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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2000 Commission File No. 0-17882
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
(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
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 969-0050
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
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 [ ]
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 19, 2000 4,197,093
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 $22,191,541 as of
May 19, 2000.
Documents Incorporated by Reference
Certain portions of the definitive proxy statement for the Company's 2000 Annual
Meeting of Stockholders are incorporated by reference in Part III of this Form
10-K.
The Index to Exhibits is located on Page 42.
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PART I
ITEM 1. BUSINESS
GENERAL
GZA GeoEnvironmental Technologies, Inc. (GZA) is a multidisciplinary consulting
and engineering firm offering environmental, geo-civil and remediation services,
as well as regulatory compliance, information management, solid waste
management, and various support services. Founded in 1964, the company now
employs approximately 500 engineers, scientists, and technical support staff in
20 offices nationwide. The firm has completed over 60,000 projects in all 50
states and 21 foreign countries.
By leveraging core services, GZA is expanding capabilities strategically to meet
clients' business challenges. Through the successful integration of our
geotechnical, environmental and civil engineering expertise, we offer
broad-based technical approaches to provide cost-effective and technically
appropriate solutions to engineering challenges. Our growth is occurring through
the successful integration of technical expertise, the expansion of capabilities
that complement our traditional core services, and development of competitive
service delivery models including risk-sharing arrangements and strategic
partnerships.
In addition to environmental and engineering consulting services provided
through GZA GeoEnvironmental, Inc., the company performs drilling operations
through GZA Drilling, Inc. Both are wholly-owned subsidiaries of GZA
GeoEnvironmental Technologies, Inc. Goldberg-Zoino Associates of New York, P.C.
d/b/a GZA GeoEnvironmental of New York, a professional corporation owned by
officers, directors and stockholders of GZA is an affiliate of GZA.
SERVICE CAPABILITIES
ENVIRONMENTAL CONSULTING AND RESTORATION
Our consulting and engineering services help clients develop and manage their
safety, health and environmental compliance programs. We also characterize
environmental contamination concerns and design, construct and operate
restoration solutions.
ENVIRONMENTAL SITE ASSESSMENTS AND INVESTIGATIONS. GZA has assisted over 4,000
industrial companies, developers, banks, lending institutions, title insurers,
and state agencies among others to collect and interpret information about
current or past hazardous material releases at a site.
REMEDIAL INVESTIGATIONS. GZA evaluates the nature, extent, and possible health
and environmental impacts of site contamination. Comprehensive site examinations
include characterization of contaminants through sampling and analysis of soils,
sediments, groundwater, surface water, and air. In assessing contamination,
predictive and analytical techniques such as computer modeling to quantify
concentrations and migration rates are used.
FEASIBILITY STUDIES. Using information developed during the remedial
investigation, feasibility studies involve identifying and evaluating
alternative remedial technologies and developing a conceptual remedial design.
When necessary, GZA performs laboratory and onsite bench-scale and pilot-scale
tests to assist in designing and estimating the cost of proposed remediation
systems.
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RISK ASSESSMENTS. GZA is experienced in preparing human health and ecological
risk assessments. We conduct surveys to identify facility hazards, including
indoor air quality assessments; develop respiratory protection, industrial
hygiene, and health and safety programs; train workers to handle hazardous
materials; and conduct asbestos investigations and develop asbestos abatement
programs.
GROUNDWATER MONITORING PROGRAMS. GZA designs and implements groundwater
monitoring programs to meet state and federal Resource Conservation and Recovery
Act of 1976 (RCRA) compliance requirements for non-hazardous and hazardous waste
landfills, and to support hydrogeologic evaluations and contamination
assessments. Work on these programs includes establishing test parameters and
sampling protocols, siting and developing wells, creating and applying database
management systems, predicting groundwater flow and contaminant transport with
supporting statistical analyses.
ENVIRONMENTAL IMPACT ASSESSMENTS AND PERMITTING. GZA performs environmental
impact assessments to estimate the chemical and physical state and biological
impacts associated with the discharge of contaminants into the environment. We
provide a wide range of services associated with acquisition of environmental
permits, including those for surface water, wetlands, waterways and solid waste
facilities.
ENVIRONMENTAL REMEDIATION. As real estate market forces promote redevelopment of
contaminated sites and refurbishing of commercial buildings, GZA's remediation
services combine environmental and engineering and construction management
expertise to provide savings and streamline project tasks.
REMEDIAL TECHNOLOGIES. GZA's remedial technologies are applied to contaminated
groundwater recovery and treatment; soil remediation and stabilization; and
contaminant containment methodologies including cutoff walls, caps, liners and
drainage systems.
REMEDIAL DESIGN/CONSTRUCTION SERVICES. GZA provides comprehensive design,
engineering, and construction services for environmental remediation. These
services range from traditional remedial measures (removal, transportation and
disposal) to design, installation, and operation of complex treatment systems
for contaminant reduction or removal.
STORAGE TANK MANAGEMENT. GZA's full range of services pertaining to aboveground
and underground tanks includes removal, replacement, and installation; tank
testing and assessment; regulatory compliance and auditing; operations and
management planning; and tank and piping upgrades.
FACILITY/SITE CLOSURES & REDEVELOPMENT. By combining geotechnical and
environmental capabilities, GZA provides cost-effective risk management
solutions for subsurface contamination. Complementing this, GZA provides turnkey
closure services including demolition, decontamination, asbestos management and
lead abatement.
REGULATORY COMPLIANCE & ENVIRONMENTAL MANAGEMENT. Compliance with environmental
regulations is mandated by state and federal regulatory agencies. In addition,
companies operating in today's business marketplace, in which acquisitions and
mergers are common, recognize that value can be derived from efficient
environmental management systems. GZA's knowledge and experience helps clients
meet or exceed regulatory requirements related to ongoing plant operations. Our
Web-based software applications expedite tasks associated with required
reporting to environmental agencies. By providing real-time monitoring as well
as automated record keeping, GZA develops compliance programs designed to
complement internal environmental, health and safety programs while reducing
resources required for reporting functions.
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AIR QUALITY SERVICES. GZA's air quality team focuses on minimizing regulatory
burdens while maximizing operational productivity. Services include: emissions
inventories; regulatory compliance assessments; permitting; accidental release
prevention studies; air dispersion modeling; control technology evaluations; and
air monitoring.
In April, 2000, South Jersey Energy Company (South Jersey) and GZA
GeoEnvironmental Technologies, Inc. announced the formation of AirLogics, LLC, a
joint venture between GZA and South Jersey, to expand marketing efforts of their
patent-pending, real-time air monitoring system. The companies also announced a
new marketing alliance with the Institute of Gas Technology, a leading energy
and environmental research and development group, to increase product sales
within the utility industry. AirLogics targets its marketing efforts on electric
and gas utility companies involved in the remediation of former manufactured gas
plants.
POLLUTION PREVENTION. Our pollution prevention services involve finding ways to
assist companies in eliminating, reducing and recycling waste. GZA provides
facility assessments; operational compliance evaluations; feasibility studies;
environmental, health and safety compliance assistance; prevention-based
management program development; and source reduction planning for toxic chemical
use.
ISO 14000 SERVICES. GZA works with plant environmental management teams to
develop ISO certification strategies. Services include: gap analysis; gap
closure planning and implementation; executive briefings and employee awareness
training; internal auditor training; policies and procedures development; and
preparation of environmental quality manuals.
WASTE MINIMIZATION AND REGULATORY COMPLIANCE SERVICES. GZA offers hazardous
waste minimization audits; permitting services including National Pollution
Discharge Elimination System (NPDES), hazardous waste facility Parts A and B,
air toxics/emissions and discharge; and regulatory assistance including RCRA
corrective actions, Superfund Amendments and Reauthorization Act of 1986 (SARA)
Title III compliance, underground storage tank registrations, and hazardous
waste facility closures.
TRAINING. GZA's training staff provides health and safety training for workers
engaged in hazardous materials and waste operations. Compliance training
includes hazardous waste; sewer and water discharge; air emissions; OSHA hazard
communication; motor carrier safety and hazardous materials handling; and
right-to-know.
GEO-CIVIL & ENGINEERING DESIGN
Founded in 1964 as a geotechnical engineering firm, GZA has developed a wealth
of expertise in project design and construction implementation of large-scale
waterfront, brownfield, commercial development, public works, water resource
improvements, and transportation initiatives including tunnels, highways,
bridges, airports and railways for public and private clients.
SITE INVESTIGATION EXPERTISE. GZA routinely performs site and subsurface
explorations for foundation engineering projects. Tasks may include site history
research; soil and rock borings and test pit explorations; undisturbed soil
sampling; soil engineering studies; geophysical investigations; geologic
mapping; and groundwater measurement and analyses.
GEOTECHNICAL STUDIES. GZA's geotechnical studies include: foundation system
design; embankment stability analyses; settlement analysis; pavement design;
soil stabilization studies; evaluating liquefaction potential; soil and water
sampling programs; dewatering system design; instrumentation program
development; shaft and tunnel engineering; slope stability analysis; field
testing; lateral support system design; impermeable liner selection; and seepage
analyses.
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DAM/FLOOD CONTROL STRUCTURE INVESTIGATION, DESIGN, AND REPAIR EXPERTISE. GZA
has analyzed, designed and provided construction observation services for more
than 300 dams in the United States. We also have extensive experience in
performing dam safety inspections and stability evaluations and hydraulic
hydrology studies, as well as providing remedial recommendations for the U.S.
Army Corps of Engineers, state and local agencies, and private owners.
CONSTRUCTION SUPPORT SERVICES. Construction services to include: earthwork
quality control; resident engineering; foundation load testing; ground
exploration; construction management; site engineering; materials testing; and
construction monitoring.
INFORMATION MANAGEMENT SERVICES
GZA provides specialized, internet-based applications to help clients run their
businesses with greater cost-effectiveness. Conceptualizing, developing,
implementing and hosting those applications enhances internal operations,
providing both GZA and its clients opportunities for expanded growth and
profitability.
ENVIRONMENTAL INFORMATION MANAGEMENT SYSTEMS. GZA's Information Solutions
Department has devised information management solutions to provide real-time
monitoring, automated recordkeeping, and enhanced regulatory compliance
applications for industrial, government, real estate and commercial clients.
INFOLINK INTRANET SYSTEM. GZA's suite of Web-based modular applications include:
Material Safety Data Sheet management; health/safety incident tracking;
environmental management with Geographic Information System interface; air
emissions tracking and reporting; self-audit tracking; ISO 14000 management; and
waste minimization.
CUSTOMERLINK. GZA uses Internet technologies to help manage complex projects by
providing clients with secured access to their information. We develop and
implement "extranets" to provide clients and project team members with secure
access to project data, document libraries, and database applications from
remote locations.
GEOGRAPHIC INFORMATION SYSTEMS (GIS). GIS technology links digital mapping with
relational databases. Key services include: needs assessment and planning;
database modeling and design; application development; and training and support.
SOLID WASTE MANAGEMENT
GZA combines environmental and engineering specialties to serve public and
private clients in developing, expanding and closing of solid waste transfer
stations and landfills.
SOLID WASTE/LANDFILL DESIGN AND MANAGEMENT. GZA has experience in all aspects of
landfill design and management, from hydrogeologic investigations at existing
sites to siting, design, construction observation, and monitoring of new
hazardous/solid waste disposal facilities. GZA has performed remedial
investigations and feasibility studies, design, construction, and closures at
over 500 landfills. Additionally, we have provided design and laboratory
services associated with natural and synthetic liners, leachate collection and
detection systems, landfill gas management programs, capping schemes, slope
stability evaluations, and construction/remediation monitoring.
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SUPPORT SERVICES
GZA's support services complement its technical service offerings and address
clients' evolving needs.
SOIL AND ROCK TESTING LABORATORY. GZA's laboratories conduct a wide variety of
tests on soil, rock and geomembrane materials. Testing methods conform with the
latest specifications of the American Society for Testing and Materials,
American Association of State Highway Officials, U.S. Army Corps of Engineers,
U.S. Environmental Protection Agency, and the U.S. Department of Transportation.
ENVIRONMENTAL CHEMISTRY LABORATORY. GZA's Environmental Chemistry Laboratory is
a state-of-the-practice facility supporting the environmental investigations of
our technical staff. The lab participates in the EPA's Performance Evaluation
Program, has received validation from the U.S. Army Corps of Engineers, and is
certified in many individual states.
DRILLING, TEST BORING AND IN-SITU TESTING SERVICES. GZA owns and operates a
variety of land-based and waterborne drilling equipment used to obtain
geotechnical and environmental information and samples. We also provide pump
test support, as well as specialty drilling, site dewatering, and subsurface
grouting services.
JOINT VENTURES
ENVIRONMENTAL REAL ESTATE INVESTORS, INC.
In January 1999 GZA and Southborough Ventures, Inc. (SVI) formed Environmental
Real Estate Investors, Inc., (EREI) a joint venture, to target environmentally
impaired properties for development. On July 21, 1999, Somerville Avenue LLC was
incorporated in accordance with the terms of the EREI joint venture agreement.
Somerville Avenue LLC subsequently acquired at a cost of $436,000 a former
industrial property in Somerville, Massachusetts and plan to transform the
parcel into a site for commercial development. The cost of the property consists
of the purchase price plus closing costs such as legal, accounting and other
similar costs directly associated with the acquired property. The formation of
a site specific Limited Liability Corporation is consistent with the EREI joint
venture agreement. In addition, EREI made a $65,000 deposit for a commercial
development site in New Bedford, Massachusetts. The development of the New
Bedford site is currently under negotiation with EREI and the owner.
Gains or losses, if any, from investment in real estate transactions will be
recorded as "Other Income" on our Consolidated Statements of Operations and
Comprehensive Income. Due to the terms of the joint venture 100% of the assets,
liabilities, and equity will be consolidated into GZA.
AQUATERRA ENVIRONMENTAL CONSULTANTS LIMITED (U.K.)
In 1991, GZA entered into a joint venture with Carl Bro Group (UK) Limited to
form Aquaterra Environmental Consultants Limited (Aquaterra). The stock of
Aquaterra was owned equally by GZA and Carl Bro Group Limited. Aquaterra, with
offices in Leeds, London, and Edinburg, provides services related to
contaminated land and groundwater remediation, environmental compliance of
operating facilities and geotechnical engineering.
On April 26, 2000 an agreement was consummated between GZA GeoEnvironmental,
Inc., Carl Bro Group Limited and Aquaterra for the sale of GZA's 5,000 shares,
representing a 50% ownership interest in Aquaterra, to Carl Bro Group Limited
for $316,322 and repayment of a GZA loan to Aquaterra of $128,480. The terms of
the agreement were substantially complete as of February 29, 2000, and therefore
the sale is reflected in the fiscal 2000 financial statements.
Carl Bro Group Limited will defend, indemnify, and hold harmless GZA against any
action, sums, demands, damages, loss or liability arising out of (i) any
professional services rendered by Aquaterra, (ii) the employment of any
Aquaterra person, (iii) taxes payable by Aquaterra and (iv) any obligation or
liability arising out of the
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operation of Aquaterra's business, whether after the sale.
AIRLOGICS, LLC (AIRLOGICS)
On April 1, 2000 South Jersey Energy Company (SJE) and GZA consummated a Limited
Liability Company Operating Agreement for the formation of AirLogics, LLC
(AirLogics). GZA and SJE formed AirLogics to expand marketing efforts of their
patent-pending, real-time air monitoring system and to focus its marketing
efforts on electric and gas utility companies involved in the remediation of
former manufactured gas plants. During fiscal 2000 GZA billed approximately
$783,000 in net revenues for air monitoring services provided for several SJE
clients. Future profits and losses of AirLogics will be shared equally by GZA
and SJE and will be accounted for under the equity method of accounting.
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 88% of net revenues.
In fiscal 2000, we were actively engaged in approximately 3,500 assignments for
approximately 1,600 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 42% of net revenues in fiscal 2000 were
derived from projects for which net revenues were $50,000 or less. In fiscal
2000, no one customer accounted for more than 5% of our net revenues.
BACKLOG
As of April 30, 2000, we had a backlog of orders we believed to be firm of
approximately $54 million. This includes estimated amounts under orders for
time, materials and unit price. The amount represents gross revenues, including
costs of services and materials subcontracted to third parties. Backlog at April
30, 2000 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, 1999, we had a backlog
of orders calculated on the same basis of approximately $47 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 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,
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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 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
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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.
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.
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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, 2000, we had 499 employees, including 397 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
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 2000, 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 2000, we paid
approximately $140,000 in base rent for this facility.
GZA leases 20 other principal facilities located in: Vernon, Connecticut;
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; Coraopolis, Pennsylvania; Providence, Rhode
Island; Dallas, Texas; Houston, Texas; Rutland, Vermont; South Burlington,
Vermont and Pewaukee, Wisconsin. These other facilities have a combined square
footage of approximately 106,000 square feet. Aggregate base rent for all
facilities leased by us (other than our facilities in Newton Upper Falls) during
fiscal year 2000 totaled approximately $1,375,000. 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.
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.
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ITEM 3. LEGAL PROCEEDINGS
In 1997, Goldberg-Zoino Associates of New York, P.C. ("GZANY"), our New York
professional corporation affiliate, entered into a contract with E.E.
Cruz/Nab/Frontier-Kemper, A Joint Venture ("JV"), to design a temporary earth
support system required for construction of the Flushing Bay Combined Sewer
Overflow Protection Facility Storage Tank, Project No. CS 4-3 for the New York
City Department of Environmental Protection. Design by GZANY and soil mix design
and installation development by the JV's construction subcontractor, The
Millgard Corporation, proceeded from August 1997 through to the end of the year.
On January 28, 1998, the JV terminated Millgard's contract for failure to
perform the specified work.
On April 22, 1999, Millgard filed suit against the JV for costs incurred prior
to termination and for lost profits for work not executed following termination.
The JV denied Millgard's claim in July 1999 and counterclaimed against Millgard
for damages of $10,750,000 resulting from a breach of contract and delay. On
September 9, 1999, the JV filed a third-party action against GZANY in the United
States District Court Southern District of New York for contribution, defense
and indemnity of claims made by Millgard. In March 2000, the JV filed an amended
complaint against GZANY alleging breach of contract and a failure to exercise
the required standard of care and claiming indemnification for any damages owed
by the JV to Millgard and for direct damages of at least $10,750,000.
