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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1999
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Commission File No. 0-17882
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3051642
(State of Incorporation) (I.R.S. Employer Identification No.)
320 NEEDHAM STREET, NEWTON UPPER FALLS, MASSACHUSETTS 02464
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 969-0050
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
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Common stock, par value $.01
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Number of Shares of Common Stock
outstanding at May 14, 1999 4,125,018
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The aggregate market value of voting stock of the registrant held by
non-affiliates of the registrant (i.e., stockholders who are not directors or
officers of the registrant and are not otherwise persons who control or are
controlled by or under common control with the registrant) was $16,183,036 as of
May 14, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the Annual Report to Stockholders of the registrant for fiscal year
1999 are incorporated by reference in Part II. The registrant intends to file
with the Securities and Exchange Commission a definitive proxy statement for the
Company's 1999 Annual Meeting of Stockholders within 120 days of the end of the
fiscal year ended February 28, 1999. Certain portions of such definitive proxy
statement are incorporated by reference in Part III of this Form 10-K.
The Index to Exhibits is located on Page 20.
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PART I
ITEM 1. BUSINESS
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GENERAL
GZA GeoEnvironmental Technologies, Inc. ("GZA") provides geotechnical
engineering, environmental consulting, environmental remediation and information
management systems to industrial, commercial, financial, public service and
government clients. Our geotechnical services involve the evaluation of soil,
rock and groundwater conditions for the design and construction of buildings,
highways, tunnels, dams, piers and other structures. Our environmental services
range from the initial assessment and evaluation of contaminated sites to the
design, construction and operation of remediation systems to treat, control or
remove contamination. We design and implement environmental health and safety
information management systems, applications and networks focused on intranet
networking platforms. We provide drilling, laboratory and instrumentation
services in support of geotechnical and environmental activities. Through our
information systems division, we provide integrated environmental information
management services.
GZA's strategy is to provide a wide range of services from the identification of
a potential problem through the design and implementation of a solution.
However, we often enter into contracts requiring only one of our services. We
believe that our ability to combine environmental, geotechnical and information
services differentiates us from many of our competitors. Environmental problems
frequently involve soil and groundwater contamination. Often, geotechnical
expertise is essential in developing the best remedial solutions. Such solutions
may involve excavation and removal of contaminated soil and groundwater,
containment by subsurface and surface hydraulic barriers, and management of
groundwater flow through soil and rock. In such situations, GZA's geotechnical
and environmental personnel work together to evaluate and develop engineered
solutions to environmental problems. Our information systems provide clients
with the data and flexibility they need to measure their environmental and
health and safety information and to comply with complex regulations. Our broad
base of technical skills enables GZA to offer efficient solutions to clients'
problems.
We provide services to clients through our subsidiaries and affiliates. GZA
GeoEnvironmental, Inc. primarily performs consulting, environmental remediation,
geotechnical and information management services. GZA Drilling, Inc. primarily
performs drilling operations. Both companies are wholly owned subsidiaries of
GZA GeoEnvironmental Technologies, Inc. In New York, services are provided by
our affiliate, Goldberg-Zoino Associates of New York, P.C., doing business as
GZA GeoEnvironmental of New York, a professional corporation owned by officers,
directors and stockholders of GZA. Aquaterra Environmental Consultants Limited,
GZA's 50%-owned joint venture in the United Kingdom, provides environmental
services in Europe.
SERVICES
We provide services in four broad categories: geotechnical engineering,
environmental consulting, environmental restoration, and information management
services. A project may involve activities in more than one of these categories.
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GEOTECHNICAL ENGINEERING SERVICES
Our geotechnical engineers evaluate the properties of soil and rock to develop
recommendations and specifications for the design and construction of structures
and civil works projects. Our clients include engineers and architects,
construction firms, public agencies, real estate developers and property owners.
SOIL AND ROCK ENGINEERING. GZA provides engineering design and construction
monitoring services in connection with earthwork projects, braced excavations,
dewatering operations, slope stability, geosynthetic applications, and ground
improvement.
FOUNDATION ENGINEERING. GZA provides consultation concerning foundation design
and construction. To formulate our recommendations, we perform geological
studies, subsurface exploration and laboratory testing to determine the
engineering properties of subsurface materials and to identify related
engineering and construction issues.
DAMS. GZA provides consulting, design and inspection services in connection with
new construction and the rehabilitation of concrete and embankment dams, dikes
and levees.
MARINE FACILITIES. GZA provides specialized geotechnical engineering and
structural design for the construction of new shoreline and off-shore marine
facilities and the rehabilitation and remediation of existing facilities.
TUNNELS. GZA provides geotechnical engineering for the design and construction
of shafts, tunnels and underground chambers in soil and rock for mass transit
programs, utilities, water supply systems, storm water runoff management
systems, highways and other uses. Our services include geological investigations
and mapping, recommendations for structural design and construction, and
installation and monitoring of instrumentation.
TRENCHLESS CONSTRUCTION. GZA helps owners, engineers and contractors make
decisions regarding the use of trenchless construction for utility development
and other projects. Our services include equipment applicability evaluations,
subsidence evaluations and groundwater control assessment. On site work may
involve use of pipe jacking, microtunneling and directional drilling.
SERVICES TO CONTRACTORS. GZA assists construction companies with specialized
technical services that deal with design, safety, environmental and quality
control issues. Examples of these services include:
- Pile Driving Studies/Testing - Vibration/Noise Monitoring
- Earthwork Control - Health and Safety Plans
- Cofferdam/Underpinning Design - Environmental Monitoring and Reporting
- Dewatering System Design - Materials Testing for Compliance
ENVIRONMENTAL CONSULTING SERVICES
We provide a wide variety of services relating to environmental issues. We seek
solutions that address regulatory requirements and are acceptable to clients in
terms of both cost and risk.
ENVIRONMENTAL MANAGEMENT AND REGULATORY COMPLIANCE SERVICES. GZA's services help
clients plan, coordinate and implement effective strategies to comply with
environmental and occupational health and safety regulations.
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Our services include:
- Compliance and Management - Strategic Planning
Systems Audits - ISO 14000 Services
- Regulatory Training - Permitting Assistance
- Occupational Health and Safety - Air Quality Engineering
- Wastewater Management - Pollution Prevention
- Stormwater and Solid and - Community Relations
Hazardous Waste Management
- Raw Materials Storage and
Management
ENVIRONMENTAL INVESTIGATIONS OF CONTAMINATED SITES AND FACILITIES. GZA performs
all aspects of environmental investigations for projects ranging from Superfund
sites to individual leaking underground storage tanks. Our services include:
- Hydrogeologic and Remedial Studies
- Facility Evaluation and Voluntary Corrective Actions
- Feasibility Studies and Remedial Design
RISK ASSESSMENT. GZA helps clients evaluate environmental data and quantify
potential risks posed to human or ecological receptors. Our services include:
- Human Health and Ecological Risk Assessment
- Development of Risk-Based Cleanup Levels
NATURAL RESOURCE EVALUATION AND PERMITTING. GZA identifies potential risks posed
to natural resources and develops solutions that are environmentally acceptable
and economically viable. Our environmental, geotechnical and civil engineering
services include:
- Water Resource Evaluation and - Wildlife and Aquatic Habitat
Aquifer Protection Evaluation
- Erosion Control and Stormwater - Wetland Impact Assessment and
Management Mitigation Design
PROPERTY TRANSFER STUDIES/ENVIRONMENTAL SITE ASSESSMENTS. GZA helps clients
assess risks associated with the purchase or management of real estate and
businesses. Our services include:
- Phase I and Phase II Environmental Site Assessments
- Property Condition Assessments
WATER RESOURCES ASSESSMENTS. GZA conducts water quality and benthic condition
surveys of reservoir and riverine systems, physical condition assessments for
dams and pumping networks associated with water supply facilities, and dredge
materials management investigations related to navigation channels.
SOLID WASTE MANAGEMENT SERVICES. GZA assists the owners and operators of
transfer stations and landfills in the siting, design, construction, operation,
maintenance, remediation, and closure of facilities. Services include:
- Feasibility/Siting Studies - Construction Management and Quality
- Environmental Impact Studies Inspection/Testing
- Geologic and Hydrogeologic - Facility Operations Engineering
Evaluations - Closure/Post Closure Monitoring
- Permitting - Environmental Remediation
- Facility Design/Build
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ENVIRONMENTAL RESTORATION SERVICES
GZA provides engineering, construction and construction management services to
help clients locate, identify and remediate environmental contamination. GZA
designs and implements its own restoration plan or constructs and operates
cleanup systems designed by others.
DESIGN AND CONSTRUCTION OF ENVIRONMENTAL TREATMENT SYSTEMS. GZA performs some or
all aspects of design, construction, installation, and start-up of remedial
treatment systems. GZA has designed, built and implemented systems for the
remediation of contaminated soil and groundwater using such methods as soil
stabilization/fixation, soil vapor extraction, counter-current aeration, carbon
adsorption, thermal desorption and bioremediation. GZA's systems may be remotely
managed using radio, dial-up and web-based information systems.
OPERATION AND MAINTENANCE SERVICES. GZA provides traditional and remote
telemetry-based operation and maintenance services for treatment systems as well
as performance evaluations, including periodic sampling and analyses of
contaminants to monitor cleanup progress.
DESIGN AND CONSTRUCTION OF CONTAINMENT SYSTEMS. GZA designs and constructs
containment systems, using a variety of techniques to physically isolate
contaminants from the surrounding environment.
HAZARDOUS MATERIALS MANAGEMENT. GZA acts as a general contractor on assignments
where the chosen remedial alternative is removal and off-site disposal of
hazardous or contaminated material. GZA oversees excavation, performs testing
and waste characterization, evaluates and monitors transportation and disposal
vendors, and assists with administration and regulatory compliance.
REMOVAL OR REPLACEMENT OF TANKS AND PIPING SYSTEMS. GZA provides underground
storage tank testing and assessment, regulatory compliance audit and planning
services and management of tank or piping upgrade, removal and installation.
ASBESTOS AND LEAD MANAGEMENT AND ABATEMENT. GZA provides a variety of services,
including asbestos survey and lead risk assessments, management of the abatement
process, air quality monitoring and development and periodic review of asbestos
management programs. Using qualified subcontractors, GZA will abate asbestos and
lead hazards as a prime contractor.
FACILITY CLOSURE AND RESTORATION. GZA provides integrated remediation services
to clients that are closing facilities and/or restoring contaminated sites for
redevelopment. Our services include environmental assessments, cost-benefit
analysis and remedial design and construction management. Our applications
include facility/equipment decontamination, decommissioning, demolition, as well
as lagoon and landfill closures and structure demolition. Projects can be
delivered via conventional owner, engineer, contractor relationships and
design-remediate project delivery mechanisms that include fixed price to closure
agreements.
INFORMATION MANAGEMENT SERVICES
Our Information Systems Division develops and delivers information management
solutions to clients, as well as administers our internal information management
strategy. This division complements and enhances our traditional role of
acquiring, accumulating and processing data, and presenting information to, or
on behalf of clients. The Information Systems Division's approach to information
management combines the latest information technology, computerized internal
information systems (intranets), the resources of the Internet, and sound
principles of the strategic use of information. GZA provides clients with
information-related services and systems that:
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- - enhance the client's ability to use data within its own organization and
improve operational and management efficiency, particularly in the area of
environmental and health and safety information management
- - reduce the cost of information management through a centralized enterprise
approach using Internet/intranet technology
- - enhance communication between GZA and our client
- - enhance communication for our clients and their customers
Our products and services are primarily web-enabled applications that advance
our client's use of the Internet and intranets. Examples of these applications
include the following:
CUSTOMERLINK(SM) is a web-based application that allows clients to access
information concerning their projects that is maintained on GZA's systems.
Through CustomerLink(SM), clients enter a secure on-line environment where they
can access electronic file cabinets of project-specific information and
collaborate with their project teams. This allows clients to directly
participate in their projects from anywhere in the world.
INFOLINK(SM) is a web-based environmental information management system that
simplifies and streamlines environmental health and safety information
management reporting. InfoLink(SM) consists of easily customized applications
that are specific to a client's needs and priorities. InfoLink(SM) applications
include:
- MSDS Management - Employee Training Management
- Safety/Health Incident Tracking - ISO 14000 Environmental Management
- Chemical Tracking and Reporting - Waste Minimization
- Regulatory Compliance Calendar - Air Emissions Tracking and Reporting
GEOGRAPHIC INFORMATION SYSTEMS AND APPLICATIONS (GIS) Geographic information
systems and applications technology links digital mapping with relational
databases. Our services include:
- Needs Assessment and Planning - Application Development
- Database Modeling and Design - Training and Support
The GIS technology provides the users with a visual image (i.e., a map of a
geographic area, a plant layout, etc.) for access to information about specific
points on the map. GZA's systems are designed to maintain data for:
- regulatory reporting/compliance in connection with landfill management and
manufacturing plant environmental data management
- energy usage analysis and management
- municipal land management, resource planning, permit control, development
planning, etc.
SUPPORT SERVICES
To support its services to clients, GZA maintains a geotechnical instrumentation
group, an environmental laboratory, a geotechnical laboratory and drilling
operations. By providing these services, GZA controls quality and provides
faster results than could generally be obtained from outsourcing such services.
GEOTECHNICAL INSTRUMENTATION. GZA's Soil and Rock Instrumentation Division
("SRI") supports our geotechnical and environmental projects and provides
specialty geotechnical instrumentation and engineering services to the heavy
construction industry and other clients. SRI maintains an instrumentation
laboratory and a fabrication shop. On geotechnical projects, SRI designs,
installs and monitors instruments to observe excavation support systems,
tunnels, and deep foundations during construction. On environmental projects,
SRI performs automated pump tests to assess aquifer characteristics. SRI also
works with the Information Systems Division to develop web-based applications
and custom software to be used in data acquisition systems for dams and
construction projects in which rapid data collection and analysis are required.
LABORATORIES. GZA's Environmental Chemistry Laboratory analyzes soil, water, air
and waste samples in connection with our environmental studies. Mobile
laboratory and vibratory drill rigs provide field sampling and small diameter
well installation as well as on-site, real-time chemical screening and analyses.
GZA's geotechnical laboratory performs analyses to determine permeability,
strength, compressibility and other engineering properties
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of rock cores and soil samples. The geotechnical laboratory also measures
geomembrane seam strength as well as frictional resistance between geomembranes
and soils or other geosynthetics.
DRILLING. GZA performs drilling, sampling and installation of monitoring and
recovery wells. Drilling to obtain samples usually forms part of the subsurface
investigation phase of both environmental and geotechnical projects. The
drilling operation also provides dewatering and pump test support services,
grouting and specialty foundation construction.
JOINT VENTURE
AQUATERRA ENVIRONMENTAL CONSULTANTS LIMITED (U.K.)
In 1991, GZA entered into a joint venture with Carl Bro Group (U.K.) Limited to
form Aquaterra Environmental Consultants Limited. The stock of Aquaterra
Environmental Consultants Limited is owned equally by GZA and Carl Bro Group.
Aquaterra Environmental Consultants Limited, with offices in Leeds, London and
Edinburgh, provides services related to contaminated land and groundwater
remediation, environmental compliance of operating facilities and geotechnical
engineering. We are currently in discussions with Carl Bro Group concerning the
future of the joint venture, and it is uncertain whether, and on what terms, the
Aquaterra joint venture will continue.
CUSTOMERS
Our client base includes industrial companies, owners and operators of solid
waste landfills, real estate developers, architects and engineers, construction
firms, parties to property transfers and financings (lenders, law firms,
corporations and developers) and public agencies. We derive most of our revenues
from the private sector. During the past year, the private sector accounted for
approximately 82% of net revenues.
In fiscal year 1999, we were actively engaged in approximately 3,700 assignments
for approximately 1,700 clients. These assignments ranged from brief projects
such as environmental site assessments and geotechnical foundation evaluations
to long-term projects such as multi-year hazardous waste cleanups and
geotechnical infrastructure projects. Most of our assignments lasted less than
six months in duration. Management estimates that 38% of net revenues in fiscal
1999 were derived from projects for which net revenues were $50,000 or less. In
fiscal year 1999, no one customer accounted for more than 5% of our net
revenues.
BACKLOG
As of April 30, 1999, we had a backlog of orders we believed to be firm of
approximately $47 million. This includes estimated amounts under orders on a
time and materials, unit price, or other basis without a fixed price. The amount
represents gross revenues, including costs of services and materials
subcontracted to third parties. Backlog at April 30, 1999 excludes the value of
government contracts that have been awarded but have not yet been executed
and/or funded. It also excludes the value of contract options that have not yet
been exercised. As of April 30, 1998, we had a backlog of orders calculated on
same basis of approximately $26 million. Because work can be terminated by the
client at any time, there is no assurance that all the amounts included in
backlog will ultimately be realized, even if covered by written contracts or
task orders.
COMPETITION
The markets for environmental and geotechnical services have become increasingly
competitive. We compete with many different small local firms and large regional
and national firms having substantially greater financial and marketing
resources than we have. Competition in both the environmental and geotechnical
services markets is based primarily on quality, diversity of services,
geographic location, price and reputation. In some geographic markets, GZA
provides environmental engineering and consulting, geotechnical engineering
design and contractor
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support services. Some state and local statutes and regulations may inhibit our
ability to compete for construction work in areas at or near sites where we have
formerly provided engineering or design services. Management believes we are one
of a few firms that offers a combination of environmental consulting,
remediation, geotechnical engineering with integrated information management
services. Management believes that the ability to provide this range of services
enhances our competitive position in our market areas.
IMPACT OF ENVIRONMENTAL REGULATION
The business of GZA and its clients is subject to a wide range of overlapping
federal, state and local environmental laws and regulations. These laws and
regulations have helped to create a demand for many of our services. Changes in
environmental laws and regulations, in the regulatory climate generally, and in
the resources available to and priorities of the federal, state and local
agencies responsible for enforcement of environmental laws and regulations could
materially affect demand for our services.
Reductions of the budgets of the U.S. Environmental Protection Agency and
Department of Defense, ongoing legislative proposals to narrow the scope of some
federal statutes, and delays in the U.S. Environmental Protection Agency
legislation could result in reduced demand for our services. Conversely,
regulatory reform initiatives designed to shift responsibility for environmental
compliance and enforcement from government agencies to private parties could
create new opportunities for us. Such initiatives have been taken in
Massachusetts and Connecticut where supervision of the clean-up of contaminated
sites has for the most part been delegated by state regulatory officials to
"licensed site professionals" or "licensed environmental professionals" employed
by private entities. We employ a number of individuals qualified and licensed in
these and other states in which we provide services. Regulatory reform
initiatives may also reduce the cost of environmental cleanups and therefore may
encourage more private remediation projects. Whether such initiatives will lead
to an increased need for our services is uncertain. There can be no assurance
that changes in the regulatory climate and in environmental statutes and
regulations will not result in reduced demand for such services.
The principal statutes affecting our business and the markets it serves include
the following:
RESOURCE CONSERVATION AND RECOVERY ACT OF 1976. The Resource Conservation and
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
establish a comprehensive regulatory scheme for the handling, transportation,
treatment, storage and disposal of hazardous waste. Although "cradle-to-grave"
responsibility for hazardous wastes rests with generators of the material, every
facility that treats, stores or disposes of specified minimum amounts of
hazardous waste must comply with specific operating, design, financial
responsibility and closure requirements. These requirements have contributed to
demand for our consulting services, permitting assistance, remedial design and
implementation and waste management services.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
addresses problems created by past handling and disposal of hazardous
substances. It requires the U.S. Environmental Protection Agency to identify
contaminated sites and to compel a wide array of "responsible parties" to pay
for necessary cleanup activities. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 also authorizes multiple damages and
penalties for non-compliance with the U.S. Environmental Protection Agency
orders and provides for the U.S. Environmental Protection Agency to perform
cleanup activities in appropriate circumstances. Our services include site
investigations, feasibility studies, development and implementation of
alternative remediation plans, oversight of contractors and support and expert
testimony for related litigation.
FEDERAL WATER POLLUTION CONTROL ACT OF 1972. The Federal Water Pollution Control
Act of 1972 establishes a system of standards, permits and enforcement
procedures for the discharge into water of pollutants from industrial
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and municipal sources. The law sets treatment standards for industries and
wastewater treatment plants. The law also regulates and requires permits for
development and construction activities involving wetlands and navigable waters.
We provide a range of services in connection with this regulatory scheme,
including regulatory permitting assessments, conceptual design planning,
wastewater pretreatment engineering, assistance with environmental impact
studies, reports and applications for environmental permits and construction
services.
CLEAN AIR ACT AMENDMENTS OF 1990. The Clean Air Act Amendments of 1990 consist
of major initiatives to attain and maintain national ambient air quality
standards. These standards ensure that new sources of potential atmospheric
emissions are equipped with appropriate pollution control technology and ensure
that emissions of hazardous air pollutants are controlled to the maximum extent
possible. The law requires a comprehensive operating permit program. We provide
a range of air quality services including emission inventories, preparation of
permit applications, and oversight of contractors.
OTHER REGULATIONS. In addition to federal environmental regulations, many states
and local authorities have enacted laws regulating activities affecting the
environment. Some of these laws impose differing, and sometimes stricter,
standards than their federal counterparts. Examples include a variety of
statutes related to "Brownfields" initiatives. Brownfields are abandoned or
underutilized properties where actual or perceived contamination may interfere
with redevelopment. Many states are encouraging reuse of such sites by
implementing regulations that establish clean-up standards based on current
risks and reasonably foreseeable future site use, rather than theoretical risks
and unlikely end uses. Some states also may provide covenants not to sue or
agreements that document the regulators' acceptance of the clean-up process.
Such covenants and agreements may be transferable with the property.
The national trend at the state and federal levels of risk-based cleanups of
contaminated properties may have a positive impact on the demand for our
services. We are working on a number of projects involving Brownfields sites,
providing services ranging from initial investigation through final
construction. We also are seeking investments in contaminated property to apply
our remediation experience to produce attractive financial returns. Through a
limited liability company or other affiliations with experienced property
developers, we are seeking premium returns with controlled risks.
POTENTIAL LIABILITY, RISK MANAGEMENT AND INSURANCE
Our professional environmental consulting, remediation design and geotechnical
engineering services, as well as our remedial construction, drilling and test
boring operations, involve risks of significant liability for environmental and
property damage, personal injury, economic loss, and costs, fines and penalties
assessed by regulatory agencies. Liability for environmental contamination and
for providing environmental services is a developing area of the law, and it is
difficult to assess accurately the potential risks to us.
Some statutes and judicial decisions impose strict liability on a party that
causes or contributes to the release of contaminants into the environment, even
if the party acted without negligence or fault. Under certain circumstances, a
government or private party might allege that our own analytical, consulting or
remedial activities subjected us to liability under various statutes or
regulations. Services by our environmental consultants as licensed site
professionals and licensed environmental professionals may expose us to
additional liability. In addition to our potential liability under statutes and
common law, we sometimes agree to indemnify clients for losses and expenses they
may incur as a result of our services. Some of these losses may not be covered
by our insurance.
Our information management services also pose risks associated primarily with
systems' security.
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We maintain comprehensive programs for risk management, health and safety
training and medical monitoring of field employees, quality assurance and
quality control and loss prevention. We seek to limit our liability to the
client and to require the client to indemnify us for costs and liabilities not
caused by our negligence or misconduct. However, not all contracts include these
provisions. There is no assurance that such provisions can be enforced or that
our clients will always have adequate financial resources to stand behind these
types of contractual promises.
We have a broad-range risk management and insurance program with large
commercial insurers. We maintain workers' compensation/employer's liability,
commercial general, automobile and umbrella liability coverage. This coverage is
written on an incident/occurrence basis. Our property is insured for loss or
damage. We also maintain environmental professional liability policies that
cover professional liability, contractor's environmental liability and completed
operations, with aggregate limits each of $5 million in excess of a deductible
of $500,000 per claim/ $1,000,000 in the annual aggregate written on a
claims-made/occurrence-type basis (respectively) for events since 1964. Shared
umbrella and follow-form excess liability coverage is secured in the amount of
$50,000,000 under one policy concurrent with the various underlying coverages.
The law concerning the extent of coverage available under liability insurance
policies in the context of environmental claims is unsettled and is likely to
remain unsettled in the foreseeable future. All of our policies permit
termination by the insurer without cause subject to a notice period. There is no
assurance that we will be able to maintain or replace our insurance policies,
that premiums will remain at levels that economically permit the maintenance of
such coverage, that all claims that may be asserted against us will be covered
by insurance or that such claims will not exceed the coverage limits.
EMPLOYEES
On April 30, 1999, we had 459 employees, including 384 technical personnel. Our
technical staff consists of civil and environmental engineers, geologists,
drillers and a number of specialists in such fields as hydrology, chemistry,
toxicology, biology and industrial hygiene. Management believes that our future
success depends in large part on its ability to attract and retain qualified
professional staff. The market for such professionals is competitive.
ITEM 2. PROPERTIES
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Our corporate and administrative headquarters and one of our district offices,
are located in Newton Upper Falls, Massachusetts, where we occupy two buildings.
One of the buildings is approximately 42,000 square feet and has a lease that
extends through February 2001. During fiscal year 1999, we paid approximately
$714,000 in base rent for this facility. The other location in Newton Upper
Falls is for approximately 10,000 square feet. In fiscal year 1999, we paid
approximately $140,000 in base rent for this facility.
GZA leases 21 other principal facilities located in: Vernon, Connecticut;
Duluth, Georgia; Portland, Maine; Brockton, Massachusetts; West Newton,
Massachusetts; Worcester, Massachusetts; Livonia, Michigan; Grand Rapids,
Michigan; Manchester, New Hampshire; Wayne, New Jersey; Hammonton, New Jersey;
Buffalo, New York; New York City, New York; Rochester, New York; Monroe, North
Carolina; Coraopolis, Pennsylvania; Providence, Rhode Island; Dallas, Texas;
Rutland, Vermont; South Burlington, Vermont and Pewaukee, Wisconsin. These other
facilities have a combined square footage of approximately 103,000 square feet.
Aggregate base rent for all facilities leased by us (other than our facilities
in Newton Upper Falls) during fiscal year 1999 totaled approximately $1,105,000.
Lease terms expire at various times through January 31, 2004.
We believe that existing facilities are adequate to meet our current
requirements. We also believe that suitable additional or substitute space will
be available on reasonable terms as needed to accommodate expansion of
operations.
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In addition to its leasehold interests in real property, we also own computer
equipment, vehicles, drilling rigs, laboratory equipment and instrumentation,
remediation treatment equipment and other machinery, equipment and furniture.
ITEM 3. LEGAL PROCEEDINGS
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We are party to several legal proceedings arising in the normal course of
business. Management believes that the outcome of these actions will not,
individually or in the aggregate, have a material adverse effect on the results
of operations or financial condition of GZA.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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The information appearing under the caption "Supplemental Information" in the
Annual Report to Stockholders of the Company for the fiscal year ended February
28, 1999, in the form included as Exhibit 13.1 to this annual report on Form
10-K, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
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The information appearing under the caption "Summary Financial Information" in
the 1999 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1999 Annual
Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
GZA does not hold derivative financial investments, derivative commodity
investments or other financial investments or engage in foreign currency hedging
or other transactions that expose us to material market risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The information appearing under the captions "Consolidated Balance Sheets,"
"Consolidated Statements of Operations and Comprehensive Income," "Consolidated
Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows,"
and "Notes to Consolidated Financial Statements" in the 1999 Annual Report is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
- -----------------------------------------------------------------------------
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------------------------------------------------------------------------------
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------
The information called for by Items 10, 11, 12 and 13 is incorporated by
reference to the definitive proxy statement relating to the Annual Meeting of
Stockholders of the Company to be held on July 13, 1999 (the "1999 Proxy
Statement"), to be filed with the Commission no later than 120 days after the
end of the fiscal year covered by this report.
12
<PAGE> 13
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
(a) Documents filed as part of the report:
(1) The following consolidated financial statements of GZA GeoEnvironmental
Technologies, Inc. and its Subsidiaries and Affiliate included in the
1999 Annual Report are incorporated by reference in Item 8:
Report of Independent Accountants.
Consolidated Balance Sheets at February 28, 1999 and 1998.
Consolidated Statements of Operations and Comprehensive Income
for the fiscal years ended February 28, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the fiscal
years ended February 28, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the fiscal years
ended February 28, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements for the fiscal years
ended February 28, 1999, 1998 and 1997.
(2) The following consolidated financial statement schedule of GZA
GeoEnvironmental Technologies, Inc. and its Subsidiaries and Affiliate
is included in this report:
Report of Independent Accountants
PAGE
----
Schedule II Valuation and Qualifying Accounts 19
(3) EXHIBITS.
