits under this Agreement, you
may receive all of the Severance Benefits described in this Section. Severance
benefits will be payable to you following your termination of employment only if
you deliver to the Company (on the form and by the deadline it prescribes) your
executed general release of all claims you may have against the Company and its
affiliates relating to your termination of employment, other than claims under
this Agreement, indemnification rights for your acts in the course and scope of
your employment, or under ERISA-regulated employee benefit plans of the Company.
(b) Lump-Sum Payment in Lieu of Future Compensation
In lieu of any further cash compensation for periods after your
employment ends, you will be paid a cash lump sum equal to 1.0 times your annual
base salary in effect when your employment ends or, if higher, in effect
immediately before the Change, or Good Reason event for which you terminate
employment
(c) Group Insurance Benefit Continuation
During the period that begins when you become entitled to Severance
Benefits under this Agreement and ends on the last day of the 12th calendar
month beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, the life, disability, accident, and health insurance
benefits (or substantially similar benefits) it was providing to you and your
spouse and dependents immediately before you became entitled to Severance
Benefits under this Agreement (or immediately before a benefit reduction that
constitutes Good Reason, if you terminate employment for that Good Reason).
These benefits shall be treated as satisfying the Company's COBRA obligations.
After benefit continuation under this subsection ends, you and your spouse and
dependents will be entitled to any remaining COBRA rights.
(d) Acceleration of Vesting under Stock Option Plans
To the extent permitted by the terms of the plans or under applicable
law, your rights to options granted under any of the Company's stock option
plans shall be immediately vested.
(e) Allowance for Professional Services
You will receive an allowance of $10,000 for your use for outplacement,
legal services, tax advice, or other professional services in connection with
the termination of your employment with the Company. Upon presentation of
invoices, the Company will pay the service providers directly until the
allowance has been exhausted. If any balance remains in the allowance fund at
the end of six months following termination, that balance will be paid to you in
a lump sum; the unused balance shall be determined on the basis of invoices
received by the Company on or before the end of the allowance period. The
Company shall have no other responsibility for expenses incurred by you except
as otherwise set forth in this Agreement.
(f) Payment of Accrued Personal Time Off ("PTO")
The Company will pay you all PTO that has accrued through the date your
employment terminates. No additional PTO shall accrue thereafter.
(g) Deferred Compensation Plans
Your vested rights under the Company's 401(k) Salary Deferral Plan and
the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to
be governed by the terms and conditions of the Plan documents and applicable
law.
7. Time for Payment
You will be paid your cash Severance Benefits within 15 days after you
become entitled to Severance Benefits under this Agreement (e.g., within 15 days
following your termination of employment
8. Relation to Other Severance Programs
Your Severance Benefits under this Agreement are in lieu of any
severance or similar benefits that may be payable to you under any other
employment agreement or other arrangement; to the extent any such benefits are
paid to you, they shall be applied to reduce the amount due under this
Agreement. This Agreement constitutes the entire agreement between you and the
Company and its affiliates with respect to such benefits. Notwithstanding any
other provision of this Agreement, if you are terminated for any reason not
addressed by this Agreement, other than termination for Cause, you will receive
separation benefits consistent with the Companys written severance policy or six
months salary, whichever is greater.
9. Disability
Following a Change in Control, while you are absent from work as a
result of physical or mental illness, the Company will continue to pay you your
full salary and provide you all other compensation and benefits payable to you
under the Company's compensation or benefit plans, programs, or arrangements.
These payments will stop if and when your employment is terminated by the
Company for Disability or at the end of the Term of this Agreement, whichever is
earlier. Severance Benefits under this Agreement are not payable if you are
terminated on account of your Disability.
10. Effect of Reemployment
Your Severance Benefits will not be reduced by any other compensation
you earn or could have earned.
11. Successors
(a) Assumption Required
In addition to obligations imposed by law on a successor to the
Company, during the Term of this Agreement the Company will require any
successor to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company was required to perform. If the Company
fails to obtain such an assumption and agreement before the effective date of a
succession, you will be entitled to Severance Benefits as if you were terminated
by the Company without Cause on the effective date of that succession.
Notwithstanding the foregoing, you and the Company or its successor may in
writing agree to replace or modify the terms of this Agreement.
(b) Heirs and Assigns
This Agreement will inure to the benefit of, and be enforceable by,
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If you die while any amount is
still payable to you under this Agreement, that amount will be paid to the
executor, personal representative, or administrator of your estate.
12. Amendments
This Agreement may be modified only by a written agreement executed by
you and the Chairman of the Board of Directors of the Company.
13. Governing Law
This Agreement creates a "top hat" employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in accordance with that law; the Company is the "plan
administrator." To the extent that state law is applicable, the statutes and
common law of the State of California (excluding its choice of law statutes or
common law) shall apply.
14. Dispute Resolution
(a) Sole Remedy
Both you and the Company agree that the sole and exclusive
remedy for any alleged breach of this Agreement by the other, or for any other
dispute arising out of any act or omission of you or the Company affecting,
involving or relating to this Agreement, shall be final and binding arbitration
conducted by and pursuant to the Employment Dispute Resolution Rules of the
American Arbitration Association in the County of San Francisco, California. The
Parties expressly waive venue in any other county or state in which they live or
might live.
(b) Time
Before demanding arbitration, the Party making the demand shall serve
written notice upon the other Party of the alleged breach or claim. Such written
notice must be served by hand delivery or by being placed in the U.S. Mail,
postage pre-paid, return receipt requested, or with an overnight mail delivery
service, not more than ninety (90) days after the breach or after the claim
arises. Failure timely to serve such notice shall constitute a waiver of the
claim. The party upon whom the notice is served shall have thirty (30) days from
the date of receipt of the notice to respond. If the party upon whom the notice
is served fails to respond within that time, of if the claim is not resolved
within that time, the party seeking arbitration must serve a demand for
arbitration upon the American Arbitration Association within fourteen (14) days.
Failure timely to serve the demand shall constitute a waiver of the claim.