In addition, we are party to several other 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
Not Applicable
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
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 2000, as reported by NASDAQ.
<TABLE>
<CAPTION>
Fiscal 2000 Fiscal 1999
- --------------------------------------------------------------------------------
High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 4.63 3.75 5.19 4.50
Second Quarter 5.50 4.00 5.19 4.69
Third Quarter 4.50 3.63 4.88 4.13
Fourth Quarter 4.94 3.75 5.00 4.00
</TABLE>
As of May 19, 2000, GZA's common stock was held by 334 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.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
report. The statement of operations data for the fiscal years ended February 29,
2000 and February 28, 1999 and 1998 and the balance sheet data at February 29,
2000 and February 28, 1999 are derived from our financial statements audited by
PricewaterhouseCoopers LLP, which are included elsewhere in this report. The
statement of operations data for the fiscal years ended February 28, 1998, 1997
and February 29, 1996 and the balance sheet data at February 28, 1998, 1997 and
February 29, 1996 are derived from our financial statements audited by
PricewaterhouseCoopers LLP that are not included in this report.
<TABLE>
<CAPTION>
Years ended 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net revenues $ 44,151 $ 40,308 $ 37,851 $ 38,211 $ 40,158
Income from continuing operations, before other income 1,800 2,098 1,810 565 1,260
and taxes
Income from continuing operations before taxes 2,094 2,481 2,247 821 1,283
Income from continuing operations 1,275 1,509 1,370 529 798
Loss from discontinued operations -- -- -- -- (99)
Net income 1,275 1,509 1,370 529 699
BASIC EARNINGS PER SHARE:
Earnings per share from continuing operations $ .35 $ .42 $ .35 $ .13 $ .21
Loss per share from discontinued operations -- -- -- -- $ (.03)
Basic earnings per share $ .35 $ .42 $ .35 $ .13 $ .18
Basic weighted average shares outstanding 3,629 3,604 3,932 3,929 3,857
DILUTED EARNINGS PER SHARE:
Earnings per share from continuing operations $ .35 $ .41 $ .34 $ .13 $ .21
Loss per share from discontinued operations -- -- -- -- $ (.03)
Diluted earnings per share $ .35 $ .41 $ .34 $ .13 $ .18
Diluted weighted average shares outstanding 3,678 3,674 3,973 3,929 3,857
BALANCE SHEET DATA:
Working capital $ 18,776 $ 17,551 $ 17,366 $ 17,177 $ 18,175
Total assets 38,359 35,257 34,221 35,535 37,614
Long-term debt (less current portion) -- -- -- -- 1,860
Stockholders' equity $ 25,617 $ 24,141 $ 22,886 $ 23,257 $ 22,465
</TABLE>
13
<PAGE> 14
The following selected quarterly financial data are unaudited and should be read
in conjunction with our financial statements and related notes appearing
elsewhere in this report. We have prepared this information on the same basis as
our audited financial statements. In the opinion of our management, this
information includes all adjustments, consisting only of normal, recurring
adjustments, necessary for a fair presentation of our operating results for the
quarters presented.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended 2/29/00 11/30/99 8/31/99 5/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands except per share amounts
<S> <C> <C> <C> <C>
Revenues $ 21,377 $ 18,118 $ 17,055 $ 15,533
Net revenues 11,137 10,999 11,331 10,684
Income (loss) before other income and tax 427 720 738 (85)
Net income 330 481 473 (9)
Other comprehensive income-change in unrealized gains (losses) (2) (3) (20) (20)
on securities
Comprehensive income (loss) 332 478 453 (29)
Basic earnings per share $ .09 $ .13 $ .13 $ (.00)
Diluted earnings per share $ .09 $ .13 $ .13 $ (.00)
</TABLE>
<TABLE>
<CAPTION>
Three months ended 2/28/99 11/30/98 8/31/98 5/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
In thousands except per share amounts
<S> <C> <C> <C> <C>
Revenues $ 14,673 $ 17,146 $ 15,330 $ 13,504
Net revenues 9,516 10,674 10,517 9,601
Income before other income and tax (41) 800 682 657
Net income 55 512 470 472
Other comprehensive income-change in unrealized gains (losses) (30) 21 11 (5)
on securities
Comprehensive income 25 533 481 467
Basic earnings per share $ .02 $ .14 $ .13 $ .13
Diluted earnings per share $ .01 $ .14 $ .13 $ .13
</TABLE>
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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)
Fiscal Year Ended Fiscal Years
- -----------------------------------------------------------------------------------------------------------------------------------
February 29, February 28, February 28, 2000 vs. 1999 vs.
2000 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues 100% 100% 100% 10% 7%
Salaries and related costs 72 71 71 10 7
General and administrative expenses 24 24 24 13 4
Income, before other income and taxes 4 5 5 (14) 16
Other income, net 1 1 1 (23) (13)
Provision for income taxes 2 2 2 (16) 11
Net income 3 4 4 (16) 10
</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 reflect 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.
FISCAL 2000 AND 1999 VERSUS PRIOR YEARS
<TABLE>
<CAPTION>
2000 vs. 1999 1999 vs. 1998
Increase Increase 1998 Amount
-------- -------- -----------
<S> <C> <C> <C>
Net Revenues. $3,844,000 9.5% $2,457,000 6.5% $37,851,000
</TABLE>
The increase in fiscal 2000 net revenues is attributable to an increase in
demand for our services in the Northeast and Great Lakes Regions. The increase
in the Northeast Region includes approximately $762,000 attributable to our
December, 1998 acquisition of Raamot Associates. The increase was offset by a
$525,000 decline in net revenues for our Southern Region due primarily to our
decision to close the Atlanta office in the first quarter of fiscal 2000.
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 Southern Region and
lower prices received for contracted billable hours of our technical staff.
<TABLE>
<CAPTION>
2000 vs. 1999 1999 vs. 1998
Increase Increase 1998 Amount
-------- -------- -----------
<S> <C> <C> <C>
Salaries and Related Costs. $2,895,000 10.0% $1,786,000 6.6% $26,981,000
</TABLE>
15
<PAGE> 16
The increase in fiscal 2000 salaries and related expenses is attributable to the
increase in full-time equivalent professional and support staff employees,
annual salary increases and a $372,000 (27%) increase in the cost of the
Company's self-insured employee medical insurance program. The increase in
salary and related expenses reflects the hiring of senior staff for initiatives
undertaken to increase net revenues and expand engineering and consulting
services.
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.
<TABLE>
<CAPTION>
2000 vs. 1999 1999 vs. 1998
Increase Increase 1998 Amount
-------- -------- -----------
<S> <C> <C> <C>
General and Administrative Expenses. $1,247,000 13.2% $385,000 4.2% $9,060,000
</TABLE>
The increase in general and administrative expenses is attributable to higher
occupancy cost due, in part, to the Raamot Associates acquisition, greater
amortization and depreciation expense for leasehold improvements and
expenditures for computer and drilling equipment and rigs, costs related to due
diligence and valuation efforts for potential acquisitions, costs for investment
banking fees and increases in professional liability claims expenses and related
legal expenses.
The increase in fiscal 2000 general and administrative expenses is also
attributable to our decision to close the Atlanta office, which resulted in
lease settlement expenses and other legal, contractual and administrative costs.
The increase in general and administrative expenses was offset partially by
decreases in bad debts, general and professional liability insurance premiums
and employee placement and recruiting fees.
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
lower net cost for technical equipment and small tools and computer automated
design services.
<TABLE>
<CAPTION>
2000 vs. 1999 1999 vs. 1998
Decrease Decrease 1998 Amount
-------- -------- -----------
<S> <C> <C> <C> <C> <C>
Other Income, Net. ($89,000) (23.0%) ($55,000) (12.5%) $437,000
</TABLE>
On April 26, 2000 an agreement was consummated between GZA GeoEnvironmental,
Inc, Carl Bro Group Limited and Aquaterra Environmental Consultants Limited
(Aquaterra) for the sale of GZA's 5,000 shares, representing a 50% ownership
interest in Aquaterra, to Carl Bro Group Limited for $316,322. The sale price
was based primarily on a September 1999 KPMG UK valuation opinion of Aquaterra.
The decrease in fiscal 2000 other income, net is due primarily to a $155,000
decrease in equity income from Aquaterra in fiscal 2000. The decrease, due to
the discontinuation of the joint venture, was offset by increases in interest
income. The decrease in fiscal 1999 other income, net was due primarily to
reductions of interest income and increases in interest expense for financing
growth of the business throughout fiscal 1999.
Provision for Income Taxes. The provision for income taxes reflects effective
tax rates of 39% for each of fiscal 2000, 1999, and 1998. 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.
16
<PAGE> 17
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 provided by operating activities was
$7,355,000 in fiscal 2000 compared with $998,000 used by operations in fiscal
1999. The increase in cash provided in fiscal 2000 is due primarily to improved
collections of accounts receivable and lower costs and estimated earnings in
excess of billings on uncompleted contracts. The increase in cash used in fiscal
1999 was due primarily to increases in accounts receivables and costs and
estimated earnings in excess of billings on uncompleted contracts.
We made capital expenditures of $1,833,000 in fiscal 2000 and $1,972,000 in
1999. The increase in capital expenditures in fiscal 2000 reflects our
investments in computer technology, testing and sampling equipment, specialty
drilling equipment rigs and accessories.
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 29, 2000, we had no borrowings under the revolving credit line and
no term loans. These two financing arrangements expire on August 31, 2000.
GZA's cash and cash equivalents were $5,966,000 at the end of fiscal 2000
compared with $894,000 at the end of fiscal 1999. Short-term investments were
$3,829,000 at the end of fiscal 2000 compared with $3,837,000 at the end of
fiscal 1999. 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 December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." This
bulletin summarizes certain views of the staff on applying generally accepted
accounting principles to revenue recognition in financial statements. The staff
believes that revenue is realized or realizable and earned when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered; the seller's price to the
buyer is fixed or determinable; and collection is reasonably assured. We do not
expect the application of SAB 101 to have a material impact on our financial
position or results of operations.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues clarifies
the following: the definition of an employee for purposes of applying APB
Opinion No. 25, the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards, and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. We do not
expect the application of FIN 44 to have a material impact on our financial
position or results of operations.
RECENT DEVELOPMENTS
On May 17, GZA GeoEnvironmental Technologies, Inc. entered into a letter of
intent with Futureco Environmental, Inc., a privately-held company organized by
certain members of GZA's senior management, providing for the acquisition by
Futureco, at a price of $6.45 per share, of all of the outstanding shares of GZA
common stock which Futureco does not already own or have the right to acquire.
GZA has appointed a Special Committee of outside directors to consider the
letter of intent as well as other strategic alternatives that may be available
to the Company, and to make recommendations to the Board of Directors. The
proposed acquisition is subject to certain conditions, including completion of
financing for the transaction by Futureco; GZA and Futureco entering into a
definitive merger agreement, which would be subject to the approval of the
holders of at least two-thirds of the outstanding shares of common
17
<PAGE> 18
stock of GZA which Futureco does not already own or have to right to acquire.
The Company cannot predict whether the proposed transaction will be completed.
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
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, shareholders'
equity and cash flows present fairly, in all material respects, the financial
position of GZA GeoEnvironmental Technologies, Inc. and its Affiliate at
February 29, 2000 and February 28, 1999, and the results of their operations and
their cash flows for each of the three years in the period ended February 29,
2000 in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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
May 5, 2000, except for Note 17, as to which the date is May 17, 2000
18
<PAGE> 19
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 29, 2000 and February 28, 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,966,000 $ 894,000
Available-for-sale securities 3,829,000 3,837,000
Accounts receivable, net 13,924,000 13,503,000
Costs and estimated earnings in excess of
billings on uncompleted contracts, net 5,669,000 8,018,000
Prepaid expenses and other current assets 215,000 149,000
Deferred income taxes 1,399,000 1,450,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets $31,002,000 27,851,000
Property and equipment, net 5,973,000 5,901,000
Investments in real estate 501,000 -
Other assets, net 883,000 1,505,000
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $38,359,000 $ 35,257,000
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 6,516,000 $ 4,776,000
Accrued payroll and expenses 3,958,000 3,900,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,539,000 1,313,000
Income taxes payable 213,000 311,000
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 12,226,000 10,300,000
- ---------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 516,000 816,000
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) - 4,134,999 shares at
February 29, 2000 and 4,078,104 shares at February 28, 1999 41,000 41,000
Capital in excess of par value 14,892,000 14,650,000
Accumulated other comprehensive income (51,000) (10,000)
Retained earnings (includes $748,000 and $926,000 of retained
earnings of the Company's consolidated affiliate at
February 29, 2000 and February 28, 1999, respectively) 13,177,000 11,902,000
- ---------------------------------------------------------------------------------------------------------------------------
Subtotal 28,059,000 26,583,000
Less: Common stock held in treasury, at cost
(500,000 shares at February 29, 2000 and February 28, 1999) (2,442,000) (2,442,000)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 25,617,000 24,141,000
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $38,359,000 $ 35,257,000
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 20
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the Years Ended February 29, 2000 and February 28, 1999 and 1998 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $72,083,000 $60,653,000 $ 59,546,000
Subcontractor costs and other direct expenses 27,932,000 20,345,000 21,695,000
- ----------------------------------------------------------------------------------------------------------------------------------
Net revenues 44,151,000 40,308,000 37,851,000
Costs and expenses:
Salaries and related costs 31,661,000 28,766,000 26,981,000
General and administrative 10,690,000 9,444,000 9,060,000
- ----------------------------------------------------------------------------------------------------------------------------------
Income before other income and taxes 1,800,000 2,098,000 1,810,000
- ----------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest income 286,000 254,000 346,000
Gain (loss) on sale of equipment, and other assets - 4,000 (6,000)
Equity in net income of joint venture 19,000 175,000 97,000
Interest expense (11,000) (50,000) -
- ----------------------------------------------------------------------------------------------------------------------------------
Total other income, net 294,000 383,000 437,000
- ----------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 2,094,000 2,481,000 2,247,000
Provision for income taxes 819,000 972,000 877,000
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 1,275,000 1,509,000 1,370,000
Other comprehensive income - change in unrealized gains
(losses) on securities (41,000) (4,000) 1,000
Comprehensive income $ 1,234,000 $ 1,505,000 $ 1,371,000
- ----------------------------------------------------------------------------------------------------------------------------------
Per share amounts:
Basic earnings per share $ .35 $ .42 $ . 35
Basic weighted average shares 3,629,000 3,604,000 3,932,000
Diluted earnings per share $ .35 $ .41 $ .34
Diluted weighted average shares 3,678,000 3,674,000 3,973,000
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE> 21
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------- Treasury Stock
Number of Par Capital in Accumulated -------------------
Shares Value Excess of Other Retained Number Amount Total
Par Value Comprehensive Earnings of Shares Stockholders'
Income Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Buyback 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
Buyback 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
Issuance of common stock 56,895 242,000 242,000
Change in unrealized losses
on available-for-sale
securities (41,000) (41,000)
Net income 1,275,000 1,275,000
- -----------------------------------------------------------------------------------------------------------------------------------
Balance
February 29, 2000 4,134,999 $41,000 $14,892,000 $(51,000) $13,177,000 500,000 $(2,442,000) $25,617,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE> 22
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended February 29, 2000 and February 28, 1999 and 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,275,000 $1,509,000 $1,370,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,870,000 1,300,000 1,333,000
(Gain) loss on disposal of equipment, other assets (2,000) (4,000) 6,000
Gain on sale of other assets 42,000 -- --
Equity in net income of joint venture (19,000) (175,000) (97,000)
Deferred (prepaid) income taxes (249,000) (347,000) 442,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable, net (105,000) (2,080,000) 1,636,000
Decrease (increase) in costs and estimated earnings in excess
of billings on uncompleted contracts, net 2,575,000 (1,279,000) (739,000)
Decrease (increase) in prepaid expenses and other current
assets (66,000) (16,000) 238,000
(Decrease) increase in accounts payable, trade 1,740,000 103,000 (882,000)
(Decrease) increase in accrued payroll and expenses 229,000 (218,000) 389,000
Increase (decrease) in income taxes payable 65,000 209,000 (261,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) in operating activities 7,355,000 (998,000) 3,435,000
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of available-for-sale securities (33,000) (322,000) (64,000)
Proceeds from disposal of equipment 5,000 155,000 82,000
Acquisition of property and equipment (1,833,000) (1,972,000) (1,232,000)
(Increase) decrease in other assets 8,000 (148,000) 56,000
Investment in real estate (501,000) - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,354,000) (2,287,000) (1,158,000)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit 4,050,000 8,830,000 -
Payments on line of credit (4,050,000) (8,830,000) -
Proceeds from issuance of common stock, net 71,000 56,000 59,000
Acquisition of treasury stock (471,000) (1,971,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used) in financing activities 71,000 (415,000) (1,912,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,072,000 (3,700,000) 365,000
Cash and cash equivalents at beginning of year 894,000 4,594,000 4,229,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $5,966,000 $ 894,000 $4,594,000
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 11,000 $ 50,000 $ -
Income taxes paid, net $ 984,000 $1,110,000 $ 696,000
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.
22
<PAGE> 23
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, estimated contract revenues and
related costs, 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 other direct 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.
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 the
corresponding service and handling charges. Net revenues also reflect estimates
for loss contingencies for disputed contract and pending change order items.
On April 1, 2000 South Jersey Energy Company (SJE) and GZA consummated a Limited
Liability Company Operating Agreement for the formation of AirLogics, LLC
(AirLogics). GZA and SJE formed AirLogics to expand marketing efforts of their
patent-pending, real-time air monitoring system and to focus its marketing
efforts on electric and gas utility companies involved in the remediation of
former manufactured gas plants. During fiscal 2000 GZA billed approximately
$783,000 in net revenues for air monitoring services provided for several SJE
clients. Future profits and losses of AirLogics will be shared equally by GZA
and SJE and will be accounted for under the equity method of accounting.
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. Accordingly, 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.
23
<PAGE> 24
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 29, 2000 and
February 28, 1999 and 1998, we recorded goodwill amortization expense of
$112,000, $29,000 and $19,000, respectively.