EXHIBIT NO. DESCRIPTION
3.1* Restated Certificate of Incorporation of the Company
3.3* Amended and Restated By-Laws of the Company
4.1* Specimen certificate for the Common Stock of the Company
10.2* Indenture of Lease dated September 5, 1984 and effective as of
December 1, 1981, and First Amendment to Indenture of Leases,
between GZA and Donald T. Goldberg and William S. Zoino, for the
GEO Building, Newton Upper Falls, Massachusetts
10.6* 1989 Incentive Stock Option Plan of the Company
10.7* 1989 Non-Qualified Stock Option Plan of the Company
13
<PAGE> 14
10.21* Support Services Agreement among the Company, Goldberg-Zoino
Associates of New York, P.C. and GZA, dated July 26, 1989
10.22*** Stockholders' Agreement among GZANY, Richard M. Simon and Joseph
D. Guertin, Jr. dated May 1, 1996, together with related Powers of
Attorney
10.23*** Voting Trust Agreement among the Company, GZANY, Messrs. Simon and
Guertin, and Richard M. Simon, as Trustee, dated May 1, 1996
10.24*** Indemnification Agreement among the Company, GZA GeoEnvironmental,
Inc. and Messrs. Simon and Guertin dated May 1, 1996
10.25* Security Agreement between GZANY and the Company dated July
26,1989
10.26* Credit Agreement among the Company, GZANY and GZA dated July 26,
1989
10.30** Revolving Credit and Term Loan Agreement among Fleet Bank and the
Company and its subsidiaries and affiliate dated February 28, 1994
10.34** Amendment No. 1 to 1989 Incentive Stock Option Plan of the Company
10.35** GZA 1995 Stock Incentive Plan
10.37** Lease Agreement dated January 1, 1992 between GZRI Associates and
GZA GeoEnvironmental, Inc. for the Providence, Rhode Island
district office
10.38** Lease Agreement dated March 1, 1992 between GZAIAT Associates and
GZA Drilling, Inc. for the Brockton, Massachusetts facilities of
GZA Drilling, Inc.
10.39** Second Amendment dated December 11, 1991 to Indenture of Lease
listed as Exhibit 10.2 hereto
10.40** Form of Confidentiality, Non-Disclosure and Restrictive Covenant
Agreement between the Company and, respectively, Donald T.
Goldberg, Andrew P. Pajak, M. Joseph Celi, Richard M. Simon, John
E. Ayres, William E. Hadge, Lawrence Feldman, Joseph P. Hehir,
Joseph D. Guertin, Jr., and certain other employees
10.42** Form of Group Life Insurance Plan for key employees; letter
describing coverage levels
10.43** Form of Indemnity Agreement between the Company and its respective
directors
10.51+ Form of Assignment of Beneficial Interest between GZA
GeoEnvironmental, Inc. ("Assignee") and, respectively, John E.
Ayres, Joseph D. Guertin, Jr., and Steven J. Trettel
("Assignors"), dated June, 1996, to transfer each Assignor's one
sixth (1/6) beneficial interest in the GZA Investment Associates
Trust to Assignee
10.52+ Form of Assignment of Beneficial Interest and Indemnity Agreement
between GZA GeoEnvironmental, Inc. ("Assignee") and Donald T.
Goldberg ("Assignor"), dated June, 1996, to transfer Assignor's
one sixth (1/6) beneficial interest in the GZA Investment
Associates Trust to Assignee
14
<PAGE> 15
10.53++ Second Loan Modification Agreement, dated as of August 7, 1997, to
the Revolving Credit and Term Loan Agreement among Fleet Bank and
the Company and its subsidiaries and affiliate included as Item
10.30, including a Promissory Note dated August 7, 1997 and a form
of Promissory Note.
10.54 GZA Restated 401(k) Profit Sharing Plan, effective as of
January 1, 1998
10.55 Memorandum of Understanding, Transfer of Assets, Contract
Obligations and Personnel From Raamot Associates, P.C. to GZA
GeoEnvironmental of New York; Confidentiality, Non-disclosure and
Restrictive Covenant Agreement between GZA and Tonis Raamot; Bill
of Sale - Personal Good Will of Tonis Raamot, P.E.
13.1 Annual Report of Stockholders of the Company for the fiscal year
ended February 28, 1999 (Portions Incorporated by reference only)
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
27.2++ Restated Financial Data Schedule for the fiscal year ended
February 29, 1996
27.3++ Restated Financial Data Schedule for the fiscal year ended
February 28, 1997
- --------------
* Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (File No. 333-29369)
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1995, as filed with the Commission on
June 12, 1995.
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996, as filed with the Commission on
May 24, 1996.
+ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1997, as filed with the Commission on
May 29, 1997.
++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended February 28, 1998, as filed with the Commission on
May 29, 1998.
(b) Reports on Form 8-K: None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
Date: May 26, 1999 /s/ ANDREW P. PAJAK
-----------------------
Andrew P. Pajak
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ ANDREW P. PAJAK May 26, 1999
- ----------------------
Andrew P. Pajak Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ JOSEPH P. HEHIR May 26, 1999
- ----------------------
Joseph P. Hehir Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ DONALD T. GOLDBERG May 26, 1999
- ----------------------
Donald T. Goldberg Director
/s/ M. JOSEPH CELI May 26, 1999
- ----------------------
M. Joseph Celi Director
/s/ JOSEPH D. GUERTIN May 26, 1999
- ----------------------
Joseph D. Guertin Director
16
<PAGE> 17
/s/ WILLIAM E. HADGE May 26, 1999
- -------------------------
William E. Hadge Director
/s/ DR. LEWIS MANDELL May 26, 1999
- -------------------------
Dr. Lewis Mandell Director
/s/ DR. THOMAS W. PHILBIN May 26, 1999
- -------------------------
Dr. Thomas W. Philbin Director
/s/ TIMOTHY W. DEVITT May 26, 1999
- -------------------------
Timothy W. Devitt Director
/s/ ROSE ANN GIORDANO May 26, 1999
- -------------------------
Rose Ann Giordano Director
/s/ DAVID B. PERINI May 26, 1999
- -------------------------
David B. Perini Director
17
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of GZA GeoEnvironmental Technologies,
Inc.:
Our report on the consolidated financial statements of GZA GeoEnvironmental
Technologies, Inc. has been incorporated by reference in this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 19 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
May 10, 1999
18
<PAGE> 19
SCHEDULE II
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
VALUATION AND QUALIFYING ACCOUNTS
Years Ended February 28, 1997, 1998, and 1999
Balance at Charged to
beginning costs and Balance at
Description of year expenses Write-offs end of year
----------- ------- -------- ---------- -----------
Year ended February 28, 1997
Allowance for doubtful accounts
(deducted from accounts
receivable) ........... $774,000 $ 525,000 $455,000 $ 844,000
Year ended February 28, 1998
Allowance for doubtful accounts
(deducted from accounts
receivable) ........... $844,000 $ 378,000 $323,000 $ 899,000
Year ended February 28, 1999
Allowance for doubtful accounts
(deducted from accounts
receivable) ........... $899,000 $2,021,000 $262,000 $2,658,000
19
<PAGE> 20
EXHIBIT INDEX
-------------
Exhibit
Number Description Page
- ------ ----------- ----
10.54 GZA Restated 401(k) Profit Sharing Plan, effective
as of January 1, 1998
10.55 Memorandum of Understanding, Transfer of Assets,
Contract Obligations and Personnel From Raamot
Associates, P.C. to GZA GeoEnvironmental of New York;
Confidentiality, Non-disclosure and Restrictive Covenant
Agreement between GZA and Tonis Raamot; Bill of Sale -
Personal Good Will of Tonis Raamot, P.E.
13.1 Annual Report to Stockholders of the Company for the
fiscal year ended February 28, 1999 (Portions incorporated
by reference only)
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth, for the periods indicated, (i) the percentage
which certain items in the consolidated statements of operations of the Company
bear to net revenues, and (ii) the percentage increase (decrease) in the dollar
amount of such items from year to year.
<TABLE>
<CAPTION>
Year-to-Year
Percentage Percentage
of Net Revenues Increase (Decrease)
- ------------------------------------------------------------------------------------------------------------------
Year Ended Fiscal Years
- ------------------------------------------------------------------------------------------------------------------
February 28, February 28, February 28, 1999 vs. 1998 vs.
1999 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues 100% 100% 100% 7% (1)%
Salaries and related costs 71 71 73 7 (3)
General and administrative expenses 24 24 26 4 (8)
Income, before other income and taxes 5 5 1 16 220
Other income, net 1 1 1 (13) 71
Provision for income taxes 2 2 1 11 200
Net income 4 4 1 10 159
</TABLE>
GENERAL
GZA's gross revenues include the cost of services and materials subcontracted to
third parties and certain expenditures such as equipment purchases, laboratory
testing, use of our field and technical equipment, travel, telephone and
reproduction charges that, under the terms of our contracts, are billed to
clients, generally with an added service and handling charge. Net revenues
exclude the amount of such reimbursable costs and expenditures but include the
corresponding service and handling charges. Net revenues also include estimates
for loss contingencies for disputed contract and pending change order items.
Accordingly, we regard net revenues, which reflect services provided and
revenues earned directly by us, as the primary measure of our business growth.
Salaries and related costs include the cost of professional, clerical and
administrative salaries, and related costs such as taxes, insurance, Incentive
Compensation Plan bonuses, which are based on total company and individual
performance goals, and other fringe benefits. General and administrative
expenses include costs of marketing, professional development and training,
professional and general liability insurance, claims and legal proceedings,
occupancy, depreciation, amortization, and clerical and administrative overhead.
On December 31, 1998, we acquired the business assets of Tonis Raamot, PE and
the personal property of Raamot Associates, PC of New York, NY. Raamot
Associates is a Manhattan-based geotechnical and construction engineering firm,
with ongoing projects including high-rise buildings, industrial and
manufacturing facilities, waterfront structures, large dams and storage
reservoirs, railroads, highways, tunnels, and sewage treatment plants. The total
acquisition price was $500,000 which consisted of $50,000 for the furniture and
fixtures of Raamot Associates, $50,000 for a covenant not-to-compete by Mr.
Raamot, and other intangible assets totaling $400,000. We also secured the
services of the former employees of Raamot Associates, PC and sublet the
premises. The furniture and fixtures are depreciated over estimated useful lives
ranging from three to five years. The covenant not-to-compete is amortized over
three years, and the intangible assets are amortized over ten years. We paid
$200,000 in cash upon consummation of the transaction, and gave the seller a
$300,000 non-interest bearing note for the remaining purchase price. This note
becomes due on December 31, 1999.
FISCAL 1999 AND 1998 VERSUS PRIOR YEARS
1999 vs. 1998 1998 vs. 1997
Increase Decrease 1997 Amount
-------- -------- -----------
Net Revenues. $2,457,000 6.5% ($360,000) (0.9%) $38,211,000
The increase in fiscal 1999 net revenues is attributable to an increase in
demand for our services in the Northeast and Great Lakes Regions. The increase
was offset by decrease in demand for our services in the Southeast Region and
lower prices received for contracted billable hours of our technical staff.
21
<PAGE> 22
The decrease in fiscal 1998 net revenues is attributable to our decision to
discontinue operations of the Phoenix, Arizona office in the second quarter of
fiscal 1998 and lower prices due to increasingly competitive market conditions
for geotechnical, environmental consulting and drilling services. The net
revenues decline was offset partially by an increase in billable hours of
technical staff for contracted activity in the Northeast Region.
1999 vs. 1998 1998 vs. 1997
Increase Decrease 1997 Amount
-------- -------- -----------
Salaries and
Related Costs. $1,786,000 6.6 % ($801,000) (2.9%) $27,782,000
Salaries and Related Costs. The increase in fiscal 1999 salaries and related
expenses is attributable to the increase in the number of full-time equivalent
professional and support staff employees, annual salary increases and Incentive
Compensation Plan bonuses. The salary and related costs increases were offset,
in part, by a net reduction in medical and workers' compensation insurance
expenses.
The decrease in fiscal 1998 salaries and related costs reflects reduced salary
and benefit costs as result of staffing and management restructuring efforts
which were initiated in fiscal 1997 and continued into fiscal 1998 and, to a
lesser extent, our decision to discontinue operations of the Phoenix office. The
salaries and related cost reductions were offset, in part, by an increase in
Incentive Compensation Plan bonus payments.
1999 vs. 1998 1998 vs. 1997
Increase Decrease 1997 Amount
-------- -------- -----------
General and
Administrative
Expenses. $ 385,000 4.2% ($804,000) (8.2%) $ 9,864,000
General and Administrative Expenses. The increase in fiscal 1999 general and
administrative expenses is attributable primarily to higher business
development, professional development and training, placement and recruiting,
consulting, and bad debt expenses which were offset, in part, by reductions in
professional liability claims and legal expenses and the lower net cost for
technical equipment and small tools and Computer Automated Design (CAD)
services.
The decrease in fiscal 1998 general and administrative expenses reflects
approximately $222,000 in lower occupancy cost as result of lease cost
reductions associated with our decision to downsize operations in fiscal 1997
and the decision to discontinue operations of the Phoenix office in the second
quarter of fiscal 1998. In addition, fiscal 1997 reflects a goodwill write-down
of $400,000 for prior years' acquisitions and approximately $300,000 in closing
costs for the Gainesville drilling operation.
1999 vs. 1998 1998 vs. 1997
DECREASE INCREASE 1997 AMOUNT
-------- -------- -----------
Other Income, Net. ($ 55,000) (12.5%) $181,000 70.7% $ 256,000
The decrease in fiscal 1999 other income, net is due primarily to the reduction
of interest income as a result of the increase in the average number of days
outstanding for accounts receivable and administrative delays in billing and
collecting for several large construction contracts and an increase in interest
expense from financing the growth of the business throughout fiscal 1999
including payment of $1,972,000 in capital expenditures. The decrease in other
income, net was offset by an increase in our equity income from Aquaterra
Environmental Consultants Limited ("Aquaterra"), a 50% owned joint venture with
Carl Bro Group (UK) Ltd. We are currently in discussions with Carl Bro Group
concerning the future of the joint venture, and it is uncertain whether, and on
what terms, the Aquaterra joint venture will continue. Discontinuance of the
joint venture could result in a reduction of our other income and adversely
affect our ability to address opportunities in the European market.
The increase in fiscal 1998 other income, net is due primarily to an increase in
interest income, a reduction in borrowing cost and an increase in our equity
income from Aquaterra.
Provision for Income Taxes. The provision for income taxes reflects effective
tax rates for fiscal 1999, 1998, and 1997 of 39%, 39%, and 36%, respectively.
Differences from the 34% federal statutory rate resulted primarily from the
combined effect of the addition of provisions for state taxes (net of federal
tax benefit), tax-exempt interest income, and other non-deductible items.
Quarterly Fluctuations and Seasonality. Our results may fluctuate from quarter
to quarter due to such factors as weather, the timing of major contracts, the
mix of projects and the level of subcontracted services involved, the timing of
additions to our professional and support staff (who may require health and
safety training and technical and project management training and, therefore,
may initially charge clients a lower percentage of their time), and the opening
or closing of offices. Operating results for any one fiscal quarter may not be
indicative of the results that will be achieved in any subsequent quarter or for
the year.
Inflation. Management does not believe that inflation has had a significant
effect on our results of operations.
22
<PAGE> 23
Future Operating Results. The volume of our services is affected by federal and
state government spending and changes in environmental regulations. In addition,
the industry is continuing to experience a period of consolidation, continuing
price competition and increasing salaries and demand for entry level and
experienced project managers. These trends are expected to continue.
Liquidity and Capital Resources. Cash used by operating activities was
$1,163,000 in fiscal 1999 compared with $3,265,000 provided by operations in
fiscal 1998. The $4,428,000 increase, in cash used, in fiscal 1999 is due
primarily to increases in accounts receivable and costs and estimated earnings
in excess of billings on uncompleted contracts. We are continuing to seek ways
to reduce delays in collection of accounts receivables particularly on large
projects where we are a third party subcontractor.
We made capital expenditures of $1,972,000 in fiscal 1999 and $1,232,000 in
1998. The increase in capital expenditures in fiscal 1999 reflects our
investments in revenue-producing information technology, testing and sampling
equipment, specialty drilling equipment rigs and accessories as well as
investments in computer technology to improve internal communications and to
address Year 2000 Compliance Program objectives.
GZA announced a 500,000 share buyback program during fiscal 1998 and had
purchased 500,000 shares at a cost of $2,442,000 as of February 28, 1999.
GZA has a Revolving Credit and Term Loan Agreement with Fleet Bank (the "Bank")
which provides for unsecured borrowings in the aggregate amount of $10,000,000.
The facility consists of a revolving credit line of $5,500,000 and a term loan
facility of $4,500,000. Revolving credit advances bear interest at the Bank's
floating base rate or, at our option, at LIBOR plus 200 basis points. Under the
terms of the line of credit, we are required to maintain a minimum net worth,
working capital, current ratio, quick ratio, tangible net worth and cash flow
coverage ratio. Term loans bear interest at the Bank's floating rate or, at our
option, at a fixed rate equal to the Bank's cost of funds plus 200 basis points.
At February 28, 1999, we had no borrowings under the revolving credit line and
no term loans.
GZA's cash and cash equivalents were $894,000 at the end of fiscal 1999 compared
with $4,594,000 at the end of fiscal 1998. Short-term investments were
$3,837,000 at the end of fiscal 1999 compared with $3,519,000 at the end of
fiscal 1998. These investments consist primarily of tax-exempt municipal bonds,
taxable U.S. Treasury Notes and other bonds and commercial paper.
Funding requirements for operations and for future growth are expected to be met
from existing cash and investments and funds generated from operations. We
believe that these sources will enable us to meet our cash requirements for at
least the next twelve months.
NEWLY ISSUED ACCOUNTING STANDARDS
In 1999, we adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income", which establishes standards for the reporting
and display of comprehensive income and its components.
In 1999, we adopted Financial Accounting Standards Board Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
statement revised guidelines for determining an entity's operating segments and
the type of financial information to be disclosed. The adoption of this
statement had no impact on the financial statements as we have one operating
segment.
YEAR 2000
GZA has established a comprehensive Year 2000 compliance program (Y2K Program)
designed to (1) identify computer systems (hardware and software) and non-IT
equipment (telecommunications equipment, laboratory instruments, technical
equipment, etc.) that may fail to recognize or properly process dates after
January 1, 2000, (2) upgrade or replace non-compliant components, systems, and
software, and (3) evaluate the Year 2000 readiness of our critical suppliers and
service providers. The progress of the Y2K Program is as follows.
MISSION-CRITICAL BUSINESS SYSTEMS
We have completed the remediation of the primary business systems with the
appropriate Y2K fixes/upgrades deployed and tested. The following upgraded
(Y2K-ready) systems are currently in production use:
23
<PAGE> 24
ACCOUNTING SYSTEM - Our accounting software has been updated to a later version
that reads any date with a two-digit year of 00 to 68 as a 21st century date and
any date with a two-digit year of 69 to 99 as a 20th century date. We believe
that the re-compiled software is fully Y2K-ready with respect to the handling
and processing of date information. The cost of the accounting software update
was approximately $2,000. Full verification and testing of the updated software
has been completed.
PAYROLL/HR SYSTEMS - Our payroll and human resource systems have been upgraded
from legacy DOS systems to ADP Payroll for Windows and ADP HR Perspective,
respectively. The cost of these upgrades, including new server hardware and
related equipment was approximately $30,000. The conversion of both the Payroll
and HR systems was complete as of December 31, 1998. Full verification and
testing of the new software was complete as of March 31, 1999.
COMPANY HEADQUARTER'S VOICE MAIL SYSTEM - The voice mail system that serves the
Newton Upper Falls, Massachusetts locations was replaced by a Y2K compliant
Octel Communications Model 200 Message Server at a cost of approximately
$30,000. We cut over to the new system on April 9, 1999. The Octel Model 200 has
been certified Y2K compliant by the vendor.
DESKTOP COMPUTING ENVIRONMENT (DESKTOP COMPUTERS, SERVERS AND NETWORK DEVICES)
We have completed a physical inventory and assessment of our computers and
computer-related hardware (PCs, servers and network components). With the
assistance of external consultants and the use of two Y2K assessment tools, we
have identified Y2K compliance problems with hardware (BIOS/RTC chips), software
applications, and data files (databases, spreadsheets, etc.). We are currently
in the process of planning client/server hardware, operating system software and
application upgrades/replacements to address the Y2K compliance issues. The
client/server remediation process is planned for completion on or before
September 30, 1999.
NON-IT EQUIPMENT
We have completed a physical inventory of our non-IT equipment. With the
assistance of an outside consultant, we have made significant progress in
assessing the Y2K status of various laboratory instruments and various pieces of
technical equipment. The assessment involves contact with the manufacturer of
each piece of equipment, by various means of inquiry, to determine compliance
status, test procedures and upgrade options. As of this report date, the
assessment is approximately 80 percent complete. Progress to date indicates that
most items checked are either compliant by design or do not rely on dates to
function or process data. To date, only two items have been found to be
non-compliant. An additional eight items may require a software upgrade
depending upon the software revision currently installed.
INSTALLED SYSTEMS (ENVIRONMENTAL MONITORING, TREATMENT AND PROCESS CONTROL
SYSTEMS)
We are conducting an inventory of environmental monitoring, treatment and
process control systems installed at client sites. Systems with electronic
controls that will be operating on and after January 1, 2000 are being assessed
for potential Year 2000 problems. We anticipate we will complete the Year 2000
assessment of our client active systems by June 30, 1999.
Although our contracts do not include Year 2000 warranties, the failure of such
installed systems to operate properly, after January 1, 2000, could lead to
disruption of our clients' business and substantial claims against us by our
clients. The nature and magnitude of the potential claims cannot be predicted at
this time. We will continue to evaluate the level of risk and nature of
uncertainties arising from potential Year 2000 non-compliance as we proceed with
our inventory and the Year 2000 assessment process. We will seek to cooperate
with our current and former clients to reduce the risk and impact of potential
date related failures in installed systems.
CRITICAL SUPPLIERS AND SERVICE PROVIDERS
We have solicited input from our key suppliers and service providers including
subcontractors, financial services firms (banks, insurance companies),
communications providers (telephone, dedicated data lines, internet service
providers), public utilities (electric, gas, water), service bureaus, and
benefits administrators regarding their Year 2000 status. We will determine
which, if any, pose a threat to the uninterrupted operation of our business in
the event that they experience system errors or failures. To date, approximately
50 percent of our key suppliers and service providers have responded to our
Y2K inquiry.
CONTINGENCY PLANNING
We have not developed Y2K contingency plans. Following (1) the internal
assessment, remediation and testing of all computer and non-IT equipment, and
(2) the evaluation of external dependencies, we will consider contingency
planning in areas where significant uncertainties remain.
ESTIMATED TOTAL COST
Although we expect that we will need to upgrade or replace various additional
computer systems, and possibly some non-IT equipment, we do not expect operating
costs or capital investments to be materially affected by Year 2000 related
expenditures. We estimate that operating and capital costs directly related to
our Y2K Program, through its completion, will range from $75,000 to $150,000 and
from $250,000 to $350,000, respectively. We plan to complete the remediation and
testing of all systems by September 30, 1999.
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of GZA GeoEnvironmental Technologies,
Inc. and Affiliate:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of stockholders'
equity, and of cash flows present fairly, in all material respects, the
financial position of GZA GeoEnvironmental Technologies, Inc. and its
subsidiaries and affiliate at February 28, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
May 10, 1999
25
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, 1999 and 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 894,000 $ 4,594,000
Available-for-sale securities 3,837,000 3,519,000
Accounts receivable, net 13,503,000 11,423,000
Costs and estimated earnings in excess of
billings on uncompleted contracts, net 8,018,000 7,261,000
Prepaid expenses and other current assets 149,000 133,000
Deferred income taxes 1,450,000 1,029,000
------------ ------------
Total current assets 27,851,000 27,959,000
Property and equipment, net 5,901,000 5,344,000
Other assets, net 1,505,000 918,000
------------ ------------
Total assets $ 35,257,000 $ 34,221,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 4,776,000 $ 4,373,000
Accrued payroll and expenses 3,900,000 4,283,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,313,000 1,835,000
Income taxes payable 311,000 102,000
------------ ------------
Total current liabilities 10,300,000 10,593,000
------------ ------------
Deferred income taxes 816,000 742,000
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized - 1,000,000 shares
issued and outstanding - none -- --
Common stock, $.01 par value; authorized - 14,000,000 shares;
issued (including treasury shares) - 4,078,104 shares at
February 28, 1999 and 4,027,440 shares at February 28, 1998 41,000 40,000
Capital in excess of par value 14,650,000 14,430,000
Accumulated other comprehensive income (10,000) (6,000)
Retained earnings (includes $926,000 and $890,000 of retained
earnings of the Company's consolidated affiliate at
February 28, 1999 and 1998, respectively) 11,902,000 10,393,000
------------ ------------
Subtotal 26,583,000 24,857,000
Less: Common stock held in treasury, at cost
(500,000 and 400,475 shares at February 28, 1999 and 1998,
respectively) (2,442,000) (1,971,000)
============ ============
Total stockholders' equity 24,141,000 22,886,000
============ ============
Total liabilities and stockholders' equity $ 35,257,000 $ 34,221,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE> 27
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the Years Ended February 28, 1999, 1998, and 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 60,653,000 $ 59,546,000 $ 59,340,000
Reimbursable expenses 20,345,000 21,695,000 21,129,000
------------ ------------ ------------
Net revenues 40,308,000 37,851,000 38,211,000
Costs and expenses:
Salaries and related costs 28,766,000 26,981,000 27,782,000
General and administrative 9,444,000 9,060,000 9,864,000
------------ ------------ ------------
Income before other income and taxes 2,098,000 1,810,000 565,000
------------ ------------ ------------
Other income (expense):
Interest income 254,000 346,000 311,000
Gain (loss) on sale of equipment, and other assets 4,000 (6,000) 27,000
Equity in net income of joint venture 175,000 97,000 28,000
Interest expense (50,000) -- (110,000)
------------ ------------ ------------
Total other income, net 383,000 437,000 256,000
------------ ------------ ------------
Income before provision for income taxes 2,481,000 2,247,000 821,000
Provision for income taxes 972,000 877,000 292,000
------------ ------------ ------------
Net income 1,509,000 1,370,000 529,000
Other comprehensive income - change in unrealized gains
(losses) on securities (4,000) 1,000 10,000
Comprehensive income $ 1,505,000 $ 1,371,000 $ 539,000
------------ ------------ ------------
Per share amounts:
Basic earnings per share $ .42 $ .35 $ .13
Basic weighted average shares 3,604,000 3,932,000 3,929,000
Diluted earnings per share $ .41 $ .34 $ .13
Diluted weighted average shares 3,674,000 3,973,000 3,929,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 28
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury Stock
------------------ Capital in Other ------------------ Total
Number of Par Excess of Comprehensive Retained Number of Stockholders'
Shares Value Par Value Income Earnings Shares Amount Equity
--------- ----- ---------- ------------- -------- --------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
February 29, 1996 3,865,610 $39,000 $13,949,000 $(17,000) $ 8,494,000 $22,465,000
Issuance of common stock 83,184 -- 253,000 253,000
Change in unrealized
losses on
available-for-sale
securities 10,000 10,000
Net income 529,000 529,000
--------- ------- ----------- -------- ----------- ------- ----------- -----------
Balance
February 28, 1997 3,948,794 39,000 14,202,000 (7,000) 9,023,000 23,257,000
Issuance of common stock 78,646 1,000 228,000 229,000
Change in unrealized
losses on
available-for-sale
securities 1,000 1,000
Net income 1,370,000 1,370,000
Buy back of treasury shares 400,475 $(1,971,000) (1,971,000)
--------- ------- ----------- -------- ----------- ------- ----------- -----------
Balance
February 28, 1998 4,027,440 40,000 14,430,000 (6,000) 10,393,000 400,475 (1,971,000) 22,886,000
Issuance of common stock 50,664 1,000 220,000 221,000
Change in unrealized
losses on
available-for-sale
securities (4,000) (4,000)
Net income 1,509,000 1,509,000
Buy back of treasury shares 99,525 (471,000) (471,000)
--------- ------- ----------- -------- ----------- ------- ----------- -----------
Balance
February 28, 1999 4,078,104 $41,000 $14,650,000 $(10,000) $11,902,000 500,000 $(2,442,000) $24,141,000
--------- ------- ----------- -------- ----------- ------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended February 28, 1999, 1998 and 1997 1999 1998 1997
- ------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,509,000 $ 1,370,000 $ 529,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,300,000 1,333,000 2,295,000
(Gain) loss on sale of equipment, other assets (4,000) 6,000 (27,000)
Equity in net income of joint venture (175,000) (97,000) (28,000)
Deferred (prepaid) income taxes (347,000) 442,000 (461,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net (2,080,000) 1,636,000 2,596,000
Decrease (increase) in costs and estimated earnings in excess of
billings on uncompleted contracts, net (1,279,000) (739,000) 248,000
Decrease (increase) in prepaid expenses and other current assets (16,000) 238,000 114,000
Decrease in refundable income taxes -- -- 138,000
(Decrease) increase in accounts payable, trade 103,000 (882,000) (230,000)
(Decrease) increase in accrued payroll and expenses (383,000) 219,000 (319,000)
Increase (decrease) in income taxes payable 209,000 (261,000) 363,000
----------- ----------- -----------
Net cash (used in) provided by operating activities (1,163,000) 3,265,000 5,218,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in available-for-sale securities (322,000) (64,000) (700,000)
Proceeds from disposal of equipment 155,000 82,000 216,000
Acquisition of property and equipment (1,972,000) (1,232,000) (995,000)
(Increase) decrease in other assets (148,000) 56,000 (108,000)
Decrease in due from affiliates -- -- 676,000
----------- ----------- -----------
Net cash used in investing activities (2,287,000) (1,158,000) (911,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 8,830,000 -- 3,542,000
Payments on line of credit (8,830,000) -- (3,542,000)
Repayments of notes payable -- -- (990,000)
Repayments of long-term debt -- -- (2,659,000)
Proceeds from issuance of common stock, net 221,000 229,000 253,000
Acquisition of treasury stock (471,000) (1,971,000) --
----------- ----------- -----------
Net cash used in financing activities (250,000) (1,742,000) (3,396,000)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (3,700,000) 365,000 911,000
Cash and cash equivalents at beginning of year 4,594,000 4,229,000 3,318,000
----------- ----------- -----------
Cash and cash equivalents at end of year $ 894,000 $ 4,594,000 $ 4,229,000
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 50,000 $ -- $ 110,000
Income taxes paid, net $ 1,110,000 $ 696,000 $ 248,000
Non cash investing activities:
Note payable issued in connection with asset acquisition: $ 300,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GZA GeoEnvironmental Technologies, Inc. and subsidiaries and affiliate ("GZA")
prepares its financial statements in accordance with generally accepted
accounting principles and has adopted accounting policies and practices which
are generally accepted in the industries in which it operates. GZA, a
multi-disciplinary consulting firm, provides a wide range of environmental
consulting, remediation, geotechnical and information system services to
industrial, commercial, financial, public service, and government clients. The
following are our significant accounting policies.