(c) Expenses and Attorneys' Fees
The prevailing party in any such proceeding, as determined by the
arbitrator, shall be entitled to an award of its reasonable attorneys' fees and
costs, including the full cost of the arbitration.
15. Limitation on Employee Rights
This Agreement does not give you the right to be retained in the
service of the Company.
16. Validity
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
17. Counterparts
This Agreement may be executed in several counterparts, each of which
will be deemed an original, but all of which will constitute one and the same
instrument.
18. Giving Notice
(a) To the Company
All communications from you to the Company relating to this Agreement
must be sent to the Company in writing, addressed as follows (or in any other
manner the Company notifies you to use):
If Mailed Harding Lawson Associates
Attention: Greg Klein
7655 Redwood Boulevard
P. O. Box 578
Novato, California 94948
If Faxed Harding Lawson Associates
Attention: Greg Klein
Fax: (415) 892 - 0685
Tel.: (415) 892 - 0821
(b) To You
All communications from the Company to you relating to this Agreement
must be sent to you in writing, addressed as indicated at the end of this
Agreement.
19. Definitions
(a) Agreement
"Agreement" means this contract, as amended.
(b) Beneficial Owner
"Beneficial Owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
(c) Board
"Board" means the Board of Directors of the Company.
(d) Cause
"Cause" means any of the following:
(1) Willful Failure to Perform Duties. You continue willfully to
fail to perform your duties for the Company after a written
demand for performance has been delivered to you by the Board
that specifically identifies how you have failed to perform.
Your conduct will not be considered "willful" if you
reasonably believed that you were acting in the best interests
of the Company or if your failure to perform was caused by
your physical or mental illness. You may not be terminated for
Cause under this paragraph after you have properly notified
the Company that you are resigning for Good Reason.
(2) Willful Adverse Conduct. You willfully engage in conduct that
is demonstrably and materially injurious to the Company or its
affiliates, monetarily or otherwise. Your conduct will not be
considered "willful" if you reasonably believed that you were
acting in the best interests of the Company.
(e) Change in Control
"Change in Control," means the first of the following to occur after
the date of this Agreement:
(1) Acquisition of Controlling Interest. Any Person becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 51 percent or more of the combined voting
power of the Company's then outstanding securities. In
applying the preceding sentence, securities acquired directly
from the Company or its affiliates by or for the Person shall
not be taken into account.
(2) Merger Approved. The shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation unless: (a) the voting securities of the Company
outstanding immediately before the merger or consolidation
would continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least 60 percent of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
and (b) no Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 51
percent or more of the combined voting power of the Company's
then outstanding securities.
(3) Sale of Assets. The shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets or a plan of
complete liquidation of the Company.
(f) Change in Management
"Change in Management," means the Company has hired a new Chief
Executive Officer ("CEO").
(g) Code
"Code" means the Internal Revenue Code of 1986, as amended.
(h) Company
"Company" means Harding Lawson Associates Group Inc. and any successor
to its business or assets that (by operation of law, or otherwise) assumes and
agrees to perform this Agreement. However, for purposes of determining whether a
Change in Control has occurred in connection with such a succession, the
successor shall not be considered to be the Company.
(i) Disability
"Disability" means that, due to physical or mental illness: (i) you
have been absent from the full-time performance of your duties with the Company
for substantially all of a period of 6 consecutive months; (ii) the Company has
notified you that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of Disability.
(j) Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) Good Reason
"Good Reason" means the occurrence of any of the following without your
express written consent after the Change:
(1) Demotion. Your duties and responsibilities are substantially
and adversely altered from those in effect immediately before
the Change, other than merely as a result of the Company
ceasing to be a public company, a change in your title, or
your transfer to an affiliate.
(2) Pay Cut. Your annual base salary is reduced other than as part
of across-the-board salary reductions affecting all employees
of similar status employed by the Company and any Person in
control of the Company.
(3) Relocation. Your principal office is transferred to another
location, which increases your one-way commute to work by more
than 50 miles, based on your residence when the transfer was
announced or, if you consent to the transfer, the Company
fails to pay (or reimburse you) for all reasonable moving
expenses you incur in changing your principal residence in
connection with the relocation and to indemnify you against
any loss you may realize when you sell your principal
residence in connection with the relocation in an arm's-length
sale for adequate consideration. For purposes of the preceding
sentence, your "loss" will be the difference between the
actual sales price of your residence and the higher of: (a)
your aggregate investment in the residence; or (b) the fair
market value of the residence, as determined by a real estate
appraiser designated by you and satisfactory to the Company.
(4) Discontinuance of Compensation Plan Participation. Other than
as part of an across-the-board reduction affecting all
employees of similar status employed by the Company and any
Person in control of the Company, the Company fails to
continue, or continue your participation in, any compensation
plan in which you participated immediately before the Change
that is material to your total compensation, unless an
equitable substitute arrangement has been adopted or made
available on a basis not materially less favorable to you than
the plan in effect immediately before the Change, both as to
the benefits you receive and your level of participation
relative to other participants. The plans referred to in the
preceding sentence include such programs as Incentive
Compensation Plan and Incentive Stock Option Plan (if still in
effect immediately before the Change), similar programs, and
any substitute plans adopted before the Change.
(5) Discontinuance of Benefits. Other than as part of an
across-the-board change affecting all employees of similar
status employed by the Company, the Company stops providing
you with benefits that, in the aggregate, are substantially as
valuable to you as those you enjoyed immediately before the
Change under the Company's pension, savings, deferred
compensation, life insurance, medical, health, disability,
accident, vacation, and any other fringe benefit plans,
programs, and arrangements.
(6) Notice of Prospective Action. During the Term of this
Agreement, you are officially notified or it is officially
announced that the Company will take any of the actions listed
above.
However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (a) you do not terminate employment within 90 days after the event
occurs; (b) the Company reverses the action or cures the default that
constitutes Good Reason before you terminate employment; or (c) you were a
primary instigator of the Good Reason event and the circumstances make it
inappropriate for you to receive benefits under this Agreement (e.g., you agree
temporarily to relinquish your position on the occurrence of a merger
transaction you negotiate). If you have Good Reason to terminate employment, you
may do so even if you are on a leave of absence due to physical or mental
illness or any other reason.