On April 26, 2000 an agreement was consummated between GZA GeoEnvironmental,
Inc., Carl Bro Group Limited and Aquaterra for the sale of GZA's 5,000 shares,
representing a 50% ownership interest in Aquaterra, to Carl Bro Group Limited
for $316,322 and repayment of a GZA loan to Aquaterra of $128,480. The terms of
the agreement were substantially complete as of February 29, 2000, and therefore
the sale is reflected in the fiscal 2000 financial statements.
Carl Bro Group Limited will defend, indemnify, and hold harmless GZA against any
action, sums, demands, damages, loss or liability arising out of (i) any
professional services rendered by Aquaterra, (ii) the employment of any
Aquaterra person, (iii) taxes payable by Aquaterra and (iv) any obligation or
liability arising out of the operation of Aquaterra's business, whether after
the sale. The sale of shares resulted in a gain of $7,000 in fiscal 2000. The
sale price of $316,322 was reclassed out of other assets and is included in
accounts receivable in the accompanying financial statements.
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. If it is determined that an impairment exists, the appropriate
adjustment to the carrying value is made. Factors which management considers in
performing the assessment include past and projected operating results, trends
and prospects.
Income Taxes. We account for income taxes pursuant to 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 common stock equivalents.
24
<PAGE> 25
Newly Issued Accounting Standards. In December 1999, the Securities and Exchange
Commission released Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements." This bulletin summarizes certain views of the staff on
applying generally accepted accounting principles to revenue recognition in
financial statements. The staff believes that revenue is realized or realizable
and earned when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collection is
reasonably assured. We do not expect the application of SAB 101 to have a
material impact on our financial position or results of operations.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues clarifies
the following: the definition of an employee for purposes of applying APB
Opinion No. 25, the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards, and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. We do not
expect the application of FIN 44 to have a material impact on our financial
position or results of operations.
Reclassification. Certain reclassifications have been made to the prior years'
financial statements to conform to the current presentation.
25
<PAGE> 26
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 P.C., at February 29, 2000 and February 28, 1999 and for each of the
three years in the period ended February 29, 2000 is as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
2000 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Total assets $2,300,000 $1,961,000
===============================================================================================
Total liabilities $1,552,000 $1,035,000
- -----------------------------------------------------------------------------------------------
Total stockholders' equity $ 748,000 $ 926,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $3,880,000 $1,509,000 $1,099,000
- ----------------------------------------------------------------------------------------------------------------
Net income $ (178,000) $ 36,000 $ 4,000
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Approximately $145,000, $164,000 and $198,000 of net revenues were billed to GZA
in fiscal 2000, 1999 and 1998, respectively.
NOTE 3. AVAILABLE-FOR-SALE SECURITIES
Unrealized losses on available-for-sale securities at February 29, 2000 and
February 28, 1999 were approximately $51,000 and $10,000, respectively, net of
deferred taxes. The maturities of available-for-sale securities held at February
29, 2000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Within one year $ 1,181,000
From 1-10 years 2,648,000
---------
Total $ 3,829,000
</TABLE>
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 29, 2000 and February
28, 1999:
<TABLE>
<CAPTION>
2000 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable, principally trade $15,194,000 $15,179,000
Retainage 1,025,000 982,000
- -------------------------------------------------------------------------------------------------------
16,219,000 16,161,000
Less - Allowance for doubtful accounts 2,295,000 2,658,000
- -------------------------------------------------------------------------------------------------------
$13,924,000 $13,503,000
=======================================================================================================
</TABLE>
All amounts billed under retainage provisions of long-term contracts are
expected to be collected within one year of completion of the contracts.
26
<PAGE> 27
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 29, 2000 and February
28, 1999:
<TABLE>
<CAPTION>
2000 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on uncompleted contracts $3,441,000 $4,539,000
Estimated earnings 2,228,000 3,479,000
- ----------------------------------------------------------------------------------------
$5,669,000 $8,018,000
========================================================================================
</TABLE>
Unbilled costs and estimated earnings on uncompleted contracts are reduced by
accumulated adjustments of $316,000 and $396,000 as of February 29, 2000 and
February 28, 1999, 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 29, 2000 and February 28, 1999:
<TABLE>
<CAPTION>
2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $4,402,000 $3,619,000
Laboratory and technical equipment 3,363,000 3,254,000
Furniture, fixtures and computer equipment 7,915,000 7,232,000
Motor vehicles, rigs and trucks 935,000 827,000
Leasehold improvements 2,549,000 2,408,000
- ----------------------------------------------------------------------------------------------------------------
19,164,000 17,340,000
Less - Accumulated depreciation and amortization 13,191,000 11,439,000
- ----------------------------------------------------------------------------------------------------------------
$5,973,000 $5,901,000
================================================================================================================
</TABLE>
Depreciation expense for the years ended February 29, 2000 and February 28, 1999
and 1998 was $ 1,758,000, $1,289,000 and $1,315,000, respectively.
At February 29, 2000 GZA had contributed approximately $388,000 for the purchase
of air monitoring equipment for activities relating to the joint marketing and
subcontract activities for South Jersey Energy Company (SJE) and GZA. GZA's
portion of this jointly owned equipment is included in furniture, fixtures and
computer equipment shown above.
NOTE 7. REVOLVING LINE OF CREDIT AND TERM LOAN FACILITY
During 2000, GZA renewed its 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 29, 2000 and February 28, 1999. We had no letters of credit
outstanding at February 29, 2000 or February 28, 1999.
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 29, 2000 or February 28, 1999. The term loan facility requires
maintenance of the same ratios and financial covenants as the revolving line of
credit.
These two financing arrangements expire on August 31, 2000.
27
<PAGE> 28
NOTE 8. ACCRUED PAYROLL AND EXPENSES
Accrued payroll and expenses consist of the following at February 29, 2000 and
February 28, 1999:
<TABLE>
<CAPTION>
2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued payroll and related benefits $3,330,000 $3,368,000
Legal and claims reserves 300,000 266,000
Other 328,000 266,000
- ------------------------------------------------------------------------------------------------------------
$3,958,000 $3,900,000
============================================================================================================
</TABLE>
NOTE 9. EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
For the Year Ended February 29, 2000
- ---------------------------------------------------------------------------------------------------------------------------
Income Shares (000s) Per share Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS:
Income available to common
shareholders $1,275,000 3,629 $ .35
- ---------------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities
Stock options - 49 -
- ---------------------------------------------------------------------------------------------------------------------------
Diluted EPS:
Income available to common
shares and common share
equivalents $1,275,000 3,678 $ .35
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------
Income Shares (000s) Per share 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
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998
- ---------------------------------------------------------------------------------------------------------------------------
Income Shares (000s) Per share 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
===========================================================================================================================
</TABLE>
28
<PAGE> 29
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 depended on market conditions, share price and
other factors. During the year ended February 28, 1999 and February 28, 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 1999 Stock Incentive Plan, (the "1999 Plan"), options to purchase
shares of common stock may be issued to key employees including executive
officers and directors who are employees. Under the 1999 Plan we may issue
either incentive stock options or non-statutory stock options. 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 1999 Plan options are non-assignable and have
various vesting terms.
The number of shares reserved for issuance under the 1999 Plan is 425,000
shares. During 2000 the Board of Directors approved the issuance of 250,250
incentive stock options and 27,700 non-qualified stock options at an exercise
price of $4.13. The awards made in 2000 under the 1999 Plan cliff vest on the
earlier of attainment of certain financial goals or June 1, 2002.
Under the 1989 Stock Incentive Plan (the "1989 Incentive Plan"), options to
purchase shares of common stock may be issued to key employees including
executive officers and directors who are employees. Option prices may not be
less than fair market value on the date of grant and terms of options may not
exceed ten years. All 1989 Plan options are non-assignable and vest over a
five-year period.
Information related to the stock options plans described above is as
follows:
<TABLE>
<CAPTION>
Stock Options Outstanding
-----------------------------------
Number of Range of
Shares Exercise Prices
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
Granted under the 1989 Plan 8,000 $4.50
Granted under the 1999 Plan 277,950 $4.13
Cancelled (10,800) $3.50
Expired (21,978) $3.50
Exercised (7,200) $3.50
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at February 29, 2000 524,850 $3.85
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of February 29, 2000, none of the options granted under the 1999 plan, all at
the exercise price of $4.13, were exercisable. Under the 1999 Plan options to
purchase 147,050 shares were available to be granted. The weighted-average
remaining contractual life of the options outstanding is 3.5 years.
As of February 29, 2000, 1999 and 1998, options under the 1989 Incentive Plan,
for 217,500, 234,878 and 224,158 shares, with weighted-average exercise prices
of $3.51, $3.50 and $3.50 respectively, were exercisable. The weighted-average
remaining contractual life of the options outstanding is 2.1 years.
29
<PAGE> 30
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. All
Non-Qualified Plan options are non-assignable and vest over a five-year period.
The Non-Qualified Plan terminated in May 31, 1999 and only the options that were
issued prior to that date remain exercisable in accordance with the
non-qualified plan terms. As of February 29, 2000, February 28, 1999 and 1998
options to purchase 7,500 shares of common stock at an exercise price of $3.50
per share were outstanding under the 1989 Non-Qualified Plan. All such options
were exercisable.
All stock option plans are administered by the Compensation Committee of our
Board of Directors.
Under GZA's 1995 Stock Incentive Plan (the "Stock Plan"), we may grant certain
key employees, at no cost, shares of "restricted stock" in consideration of
services. A condition of receipt of any award under the Stock Plan is that the
employee must either own, 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, 3,733, 4,432, and 2,273 shares were issued to
employees during fiscal years ending 2000, 1999 and 1998, respectively.
During fiscal 2000, 1,724 shares were forfeited by employees who left the
company.
As of July 1999, the 1989 Incentive Plan and the 1995 Stock Incentive Plan were
terminated, and any future awards of these types are to be issued under the 1999
Plan. Awards issued under these Plans prior to July 1999 remain exercisable.
We also maintain an employee stock purchase plan (the "ESPP 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
ESPP plan, 10,004, 10,466 and 11,102 shares were purchased during fiscal 2000,
1999 and 1998, respectively.
GZA applies Accounting Principles Board Opinion No. 25 in accounting for awards
to employees under 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 $1,136,000, $1,433,000 and $1,304,000 for the fiscal years ended
February 29, 2000 and February 28, 1999 and 1998. Our pro forma diluted net
income per share would have been $.31, $.39, and $.32 for the fiscal years ended
February 29, 2000 and February 28, 1999 and 1998, respectively.
The weighted-average fair value of options granted during 2000, 1999 and 1998
was $1.83, $2.13 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 2000, 1999 and 1998: risk free interest
rates of 5.63%, 5.61% and 6.16%, respectively; dividend yields of 0%; volatility
factors of the expected market price of our common stock of 48%, 38% and 43%,
respectively; and a weighted average expected life of the options of 3.5 years.
NOTE 12. INVESTMENT IN REAL ESTATE
In January 1999 GZA and Southborough Ventures, Inc. (SVI) formed Environmental
Real Estate Investors, Inc., (EREI) a joint venture, to target environmentally
impaired properties for development. On July 21, 1999, Somerville Avenue LLC
was incorporated with the terms of the EREI joint venture agreement.
Somerville Avenue LLC subsequently acquired at a cost of $436,000 a former
industrial property in Somerville, Massachusetts and plan to transform the
parcel into a site for commercial development. The cost of the property
consists of the purchase price plus closing costs such as legal, accounting and
other similar costs directly associated with the acquired property. The
formation of a site specific Limited Liability Corporation is consistent with
the EREI joint venture agreement. In addition, EREI made a $65,000 deposit for
a commercial development site in New Bedford, Massachusetts. The development of
the New Bedford site is currently under negotiation with EREI and the owner.
Gains or losses, if any, from investment in real estate transactions will be
recorded as "Other Income" on our Consolidated Statements of Operations and
Comprehensive Income. Due to the terms of the joint venture 100% of the assets,
liabilities, and equity are consolidated into GZA.
30
<PAGE> 31
NOTE 13. INCOME TAXES
The provision for income taxes consisted of the following for fiscal years:
<TABLE>
<CAPTION>
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
State $ 240,000 $ 303,000 $ 109,000
Federal 800,000 1,016,000 326,000
- --------------------------------------------------------------------------------------------------------------------------
Total current 1,040,000 1,319,000 435,000
- --------------------------------------------------------------------------------------------------------------------------
Deferred (prepaid):
State (49,000) (83,000) 98,000
Federal (172,000) (264,000) 344,000
- --------------------------------------------------------------------------------------------------------------------------
Total deferred (prepaid) (221,000) (347,000) 442,000
- --------------------------------------------------------------------------------------------------------------------------
Total provision for income taxes $ 819,000 $ 972,000 $ 877,000
==========================================================================================================================
</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.
Reconciliations of the U.S. federal statutory income tax rate to the effective
income tax rate are as follows for fiscal years:
<TABLE>
<CAPTION>
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<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 6
Reduction of valuation allowance (4) (1) (1)
Non-deductible expenses 3 - -
- ------------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 39% 39% 39%
==============================================================================================================================
</TABLE>
GZA's net deferred tax asset at February 29, 2000 and February 28, 1999 consists
of gross deferred tax liabilities of $885,000 and $753,000 and deferred tax
assets of $2,044,000 and $1,763,000, respectively. GZA's state and federal net
operating loss carryforwards expire in fiscal 2010 through fiscal 2013. As a
result of the sale of Aquaterra, during 2000, the company utilized approximately
$250,000 of a capital loss carryforward which had previously been offset with a
full valuation allowance. Accordingly, the valuation allowance has been reduced
by $100,000. The components of GZA's net deferred tax assets as of February 29,
2000 and February 28, 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 510,000 $ 167,000
Depreciation and amortization 375,000 586,000
Net operating loss carryforwards (617,000) (214,000)
Allowance for doubtful accounts (855,000) (945,000)
Other accrued expenses (572,000) (604,000)
Valuation allowance 276,000 376,000
- -------------------------------------------------------------------------------------------------------
Total net deferred tax assets $ (883,000) $ (634,000)
=======================================================================================================
</TABLE>
The components of GZA's deferred income tax provision (benefit) for the years
ended February 29, 2000 and February 28, 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash versus accrual method of accounting $ 343,000 $ 3,000
Depreciation and amortization (211,000) 94,000
Net operating loss carryforwards (403,000) 17,000
Allowance for doubtful accounts 90,000 (586,000)
Other accrued expenses 60,000 145,000
Valuation allowance (100,000) (20,000)
- --------------------------------------------------------------------------------------------------------------
Total deferred income tax provision (benefit) $ (221,000) $ (347,000)
==============================================================================================================
</TABLE>
31
<PAGE> 32
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 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 $716,000, $660,000, and $661,000 for
fiscal 2000, 1999 and 1998, respectively. In fiscal 2000, 1999 and 1998, the
Board of Directors voted to make 25% of our contribution to the Plan in stock of
GZA. As a result, in fiscal years 2000, 1999 and 1998, respectively, 42,725,
38,152, and 32,445 shares of our stock (having a total fair value of
approximately $179,000, $172,000, and $165,000 on the date of contribution) were
contributed in addition to cash contributions of $537,000, $488,000, and
$496,000, respectively. These contributions are accrued for at the balance sheet
date as a component of accrued payroll and expenses, and are transferred to the
profit sharing plan after year end.
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 $886,000, $868,000, and $901,000 in fiscal 2000, 1999 and
1998, respectively.
GZA provides geotechnical design, instrumentation and other consulting services,
on a contracting and subcontracting basis, to a company and affiliates of the
company of which a director of GZA was Chairman of the Board of Directors during
2000. In fiscal 2000 and 1999, we billed an aggregate of $2,695,000 and
$5,100,000, respectively for services provided to this company and its
affiliates.
During fiscal 2000, the Chairman of the Board of GZA provided consulting
services for which he was compensated $67,000.
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 29, 2000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $2,158,000
2002 965,000
2003 648,000
2004 311,000
2005 -
- -------------------------------------------------------------------------
Total minimum lease payments $4,082,000
=========================================================================
</TABLE>
Rent expense charged to operations was $2,352,000, $2,061,000 and $2,137,000 in
fiscal 2000, 1999 and 1998, 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.
32
<PAGE> 33
In 1997, Goldberg-Zoino Associates of New York, P.C. ("GZANY"), our New York
professional corporation affiliate, entered into a contract with E.E.
Cruz/Nab/Frontier-Kemper, A Joint Venture ("JV"), to design a temporary earth
support system required for construction of the Flushing Bay Combined Sewer
Overflow Protection Facility Storage Tank, Project No. CS 4-3 for the New York
City Department of Environmental Protection. Design by GZANY and soil mix design
and installation development by the JV's construction subcontractor, The
Millgard Corporation, proceeded from August 1997 through to the end of the year.
On January 28, 1998, the JV terminated Millgard's contract for failure to
perform the specified work.
On April 22, 1999, Millgard filed suit against the JV for costs incurred prior
to termination and for lost profits for work not executed following termination.
The JV denied Millgard's claim in July 1999 and counterclaimed against Millgard
for damages of $10,750,000 resulting from a breach of contract and delay. On
September 9, 1999, the JV filed a third-party action against GZANY in the United
States District Court Southern District of New York for contribution, defense
and indemnity of claims made by Millgard. In March 2000, the JV filed an amended
complaint against GZANY alleging breach of contract and a failure to exercise
the required standard of care and claiming indemnification for any damages owed
by the JV to Millgard and for direct damages of at least $10,750,000.
In addition, we are party to several other 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. NOTE
17. SUBSEQUENT EVENT
On May 17, GZA GeoEnvironmental Technologies, Inc. entered into a letter of
intent with Futureco Environmental, Inc., a privately-held company organized by
certain members of GZA's senior management, providing for the acquisition by
Futureco, at a price of $6.45 per share, of all of the outstanding shares of GZA
common stock which Futureco does not already own or have the right to acquire.
GZA has appointed a Special Committee of outside directors to consider the
letter of intent as well as other strategic alternatives that may be available
to the Company, and to make recommendations to the Board of Directors. The
proposed acquisition is subject to certain conditions, including completion of
financing for the transaction by Futureco; GZA and Futureco entering into a
definitive merger agreement, which would be subject to the approval of the
holders of at least two-thirds of the outstanding shares of common stock of GZA
which Futureco does not already own or have the right to acquire. The Company
cannot predict whether the proposed transaction will be completed.