Basis of Consolidation. The accompanying consolidated financial statements
include the accounts of GZA GeoEnvironmental Technologies, Inc. and its wholly
owned subsidiaries and affiliate. All material intercompany transactions and
balances have been eliminated.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from reported amounts that
reflect estimates that require the use of significant judgment by management.
Such amounts include, but are not limited to, allowances for doubtful accounts,
reserves for unbilled amounts and claims reserves.
Revenues and Cost Recognition. Revenue from engineering service contracts is
recognized as the services are provided. Revenue from long-term contracts is
generally recognized on the percentage-of-completion method. Under this method,
we recognize the proportion of the total profit anticipated from the contract
which the cost of the work completed bears to the estimated total cost of the
contractual work. For contracts which extend over more than one year, revisions
in cost and earnings estimates during the course of the work are reflected in
the period when the facts requiring the revision become known. Provisions for
estimated losses on uncompleted contracts are made in the period when it is
determined a loss may occur. For purposes of determining the percentage of
completion, contract costs include all material, labor, and indirect costs
related to contract performance. Contracts relating to government-funded
projects may include clauses under which the contract may be terminated for the
convenience of the government, or be subject to renegotiation at the request of
the government based upon certain contractual conditions. If such contracts are
terminated or renegotiated, we reflect any adjustments in the period they become
known.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand and
investments in fixed income securities with original maturity dates of three
months or less.
Concentration of Credit Risk. Financial instruments which potentially expose us
to concentrations of credit risk consist primarily of trade accounts receivable
and costs and estimated earnings in excess of billings on uncompleted contracts.
We have not experienced significant losses related to receivables from
individual customers or groups of customers in a particular industry or
geographic area. Due to these factors, no additional credit risk beyond amounts
provided for collection losses is believed present in our accounts receivable
and costs and estimated earnings in excess of billings on uncompleted contracts.
Available-for-Sale Securities. Available-for-sale securities, consisting
primarily of tax exempt municipal bonds, taxable U.S. treasury notes and other
bonds and commercial paper, with original maturity dates of three months or
more, are carried at fair value. We limit the amount of our investments in any
one entity to minimize exposure to loss. The securities are reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
component of comprehensive income, and therefore as an adjustment to
stockholders' equity.
Property, Equipment and Depreciation. Property and equipment are stated at cost.
Additions and improvements, unless of a relatively minor amount, are
capitalized. Expenditures for normal maintenance and repairs are charged to
expense as incurred. The cost and related accumulated depreciation of property
and equipment sold or otherwise disposed of are eliminated from the accounts and
the resulting gains or losses are reflected in income. Depreciation is provided
using various straight-line and accelerated methods over the estimated useful
lives of the individual assets, which range from three to ten years. Leasehold
improvements are amortized on a straight-line basis over the estimated useful
life of the improvement or the remaining life of the lease, whichever is
shorter.
30
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Other Assets. Other assets consist principally of investments in unconsolidated
companies and the excess of cost over net assets acquired resulting from
acquisitions of businesses (goodwill). Amortization of these costs is computed
on a straight-line basis over the estimated useful life of other assets, ranging
from ten to twenty-five years. For the fiscal years ended February 28,
1999, 1998 and 1997, we recorded goodwill amortization expense of $29,000,
$19,000 and $439,000, respectively.
We periodically review the propriety of carrying amounts of our long-lived and
intangible assets, and periodically review the amortization periods, to
determine whether current events and circumstances warrant adjustments to the
carrying value or estimated useful lives. At each balance sheet date, management
evaluates whether there has been a permanent impairment in the value of such
assets by assessing the carrying value against anticipated future operating
results. Factors which management considers in performing the assessment include
past and projected operating results, trends and prospects. During fiscal 1997
we wrote off $400,000 of goodwill related to prior years' acquisitions.
Income Taxes. We account for income taxes pursuant to the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," under which the
liability method is used to account for deferred income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Computation of Earnings Per Share. Basic earnings per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
common shares outstanding during the period, including the dilutive effect of
common stock equivalents. Stock options having an exercise price below the
average fair market value of our common stock during the fiscal year are deemed
to be a common stock equivalent.
Newly Issued Accounting Standards. In 1999, we adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
establishes standards for the reporting and display of comprehensive income and
its components.
In 1999, we adopted Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
statement revised guidelines for determining an entity's operating segments and
the type of financial information to be disclosed. The adoption of this
statement had no impact on the financial statements as we have one operating
segment.
Reclassification. Certain reclassifications have been made to the prior years'
financial statements to conform to the current presentation.
31
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. CONDENSED FINANCIAL INFORMATION OF AFFILIATE
The condensed financial information of GZA's affiliate, GZA GeoEnvironmental of
New York, at February 28, 1999 and 1998 and for each of the three years in the
period ended February 28, 1999 is as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Total assets $1,961,000 $1,038,000
========== ==========
Total liabilities $1,035,000 $ 144,000
---------- ----------
Total stockholders' equity $ 926,000 $ 890,000
========== ==========
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues $1,509,000 $1,099,000 $1,227,000
---------- ---------- ----------
Net income (loss) $ 36,000 $ 4,000 $ (378,000)
========== ========== ==========
</TABLE>
Approximately $164,000, $198,000 and $235,000 of net revenues were billed to GZA
in fiscal 1999, 1998 and 1997, respectively.
NOTE 3. AVAILABLE-FOR-SALE SECURITIES
Unrealized losses on available-for-sale securities at February 28, 1999 and 1998
were approximately $10,000 and $6,000, respectively, net of deferred taxes. The
maturities of available-for-sale securities held at February 28, 1999 are as
follows:
Within one year $ 452,000
From 1-5 years 3,385,000
----------
Total $3,837,000
Certain of these available-for-sale securities have maturities in excess of one
year but are classified as current assets consistent with their use. Gross
realized gains and losses from available-for-sale securities were immaterial to
GZA's operating results.
NOTE 4. ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following at February 28:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Accounts receivable, principally trade $15,179,000 $11,410,000
Retainage 982,000 912,000
----------- -----------
16,161,000 12,322,000
Less - Allowance for doubtful accounts 2,658,000 899,000
----------- -----------
$13,503,000 $11,423,000
=========== ===========
</TABLE>
All amounts billed under retainage provisions of long-term contracts are
expected to be collected within one year of completion of the contracts.
32
<PAGE> 33
NOTE 5. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS, NET
Costs and estimated earnings in excess of billings on uncompleted contracts,
net, which represent revenues earned but not billed under the terms of the
related contracts, are as follows, as of February 28:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Costs incurred on uncompleted contracts $4,539,000 $4,168,000
Estimated earnings 3,479,000 3,093,000
---------- ----------
$8,018,000 $7,261,000
========== ==========
</TABLE>
Included in unbilled costs and estimated earnings on uncompleted contracts are
reserves of $396,000 and $582,000 as of February 28, 1999 and 1998,
respectively, based on management's estimates of the contract values. Management
continuously evaluates and adjusts specific reserves based on progress of
contract negotiations and management's judgment of the ultimate contract value.
At the point when material changes are renegotiated or known, GZA reflects the
appropriate adjustments. Costs incurred on uncompleted contracts are typically
billed at the end of a two-week or four-week billing cycle.
NOTE 6. PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost and consist of the following as of
February 28:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Machinery and equipment $ 3,619,000 $ 3,103,000
Laboratory and technical equipment 3,254,000 3,448,000
Furniture, fixtures and computer equipment 7,232,000 7,387,000
Motor vehicles, rigs and trucks 827,000 748,000
Leasehold improvements 2,408,000 2,495,000
----------- -----------
17,340,000 17,181,000
Less - Accumulated depreciation and amortization 11,439,000 11,837,000
----------- -----------
$5,901,000 $ 5,344,000
=========== ===========
</TABLE>
Depreciation expense for the years ended February 28, 1999, 1998 and 1997 was
$1,289,000, $1,315,000 and $1,857,000, respectively.
NOTE 7. REVOLVING LINE OF CREDIT AND TERM LOAN FACILITY
GZA has entered into two financing arrangements with a financial institution
(the "Bank"). We have available an unsecured revolving line of credit under
which we can borrow up to $5,500,000 in a combination of cash and letters of
credit, with interest payable monthly at the Bank's Corporate Base Rate, as
defined, or the applicable LIBOR rate plus 200 basis points. Under the terms of
the line of credit, we are required to maintain a minimum net worth, working
capital, current ratio, quick ratio, tangible net worth and cash flow coverage
ratio. There were no borrowings under this revolving credit agreement at
February 28, 1999 and 1998. We had no letters of credit outstanding at February
28, 1999 or 1998.
GZA also has available a $4,500,000 term loan facility, providing for term
borrowings amortized through July 31, 2000 bearing interest at a variable rate
equal to the Bank's Corporate Base Rate, as defined, or a fixed rate over the
term of the loan. There were no borrowings under the term loan facility at
February 28, 1999 or 1998. The term loan facility requires maintenance of the
same ratios and financial covenants as the revolving line of credit.
33
<PAGE> 34
NOTE 8. ACCRUED PAYROLL AND EXPENSES
Accrued payroll and expenses consist of the following at February 28:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Accrued payroll and related benefits $3,368,000 $3,230,000
Legal and claims reserves 266,000 675,000
Other 266,000 378,000
---------- ----------
$3,900,000 $4,283,000
========== ==========
NOTE 9. EARNINGS PER SHARE (EPS)
<CAPTION>
For the Year Ended February 28, 1999
------------------------------------
Shares Per share
Income (000s) Amount
---------- ------ ---------
<S> <C> <C> <C>
Basic EPS
Income available to common shareholders $1,509,000 3,604 $ .42
---------- ----- -----
Effect of dilutive securities
Stock options -- 70 --
---------- ----- -----
Diluted EPS
Income available to common shares and
common share equivalents $1,509,000 3,674 $ .41
========== ===== =====
<CAPTION>
For the Year Ended February 28, 1998
------------------------------------
Shares Per share
Income (000s) Amount
---------- ------ ---------
<S> <C> <C> <C>
Basic EPS
Income available to common shareholders $1,370,000 3,932 $ .35
---------- ----- -----
Effect of dilutive securities
Stock options -- 41 --
---------- ----- -----
Diluted EPS
Income available to common shares and
common share equivalents $1,370,000 3,973 $ .34
========== ===== =====
<CAPTION>
For the Year Ended February 28, 1997
------------------------------------
Shares Per share
Income (000s) Amount
---------- ------ ---------
<S> <C> <C> <C>
Basic and Diluted EPS
Income available to common shareholders $ 529,000 3,929 $ .13
========== ===== =====
</TABLE>
34
<PAGE> 35
NOTE 10. TREASURY STOCK
In 1997, the Board of Directors authorized the repurchase of up to 500,000
shares of GZA's common stock in the open market at prevailing prices. The amount
and timing of stock repurchases depend on market conditions, share price and
other factors. During the year ended February 28, 1999 and 1998, we repurchased
99,525 and 400,475 shares of common stock, at a cost of $471,000 and $1,971,000,
which includes transaction fees, respectively.
NOTE 11. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLAN
Under GZA's 1989 Incentive Stock Option Plan, as amended (the "Incentive Plan"),
options to purchase shares of common stock may be issued to key employees
including executive officers and directors who are employees. The Incentive Plan
is administered by our Board of Directors. Option prices may not be less than
fair market value on the date of grant and terms of options may not be more than
ten years. All Incentive Plan options are non-assignable and vest over a
five-year period. The Incentive Plan terminates on May 31, 1999 or when all
options issuable thereunder have been exercised.
The number of shares reserved for issuance under the Incentive Plan is 510,000
shares. During 1996 and 1997, the Board of Directors approved reductions, from
$5.70 to $5.25 and $5.25 to $3.50, respectively, in the exercise price of
outstanding options under the Incentive Plan. The reduced exercise prices were
not less than fair market value of our common stock on the date of the
reductions and therefore did not result in compensation expense charges.
Information related to the Incentive Plan is summarized as follows:
<TABLE>
<CAPTION>
Incentive Stock Options Outstanding
-----------------------------------
Number of Range of
Shares Exercise Prices
--------- ---------------
<S> <C> <C>
Balance at February 29, 1996 248,278 $5.25
Granted 89,200 3.50 - 5.25
Cancelled (32,600) 3.50 - 5.25
-------- --------------
Balance at February 28, 1997 304,878 3.50
Granted 10,000 3.50
Cancelled (18,200) 3.50
Exercised (3,600) 3.50
-------- --------------
Balance at February 28, 1998 293,078 3.50
Granted 2,000 5.00
Cancelled (16,200) 3.50
Exercised 0 3.50
-------- --------------
Balance at February 28, 1999 278,878 $3.50
-------- --------------
</TABLE>
As of February 28, 1999, 1998 and 1997 options for 234,878 , 224,158 and 199,348
shares, with weighted-average exercise prices of $3.50, $3.50 and $3.50 (giving
effect to the option repricing in 1997) were exercisable. As of February 28,
1999 options to purchase 227,522 shares were available to be granted under the
Incentive Plan. The weighted-average remaining contractual life of the options
outstanding is 2.6 years.
Under GZA's 1989 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"),
non-qualified stock options to purchase up to 15,000 shares of common stock may
be issued to key employees, executive officers and directors of GZA. The
Non-Qualified Plan is administered by our Board of Directors. All Non-Qualified
Plan options are non-assignable and vest over a five-year period. The
Non-Qualified Plan terminates on May 31, 1999 or when all options issuable
thereunder have been exercised.
During fiscal 1997, the Board of Directors approved a reduction, from $5.25 to
$3.50, in the exercise price of outstanding options under the Non-Qualified
Plan. The reduction of the exercise price of these options did not result in
compensation expense charges.
As of February 28, 1998, options to purchase 7,500 shares of common stock at an
exercise price of $3.50 per share were outstanding under the Non-Qualified Plan.
All such options were exercisable.
Under GZA's 1995 Stock Incentive Plan (the "Stock Plan"), we may grant certain
key employees, at no cost, shares of "restricted stock" of GZA in appreciation
of services. A condition of receipt of any award under the Stock Plan is that
the employee must either own,
35
<PAGE> 36
or agree to acquire within one year, an equivalent number of shares. All shares
awarded under the Stock Plan vest over a five-year period. Unearned compensation
related to the award of restricted stock is recorded at the date of award based
on the fair market value of the shares against paid in capital, and is amortized
to expense over the applicable vesting period. The maximum number of shares that
may be granted under the Stock Plan is 200,000. Pursuant to the Plan, 4,432,
2,273, and 15,053 shares were issued to certain employees during fiscal years
ending 1999, 1998 and 1997, respectively.
We also maintain an employee stock purchase plan under which up to 220,000
shares of our common stock are available for purchase by our employees. Eligible
employees can purchase shares of the stock at the lower of 85% of the fair
market value of the stock on the first or last day of each six-month period
beginning on March 1 or September 1. Monies to purchase the shares are withheld
from an employee's pay through payroll deductions. Under the plan, 10,466,
11,102 and 12,998 shares were purchased during fiscal 1999, 1998 and 1997,
respectively.
GZA applies Accounting Principles Board Opinion No. 25 in accounting for our
stock option and employee stock purchase plans. Accordingly, no compensation
cost has been recognized for our stock option plans. Had compensation cost for
our stock-based compensation plans been determined based on the fair market
value at the grant dates as calculated in accordance with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," our net
income and diluted net income per common share amounts would have been reduced.
Our pro forma net income amounts would have been $1,433,000, $1,304,000 and
$485,000 for the fiscal years ended February 28, 1999 and 1998 and 1997. Our pro
forma diluted net income per share would have been $0.39, $0.32, and $0.12 for
the fiscal years ended February 28, 1999 and 1998 and 1997, respectively.
The weighted-average fair value of options granted during 1999, 1998 and 1997
was $2.13, $1.47 and $1.47 per option, respectively. The fair value of these
options at date of grant was estimated using the Black-Scholes model with the
following assumptions for fiscal years 1999, 1998 and 1997: risk free interest
rates of 5.61%, 6.16% and 6.68%, respectively; dividend yields of 0%; volatility
factors of the expected market price of our common stock of 38%, 43% and 43%,
respectively; and a weighted average expected life of the options of five years.
NOTE 12. PURCHASE OF OTHER ASSETS
On December 31, 1998, we acquired the business assets of Tonis Raamot, PE and
the personal property of Raamot Associates, PC of New York, NY. Raamot
Associates is a Manhattan-based geotechnical and construction engineering firm,
with ongoing projects including high-rise buildings, industrial and
manufacturing facilities, waterfront structures, large dams and storage
reservoirs, railroads, highways, tunnels, and sewage treatment plants. The total
acquisition price was $500,000 which consisted of $50,000 for the furniture and
fixtures of Raamot Associates, $50,000 for a covenant not-to-compete by Mr.
Raamot, and other intangible assets totaling $400,000. We also secured the
services of the former employees of Raamot Associates, PC and sublet the
premises. The furniture and fixtures are depreciated over estimated useful lives
ranging from three to five years. The covenant not-to-compete is amortized over
three years, and the intangible assets are amortized over ten years. We paid
$200,000 in cash upon consummation of the transaction, and gave the seller a
$300,000 non-interest bearing note for the remaining purchase price. This note
becomes due on December 31, 1999.
36
<PAGE> 37
NOTE 13. INCOME TAXES
The provision for income taxes consisted of the following for fiscal years:
<TABLE>
<CAPTION>
1999 1998 1997
---------- -------- ---------
<S> <C> <C> <C>
Currently payable:
State $ 303,000 $109,000 $ 151,000
Federal 1,016,000 326,000 602,000
---------- -------- ---------
Total current 1,319,000 435,000 753,000
---------- -------- ---------
Deferred (prepaid):
State (83,000) 98,000 (121,000)
Federal (264,000) 344,000 (340,000)
---------- -------- ---------
Total deferred (prepaid) (347,000) 442,000 (461,000)
---------- -------- ---------
Total provision for income taxes $ 972,000 $877,000 $ 292,000
========== ======== =========
</TABLE>
Deferred income taxes are provided to account for temporary differences between
the financial reporting basis and income tax basis of GZA's assets and
liabilities using the liability method of accounting for income taxes. Deferred
taxes represent the future income tax effect of reported differences between the
book and tax bases of GZA's assets and liabilities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliations of the U.S. federal statutory income tax rate to the effective
income tax rate are as follows for fiscal years:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory income tax rate 34% 34% 34%
State and foreign income tax, net of
federal income tax benefit 6 6 3
Interest income exempt from federal tax -- -- (3)
Reduction of valuation allowance (1) (1) --
Non-deductible expenses -- -- 2
---- ---- ----
Effective income tax rate 39% 39% 36%
==== ==== ====
</TABLE>
GZA's net deferred tax asset at February 28, 1999 and 1998 consists of gross
deferred tax liabilities of $753,000 and $656,000 and deferred tax assets of
$1,763,000 and $1,339,000, respectively. GZA's net operating loss carryforwards
expire in fiscal 2010 through fiscal 2013. The components of GZA's net deferred
tax assets as of February 28, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Cash versus accrual method of accounting $ 167,000 $ 164,000
Depreciation and amortization 586,000 492,000
Net operating loss carryforwards (214,000) (231,000)
Allowance for doubtful accounts (945,000) (359,000)
Other accrued expenses (604,000) (749,000)
Valuation allowance 376,000 396,000
--------- ---------
Total net deferred tax assets $(634,000) $(287,000)
========= =========
The components of GZA's deferred income tax provision (benefit) for the years
ended February 28, 1999 and 1998 are as follows:
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Cash versus accrual method of accounting $ 3,000 $ 24,000
Depreciation and amortization 94,000 266,000
Net operating loss carryforwards 17,000 (21,000)
Allowance for doubtful accounts (586,000) (41,000)
Other accrued expenses 145,000 240,000
Valuation allowance (20,000) (26,000)
--------- --------
Total deferred income tax provision (benefit) $(347,000) $442,000
========= ========
</TABLE>
37
<PAGE> 38
NOTE 14. RETIREMENT PLAN
GZA maintains a Profit Sharing Plan under Section 401(k) of the Internal Revenue
Code which covers all employees who meet minimum age and service requirements.
Annual Company contributions are determined by the Board of Directors. The year
end for the profit sharing plan is December 31. Amounts contributed by us under
the plan vest according to a seven-year vesting schedule. To participate in the
plan, an employee must contribute a minimum of 2% of his or her base salary, and
may contribute additional amounts. Participant contributions are fully vested at
all times. Our contributions to the plan were $660,000, $661,000, and $682,000
for fiscal 1999, 1998 and 1997, respectively. In fiscal 1999, 1998 and 1997, the
Board of Directors voted to make 25% of our contribution to the Plan in stock of
GZA. As a result, in fiscal years 1999, 1998 and 1997, respectively, 38,152,
32,445, and 58,064 shares of our stock (having a total fair value of
approximately $172,000, $165,000, and $171,000 on the date of contribution) were
contributed in addition to cash contributions of $488,000, $496,000, and
$511,000, respectively.
NOTE 15. RELATED PARTY TRANSACTIONS
GZA leases office space from certain stockholders and from entities owned by
certain stockholders and employees. Lease payments, net of sublease income, to
these entities totaled $868,000, $901,000, and $957,000 in fiscal 1999, 1998 and
1997, respectively.
GZA provides geotechnical design, instrumentation and other consulting services,
on a contracting and subcontracting basis, to a company and affiliated entity of
which director of GZA is Chairman of the Board of Directors. In fiscal 1999, we
billed an aggregate of $5,100,000 for services provided to this company and
affiliated entity.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Lease Commitments. GZA leases certain facilities and equipment under the terms
of various noncancellable operating leases, including leases with related
parties described in Note 15. Lease terms generally range from two to five
years. Additionally, we lease certain equipment under operating leases.
Future minimum lease payments under noncancellable operating leases as of
February 28, 1999 are as follows:
<TABLE>
<C> <C>
2000 $1,925,000
2001 1,648,000
2002 628,000
2003 406,000
2004 180,000
----------
Total minimum lease payments $4,787,000
==========
</TABLE>
Rent expense charged to operations was $2,061,000, $2,137,000 and $2,312,000 in
fiscal 1999, 1998 and 1997, respectively.
Claims and Legal Proceedings. GZA is a party to several legal actions claiming
damages in connection with environmental remediation, environmental consulting,
and construction projects arising in the normal course of business. Management
believes that the outcomes of the legal actions to which it is a party will not,
in the aggregate, have a material adverse effect on the results of operations or
financial condition of GZA.
Our services involve risks of significant liability for environmental and
property damage, personal injury, economic loss, and costs assessed by
regulatory agencies for which insurance coverage or the contractual provisions
may apply. Claims may potentially be asserted against us under federal and state
statutes, common law, contractual indemnification agreements or otherwise.
38
<PAGE> 39
SUPPLEMENTAL INFORMATION
PRICE RANGE OF COMMON STOCK (UNAUDITED)
GZA's common stock is traded in the over-the-counter market under the symbol
"GZEA" and is included in the National Association of Securities Dealers, Inc.
National Market System ("NASDAQ"). The following table sets forth the quarterly
range of high and low sale prices per share of GZA's common stock for fiscal
year 1999, as reported by NASDAQ.
<TABLE>
<CAPTION>
Fiscal 1999: High Low
------ -------
<S> <C> <C>
First Quarter 5 3/16 4 1/2
Second Quarter 5 3/16 4 11/16
Third Quarter 4 7/8 4 1/8
Fourth Quarter 5 4
</TABLE>
As of May 14, 1999, GZA's common stock was held by 339 holders of record. GZA
has never paid cash dividends on its common stock, and does not intend to pay
cash dividends in the foreseeable future. GZA currently intends to retain any
future earnings to finance growth.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended 2/28/99 11/30/98 8/31/98 5/31/98
------- -------- ------- -------
<S> <C> <C> <C> <C>
In thousands except per share amounts
Revenues $14,673 $17,146 $15,330 $13,504
Net revenues 9,516 10,674 10,517 9,601
Income (loss) before other income and tax (41) 800 682 657
Net income 55 512 470 472
Basic earnings per share $ .02 $ .14 $ .13 $ .13
Diluted earnings per share $ .01 $ .14 $ .13 $ .13
<CAPTION>
Three months ended 2/28/98 11/30/97 8/31/97 5/31/97
------- -------- ------- -------
<S> <C> <C> <C> <C>
In thousands except per share amounts
Revenues $15,406 $15,900 $15,384 $12,856
Net revenues 9,011 9,686 9,565 9,589
Income before other income and tax 157 747 398 508
Net income 221 503 280 366
Basic earnings per share $ .07 $ .12 $ .07 $ .09
Diluted earnings per share $ .06 $ .12 $ .07 $ .09
</TABLE>
39
<PAGE> 40
CORPORATE INFORMATION
Directors and Executive Officers
Donald T. Goldberg
Chairman of the Board of Directors
Andrew P. Pajak
Director
President and
Chief Executive Officer
Joseph P. Hehir
Chief Financial Officer
Executive Vice President
M. Joseph Celi
Director
Executive Vice President
GZA GeoEnvironmental, Inc.
Joseph D. Guertin
Director
Senior Vice President
GZA GeoEnvironmental, Inc.
Timothy W. Devitt
Director
William E. Hadge
Director
Senior Vice President
GZA GeoEnvironmental, Inc.
Lewis Mandell
Director
Thomas W. Philbin
Director
John E. Ayres
Executive Vice President
Richard M. Simon
Secretary
Executive Vice President
STOCKHOLDER INFORMATION
Independent Accountants
PricewaterhouseCoopers LLP
Boston, Massachusetts
Counsel
Foley, Hoag & Eliot LLP
Boston, Massachusetts
Registrar and Transfer Agent
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Tel 212/936-5100
Common Stock Listing
The common stock of GZA GeoEnvironmental Technologies, Inc. is traded over the
counter in the NASDAQ national market quotation system under the symbol GZEA.