(l) Person
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Section 13(d) of that Act, and shall include a "group,"
as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(m) Potential Change in Control
"Potential Change in Control" means that any of the following has
occurred during the term of this Agreement:
(1) Agreement Signed. The Company enters into an agreement that
will result in a Change in Control.
(2) Notice of Intent to Seek Change in Control. The Company or any
Person publicly announces an intention to take or to consider
taking actions that will result in a Change in Control.
(3) Board Declaration. With respect to this Agreement, the Board
adopts a resolution declaring that a Potential Change in
Control has occurred.
(n) Severance Benefits
"Severance Benefits" means your benefits under Section 6 of this
Agreement.
(o) Term of this Agreement
"Term of this Agreement" means the period that commences on the date of
this Agreement and ends on the later of:
(1) The last day of the 24th month from the date of this Agreement.
or
(2) The last day of the 12th month from the Change.
Date 02/22/99 /s/ Greg P. Klein
Gregory P. Klein
Vice President - Human Resources
Date 02/17/99 /s/ D. K. Stager
Donald K. Stager
Chairman - Compensation Committee
Date 02/17/99 /s/ Claude Corvino
Claude Corvino
Company notices to you shall be addressed as follows (or in any other manner you
notify the Company to use):
If Mailed Claude Corvino
1172 Wikiup Drive.
Santa Rosa, Ca. 95403
If Faxed Claude Corvino
Fax: N/A
Tel.: (707) 545-4664
RETENTION AGREEMENT
This Agreement between Arthur C. Riese (you) and Harding Lawson Associates Group
Inc. (Company) have been entered into as of February 17, 1999. This Agreement
promises you severance benefits if, following a Change of Control, a Potential
Change in Control or a Change of Management, (referred to collectively hereafter
as the "Change") you are terminated without Cause or resign for Good Reason
during the Term of this Agreement. Capitalized terms are defined in the last
section of this Agreement.
1. Purpose
The Company considers a sound and vital management team to be
essential. Management personnel who become concerned about the possibility that
the Company may undergo a Change in Control or a Change in Management may
terminate employment or become distracted. Accordingly, the Board has determined
that appropriate steps should be taken to minimize the distraction executives
may suffer from the possibility of a Change in Control or Management. One step
is to enter into this Agreement with you.
2. Your Promise
If one or more of the events set forth in section 3 below occur during
the Term of this Agreement, you promise not to resign for at least 12 full
calendar months except as follows: (a) you may resign if you are given Good
Reason to do so; and (b) you may terminate employment on account of retirement
on or after attaining age 65 or because you become unable to work due to serious
illness or injury.
3. Events That Trigger Severance Benefits
(a) Termination After a Change in Management
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Management has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(b) Termination After a Change in Control
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Control has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(c) Termination After a Potential Change in Control
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement and within twelve months after a Potential
Change in Control has occurred but before a Change in Control actually occurs,
your employment is terminated by the Company without Cause or you resign for
Good Reason, but only if either: (i) you are terminated at the direction of a
Person who has entered into an agreement with the Company that will result in a
Change in Control; or (ii) the event constituting Good Reason occurs at the
direction of such Person.
(d) Successor Fails To Assume This Agreement
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement, a successor to the Company fails to assume
this Agreement, as provided in Section 13(a).
4. Events That Do Not Trigger Severance Benefits
You will not be entitled to Severance Benefits if your employment ends
because you are terminated for Cause or on account of Disability or because you
resign without Good Reason, retire, or die. Except as provided in Section 3(c),
you will not be entitled to Severance Benefits while you remain protected by
this Agreement and remain employed by the Company, its affiliates, or their
successors.
5. Termination Procedures
If you are terminated by the Company after the Change and during the
Term of this Agreement, you will receive written notice of your termination If
you are being terminated for Cause, your notice of termination will include a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board (at a meeting of the Board called
and held for the purpose of considering your termination (after reasonable
notice to you and an opportunity for you and your counsel to be heard before the
Board)) finding that, in the good faith opinion of the Board, Cause for your
termination exists and specifying the basis for that opinion in detail.
6. Severance Benefits
(a) In General
If you become entitled to Severance Benefits under this Agreement, you
may receive all of the Severance Benefits described in this Section. Severance
benefits will be payable to you following your termination of employment only if
you deliver to the Company (on the form and by the deadline it prescribes) your
executed general release of all claims you may have against the Company and its
affiliates relating to your termination of employment, other than claims under
this Agreement, indemnification rights for your acts in the course and scope of
your employment, or under ERISA-regulated employee benefit plans of the Company.
(b) Lump-Sum Payment in Lieu of Future Compensation
In lieu of any further cash compensation for periods after your
employment ends, you will be paid a cash lump sum equal to 1.0 times your annual
base salary in effect when your employment ends or, if higher, in effect
immediately before the Change, or Good Reason event for which you terminate
employment
(c) Group Insurance Benefit Continuation
During the period that begins when you become entitled to Severance
Benefits under this Agreement and ends on the last day of the 12th calendar
month beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, the life, disability, accident, and health insurance
benefits (or substantially similar benefits) it was providing to you and your
spouse and dependents immediately before you became entitled to Severance
Benefits under this Agreement (or immediately before a benefit reduction that
constitutes Good Reason, if you terminate employment for that Good Reason).
These benefits shall be treated as satisfying the Company's COBRA obligations.
After benefit continuation under this subsection ends, you and your spouse and
dependents will be entitled to any remaining COBRA rights.
(d) Acceleration of Vesting under Stock Option Plans
To the extent permitted by the terms of the plans or under applicable
law, your rights to options granted under any of the Company's stock option
plans shall be immediately vested.