33
<PAGE> 34
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 2000 Annual Meeting
of Stockholders of the Company, to be filed with the Commission no later than
120 days after the end of the fiscal year covered by this report.
34
<PAGE> 35
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
are included in this report:
Report of Independent Accountants.
Consolidated Balance Sheets at February 29, 2000 and
February 28, 1999.
Consolidated Statements of Operations and
Comprehensive Income for the fiscal years ended
February 29, 2000 and February 28, 1999 and 1998.
Consolidated Statements of Stockholders' Equity for
the fiscal years ended February 29, 2000 and February
28, 1999 and 1998.
Consolidated Statements of Cash Flows for the fiscal
years ended February 29, 2000 and February 28, 1999
and 1998.
Notes to Consolidated Financial Statements for the
fiscal years ended February 29, 2000 and February 28,
1999 and 1998.
(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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Schedule II Valuation and Qualifying Accounts 41
</TABLE>
(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
35
<PAGE> 36
10.6*# 1989 Incentive Stock Option Plan of the Company
10.7*# 1989 Non-Qualified Stock Option Plan of the Company
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
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
36
<PAGE> 37
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.
10.56# GZA 1999 Stock Incentive Plan
10.57# GZA Long-Term Incentive Compensation Plan of FYE
2000-2002
10.58 Letter of agreement dated April 26, 2000 regarding sale of
GZA's interest in Carl Bro Aquaterra Limited to Carl Bro Group
Limited
10.59 Limited Liability Company Operating Agreement of AirLogics,
LLC
10.60 Third Loan Modification Agreement dated as of February 25,
2000 between Fleet Bank and the Company
22.1 Subsidiaries of the Registrant on Financial Statement Schedule
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
- -------------------
* 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.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1999, as filed with the
Commission on May 26, 1999.
# Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K: None.
37
<PAGE> 38
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, 2000 /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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Andrew P. Pajak Chief Executive Officer and Director May 26, 2000
- --------------------------- (Principal Executive Officer)
Andrew P. Pajak
/s/ Joseph P. Hehir Chief Financial Officer May 26, 2000
- --------------------------- (Principal Financial and Accounting Officer)
Joseph P. Hehir
/s/ Donald T. Goldberg Director May 26, 2000
- ---------------------------
Donald T. Goldberg
/s/ M. Joseph Celi Director May 26, 2000
- ---------------------------
M. Joseph Celi
</TABLE>
38
<PAGE> 39
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William E. Hadge Director May 26, 2000
- ---------------------------
William E. Hadge
/s/ Dr. Lewis Mandell Director May 26, 2000
- ---------------------------
Dr. Lewis Mandell
/s/ Dr. Thomas W. Philbin Director May 26, 2000
- -------------------------
Dr. Thomas W. Philbin
/s/ Timothy W. Devitt Director May 26, 2000
- ---------------------------
Timothy W. Devitt
/s/ Rose Ann Giordano Director May 26, 2000
- ---------------------
Rose Ann Giordano
/s/ David B. Perini Director May 26, 2000
- -------------------
David B. Perini
</TABLE>
39
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of GZA GeoEnvironmental Technologies,
Inc. and Affiliate:
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 presented on page 41 of this Annual
Report on 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
May 5, 2000, except for Note 17, as to which the date is May 17, 2000.
40
<PAGE> 41
SCHEDULE II
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC. AND AFFILIATE
VALUATION AND QUALIFYING ACCOUNTS
Years Ended February 28, 1998, 1999, and February 29, 2000
<TABLE>
<CAPTION>
Balance at Charged to
beginning costs and Balance at
Description of year expenses Write-offs end of year
----------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C>
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
Year ended February 29, 2000
Allowance for doubtful accounts
(deducted from accounts
receivable)...................... $2,658,000 $423,000 $786,000 $2,295,000
</TABLE>
41
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10.56 GZA 1999 Stock Incentive Plan
10.57 GZA Long-Term Incentive Compensation Plan of FYE 2000-2002
10.58 Letter of agreement dated April 26, 2000 regarding sale of
GZA's interest in Carl Bro Aquaterra Limited to Carl Bro
Group Limited
10.59 Limited Liability Company Operating Agreement of
AirLogics, LLC
10.60 Third Loan Modification Agreement dated as of February 25,
2000 between Fleet bank and the Company
22.1 Subsidiaries of the Registrant on Financial Statement
Schedule
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
</TABLE>
42
<PAGE> 43
EXHIBIT LIST FOR GZA GEOENVIRONMENTAL TECHNOLOGIES, Inc.
1) GZA 1999 Stock Incentive Plan
2) GZA Long-Term Incentive Compensation Plan of FYE 2000-2002
3) Sale of GZA's interest in Carl Bro Aquaterra Limited to Carl Bro Group
Limited.
4) Limited Liability Company Operating Agreement of AirLogics, LLC
5) 3rd loan Modification Agreement
<PAGE> 1
Exhibit - 10.56
GZA GEOENVIRONMENTAL TECHNOLOGIES, INC.
1999 STOCK INCENTIVE PLAN(1)
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the GZA GeoEnvironmental Technologies, Inc.
1999 Stock Incentive Plan (the "Plan"). The purpose of the Plan is to encourage
and enable officers, directors, and employees of GZA GeoEnvironmental
Technologies, Inc. (the "Company") and its Subsidiaries and other persons to
acquire a proprietary interest in the Company. It is anticipated that providing
such persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company and its
shareholders, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Award" or "Awards", except where referring to a particular category of
grant under the Plan or where the context otherwise does not permit, shall
include Incentive Stock Options, Non-Statutory Stock Options, Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards.
"Board" means the Board of Directors of the Company.
"Cause" means (i) any material breach by the participant of any
agreement to which the participant and the Company are both parties, and (ii)
any act or omission justifying termination of the participant's employment for
cause, as determined by the Committee.
"Change of Control" shall have the meaning set forth in Section 14.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Conditioned Stock Award" means an Award granted pursuant to Section 6.
"Committee" shall have the meaning set forth in Section 2.
"Disability" means disability as set forth in Section 22(e)(3) of the
Code.
- --------------
(1) Adopted by the Board of Directors of the Company on May 17, 1999. Approved
by the Stockholders on July 13, 1999. Amended by the Board [P. 5(b)] on
July 13, 1999.
March 27, 2000 Page 1 of 14
<PAGE> 2
"Effective Date" means the date on which the Plan is adopted by the
Board.
"Eligible Person" shall have the meaning set forth in Section 4.
"Fair Market Value" on any given date means the closing price per share
of the Stock on such date as reported by a nationally recognized stock exchange,
or, if the Stock is not listed on such an exchange, as reported by the NASDAQ
National Market, or, if the Stock is not listed on NASDAQ, the fair market value
of the Stock as determined by the Committee.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Statutory Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of the
Company and its Subsidiaries then in effect.
"Outside Director" means any director who is not an officer or employee
of the Company.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means an Award granted pursuant to Section 8.
"Stock" means the Common Stock, $.01 par value per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means a subsidiary as defined in Section 424 of the Code.
"Unrestricted Stock Award" means an Award granted pursuant to
Section 7.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS.
(a) Committee. The Plan shall be administered by a committee of
the Board (the "Committee") consisting of not less than two (2) Outside
Directors, but the authority and validity of any act taken or not taken by the
Committee shall not be affected if any person administering the Plan is not an
"Outside Director." Except as specifically reserved to the Board under the terms
of the Plan, the Committee shall have full and final authority to operate,
manage and administer the Plan on behalf of the Company. Action by the Committee
shall require the affirmative vote of a majority of all members thereof.
March 27, 2000 Page 2 of 14
<PAGE> 3
(b) Powers of Committee. The Committee shall have the power and
authority to grant and modify Awards consistent with the terms of the Plan,
including the power and authority:
(i) to select the persons to whom Awards may from time to
time be granted;
(ii) to determine the time or times of grant, and the
extent, if any, of Incentive Stock Options, Non-Statutory Stock
Options, Restricted Stock or Unrestricted Stock Awards and Performance
Shares, or any combination of the foregoing, granted to any one or more
participants;
(iii) to determine the number of shares to be covered by
any Award;
(iv) subject to the provisions of Section 5, to determine
and to modify the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms and
conditions may differ among individual Awards and participants, and to
approve the form of written instruments evidencing the Awards;
provided, however, that no such action shall adversely affect rights
under any outstanding Award without the participant's consent;
(v) to accelerate the exercisability or vesting of all
or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to
extend the period in which any outstanding Stock Option may be
exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts equal to interest (at rates determined by the Committee)
or dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration
of the Plan.
(c) Ratification by Board of Awards to Officers. Notwithstanding
the foregoing, no grant by the Committee of an Award to a participant who is
then an officer of the Company (within the meaning of Rule 16a-1 under the
Securities Exchange Act of 1934, as amended) shall be effective unless and until
such Award has been approved and ratified by the Board.
March 27, 2000 Page 3 of 14
<PAGE> 4
Subject to the foregoing, all decisions and interpretations of the
Committee shall be binding on all persons, including the Company and Plan
participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.
(a) Shares Issuable. The maximum number of shares of Stock with
respect to which Awards may be granted under the Plan shall be 425,000. For
purposes of this limitation, the shares of Stock underlying any Awards which are
forfeited, cancelled, reacquired by the Company or otherwise terminated (other
than by exercise) shall be added back to the shares of Stock with respect to
which Awards may be granted under the Plan so long as the participants to whom
such Awards had been previously granted received no benefits of ownership of the
underlying shares of Stock to which the Award related. Subject to such overall
limitation, any type or types of Award may be granted with respect to shares,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.
(b) Stock Dividends, Mergers, etc. In the event that after the
Effective Date, the Company effects a stock dividend, stock split or similar
change in capitalization affecting the Stock, the Committee shall make
appropriate adjustments in (i) the number and kind of shares of stock or
securities with respect to which Awards may thereafter be granted (including
without limitation the limitations set forth in Section 3(a) above), (ii) the
number and kind of shares remaining subject to outstanding Awards, and (iii) the
option or purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company, the Committee in its
sole discretion may, as to any outstanding Awards, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
Awards as it may determine and as may be permitted by the terms of such
transaction, or accelerate, amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances), subject, however, to the
provisions of Section 14.
(c) Substitute Awards. The Committee may grant Awards under the
Plan in substitution for stock and stock based awards held by employees of
another corporation who concurrently become employees of the Company or a
Subsidiary as the result of a merger or consolidation of the employing
corporation with the Company or a Subsidiary or the acquisition by the Company
or a Subsidiary of property or stock of the employing corporation. The Committee
may direct that the substitute awards be granted on such terms and conditions as
the Committee considers appropriate in the circumstances. Shares which may be
delivered under such substitute awards may be in addition to the maximum number
of shares provided for in Section 3(a).
March 27, 2000 Page 4 of 14
<PAGE> 5
SECTION 4. ELIGIBILITY.
Awards may be granted to officers, directors, consultants and employees
of the Company or its Subsidiaries ("Eligible Persons").
SECTION 5. STOCK OPTIONS.
The Committee may grant to Eligible Persons options to purchase stock.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Statutory Stock Options. Unless otherwise so designated, an
Option shall be a Non-Statutory Stock Option. To the extent that any option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Statutory
Stock Option.
No Incentive Stock Option shall be granted under the Plan after the
tenth anniversary of the date of adoption of the Plan by the Board.
The Committee in its discretion may determine the effective date of
Stock Options, provided, however, that grants of Incentive Stock Options shall
be made only to persons who are, on the effective date of the grant, employees
of the Company or any Subsidiary. Stock Options granted pursuant to this Section
5(a) shall be subject to the following terms and conditions and the terms and
conditions of Section 12 and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
desirable.
(a) Exercise Price. The exercise price per share for the
Stock covered by a Stock Option granted pursuant to this Section 5(a)
shall be determined by the Committee at the time of grant but shall be
not less than one hundred percent (100%) of Fair Market Value on the
date of grant. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) more
than ten percent (10%) of the combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation and an
Incentive Stock Option is granted to such employee, the option price
shall be not less than one hundred ten percent (110%) of Fair Market
Value on the grant date.
(b) Prohibition on Repricing of Options. No grant of a
Stock Option under the Plan shall be made contingent upon the surrender
or cancellation by the holder of such Stock Option of an outstanding
option to purchase Common Stock that has an exercise price higher than
that of the new Stock Option, nor shall any outstanding Stock Option be
modified or amended to reduce the exercise price thereof (other than
pursuant to Section 3(b) above).
March 27, 2000 Page 5 of 14
<PAGE> 6
(c) Option Term. The term of each Stock Option shall be
fixed by the Committee, but no Incentive Stock Option shall be
exercisable more than ten (10) years after the date the option is
granted. If an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent
(10%) of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five (5) years from the date of grant.
(d) Exercisability; Rights of a Shareholder. Stock
Options shall become vested and exercisable at such time or times,
whether or not in installments, as shall be determined by the Committee
at or after the grant date. The Committee may at any time accelerate
the exercisability of all or any portion of any Stock Option. An
optionee shall have the rights of a shareholder only as to shares
acquired upon the exercise of a Stock Option and not as to unexercised
Stock Options.
(e) Method of Exercise. Stock Options may be exercised in
whole or in part, by delivering written notice of exercise to the
Company, specifying the number of shares to be purchased. Payment of
the purchase price may be made by one or more of the following methods:
(i) In cash, or by check or other instrument
acceptable to the Committee;
(ii) In the form of shares of Stock that are not
then subject to restrictions and that have been outstanding
for at least six months, if permitted by the Committee in its
sole discretion. Such surrendered shares shall be valued at
Fair Market Value on the exercise date; or
(iii) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company to pay
the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment
procedure. The Company need not act upon such exercise notice
until the Company receives full payment of the exercise price;
or
(iv) By any other means (including, without
limitation, by delivery of a promissory note of the optionee
payable on such terms as are specified by the Committee) which
the Committee determines are consistent with the purpose of
the Plan and with applicable laws and regulations.
March 27, 2000 Page 6 of 14
<PAGE> 7
The delivery of certificates representing shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent
upon receipt from the Optionee (or a purchaser acting in his stead in
accordance with the provisions of the Stock Option) by the Company of
the full purchase price for such shares and the fulfillment of any
other requirements contained in the Stock Option or imposed by
applicable law.
(f) Non-transferability of Options. Except as the
Committee may provide with respect to a Non-Statutory Stock Option, no
Stock Option shall be transferable other than by will or by the laws of
descent and distribution and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee.
(g) Annual Limit on Incentive Stock Options. To the
extent required for "incentive stock option" treatment under Section
422 of the Code, the aggregate Fair Market Value (determined as of the
time of grant) of the Stock with respect to which incentive stock
options granted under this Plan and any other plan of the Company or
its Subsidiaries become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
(h) Form of Settlement. Shares of Stock issued upon
exercise of a Stock Option shall be free of all restrictions under the
Plan, except as otherwise provided in this Plan.
SECTION 6. RESTRICTED STOCK AWARDS.
(a) Nature of Restricted Stock Award. The Committee in its
discretion may grant Restricted Stock Awards to any Eligible Person. A
Restricted Stock Award is an Award entitling the recipient to acquire, at no
cost, shares of Stock subject to such restrictions and conditions as the
Committee may determine at the time of grant ("Restricted Stock"). Shares of
Restricted Stock may be granted in respect of past services or other valid
consideration.
(b) Acceptance of Award. A participant who is granted a Restricted
Stock Award shall have no rights with respect to such Award unless the
participant shall have accepted the Award within 60 days (or such shorter date
as the Committee may specify) following the award date by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Stock Award in such form as the Committee shall
determine.
(c) Rights as a Stockholder. Upon complying with Section 6(b)
above, a participant shall have all the rights of a stockholder with respect to
the Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company forfeiture rights described in this
Section 6 and subject to such other conditions, if any, contained in the written
instrument evidencing the Restricted Award. Unless the Committee shall otherwise
determine, certificates evidencing shares of Restricted Stock shall remain in
the possession of the Company until such shares are vested as provided in
Section 6(e) below.
March 27, 2000 Page 7 of 14
<PAGE> 8
(d) Restrictions. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including, without limitation,
death, disability or retirement), the participant or the participant's legal
representative shall, unless otherwise determined by the Committee in its sole
discretion, forfeit to the Company the shares of Restricted Stock with respect
to which conditions have not lapsed or otherwise been satisfied. Except as
otherwise specified in the written instrument evidencing the Restricted Award or
otherwise determined in writing by the Committee, such forfeiture shall be
effective on the thirtieth (30th) day following such termination of employment.
(e) Vesting of Restricted Stock. The Committee at the time of
grant shall specify the date or dates and other conditions, if any, on which the
non-transferability of the Restricted Stock and the Company's right of
forfeiture shall lapse. Subsequent to such date or dates and/or the satisfaction
of such other conditions, if any, the shares with respect to which all
restrictions have lapsed shall no longer be Restricted Stock and shall be deemed
"vested".
(f) Certificate from Recipient. The Committee may require that,
as a condition to receipt of a Restricted Stock Award or the vesting of a
Restricted Stock Award and delivery to the recipient of a certificate evidencing
the vested shares, the recipient provide the Company with satisfactory evidence
that the recipient has satisfied those conditions established by the Committee
and/or this Plan with respect to the grant or vesting of such Award.
(g) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.
SECTION 7. UNRESTRICTED STOCK AWARDS.
(a) Grant or Sale of Unrestricted Stock. The Committee in its
discretion may grant or sell to any Eligible Person shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock") at a purchase price
determined by the Committee. Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.
(b) Restrictions on Transfers. The right to receive unrestricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution.
March 27, 2000 Page 8 of 14
<PAGE> 9
SECTION 8. PERFORMANCE SHARE AWARDS.
Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any Eligible
Person. The Committee in its discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares.