Annual Meeting
The Annual Meeting of Stockholders will be held at 10:00 a.m. on July 13, 1999
at the Sheraton Needham Hotel, 100 Cabot Street, Needham, Massachusetts
Stockholders Reports
A copy of the Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, may be obtained without charge by writing to Investor
Relations, GZA GeoEnvironmental Technologies, Inc., 320 Needham Street, Newton
Upper Falls, Massachusetts 02464
Corporate Headquarters
GZA GeoEnvironmental
Technologies, Inc.
320 Needham Street
Newton Upper Falls
Massachusetts 02464
Tel 617/969-0050
Fax 617/969-0715
Operations
The Company conducts all its operations through its wholly owned subsidiaries
GZA GeoEnvironmental, Inc. (GZA) and GZA Remediation, Inc. (GZAR); and through
GZA's wholly owned subsidiary GZA Drilling, Inc.; through the Company's
affiliate Aquaterra Environmental Consultants Limited, a joint venture of the
Company and Carl Bro Group (UK) Ltd.; and through the Company's affiliate
Goldberg-Zoino Associates of New York, P.C. (doing business as GZA
GeoEnvironmental of New York), a New York professional service corporation
wholly owned by officers, directors, and stockholders of the Company. The
Company was incorporated in Delaware on May 5, 1989.
40
<PAGE> 1
EXHIBIT 10.54
GZA RESTATED 401(k) PROFIT SHARING PLAN
Effective As of January 1, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I - The Plan 2
1.1 Name of Plan 2
1.2 Interpretation of Plan Agreement 2
1.3 Reversion of Certain Contributions 2
ARTICLE II - Definitions 4
2.1 "Account" 4
2.2 "Affiliated Company" 4
2.3 "Agreement" 4
2.4 "Beneficiary" 4
2.5 "Board" 4
2.6 "Brokerage Agreement" 4
2.7 "Code" 5
2.8 "Company Contributions" 5
2.9 "Company Stock" 5
2.10 "Company Stock Fund" 5
2.11 "Committee" 5
2.12 "Company" 5
2.13 "Compensation" 5
2.14 "Effective Date" 6
2.15 "Eligible Employee" 6
2.16 "Employee" 6
2.17 "Entry Date" 6
2.18 "ERISA" 6
2.19 "Highly Compensated Employee" 6
2.20 "Hour of Service" 7
2.21 "Investment Fund"or "Investment Funds" 8
2.22 "Matching Contributions" 8
2.23 "Non-Highly Compensated Employee" 8
2.24 "One-Year Break in Service" 8
2.25 "Participant" 9
2.26 "Plan" 9
2.27 "Plan Year" 9
2.28 "QNEC Contributions" 9
2.29 "Regular Employee" 9
2.30 "Rollover Contributions" 9
2.31 "Tax-Deferred Contributions" 9
2.32 "Total Compensation" 9
2.33 "Trust" 10
2.34 "Trustee" 10
2.35 "Valuation Date" 10
2.36 "Voluntary Contributions" 10
2.37 A "Year of Eligibility Service" 10
2.38 A "Year of Vesting Service" 10
<PAGE> 3
PAGE
ARTICLE III - Membership 11
3.1 Eligibility for Membership 11
3.2 Determination of Eligibility by Committee 11
3.3 Duration of Membership 12
3.4 Leaves of Absence 12
ARTICLE IV - Contributions 14
4.1 Salary Reduction Agreement 14
4.2 Annual Company Contributions 15
4.3 Participants' After-Tax Voluntary Contributions 16
4.4 Payment of Contributions 16
4.5 Rollover Contributions 16
ARTICLE V - Participants' Accounts; Valuation and Allocation of Assets 18
5.1 Participants' Accounts 18
5.2 Allocation of Contributions to Accounts 18
5.3 Allocations Do Not Vest Any Rights 20
5.4 Allocation of Forfeitures 20
5.5 Allocation of Rollover Contributions 20
5.6 Participant Directed Investment 21
5.7 Investment of Certain Contributions 24
5.8 Valuation of Trust and Accounts 24
5.9 Distributions 24
ARTICLE VI - Limitations on Contributions and Allocations 26
6.1 Contributions to be Deductible 26
6.2 Limitation on Tax-Deferred Contributions 26
6.3 Limitation on Matching Contributions 29
6.4 Multiple Use Test 31
6.5 Limitations on Allocations 32
ARTICLE VII - Payments to or for the Accounts of Participants or
Terminated Participants 34
7.1 Restriction on Payments and Distributions 34
7.2 Retirement at or after Age 60 34
7.3 Disability Retirement 34
7.4 Death Benefits 35
7.5 Termination of Employment Prior to Retirement or Death 37
7.6 Reemployment 38
7.7 Manner and Timing of Distributions 40
7.8 Waiver and Spousal Consent 45
7.9 Direct Rollovers 47
ARTICLE VIII - Withdrawals and Loans Prior to Termination of Employment 49
8.1 In-service Withdrawals 49
8.2 In-service Withdrawals for Hardship 49
<PAGE> 4
PAGE
8.3 Loans to Participants 52
ARTICLE IX - Amendment and Termination 55
9.1 Right to Amend or Terminate 55
9.2 Amendment for Tax Exemption 55
9.3 Liquidation of Trust in Event of Termination 56
9.4 Termination of Plan and Trust 56
ARTICLE X - Administration of the Plan 57
10.1 Fiduciaries 57
10.2 The Company 57
10.3 GZA GeoEnvironmental Technologies, Inc. 58
10.4 Appointment of Administrative Committee 58
10.5 Investment Manager 59
10.6 Claims Procedure 60
10.7 Records and Reports 61
10.8 Powers and Duties of the Committee 61
10.9 Rules and Decisions 63
10.10 Authorization of Benefit Payments 63
10.11 Application and Forms for Benefits 63
10.12 Employment of Agents 63
10.13 Discretionary Action 64
10.14 Facility of Payment 64
10.15 Compensation of Committee and Plan Expenses 65
10.16 Indemnification 65
10.17 Review of Domestic Relations Orders 66
10.18 Voting of Company Stock 66
10.19 Tender Offer or Exchange Offer 68
ARTICLE XI - The Company 70
11.1 No Contract of Employment 70
11.2 Liability of the Company 70
11.3 Action by the Company 70
11.4 Successor to Business of GZA GeoEnvironmental
Technologies, Inc 71
ARTICLE XII - Additional Participating Companies 72
12.1 Participation 72
12.2 Effective Date 72
12.3 Administration 72
12.4 Termination 72
ARTICLE XIII - Top-Heavy Provisions 73
13.1 General Rule 73
13.2 Minimum Contribution Provisions 73
13.3 Minimum Vesting Provisions 73
13.4 Top-Heavy Plan Definition 74
<PAGE> 5
PAGE
13.5 Key Employee 76
13.6 Non-Key Employee 76
ARTICLE XIV - Miscellaneous 77
14.1 Spendthrift Provision 77
14.2 Merger or Consolidation 77
14.3 Construction 77
14.4 Leased Employees 78
14.5 Definition of Words 78
14.6 USERRA 79
14.7 Titles 79
14.8 Correction Methods 79
14.9 Execution of Agreement 79
<PAGE> 6
GZA RESTATED 401(K) PROFIT SHARING PLAN
WHEREAS, effective January 1, 1986, the Goldberg-Zoino & Associates,
Inc. 401(k) Profit Sharing Plan and Trust was established;
WHEREAS, said Plan was amended and restated effective January 1, 1988
and pursuant to such amendment and restatement the name of the Plan was changed
to Goldberg-Zoino & Associates, Inc. Restated 401(k) Profit Sharing Plan and
Trust;
WHEREAS, said Plan was amended effective January 1, 1991 and pursuant
to such amendment the name of the Plan was changed to GZA GeoEnvironmental, Inc.
Restated 401(k) Profit Sharing Plan and Trust;
WHEREAS, the Plan was recently amended and restated effective January
1, 1994 and subsequently amended by the First and Second Amendments thereto;
WHEREAS the Company wishes to make changes to the Plan, including
further changing the name of the Plan to "GZA Restated 401(k) Profit Sharing
Plan," making changes required by recent legislation and changing the Plan
sponsor to GZA GeoEnvironmental Technologies, Inc.;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Trust Agreement effective January 1, 1986, as subsequently
amended and restated, is hereby further amended and restated as a plan document
provided herein effective as of January 1, 1998 except that changes made to
Sections 2.13, 2.19, 6.2, 6.3, 7.7(f)(ii) and 14.4 are effective as of January
1, 1997.
<PAGE> 7
THE PLAN
NAME OF PLAN. This Plan shall be known as the "GZA Restated
401(k) Profit Sharing Plan."
INTERPRETATION OF PLAN AGREEMENT. The Plan is established for
the purpose of providing a medium for savings by eligible Employees of the
Company by means of salary reduction arrangements and for additional
contributions by the Company and is established for the exclusive benefit of
such Employees and their Beneficiaries. So far as possible, this Plan Agreement
shall be interpreted in a manner consistent with this intent and with the intent
of the Company that the Plan and underlying Trust shall continue to satisfy
those provisions of the Internal Revenue Code of 1986 and the Employee
Retirement Income Security Act of 1974 relating to exempt employees' trusts, as
either of them may from time to time be amended. Except as provided in Sections
1.3 and 10.15, under no circumstances shall any property, whether corpus or
income of the Trust hereunder, or any funds contributed to the Trust, ever
revert to or be used or enjoyed by the Company or be used for any purpose other
than for the exclusive benefit of the Participants or their Beneficiaries.
REVERSION OF CERTAIN CONTRIBUTIONS. All contributions by the
Company hereunder shall be made upon the condition that such contributions are
fully deductible for Federal income tax purposes. In the event that any such
deduction is disallowed in whole or in part, then the Company may direct the
Trustee to return such contribution (to the extent disallowed) to the Company at
any time within the 12-month period commencing on the date of disallowance. In
the event that the Company shall make a contribution hereunder on the basis of a
mistake of fact, the Company may direct the
<PAGE> 8
Trustee to return such contribution to the Company at any time within the
twelve-month period commencing on the date of contribution.
<PAGE> 9
DEFINITIONS
Whenever used in this Agreement, unless the context clearly indicates
otherwise, the following words shall have the following meanings:
"Account" means a Participant's interest in the Plan,
including his Company Account, Tax-Deferred Account, Matching Account, Voluntary
Account, Rollover Account, and QNEC Account, all as described in Section 5.1,
and his loan account as described in Section 8.3.
"Affiliated Company" means (a) a participant of a controlled
group of corporations (as determined under Section 414(b) of the Code and the
regulations thereunder) of which the Company is a Participant, (b) an
unincorporated trade or business which is under common control with the Company
as determined under Section 414(c) of the Code and regulations thereunder, (c) a
Participant of an "affiliated service group" (within the meaning of Section
414(m) of the Code and regulations thereunder) of which the Company is a
Participant, or (d) an organization which is required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the Code.
"Agreement" means this Plan document as the same may be
amended from time to time.
"Beneficiary" means the person or persons designated pursuant
to the provisions of Section 7.4 of this Agreement to receive distribution of a
Participant's share upon his death.
"Board" means the Board of Directors of the Company.
"Brokerage Agreement" means a brokerage account established by
a Participant under the Plan with the Trustee or with a brokerage firm approved
by the Trustee.
<PAGE> 10
"Code" means Internal Revenue Code of 1986, as amended from
time to time.
"Company Contributions" means the contributions made by the
Company pursuant to Section 4.2(c) of the Plan.
"Company Stock" means shares of common stock of the Company or
any Affiliated Company which are readily tradeable on an established securities
market.
"Company Stock Fund" means the Investment Fund which consists
primarily of Company Stock and cash or cash equivalents.
"Committee" means the Administrative Committee constituted
under Article X in office from time to time.
"Company" means GZA GeoEnvironmental Technologies, Inc. and
any successor to all or a major portion of its business which accepts this Plan.
The term "Company" also includes an Affiliated Company which adopts this Plan
for the benefit of its Employees pursuant to Article XII.
"Compensation" means the regular salary and wages of an
Employee paid by the Company for any Plan Year, including any amounts deferred
at the election of the Participant and which is not includable in the
Participant's gross income by reason of Section 125 or 401(k) of the Code, but
excluding bonuses, overtime, and taxable fringe benefits.
A Participant's Compensation taken into account under the Plan for any
Plan Year beginning after December 31, 1994 shall not exceed $150,000 as
adjusted by the Secretary of the Treasury or his delegate under Section
401(a)(17)(B) of the Code. On and after January 1, 1997, the family aggregation
rule affecting the definition of "Compensation" shall cease to apply.
<PAGE> 11
"Effective Date" means January 1, 1998, the effective date of
this amended and restated Plan, except as otherwise provided herein. The
original effective date of the Plan was January 1, 1986.
"Eligible Employee" means any Regular Employee or Employee.
Notwithstanding the foregoing, the term "Eligible Employee" shall not include
any leased employees (as defined in Section 14.4), or Employees whose employment
is governed by the terms of a collective bargaining agreement between Employee
representatives (within the meaning of Code Section 7701(a)(46)) and the Company
under which retirement benefits were the subject of good faith bargaining
between the parties, unless such agreement expressly provides for such coverage
in this Plan.
"Employee" means any person who is employed by the Company as
a common law employee and not classified by the Company as an independent
contractor. An Employee's employment shall commence on the date on which he
first performs an Hour of Service.
"Entry Date" means each January 1, April 1, July 1 and October
1. With respect to any Eligible Employee, his Entry Date is the Entry Date on
which he is first admitted to membership hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Highly Compensated Employee" means:
any Employee who was, at any time in the preceding
Plan Year or the current Plan Year, a five percent owner; or
<PAGE> 12
any Employee who, in the preceding Plan Year, received Total Compensation in
excess of $80,000 (as adjusted by the Secretary of the Treasury to reflect rises
in the cost of living in accordance with Code Section 415(d)).
A. "Hour of Service" means:
1. Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for the Company. These hours
shall be credited to the Employee for the twelve consecutive month computation
period or periods in which the duties are performed;
Each hour for which an Employee is paid, or entitled
to payment, by the Company on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, or leave of absence; provided that no more than
501 Hours of Service shall be credited under this paragraph with respect to any
continuous period of absence for which no duties are performed. Hours under this
paragraph shall be calculated and credited pursuant to Section 2530.200b-2(b)
and (c) of the Department of Labor Regulations which are incorporated herein by
this reference;
Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Company. The same
Hours of Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be and under this paragraph (c). These hours shall be
credited to the Employee for the 12 consecutive month computation period or
periods to which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made; and
<PAGE> 13
Each hour with which the Employee is credited
pursuant to Section 3.4.
Solely for purposes of determining whether a One-Year
Break in Service has occurred in a twelve consecutive month computation period,
an Employee who is absent from work by reason of pregnancy, birth, or adoption
of his child, or for purposes of caring for such child for a period beginning
immediately following such birth or adoption, shall receive credit for the Hours
of Service which would otherwise have been credited to such Employee but for
such absence, or in any case in which such hours cannot be determined, eight (8)
Hours of Service per day of such absence, provided, that the total number of
hours credited under this paragraph shall not exceed the difference between 501
and the number of hours with which such Employee would otherwise have been
credited during the computation period for which this paragraph applies. The
Hours of Service credited under this paragraph shall be credited in the first
computation period such credit is necessary to avoid a One-Year Break in
Service.
"Investment Fund" or "Investment Funds" means such one or more
separate investment accounts, including collective investment funds and mutual
funds, as the Committee may from time to time, and in its sole discretion,
specify as being available for the investment of Plan assets.
"Matching Contributions" means the contributions made by the
Company pursuant to Section 4.2(b) of the Plan.
"Non-Highly Compensated Employee" means any Employee who is
not a Highly Compensated Employee.
"One-Year Break in Service" means any twelve consecutive month
computation period during which a Participant has not been credited with more
than 500
<PAGE> 14
Hours of Service with the Company. The computation period for One-Year Breaks in
Service shall be identical to the computation period for the Participant's Years
of Eligibility Service or Years of Vesting Service, as the case may be.
"Participant" means any Eligible Employee who is admitted to
membership in the Plan as determined under Article III of this Agreement.
"Plan" means "GZA Restated 401(k) Profit Sharing Plan" as set
forth herein, together with any and all amendments thereto.
"Plan Year" means the calendar year.
"QNEC Contributions" means the contributions made by the
Company pursuant to Section 4.2(d) of the Plan.
"Regular Employee" means any Employee, other than a
cooperative student, intern or other employee hired on a temporary basis, who is
regularly scheduled to work at least 20 hours per week.
"Rollover Contributions" means the contributions made by an
Eligible Employee pursuant to Section 4.5 of the Plan.
"Tax-Deferred Contributions" means the contributions required
to be made by the Company pursuant to Section 4.2(a) of the Plan on behalf of
each Participant who has entered into a salary reduction agreement with the
Company.
"Total Compensation" means a Participant's total taxable
compensation as reported on Form W-2 (or any substitute form) plus any amount
which is deferred at the election of the Participant and which is not includable
in the Participant's gross income by reason of Section 125 or 401(k) of the
Code. A Participant's Total Compensation taken into account under the Plan for
any Plan Year after December 31, 1994 shall not exceed $150,000 as adjusted by
the Secretary of the Treasury or his delegate under
<PAGE> 15
Section 401(a)(17)(B) of the Code. On and after January 1, 1997, the family
aggregation rule affecting the definition of "Total Compensation" shall cease to
apply.
"Trust" means the trust fund created by an agreement between
the Company and the Trustee for purposes of holding Plan assets.
"Trustee" means the United States Trust Company of New York
and any duly appointed successor trustee or trustees.
"Valuation Date" means each business day of the Plan Year.
"Voluntary Contributions" means the after-tax contributions
made by Participants prior to January 1, 1995.
A "Year of Eligibility Service" for any Employee means (a) the
twelve-month period beginning on the date he becomes an Employee but only if he
is credited with 1,000 or more Hours of Service during such period; AND (b) each
Plan Year commencing after the date he becomes an Employee during which such
Employee is credited with 1,000 or more Hours of Service.
A "Year of Vesting Service" for any Employee means a Plan Year
during which he has been credited with 1,000 or more Hours of Service.
<PAGE> 16
I. MEMBERSHIP
A. ELIGIBILITY FOR MEMBERSHIP. Each Eligible Employee,
including each future Eligible Employee, shall become a Participant under the
Plan as follows:
Each Eligible Employee who is a Regular Employee
shall be eligible to participate hereunder as of the Entry Date coincident with
or first following the completion of the three (3) Months of Service AND
attainment of age 21.
Each Eligible Employee who is not a Regular Employee
shall be eligible to participate hereunder as of the Entry Date coincident with
or first following the completion of a Year of Eligibility Service AND
attainment of age 21.
For purposes of Section 3.1(a), a Regular Employee will be deemed to
have completed three (3) Months of Service if he is in the employ of the
Employer at any time three (3) months after his employment commencement date.
Employment commencement date shall be the first day that he is entitled to be
credited with an Hour of Service for the performance of duty.
In the event an individual has completed the foregoing eligibility
requirements but is not an Eligible Employee on the applicable Entry Date, such
individual shall not become a Participant of the Plan at that time. If such
individual thereafter becomes an Eligible Employee, such individual shall become
a Participant on the date he subsequently becomes an Eligible Employee.
DETERMINATION OF ELIGIBILITY BY COMMITTEE. The determination
of an Employee's eligibility for membership under the Plan shall be made by the
Committee from the records of the Company, and the Committee's decisions on
these matters shall be conclusive and binding upon all persons.
DURATION OF MEMBERSHIP. A Participant shall continue as an
active Participant until he ceases to be an Eligible Employee and, except as
otherwise provided
<PAGE> 17
in Sections 5.2(b) and 5.2(c), shall stop being an active Participant entitled
to share in contributions hereunder immediately upon such cessation.
A former Participant shall once again become an active Participant
under the Plan as of the date on which he again becomes an Eligible Employee.
LEAVES OF ABSENCE. Except as otherwise specifically provided,
an Employee who leaves the Company to enter the armed services of the United
States of America and who returns to its employ at or before the expiration of
90 days after the date on which he is first entitled to be released from active
duty in the armed services (or at such later date as the Company may approve or
as may be required by law) or an Employee who is absent from work, with the
approval of the Company, on account of sickness, disability, vacation, or for
any other reason shall be credited by the Committee for all purposes of this
Plan (including, without limitation, admission to membership) with the number of
Hours of Service obtained by multiplying the number of hours in his regular work
week during the period (the duration of which shall be determined by the
Committee, in its discretion) immediately prior to the date such absence began
by the duration (in weeks) of the absence.
For purposes of this Agreement, service in the armed forces shall mean
compulsory or voluntary service in the Armed Services of the United States if,
under any then-applicable federal law, reemployment rights are provided upon
termination of such service.
For purposes of granting leaves of absence and determining the number
of credited Hours of Service, all Employees in similar circumstances shall be
treated alike in accordance with the standards set forth in Section 10.13.
Nothing herein contained shall restrain the Company's right to terminate the
employment of any Employee, whether or not during a leave of absence. If any
Employee shall fail to return from any such absence
<PAGE> 18
as required by the Company in accordance with the Plan, then unless otherwise
prohibited by applicable law, he shall retroactively lose all credit for those
Years of Eligibility Service and Years of Vesting Service which have been
credited to such Employee by reason of Hours of Service previously credited to
him, with respect to such absence, under this Section 3.4 except that if the
Company shall determine (and so notify the Committee in writing) that his
employment was terminated at a date later than the date on which such absence
commenced (but in no event later than the date on which the Employee failed to
return from such absence as required by the Company), he shall retroactively
lose credit only for those Hours of Service previously credited to him under
this Section 3.4 with respect to that portion of such absence occurring after
the date specified by the Company as the date on which his employment was
terminated.
<PAGE> 19
I. CONTRIBUTIONS
A. SALARY REDUCTION AGREEMENT. Each Participant who wishes to
save on a tax-deferred basis may elect to have the Company make Tax-Deferred
Contributions to the Plan on his behalf by agreeing to adjust his Compensation
by the amount of such Tax-Deferred Contributions. The Committee or its
administrative delegate shall notify each Eligible Employee on or before the
date he becomes a Participant of his right to reduce his Compensation in
consideration of the Tax-Deferred Contributions to be made to the Plan by the
Company on his behalf. A Participant's salary reduction amount each Plan Year
shall be a percentage of his Compensation equal to any whole percentage between
2% and 15%, inclusive, but not more than $10,000 (adjusted pursuant to Section
402(g)(5) of the Code and the regulations thereunder). Such salary reduction
agreement shall take effect on the first payroll date that is administratively
feasible. A Participant may elect to change the amount of his salary reduction
and the corresponding amount of Tax-Deferred Contributions made on his behalf to
any other whole percentage rate (including zero) permissible pursuant to this
Section 4.1. The Participant's election to suspend, change, or resume the amount
of his salary reduction shall be made under procedures established by the
Committee, which procedures may include a voice response system provided by the
Committee's administrative delegate. An election to suspend salary reduction
shall be processed during the next payroll period that is administratively
feasible. Any change in or resumption of salary reduction shall be processed as
of the first day of the following payroll period to the extent administratively
feasible.
B. ANNUAL COMPANY CONTRIBUTIONS.
1. TAX-DEFERRED CONTRIBUTIONS. Subject to the
limitations of Article VI, for each payroll period, the Company shall make a
Tax-Deferred Contribution
<PAGE> 20
to the Trust in cash on behalf of each Participant of the Plan equal to the
amount, if any, by which such Participant's Compensation for such period is
reduced pursuant to a salary reduction agreement between the Company and such
Participant.
MATCHING CONTRIBUTIONS. Subject to the provisions of
Article VI, for each Plan Year, the Company shall contribute to the Trust that
amount of Matching Contributions as may be voted by the Board in its sole
discretion. The foregoing contribution shall be reduced by the amount of any
forfeitures (other than forfeitures used to restore previously forfeited amounts
under Section 7.6(b) or 10.14). Such contribution may be made in cash, Company
Stock, or a combination of cash and Company Stock.
COMPANY CONTRIBUTIONS. Subject to the provisions of
Article VI, for each Plan Year the Company shall contribute to the Trust in
cash, Company Stock, or a combination of cash and Company Stock, that amount of
Company Contributions as may be voted by the Board in its sole discretion.
QNEC CONTRIBUTIONS. Subject to the provisions of
Article VI, for any Plan Year in which the Plan fails to meet either or both the
non-discrimination tests set forth in Section 6.2 or 6.3, the Company may
contribute an additional amount to the Trust to enable the Plan to satisfy such
tests. Such contribution may be made in cash, Company Stock, or a combination of
cash and Company Stock.
DETERMINATION OF COMPANY STOCK CONTRIBUTION. The
Company shall determine the number of shares of Company Stock to be contributed
to the Plan by dividing the amount of contribution by the closing price of the
Common Stock immediately following Board approval.
PARTICIPANTS' AFTER-TAX VOLUNTARY CONTRIBUTIONS. Effective
January 1, 1995, after-tax voluntary contributions by Participants shall not be
permitted.
<PAGE> 21
PAYMENT OF CONTRIBUTIONS. Effective on and after February 3,
1997, the Tax-Deferred Contributions elected by Participants in each payroll
period shall be paid into the Trust by the Company as soon as possible but in no
event later than the 15th business day of the month following the month in which
such contributions would otherwise have been payable to the Participants in
cash. The Matching Contributions and the Company Contributions to the Trust for
each Plan Year shall be paid into the Trust by the Company within the time
required by law in order to obtain a deduction of such contribution to the Trust
for Federal income tax purposes for such Plan Year.
ROLLOVER CONTRIBUTIONS. An Eligible Employee may contribute
all or any part of (a) any amount received by such Eligible Employee from
another plan and trust qualified as an exempt employee benefit plan and trust
under Sections 401(a) and 501(a) of the Code, including any direct rollover, or
(b) any amount received by such Eligible Employee out of an individual
retirement account or individual retirement annuity which consists solely of
amounts attributable to a prior rollover contribution from a qualified employee
benefit plan which, but for such contribution to the Plan, would have been
taxable income to such Eligible Employee. An Eligible Employee may make a
contribution under this section whether or not he has satisfied the eligibility
requirements specified in Article III. An Eligible Employee who makes a
contribution under this Section 4.5 and does not otherwise qualify as a
Participant is, nevertheless, deemed to be a Participant for the limited purpose
of administering that contribution. Contributions under this Section 4.5 shall
be made in cash, check, or securities, provided that such securities are
acceptable to the Trustee and shall be deposited into the Investment Funds in
the proportions designated by the Participant pursuant to Section 4.5. An
Eligible Employee shall be fully vested at all times in his contributions made
under this Section
<PAGE> 22
4.5. Rollover Contributions pursuant to this Section 4.5 shall not be deemed to
be Participant contributions for purposes of Article VI. If the Committee shall
subsequently determine that contributions made to the Plan by an Eligible
Employee pursuant to this Section 4.5 do not qualify as Rollover Contributions,
such contributions, as adjusted for earnings or losses, shall be distributed to
the Eligible Employee as soon as administratively feasible.
<PAGE> 23
I. PARTICIPANTS' ACCOUNTS; VALUATION AND ALLOCATION OF
ASSETS
A. PARTICIPANTS' ACCOUNTS. The following Accounts for
each Participant shall be maintained in each Investment Fund of the Trust:
A Tax-Deferred Account to which the Tax-Deferred
Contributions made by the Company on behalf of the Participant shall be
allocated;
A Matching Account to which Matching Contributions
made by the Company on behalf of the Participant shall be allocated;
A Company Account to which discretionary Company
Contributions allocated to such Participant shall be allocated;
A Voluntary Account to which voluntary, after-tax
contributions made by the Participant prior to January 1, 1995 shall be
allocated;
A Rollover Account to which rollover contributions
made by an Eligible Employee under Section 4.5 shall be allocated; and
A QNEC Account to which QNEC Contributions made
pursuant to Section 4 on behalf of the Participant shall be allocated.
Contributions shall be allocated to the appropriate Account in
accordance with Section 5.2 when paid to the Trust by the Company and, except
for amounts allocated to the Company Stock Fund, shall be deposited to the
Investment Funds in the proportions designated by the Participant pursuant to
Section 5.6.
ALLOCATION OF CONTRIBUTIONS TO ACCOUNTS. Amounts contributed
to the Plan shall be allocated among the accounts of Participants as follows:
ALLOCATION OF TAX-DEFERRED CONTRIBUTIONS. All Tax-Deferred
Contributions made by the Company on behalf of each Participant pursuant to
Section 4.2(a) shall be allocated to such Participant's Tax Deferred Account.