(e) Allowance for Professional Services
You will receive an allowance of $10,000 for your use for outplacement,
legal services, tax advice, or other professional services in connection with
the termination of your employment with the Company. Upon presentation of
invoices, the Company will pay the service providers directly until the
allowance has been exhausted. If any balance remains in the allowance fund at
the end of six months following termination, that balance will be paid to you in
a lump sum; the unused balance shall be determined on the basis of invoices
received by the Company on or before the end of the allowance period. The
Company shall have no other responsibility for expenses incurred by you except
as otherwise set forth in this Agreement.
(f) Payment of Accrued Personal Time Off ("PTO")
The Company will pay you all PTO that has accrued through the date your
employment terminates. No additional PTO shall accrue thereafter.
(g) Deferred Compensation Plans
Your vested rights under the Company's 401(k) Salary Deferral Plan and
the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to
be governed by the terms and conditions of the Plan documents and applicable
law.
7. Time for Payment
You will be paid your cash Severance Benefits within 15 days after you
become entitled to Severance Benefits under this Agreement (e.g., within 15 days
following your termination of employment
8. Relation to Other Severance Programs
Your Severance Benefits under this Agreement are in lieu of any
severance or similar benefits that may be payable to you under any other
employment agreement or other arrangement; to the extent any such benefits are
paid to you, they shall be applied to reduce the amount due under this
Agreement. This Agreement constitutes the entire agreement between you and the
Company and its affiliates with respect to such benefits. Notwithstanding any
other provision of this Agreement, if you are terminated for any reason not
addressed by this Agreement, other than termination for Cause, you will receive
separation benefits consistent with the Companys written severance policy or six
months salary, whichever is greater.
9. Disability
Following a Change in Control, while you are absent from work as a
result of physical or mental illness, the Company will continue to pay you your
full salary and provide you all other compensation and benefits payable to you
under the Company's compensation or benefit plans, programs, or arrangements.
These payments will stop if and when your employment is terminated by the
Company for Disability or at the end of the Term of this Agreement, whichever is
earlier. Severance Benefits under this Agreement are not payable if you are
terminated on account of your Disability.
10. Effect of Reemployment
Your Severance Benefits will not be reduced by any other compensation
you earn or could have earned.
11. Successors
(a) Assumption Required
In addition to obligations imposed by law on a successor to the
Company, during the Term of this Agreement the Company will require any
successor to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company was required to perform. If the Company
fails to obtain such an assumption and agreement before the effective date of a
succession, you will be entitled to Severance Benefits as if you were terminated
by the Company without Cause on the effective date of that succession.
Notwithstanding the foregoing, you and the Company or its successor may in
writing agree to replace or modify the terms of this Agreement.
(b) Heirs and Assigns
This Agreement will inure to the benefit of, and be enforceable by,
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If you die while any amount is
still payable to you under this Agreement, that amount will be paid to the
executor, personal representative, or administrator of your estate.
12. Amendments
This Agreement may be modified only by a written agreement executed by
you and the Chairman of the Board of Directors of the Company.
13. Governing Law
This Agreement creates a "top hat" employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in accordance with that law; the Company is the "plan
administrator." To the extent that state law is applicable, the statutes and
common law of the State of California (excluding its choice of law statutes or
common law) shall apply.
14. Dispute Resolution
(a) Sole Remedy
Both you and the Company agree that the sole and exclusive remedy for
any alleged breach of this Agreement by the other, or for any other dispute
arising out of any act or omission of you or the Company affecting, involving or
relating to this Agreement, shall be final and binding arbitration conducted by
and pursuant to the Employment Dispute Resolution Rules of the American
Arbitration Association in the County of San Francisco, California. The Parties
expressly waive venue in any other county or state in which they live or might
live.
(b) Time
Before demanding arbitration, the Party making the demand shall serve
written notice upon the other Party of the alleged breach or claim. Such written
notice must be served by hand delivery or by being placed in the U.S. Mail,
postage pre-paid, return receipt requested, or with an overnight mail delivery
service, not more than ninety (90) days after the breach or after the claim
arises. Failure timely to serve such notice shall constitute a waiver of the
claim. The party upon whom the notice is served shall have thirty (30) days from
the date of receipt of the notice to respond. If the party upon whom the notice
is served fails to respond within that time, of if the claim is not resolved
within that time, the party seeking arbitration must serve a demand for
arbitration upon the American Arbitration Association within fourteen (14) days.
Failure timely to serve the demand shall constitute a waiver of the claim.
(c) Expenses and Attorneys' Fees
The prevailing party in any such proceeding, as determined by the
arbitrator, shall be entitled to an award of its reasonable attorneys' fees and
costs, including the full cost of the arbitration.
15. Limitation on Employee Rights
This Agreement does not give you the right to be retained in the
service of the Company.
16. Validity
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
17. Counterparts
This Agreement may be executed in several counterparts, each of which
will be deemed an original, but all of which will constitute one and the same
instrument.
18. Giving Notice
(a) To the Company
All communications from you to the Company relating to this Agreement
must be sent to the Company in writing, addressed as follows (or in any other
manner the Company notifies you to use):
If Mailed Harding Lawson Associates
Attention: Greg Klein
7655 Redwood Boulevard
P. O. Box 578
Novato, California 94948
If Faxed Harding Lawson Associates
Attention: Greg Klein
Fax: (415) 892 - 0685
Tel.: (415) 892 - 0821
(b) To You
All communications from the Company to you relating to this Agreement
must be sent to you in writing, addressed as indicated at the end of this
Agreement.
19. Definitions
(a) Agreement
"Agreement" means this contract, as amended.
(b) Beneficial Owner
"Beneficial Owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
(c) Board
"Board" means the Board of Directors of the Company.
(d) Cause
"Cause" means any of the following:
(1) Willful Failure to Perform Duties. You continue willfully to
fail to perform your duties for the Company after a written
demand for performance has been delivered to you by the Board
that specifically identifies how you have failed to perform.
Your conduct will not be considered "willful" if you
reasonably believed that you were acting in the best interests
of the Company or if your failure to perform was caused by
your physical or mental illness. You may not be terminated for
Cause under this paragraph after you have properly notified
the Company that you are resigning for Good Reason.