SECTION 9. TERMINATION OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Stock Options:
(i) Termination by Death. If any participant's employment
by the Company and its Subsidiaries terminates by reason of death, any
Stock Option owned by such participant may thereafter be exercised to
the extent exercisable at the date of death, by the legal
representative or legatee of the participant, for a period of one
hundred eighty (180) days (or such longer period as the Committee shall
specify at any time) from the date of death, or until the expiration of
the stated term of the Stock Option, if earlier.
(ii) Termination by Reason of Disability or Normal
Retirement.
(A) Any Stock Option held by a participant whose
employment by the Company and its Subsidiaries has terminated by reason
of Disability may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of one
hundred eighty (180) (or such longer period as the Committee shall
specify at any time) from the date of such termination of employment,
or until the expiration of the stated term of the Option, if earlier.
(B) Any Stock Option held by a participant whose
employment by the Company and its Subsidiaries has terminated by reason
of Normal Retirement may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of one
hundred eighty (180) (or such longer period as the Committee shall
specify at any time) from the date of such termination of employment,
or until the expiration of the stated term of the Option, if earlier.
(C) The Committee shall have sole authority and
discretion to determine whether a participant's employment has been
terminated by reason of Disability or Normal Retirement.
March 27, 2000 Page 9 of 14
<PAGE> 10
(D) Except as otherwise provided by the Committee at the
time of grant, the death of a participant during a period provided in
this Section 9(a)(ii) for the exercise of an Incentive Stock Option
shall extend such period for one hundred eighty (180) days from the
date of death, subject to termination on the expiration of the stated
term of the Option, if earlier.
(iii) Termination for Cause. If any participant's
employment by the Company and its Subsidiaries has been terminated for
Cause, any Stock Option held by such participant shall immediately
terminate and be of no further force and effect.
(iv) Other Termination. Unless otherwise determined by the
Committee, if a participant's employment by the Company and its
Subsidiaries terminates for any reason other than death, Disability,
Normal Retirement or for Cause, any Stock Option held by such
participant may thereafter be exercised, to the extent it was
exercisable on the date of termination of employment, for thirty (30)
days (or such longer period as the Committee shall specify at any time)
from the date of termination of employment or until the expiration of
the stated term of the Option, if earlier.
SECTION 10. TAX WITHHOLDING.
(a) Payment by Participant. Each participant shall, no later than
the date as of which the value of an Award or of any Stock or other amounts
received thereunder first becomes includable in the gross income of the
participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any Federal,
state or local taxes of any kind required by law to be withheld with respect to
such income. The Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(b) Payment in Shares. A Participant may elect, with the consent
of the Committee, to have such tax withholding obligation satisfied, in whole or
in part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to an Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
minimum statutory withholding amount due with respect to such Award, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy such minimum statutory withholding amount.
(c) Section 83(b) Election. As a condition to the grant and
acceptance of any Restricted Stock Award hereunder, the Committee may require
that a participant execute and file or deliver to the Company for filing with
the Internal Revenue Service an election under Section 83(b) of the Code to have
the fair value of the total number of shares subject to the Award
March 27, 2000 Page 10 of 14
<PAGE> 11
included in the gross income of the participant for Federal income tax purposes
in the year in which the Award was granted.
SECTION 11. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary
or from the Company to a Subsidiary, or from one Subsidiary to another;
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 12. AMENDMENTS AND TERMINATION.
The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or, subject to Section
5(b) above, provide substitute Awards at the same or reduced exercise or
purchase price or with no exercise or purchase price, provided that such price,
if any, must satisfy the requirements which would apply to the substitute or
amended Award if it were then initially granted under this Plan) for the purpose
of satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent. However, no such amendment, unless approved by the stockholders of the
Company, shall be effective if it would cause the Plan to fail to satisfy the
incentive stock option requirements of the Code
SECTION 13. STATUS OF PLAN.
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
March 27, 2000 Page 11 of 14
<PAGE> 12
SECTION 14. CHANGE OF CONTROL PROVISIONS.
(a) Upon the occurrence of a Change of Control as defined in this
Section 14:
(i) subject to the provisions of clause (iii) below,
after the effective date of such Change of Control, each holder of an
outstanding Stock Option, Restricted Stock Award or Performance Share
Award shall be entitled, upon exercise of such Award, to receive, in
lieu of shares of Stock (or consideration based upon the Fair Market
Value of Stock), shares of such stock or other securities, cash or
property (or consideration based upon shares of such stock or other
securities, cash or property) as the holders of shares of Stock
received in connection with the Change of Control;
(ii) the Committee may accelerate the time for exercise
of, and waive all conditions and restrictions on, each unexercised and
unexpired Stock Option, Restricted Stock Award or Performance Share
Award, effective upon a date prior or subsequent to the effective date
of such Change of Control, specified by the Committee; or
(iii) each outstanding Stock Option, Restricted Stock Award
and Performance Share Award may be cancelled by the Committee as of the
effective date of any such Change of Control provided that (x) notice
of such cancellation shall be given to each holder of such an Award and
(y) each holder of such an Award shall have the right to exercise such
Award to the extent that the same is then exercisable or, in full, if
the Committee shall have accelerated the time for exercise of all such
unexercised and unexpired Awards, during the thirty (30) day period
preceding the effective date of such Change of Control; provided that
(iv) notwithstanding the foregoing, if the Board has
determined that accounting for a specific transaction involving a
Change in Control as a pooling of interests is desirable, and if the
Company is advised in writing by its independent public accountants
that acceleration of the vesting of any outstanding Award pursuant to
the foregoing provisions or pursuant to the specific provisions of such
Award, by reason of such Change in Control, would preclude accounting
for such Change in Control as a pooling of interests, and if prior to
such change in Control the Company shall notify the holder of each such
Award in writing to such effect, then in such event the provision
providing for acceleration of such Award shall be of no force or effect
in connection with such Change in Control.
(b) The Committee may include in the written instrument evidencing
any Award such provisions for acceleration of the vesting of such Award in the
event of a Change in Control as the Committee determines to be appropriate,
subject to paragraph 4(a)(iv) above.
March 27, 2000 Page 12 of 14
<PAGE> 13
(c) "Change of Control" shall mean the occurrence of any one of
the following events:
(i) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the Act) (other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power
of the Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other
entity, unless (A) such merger or consolidation would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company of such surviving entity outstanding
immediately after such merger or consolidation or (B) a majority of the
directors constituting the full Board of Directors of the surviving
entity immediately following such merger or consolidation are persons
who immediately prior to the merger or consolidation were directors of
the Company; or
(iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
SECTION 15. GENERAL PROVISIONS.
(a) No Distribution; Compliance with Legal Requirements. The
Committee may require each person acquiring shares pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities laws and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates
to participants under this Plan shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
March 27, 2000 Page 13 of 14
<PAGE> 14
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon its adoption by the Board. The
Board may, but shall not be required to, submit the Plan for approval by the
holders of a majority of the shares of capital stock of the Company present or
represented and entitled to vote at a meeting of stockholders. Failure to obtain
such stockholder approval shall not affect the validity of any Award granted
under the Plan; provided, that it is understood that if such approval is not
obtained within twelve (12) months of the Effective Date, Stock Options granted
under the Plan will not qualify as Incentive Stock Options.
SECTION 17. GOVERNING LAW.
This Plan shall be governed by, and construed and enforced in
accordance with, the substantive laws of The Commonwealth of Massachusetts
without regard to its principles of conflicts of laws.
* * * * *
March 27, 2000 Page 14 of 14
<PAGE> 1
Exhibit - 10.57
Summary Plan Description
To: Long-Term Incentive Compensation Plan Participants
From: A. P. Pajak
Date: September 14, 1999
Re: SUMMARY PLAN DESCRIPTION
LONG-TERM INCENTIVE COMPENSATION PLAN OF FYE 2000-2002
1 Introduction
The purpose of the Long-Term Incentive Compensation Plan of FYE 2000-2002 (the
"Plan") is to encourage and enable executives, officers and key employees of GZA
GeoEnvironmental Technologies, Inc. (the "Company") and its Subsidiaries and
other persons to acquire a direct stake in the Company's welfare. Promoting
closer identification of these individuals' personal interests with those of the
Company and its shareholders is expected to stimulate their efforts on the
Company's behalf and strengthen their desire to remain with the Company. The
Plan focuses on achieving financial goals set forth in the Company's long-term
Strategic Plan.
2 Plan Summary
2.1 Overview
Upon selection to participate in the Plan, each designated "Participant" will be
assigned a Target Award that represents the amount of Plan compensation that is
expected to be paid to a Participant if certain pre-established financial goals
("Performance Objectives") are fully met. The Target Award will be calculated by
multiplying the Participant's base salary (inclusive of pre-tax deductions for
401(k) deferral and benefits deductions but exclusive of any bonus payments made
during the Plan Period under either the Annual or Long-Term Plans or any special
compensation) earned during the initial year of the Plan by a Target Award
Percentage. Groups of Participants' awards may be adjusted to yield uniform
Target Awards for common classes of Participants in the Plan.
2.2 Eligibility
a) Eligibility to participate in the Plan is limited to individuals who are
executives, managers and key employees of the Company whose duties and
responsibilities provide them the opportunity to (i) make a material and
significant impact on the financial performance of the Company, (ii) have
major responsibility in the control of the corporate assets, and (iii)
provide critical staff support necessary to enhance operating
profitability.
b) Eligibility and designated levels of participation will be determined by
the CEO subject to Committee approval as described below. The fixing of
eligibility and level of participation shall not create any vested right in
any Participant to receive a bonus hereunder.
Long-Term Incentive Stock Option Plan of FYE 2000--2002 1 September 14, 1999
<PAGE> 2
2.3 Administration
a) The Compensation Committee, or such other Committee of the Board of
Directors designated by the Board, shall administer the Plan. The
administration of the Plan shall include the power to:
i) Approve Participants participation in the Plan
ii) Establish Performance Goals
iii) Determine if and when any Bonuses shall be paid
iv) Pay out any Bonuses, in cash, Stock, or stock options, or a
combination thereof, as the Committee shall determine from
time to time
v) Approve the amount, the form, performance targets, and all other
particulars of awards under the Plan
vi) If deemed appropriate, adjust targets or payments to reflect
special achievements to which no bonus would, by strictest
adherence to the Plan, be due or to adjust actual results to
be used for bonus performance measures in the event of
one-time-only or unusual charges or additions to earnings,
such as special write-offs or extraordinary gains
vii) Impose and change, from time to time, the maximum amounts or
percentages payable under the Plan
viii) Construe and interpret the Plan
ix) Establish rules and regulations and to perform all other acts
it believes reasonable and proper, including the authority to
delegate responsibilities to others to assist in administering
the Plan.
b) Until such time as the Committee makes a determination to make payment of
the incentive compensation hereunder with respect to the actual results
compared to the Performance Goals for any Plan Period, no Participant shall
have any vested right to receive any amount that might be calculated as
payable pursuant to the Plan. Furthermore, for any Plan Period and up until
the Payment Date, the Committee may cancel any Bonuses awarded under the
Plan if a Participant conducts himself or herself in a manner that the
Committee determines to be inimical to the best interests of the Company.
c) Any decision made or action taken by the Committee arising out of or in
connection with the interpretation and administration of the Plan shall be
final and conclusive.
d) If any statute, rule or government regulation or any related compensation
plan of the Company requires ratification of the Committee's action, the
Committee will submit its recommendation to the Board for such
ratification.
2.4 Form of Award
The Target Award will be delivered in three forms:
o Cash Performance Awards that will be paid following the Plan
Period if the EBIBT reported to the stockholders meets or
exceeds the earnings goal approved by the Committee.
o Incentive and Non-Qualified Stock Options that will deliver
reward to the extent that the market value of the Company's
stock increases due to achievement of the Strategic Plan goals
The percentage of Target Award assigned to stock options and to cash will be
determined by the Committee.
Long-Term Incentive Stock Option Plan of FYE 2000--2002 2 September 14, 1999
<PAGE> 3
2.5 Value of ICP Awards
2.5.1 STOCK OPTIONS
Stock options will be issued pursuant to a current Stock Incentive Plan approved
by the Stockholders of the Company at the time a Participant is selected to
participate in the Plan. The projected value of stock option awards will be
based on the current market value and the expected market value of the Company's
shares at the end of the Plan Period based on projected earnings of the Company
at the end of the Plan Period and anticipated price/earnings ratio. Stock option
vesting may be step or cliff but will be determined at the time of grant
irrespective of future stock price or other performance parameter. Early vesting
may be provided if target measures are reached prior to the end of the Plan
Period. There is no guarantee that the share price will reach the projected
value even if the projected earnings per share is reached. There is no guarantee
that the expected level of compensation will be realized from the stock options.
2.5.2 CASH PERFORMANCE AWARDS
Cash Performance Awards will be made based on achieving the cumulative earnings
goal over the Plan Period. The goal will be based on projected earnings before
bonus, interest and taxes (EBIBT) from the current Five-year Strategic Plan plus
such additional earnings necessary to fund the Cash Performance Awards. The cash
awards will be paid in full if the target cumulative earnings are achieved over
the period of the Plan. Individual year earnings achievements will be ignored
for the purpose of Plan goals. No payment will be made if the achieved
cumulative earnings do not meet or exceed the target earnings. Payments will be
made irrespective of the market price of the Company's shares. The performance
goal for the current Plan Period is defined in Exhibit A.
2.6 TERMINATION OF EMPLOYMENT
In the event a Participant ceases to be employed by the Company:
a) Due to normal retirement, or early retirement with Committee consent, under a
formal plan or policy of the Company, or total and permanent disability, as
determined by the Committee, or death, a Participant's eligibility shall
continue to remain in effect for the duration of the Plan Period. In the event
of such a termination of employment, the Participant, or her or his Beneficiary,
on the Payment Date, shall receive the Participant's portion of the Cash
Performance Award for the applicable Plan Period, adjusted by the Committee in
its sole discretion, pro rata, for the Participant's shortened participation.
b) In the event that a Participant shall cease to be an employee of the Company
upon the occurrence of any other event, the Participant's eligibility under the
Plan shall be canceled and terminated forthwith, and no Bonuses shall be payable
under the Plan except as and to the extent the Committee may determine
otherwise.
c) For purposes of the preceding, it shall not be considered a termination of
employment when a Participant is placed by the Company on military or sick leave
or such other type of leave of absence, for a period of six months or less, that
is considered as continuing intact the employment relationship of the
Participant. For any such leave extending beyond six months, the Committee shall
decide whether and when there has been a termination of employment.
d) Disposition of stock options and restricted stock awarded under this Plan,
subsequent to termination, will be determined by the provisions of the Stock
Incentive Plan under which such options or shares have been issued.
Long-Term Incentive Stock Option Plan of FYE 2000--2002 3 September 14, 1999
<PAGE> 4
2.7 ADJUSTMENTS
If there shall be any change in the Stock subject to the Plan through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
exchange of stock or other change in the corporate structure, appropriate
adjustments shall be made in the aggregate number and kind of shares subject to
the Plan to reflect such changes, if and to the extent determined by the
Committee, whose determination shall be conclusive. Such adjustments shall be
made in accordance with the Stock Incentive Plan under which the shares were
issued.
2.8 AMENDMENT AND TERMINATION OF PLAN
The Board may, at any time, and from time to time, suspend or terminate the Plan
in whole or in part or amend it from time to time in such respects as the Board
may deem appropriate and in the best interests of the Company.
3 Miscellaneous
a) GOVERNMENT AND OTHER REGULATIONS: The obligation of the Company to issue,
or transfer and deliver shares for Bonuses under the Plan shall be subject
to all applicable laws, regulations, rules and orders that shall then be in
effect.
b) UNFUNDED PLAN: The Plan, insofar as it provides for payments, shall be
unfunded, and the Company shall not be required to segregate any assets
that may at any time be subject to Bonuses under the Plan. Any liability of
the Company to any person with respect to any award under this Plan shall
be based solely upon contractual obligations that may be created under this
Plan.
c) RIGHT TO CONTINUED EMPLOYMENT: No person shall have any claim or right to
be granted a Bonus under the Plan, and the grant of a Bonus under the Plan
shall not be construed as giving any Participant the right to be retained
in the employ of the Company, and the Company expressly reserves the right
at any time to dismiss a Participant with or without cause, free from any
liability, or any claim under the Plan.
d) NON-TRANSFERABILITY: Except by will or the laws of descent and
distribution, no right or interest of any Participant in the Plan shall be
assignable or transferable and no right or interest of any Participant
shall be liable for, or subject to, any lien, obligation or liability of
such Participant.
e) WITHHOLDING: The Company shall have the right to withhold from cash
payments sufficient amounts to cover tax withholding for income and
employment taxes, and if the amount of cash payment is insufficient, the
Company may require the Participant to pay to it the balance required to be
withheld. Likewise, the Company may require a payment by the Participant to
cover applicable withholding for income and employment taxes in the event
any part of the Bonus is paid in Stock.
f) PLAN EXPENSES: Any expenses of administering this Plan shall be borne by
the Company.
g) LEGAL CONSIDERATIONS: No persons, including a Participant, or his or her
Beneficiary, shall have any claim or right to the payment of an award, if,
in the opinion of counsel for the Company, such payment does not comply
with legal requirements or is opposed to governmental public policy.
h) OTHER PLANS: Nothing contained herein shall prevent the Company from
establishing other incentive and benefit plans in which Participants in the
Plan may also participate. However, any amounts paid to a Participant with
respect to Bonuses under the Plan shall not affect the level of benefits
provided to or received by any Participant (or his or her estate or
Beneficiary) as part of any other employee benefit plan of the Company.
i) NO WARRANTY OF TAX EFFECT: No opinion shall be deemed to be expressed or
warranties made as to the effect for federal, state or local tax purposes
of any Bonuses.
Long-Term Incentive Stock Option Plan of FYE 2000--2002 4 September 14, 1999
<PAGE> 5
j) CONSTRUCTION OF PLAN: The place of administration of the Plan shall be in
the Commonwealth of Massachusetts, and the validity, construction,
interpretation, administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined solely in
accordance with the laws of the Commonwealth of Massachusetts.
4 Implementation
a) The CEO will develop a Schedule of Participants Awards (the
"Schedule", Exhibit A), detailing Participants and levels of
long-term incentive compensation as a function of base salary
and target performance measures for and adoption by the
Compensation Committee.
b) The Committee will present a motion to the Board for award of
stock options to be granted to Participants, including numbers
of shares, vesting and exercise period and other terms based on
a recommendation prepared by the CEO.
c) The Committee will authorize the CEO to grant Cash Performance
Awards pursuant to the amounts set forth in the approved
schedule subject to the conditions set forth in the plan
prepared by the CEO.