<PAGE> 24
ALLOCATION OF MATCHING CONTRIBUTIONS. Upon receiving Matching
Contributions made by the Company pursuant to Section 4.2(b) for any Plan Year,
and after the Account balances of Participants have been adjusted to reflect
reevaluation of the Trust, the Trustee shall allocate the Matching Contributions
for such Plan Year to the Matching Account of each Participant who either (i) is
credited with at least 1,000 Hours of Service for such Plan Year and is an
Eligible Employee (or is on an approved leave of absence) on the last day of
such Plan Year, or (ii) retired upon or after attainment of age 60, died, or
became "permanently and totally disabled" (as defined in Section 7.3) during
such Plan Year. The portion of the Matching Contributions allocated to an
eligible Participant shall bear the same ratio to the total Matching
Contributions as the Tax-Deferred Contributions of such Participant bears to the
total Tax-Deferred Contributions of all eligible Participants. For this purpose,
Tax-Deferred Contributions of each eligible Participant in excess of two percent
(2%) of his Compensation for such Plan Year shall be disregarded.
ALLOCATION OF COMPANY CONTRIBUTIONS. Upon receiving Company
Contributions made by the Company pursuant to Section 4.2(c) for any Plan Year,
and after the Account balances of Participants have been adjusted to reflect
reevaluation of the Trust, the Trustee shall allocate a portion of the Company
Contributions for such Plan Year to the Company Account of each Participant who
either (i) is credited with at least 1,000 Hours of Service for such Plan Year
and is an Eligible Employee (or is on an approved leave of absence) on the last
day of such Plan Year, or (ii) retired upon or after attainment of age 60, died,
or became "permanently and totally disabled" (as defined in Section 7.3) during
such Plan Year. The portion of the discretionary Company Contributions allocated
to an eligible Participant shall bear the same ratio to the total
<PAGE> 25
discretionary Company Contributions as the "compensation" of such Participant
bears to the total "compensation" for all eligible Participants. For purposes of
this Section 5.2(c), "compensation" means Compensation as defined in Section
2.11 plus overtime.
ALLOCATIONS DO NOT VEST ANY RIGHTS. An allocation of
contributions hereunder shall not operate to vest in any Participant any right
or interest in any specific assets of the Trust, unless specifically stated to
the contrary herein; nor shall such allocation operate to vest any benefits in a
Participant, all rights to vested benefits hereunder being governed by the terms
of Article VII.
ALLOCATION OF FORFEITURES. Except as otherwise provided in
Section 7.6(b), any amounts held by the Trustee representing forfeitures during
a Plan Year shall be applied toward reducing the aggregate amount of Matching
Contributions determined by the Company for the Plan Year pursuant to Section
4.2(b) unless the Committee directs the Trustee to use all or a portion of such
forfeitures to pay Plan expenses.
ALLOCATION OF ROLLOVER CONTRIBUTIONS. At the time of payment
of Rollover Contributions to the Trust pursuant to Section 4.5, the Committee
shall deliver to the Trustee a schedule showing the name of each Participant
whose Rollover Contributions are included in said payment, the amount of such
Rollover Contributions made by each such Participant and the portion of such
Rollover Contributions that is to be invested in each Investment Fund. The
Trustee shall credit to the Rollover Account of each Participant listed on such
schedule the amount of the Rollover Contributions of such Participant as shown
therein.
A. PARTICIPANT DIRECTED INVESTMENT.
1. Each Participant, including each terminated
Participant, shall elect the manner of investment of all amounts which have been
allocated to his
<PAGE> 26
Accounts; provided, however, that the Participant may not direct the amount in
his Accounts that is invested in the Company Stock Fund. Such election shall
direct the percentage, in whole percentage amounts, of the aggregate amount then
credited, and/or thereafter to be credited, to such Accounts which is to be
invested by the Trustee in each of the Investment Funds. The Committee's
administrative delegate shall maintain records of account at all times
adequately reflecting each Participant's interest in each of the Investment
Funds.
A Participant may also establish a Brokerage Account
for the investment of assets in his Accounts in publicly-traded securities,
including but not limited to stocks, bonds and mutual funds and, limited
partnership interests. Any investments within the Brokerage Account shall be
made by direct instructions to the Committee's administrative delegate and shall
be subject to the rules imposed by the brokerage firm. With respect to amounts
credited to a Brokerage Account for which no specific investment instructions
have been received, such amounts shall be deposited in a short-term money market
fund selected by the Committee. Notwithstanding the foregoing, the Committee may
establish a minimum investment amount or account balance amount as a
prerequisite for establishing a Brokerage Account.
While any balance remains in the Accounts of a
Participant after his death, the Beneficiary of a Participant shall direct the
investment of the Accounts to the same extent as if the Beneficiary were the
Participant. An alternate payee named in a qualified domestic relations order
shall direct the investment of the Participant's Accounts subject to the order
to the same extent as if such alternate payee were the Participant.
<PAGE> 27
A Participant may elect to transfer any amounts from
one Investment Fund to another Investment Fund at any time by direct
instructions through voice response system to the Committee's administrative
delegate with respect to the desired transfer. Subject to (b) above, a
Participant may also elect to transfer any amounts from the Brokerage Account to
an Investment Fund or from an Investment Fund to a Brokerage Account at any time
by direct instructions to the Committee's administrative delegate with respect
to the desired transfer. The Participant's transfer election shall be made in
whole percentages of his Account or in dollars. The Committee's administrative
delegate shall effect any such transfer promptly in accordance with its stated
policies, and shall report all such transfers to the Committee at a time and in
a manner agreed to with the Committee.
All dividends and capital gains or other
distributions received on mutual fund shares held in each Participant's Accounts
shall be reinvested in full and fractional shares and all amounts so received or
purchased upon such reinvestment shall be credited to such Accounts. If any
dividends or capital gains or other distributions may be received at the
election of the shareholder in additional shares or in cash or other property,
the Trustee shall elect to receive such dividends or capital gains or other
distributions in additional shares. The Committee's administrative delegate
shall keep and regularly furnish to the Committee a detailed cumulative
statement of each Participant's account balances, showing separately each
Account, and the contributions credited to each Account for each period; the
shares (including fractional shares thereof) purchased therewith and the number
and cost of the same, the earnings thereon and the shares purchased therewith
and the number and cost of the same, each transfer of cash or property from one
investment to another, including fees, and commissions and each
<PAGE> 28
transaction within the Brokerage Accounts; and shall furnish to the Committee
and the Trustee any necessary information required by the Trust or government
regulations; shall prepare for the Committee and the Trustee such returns,
reports or forms pertaining to such investment as the Committee or the Trustee
shall be required to furnish to any governmental agency; and in general to do
any and all such administrative acts under the Trust as the Trustee or the
Committee may do through such a designee.
Any investment election made hereunder shall continue
to be effective until properly revoked by the Participant. If, at any time,
there shall be no investment election in effect with respect to a Participant,
the Committee shall direct the Trustee to invest all amounts standing in or
thereafter to be credited to such Participant's Accounts in such one or more of
the Investment Funds as the Committee shall, in its sole discretion, select on a
uniform basis for all Participants similarly situated.
Any investment expenses incurred by a Participant's
Account, including exchange or redemption fees, deferred sales charges,
commissions, brokerage fees, shall be charged to such Participant's Account.
It is intended that Section 404(c) of ERISA and the
regulations issued thereunder will apply to the exercise of investment
responsibilities under this Section 5.6. The Company, the Committee and the
Trustee shall be relieved of liability for any losses that are the direct and
necessary result of investment instructions given by a Participant, his
Beneficiary, or an alternate payee under a qualified domestic relations order.
INVESTMENT OF CERTAIN CONTRIBUTIONS. The Committee may direct
the Trustee to invest amounts contributed by the Company, including amounts
contributed in Company Stock, in the Company Stock Fund. Notwithstanding any
other provision of
<PAGE> 29
the Plan to the contrary, no employee contribution, including Voluntary
Contributions, Tax-Deferred Contributions or Rollover Contributions, may be
invested in the Company Stock Fund.
VALUATION OF TRUST AND ACCOUNTS. As of the end of each
Valuation Date, the Trustee shall determine the net worth of the assets and
liabilities of the Trust and the Trustee shall cause the Account balances of
each Participant and each former Participant to be adjusted to reflect its
income, gain, losses, appreciation, depreciation and expenses since the last
Valuation Date. In determining the net worth of the Trust or any component
thereof, the Trustee shall value the assets at their fair market value and the
Trustee shall determine the fair market value of assets with no readily
ascertainable market value on any reasonable basis it may deem appropriate;
provided, however, that such basis is consistently and uniformly used on each
Valuation Date.
DISTRIBUTIONS. Whenever the Committee shall direct the Trustee
to make any distribution to or in behalf of a Participant in accordance with the
provisions of Article VI, VII, VIII or IX, the Participant's Accounts from which
such distribution is made shall be charged with the amount of such distribution.
For this purpose, distributions shall also include in-service withdrawals or
loans. Such distribution shall first be withdrawn pro rata among the Investment
Funds, and then from the Brokerage Accounts. The amount to be so distributed
shall be based on the value of the Accounts determined as of the Valuation Date
selected by the Trustee in accordance with the Trustee's stated policies.
<PAGE> 30
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
CONTRIBUTIONS TO BE DEDUCTIBLE. The aggregate Tax-Deferred
Contributions made by the Company each Plan Year shall not exceed that amount
which, when added to the Company Contributions and Matching Contributions made
by the Company for that Plan Year, equals the maximum amount allowable as a
deduction by the Company under Section 404 of the Code with respect to such Plan
Year.
LIMITATION ON TAX-DEFERRED CONTRIBUTIONS.
For each Plan Year commencing on or after January 1,
1997, the Tax-Deferred Contributions on behalf of the group of Participants who
are Highly Compensated Employees shall be limited so that one of the following
tests is met:
The Actual Deferral Percentage of the group of
Participants who are Highly Compensated Employees for the current Plan
Year is not more than the Actual Deferral Percentage of the group of
Participants who were Non-Highly Compensated Employees for the
preceding Plan Year multiplied by 1.25; or
The Actual Deferral Percentage of the group of
Participants who are Highly Compensated Employees for the current Plan
Year is not more than two (2) percentage points greater than the Actual
Deferral Percentage of the group of Participants who were Non-Highly
Compensated Employees for the preceding Plan Year and the Actual
Deferral Percentage of the group of Participants who are Highly
Compensated Employees for the current Plan Year is not more than the
Actual Deferral Percentage of the group of Participants who were
Non-Highly Compensated Employees for the preceding Plan Year multiplied
by two (2).
<PAGE> 31
As used in (a) above, "Actual Deferral Percentage"
for a specified group of Participants for a Plan Year shall be the average of
the ratios (calculated separately for each Eligible Employee in such group and
expressed as a percentage) of (i) the amount of the Tax-Deferred Contributions
actually made by the Company on behalf of the Participant for such Plan Year to
(ii) the amount of the Participant's Total Compensation for the Plan Year,
excluding any amounts earned prior to the Eligible Employee's Entry Date. For
this purpose, an Eligible Employee who has met the Plan's eligibility
requirement but has not elected to make any Tax Deferred Contributions is
nevertheless deemed to be a Participant.
If, for any Plan Year, the deferrals made by
Participants who are Highly Compensated Employees exceed the deferral rate
allowed under (a) above, to the extent permitted by law, the Company, in its
discretion, may make a QNEC Contribution for eligible Participants who are not
Highly Compensated Employees, to be allocated among their QNEC Accounts in
proportion to their Total Compensation for the Plan Year, excluding any amounts
earned prior to the Eligible Employee's Entry Date.
If, for any Plan Year, the Committee determines the
Tax-Deferred Contributions made on behalf of Highly Compensated Employees exceed
the limitation set forth in (a) above and to the extent the contribution
described in (c) above is not made, the Committee shall direct the Trustee to
reduce such contributions of such Highly Compensated Employees, beginning with
the highest amount of the Tax-Deferred Contributions, to the extent necessary to
cause the Plan to meet such limitation. Any Tax-Deferred Contributions so
reduced, together with income or loss allocable thereto in accordance with
Section 6.2(e) below, shall be returned to the Highly Compensated Employees on
whose behalf such contributions were made no later than December 31 of
<PAGE> 32
the following Plan Year. In making such return of excess contributions,
withdrawals shall be made first from a Participant's interest in the Investment
Funds on a pro rata basis and, if necessary, from his interest in any Brokerage
Account.
The income or loss allocable to Tax-Deferred
Contributions which exceed the limitation set forth in (a) above shall be
determined by multiplying the sum of the investment gain or loss earned by such
Participant's Tax-Deferred Account for the Plan Year by a fraction. The
numerator of the fraction is the amount of the Participant's excess Tax-Deferred
Contributions to be distributed and the denominator is the sum of the amount
credited to the Tax-Deferred Account as of the beginning of the Plan Year plus
the Participant's Tax-Deferred Contributions for the Plan Year. Gain or loss
allocable to the period between the end of the Plan Year and the date of
distribution shall be disregarded. Notwithstanding the foregoing, the amount
that would otherwise be distributed to a Participant in accordance with the
provisions of (d) above shall be reduced in accordance with Treasury regulations
by the amount, if any, distributed to the Participant for the Plan Year under
Section (g) below.
Any Matching Contributions attributable to the excess
Tax-Deferred Contributions distributed in accordance with (d) above shall be
forfeited and shall be applied to reduce Matching Contributions pursuant to
Section 4.2(b).
If, during any Plan Year, more than the maximum
permissible amount under Section 402(g) of the Code is allocated pursuant to one
or more cash or deferred arrangements to a Participant's accounts under this
Plan and any other Plan described in Sections 401(k), 408(k), or 403(b) of the
Code, the following provisions shall apply:
<PAGE> 33
No later than March 1 of the next succeeding Plan
Year, the Participant may, but is not required to, allocate all or part
of such contributions in excess of the maximum permissible amount
("excess deferrals") to this Plan. To be effective, such allocation
must be in writing, state that excess deferrals have been made on
behalf of such Participant for the preceding Plan Year, and state the
amount of such excess allocated to the Plan.
To the extent a Participant timely allocates excess
deferrals to this Plan pursuant to (i) above, the Committee shall
direct the Trustee to distribute such excess deferrals, as adjusted for
gain or losses allocable thereto in accordance with Section 6.2(e), to
the Participant no later than the April 15 following such allocation.
In making such distribution withdrawals shall be made first from the
Participant's interest in the Investment Funds on a pro rata basis and,
if necessary, from any Brokerage Account.
All determinations required under this Section 6.2
shall be made by the Committee, and its determination shall be final and binding
on all persons.
A. LIMITATION ON MATCHING CONTRIBUTIONS.
1. For each Plan Year commencing on or after
January 1, 1997, the Matching Contributions on behalf of the group of
Participants who are Highly Compensated Employees shall be limited so that one
of the following tests is met:
the Average Contribution Percentage of the
group of Participants who are Highly Compensated Employees for the
current Plan Year is not more than the Average Contribution Percentage
of the group of Participants who were Non-Highly Compensated Employees
for the preceding Plan year multiplied by 1.25; or
<PAGE> 34
the Average Contribution Percentage of the
group of Participants who are the Highly Compensated Employees of the
current Plan Year is not more than two (2) percentage points greater
than the Average Contribution Percentage of the group of Participants
who were Non-Highly Compensated Employees for the preceding Plan Year
and the Average Contribution Percentage of the group of Participants
who are Highly Compensated Employees for the current Plan Year is not
more than the Average Contribution Percentage of the group of
Participants who were Non-Highly Compensated Employees for the
preceding Plan Year multiplied by two (2).
As used in (a) above, "Average Contribution
Percentage" of a specified group of Participants for a Plan Year shall be the
average of the ratios (calculated separately for each Participant in such group)
of (i) the amount of the Matching Contributions allocated to the Participant for
such Plan Year to (ii) the Participant's Total Compensation for the Plan Year,
excluding any amounts earned prior to the Participant's Entry Date.
If, for any Plan Year, the test in (a) above is
exceeded, the Company, in its discretion, may make a QNEC Contribution for
eligible Participants who are not Highly Compensated Employees, to be allocated
among their QNEC Accounts in proportion to their Tax-Deferred Contributions for
the Plan Year.
If, for any Plan Year, the Committee determines the
Matching Contributions allocated to Participants who are Highly Compensated
Employees exceed the limitation set forth in (a) above and to the extent the
contribution described in (c) above is not made, the Committee shall direct the
Trustee to reduce the Matching Contributions allocated to such Highly
Compensated Employees, beginning with the
<PAGE> 35
highest amount of Matching Contributions, to the extent necessary to cause the
Plan to meet such limitation. The vested portion of such Matching Contributions
so reduced ("Excess Aggregate Contributions"), adjusted for income or loss
allocable thereto, shall be distributed by December 31 of the following year to
the Participants to whose Matching Account such contributions were allocated.
The non-vested portion of the Excess Aggregate Contributions, adjusted for
income or loss allocable thereto, shall be forfeited no later than December 31
of the following Plan Year and shall be applied to reduce Matching Contributions
pursuant to the provisions of Section 4.2(b).
The income or loss allocable to Excess Aggregate
Contributions shall be determined by multiplying the sum of the investment gain
or loss earned by such Participant's Matching Account for the Plan Year by a
fraction. The numerator of the fraction is the amount of the Participant's
Excess Aggregate Contributions and the denominator is the sum of the amount
credited to the Matching Account balance as of the beginning of the Plan Year
plus the Matching Contributions allocated to the Matching Account for the Plan
Year. Gain or loss allocable to the period between the end of the Plan Year and
the date of distribution shall be disregarded.
All determinations required under this Section 6.3
shall be made by the Committee, and its determination shall be final and binding
on all persons.
MULTIPLE USE TEST. The sum of Actual Deferral Percentages and
Average Contribution Percentages of the Participants who are considered Highly
Compensated Employees shall not exceed the combined limit determined under rules
and regulations promulgated by the Internal Revenue Service to prevent the
multiple use of the alternative limit set forth in Section 6.2(a)(ii) and
Section 6.3(a)(ii). If the combined limit should be exceeded in any Plan Year,
the Committee shall direct the Trustee to reduce the
<PAGE> 36
Tax-Deferred Contributions of Participants in accordance with Section 6.2(d), to
the extent necessary to meet the combined limit.
LIMITATIONS ON ALLOCATIONS. Notwithstanding anything
hereinabove to the contrary, the amount of "annual additions" credited to the
Accounts of any Participant for any Limitation Year shall be reduced to the
extent that the amount so credited would cause contributions credited to the
Accounts of such Participant under the Trust for such Limitation Year to exceed
the lesser of
$30,000, as adjusted pursuant to Section 415(d) of
the Code, or
25 percent of such Participant's Total Compensation
for such Limitation Year.
For purposes of this Section 6.5, "annual additions" shall mean for any
Limitation Year the sum of employer contributions and forfeitures credited to
the Participant's Accounts under this Plan and any other defined contribution
plan maintained by the Company or any Affiliated Company during such Limitation
Year (including any Tax-Deferred Contributions returned to the Participant
pursuant to Section 6.2(d) or 6.4, any Matching Contributions returned to or
forfeited by the Participant pursuant to Section 6.3(d), but excluding any
Tax-Deferred Contributions returned to the Participant pursuant to Section
6.2(g)).
Any reductions required pursuant to the foregoing paragraph shall be
made in the following order: (i) against the Tax-Deferred Contributions made on
behalf of such Participant for the Limitation Year, which shall be refunded to
the Participant with earnings; (ii) against the Matching Contributions allocated
to the Participant's Matching Account for the Limitation Year; and (iii) against
the Company Contributions, if any, allocated to the Participant's Company
Account for the Limitation Year. If any reduction is required under (ii) or
(iii) above, the amount of such reduction shall be held unallocated and shall be
reapplied to reduce contributions made in the future by the Company on
<PAGE> 37
behalf of the Participant if the Participant is covered by the Plan as of the
end of the Limitation Year. If the Participant is not covered by the Plan as of
the end of such Limitation Year, the amount of such reduction shall be held
unallocated in a suspense account and shall be used to reduce Company Matching
Contributions and discretionary Company Contributions made on behalf of all
eligible Participants for such Limitation Year (and succeeding Limitation Years,
as necessary).
For purposes of this Section 6.5, the Plan's Limitation Year shall be
the Plan Year.
<PAGE> 38
I. PAYMENTS TO OR FOR THE ACCOUNTS OF
PARTICIPANTS OR TERMINATED PARTICIPANTS
RESTRICTION ON PAYMENTS AND DISTRIBUTIONS. No money or other
property of the Trust shall be paid out or distributed by the Trustee except (a)
for the purchase or other acquisition of investments, (b) for defraying the
expenses, including taxes, if any, of administering the Trust as elsewhere
herein provided, (c) for the return of contributions as provided in Section 1.3,
or (d) for the purpose of making distributions to or for the benefit of
Participants in accordance with the rules set forth in this Plan.
All benefits payable under the Plan shall be paid or provided for
solely from the Trust, and the Company assumes no liability or responsibility
therefor.
RETIREMENT AT OR AFTER AGE 60. Upon retirement of a
Participant, which shall be deemed to mean any termination of his employment
with the Company at or after his reaching age 60 for a reason other than death,
the Committee shall direct the Trustee to distribute, in accordance with the
provisions of Section 7.7, the full amount standing to the credit of such
Participant's Accounts. A Participant shall become fully vested in his Accounts
upon attaining age 60.
DISABILITY RETIREMENT. If a Participant becomes "permanently
and totally disabled" while an Employee, the Participant shall be fully vested
in his Accounts and the Committee shall direct the Trustee to distribute, in
accordance with the provisions of Section 7.7, the full amount standing to the
credit of such Participant's Accounts. For purposes of this Section 7.3,
"permanently and totally disabled" shall mean suffering from a physical or
mental condition resulting from bodily injury, disease or mental disorder which,
in the opinion of a licensed physician chosen by the Committee, renders the
Participant incapable of continuing his usual and customary employment with the
Company.
<PAGE> 39
A. DEATH BENEFITS.
1. Upon the death of a Participant while
actively employed by the Company, the Participant's Accounts shall become fully
vested. Upon the death of a Participant who is not actively employed by the
Company, no additional vesting shall occur. Upon the death of a Participant
(including a former active Participant) prior to his "annuity starting date,"
the vested portion of such Participant's Accounts shall be distributed to his
surviving spouse, if any, by the purchase of a "pre-retirement survivor
annuity;" provided, however, that if the pre-retirement survivor annuity has
been waived pursuant to Section 7.8, the vested portion of such Participant's
Accounts shall be distributed pursuant to Section 7.4(b) below. For purposes of
this Section 7.4 and Section 7.8(a)(ii), "annuity starting date" means (i) the
first day of the first period for which an amount is payable as an annuity, or
(ii) in the case of a benefit not payable in the form of an annuity the first
day on which all events have occurred which entitle the Participant to such
benefit.
A "pre-retirement survivor annuity" is a nontransferable
annuity contract payable in equal monthly amounts for the life of the surviving
spouse, with such payments commencing upon a date selected by the surviving
spouse, which date shall be no earlier than a reasonable period of time after
the Participant's death and no later than the date on which the Participant
would have attained age 70 1/2 had he survived. A surviving spouse entitled to a
pre-retirement survivor annuity may, in lieu thereof, elect to have such amount
distributed to her, as a designated Beneficiary, under one of the options of
Section 7.7.
Notwithstanding the foregoing, if the value of the portion of
a deceased Participant's Accounts distributable under this Section 7.4(a) does
not exceed $5,000 (determined as of the proposed date of distribution), the
Committee shall direct the
<PAGE> 40
Trustee to pay such amount to such Participant's surviving spouse in one lump
sum payment, such payment to be in lieu of purchasing a pre-retirement survivor
annuity.
A former spouse shall be treated as a surviving spouse to the
extent benefits must be paid to such former spouse upon the Participant's death
pursuant to a qualified domestic relations order (as defined in Section 414(p)
of the Code), except that no consent shall be required from such former spouse
with respect to the designation of a Beneficiary to receive benefits not subject
to said order.
If, and only if, a Participant is permitted under
this Section 7.4 to designate a Beneficiary other than his surviving spouse,
then such Participant's Accounts shall be distributed in accordance with this
paragraph (b) of Section 7.4. Such a Participant shall have the right to
designate one or more Beneficiaries, including contingent Beneficiaries,
entitled to receive the amount payable in behalf of such Participant under the
provisions of this Plan in the event of death. Such designation shall be made in
writing in such manner as the Committee shall determine. A Participant may
change such designation from time to time, and may revoke such designation,
provided, however, that any subsequent designation must meet the requirements of
this Section 7.4 and Section 7.8. Upon the death of any Participant, the
Committee shall direct the Trustee to distribute, for the benefit of such
Participant's Beneficiaries and in accordance with the provisions of Section
7.7, the full amount standing to the credit of the Participant's Accounts. If a
Participant dies without having designated a Beneficiary, or if none of the
designated Beneficiaries survives the Participant, or if the Committee is in
doubt as to the effective status of a Beneficiary designation, distribution of
the Participant's Accounts shall be made to his surviving spouse, if any, and
otherwise to the duly appointed executor or administrator of his estate. If a
Beneficiary entitled to receive any amount payable on behalf of a Participant
under the Plan dies prior to having received
<PAGE> 41
the entire amount, the undistributed balance, together with any interest
accumulated thereon, shall be distributed to such Beneficiary's estate in
accordance with Section 7.7.
TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT OR DEATH. If any
Participant terminates his employment with the Company under circumstances other
than by reason of retirement, disability, or death, as provided for under
Sections 7.2 through 7.4, he shall be entitled to a termination benefit equal to
the full amount standing to the credit of his Tax-Deferred Account, Voluntary
Account, Rollover Account, and QNEC Account, and the vested portion of his
Matching Account and Company Account determined as follows:
Years of Vesting Service Vested Percentage
---------------------------------------------------------
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 or more 100%
A Participant absent from the employ of the Company on an absence with
respect to which he is credited with Hours of Service pursuant to Section 3.4
shall not be considered to have terminated his employment for purposes of this
Section unless he shall fail to return from such absence; and in such event, the
date of his termination of employment shall be determined pursuant to the
provisions of Section 3.4.
The vested benefit determined in accordance with the foregoing
provision shall never be adjusted or altered in any fashion on account of any
Years of Vesting Service which the Participant might complete upon reemployment
with the Company after a Break in Service, except as provided in Section 7.6.
The determination of the amount to which such terminated Participant is
entitled in accordance with the foregoing rules shall be made by the Committee.
<PAGE> 42
Any amounts standing to the credit of a Participant's Accounts to which
he is not entitled at the time of his termination of employment shall be
forfeited by him upon the earlier of the payment of the full amount to which
such Participant is entitled under the Plan or the occurrence of five (5)
consecutive One-Year Breaks in Service by a such Participant. For purposes of
the preceding sentence, a terminated Participant who is not entitled to receive
any portion of his Matching and Company Accounts under the Plan shall be deemed
to have received the entire amount to which he is entitled on the date his
employment terminates and shall forfeit his entire Matching and Company Accounts
as of that date.
Upon the termination of a Participant's employment as described above
in subsection (a), the Committee shall direct the Trustee to distribute the
Participant's vested benefit in accordance with Section 7.7.
REEMPLOYMENT. If a terminated Participant is reemployed by the
Company, he shall again become a Participant upon becoming an Eligible Employee
as provided in Section 3.3, and all his prior Years of Vesting Service shall be
fully restored for all purposes of the Plan.
If such a terminated Participant was not 100% vested under Section 7.5
at the time of his prior termination, the following special provisions shall
apply:
If such a terminated Participant is reemployed after
incurring five (5) or more consecutive One-Year Breaks in Service, he shall have
no right to the previously forfeited portion of his Matching and Company
Accounts and any vested portion of his Matching and Company Accounts which have
not been distributed shall be held in separate, fully vested accounts until such
Participant becomes fully vested under Section 7.5 whereupon such separate
accounts shall be merged with the Matching and Company Accounts of the same kind
otherwise maintained for him under this Plan.
<PAGE> 43
If such a terminated Participant is reemployed and
becomes an Eligible Employee before incurring five (5) consecutive One-Year
Breaks in Service, the full amount of the non-vested balance of his Matching and
Company Accounts shall be restored to his credit, provided that no amounts have
been forfeited from his Matching and Company Accounts, or if no distribution has
previously been made to such Participant on account of his prior termination of
employment. If the non-vested portion of the Participant's Matching and Company
Accounts has been forfeited on account of a prior distribution to the
Participant, the Participant shall have the right to repay to the Trust the full
amount which was distributed to him from the Plan. Such repayment must be made
before the earlier of five (5) years from the Participant's reemployment date,
or the close of the first period of five (5) consecutive One-Year Breaks in
Service following the distribution. Upon such repayment, the amount of such
repayment, plus the amount which was previously forfeited, shall be restored to
the Participant's Matching and Company Accounts. Such restoration shall be made
initially from amounts forfeited by other Participants pursuant to Section 7.5
and then, if necessary, from additional Company contributions.