(2) Willful Adverse Conduct. You willfully engage in conduct that
is demonstrably and materially injurious to the Company or its
affiliates, monetarily or otherwise. Your conduct will not be
considered "willful" if you reasonably believed that you were
acting in the best interests of the Company.
(e) Change in Control
"Change in Control," means the first of the following to occur after
the date of this Agreement:
(1) Acquisition of Controlling Interest. Any Person becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 51 percent or more of the combined voting
power of the Company's then outstanding securities. In
applying the preceding sentence, securities acquired directly
from the Company or its affiliates by or for the Person shall
not be taken into account.
(2) Merger Approved. The shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation unless: (a) the voting securities of the Company
outstanding immediately before the merger or consolidation
would continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least 60 percent of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
and (b) no Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 51
percent or more of the combined voting power of the Company's
then outstanding securities.
(3) Sale of Assets. The shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets or a plan of
complete liquidation of the Company.
(f) Change in Management
"Change in Management," means the Company has hired a new Chief
Executive Officer ("CEO").
(g) Code
"Code" means the Internal Revenue Code of 1986, as amended.
(h) Company
"Company" means Harding Lawson Associates Group Inc. and any successor
to its business or assets that (by operation of law, or otherwise) assumes and
agrees to perform this Agreement. However, for purposes of determining whether a
Change in Control has occurred in connection with such a succession, the
successor shall not be considered to be the Company.
(i) Disability
"Disability" means that, due to physical or mental illness: (i) you
have been absent from the full-time performance of your duties with the Company
for substantially all of a period of 6 consecutive months; (ii) the Company has
notified you that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of Disability.
(j) Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) Good Reason
"Good Reason" means the occurrence of any of the following without your
express written consent after the Change:
(1) Demotion. Your duties and responsibilities are substantially
and adversely altered from those in effect immediately before
the Change, other than merely as a result of the Company
ceasing to be a public company, a change in your title, or
your transfer to an affiliate.
(2) Pay Cut. Your annual base salary is reduced other than as part
of across-the-board salary reductions affecting all employees
of similar status employed by the Company and any Person in
control of the Company.
(3) Relocation. Your principal office is transferred to another
location, which increases your one-way commute to work by more
than 50 miles, based on your residence when the transfer was
announced or, if you consent to the transfer, the Company
fails to pay (or reimburse you) for all reasonable moving
expenses you incur in changing your principal residence in
connection with the relocation and to indemnify you against
any loss you may realize when you sell your principal
residence in connection with the relocation in an arm's-length
sale for adequate consideration. For purposes of the preceding
sentence, your "loss" will be the difference between the
actual sales price of your residence and the higher of: (a)
your aggregate investment in the residence; or (b) the fair
market value of the residence, as determined by a real estate
appraiser designated by you and satisfactory to the Company.
(4) Discontinuance of Compensation Plan Participation. Other than
as part of an across-the-board reduction affecting all
employees of similar status employed by the Company and any
Person in control of the Company, the Company fails to
continue, or continue your participation in, any compensation
plan in which you participated immediately before the Change
that is material to your total compensation, unless an
equitable substitute arrangement has been adopted or made
available on a basis not materially less favorable to you than
the plan in effect immediately before the Change, both as to
the benefits you receive and your level of participation
relative to other participants. The plans referred to in the
preceding sentence include such programs as Incentive
Compensation Plan and Incentive Stock Option Plan (if still in
effect immediately before the Change), similar programs, and
any substitute plans adopted before the Change.
(5) Discontinuance of Benefits. Other than as part of an
across-the-board change affecting all employees of similar
status employed by the Company, the Company stops providing
you with benefits that, in the aggregate, are substantially as
valuable to you as those you enjoyed immediately before the
Change under the Company's pension, savings, deferred
compensation, life insurance, medical, health, disability,
accident, vacation, and any other fringe benefit plans,
programs, and arrangements.
(6) Notice of Prospective Action. During the Term of this
Agreement, you are officially notified or it is officially
announced that the Company will take any of the actions listed
above.
However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (a) you do not terminate employment within 90 days after the event
occurs; (b) the Company reverses the action or cures the default that
constitutes Good Reason before you terminate employment; or (c) you were a
primary instigator of the Good Reason event and the circumstances make it
inappropriate for you to receive benefits under this Agreement (e.g., you agree
temporarily to relinquish your position on the occurrence of a merger
transaction you negotiate). If you have Good Reason to terminate employment, you
may do so even if you are on a leave of absence due to physical or mental
illness or any other reason.
(l) Person
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Section 13(d) of that Act, and shall include a "group,"
as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(m) Potential Change in Control
"Potential Change in Control" means that any of the following has
occurred during the term of this Agreement:
(1) Agreement Signed. The Company enters into an agreement that
will result in a Change in Control.
(2) Notice of Intent to Seek Change in Control. The Company or any
Person publicly announces an intention to take or to consider
taking actions that will result in a Change in Control.
(3) Board Declaration. With respect to this Agreement, the Board
adopts a resolution declaring that a Potential Change in
Control has occurred.
(n) Severance Benefits
"Severance Benefits" means your benefits under Section 6 of this
Agreement.
(o) Term of this Agreement
"Term of this Agreement" means the period that commences on the date of
this Agreement and ends on the later of:
(1) The last day of the 24th month from the date of this Agreement.
or
(2) The last day of the 12th month from the Change.
Date 02/22/99 /s/Greg P. Klein
Gregory P. Klein
Vice President - Human Resources
Date 02/17/99 /s/D.K. Stager
Donald K. Stager
Chairman - Compensation Committee
Date 02/17/99 /s/Arthur C. Riese
Arthur C. Riese
Company notices to you shall be addressed as follows (or in any other manner you
notify the Company to use):
If Mailed Arthur C. Riese
1025 S. Josephine.
Denver, CO 80209
If Faxed Arthur C. Riese
Fax: N/A
Tel.: (303) 733-2379
EXECUTIVE RETENTION AGREEMENT
This Agreement between Gregory A. Thornton (you) and Harding Lawson
Associates Group Inc. (Company) have been entered into as of February 17, 1999.