* * * *
Long-Term Incentive Stock Option Plan of FYE 2000--2002 5 September 14, 1999
<PAGE> 1
EXHIBIT 10.58
Private & Confidential
DATED 2000
----------------------------------
GZA GEOENVIRONMENTAL, INC. (1)
CARL BRO GROUP LIMITED (2)
AND
CARL BRO AQUATERRA LIMITED (3)
---------------------------------------------
AGREEMENT
FOR THE SALE AND PURCHASE OF THE
5,000 "B" ORDINARY SHARES OF (POUND)1 EACH IN
CARL BRO AQUATERRA LIMITED
---------------------------------------------
<PAGE> 2
CONTENTS
CLAUSE HEADING PAGE
1 Definitions and interpretation....................................1
2 Sale of the Sale Shares and the Vendor's title....................3
3 Indemnity.........................................................4
4 Mutual Release....................................................4
5 Consideration for the sale of the Sale Shares.....................5
6 Completion........................................................5
7 Post-Completion matters...........................................5
8 Payments..........................................................6
9 General...........................................................6
10 Applicable law and submission to jurisdiction.....................8
SCHEDULE
1 The Company.......................................................9
2 Completion matters...............................................10
AGREED FORM DOCUMENTS
Officers' resignations (schedule 2 paragraph 1.5)
<PAGE> 3
THIS AGREEMENT is dated 26TH APRIL 2000 and is made BETWEEN:
(1) GZA GEOENVIRONMENTAL, INC., a company incorporated under the laws of the
State of Massachusetts whose principal place of business is at 320 Needham
Street, Newton, Upper Falls, Massachusetts 02464, USA ("THE VENDOR");
(2) CARL BRO GROUP LIMITED, a company incorporated in England (No. 2237772)
whose registered office is at Newton House, Newton Road, Leeds LS7 4DN
("THE PURCHASER"); and
(3) CARL BRO AQUATERRA LIMITED, a company incorporated in England (No.
2621323), further details of which are set out in schedule 1 ("THE
COMPANY"),
(together "THE PARTIES" and each a "PARTY").
NOW IT IS HEREBY AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS USED IN THIS AGREEMENT
In this Agreement, unless the context otherwise requires:
"CA 1985" means the Companies Act 1985;
"COMPLETION" means completion of the sale and purchase of the Sale Shares
by the performance by the Parties of their respective obligations under
clause 4 and schedule 2;
"COMPLETION DATE" means the date of this Agreement;
"HOLDING COMPANY" means a holding company (as defined in sections 736 and
736A CA 1985) or a parent undertaking (as defined in section 258 CA 1985));
"PURCHASE PRICE" has the meaning given in clause 5;
"PURCHASER'S SOLICITORS" means Addleshaw Booth & Co of Sovereign House, PO
Box 8, Sovereign Street, Leeds LS1 1HQ;
"SALE SHARES" means the 5,000 "B" Ordinary Shares of (pound)1 each in the
Company held by the Vendor;
"SECURITY INTEREST" means any claim, mortgage, lien, pledge, charge,
encumbrance, equity, hypothecation, right of pre-emption or other security
interest or any other restriction or right exercisable by, or in favour of,
any third party (or an agreement or commitment to create any of them);
"SHARE TRANSFERS" has the meaning given in paragraph 1.2 of schedule 2; and
1
<PAGE> 4
"SUBSIDIARY" means a subsidiary (as defined by sections 736 and 736A CA
1985) or a subsidiary undertaking (as defined by section 258 CA 1985).
1.2 TERMS DEFINED ELSEWHERE IN THIS AGREEMENT
In addition to the terms defined in clause 1.1, certain other terms are
defined elsewhere in this Agreement (denoted by capitalised words in quotes
and bold type). Each such term shall have the meaning stated for the
purpose of the provision in which it is defined and, if used elsewhere in
this Agreement, where so used, unless the context otherwise requires.
1.3 INTERPRETATION OF WORDS AND EXPRESSIONS USED IN THIS AGREEMENT
In this Agreement, unless the context otherwise requires:
(a) a document expressed to be "IN THE AGREED FORM" means a document in a
form which has been agreed by the Parties at or before the execution
of this Agreement and which has, for the purposes of identification,
been signed or initialled by them or on their behalf;
(b) references to a clause or schedule are to a clause of, or a schedule
to, this Agreement respectively; references to this Agreement include
its schedules and references in a schedule to a paragraph are to a
paragraph of that schedule;
(c) references to this Agreement or any other document or to any specified
provision of this Agreement or any other document are to this
Agreement, that document or that provision as in force for the time
being and as amended from time to time in accordance with the terms of
this Agreement or that document, as the case may be; and
(d) references to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, Court, official or
any legal concept or thing shall, in respect of any jurisdiction other
than England and Wales, be deemed to include what most nearly
approximates in that jurisdiction to the English legal term.
1.4 CONTENTS TABLE AND HEADINGS
In this Agreement, the contents table and the descriptive headings to, and
within, clauses, schedules and paragraphs are inserted for convenience
only, have no legal effect and shall be ignored in the interpretation and
construction of this Agreement.
2 SALE OF THE SALE SHARES AND THE VENDOR'S TITLE
2.1 SALE OF THE SALE SHARES
The Vendor shall sell to the Purchaser and the Purchaser (relying, as the
Vendor hereby acknowledges, on the representations, warranties, covenants,
undertakings
2
<PAGE> 5
and indemnities of the Vendor referred to in this Agreement) shall purchase
from the Vendor the Sale Shares. The Vendor makes no representation and
provides no warranty, covenant or indemnity other than those set out in
this Agreement.
2.2 THE VENDOR'S TITLE TO THE SALE SHARES
The Vendor shall sell and transfer to the Purchaser the Sale Shares with
full title guarantee and free from any Security Interest.
2.3 TITLE TO SALE SHARES TO PASS ON COMPLETION
Title to, beneficial ownership of, and any risk attaching to, the Sale
Shares shall pass on Completion and the Sale Shares shall be sold and
purchased together with all rights and benefits attached or accruing to
them at, or at any time on or after, Completion (including the right to
receive all dividends, distributions or any return of capital declared,
paid or made by the Company in respect of any such shares on or after
Completion).
2.4 WAIVER OF PRE-EMPTION RIGHTS BY THE VENDOR AND PURCHASER
Each of the Purchaser and the Vendor hereby waives any rights of
pre-emption or first refusal or similar rights conferred on it by the
articles of association of the Company or otherwise over any of the Sale
Shares.
2.5 CAPACITY OF THE VENDOR
The Vendor warrants, undertakes and represents to the Purchaser that:
(a) the Vendor has the requisite power and authority under its
constitutional documents and otherwise to execute, deliver and perform
its obligations under this Agreement and any other document to be
executed by it;
(b) the execution and delivery of, and the performance of the obligations
of the Vendor under, this Agreement have been duly authorised by all
necessary corporate action on its part whether under its
constitutional documents or otherwise; and
(c) this Agreement constitutes legal, valid and binding obligations of the
Vendor enforceable in accordance with its terms.
2.6 SHARE CERTIFICATE
(a) The Vendor confirms that, so far as it is aware, no certificate of
title to the Sale Shares has been issued to it.
(b) The Vendor further confirms that neither the Sale Shares nor any
certificate of title relating to them has been transferred, charged,
lent, deposited or
3
<PAGE> 6
dealt with in any manner affecting the title to them and the Vendor is
the person entitled to be on the register in respect of the Sale
Shares.
(c) The Vendor undertakes to indemnify and keep the Company fully and
effectively indemnified from and against all actions, proceedings,
claims, damages, costs, expenses and demands which may be brought or
made against the Company or suffered or incurred by the Company or for
which the Company may become liable by reason of the Vendor having
undertaken any of the matters referred to in clause 2.6(b).
3 INDEMNITY
The Purchaser will defend, indemnify and hold harmless the Vendor against
any action, sums, demand, damages, loss or liability arising out of:
(a) any professional services rendered by the Company;
(b) the employment by the Company of any person;
(c) taxes payable by the Company, and
(d) any other obligation or liability arising out of the operation of the
Company's business, whether or after the Completion Date,
in each case arising out of the ownership by GZA of the sale shares and
excluding any liability arising as a consequence of trading between the
Vendor and the Company.
4 MUTUAL RELEASE
Except as otherwise expressly set forth herein and except for any liability
arising as a consequence of trading between the parties, each Party hereby
releases the other Parties and the officers, directors, employees, agents
and affiliates of such other Parties of and from all actions, suits,
damages, losses, liabilities or claims of any character that a releasing
Party has or may have had against any of the released Parties at any time
to and including the Completion Date.
5 CONSIDERATION FOR THE SALE OF THE SALE SHARES
The consideration for the sale of the Sale Shares shall be the payment on
Completion by the Purchaser to the Vendor of (pound)210,000 ("THE PURCHASE
PRICE"), plus interest at the rate of 8.5 per cent per annum applied to all
outstanding amounts not paid at Completion until such amounts are paid in
full, in cash in accordance with the provisions of clause 8.
4
<PAGE> 7
6 COMPLETION
Completion shall take place at the offices of the Purchaser's Solicitors or
at such other place as the Parties may agree on the Completion Date when
the Parties shall comply with all of their respective obligations as set
out in schedule 2. The Purchaser shall not be obliged to complete the
purchase of any of the Sale Shares unless the purchase of all the Sale
Shares is completed simultaneously.
7 POST-COMPLETION MATTERS
7.1 APPOINTMENT OF THE PURCHASER AS ATTORNEY FOR THE VENDOR
The Vendor hereby irrevocably and unconditionally appoints the Purchaser
and any director of the Purchaser for the time being acting severally as
its lawful attorney (and to the complete exclusion of any rights that it
may have in such regard) for the purpose of exercising any and all voting
and other rights and receiving any and all benefits and entitlements which
may now or at any time after the date of this Agreement attach to or arise
in respect of any of the Sale Shares and receiving notices of and attending
and voting at all meetings of the members of the Company (or any class
thereof) and generally executing or approving such deeds or documents and
doing any such acts or things in relation to any of the Sale Shares as the
attorney may think fit, in each case from Completion to the day on which
the Purchaser is entered in the register of members as the holder of the
Sale Shares. For such purpose, the Vendor hereby authorises and instructs
the Company to send all notices in respect of the Sale Shares to the
Purchaser during such period.
7.2 FURTHER ASSURANCE BY THE VENDOR
The Vendor shall execute or, so far as it is able, procure the execution of
all such documents and/or do or, so far as it is able, procure the doing
of, such acts and things as the Purchaser shall after Completion require in
order to give effect to the provisions of this Agreement and to give to the
Purchaser the full benefit of this Agreement or any other such document.
8 PAYMENTS
8.1 PAYMENTS TO THE VENDOR
Any amounts payable to the Vendor pursuant to this Agreement shall be paid
by way of telegraphic transfer to the following account of the Vendor:
Bank: Fleet Bank, N.A.
1 Federal Street
Boston MA 02110
Sort Code: 011000138
Account Name: GZA GeoEnvironmental - Accounts Payable
5
<PAGE> 8
Account No.: 027-890-4909
9 GENERAL
9.1 CONTINUING EFFECT OF THIS AGREEMENT
All provisions of this Agreement shall, so far as they are capable of being
performed or observed, continue in full force and effect notwithstanding
Completion, except in respect of those matters then already performed and
Completion shall not constitute a waiver of any of the Purchaser's rights
in relation to this Agreement.
9.2 ANNOUNCEMENTS
Save as (but only to the extent) expressly required by law or by any
relevant national or supra-national regulatory, governmental or
quasi-governmental body or authority, all announcements by, of or on behalf
of the Vendor relating to the subject matter of this Agreement or the
transaction contemplated by this Agreement shall be in terms to be approved
in writing by the Purchaser in advance of issue.
9.3 ENTIRE AGREEMENT
(a) This Agreement sets out the entire agreement and understanding between
the Parties in connection with the sale and purchase of the Sale
Shares and other matters described in them.
(b) Without prejudice to the generality of clause 9.3(a), this Agreement
shall supersede as from the date of this Agreement:
(i) a shareholders agreement dated 10th November 1992 between the
Purchaser, the Vendor and the Company; and
(ii) a letter dated 21st October 1999 from Andrew Pajak of the Vendor
to Roger Pyle of the Purchaser.
9.4 ALTERATIONS
No purported alteration of this Agreement shall be effective unless it is
in writing, refers specifically to this Agreement and is duly executed by
each Party to this Agreement.
9.5 COUNTERPARTS
This Agreement may be entered into in the form of two or more counterparts,
each executed by one or more of the Parties but, taken together, executed
by all and, provided that all the Parties so enter into this Agreement,
each of the executed counterparts, when duly exchanged and delivered, shall
be deemed to be an original, but, taken together, they shall constitute one
instrument.
6
<PAGE> 9
9.6 PAYMENT OF COSTS
(a) Subject to clause 9.6(b) each of the Parties shall be responsible for
its respective legal and other costs and expenses incurred in relation
to the negotiation, preparation and completion of this Agreement and
all ancillary documents.
(b) The Purchaser shall reimburse the Vendor for reasonable legal and
accounting costs incurred by the Vendor in relation to the
negotiation, preparation and completion of the Agreement and all
ancillary documents up to a maximum of $14,600.
9.7 SUCCESSORS AND ASSIGNS
(a) This Agreement shall be binding on, and shall enure for the benefit
of, the successors in title of each Party.
(b) Save as provided in clause 9.7(c), none of the Parties to this
Agreement may be entitled to assign the benefit of any rights under
this Agreement.
(c) The benefit of this Agreement shall be freely assignable by the
Purchaser and, in the event of any such assignment, all references in
this Agreement to the Purchaser shall be deemed to include its
assigns.
(d) The Parties agree that any loss suffered by any member of the
Purchaser's Group or any assignee of the Purchaser's rights under this
Agreement as a result of a breach of any provision of this Agreement
shall be treated as, and shall be deemed to be, a loss of the
Purchaser.
10 APPLICABLE LAW AND SUBMISSION TO JURISDICTION
APPLICABLE LAW
10.1 This Agreement shall be governed by and construed in accordance with
English law, and all claims and disputes between the parties or any of them
arising out of or in connection with this Agreement (whether or not
contractual in nature) shall be determined in accordance with English law.
10.2 For the avoidance of doubt, the parties expressly agree if in any court any
party argues that a court (other than a court in England and Wales) has
jurisdiction to determine any dispute or difference between the parties or
any of them arising out of or in connection with this Agreement shall be
determined in accordance with English law, and any right any party might
otherwise have to rely upon the law of the forum is hereby irrevocably and
unconditionally waived.
SUBMISSION TO JURISDICTION
10.3 Each party submits to the jurisdiction of the Courts of England and Wales
in relation to all claims, disputes, differences or other matters arising
out of or in connection
7
<PAGE> 10
with this Agreement, provided that nothing in this clause shall prevent the
Purchaser or the Company in its or their sole and unfettered discretion,
from commencing proceedings against the Vendor in any court of competent
jurisdiction.
10.4 Each party irrevocably waives any right that it may have:
(a) to object to an action being brought in those Courts, to claim that
the action has been brought in an inconvenient forum, or to claim that
those Courts do not have jurisdiction. The waiver contained in this
clause includes (without limitation) a waiver of all formal and
substantive requirements of any otherwise competent jurisdiction in
relation to this clause; or
(b) to oppose the enforcement of any judgment of any court of England and
Wales whether on any ground referred to in clause 10.4(a) or
otherwise.
IN WITNESS whereof this Agreement has been entered into as a Deed on the date
specified above.
8
<PAGE> 11
SCHEDULE 1
----------
THE COMPANY
-----------
1 Date of incorporation: 18th June 1991
2 Registered number: 2621323
3 Registered office: Newton House, Newton Road, Leeds LS7 4DN
4 Authorised share capital: (pound)10,000 divided into 5,000 "A"
ordinary shares of (pound)1 each and 5,000
"B" ordinary shares of(pound)1 each
5 Issued share capital: 5,000 "A" ordinary shares all fully paid
registered in the name of the Purchaser
5,000 "B" ordinary shares all fully paid
registered in the name of the Vendor
6 Directors: Andrew Richard Dean
Andrew P Pajak
James Roger Pyle
7 Secretary: Paul David Berry
8 Auditors: PricewaterhouseCoopers
9 Accounting reference date: 30 June
9
<PAGE> 12
SCHEDULE 2
COMPLETION MATTERS
1 DOCUMENTS AND OTHER ITEMS TO BE DELIVERED BY THE VENDOR
1.1 The following documents and other items set out in the remainder of this
paragraph 1 shall be delivered by the Vendor to the Purchaser at
Completion.
THE SALE SHARES
1.2 A transfer in respect of the Sale Shares ("THE SHARE TRANSFER") duly
executed and completed in favour of the Purchaser.
1.3 Share certificates for the Sale Shares.
BOARD MINUTES OF THE VENDOR
1.4 Certified copies of the board minutes for the Vendor recording the
resolution of the board of directors of the Vendor authorising:
(a) the sale of the Sale Shares held by the Vendor;
(b) the execution of the transfers in respect of such Sale Shares; and
(c) the execution of this Agreement and all relevant Transaction
Documents.
DIRECTOR'S RESIGNATION
1.5 The written resignation of Andrew P Pajak in the agreed form resigning his
office as a director of the Company.
2 OBLIGATIONS OF THE VENDOR
BOARD RESOLUTIONS
2.1 The Purchaser and the Vendor shall procure that written board resolutions
of the Company are passed which:
Registration of the Share Transfer
(a) resolve to register the Share Transfer (subject only to it being duly
stamped) notwithstanding any provision to the contrary in the articles
of association of the Company;
Resignation of director
10
<PAGE> 13
(b) approve the resignation of Andrew P Pajak as a director of the
Company; and
Miscellaneous
(c) approve the matters referred in paragraph 4.