A. MANNER AND TIMING OF DISTRIBUTIONS.
(a) Whenever a Participant's vested Accounts
become distributable to such Participant or his designated Beneficiary pursuant
to this Article VII, subject to the provisions of paragraph (c) below, a
Participant (or, in the event of the Participant's death, his Beneficiary) may
elect the form of distribution of his Account under one or more of the options
set forth below by filing a written election with the Committee.
<PAGE> 44
OPTION A: One lump sum payment in cash (subject to paragraph
(d) below).
OPTION B: Payments in cash (subject to paragraph (d) below)
in monthly, quarterly, semi-annual or annual
installments over a period certain not exceeding the
life expectancy of the Participant and his designated
Beneficiary. The amount of each payment hereunder
shall be equal to the total amount in the Account
remaining to be distributed under this Option B to
such Participant or his Beneficiary divided by the
number of payments remaining to be made under this
Option B, inclusive of the current payment.
OPTION C: Purchase of a nontransferable annuity contract
payable over the life or life expectancy of the
Participant (or Participant and his designated
Beneficiary), which satisfies the requirements of
Section 401(a)(9) of the Code.
Notwithstanding the provisions of paragraph
(a) above, if the aggregate benefit payable to a Participant does not exceed
$5,000, the Committee shall direct the Trustee to distribute such benefit to the
Participant in one lump sum payment.
If the aggregate benefit payable to a Participant
hereunder exceeds $5,000, the full amount of such Participant's Account shall be
applied to the purchase of a "qualified joint and survivor annuity" pursuant to
Option C, unless the Participant waives such form of payment and such
Participant's spouse, if any, consents to such waiver pursuant to Section 7.8.
Payments under such "qualified joint and survivor annuity" shall commence on the
first day of the month following the Participant's attainment of age 62 or
termination of employment, whichever is later, unless such Participant consents
in writing to an earlier commencement. For purposes of this paragraph (c), a
"qualified joint and survivor annuity" is a nontransferable annuity contract
which provides for monthly payments to the Participant for life and, in the case
<PAGE> 45
of a married Participant, with monthly payments continuing after his death to
his spouse for her life equal to 50% of the amount payable during the
Participant's lifetime.
Whenever during any Plan Year the vested amount
standing to the credit of a Participant's Accounts becomes distributable
pursuant to Sections 7.2 through 7.5, the distribution shall be made in cash;
provided, however, that is a Participant or Beneficiary so demands, such benefit
to the extent comprised of Company Stock shall be distributed in the form of
Company Stock. Prior to making a distribution of benefits, the Committee shall
advise the Participant or his Beneficiary, in writing, of the right to demand
such distribution of Company Stock.
Whenever during any Plan Year the vested amount
standing to the credit of a Participant's Accounts becomes distributable
pursuant to Sections 7.2 through 7.5, the distribution shall commence within a
reasonable time thereafter; PROVIDED, however, that in no event shall the
distribution of a Participant's Accounts, unless the Participant elects
otherwise, begin later than the 60th day after the close of the Plan Year in
which the later of the following events occurs:
The date the Participant attains age 60;
The Participant's termination of employment with the Company;
The tenth (10th) anniversary of the year the Participant commenced
membership in the Plan.
For purposes of the foregoing sentence, a distribution made later than the date
specified above shall be deemed to be made as of such date if it is made not
later than the 60th day following the date on which the amount of such
distribution is finally ascertained.
<PAGE> 46
Notwithstanding any provision to the contrary, in
order to comply with Sections 401(a)(9), 411(a)(11) and 414(p) of the Code, the
following provisions shall apply:
If the sum of a Participant's Account
balances to be distributed upon retirement, disability or other
termination of employment under Section 7.2, 7.3 or 7.5 is greater than
$5,000, such Accounts shall not be distributed in whole or in part
until the Participant attains age 62 or dies, whichever is earlier,
unless the Participant and his spouse consent to an earlier
distribution in writing.
Distribution of benefits to a Participant
who attains age 70 1/2 after 1998 shall begin later no than the April 1
next following the calendar year in which such Participant (A) attains
age 70 1/2 or (B) terminates employment with the Company, whichever is
later (the "Required Distribution Date"). Clause (B) shall not apply in
the case of a Participant who is a "five percent owner" at any time
during the Plan Year ending in the calendar year in which the
Participant attains age 70 1/2. If the Participant becomes a "five
percent owner" during any subsequent Plan Year, the required
distribution date shall be April 1 of the calendar year following such
Plan Year. For purposes of this subsection, a "five percent owner" is
defined in Section 416(i)(1)(B)(i) of the Code.
Distribution of benefits to a Participant
who attains or attained 70 1/2 before 1999 shall begin no later than
the April 1 next following the calendar year in which such Participant
attains age 70 1/2 (the "Required Distribution Date"); provided, a
Participant who is not a five percent owner may
<PAGE> 47
elect to defer distribution of benefits until after his termination of
employment with the Company.
In the event a Participant attains his
Required Distribution Date, his required minimum distribution shall be
calculated following the regulations promulgated under Section
401(a)(9) of the Code and based on the life expectancy of the
Participant or the joint life and last survivor expectancies of the
Participant and his designated beneficiary. Life expectancy shall be
calculated in accordance with Table V or VI of Treasury Regulations
Section 1.72-9. The life expectancy of the Participant (and the
Participant's spousal designated Beneficiary) may be recalculated at
the election of the Participant (or Participant's spousal designated
Beneficiary if the Participant dies before his Required Distribution
Date); provided, absent an election to recalculate, life expectancy of
the Participant (and his spouse, if applicable) shall not be
recalculated. If someone other than the Participant's spouse is the
designated Beneficiary, then the required minimum distribution shall
also meet the minimum distribution incidental benefit requirement as
set forth in the regulations promulgated under Section 401(a)(9) of the
Code.
If a Participant dies after his Required
Distribution Date, the remaining portion of his interest shall be
distributed at least as rapidly as under the method of distribution in
effect as of the date of death. If a Participant dies before his
Required Distribution Date, his entire interest shall be distributed to
his Beneficiary no later than December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death;
provided, however, that if the Participant's Beneficiary is the
surviving spouse, the Participant's entire interest
<PAGE> 48
shall be paid to his surviving spouse no later than December 31 of the
calendar year in which the Participant would have attained age 70 1/2,
if such date is later; and provided, further, that if the Participant's
Beneficiary is not the surviving spouse, the Participant's entire
interest may be distributed to the Beneficiary over a period not
exceeding the life expectancy of the Beneficiary if the distribution
begins no later than December 31 of the calendar year following the
calendar year of the Participant's death.
If, and to the extent that, any portion of a
Participant's Accounts is payable to a former spouse pursuant to a
qualified domestic relations order within the meaning of Sections
401(a)(13)(B) and 414(p) of the Code, the provisions of said order
shall govern the distribution thereof. Such an order may provide for
payments to a former spouse or dependent from a Participant's account
balances even though the Participant is still employed by the Company
or is otherwise not eligible for the distribution of benefits under the
Plan.
A. WAIVER AND SPOUSAL CONSENT.
1. A Participant may waive his right to receive
distribution of his Accounts as a "qualified joint and survivor annuity"
pursuant to of Section 7.7(d) and/or his spouse's right to receive the
"pre-retirement survivor annuity" pursuant to Section 7.4(a) in the event of his
death; provided, however, that such a waiver shall not be effective unless it is
in a writing which satisfies the following conditions:
the Participant's spouse has consented to
such waiver in a writing, such waiver designates a beneficiary (or form
of benefit) which may not be changed without spousal consent (or the
consent of the spouse expressly permits such changes by the Participant
without any further consent by the
<PAGE> 49
spouse) and the spouse's consent acknowledges the effect thereof and is
witnessed by a notary public or a Plan representative; provided,
however, that a spouse's consent shall not be required if the
Participant establishes to the satisfaction of the Committee that the
consent of the spouse cannot be obtained because there is no spouse,
because the spouse cannot be located, or because of other circumstances
prescribed by applicable regulations; and
either (A) such a waiver of a "qualified
joint and survivor annuity" and any spousal consent thereto are made
within 90 days prior to the Participant's annuity starting date, or (B)
such a waiver of the pre-retirement survivor annuity and any spousal
consent thereto are made during an election period beginning on the
first day of the Plan Year in which the Participant attains age 35 or
becomes a Participant (whichever is later) and ending on the date of
the Participant's death. An earlier waiver (with spousal consent) may
be made provided a written explanation of the pre-retirement survivor
annuity is given to the Participant and the waiver becomes invalid at
the beginning of the Plan Year in which the Participant turns age 35.
In the event a vested Participant terminates employment prior to the
beginning of the election period, the election period shall begin on
the date of such termination of employment.
A revocation of a prior waiver may be made by a
Participant, without the consent of his spouse, at any time during the period in
which such election could have been made. After such a revocation, the
Participant shall be free to make a new waiver in accordance with the
requirements of this Section 7.8. The number of revocations shall not be
limited. Any consent given by a Participant's spouse shall be effective only
with regard to such spouse.
<PAGE> 50
The Committee shall provide each Participant with
such general information regarding his spouse's entitlement to the
pre-retirement survivor annuity pursuant to Section 7.4(a) and his entitlement
to receive distribution of his Account in the form of a "qualified and joint
survivor annuity" pursuant to Section 7.7(c) and, upon request within 60 days of
receipt of such general information, with such additional specific financial
information as is required by Sections 401(a)(11) and 417 of the Code and the
regulations promulgated thereunder. Such information shall be provided at such
time and in such manner as is consistent with the requirements of said
regulations.
A. DIRECT ROLLOVERS.
1. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's election under this
Article, a distributee may elect, at the time and in the manner prescribed by
the Committee and subject to the spousal consent requirement of Section 7.8, to
have any portion of an Eligible Rollover Distribution from the Plan paid
directly to an Eligible Retirement Plan specified by the distributee in a Direct
Rollover.
Distributions may commence less than 30 days after
the notice under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
The Committee clearly informs the
Participant that the Participant has a right to a period of at least 30
days after receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and
The Participant affirmatively elects a
distribution at least seven (7) days after receiving the notice.
<PAGE> 51
Whenever used in this Section 7.9, the following
words shall have the following meanings:
ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible
Rollover Distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income.
ELIGIBLE RETIREMENT PLAN. An Eligible
Retirement Plan is an individual retirement account described in
Section 408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity Plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution
to the surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
DISTRIBUTEE. A distributee includes an
Employee or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section
<PAGE> 52
414(p) of the Code, are distributee with regard to the interest of the
spouse or former spouse.
DIRECT ROLLOVER. A Direct Rollover is a
payment by the Plan to the Eligible Retirement Plan specified by the
distributee.
<PAGE> 53
I. WITHDRAWALS AND LOANS PRIOR TO
TERMINATION OF EMPLOYMENT
IN-SERVICE WITHDRAWALS. Each Participant may make in-service
withdrawals from the Plan during employment subject to the provisions of this
Article. A married Participant must obtain the consent of his spouse in
accordance with the provisions of Section 7.8 to obtain a withdrawal hereunder.
Withdrawal requests shall be made through the voice response system provided by
the Committee's administrative delegate or through such other procedure
permitted by the Committee and shall specify the amount of the withdrawal and
such other information (oral or written) as may be required by the Committee or
its administrative delegate. In-service withdrawal amounts shall be taken first
pro rata among the Investment Funds in each Account and then, if necessary, from
any Brokerage Account in each Account.
IN-SERVICE WITHDRAWALS FOR HARDSHIP. In accordance to the
restrictions and provisions described in this Section 8.2 and other rules and
procedures prescribed by the Committee, a Participant who is an Eligible
Employee and who has an immediate and heavy financial need may request an
in-service withdrawal from such of his Accounts in which he is 100 percent
vested. Any withdrawal from such accounts shall be made in the following
sequence, taking into consideration only those accounts in which the Participant
is 100 percent vested:
First, from amounts allocated to his Voluntary
Account;
then, from amounts allocated to his Rollover Account;
then, from amounts allocated to his Company Account;
then, from amounts allocated to his Matching Account;
and
<PAGE> 54
lastly, from Tax-Deferred Contributions allocated to
his Tax-Deferred Account; provided that no investment earnings allocated to the
Tax-Deferred Account after December 31, 1988 shall be subject to in-service
withdrawal on account of financial hardship.
No withdrawals shall be permitted until the Participant has borrowed
the maximum loan permissible under Section 8.3. All withdrawals shall be subject
to the consent of the Participant's spouse in accordance with the provisions of
Section 7.8.
The withdrawal of any amount from a Participant's accounts pursuant to
this Section 8.2 shall be subject to the approval of the Committee or its
administrative delegate. The basis for consenting or refusing to approve the
Participant's request shall be its determination that the requested withdrawal
is necessary to allow such Participant to meet an immediate and heavy financial
need which such Participant is not able to meet from any other reasonably
available resources. The foregoing standard shall be applied by the Committee or
its administrative delegate so as to conform to the requirement of Section
401(k) of the Code and the regulations thereunder.
A distribution shall be deemed to be made on account of an immediate
and heavy financial need of the Participant if the distribution is on account
of:
(a) Medical expenses described in Section 213(d) of the
Code previously incurred by the Participant, his spouse or his dependents or
expenses necessary for these persons to obtain medical care, which expenses are
not covered by insurance;
(b) Purchase (excluding mortgage payments) of a principal
residence of the Participant;
(c) Payment of tuition, related educational fees and room
and board expenses for the next twelve (12) months of post-secondary education
for the Participant, his spouse, his children or his dependents;
(d) The need to prevent eviction of the Participant from
his principal residence or foreclosure on the mortgage of the Participant's
principal residence;
<PAGE> 55
(e) Funeral expenses for a Participant of the
Participant's family;
(f) Any other financial need permitted by the
Commissioner of the Internal Revenue Service.
If a Participant has an immediate and heavy financial need as described
above, he may receive a hardship withdrawal not in excess of the amount of the
immediate and heavy financial need (plus an amount necessary to pay any federal,
state or local income taxes or penalties reasonably anticipated to result from
the distribution) provided the Committee determines that such Participant is not
able to meet such need from any other reasonably available resources.
A Participant who receives a hardship withdrawal from his Tax-Deferred
Account pursuant to this Section 8.2 may not make Tax-Deferred Contributions to
the Plan for at least 12 months after receipt of the withdrawal. In addition,
such Participant may not make Tax-Deferred Contributions to the Plan for the
Participant's taxable year immediately following the taxable year of the
hardship withdrawal in excess of the applicable limit under Section 402(g) for
such next taxable year less the amount of such Participant's Tax-Deferred
Contributions for the taxable year of the hardship withdrawal.
LOANS TO PARTICIPANTS. Upon application of a Participant who
is an Employee, the Committee may direct the Trustee to lend to the Participant
such amount or amounts as the Committee may determine proper from the
Participant's accounts in the Plan; provided that the aggregate amount of all
outstanding loans from this Plan, including accrued interest thereon, shall not
exceed the lesser of (a) $50,000, reduced by the excess of the highest
outstanding loan balance of loans from the Plan during the one (1) year period
ending on the day before the date such loan is made over the outstanding balance
of loans from the Plan on the date on which such loan was made, or (b) 50
percent of the sum (determined at the time the loan is made) of the
Participant's vested
<PAGE> 56
account balances under the Plan. Any loan application shall be made through the
voice response system provided by the Committee's administrative delegate.
Each loan to Participants shall meet the following requirements:
Loans shall be made available to all
Participants on a reasonably equivalent basis. For this purpose, the
Committee may make reasonable distinctions based upon credit
worthiness, other obligations of the Participant and other factors that
may adversely affect the ability to assure repayment.
Loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Participants.
Loans shall be evidenced by the promissory
notes of the Participant and shall bear an interest rate equal to the
prime rate as published in the Wall Street Journal plus two percent
fixed at the start of each loan.
Loans shall be secured by the Participant's
vested interest in the Trust; provided the Participant must obtain the
consent of his spouse (if any) in accordance with the provisions of
Section 7.8 to obtain any loan hereunder.
A default will occur if a Participant misses
any loan repayment and does not make payment prior to the expiration of
a 90-day grace period after the date of such missed repayment. In the
event of default, foreclosure on the note and attachment of security
will not occur until a distributable event occurs under the Plan.
<PAGE> 57
Each loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not
less frequently than quarterly, over a period not extending beyond five
(5) years from the date of the loan. If the loan is used to acquire any
dwelling unit which within a reasonable time is to be used (determined
at the time such loan is made) as a principal residence of the
Participant, then the repayment period shall not extend beyond ten (10)
years.
The minimum loan amount shall be $1,000 and
no Participant may have more than one (1) outstanding loan from this
Plan at any time.
Each loan shall ordinarily be repaid by
payroll deduction; provided, a terminated Participant who has a loan
outstanding shall be eligible to repay such outstanding loan in
accordance with procedures established by the Committee; and provided
further, a Participant may elect at any time to pre-pay the outstanding
balance in full.
Loan repayment may be suspended under the
Plan as permitted under Section 72(p)(2)(C) of the Code and regulations
thereunder.
Each such loan shall be administered in
accordance with the Plan's loan policy.
A Participant's Accounts may be charged with
a reasonable loan administrative fee.
Each such loan shall be deemed to be an investment made at the
direction of such Participant and shall be credited to the separate investment
account of the borrowing Participant. The Participant's Accounts shall be
reduced to the extent necessary to permit
<PAGE> 58
the establishment of a separate loan account for such Participant in the
following order: Voluntary Account, Rollover Account, QNEC Account, Company
Account, Tax-Deferred Account and Company Matching Account. Such reduction shall
be taken first pro rata among the Investment Funds in the account and then, if
necessary, from any Brokerage Account in each account. All interest and loan
repayments, adjusted for administrative expenses, shall be credited to such
Participant's separate loan account. Amounts credited to such Participant's
separate loan account as a result of payments of interest and principal shall be
credited to the Participant's Accounts in the inverse order used to fund the
loan and shall be reinvested as soon as practicable in the Investment Funds in
accordance with the investment election of the Participant for new contributions
currently on file with the Committee.
If a former Participant with an outstanding loan fails to make any loan
repayment, upon the expiration of a 90-day grace period, the Committee shall
direct the Trustee to apply his Account balance in payment of the entire
outstanding loan principal, whether or not then due, and any interest
theretofore accrued.
<PAGE> 59
AMENDMENT AND TERMINATION
RIGHT TO AMEND OR TERMINATE. GZA GeoEnvironmental
Technologies, Inc. reserves the right at any time and from time to time to amend
this Agreement, in whole or in part, or discontinue or terminate the Plan and
its underlying Trust, by delivering to the Committee and the Trustee a copy of
an amendment or appropriate resolution of discontinuance or termination and
specifying therein the date as of which the Plan and Trust shall be amended,
discontinued or terminated; PROVIDED, however, that except as provided in
Section 9.2, GZA GeoEnvironmental Technologies, Inc. shall have no power to
amend, discontinue or terminate this Agreement in such manner as would cause or
permit (a) any of the Trust assets to be diverted to purposes other than for the
exclusive benefit of the Employees of the Company or their Beneficiaries or
estates; (b) any reduction in the amount theretofore credited to the Account of
any Participant; (c) any portion of the Trust assets to revert to or become the
property of the Company; (d) the duties or liabilities of the Committee to be
increased without its written consent, and/or (e) the elimination of a subsidy
or an optional form of benefit with respect to amounts credited to a
Participant's Accounts prior to the amendment.
AMENDMENT FOR TAX EXEMPTION. GZA GeoEnvironmental
Technologies, Inc. reserves the right to amend this Plan document, the Trust
Agreement and the Trust established thereunder in such manner as may be
necessary or advisable so that said Trust may qualify and continue to qualify as
an exempt employees' trust under the provisions of the Code; and any such
amendment may be made retroactively.
LIQUIDATION OF TRUST IN EVENT OF TERMINATION. In the event of
termination of this Plan and Trust, or complete discontinuance of contributions
thereto by GZA GeoEnvironmental Technologies, Inc., the rights of all
Participants to amounts
<PAGE> 60
theretofore credited to their Accounts shall continue to be fully vested and
nonforfeitable. Upon such termination or discontinuance, the Committee shall
direct the Trustee to hold the assets of the Trust in accordance with the
provisions of the Plan, and after payment of all expenses and revaluation of the
Trust, the Committee shall direct the Trustee to distribute from time to time to
the Participants (including retired or terminated Participants) or other person
or persons entitled thereto in accordance with such provisions; provided,
however, that if the Plan is terminated without the establishment of a successor
Plan, the Committee may direct the Trustee to proceed with such distribution at
any time after such termination or discontinuance but prior to the time the
Participants would otherwise become entitled thereto under the Plan. Any
distribution under this Section shall be made in accordance with Section 7.7
commencing not later than the date prescribed for distribution. Distribution may
be made wholly or partly in cash or in kind, PROVIDED that no person shall be
required to accept distribution in any form other than cash.
TERMINATION OF PLAN AND TRUST. This Agreement and the Plan and
the underlying Trust shall in any event terminate whenever all property held
under the Trust shall have been distributed in accordance with the terms hereof.
<PAGE> 61
ADMINISTRATION OF THE PLAN
FIDUCIARIES. The named fiduciaries with respect to the Plan
shall be the Company, the Committee, the Investment Manager or Managers, and the
Trustee. The responsibilities of the named fiduciaries shall be allocated as
provided herein, and each such fiduciary shall have only those responsibilities
and obligations that are specifically imposed upon him or it by the Plan or the
Trust Agreement. It is intended under this Plan that each of the named
fiduciaries shall be responsible for the proper exercise of his or its own
powers, duties, responsibilities and obligations under the Plan and shall not be
responsible for any act or failure to act of any other fiduciary.
Each named fiduciary shall be entitled to delegate all or any part of
his or its fiduciary responsibilities and obligations (except responsibilities
related to the management of Trust assets) to any other person or entity. In the
event of any such delegation, (a) the delegating fiduciary shall not be liable
for any act or omission of the person to whom the responsibility has been
delegated so long as the selection and retention of such person is prudent and
(b) the person to whom the fiduciary powers and obligations are delegated shall
be responsible only for the proper exercise of the powers, duties,
responsibilities and obligations that have been specifically delegated to him.
Unless specifically exempted by applicable federal law, each fiduciary
shall be bonded as required under ERISA.
THE COMPANY. The Company shall be responsible for making
contributions to the Trust as provided in Article IV hereof.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. GZA GeoEnvironmental
Technologies, Inc. acting through the Committee, shall serve as the Plan
Administrator. It shall also (a) appoint and remove each Participant of the
Committee, the Trustee and any Investment Manager and the successor of any of
them, and (b) have the power to
<PAGE> 62
amend and terminate this Plan and the Trust Agreement and the Trust established
thereunder.
APPOINTMENT OF ADMINISTRATIVE COMMITTEE. The Plan shall be
administered by the Administrative Committee (referred to throughout the Plan as
the "Committee") which shall consist of one or more Participants as GZA
GeoEnvironmental Technologies, Inc. shall determine from time to time. Such
Participant shall be appointed by and serve at the pleasure of GZA
GeoEnvironmental Technologies, Inc. Any Employee Participant of the Committee
shall not be precluded from participating in this Plan, but shall not be
permitted to make any decision or take any action with respect to his own
participation in the Plan.
Any action taken by the Committee shall be by majority rule of the
members of the Committee. The Committee may delegate to any one of their number
authority to sign documents on behalf of the Committee, or to perform
ministerial acts, but no person to whom such authority is delegated shall
perform any act involving the exercise of discretion without first obtaining the
approval of the Committee. Any member of the Committee may resign at any time by
providing the Company with written notice of his intent to resign. The Company
may remove any member of the Committee at any time by providing such member
written notification of his removal.
A. INVESTMENT MANAGER.
1. GZA GeoEnvironmental Technologies, Inc. may
appoint one or more Investment Managers, as that term is defined in Section
3(38) of ERISA, to manage all or any portions of the Trust. Each Investment
Manager shall have the power to manage the investment of (including the power to
acquire and dispose of) the assets of the Trust which are specifically
designated from time to time by GZA GeoEnvironmental Technologies, Inc. as being
subject to the investment management of such Investment
<PAGE> 63
Manager. GZA GeoEnvironmental Technologies, Inc. shall enter into a written
contract with each Investment Manager and shall obtain from each Investment
Manager a written acknowledgment that it is a fiduciary with respect to the
Plan. GZA GeoEnvironmental Technologies, Inc. shall retain the right to remove
and replace any Investment Manager.
The Trustee shall not have any authority with respect
to or responsibility for the investment management of any Trust assets with
respect to which the appointment of an Investment Manager is in effect in
accordance with the provisions of subsection (a) above. The Trustee shall not be
under any obligation to question the propriety of any directions given by an
Investment Manager, to review any securities or other property of the Trust
constituting assets thereof with respect to which an Investment Manager has
investment responsibility, to make any suggestions to such Investment Manager in
connection therewith or to take any action with respect to the investment of any
such assets. The Trustee shall not incur any liability or otherwise be
responsible for any losses which may result from compliance with the directions
of an Investment Manager given with respect to such assets, or failure to act in
the absence of such directions.
Each Investment Manager shall have full and complete
discretion and authority with respect to managing the investment of all assets
placed under its management from time to time including, without implied
limitation, authority to purchase, sell, exchange, convert, trade and generally
deal in securities and other assets subject to its investment control. Each
Investment Manager shall have absolute authority and discretion to place
brokerage orders on behalf of the Trust with such broker or brokers as the
Investment Manager shall select in its sole discretion. Notwithstanding anything
to the contrary elsewhere herein, the Investment Manager shall act in accordance
<PAGE> 64
with all investment objectives, investment restrictions, and investment
guidelines established by the Committee from time to time. It shall incur no
liability or other responsibility on account of any damage or loss which may
result from its acting in accordance with said objectives, restrictions or
guidelines. Except as otherwise provided in the investment guidelines
established herein, each Investment Manager shall manage the investment of the
assets under its control in its complete discretion and as though said assets
constituted the entire fund. Each Investment Manager shall have the authority to
exercise all investment powers hereunder with respect to such assets. No
Investment Manager shall be responsible in any way for the management of other
Trust assets which are not subject to its control or be under any obligation to
inquire as to the management of any such other assets, nor shall any Investment
Manager incur any liability as a result of the way in which any such other
assets are managed or the way in which the Plan is otherwise administered.
CLAIMS PROCEDURE. The Committee shall make all determinations
as to the right of any person to a benefit. Any denial by the Committee of the
claim for benefits to a Participant, former Participant or Beneficiary under the
Plan shall be made within 90 days of submission of the claim and shall be stated
in writing by it and delivered or mailed to the Participant, former Participant
or Beneficiary; and such notice shall set forth the specific reasons for the
denial, written to the best of its ability in a manner that may be understood
without legal counsel.
Any person whose claim has been denied shall have the opportunity to
appeal such denial by written notification to the Committee within 60 days
following receipt of notice of denial. Within 60 days following receipt of such
written appeal, the Committee shall transmit written notification of its
decision regarding the appeal to said person,
<PAGE> 65
provided, however, that if the Committee determines a hearing shall be
necessary, such 60-day period shall be extended to 120 days.
RECORDS AND REPORTS. The Committee shall exercise such
authority and responsibility as it deems appropriate in order to comply with
ERISA, and governmental regulations issued thereunder relating to records of
Participant's length of service and retirement benefits; notifications to
Participants; periodic registration with the Internal Revenue Service; and
annual reports to the Internal Revenue Service and/or the Department of Labor.
POWERS AND DUTIES OF THE COMMITTEE. The Committee shall have
such duties and powers as may be necessary to discharge its duties hereunder,
including, but not limited to the following:
To construe and interpret the Plan, decide all
questions of eligibility and determine the amount and time of payment of any
benefits hereunder;
To prescribe procedures to be followed by
Participants, former Participants or Beneficiaries in filing applications for
benefits;
To prepare and distribute, in such manner as it
determines to be appropriate, information explaining the Plan;
To receive from the appropriate sources such
information as shall be necessary for the proper administration of the Plan;
To receive, review and keep on file (as it deems
convenient or proper) reports of the financial condition, and of the receipts
and disbursements, of the assets of the Plan;
To appoint or employ individuals to assist in the
administration of the Plan and any other agents it deems advisable, including
legal counsel;
<PAGE> 66
To direct the Trustee to pay reasonable expenses of
the Plan and Trust out of Trust assets;
To select appropriate investment vehicles, which may
include collective investment funds and self-directed brokerage accounts, to
constitute the Investment Funds available under the Trust for the investment of
Plan assets, to permit Participants to direct investment of their account
balances in the Investment Funds, and to prescribe rules and procedures relating
to such directed investment;
To enter into any and all contracts and agreements
for carrying out the terms of the Plan and the administration thereof, to select
the Investment Funds available under the Trust and to do all acts as the
Committee, in its sole discretion, may deem necessary or appropriate, and all
such contracts, agreements, and acts shall be binding and conclusive on the
parties hereto and on the Employees involved; and
To determine any facts necessary for it to carry out
its duties hereunder.