This Agreement promises you severance benefits if, following a Change of
Control, a Potential Change in Control or a Change of Management, (referred to
collectively hereafter as the "Change") you are terminated without Cause or
resign for Good Reason during the Term of this Agreement. Capitalized terms are
defined in the last section of this Agreement.
1. Purpose
The Company considers a sound and vital management team to be
essential. Management personnel who become concerned about the possibility that
the Company may undergo a Change in Control or a Change in Management may
terminate employment or become distracted. Accordingly, the Board has determined
that appropriate steps should be taken to minimize the distraction executives
may suffer from the possibility of a Change in Control or Management. One step
is to enter into this Agreement with you.
2. Your Promise
If one or more of the events set forth in section 3 below occur during
the Term of this Agreement, you promise not to resign for at least 12 full
calendar months except as follows: (a) you may resign if you are given Good
Reason to do so; and (b) you may terminate employment on account of retirement
on or after attaining age 65 or because you become unable to work due to serious
illness or injury.
3. Events That Trigger Severance Benefits
(a) Termination After a Change in Management
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Management has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(b) Termination After a Change in Control
You will receive Severance Benefits under this Agreement if, during the
Term of this Agreement and within twelve months after a Change in Control has
occurred, your employment is terminated by the Company without Cause (other than
on account of your Disability) or you resign for Good Reason.
(c) Termination After a Potential Change in Control
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement and within twelve months after a Potential
Change in Control has occurred but before a Change in Control actually occurs,
your employment is terminated by the Company without Cause or you resign for
Good Reason, but only if either: (i) you are terminated at the direction of a
Person who has entered into an agreement with the Company that will result in a
Change in Control; or (ii) the event constituting Good Reason occurs at the
direction of such Person.
(d) Successor Fails To Assume This Agreement
You also will receive Severance Benefits under this Agreement if,
during the Term of this Agreement, a successor to the Company fails to assume
this Agreement, as provided in Section 13(a).
4. Events That Do Not Trigger Severance Benefits
You will not be entitled to Severance Benefits if your employment ends
because you are terminated for Cause or on account of Disability or because you
resign without Good Reason, retire, or die. Except as provided in Section 3(c),
you will not be entitled to Severance Benefits while you remain protected by
this Agreement and remain employed by the Company, its affiliates, or their
successors.
5. Termination Procedures
If you are terminated by the Company after the Change and during the
Term of this Agreement, you will receive written notice of your termination If
you are being terminated for Cause, your notice of termination will include a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board (at a meeting of the Board called
and held for the purpose of considering your termination (after reasonable
notice to you and an opportunity for you and your counsel to be heard before the
Board)) finding that, in the good faith opinion of the Board, Cause for your
termination exists and specifying the basis for that opinion in detail.
6. Severance Benefits
(a) In General
If you become entitled to Severance Benefits under this Agreement, you
may receive all of the Severance Benefits described in this Section. Severance
benefits will be payable to you following your termination of employment only if
you deliver to the Company (on the form and by the deadline it prescribes) your
executed general release of all claims you may have against the Company and its
affiliates relating to your termination of employment, other than claims under
this Agreement, indemnification rights for your acts in the course and scope of
your employment, or under ERISA-regulated employee benefit plans of the Company.
(b) Lump-Sum Payment in Lieu of Future Compensation
In lieu of any further cash compensation for periods after your
employment ends, you will be paid a cash lump sum equal to 1.0 times your annual
base salary in effect when your employment ends or, if higher, in effect
immediately before the Change, or Good Reason event for which you terminate
employment
(c) Group Insurance Benefit Continuation
During the period that begins when you become entitled to Severance
Benefits under this Agreement and ends on the last day of the 12th calendar
month beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, the life, disability, accident, and health insurance
benefits (or substantially similar benefits) it was providing to you and your
spouse and dependents immediately before you became entitled to Severance
Benefits under this Agreement (or immediately before a benefit reduction that
constitutes Good Reason, if you terminate employment for that Good Reason).
These benefits shall be treated as satisfying the Company's COBRA obligations.
After benefit continuation under this subsection ends, you and your spouse and
dependents will be entitled to any remaining COBRA rights.
(d) Acceleration of Vesting under Stock Option Plans
To the extent permitted by the terms of the plans or under applicable
law, your rights to options granted under any of the Company's stock option
plans shall be immediately vested.
(e) Allowance for Professional Services
You will receive an allowance of $10,000 for your use for outplacement,
legal services, tax advice, or other professional services in connection with
the termination of your employment with the Company. Upon presentation of
invoices, the Company will pay the service providers directly until the
allowance has been exhausted. If any balance remains in the allowance fund at
the end of six months following termination, that balance will be paid to you in
a lump sum; the unused balance shall be determined on the basis of invoices
received by the Company on or before the end of the allowance period. The
Company shall have no other responsibility for expenses incurred by you except
as otherwise set forth in this Agreement.
(f) Payment of Accrued Personal Time Off ("PTO")
The Company will pay you all PTO that has accrued through the date your
employment terminates. No additional PTO shall accrue thereafter.
(g) Deferred Compensation Plans
Your vested rights under the Company's 401(k) Salary Deferral Plan and
the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to
be governed by the terms and conditions of the Plan documents and applicable
law.
7. Time for Payment
You will be paid your cash Severance Benefits within 15 days after you
become entitled to Severance Benefits under this Agreement (e.g., within 15 days
following your termination of employment
8. Relation to Other Severance Programs
Your Severance Benefits under this Agreement are in lieu of any
severance or similar benefits that may be payable to you under any other
employment agreement or other arrangement; to the extent any such benefits are
paid to you, they shall be applied to reduce the amount due under this
Agreement. This Agreement constitutes the entire agreement between you and the
Company and its affiliates with respect to such benefits. Notwithstanding any
other provision of this Agreement, if you are terminated for any reason not
addressed by this Agreement, other than termination for Cause, you will receive
separation benefits consistent with the Companys written severance policy or six
months salary, whichever is greater.