REPAYMENT OF INDEBTEDNESS
2.2 The Vendor shall repay to the Company, or procure the repayment to the
Company of, all indebtedness outstanding at Completion from the Vendor in
respect of trading in the ordinary course of business by the Company with
the Vendor which has become payable in accordance with any terms previously
agreed by the Vendor and the Company.
3 OBLIGATIONS OF THE PURCHASER
3.1 The Purchaser shall pay the Purchase Price in accordance with the
provisions of clause 8.
4 JOINT OBLIGATIONS OF THE PURCHASER AND THE VENDOR
4.1 The Purchaser and the Vendor shall join in procuring that:
(a) all existing bank mandates in force for the Company shall be altered
(in such manner as the Purchaser shall at Completion require) to
reflect the resignations and appointments referred to in paragraph
2.1; and
(b) the Company shall repay the loan of (pound)80,000 made to it by the
Vendor in full and final settlement of all and any amounts due by the
Company, plus interest at the rate of 8.5 per cent per annum applied
to all outstanding amounts not paid at Completion until such amounts
are paid in full, to the Vendor (other than any trading in the
ordinary course of business by the Company with the Vendor which has
not yet become payable in accordance with any terms previously agreed
by the Vendor and the Company and which shall be repaid in accordance
with existing arrangements).
11
<PAGE> 14
EXECUTED and delivered as a DEED )
by GZA GEOENVIRONMENTAL, INC )
acting by: )
-------------------------------------
Director
-------------------------------------
Director/Secretary
EXECUTED and delivered as a DEED )
by CARL BRO GROUP LIMITED )
acting by: )
-------------------------------------
Director
-------------------------------------
Director/Secretary
EXECUTED and delivered as a DEED )
by CARL BRO AQUATERRA LIMITED )
acting by: )
-------------------------------------
Director
-------------------------------------
Director/Secretary
12
<PAGE> 1
\ Exhibit 10.59
LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF
AIRLOGICS, LLC
This Limited Liability Company Operating Agreement (including the
appendices attached hereto, the "Agreement") of AirLogics LLC, a Delaware
limited liability company (the "Company"), is made as of April 1, 2000 between
SOUTH JERSEY ENERGY COMPANY ("SJE"), a New Jersey corporation, located at Number
One South Jersey Plaza, Route 54, Folsom, NJ 08037 and GZA GEOENVIRONMENTAL,
INC. ("GZA"), a Massachusetts corporation, located at 320 Needham Street, Newton
Upper Falls, MA 02464 as the members of the Company ("Members," and each a
"Member").
ARTICLE I DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set forth in
this Article I unless otherwise expressly provided.
1.1 "ACT" means the Delaware Limited Liability Company Act, as amended.
1.2 ADJUSTED CAPITAL ACCOUNT DEFICIT - with respect to any Member, the
deficit balance, if any, in such Members Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of
this Operating Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit
is intended to comply with the provisions of Regulations
Section 1.704-1 (b)(2)(ii)(d) and shall be interpreted
consistently therewith.
1.3 "AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under common control with such
Person. "Controlled Affiliate" means, with respect to any Person: (a) any Person
directly or indirectly controlled by such Person, and (b) any Person a majority
of whose equity securities are owned directly or indirectly by such Person. For
purposes of these definitions, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
-1-
<PAGE> 2
1.4 "AGREEMENT" means the Limited Liability Company Operating Agreement
of the Company between SJE and GZA, as the Members of the Company.
1.5 "ASSETS" has the meaning defined in Section 3.1 (a).
1.6 " BUSINESS" has the meaning given that term in Section 3.1.
1.7 CAPITAL ACCOUNT - with respect to any Member, the Capital Account
maintained or such Person in accordance with the following provisions:
(i) To each Members Capital Account there shall be credited
such Members Capital Contributions, such Member's distributive
share of Profits and any items in the nature of income or gain
which are specially allocated pursuant to Sections 4.08 or
4.09 hereof, and the amount of any Company liabilities assumed
by such Member or which are secured by any Property
distributed to such Member.
(ii) To each Member's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Property
distributed to such Member pursuant to any provision of this
Operating Agreement, such Member's distributive share of
Losses and any items in the nature of expenses or losses which
are specially allocated pursuant to Sections 4.08 or 4.09
hereof, and the amount of any liabilities of such Member
assumed by the Company or which are secured by any property
contributed by such Member to the Company.
(iii) In the event any interest in the Company is transferred
in accordance with the terms of this Operating Agreement, the
transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred
interest.
(iv) In determining the amount of any liability for purposes
of Sections 1.7(i) and 1.7(ii) hereof, there shall be taken
into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this
Operating Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section
1.7041 (b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Executive
Committee shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits
relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Company or
the Members), are computed in order to comply with such
Regulations, the Executive Committee may make such
modification, provided that is not likely to have a material
effect on the amounts distributable to any Member pursuant to
Article IX hereof upon the dissolution of the Company. The
Executive Committee also shall (i) make any adjustments that
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are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company
capital reflected on the Company's balance sheet, as computed
for book purposes in accordance with Regulations Section
1.7041(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events might
otherwise cause this Operating Agreement not to comply with
Regulations Section 1.7041(b).
1.8 CAPITAL CONTRIBUTION - With respect to any Member, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed to the Company with respect to the Percentage Interest held by such
Member pursuant to the terms of this Operating Agreement. The principal amount
of a promissory note which is not readily traded on an established securities
market and which is contributed to the Company by the maker of the note (or by a
Person related to the maker of the note within the meaning of Regulations
Section 1.7041(b)(2)(ii)(c)) shall not be included in the Capital Contribution
of any Member until the Company makes a taxable disposition of the note or until
(and to the extent) principal payments are made on the note, all in accordance
with Regulations Section 1.7041(b)(2)(iv)(d)(2).
1.9 COMPANY MINIMUM GAIN - Refers to "partnership minimum gain" as set
forth in Regulations Sections 1.7042(b)(2) and 1.7042(d).
1.10 "CERTIFICATE OF FORMATION" means the Certificate of Formation of
the Company as filed with the Secretary of State of Delaware, as the same may be
amended or restated from time to time.
1.11 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
1.12 "COMPANY" means AirLogics, LLC, a Delaware limited liability
company.
1.13 "CONTRACT" means a contract for the sale of air monitoring
equipment and services to a customer.
1.14 "CONTROLLED AFFILIATE" has the meaning defined in Section 1.3.
1.15 "COVERED PERSON" is any Member, Executive Committee, employee or
agent of the Company.
1.16 "DEPRECIATION" - For each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with
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reference to such beginning Gross Asset Value using any reasonable method
selected by the Executive Committee.
1.17 "EFFECTIVE DATE" means April 1, 2000 which is the date on which
the Certificate of Formation is, by its express terms, to become effective.
1.18 GROSS ASSET VALUE - With respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value
of such asset, as determined by the majority of the Members;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values,
as determined by the Executive Committee, as of the following
times: (a) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (b) the distribution
by the Company to a Member of more than a de minimis amount of
Property as consideration for an interest in the Company; and
(c) the liquidation of the Company within the meaning of
Regulations Section 1.7041(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clauses (a) and (b) above shall
be made only if the Executive Committee reasonably determines
that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed
to any Member shall be adjusted to equal the gross fair market
value of such asset on the date of distribution as determined
by the Executive Committee; and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Sections 734(b)
or 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to
Regulations Section 1.7041 (b)(2)(iv)(m) and Sections
2.01(42)(vi) and 9.03(e) hereof; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this Section
2.01(18)(iv) to the extent the Executive Committee determines
that an adjustment pursuant to Section 2.01(17)(ii) hereof is
necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this
Section 1.18(iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to these Sections 1.18(i), (ii), or (iv)
hereof, such Gross Asset Value shall thereafter
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be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Profits and
Losses.
1.19 "GZA GEOENVIRONMENTAL INC." means GZA, a Massachusetts corporation
and Member of the Company.
1.20 "ENTITY" means any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association, or any foreign trust, or foreign business
organization.
1.21 "EVENT OF DISSOLUTION" has the meaning defined in Section 9.1.
1.22 "EXECUTIVE COMMITTEE" has the meaning defined in Section 5.2(a).
1.23 "FISCAL YEAR" means (i) the period commencing on the Effective
Date and ending on the immediately succeeding December 31, and (ii) any
subsequent twelve month period commencing on January 1 and ending on December
31, and any portion of said subsequent period for which the Company is required
to allocate Profits, Losses, and other items of Company income, gain, loss, or
deduction.
1.24 LIQUIDATING EVENT - Any of the events described in Section 14.01.
1.25 "LLC LAW" means the Delaware Limited Liability Company Act and all
amendments thereto.
1.26 "MEMBER" means each of SJE and GZA; together SJE and GZA may be
referred to as "Members".
1.27 "MEMBER MONTHLY LOAN BALANCE" has the meaning defined in Section
6.2.
1.28 MEMBER NONRECOURSE DEBT - Refers to "partner nonrecourse debt" as
set forth in Regulations Section 1.7042(b)(4).
1.29 MEMBER NONRECOURSE DEBT MINIMUM GAIN - An amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.7042(i)(3).
1.30 MEMBER NONRECOURSE DEDUCTIONS - Refers to "partner nonrecourse
deductions" as set forth in Regulations Sections 1.7042(i)(1) and 1.7042(i)(2).
1.31 NET CASH FROM OPERATIONS - The gross cash proceeds from Company
operations less the portion thereof used to pay or establish reserves for all
Company expenses, debt payments, capital improvements, replacements, and
contingencies, all as determined by the
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Executive Committee. "Net Cash From Operations" shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar allowances, but
shall be increased by any reductions of reserves previously established pursuant
to the first sentence of this definition.
1.32 NONRECOURSE DEDUCTIONS - has the meaning set forth in Regulations
Section 1.7042(b)(3).
1.33 NONRECOURSE LIABILITY - Has the meaning set forth in Regulations
Section 1.7042(b)(3).
1.34 "PERCENTAGE INTEREST" means, subject to Section 4.03, as to SJE
having 50% and GZA having 50% of all interests in the Company, which shall be
such Member's percentage share of (i) total Profits or Losses of the Company to
be allocated; (ii) the total amount of the initial and each additional capital
contribution; and (iii) the total amount of each distribution.
1.35 "PERSON" means any individual or Entity, and the executors,
administrators, legal representatives, successors, and assigns of a "Person"
when the context so permits.
1.36 PROFITS AND LOSSES - For each Fiscal Year, an amount equal to the
Company's taxable income or loss for such Fiscal Year, determined in accordance
with Code Section 703(a) (for this purposes, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this Section 1.37 shall be added
to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section
1.7041(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this Section 1.37
shall be subtracted from such taxable income or added to such
loss;
(iii) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to Section 1.18(ii) or Section 1.18(iii)
hereof, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the
Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its
Gross Asset Value;
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(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year, computed in accordance with
Section 1.16 hereof;
(vi) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Sections 734(b) or 743(b)
is required pursuant to Regulations Section
1.7041(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Members interest in the Company, the amount
of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and
(vii) Notwithstanding any other provision of this Section
1.37, any items which are specially allocated pursuant to
Sections 4.08 and 4.09 hereof shall not be taken into account
in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to
Sections 4.08 and 4.09 hereof shall be determined by applying
rules analogous to those set forth in Sections 1.37(i) through
1.37(vi) above.
1.37 PROPERTY - All real and personal property acquired by the Company
and any improvements thereto, and shall include both tangible and intangible
property.
1.38 REGULATIONS - Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.39 REGULATORY ALLOCATIONS - Has the meaning set forth in Section 4.09
hereof.
1.40 "SJE" means South Jersey Energy Company, a New Jersey corporation
and Member of the Company.
1.41 "SUPPORT SERVICES AGREEMENT" has the meaning defined in Section
6.1.
1.42 TAXING JURISDICTION - Any state, local or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
1.43 "TRANSACTION OPPORTUNITY" means the sale of equipment and/or
provision of service to perform automated real-time air monitoring.
1.44 "TRANSFER" means, in either noun or verb form, any voluntary or
involuntary
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transfer, sale, or other disposition.
ARTICLE II FORMATION, TERM, NAME AND STATUS.
2.1 FORMATION. The Members acknowledge that the Company is to be
formed pursuant to the Act by the filing of a Certificate of Formation in the
form required with the Delaware Secretary of State upon signing of the Operating
Agreement. The fact that the Certificate of Formation is on file with the
Department of State of the State of Delaware shall constitute notice that the
Company is a limited liability company. Simultaneously with the execution of
this Operating Agreement and filing and acceptance of the Certificate of
Formation, GZA and SJE shall be admitted as Members of the Company.
2.2 TERM. The term of the Company shall commence on the Effective Date
and, unless sooner dissolved in accordance with this Agreement or as required by
statute, shall continue until the twentieth anniversary of the Effective Date.
2.3 NAME. The name of the Company is AirLogics, LLC.
2.4 NO STATE LAW PARTNERSHIP, LIABILITY TO THIRD PARTIES. The Members
intend that the Company not be a partnership (including, without limitation, a
limited partnership), and that no Member be a partner or joint venture of any
other Member nor assume the duties that either such status may impose, for any
purposes other than federal and state tax purposes, and that this Agreement not
be construed otherwise. Except to the limited extent expressly provided in
Section 7.4, no Member shall be liable for the debts, obligations or liabilities
of the Company to third parties, including under a judgment, decree or order of
a court.
2.5 AGREEMENT, EFFECT OF INCONSISTENCIES WITH LLC LAW. For and in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Members executing this Operating Agreement hereby agree to the
terms and conditions of this Operating Agreement, as it may from time to time be
amended according to its terms. It is the express intention of the Members that
this Operating Agreement shall be the sole source of agreement of the parties,
and, except to the extent a provision of this Operating Agreement expressly
incorporates federal income tax rules by reference to sections of the Code or
Regulations or is expressly prohibited or ineffective under the LLC Law, this
Operating Agreement shall govern, even when inconsistent with, or different
than, the provisions of the LLC Law or any other law or rule. To the extent any
provision of this Operating Agreement is prohibited or ineffective under the LLC
Law, this Operating Agreement shall be considered amended to the smallest degree
possible in order to make the agreement effective under the LLC Law. In the
event the LLC Law is subsequently amended or interpreted in such a way to make
any provision of this Operating Agreement that was formerly invalid valid, such
provision shall be considered to be valid from the effective date of such
interpretation or amendment. The Members hereby agree that each Member shall be
entitled to rely on the provisions of this Operating Agreement, and no Member
shall be liable to the Company or to any Member for any action or refusal to act
taken in good faith reliance on the terms of this Operating Agreement. The
Members hereby agree that the duties and obligations imposed on the Members
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as such shall be those set forth in this Operating Agreement, which is intended
to govern the relationship among the Company and the Members, notwithstanding
any provision of the LLC Law or common law to the contrary.
2.6 CONFIRMATION OF STATUS, SCOPE OF AUTHORITY. Each Member hereby
confirms and agrees to its status as a Member upon the terms and conditions set
forth in this Agreement.
2.7 PRINCIPAL OFFICE. The principal office of the Company shall be
located at 1 South Jersey Plaza, Folsom, New Jersey 08037.
ARTICLE III PURPOSE, EXCLUSIVE DEALINGS, AND ASSETS.
3.1 PURPOSE.
(a) The Company has been organized for the purpose of
providing automated real-time air monitoring equipment and services,
(the "Business"). The Executive Committee shall have no authority to
undertake any activity outside of the parameters of the Business
without the unanimous support of all Members.
(b) In addition, the Company may engage in any act concerning
any or all other business or activity that now or hereafter may be
necessary, incidental, proper, advisable, or convenient to accomplish
the foregoing purposes and that is not forbidden by the law of the
jurisdiction in which the Company engages in that business; PROVIDED,
HOWEVER, THAT NOTWITHSTANDING ANYTHING STATED HEREIN TO THE CONTRARY,
the Company shall not engage in any activity which would cause the
Company to be a "public utility company" or a "holding company" as such
terms are used in the Public Utility Holding Company Act of 1935, as
amended. The Company may accomplish the purposes set forth in this
Section 3.1 by entering into any contract, subject to the provisions of
this Agreement, or taking any other action permitted under the Act and
any other applicable law and necessary or convenient to the conduct,
promotion or attainment of the business, purposes or activities of the
Company.
(c) Except as provided in Sections 3.2(a)-(d), any Member may
engage in or possess an interest in other business ventures of every
nature and description, independently or with others, and neither the
Company nor the Members shall have any right by virtue of this
Agreement in such other business ventures or to the income or profits
derived therefrom.
(d) The Company exists only for the purposes specified in
this Article III, and may not conduct any business other than the
Business without the approval of an unanimous decision of the Members.
Furthermore, notwithstanding the provisions of this Agreement, the
Company shall not do business in any jurisdiction that would jeopardize
the limitation on liability afforded to Members under the LLC Law or
this Operating Agreement.
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3.2 EXCLUSIVE DEALINGS.
(a) From the Effective Date, each Member must offer to the
Company each Transaction Opportunity which falls within the purpose defined
herein. Neither Member shall pursue (or permit its Affiliates or Controlled
Affiliates to pursue) such Transaction Opportunities for itself (or themselves)
except as permitted by Sections 3.2 (e), and 9.2(b).
(b) After a Transaction Opportunity has been offered to the
Company, the Members of the Executive Committee shall accept or reject the
Transaction Opportunity on behalf of the Company.
(c) If a Transaction Opportunity is accepted, the Executive
Committee shall document the acceptance of the Transaction Opportunity and
pursue the underlying transaction.
(d) Any Transaction Opportunity which the Executive Committee
does not accept within a reasonable time (two weeks) of its presentation to the
Executive Committee will be deemed to be rejected by the Company. For purposes
of Article XIV, such rejection shall not constitute a dispute unless there is a
good faith dispute as to whether or not a rejection actually occurred.
(e) If Transaction Opportunity is rejected by the Company:
(i) the Company shall not pursue the Transaction
Opportunity; and
(ii) either Member, or both, may pursue the
Transaction Opportunity for its own benefit.
3.3 INTELLECTUAL PROPERTY. Upon formation of AirLogics, LLC, SJE and
GZA agree to assign all of their intellectual property rights in the Perimeter
Air Monitoring System for which a patent is pending with the United States
Patent Office, Application No. 09/143,699 to Airlogics, LLC.