The Committee shall have no power to add to, subtract from or modify
any of the terms of the Plan, or to change or add to any benefits provided by
the Plan, or to waive or fail to apply any requirements of eligibility for a
benefit under the Plan.
RULES AND DECISIONS. The Committee may adopt such rules as it
deems necessary, desirable, or appropriate. When making a determination or
calculation, the Committee shall be entitled to rely upon information furnished
by a Participant or Beneficiary, the Company or its the legal counsel, or the
Trustee.
AUTHORIZATION OF BENEFIT PAYMENTS. The Committee shall issue
directions to the appropriate party, including the Trustee, concerning the
payment of all benefits
<PAGE> 67
which are to be paid from the assets of the Plan, and warrants that all such
directions are in accordance with the provisions of this Plan.
APPLICATION AND FORMS FOR BENEFITS. The Committee may require
a Participant or Beneficiary to complete and file with it an application for
benefits and all other forms approved by it and furnish all pertinent
information requested by it, including the Participant's or Beneficiary's
current mailing address.
EMPLOYMENT OF AGENTS. The Committee may employ agents,
including, but not limited to, investment counsel, custodians, accountants,
consultants, or attorneys, to exercise and perform such services and duties
(including any fiduciary responsibilities other than trustee responsibility) in
connection with the administration of the Plan as it may direct. The
compensation of such agents shall be an expense chargeable in accordance with
this Section 10.12. The Committee shall be fully protected in delegating any
such power or duty to or in acting upon the advice of any such agent, in whole
or in part, and except as may be required by Federal law, shall not be liable
for any act or omission of any such agent, the Committee's only duty being to
use reasonable care in the selection and retention of any such agent.
DISCRETIONARY ACTION. Whenever under the provisions of the
Plan the Committee is given any discretionary power or powers, such power or
powers shall not be exercised in such manner as to cause any discrimination in
favor of or against any Employee or class of Employees. Any discretionary action
taken hereunder shall be consistent with any prior discretionary action taken
under similar circumstances. There shall be kept, with the records of the Plan,
a record of all discretionary action taken under any provision hereof, setting
forth the date of such action, the Employee or Employees
<PAGE> 68
directly affected thereby, and the relevant facts on which a discretionary
judgment was based.
FACILITY OF PAYMENT. Whenever, in the Committee's opinion, a
person entitled to receive any benefit hereunder is under a legal disability or
is incapacitated in any way so as to be unable to manage his financial affairs,
the Committee may cause payments otherwise payable to such person to be made to
such person's legal representative for his benefit. Any payment of benefits in
accordance with the provisions of this Section 10.14 shall be a complete
discharge of any liability for the making of such payment under the provisions
of this Plan. In the event that a person entitled to receive any benefit
hereunder cannot be located after reasonable efforts of the Committee, or in the
event a distribution is made to a Participant by check and the check is not
presented for payment within such time period as may be prescribed by the
Committee, such person's benefit shall be forfeited, and shall be reapplied in
such a way as to offset future Matching Contributions under this Plan; provided,
however, that if such person subsequently files a claim for benefit with the
Committee, such benefit shall be restored (by a special Company contribution or
from current forfeitures) to the value previously forfeited.
COMPENSATION OF COMMITTEE AND PLAN EXPENSES. The Committee
shall serve without compensation for services as such, but all expenses incurred
by the Committee in administering the Plan shall constitute a charge upon the
Trust, unless paid by the Company in its sole discretion. Such expenses shall
include any expenses incident to the functioning of the Plan and Trust,
including, but not limited to, attorneys' fees, fidelity bonding, accounting and
clerical charges, trustee fees, Plan investment costs, record keeping fees,
consultants' fees and other costs of administering the Plan and Trust.
<PAGE> 69
Any fees payable to the Committee's administrative delegate which are chargeable
to a Participant's Accounts shall be withdrawn from his Accounts in the
following order: Tax-Deferred Account, Voluntary Account, Rollover Account,
Company Account, QNEC Account, Matching Account. Such withdrawal shall be taken
first pro rata among the Investment Funds in the account and then, if necessary,
from any Brokerage Account in the account.
INDEMNIFICATION. The Company shall indemnify and hold harmless
each Participant of the Committee from and against any and all claims, losses,
damages, expenses (including reasonable attorneys' fees approved by the Company)
and liability (including any reasonable amounts paid in settlement with the
Company's approval) arising from any act or omission of such Participant, except
when the same is judicially determined to be due to the willful misconduct of
such Participant.
REVIEW OF DOMESTIC RELATIONS ORDERS. The Committee shall
determine whether any domestic relations order received by the Plan is
"qualified" within the meaning of Section 414(p) of the Code. Upon receipt of a
domestic relations order, the Committee (a) shall promptly notify the
Participant and each alternate payee under said order of the receipt by the
Committee of said order and its procedures for determining the qualified status
of said order, and (b) shall direct the Trustee to separately account for any
amounts payable to an alternate payee pursuant to said order. Within a
reasonable time thereafter, the Committee shall determine whether such order is
a qualified domestic relations order and shall notify the Participant and each
alternate payee of such determination. If, within the eighteen month period
beginning on the first date any amount is payable to an alternate payee, the
Committee determines the order is not qualified or is unable to determine
whether or not relations order is "qualified" under
<PAGE> 70
Section 414(p) of the Code, the amount previously segregated under (b) above
shall again be merged with the Participant's accounts under the Plan and any
subsequent determination that the order is qualified shall be applied
prospectively only.
VOTING OF COMPANY STOCK. Each Participant shall have the right
and shall be afforded the opportunity to direct the manner in which the interest
of such Participant in Company Stock held in the Company Stock Fund shall be
voted at all stockholders' meetings. To facilitate such right the Company shall
deliver to each Participant a copy of all proxies, notices, and other
information which it distributes to its shareholders generally and the Committee
shall establish such procedures for the collection of Participants' instructions
on the voting of such Company Stock and the timely transmission of such
instructions to the Trustee as it shall determine to be appropriate. Any Company
Stock held by the Trustee which is not yet allocable to any Participant shall be
voted in the same manner and in the same proportion as the Company Stock with
respect to which voting directions have been timely received. Any Company Stock
allocable to the interests of Participants for which no signed voting-direction
instrument is timely received from the Participant shall be voted by the Trustee
in the same manner and in the same proportion as the Company Stock with respect
to which voting directions have been timely received. The instructions received
by the Trustee from Participants shall be held by the Trustee in strict
confidence and shall not be divulged to any person, including employees,
officers and directors of the Company or any Affiliated Company; provided,
however, that to the extent necessary for the operation of the Plan, such
instructions may be relayed by the Trustee to a record keeper, auditor or other
person providing services to the Plan if such person is not the Company, an
Affiliated Company or any employee, officer or director thereof, and agrees not
to divulge such directions to
<PAGE> 71
any other person, including employees, officers and directors of the Company and
any Affiliated Company. Participants do not acquire ownership of Company Stock
held by the Trustee for their account unless and until the Trustee delivers to
them in accordance with Section 7.7 hereof stock certificates which have been
registered in their names on the stock books of the Company. For purposes of
this Section 10.18, each Participant shall be a named fiduciary under the Plan
with respect to the sum of (a) the shares of Company Stock representing his
interest in the Company Stock Fund and (b) a proportionate number of any
undirected shares of Company Stock. Each Participant's proportionate share shall
be a fraction, the numerator of which shall be the number of shares of Company
Stock for which he provides instructions to the Trustee in a timely manner and
the denominator of which shall be the total number of shares of Company Stock
for which instructions are timely provided to the Trustee. For purposes of this
Section 10.18, the term "Participant" shall include a former Participant, a
surviving spouse or other Beneficiary, whichever is applicable.
TENDER OFFER OR EXCHANGE OFFER. In the event of a tender offer
or exchange offer by any person (including the Company) for any or all shares of
Company Stock held in the Trust, each Participant shall have the right and shall
be afforded the opportunity to direct in writing whether the shares of Company
Stock (including any fractional shares) representing his interest in the Company
Stock Fund shall be tendered or exchanged in response to such offer. The Trustee
shall act with respect to such Company Stock in accordance with such written
instructions. To the extent that the Trustee does not receive timely
instructions from a Participant, the shares of Company Stock representing his
interest in the Company Stock Fund will not be tendered. To facilitate the
foregoing right of the Participants, the Company shall utilize its best efforts
<PAGE> 72
to distribute or cause to be distributed to each Participant substantially the
same information as may be distributed to the stockholders of the Company in
connection with such offer and the Committee shall establish such procedures for
the collection of Participants' instructions with respect to such Company Stock
and the timely transmission of such instructions to the Trustee as it shall
determine to be appropriate. The instructions received by the Trustee from
Participants shall be held by the Trustee in strict confidence and shall not be
divulged or released to any person, including employees, officers and directors
of the Company; or any Affiliated Company; provided, however, that to the extent
necessary for the operation of the Plan, such instructions may be relayed by the
Trustee to a record keeper, auditor or other person providing services to the
Plan if such person is not the Company, an Affiliated Company or any employee,
officer, or director thereof, and agrees not to divulge such instructions to any
other person, including employees, officers and directors and directors of the
Company and any Affiliated Company. For purposes of this Section 10.19, each
Participant shall be a named fiduciary under the Plan with respect to the shares
of Company Stock representing his interest in the Company Stock Fund. For
purposes of this Section 10.19, the term "Participant" shall include a former
Participant, surviving spouse or other Beneficiary, whichever is applicable.
<PAGE> 73
THE COMPANY
NO CONTRACT OF EMPLOYMENT. Neither the Plan nor the trust
agreement shall be construed as creating any contract of employment between the
Company and any Participant, Employee or other person, and nothing herein
contained shall give any person the right to be retained in the employ of the
Company or otherwise restrain the Company's right to deal with its employees,
including Participants and Employees, and their admission, hiring, discharge,
layoff, compensation, and all other conditions of employment in all respects as
though this Plan or underlying Trust did not exist.
LIABILITY OF THE COMPANY. Subject to its agreement to
indemnify the Committee as provided in Section 10.16 and except as otherwise
provided by applicable Federal law, neither the Company nor any person acting in
behalf of the Company shall be liable for any act or omission on the part of the
Committee, or for any act performed or the failure to perform any act by any
person with respect to this Agreement, the Plan or Trust, GZA GeoEnvironmental
Technologies, Inc.'s only duty being to use reasonable care in the selection of
the Committee, the Trustee and any Investment Manager.
ACTION BY THE COMPANY. Whenever under the terms of this
Agreement, the Company is permitted or required to take any action, such action
taken by an authorized agent of the Company shall be deemed to be the action of
the Company, as applicable. The execution of any direction, document or
certificate in behalf of the Company by any of its authorized agents shall
constitute his certification of his authority with respect thereto, and the
Committee or other person shall be protected in accepting and relying upon any
such direction, document or certificate and is released from inquiry into the
authority of any agent of the Company.
<PAGE> 74
SUCCESSOR TO BUSINESS OF GZA GEOENVIRONMENTAL TECHNOLOGIES,
INC. Unless this Plan and underlying Trust be sooner terminated, a successor to
the business of GZA GeoEnvironmental Technologies, Inc., by whatever form or
manner resulting, may continue the Plan and underlying Trust, and such successor
shall ipso facto succeed to all the rights, powers and duties of GZA
GeoEnvironmental Technologies, Inc. hereunder. The employment of any Employee
who has continued in the employ of such successor shall not be deemed to have
been terminated or severed for any purposes hereunder by reason of such
succession.
<PAGE> 75
ADDITIONAL PARTICIPATING COMPANIES
PARTICIPATION. Any Affiliated Company may, with the consent of
GZA GeoEnvironmental Technologies, Inc., become a participating Company by
action of the board of directors of such Affiliated Company adopting the Plan
and the Trust as a plan and a trust for the benefit of its employees. Any such
additional participating Company is hereinafter referred to in this Article XII
as a "Participating Company."
EFFECTIVE DATE. The participation of a Participating Company
shall take effect as of the date of its action to adopt the Plan and Trust or
such other date as it may specify.
ADMINISTRATION. Each Participating Company shall be deemed the
"Company" and shall have and exercise all the rights, powers, and duties thereof
with respect to the Plan as applied to itself and its employees and that part of
the Trust which represents accounts of Participants employed by it. Subject to
Sections 10.2 and 12.4, each Participating Company hereby authorizes GZA
GeoEnvironmental Technologies, Inc. to exercise on its behalf all such rights,
powers, and duties, including amendment or termination of the Plan.
TERMINATION. If the Plan shall be terminated by any one
Participating Company, the Trust shall be valued pursuant to Section 5.8 and
assets representing the accounts of all Participants employed by such
Participating Subsidiary shall be segregated into a separate trust and held
subject to the provisions of the Plan, and all rights, powers, and duties of the
Company and GZA GeoEnvironmental Technologies, Inc. with respect to such
separate trust shall be exercised by such Participating Company.
<PAGE> 76
I. TOP-HEAVY PROVISIONS
A. GENERAL RULE. For any Plan Year for which this Plan
is a "top-heavy plan" as defined in Section 13.4 below, any other provisions of
this Plan to the contrary notwithstanding, this Plan shall be subject to the
minimum contribution provisions set by Section 13.2 and the minimum vesting
provisions set by Section 13.3.
MINIMUM CONTRIBUTION PROVISIONS. Each Participant who is a
non-key employee (as defined in Section 13.6 below) shall be entitled to a
minimum contribution under the Plan (excluding Matching Contributions but
including discretionary Company Contributions and contributions made by the
Company pursuant to Sections 6.2(c) and 6.3(c)) equal to the lesser of (a) 3% of
the Participant's Total Compensation, or (b) the highest percentage of Total
Compensation contributed on behalf of a Key Employee.
MINIMUM VESTING PROVISIONS. Each Participant who is a non-key
employee (as defined in Section 13.6 below) shall have his vested percentage in
his Company Account and Matching Account determined under the following
schedule:
Years of Vesting Service Vested Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
Once a Participant becomes subject to the above vesting schedule, such
vesting schedule shall continue to apply to such Participant's Company Account
and Matching Account in the future, regardless of whether the Plan continues to
be top heavy.
TOP-HEAVY PLAN DEFINITION. This Plan shall be a "top-heavy
plan" for any Plan Year if, as of the determination date (as defined in Section
13.4(a) below), the sum
<PAGE> 77
of the Accounts under the Plan for Participants (including former Participants)
who are "Key Employees" (as defined in Section 13.5 below) exceeds 60 percent of
the sum of the Accounts under the Plan for all Participants (excluding the
Accounts of former "Key Employees" and of Employees who have not performed any
services for the Company or an Affiliated Company at any time during the
five-year period ending on the determination date) unless the Plan is part of an
aggregation group or if this Plan is part of an aggregation group (as defined in
Section 13.4(b) below) which for such Plan Year is a top-heavy group (as defined
in Section 13.4(c) below).
"Determination date" means for any Plan Year the last
day of the immediately preceding Plan Year.
"Aggregation group" means the group of plans, if any,
that includes the group of plans that are required to be aggregated and, if the
Committee so elects, the group of plans that are permitted to be aggregated.
the group of plans that are required to be
aggregated (the "required aggregation group") includes:
(A) each plan of the Company (and of other
companies which are required to be aggregated with the Company
by reason of Section 414(b), 414(c) or 414(m) of the Code) in
which a "Key Employee" is a Participant, and
(B) each other plan of the Company (and of
other companies which are required to be aggregated with the
Company by reason of Section 414(b), 414(c) or 414(m) of the
Code) which enables a plan in which a Key Employee is a
Participant to meet the requirements of either Section
401(a)(4) or Section 410 of the Code.
<PAGE> 78
The plans that are permitted to be
aggregated (the "permissive aggregation group") includes any plan that
is not part of the "required aggregation group" that the Committee
certifies as constituting a plan within the "permissive aggregation
group". Such plans may be added to the "permissive aggregation group"
only if, after the addition, the "aggregation group" as a whole
continues to meet the requirements of both Section 401(a)(4) and
Section 410 of the Code.
"Top-heavy group" means the "aggregation group", if
as of the applicable determination date, the sum of the present value of the
accrued benefits for "Key Employees" under all defined benefit plans included in
the "aggregation group" plus the aggregate of the accounts of "Key Employees"
under all defined contribution plans included in the "aggregation group" exceeds
60 percent of the sum of the present value of the accrued benefits for all
employees under all such defined benefit plans plus the aggregate accounts for
all Employees under such defined contribution plans (excluding the accrued
benefit and accounts of former "Key Employees" and of Employees who have not
received any remuneration from the Company at any time during the five-year
period ending on the determination date).
In determining whether this Plan constitutes a
"top-heavy plan" the Committee shall follow the rules set forth in Section 416
of the Code and regulations pertaining thereto.
KEY EMPLOYEE. The term "Key Employee" means any Participant
(and any Beneficiary of a Participant) under this Plan who is a "Key Employee"
as determined in accordance with Section 416(i)(1) of the Code.
<PAGE> 79
NON-KEY EMPLOYEE. The term "non-key employee" means any
Employee (and any Beneficiary of an Employee) who is a "non-key employee" as
determined in accordance with Section 416(i)(2) of the Code.
<PAGE> 80
MISCELLANEOUS
SPENDTHRIFT PROVISION. To the maximum extent permitted by law,
beneficial interests of Participants or their Beneficiaries in the Trust shall
not be assignable nor subject to alienation, sale, transfer, pledge,
encumbrance, mortgage, attachment nor receivership, nor shall they pass to any
trustee in bankruptcy or be reached or applied by any legal process for the
payment of any obligations of any such person, except obligations of a
Participant to the Trust in connection with one or more loans to such
Participant pursuant to Section 8.5 of this Agreement or obligations of a
Participant pursuant to a qualified domestic relations order within the meaning
of Sections 401(a)(13)(B) and 414(p) of the Code. Any attempt at such
assignment, alienation, sale, transfer, pledge, encumbrance, mortgage or
attachment shall be void.
MERGER OR CONSOLIDATION. In the event that this Plan is merged
with or consolidated with any other Plan, or the assets or liabilities accrued
under this Plan are transferred to any other Plan, each Participant's benefit
under such other Plan shall be at least as great immediately after such merger,
consolidation or transfer (if such Plan were then to terminate) as the benefit
to which he would have been entitled under this Plan immediately before such
merger, consolidation or transfer (if the Plan were then to terminate).
CONSTRUCTION. In any question of interpretation or other
matter of doubt, the Committee and the Company may rely upon the opinion of
counsel for the Company or any other attorney at law designated by the Company.
The provisions of this Agreement shall be construed, administered and enforced
according to the laws of the United States and, to the extent permitted by such
laws, by the laws of The
<PAGE> 81
Commonwealth of Massachusetts. All contributions to the Trust shall be deemed to
be made in the State of Missouri.
LEASED EMPLOYEES. A "leased employee" shall receive credit for
Hours of Service and Years of Service for the entire period during which he is a
leased employee of the Company as if he were an Employee of the Company;
provided, however, that a leased employee shall not be an Employee eligible to
participate in the Plan as long as he remains a leased employee. For purpose of
this Section 14.4, the term "leased employee" means any person (a) who is not an
Employee of the Company and (b) who pursuant to an agreement between the Company
and any other person (a "leasing organization") has performed services for the
Company on a substantially full-time basis for a period of at least one year and
such services are performed under primary direction or control by the Company.
Notwithstanding the foregoing, if leased employees constitute less than 20
percent of the Company's nonhighly compensated work force within the meaning of
Section 414(n)(5) of the Code, a person who is covered by a money purchase
pension Plan maintained by the leasing organization which provides a
nonintegrated employer contribution rate of at least ten percent) of
compensation, immediate participation and full and immediate vesting shall not
be considered a "leased employee."
DEFINITION OF WORDS. Feminine or neuter pronouns shall be
substituted for those of the masculine form, the plural shall be substituted for
the singular, and vice versa, in any place or places herein where the context
may require such substitution or substitutions. Words such as "herein,"
"hereunder," "hereof" and the like refer to this Agreement as a whole and not
merely to the Article or Section in which they appear, unless the context
clearly requires otherwise.
<PAGE> 82
USERRA. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits and service credit with respect to qualified
military service shall be provided in accordance with Section 414(u) of the
Code.
TITLES. The titles of Articles and Sections are included only
for convenience and shall not be construed as a part of this Agreement or in any
respect affecting or modifying its provisions.
CORRECTION METHODS. The Company may make any corrections under
the Plan necessary to retain the qualified status of the Plan and Trust under
Code Sections 401(a) and 501(a). Such corrections shall include, but not be
limited to, any corrections described in the Internal Revenue Service's Employee
Plans Compliance Resolution System.
A. EXECUTION OF AGREEMENT. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER
OF COUNTERPARTS AND EACH FULLY EXECUTED COUNTERPART SHALL BE DEEMED AN ORIGINAL
FOR ALL PURPOSES.
IN WITNESS WHEREOF THIS AGREEMENT HAS BEEN SIGNED AND SEALED FOR AND IN
BEHALF OF THE COMPANY BY ITS DULY AUTHORIZED OFFICER THIS DAY OF , 1998.
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
BY:
-----------------------------------
Title:
<PAGE> 1
================================================================================
EXHIBIT 10.55
MEMORANDUM OF UNDERSTANDING
Transfer of Assets, Contract Obligations, and Personnel from
Raamot Associates, P.C. to
GZA GeoEnvironmental of New York
December 29, 1998
Prepared by Richard M. Simon, P.E.
<PAGE> 2
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (the "Memorandum") is made this 31st day of
December, 1998 by and between Raamot Associates, P.C., a New York Professional
Corporation, with principal place of business at Two Pennsylvania Plaza, New
York, New York 10121 (hereinafter "Raamot") and Goldberg-Zoino & Associates of
New York, P.C., d/b/a/ GZA GeoEnvironmental of New York, a New York Professional
Corporation, with principal place of business at 364 Nagel Drive, Buffalo, New
York 14225 (hereinafter "GZANY").
WHEREAS, Raamot has decided to cease business operations centered from
Raamot's New York City office located at Two Pennsylvania Plaza, New York, New
York 10121 (hereinafter the "Office"), and
WHEREAS, Raamot has a need to complete Client contract obligations that
may extend beyond any selected date of termination of operations by Raamot in
the Office, and
WHEREAS, Raamot must terminate occupancy under the lease of the Office
and vacate the Office under terms described in the lease between Raamot and the
Landlord and to be negotiated in the future, and
WHEREAS, Tonis Raamot, P.E. has developed Client relationships that
have value to GZANY from its continuing operations in New York City and
elsewhere, and
WHEREAS, Raamot has employed a skilled and valuable staff of employees
in its New York City Office to whom Raamot may have certain continuing
obligations under law and good business practice, and
WHEREAS, these Raamot employees are valuable in the completion of
Raamot's obligations to its Clients as well as valuable to any new employer who
may wish to capitalize on Tonis Raamot's developed Client relationships,
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements hereinafter set forth, mutually covenant and agree as
follows:
EFFECTIVE DATE
1. Except for completing on-going professional work already under contract
and administrative efforts to orderly close the business of Raamot Associates,
P.C., Raamot will cease accepting new work assignments in its New York City
Office at the close of business on December 31, 1998 or such proximate date as
mutually agreed (the "Termination Date").
- --------------------------------------------------------------------------------
Memorandum of Understanding 1 December 29, 1998
<PAGE> 3
EMPLOYEE STATUS
2. After the Termination Date, all Raamot employees employed at its New
York City Office will cease status as Raamot employees.
3. The "Termination Date" for the purpose of all Raamot employee benefit
obligations will be the Termination Date. Employees will be paid salary and
wages by Raamot through that date plus pay for accrued vacation not taken
through that date. All contributions by Raamot to benefit plans credited on
behalf of terminated Raamot employees will cease as of the Termination Date
including Employer's share of medical, life and disability and insurance
benefits and Employer's Optional Contribution to the Raamot SEP Retirement Plan.
Employer contributions stemming from employee payroll deferments, if any, will
be made through the final date of payroll and as selected by the individual
employee.
4. GZANY agrees to offer to the former Raamot employees listed in Exhibit
A employment beginning on the next regular work day after the Termination Date,
subject to GZANY's ordinary employment conditions, including but not limited to,
documentation of permission to work in the U.S., school credentials,
professional licenses and training courses, and a medical exam indicating
fitness for job duties. Raamot employees who accept the GZANY offers of
employment will be termed "Transferred Employees." GZANY will provide continuity
of medical benefits for those Transferred Employees and heir dependents who were
previously covered by a Raamot health insurance benefits program and who choose
to enroll the employee and dependents (if any) in GZANY's medical insurance
benefit program.
5. Raamot will not seek to offer employment of current Raamot New York
City employees unless and until the employee expresses his or her intent to
decline GZANY's employment offer. Should certain Raamot New York City employees
choose to decline GZANY's employment offer, Raamot will be free at Raamot's
option to offer these employees employment, provided that the activities
proposed to be and actually carried out do not violate Tonis Raamot's covenant
not to compete with GZANY.
MEDICAL BENEFITS
6. Former Raamot employees who accept employment with GZANY will be
provided benefits in accordance with GZANY's regular benefit program.
OFFICE OCCUPANCY
7. Subject to the approval of the landlord as set forth in the Raamot
prime lease, GZANY agrees to sublet the Office from Raamot for the period
immediately following the Termination Date through October 31, 1999. The Office
includes two storage spaces included in the lease and rent payment. The terms of
the sublease will be substantially as those set forth in Raamot's prime lease
for the Office dated May 18, 1979, and as amended on June 17, 1991 and April 7,
1994 (the "Lease"), that is incorporated herein as Exhibit B. GZANY will pay
Raamot, as sublease rent in advance on the first day of each month, the total
rent Raamot, as lessee, pays the lessor under the terms of the Lease plus all
taxes and other increased rent that Raamot is required
- --------------------------------------------------------------------------------
Memorandum of Understanding 2 December 29, 1998
<PAGE> 4
to pay Lessor under the terms of the Lease. The current rent including
additional rent is $9585 per month. Raamot represents and warrants to GZANY that
(i) the lease is in full force and effect in accordance with its terms, (ii)
that the rent and other sums payable to the landlord thereunder have been paid,
and (iii) there is no default or any event which, with the passage of time or
the giving of notice or both, would constitute an event of default under the
lease. If payments are made to Raamot, Raamot covenants and agrees to timely pay
to landlord all sums timely due. At the option of GZANY, GZANY may make payments
directly to landlord for the account of Raamot.
INDEMNITY/INSURANCE
8. GZANY agrees to defend, indemnify and hold harmless both Raamot and the
property Lessor in accordance with the terms of the Lease. GZANY will be
responsible for insuring its personal property in the Office during the term of
the sublease and to provide comprehensive general liability insurance
substantially in accordance with the terms of the Lease naming both Raamot and
Lessor as "Additional Insured" under the terms of GZANY's insurance policies.
Such insurance shall be stated as primary for claims made against Raamot and
Lessor arising out of GZANY's occupancy of the Office.
TRAINING AND HEALTH MONITORING
9. Prior to the end of their employment, Raamot will provide each employee
a copy of his or her personnel record as they may be entitled to under laws and
regulations, including but not limited to training and health and safety
monitoring records. GZANY may request copies of such records from the
Transferred Employees.
ACCOUNTS RECEIVABLE/ACCOUNTS PAYABLE
10. Raamot will retain the right and obligation to collect accounts
receivable and unbilled retainage, progress billings and work-in-process for all
Client contracts executed by Raamot and not specifically assigned to GZANY.
Raamot may use such monies collected for whatever purpose it deems proper and
necessary, and GZANY shall have no right to receive benefit or credit for any
moneys collected by Raamot.
11. GZANY agrees to assist and cooperate with Raamot in all reasonable
respects to solicit Clients to effect the collection of outstanding accounts
owed Raamot. Raamot will work to collect such moneys owed Raamot with
consideration to the maintenance of Client relationships developed by Tonis
Raamot, P.E. and that may accrue to GZANY. Nothing in this paragraph will
preclude Raamot from aggressively pursuing collection of moneys owed, including
institution of legal action, if warranted in Raamot's sole judgment.