9. Disability
Following a Change in Control, while you are absent from work as a
result of physical or mental illness, the Company will continue to pay you your
full salary and provide you all other compensation and benefits payable to you
under the Company's compensation or benefit plans, programs, or arrangements.
These payments will stop if and when your employment is terminated by the
Company for Disability or at the end of the Term of this Agreement, whichever is
earlier. Severance Benefits under this Agreement are not payable if you are
terminated on account of your Disability.
10. Effect of Reemployment
Your Severance Benefits will not be reduced by any other compensation
you earn or could have earned.
11. Successors
(a) Assumption Required
In addition to obligations imposed by law on a successor to the
Company, during the Term of this Agreement the Company will require any
successor to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company was required to perform. If the Company
fails to obtain such an assumption and agreement before the effective date of a
succession, you will be entitled to Severance Benefits as if you were terminated
by the Company without Cause on the effective date of that succession.
Notwithstanding the foregoing, you and the Company or its successor may in
writing agree to replace or modify the terms of this Agreement.
(b) Heirs and Assigns
This Agreement will inure to the benefit of, and be enforceable by,
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If you die while any amount is
still payable to you under this Agreement, that amount will be paid to the
executor, personal representative, or administrator of your estate.
12. Amendments
This Agreement may be modified only by a written agreement executed by
you and the Chairman of the Board of Directors of the Company.
13. Governing Law
This Agreement creates a "top hat" employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in accordance with that law; the Company is the "plan
administrator." To the extent that state law is applicable, the statutes and
common law of the State of California (excluding its choice of law statutes or
common law) shall apply.
14. Dispute Resolution
(a) Sole Remedy
Both you and the Company agree that the sole and exclusive
remedy for any alleged breach of this Agreement by the other, or for any other
dispute arising out of any act or omission of you or the Company affecting,
involving or relating to this Agreement, shall be final and binding arbitration
conducted by and pursuant to the Employment Dispute Resolution Rules of the
American Arbitration Association in the County of San Francisco, California. The
Parties expressly waive venue in any other county or state in which they live or
might live.
(b) Time
Before demanding arbitration, the Party making the demand shall serve
written notice upon the other Party of the alleged breach or claim. Such written
notice must be served by hand delivery or by being placed in the U.S. Mail,
postage pre-paid, return receipt requested, or with an overnight mail delivery
service, not more than ninety (90) days after the breach or after the claim
arises. Failure timely to serve such notice shall constitute a waiver of the
claim. The party upon whom the notice is served shall have thirty (30) days from
the date of receipt of the notice to respond. If the party upon whom the notice
is served fails to respond within that time, of if the claim is not resolved
within that time, the party seeking arbitration must serve a demand for
arbitration upon the American Arbitration Association within fourteen (14) days.
Failure timely to serve the demand shall constitute a waiver of the claim.
(c) Expenses and Attorneys' Fees
The prevailing party in any such proceeding, as determined by the
arbitrator, shall be entitled to an award of its reasonable attorneys' fees and
costs, including the full cost of the arbitration.
15. Limitation on Employee Rights
This Agreement does not give you the right to be retained in the
service of the Company.
16. Validity
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
17. Counterparts
This Agreement may be executed in several counterparts, each of which
will be deemed an original, but all of which will constitute one and the same
instrument.
18. Giving Notice
(a) To the Company
All communications from you to the Company relating to this Agreement
must be sent to the Company in writing, addressed as follows (or in any other
manner the Company notifies you to use):
If Mailed Harding Lawson Associates
Attention: Greg Klein
7655 Redwood Boulevard
P. O. Box 578
Novato, California 94948
If Faxed Harding Lawson Associates
Attention: Greg Klein
Fax: (415) 892 - 0685
Tel.: (415) 892 - 0821
(b) To You
All communications from the Company to you relating to this Agreement
must be sent to you in writing, addressed as indicated at the end of this
Agreement.
19. Definitions
(a) Agreement
"Agreement" means this contract, as amended.
(b) Beneficial Owner
"Beneficial Owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
(c) Board
"Board" means the Board of Directors of the Company.
(d) Cause
"Cause" means any of the following:
(1) Willful Failure to Perform Duties. You continue willfully to
fail to perform your duties for the Company after a written
demand for performance has been delivered to you by the Board
that specifically identifies how you have failed to perform.
Your conduct will not be considered "willful" if you
reasonably believed that you were acting in the best interests
of the Company or if your failure to perform was caused by
your physical or mental illness. You may not be terminated for
Cause under this paragraph after you have properly notified
the Company that you are resigning for Good Reason.
(2) Willful Adverse Conduct. You willfully engage in conduct that
is demonstrably and materially injurious to the Company or its
affiliates, monetarily or otherwise. Your conduct will not be
considered "willful" if you reasonably believed that you were
acting in the best interests of the Company.
(e) Change in Control
"Change in Control," means the first of the following to occur after
the date of this Agreement:
(1) Acquisition of Controlling Interest. Any Person becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company representing 51 percent or more of the combined voting
power of the Company's then outstanding securities. In
applying the preceding sentence, securities acquired directly
from the Company or its affiliates by or for the Person shall
not be taken into account.
(2) Merger Approved. The shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation unless: (a) the voting securities of the Company
outstanding immediately before the merger or consolidation
would continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least 60 percent of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
and (b) no Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 51
percent or more of the combined voting power of the Company's
then outstanding securities.
(3) Sale of Assets. The shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets or a plan of
complete liquidation of the Company.
(f) Change in Management
"Change in Management," means the Company has hired a new Chief
Executive Officer ("CEO").
(g) Code
"Code" means the Internal Revenue Code of 1986, as amended.
(h) Company
"Company" means Harding Lawson Associates Group Inc. and any successor
to its business or assets that (by operation of law, or otherwise) assumes and
agrees to perform this Agreement. However, for purposes of determining whether a
Change in Control has occurred in connection with such a succession, the
successor shall not be considered to be the Company.