12. On request from Raamot, GZANY agrees to inform Raamot as to cash
payments received by GZANY from former Raamot Clients with whom Raamot has
current outstanding accounts receivable.
- --------------------------------------------------------------------------------
Memorandum of Understanding 3 December 29, 1998
<PAGE> 5
13. All project specific charges including accounts payable,
subcontractors' invoices and the like related to projects under contract to
Raamot will be paid by Raamot whether incurred before or after the Termination
Date.
14. All project specific charges including accounts payable,
subcontractors' invoices and the like related to projects under contract to
GZANY will be paid by GZANY whether incurred before or after the Termination
Date.
15. After the Termination Date, GZANY agrees to cooperate with Raamot in
closing all bookkeeping records, final billing of Raamot projects and necessary
activities as required to close Raamot's New York City operations in an orderly
fashion.
16. GZANY agrees that costs for the services of GZANY employees in regard
to bookkeeping and collection of accounts receivable will be provided without
charge to Raamot.
PROJECT RECORDS
17. Both parties agree that Raamot's project files and records are
confidential documents that are and will remain the property of Raamot. GZANY
will store the files for a period of at least five years from the date of this
Agreement without charge to Raamot.
18. During such period, GZANY will have the authority to accept delivery
and obtain access and copy such files pertaining to certain Clients' work
provided such Clients approve in advance the release of such information to
GZANY or others in accordance with the terms of the confidentiality provisions
of the contract of engagement under which the Raamot work was performed. GZANY
agrees to keep such Raamot files intact and to return them to storage
substantially as they were received.
19. Other than release of information as authorized by specific Clients,
GZANY agrees to preserve the confidentiality of Raamot's records as Raamot is
required to preserve confidentiality under the terms of its various Client
contracts.
20. During such period, from time to time, Raamot may require access to
certain Raamot records for its own purposes. GZANY agrees to cooperate with
Raamot to effect identification and access to such records and to copy or ship
such records to Raamot at Raamot's request. Raamot agrees to pay for any
specific charges levied by the records storage company for access to the records
required by Raamot plus any reasonable out-of-pocket costs incurred by GZANY for
copying and shipping of such requested records. GZANY agrees that costs for the
services of GZANY employees in regard to file management will be provided
without additional charge to Raamot.
- --------------------------------------------------------------------------------
Memorandum of Understanding 4 December 29, 1998
<PAGE> 6
CAPITAL EQUIPMENT
21. Raamot agrees to sell to GZANY all tangible personal property owned by
Raamot as listed in the attached Exhibit C in consideration of the payment by
GZANY to Raamot of $50,000.00 in cash within ten (10) calendar days of the
Termination Date.
22. Raamot warrants that it is the lawful owner of and has the right to
sell said listed personal property and that it is free and clear of all liens,
attachments or other encumbrances that may impair Raamot's ability to offer it
for sale.
23. GZANY agrees that all property acquired under this transaction is sold
"as is."
24. Raamot agrees to assign to GZANY all existing warranties, leases and
maintenance contracts on such owned and leased equipment that may currently be
in place, and GZANY agrees to assume all rights and responsibilities associated
with those contracts including those associated with contract termination
following the Termination Date. GZANY agrees to pay directly to the service
providers all accrued lease, service and maintenance contract fees due for
services following the Termination Date and all other payments that may accrue
following the Termination Date.
TELEPHONE SERVICE AND CHARGES
25. Raamot will close its telephone and communication accounts connected to
the Office, including but not limited to, local telephone service, long distance
service and pager and cellular phone service accounts on the Termination Date.
Raamot will pay all charges on its account for telephone and communication
service to the Office through the Termination Date including all charges that
may have accrued as a consequence of GZANY'S business without contribution from
GZANY.
26. Raamot agrees to cooperate with GZANY to transfer the existing
telephone line numbers and communication accounts to GZANY's name and account.
GZANY agrees to pay all charges for telephone and communication service to the
Office after the Termination Date including all charges that may have accrued as
a consequence of Raamot's business without contribution from Raamot.
27. Raamot will cooperate with GZANY to transfer Raamot's current telephone
listing from Raamot to GZANY for GZANY's use after the Termination Date.
CLIENT CONTRACT OBLIGATIONS
28. It is the intent of this Memorandum that all requests for proposals and
executed contracts received by Raamot prior to the Termination Date that can be
substantially completed prior to the Termination Date will be performed under
contract to Raamot and by Raamot employees.
29. It is the intent of this Memorandum that all contracts received by
Raamot prior to or after the Termination Date and that may require completion
substantially after the Termination Date will be performed by contracts entered
into between GZANY and the respective Clients. Prior to
- --------------------------------------------------------------------------------
Memorandum of Understanding 5 December 29, 1998
<PAGE> 7
the Termination Date, GZANY agrees that work on such contracts will be performed
by Raamot personnel as much as practicable.
30. In the event that certain Raamot contract obligations extend beyond the
Termination Date, GZANY agrees to provide technical professional and other labor
to complete the work under the terms of a negotiated labor service subcontract
with Raamot. Raamot will provide overall professional supervision of the work
and will be solely responsible for claims that may arise out of the work due to
professional acts, and Raamot will defend, indemnify and hold harmless GZANY
from such claims for work performed by GZANY under subcontract to Raamot.
31. In the event that certain GZANY contract obligations emanating from
GZANY New York City activities or other contracts require performance by Raamot
employees prior to the Termination Date, Raamot agrees to provide technical
professional and other labor to complete the work under the terms of a
negotiated labor service subcontract with GZANY. GZANY will provide overall
professional supervision of the work and will be solely responsible for claims
that may arise out of the work due to professional acts and will defend,
indemnify and hold harmless Raamot from such claims for work performed by Raamot
under subcontract to GZANY.
LIABILITIES AND OBLIGATIONS TO RAAMOT
32. Notwithstanding anything to the contrary contained in this Memorandum,
GZANY does not assume any liability, obligation, claim against or contract of
Raamot of any kind or nature (fixed, contingent or otherwise), at any time
existing or asserted, whether the same (i) is currently known or unknown and
recorded or not on the books and records of Raamot, or (ii) arises out of or by
reason of any transaction or event occurring prior to or subsequent to this
Memorandum. Raamot shall pay or make provision for payment of all of its
liabilities of every kind and nature (including claims of professional error or
omission), and agrees to indemnify and hold GZANY harmless from and against any
such liabilities, obligations, claims against or contracts, and any actions,
claims, demands, assessments, judgments, fines, costs, and expenses (including
attorneys' fees) relating to the foregoing.
33. The rate of compensation for services rendered under the terms of
either labor subcontract between Raamot and GZANY will be Raamot's Standard
Schedule of Fees as set forth in Exhibit D. Raamot and GZANY agree to review,
reconcile and make payments for accounts and charges accrued under the
respective subcontracts on April 15, 1999 and on the fifteenth of the month
thereafter.
CLIENT CONTRACT RELATIONSHIPS
34. GZANY will take the lead and Raamot agrees to make all reasonable
accommodation to cooperate with GZANY in attempting to transfer all contracts
and Client relationships from Raamot to GZANY.
- --------------------------------------------------------------------------------
Memorandum of Understanding 6 December 29, 1998
<PAGE> 8
SPIRIT AND INTENT
35. Raamot and GZANY agree to assist and cooperate in all reasonable
respects with each other in connection with the closure of Raamot's New York
City operations, the establishment and preservation of each party's business
relationships, and the carrying out of the obligations of the respective parties
hereunder. Both parties agree to provide any further document (including
releases) that may be reasonably requested by the other party to evidence the
agreements set forth herein.
36. This Memorandum of Understanding shall supersede any prior oral or
written understanding or agreement that may exist at the time of execution. This
Memorandum shall be governed by New York law. The provisions of this Memorandum
are severable; if any provision is judged unenforceable it shall be
appropriately limited and given effect to the extent it is enforceable. Headings
in this Memorandum of Understanding are for convenience only and do not form a
part of the Memorandum. Nothing in this Agreement shall be construed to give any
rights or benefits to third parties.
DISPUTES
37. If a dispute arises out of or relates to this Memorandum of
Understanding, or the breach thereof, and if said dispute cannot be settled
through negotiation, the parties agree first to try in good faith to settle the
dispute by mediation administered by the American Arbitration Association under
its Commercial Mediation Rules, as a condition precedent to filing demand for
arbitration under the terms of this Memorandum. Such Mediation shall be
conducted in New York City or such other venue as the parties mutually agree.
38. Should mediation fail to resolve any dispute between the parties, any
controversy or claim arising out of or relating to this contract, or the breach
thereof, shall be settled by arbitration administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Such Arbitration shall be conducted in New York
City or such other venue as the parties mutually agree.
39. Mediator fees and administrative charges will be shared equally by the
parties. Arbitrator fees and administrative charges will be allocated by the
arbitrator(s). Each party will pay its own fees for legal representation and
out-of-pocket expenses associated with dispute resolution.
Guaranty
40. For good and valuable consideration, and as an inducement for Raamot to
enter into this Memorandum of Understanding and for Tonis Raamot, P.E. to enter
into an installment sale of his personal goodwill, it is hereby agreed that the
GZA GeoEnvironmental Technologies, Inc. does hereby guaranty to Raamot and to
Tonis Raamot, P.E. the prompt, punctual and full payment of all monies now or
hereinafter due Raamot and Tonis Raamot, P.E. from GZANY.
- --------------------------------------------------------------------------------
Memorandum of Understanding 7 December 29, 1998
<PAGE> 9
Executed as of the date first written above by the parties hereto by their
respective officers who have hereto been duly authorized.
RAAMOT ASSOCIATES, P.C. GZA GEOENVIRONMENTAL OF NEW YORK
By: By:
------------------------------ ----------------------------------------
Title: President Title: President
Printed Name: Tonis Raamot Printed Name: Richard M. Simon
Solely with respect to Paragraph 40 above
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
By:
----------------------------------------
Title: President and Chief Executive Officer
Printed Name: Andrew P. Pajak
- --------------------------------------------------------------------------------
Memorandum of Understanding 8 December 29, 1998
<PAGE> 10
EXHIBIT A
LIST OF EMPLOYEES
===========================================================
NAME RAAMOT SALARY GZA GRADE
-----------------------------------------------------------
Behn, Michael T. $52,080 Pr. Mgr.
-----------------------------------------------------------
Garino, Robert A. 39,000 E1
-----------------------------------------------------------
Kagaoan, Juan A. 40,800 E1
-----------------------------------------------------------
Khatari, Muktar 37,800 E2
-----------------------------------------------------------
Mosley, Ernest 66,000 Sen. PM
-----------------------------------------------------------
Raamot, Tonis 120,000 Principal
-----------------------------------------------------------
Storm, Jens T. 24,000 Coop Student
-----------------------------------------------------------
Sullivan, Thomas 52,800 Sen. PM
-----------------------------------------------------------
Totten, Irene 31,200 AA2
===========================================================
- --------------------------------------------------------------------------------
Memorandum of Understanding 9 December 29, 1998
<PAGE> 11
EXHIBIT B
Lease Amendments For Office Suite 1807
Two Pennsylvania Plaza,
New York, New York 10121
<PAGE> 12
EXHIBIT C
Schedule Of Personal And Capital Equipment
<PAGE> 13
EXHIBIT D
RAAMOT FEE SCHEDULE
Principal $_____.00/hr.
Associate Principal $_____.00/hr.
Sr. Project Manager $_____.00/hr.
Project Manager $_____.00/hr.
Engineer I $_____.00/hr.
Engineer II $_____.00/hr.
Technician I $_____.00/hr.
Technician II $_____.00/hr.
Drafting $_____.00/hr.
Word Processor $_____.00/hr.
Travel per staff rate
Travel Expenses cost plus 10%
Equipment Rental cost plus 10%
Materials and Supplies cost plus 10%
Analytical Fees cost plus 10%
Contractors Fees cost plus 10%
Consumables and Reimbursable Fees cost plus 10%
Mileage cost plus 10%
<PAGE> 14
December 23, 1998
Mr. Tonis Raamot, P.E.
Raamot Associates, P.C.
Two Pennsylvania Plaza
New York, New York 10121
Dear Toni:
GZA GeoEnvironmental, Inc. (GZA) is very pleased to offer you a part-time
position as Principal with GZA GeoEnvironmental of New York. Your salary will be
$3,461.54 per pay period, which equates to an annual equivalent of $90,000. This
offer is conditioned on your signing the attached Non-Disclosure/Non-Competition
Agreement dated December 31, 1998 and GZA's Employee Agreement.
Your position of Principal is a part-time salaried position with your regular
work schedule to average 19.5 hours per week.; no additional compensation is
paid for overtime worked (time beyond 19.5 hours per week). You are entitled to
statutory benefits of employers' FICA and Medicare payments plus unemployment
insurance. You will receive initially three weeks of paid vacation.
You will report to Dennis Rubin in GZA's Wayne, NJ office. Consistent with our
discussions, we expect that your responsibilities will include:
- - Business development to increase and supervise work in and around New
York City from your prior Client contacts and from new client
marketing.
- - Serve as Principal-In-Charge (PIC) on selected projects, overseeing the
work of Senior Project Managers, Project Managers, and technical staff.
- - Mentoring and developing staff personnel consistent with the
requirements of your work.
- - Management and administration of GZA employees in the New York City
office and other office management responsibilities will fall to Dennis
Rubin.
- - As a special incentive component to your compensation, GZA will pay you
a bonus of $50,000 if the accrued net revenues (revenues less
reimbursable expenses) of the New York City operations as computed for
GZA's public accounting purposes meet or exceed $1.9 million during
GZA's fiscal year ending February 28, 2000. Such bonus would be paid
prior to GZA's filing of the 10K report to the SEC in approximately May
2000. This bonus will not be prorated. GZANY retains sole right and
discretion to accept or decline work.
A pre-employment physical exam is required of all new GZA employees. An
appointment will be set up for you when we set a date for you to start work.
Your employment with GZA will be contingent upon acceptable pre-employment
physical examination results. The results of the physical examination are
completely confidential; GZA only receives a Pass/Fail result from the medical
center. The company will completely cover the cost of the physical examination.
It will be necessary for you to fill out a standard form to verify your
eligibility to work in the United States, and we will require that you provide a
copy of your U.S. Passport, or if that is not
<PAGE> 15
Tonis Raamot December 23, 1998
- --------------------------------------------------------------------------------
available, other documentation allowed under federal regulations will suffice.
In addition, we will also require a copy of your current New York State
engineering registration to include in your personnel file.
Consistent with Company policy, your employment at GZA is subject to the terms
and condition described in the attached GZA Employee Agreement and Ethics
Policy. Please review these documents and, if you wish to accept this offer of
employment and compensation as outlined above, please acknowledge your
acceptance in the spaces provided on this letter and sign the attached
Agreements and return one set of copies to us.
If you have any further questions regarding the position, GZA, or any aspect of
this offer, please do not hesitate to call me directly (617) 630-6205. We trust
that you will accept this offer and look forward to your joining us on or about
December 28, 1998.
Very truly yours,
GZA GEOENVIRONMENTAL OF NEW YORK
Richard M. Simon, P.E.
President
RMS:idm
Attachments: Employee Agreement and Ethics Policy
Confidentiality, Non-Disclosure Agreement
cc: A.P. Pajak
W.R. Beloff
D. Rubin
I acknowledge acceptance of this offer of employment with terms of compensation
described herein.
Signed: Date:
------------------------------------------- --------------------
<PAGE> 16
CONFIDENTIALITY, NON-DISCLOSURE AND
RESTRICTIVE COVENANT AGREEMENT
Agreement made this 31st day of December, 19, by and between GZA
GeoEnvironmental of New York (the "Company") and the individual named as
"Employee" on the signature page hereof (the "Employee").
WITNESSETH
WHEREAS, the Employee will be employed by the Company at the Company's
office at New York City, NY in a capacity in which he is responsible for
developing and managing important client relationships on behalf of the Company,
and, as a consequence of such employment, has had and will have access to
valuable trade secrets, confidential information and goodwill of the Company;
and
WHEREAS, the Company and the Employee desire to set forth, in this
Agreement, their agreements and understandings regarding the Employee's
obligations, with respect to non-disclosure of such proprietary and confidential
information, and in respect to the Employee's agreement following termination of
employment, to refrain from seeking business from, or performing services for,
the Company's Clients during the "Restriction Period," as hereinafter defined;
NOW, THEREFORE, for good and valuable consideration as set forth in
paragraph 6 below, the receipt and sufficiency of which are hereby acknowledged,
the Employee and the Company hereby agree as follows:
1. NON-COMPETITION. While employed by the Company, the Employee
will not, other than on behalf of the Company, directly or indirectly, as an
owner, partner, co-venturer, shareholder, principal, lender, director,
consultant, agent or employee, engage in the business of providing geotechnical
or environmental consulting services or any other business in which the Company
is engaged, or actively planning to engage, at the time of such termination,
anywhere in the United States, Canada or Mexico, or agree to do, or make
preparations to do, any of the foregoing.
2. NON-SOLICITATION COVENANT.
a) The Employee covenants and agrees that during the
three- (3-) year period following the date of this Agreement or the
one- (1-) year period following the termination of his employment for
any reason, whichever is the later date, (the "Restricted Period"), the
Employee shall not, directly or indirectly, solicit, accept or receive
business from, or seek to, or perform, any services for any Client of
the Company (as hereinafter defined), nor assist or facilitate, in any
way, any others in the carrying out of any such or similar activities
with respect to any Client of the Company anywhere in the United
States, Canada or Mexico. The Employee also covenants and agrees that
should he sell the stock of a professional corporation with the
Employee's name in the corporation's name, such sale shall carry the
same covenant and restriction as set forth herein regarding the use of
the Employee's name in soliciting, accepting or receiving business
from, or
- --------------------------------------------------------------------------------
Restrictive Covenant Agreement -1- December 31, 1998
<PAGE> 17
seeking to, or performing, any services for any Client of the Company
(as hereinafter defined), nor assisting or facilitating, in any way,
any others in the carrying out of any such or similar activities with
respect to any Client of the Company anywhere in the United States,
Canada or Mexico during the Restricted Period.
b) "Client" as used in this Agreement shall mean any
person or entity for whom (i) the Company has performed services within
the thirty-six (36) months prior to the date of termination of
employment, and (ii) any person or entity to whom the Company has
submitted a bid or proposal for services within eighteen (18) months
prior to the date of termination of employment, or with respect to
whom, at or about the time employment is terminated, the Company is
engaged in any stage, in the preparation of a bid or proposal, if, in
either case, the Employee participated in any manner, whether in a
supervisory role or otherwise, in the performance of such services or
the preparation of such bid or proposal for such person or entity.
c) During the Restricted Period, the Employee shall not
(a) hire or participate in the recruitment or hiring (other than by the
Company) of, any Company Employee (as defined below), nor (b) directly
or indirectly solicit, encourage or otherwise seek to induce any
Company Employee to terminate his or her employment by the Company in
order to become employed by or otherwise perform services for any other
Person. For purposes of this Section, "Company Employee" determined as
of any time shall mean any employee or full-time consultant of the
Company, as well as any person who served in such a capacity during the
six-month period preceding the date of determination.
3. LIMITATION OF SCOPE IN CERTAIN CIRCUMSTANCES. The restrictions
on Employee's conduct during the Restrictive Period set forth herein are
considered by the parties to be reasonable for the purpose of protecting the
proprietary rights and goodwill of the Company, and not to prevent Employee from
practicing his or her profession. However, if any such restriction is found by a
court of competent jurisdiction to be unenforceable because, under the public
policy, law or statutes of that jurisdiction, it extends for too long a period
of time or over too great a range of activities or in too broad a geographic
area, it shall be interpreted (but only with respect to such jurisdiction) to
extend only over the maximum period of time, range of activities, or geographic
areas as to which it may be enforceable.
4. CONFIDENTIALITY. The Employee, in recognition of the
relationship of trust and confidence between Employee and Company, while
employed by the Company, and for all periods after termination of employment,
will not use for his or her own benefit or disclose to any others any trade
secrets of the Company or any other information of a technical, commercial, or
other nature, nor any marketing or manufacturing information, customer lists,
processes, or compilations of data relating to the business of the Company or
its Clients, consultants, sources, or suppliers which the Company retains and
maintains, in confidence, and which are not generally available to the public.
- --------------------------------------------------------------------------------
Restrictive Covenant Agreement -2- December 31, 1998
<PAGE> 18
5. INJUNCTIVE RELIEF. The Employee agrees that the damages and
injury to the Company from any breach by the Employee of his or her covenants
and agreements as set forth in Sections 1, 2 and 4 would be substantial,
although difficult to ascertain, and that money damages will not afford the
Company an adequate remedy. Therefore, the Employee agrees that, in case of any
breach by the Employee of such covenants and agreements, the Company shall be
entitled, in addition to all other remedies it may have, to injunctions and
other appropriate court orders to restrain any such breach, without the
necessity of showing or proving any actual damages or injury to the Company.
6. CONSIDERATION. In consideration of Employee's agreeing to the
confidentiality, non-disclosure and restrictive covenants set forth herein,
Company agrees to pay Employee fifty thousand dollars ($50,000.00) within
fifteen days of execution of this Agreement and an accompanying Memorandum of
Understanding regarding assumption of business assets of Raamot Associates, P.C.
by both Raamot Associates, P.C. and the Company.
7. MISCELLANEOUS. All covenants and agreements of the parties
contained herein shall survive the termination of the Employee's employment with
the Company for any reason whatsoever. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
This Agreement constitutes the entire Agreement between the
parties hereto with regard to the subject matter hereof, superseding all prior
understandings and agreements, whether written or oral. This Agreement may not
be amended or revised except by a writing signed by the parties. No delay or
omission by the Company in exercising any right under this Agreement will
operate as a waiver of that or any other right. A waiver or consent given by the
Company on any one occasion is effective only in that instance and will not be
construed as a bar to or waiver of any right on any other occasion. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, and legal representatives. The
undertakings of the Employee regarding confidentiality include all technical
information, trade secret or process, of the Company, whether or not the same
may, or shall, have been, in part, originated, discovered, or invented by the
Employee during the course of normal business hours.
8. AFFILIATES OR SUBSIDIARIES OF THE COMPANY. For purposes of
this Agreement, all references to the "Company" shall be deemed to include any
corporation or entity that controls, is controlled by, or is under common
control with the Company, or in which it, now or hereafter, has an equity
interest including, without intending to limit the complete generality of the
foregoing, GZA GeoEnvironmental Technologies, Inc.; GZA GeoEnvironmental, Inc.;
GZA GeoEnvironmental of New York; GZA Remediation, Inc.; and GZA Drilling, Inc..
For purposes of Sections 1 and 2 of this Agreement, all references to the
"Company" shall also be deemed to include Raamot Associates, P.C., a New York
Professional Corporation.
9. GOVERNING LAW. This Agreement shall be deemed to have been
entered into, and shall be governed by, and construed in accordance with, the
substantive laws of The State of New York (excluding its conflicts of laws
rules).
* * * * * *
- --------------------------------------------------------------------------------
Restrictive Covenant Agreement -3- December 31, 1998
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
an agreement under seal as of the day and year first above written.
EMPLOYEE: TONIS RAAMOT GZA GEOENVIRONMENTAL OF NEW YORK
By:
- -------------------------------------- -----------------------------------
Title: President
Witness: Witness:
- -------------------------------------- -----------------------------------
- --------------------------------------------------------------------------------
Restrictive Covenant Agreement -4- December 31, 1998
<PAGE> 20
BILL OF SALE
PERSONAL GOOD WILL OF TONIS RAAMOT, P.E.
This AGREEMENT is made this 31st day of December, 1998 by and between Tonis
Raamot, P.E., of 9995 Shore Road, Apt. E, Brooklyn, New York 11209 (hereinafter
"Seller") and Goldberg-Zoino & Associates of New York, P.C., d/b/a/ GZA
GeoEnvironmental of New York, a New York Professional Corporation, with
principal place of business at 364 Nagel Drive, Buffalo, New York 14225
(hereinafter "GZANY").
For good and sufficient consideration, as defined in paragraph 3 below, receipt
of which is hereby acknowledged, the Seller hereby sells, transfers and conveys
to GZANY:
1) The whole of the personal good will of Tonis Raamot, P.E. earned by the
undersigned over the approximately thirty years professional
engineering career in the employ of Raamot Associates, P.C. and other
employers which is the subject of this sale.
2) Raamot agrees to abide by the Confidentiality, Non-Disclosure and
Restrictive Covenant Agreement between Tonis Raamot and GZANY of even
date.
3) As consideration, GZANY will pay Tonis Raamot $400,000 total broken
down as follows:
- $100,000 on or before February 28, 1999
- $300,000 on a date between 12/1/99 and February 29, 2000 as
selected by Tonis Raamot following 10 days prior written
notice.
4) The rights and obligations under this Bill of Sale shall be binding
upon and inure to the benefit of the parties, their successors, assigns
and personal representatives.
Signed as a sealed instrument this _____ day of December, 1998.
GZA GEOENVIRONMENTAL OF NEW YORK
TONIS RAAMOT, P.E.
Signed: By:
------------------------------ -------------------------------
Name: Richard M. Simon
Title: President
Witness: Witness:
------------------------------ --------------------------
<PAGE> 1
Exhibit 13.1
SUMMARY OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years ended 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net revenues $40,308 $37,851 $38,211 $40,158 $40,995
Income from continuing operations, before other income and 2,098 1,810 565 1,260 1,179
taxes
Income from continuing operations before taxes 2,481 2,247 821 1,283 1,272
Income from continuing operations 1,509 1,370 529 798 822
Loss from discontinued operations -- -- -- (99) (2,216)
Net income (loss) 1,509 1,370 529 699 (1,394)
BASIC EARNINGS PER SHARE:
Earnings per share from continuing operations $ .42 $ .35 $ .13 $ .21 $ .22
Loss per share from discontinued operations -- -- -- $ (.03) $ (.59)
Basic earnings (loss) per share $ .42 $ .35 $ .13 $ .18 $ (.37)
Basic weighted average shares outstanding 3,604 3,932 3,929 3,857 3,780
DILUTED EARNINGS PER SHARE:
Earnings per share from continuing operations $ .41 $ .34 $ .13 $ .21 $ .22
Loss per share from discontinued operations -- -- -- $ (.03) $ (.59)
Diluted earnings (loss) per share $ .41 $ .34 $ .13 $ .18 $ (.37)
Diluted weighted average shares outstanding 3,674 3,973 3,929 3,857 3,780
BALANCE SHEET DATA:
Working capital $17,551 $17,366 $17,177 $18,175 $16,582
Total assets 35,257 34,221 35,535 37,614 39,111
Long-term debt (less current portion) -- -- -- 1,860 2,730
Stockholders' equity $24,141 $22,886 $23,257 $22,465 $21,685
</TABLE>
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
- ------------------ ---------------
1. GZA GeoEnvironmental, Inc. Massachusetts
2. GZA Remediation, Inc. Massachusetts
3. GZA Securities Corporation Massachusetts
4. GZA Drilling, Inc. (a wholly owned
subsidiary of GZA GeoEnvironmental, Inc.) Massachusetts
5. GZA Texas, Inc. (a wholly owned subsidiary
of GZA GeoEnvironmental, Inc.) Massachusetts
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statements of GZA GeoEnvironmental Technologies, Inc. on Form S-8 (File No.
33-63940, File No. 33-75688 and File No. 333-24423) of our report dated May 10,
1999 relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated May 10, 1999
relating to the financial statement schedule, which appears in this Form 10-K.
PRICEWATERHOUSECOOPERS LLP.
Boston, Massachusetts
May 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF THE REGISTRANT AT FEBRUARY 28, 1999 AND FEBRUARY
28, 1998 AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR
THE TWELVE MONTHS ENDED FEBRUARY 28, 1999, FEBRUARY 28, 1998 AND FEBRUARY 28,
1997 OF THE REGISTRANT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS IN FORM 10-K FOR THE TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1999.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999<F1>
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<EXCHANGE-RATE> 1
<CASH> 894,000
<SECURITIES> 3,837,000
<RECEIVABLES> 13,503,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,851,000
<PP&E> 5,901,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,257,000
<CURRENT-LIABILITIES> 10,300,000
<BONDS> 0
0
0
<COMMON> 41,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,257,000
<SALES> 0
<TOTAL-REVENUES> 60,653,000
<CGS> 0
<TOTAL-COSTS> 58,555,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,000
<INCOME-PRETAX> 2,481,000
<INCOME-TAX> 972,000
<INCOME-CONTINUING> 1,509,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,509,000
<EPS-BASIC> .42
<EPS-DILUTED> .41
<FN>
</FN>
</TABLE>