(i) Disability
"Disability" means that, due to physical or mental illness: (i) you
have been absent from the full-time performance of your duties with the Company
for substantially all of a period of 6 consecutive months; (ii) the Company has
notified you that it intends to terminate you on account of Disability; and
(iii) you do not resume the full-time performance of your duties within 30 days
after receiving notice of your intended termination on account of Disability.
(j) Exchange Act
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) Good Reason
"Good Reason" means the occurrence of any of the following without your
express written consent after the Change:
(1) Demotion. Your duties and responsibilities are substantially
and adversely altered from those in effect immediately before
the Change, other than merely as a result of the Company
ceasing to be a public company, a change in your title, or
your transfer to an affiliate.
(2) Pay Cut. Your annual base salary is reduced other than as part
of across-the-board salary reductions affecting all employees
of similar status employed by the Company and any Person in
control of the Company.
(3) Relocation. Your principal office is transferred to another
location, which increases your one-way commute to work by more
than 50 miles, based on your residence when the transfer was
announced or, if you consent to the transfer, the Company
fails to pay (or reimburse you) for all reasonable moving
expenses you incur in changing your principal residence in
connection with the relocation and to indemnify you against
any loss you may realize when you sell your principal
residence in connection with the relocation in an arm's-length
sale for adequate consideration. For purposes of the preceding
sentence, your "loss" will be the difference between the
actual sales price of your residence and the higher of: (a)
your aggregate investment in the residence; or (b) the fair
market value of the residence, as determined by a real estate
appraiser designated by you and satisfactory to the Company.
(4) Discontinuance of Compensation Plan Participation. Other than
as part of an across-the-board reduction affecting all
employees of similar status employed by the Company and any
Person in control of the Company, the Company fails to
continue, or continue your participation in, any compensation
plan in which you participated immediately before the Change
that is material to your total compensation, unless an
equitable substitute arrangement has been adopted or made
available on a basis not materially less favorable to you than
the plan in effect immediately before the Change, both as to
the benefits you receive and your level of participation
relative to other participants. The plans referred to in the
preceding sentence include such programs as Incentive
Compensation Plan and Incentive Stock Option Plan (if still in
effect immediately before the Change), similar programs, and
any substitute plans adopted before the Change.
(5) Discontinuance of Benefits. Other than as part of an
across-the-board change affecting all employees of similar
status employed by the Company, the Company stops providing
you with benefits that, in the aggregate, are substantially as
valuable to you as those you enjoyed immediately before the
Change under the Company's pension, savings, deferred
compensation, life insurance, medical, health, disability,
accident, vacation, and any other fringe benefit plans,
programs, and arrangements.
(6) Notice of Prospective Action. During the Term of this
Agreement, you are officially notified or it is officially
announced that the Company will take any of the actions listed
above.
However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (a) you do not terminate employment within 90 days after the event
occurs; (b) the Company reverses the action or cures the default that
constitutes Good Reason before you terminate employment; or (c) you were a
primary instigator of the Good Reason event and the circumstances make it
inappropriate for you to receive benefits under this Agreement (e.g., you agree
temporarily to relinquish your position on the occurrence of a merger
transaction you negotiate). If you have Good Reason to terminate employment, you
may do so even if you are on a leave of absence due to physical or mental
illness or any other reason.
(l) Person
"Person" has the meaning given in Section 3(a)(9) of the Exchange Act,
as modified and used in Section 13(d) of that Act, and shall include a "group,"
as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries; (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities; or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(m) Potential Change in Control
"Potential Change in Control" means that any of the following has
occurred during the term of this Agreement:
(1) Agreement Signed. The Company enters into an agreement that
will result in a Change in Control.
(2) Notice of Intent to Seek Change in Control. The Company or any
Person publicly announces an intention to take or to consider
taking actions that will result in a Change in Control.
(3) Board Declaration. With respect to this Agreement, the Board
adopts a resolution declaring that a Potential Change in
Control has occurred.
(n) Severance Benefits
"Severance Benefits" means your benefits under Section 6 of this
Agreement.
(o) Term of this Agreement
"Term of this Agreement" means the period that commences on the date of
this Agreement and ends on the later of:
(1) The last day of the 24th month from the date of this Agreement.
or
(2) The last day of the 12th month from the Change.
Date 02/22/99 /s/Greg P. Klein
Gregory P. Klein
Vice President - Human Resources
Date 02/17/99 /s/D. K. Stager
Donald K. Stager
Chairman - Compensation Committee
Date 02/17/99 /s/Gregory A. Thornton
Gregory A. Thornton
Company notices to you shall be addressed as follows (or in any other manner you
notify the Company to use):
If Mailed Gregory A. Thornton
45 Molino Ave.
Mill Valley, Ca. 94941
If Faxed Gregory A. Thornton
Fax: N/A
Tel.: (415) 381 - 9059
<TABLE>
<CAPTION>
Exhibit No. 11
HARDING LAWSON ASSOCIATES GROUP, INC.
Computation of Per Share Earnings
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
February 28, February 28,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average basic shares outstanding 4,815 4,986 4,844 5,016
Net effect of dilutive stock options
based on the treasury stock
method. 15 156 46 81
- -------------------------------------------------------------------------------------------------------------------
Average diluted shares outstanding 4,830 5,142 4,890 5,097
===================================================================================================================
Net income $ 414 $ 254 $1,566 $2,065
===================================================================================================================
Basic and diluted earnings per
common share $ 0.09 $ 0.05 $ 0.32 $ 0.41
===================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 12560
<SECURITIES> 0
<RECEIVABLES> 46824
<ALLOWANCES> 2332
<INVENTORY> 0
<CURRENT-ASSETS> 60962
<PP&E> 26973
<DEPRECIATION> 21289
<TOTAL-ASSETS> 78122
<CURRENT-LIABILITIES> 26794
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 49950
<TOTAL-LIABILITY-AND-EQUITY> 78122
<SALES> 0
<TOTAL-REVENUES> 121466
<CGS> 0
<TOTAL-COSTS> 40693
<OTHER-EXPENSES> 78454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 2668
<INCOME-TAX> 1,123
<INCOME-CONTINUING> 1566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1566
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