3.4 RESPONSIBILITY FOR WARRANTIES AND SYSTEM SUPPORT. AirLogics shall
be exclusively responsible for providing any warranties on sales of automated
air monitoring equipment. AirLogics shall provide all required system support on
equipment sold and services provided to customers.
ARTICLE IV MEMBER CONTRIBUTIONS, ALLOCATIONS, DISTRIBUTIONS AND TAXES.
4.1 INITIAL CAPITAL CONTRIBUTIONS. The names, addresses, initial
Capital Contributions, and Percentage Interests of the Members are set forth
below. The initial Capital Contributions shall be made concurrently with the
last execution of this Operating Agreement. Each Member acknowledges that the
interests in the Company have not been registered under the
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Securities Act of 1933, as amended, or any state securities laws, and may not be
resold or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements.
SJE: $250,000
GZA: $250,000
4.2 CAPITAL ACCOUNTS. A separate Capital Account shall be established
and maintained for each Member.
4.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) Additional monetary Capital Contributions, may be requested by the
Executive Committee in its reasonable discretion as may be needed to cover
ongoing operating expenses or to cover losses the Company has incurred, Such
additional monetary Capital Contributions shall be payable in cash in proportion
to the Percentage Interests of the Members. Except as stated above, no Member
shall be required to make any additional monetary capital contributions.
(b) In the event that a Member fails to make any additional monetary
Capital Contribution as provided above, all other Members may elect to make any
monetary Capital Contributions that have not been made by the non-contributing
Member. Such election shall be made in writing, with notice to all other
Members, within twenty-five (25) days after the issuance of the original written
notice from the Executive Committee regarding the additional Capital
Contributions. If more than one Member elects to make the additional Capital
Contribution, then all such electing Members shall contribute on a pro rata
basis determined by their respective Percentage Interests.
(c) In the event that a Member fails to make an additional Capital
Contribution as provided above, the Percentage Interests of the Members shall be
adjusted so that the Percentage Interest of each Member shall equal the Gross
Asset Value of the Capital Contributions made by such Member divided by the
Gross Asset Value of all Capital Contributions.
4.4 LOANS. If any Member shall make any loan or loans to the Company or
advance money on its behalf, the amount of any such loan or advance
shall not be treated as a Capital Contribution of the Company but shall
be a debt due from the Company. The amount of such loan or advance by a
lending Member shall be repayable out of the Company's cash and shall
bear interest at the rate agreed between the Company and the lending
Member. No Member shall be obligated to make any loan or advance to the
Company.
4.5 OTHER CONTRIBUTIONS MATTERS.
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(a) Under circumstances requiring a return of any Capital
Contributions, no Member shall have the right to receive property other than
cash except as may be specifically provided herein.
(b) No Member shall receive any interest, salary, or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Company or otherwise in its capacity as Member, except
as otherwise provided in this Operating Agreement.
(c) Each Member waives any and all rights that it may have to maintain
an action for partition of the Company's Property.
4.6 PROFITS. After giving effect to the special allocations set forth
in Sections 4.8 and 4.9 hereof, Profits for any Fiscal Year shall be allocated
among the Members in proportion to their Percentage Interests.
4.7 LOSSES.
(a) After giving effect to the special allocations set forth in
Sections 4.8 and 4.9 hereof, Losses for any Fiscal Year shall be allocated among
the Members in proportion to their Percentage Interests.
(b) The Losses allocated pursuant to Section 4.7(a) hereof shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year. In the event some but not all of the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Losses pursuant to Section
4.7(a) hereof, the limitation set forth in this Section 4.7(b) shall be applied
on a Member by Member basis so as to allocate the maximum permissible Losses to
each Member under Regulations Section 1.7041(b)(2)(ii)(d). All Losses in excess
of the limitations set forth in this Section 4.7(b) shall be allocated to the
Members in proportion to their Percentage Interests.
4.8 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.7042(f), notwithstanding any other provision of this
Article IV, if there is a net decrease in Company Minimum Gain during any
Company Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Regulations Section 1.7042(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.7042(f)(6) and 1.70420)(2). This Section
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4.8(a) is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.7041 (f) and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.7041 (i)(4), notwithstanding any other provision of this
Article IV, if there is a net decrease in Member Nonrecourse Debt Minimum Gain
attributable to a Member Nonrecourse Debt during any Company Fiscal Year, each
Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.7042(i)(5), shall be specially allocated items of Company income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.7042(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Sections 1.7042(i)(4) and
1.70420)(2). This Section 4.8(b) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.7042(i)(4) and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be specially allocated among the Members in proportion to their Percentage
Interests.
(d) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Fiscal Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.7042(i)(1).
(e) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Sections 734(b) or
743(b) is required, pursuant to Regulations Sections 1.7041(b)(2)(iv)(m)(2) or
1.7041(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as the result of a distribution to a Member in complete liquidation of its
interest in the Company, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Members in accordance with their
Percentage Interests in the Company in the event Regulations Section
1.7041(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution was
made in the event Regulations Section 1.7041(b)(2)(iv)(m)(4) applies.
(f) Allocations Relating to Taxable Issuance of Percentage Interests.
Any income, gain, loss or deduction realized as a direct or indirect result of
the issuance of an interest in the Company to a Member (the "Issuance Items")
shall be allocated among the Members so that, to the extent possible, the net
amount of such Issuance Items, together with all other allocations under this
Operating Agreement to each Member, shall be equal to the net amount that would
have been allocated to each such Member if the Issuance Items had not been
realized.
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(g) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Regulations
Sections 1.7041(b)(2)(ii)(d) (4), 1.704(b)(2)(ii)(d)(5), or
1.7041(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit
of such Member as quickly as possible, provided that an allocation pursuant to
this Section 4.8(g) shall be made only if and to the extent that such Member
would have an adjusted Capital Account Deficit after all other allocations
provided for in this Section 4.8 have been tentatively made as if this Section
4.8(g) were not included in this Operating Agreement.
4.9 CURATIVE ALLOCATIONS. The allocations set forth in Sections 4.8(a),
4.8(b), 4.8(c), 4.8(d), 4.8(e) and 4.8(g) hereof (the "Regulatory Allocations")
are intended to comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss, or deduction pursuant
to this Section 4.9. Therefore, notwithstanding any other provision of this
Article IV (other than the Regulatory Allocations), the Executive Committee
shall make such offsetting special allocations of Company income, gain, loss or
deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Member's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations were not part of this Operating Agreement and
all Company items were allocated pursuant to Sections 4.6 and 4.7 hereof. In
exercising its discretion under this Section 4.9, the Executive Committee shall
take into account future Regulatory Allocations under Sections 4.8(a) and 4.8(b)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 4.8(c) and 4.8(d).
4.10 OTHER ALLOCATION RULES.
(a) The Members are aware of the income tax consequences of the
allocations made by this Article IV and hereby agree to be bound by the
provisions of this Article IV in reporting their shares of Company income and
loss for income tax purposes.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Executive
Committee using any permissible method under Code Section 706 and the
Regulations thereunder.
(c) Solely for purposes of determining a Member's proportionate share
of the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.7523(a) (3), the Members' interests in Company profits are
in proportion to their Percentage Interests.
(d) To the extent permitted by Regulations Section 1.7042(h)(3), the
Executive Committee shall endeavor not to treat distributions of Net Cash from
Operations as having been made from the proceeds of a Nonrecourse Liability or a
Member Nonrecourse Debt.
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4.11 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any Property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with Section 1.18 hereof).
In the event the Gross Asset Value of any Company asset is adjusted
pursuant to Section 1.18 hereof, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Executive Committee in any manner that reasonably reflects the
purpose and intention of this Operating Agreement. Allocations pursuant to this
Section 4.11 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provisions of this Operating Agreement.
4.12 TAX CHARACTERIZATION AND RETURNS.
(a) The Members acknowledge that the Company will be treated as a
"partnership" for federal and State of Delaware state tax purposes. All
provisions of this Operating Agreement and the Company's Articles of
Organization are to be construed so as to preserve that tax status.
(b) In accordance with Section 10.03, within ninety (90) days after the
end of each Fiscal Year, the Executive Committee will cause to be delivered to
each person who was a Member at any time during such Fiscal Year a Form K-1 and
such other information, if any, with respect to the Company as may be necessary
for the preparation of each Members federal or state income tax (or information)
returns, including a statement showing each Member's share of income, gain or
loss, and credits for the Fiscal Year.
4.13 TAX ELECTIONS. The Executive Committee may make any tax elections
for the Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company, including the election
referred to in Code Section 754 to adjust the basis of Company assets.
4.14 TAXES OF TAXING JURISDICTIONS. To the extent that the laws of any
Taxing Jurisdiction require, each Member (or such Members as maybe required by
the Taxing Jurisdiction) will submit an agreement indicating that the Member
will make timely income tax payments to the Taxing Jurisdiction and that the
Member accepts personal jurisdiction of the Taxing Jurisdiction with regard to
the collection of income taxes attributable to the Member's income, and
interest, and penalties assessed on such income. If the Member fails to provide
such agreement, the Company may withhold and pay over to such Taxing
Jurisdiction the amount of
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tax, penalty and interest determined under the laws of the Taxing Jurisdiction
with respect to such income.
The Tax Partner on behalf of the Executive Committee, where permitted
by the rules of any Taxing Jurisdiction, may file a composite, combined or
aggregate tax return reflecting the income of the Company and pay the tax,
interest and penalties of some or all of the Members on such income to the
Taxing Jurisdiction, in which case the Company shall inform the Members of the
amount of such tax interest and penalties so paid.
4.15 TAX MATTERS PARTNER. SJE is initially designated as the "tax
matters partner" of the Company pursuant to Code Section 321 (a)(7). The Members
may, by vote of a majority of the Members, designate any Member as tax matters
partner. Any Member designated as tax matters partner shall take such action as
may be necessary to cause each other Member to become a "notice partner" within
the meaning of Code Section 6223. Any Member who is designated tax matters
partner may not take any action contemplated by Code Sections 6222 through 6232
without the consent of the other Member.
ARTICLE V MANAGEMENT.
5.1 MANAGEMENT BY MEMBERS. The business and affairs of the Company
shall be directed by its Members in accordance with the provisions of this
Agreement as set forth below.
5.2 EXECUTIVE COMMITTEE.
(a) The Company shall be managed by and at the direction of
its Members through a committee consisting of two
representatives of SJE and two representatives of GZA (the
"Executive Committee"). Each meeting of the Executive
Committee shall be deemed a meeting of the Members. Meetings
of the Members (apart from meetings of the Executive
Committee) are neither necessary nor required.
(b) From time to time, each Member shall elect its two
representatives to the Executive Committee, and such election
shall be communicated in writing to the LLC. At the time of
formation, GZA names M. Joseph Celi and William R. Beloff as
its representatives. SJE names Edward J. Graham and George L.
Baulig as its representatives.
(c) The Executive Committee shall have the authority to manage
and establish policies and strategies of the Company
including, without limitation, the authority to:
(i) enter into any and all agreements, contracts,
documents, certifications, and instruments necessary
or convenient in connection with the management,
maintenance and operation of the property of the
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Company, or in connection with managing the affairs
of the Company, including amendments to this
Agreement and the Certificate of Formation in
accordance with the terms of this Agreement;
(ii) allocate and distribute Profits and Losses to
Members in accordance with their Percentage
Interests;
(iii) establish an Operating Committee, if desired,
establish and modify Operating Committee Procedures
from time to time;
(iv) establish reserves from Profits which otherwise
would be distributed to Members;
(v) borrow money and issue evidence of indebtedness
necessary, convenient, or incidental to the
accomplishment of the purpose of the Company; and
secure the same by mortgage, pledge, or other lien on
any property or asset of the Company;
(vi) prepay in whole or part, refinance, recast,
increase, modify or extend any liabilities affecting
the property of the Company and in connection
therewith execute any extensions or renewals of
encumbrances on any or all of such property;
(vii) invest, manage, and distribute Company funds to
the Members in accordance with the provisions of this
Agreement, and perform all matters in furtherance of
the objectives of the Company or this Agreement,
including but not limited to opening and maintaining
Company bank accounts and authorizing signatories
with respect thereto;
(viii) employ accountants, legal counsel, managing
agents and other Persons (including but not limited
to Affiliates of Members, subject to Section 6.1 of
the Agreement) to perform service for the Company and
to compensate them from Company funds;
(ix) make any and all elections for federal, state,
and local tax purposes including, without limitation,
any election, if permitted by applicable law: (A) to
adjust the basis of property of the Company pursuant
to Code Sections 754, 734(b), and 743(b), or
comparable provisions of state or local law, in
connection with Company distributions; (B) to extend
the statute of limitations for assessment of tax
deficiencies against Members with respect to
adjustments to the Company's federal, state, or local
tax returns; and (C) to the extent provided in Code
Sections 6221 through 6231, to represent the Company
and its Members before taxing authorities or courts
of competent jurisdiction in tax matters affecting
the Company and its Members, and to file any tax
returns and to
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execute any agreements or other documents relating to
or affecting such tax matters, including agreements
or other documents that bind the Members with respect
to such tax matters or otherwise affect the rights of
the Company or the Members;
(x) institute, prosecute, defend, settle, compromise,
and dismiss lawsuits or other judicial or
administrative proceedings brought on or in behalf
of, or against, the Company or the Members in
connection with activities arising out of, connected
with, or incidental to this Agreement, and to engage
counsel or others in connection therewith;
(xi) engage in any kind of activity and perform and
carry out contracts of any kind (including contracts
of insurance covering risks to property of the
Company) necessary or incidental to, or in connection
with, the accomplishment of the purposes of the
Company, as may be lawfully carried on or performed
by a limited liability company under the Act;
(xii) take, or refrain from taking, all actions not
expressly proscribed or limited by or addressed in
this Agreement, as may be necessary or appropriate to
accomplish the purposes of the Company, including but
not limited to the establishment, maintenance, and
expenditure of reserves to provide for working
capital, debt service, and such other purposes as it
may deem necessary or advisable;
(xiii) sell all or substantially all of the assets of
the Company;
(xiv) merge or consolidate the Company;
(xv) mortgage or encumber all or substantially all of
the assets of the Company;
(xvi) approve the Company's budget;
(xvii) vote to dissolve the Company;
(xviii) vote to seek bankruptcy protection for the
Company; and
(xix) distribute excess cash to the Members.
(d) Any decision or act of the Executive Committee taken in
accord with the provisions of this Agreement shall control and
bind the Company.
(e) Any Member may replace either or both of its
representatives on the Executive Committee at any time.
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5.3 DECISIONS OF THE EXECUTIVE COMMITTEE. All decisions of the
Executive Committee require the assent of a majority of all then current
Executive Committee members, provided that such majority assent shall include
the assent of at least one representative each of SJE and GZA.
5.4 RIGHT TO RELY ON EXECUTIVE COMMITTEE.
(a) Any Person dealing with the Company may rely (without duty of
further inquiry) upon a certificate signed by any member of the Executive
Committee as to:
(i) the identity of any member of the Executive or
Operating Committees or Member of the Company;
(ii) the existence or nonexistence of any fact or
facts which constitute a condition precedent to acts by the
Executive Committees or which are in any other manner germane
to the affairs of the Company;
(iii) the Persons who are authorized to execute and
deliver any instrument or document of the Company; or
(iv) any act or failure to act by the Company or any
other matter whatsoever involving the Company or any member of
the Executive Committee, or any Member of the Company.
(b) Except as otherwise required by law, the signature of any member of
the Executive Committee shall be sufficient to constitute execution of a
document, on behalf of the Company, which has been properly authorized by action
of the Executive Committee. Notwithstanding Article XIII, the Members agree that
a copy of this Agreement may be shown to appropriate parties in order to confirm
the same. Any member of the Executive Committee shall have the power and
authority to execute on behalf of the Company, the Executive Committee, or the
Members any document to be filed with the Secretary of the State of Delaware
pursuant to the Act.
5.5 DESIGNATION OF OFFICER TITLES. The Members may provide officer
titles for members of the Executive Committee of the Company. The officer titles
may include, but shall not be limited to, a Chairman, a President, one or more
Vice Presidents, a Treasurer, a Secretary and such other officer titles as the
Members decide to appoint.
5.6 FUNCTIONING OF THE EXECUTIVE COMMITTEE
(a) Quorum and Voting. Three of the four members of the
Executive Committee shall constitute a quorum for the conducting of
business. Approval of any matter brought before the Executive Committee
requires the assent of three of the four members of the Executive
Committee. Each member of the Executive Committee shall have one vote
on each matter.
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(b) Chairman. One of the members of the Executive Committee
shall serve as the Chairman of the Executive Committee for a term of
one year. The position of Chairman shall rotate annually between a
representative of SJE and a representative of GZA. The initial Chairman
of the Executive Committee shall be a representative of GZA. The
Chairman shall vote solely in his capacity as a member of the Executive
Committee.
(c) Meetings. Regular meetings of the Executive Committee
shall be held as determined by the Chairman of the Executive Committee,
but at least quarterly. Members of the Executive Committee may
participate in a meeting of the Executive Committee by a means of a
conference telephone or similar communications equipment whereby all
persons participating in the meeting can hear each other and be heard
sufficiently to permit contemporaneous exchange and debate.
Participation in a meeting in this manner shall constitute presence in
person at the meeting.
(d) Notice, Waiver, and Minutes. All members of the Executive
Committee shall receive a notice of each regular meeting of the
Executive Committee together with a copy of the proposed agenda for
such meeting at least five days prior to a scheduled regular meeting
date. The Chairman or any two members of the Executive Committee may,
upon two day's notice (such notice to include a proposed agenda) to the
other members of the Executive Committee, call a special meeting of the
Executive Committee at any time. Attendance at any meeting of the
Executive Committee (either in person or by means of conference
telephone or similar communications equipment) shall constitute waiver
of notice thereof. The Executive Committee shall cause minutes of its
meetings to be kept which shall be open for inspection by any Member at
any time.
(e) Alternate Representatives. Each member of the Executive
Committee shall be entitled to appoint (and to change) an alternate
representative to attend meetings of the Executive Committee in such
member's place. A member of the Executive Committee may appoint as an
alternate, only a representative of the same Member. An alternate may
not be a member of the Executive Committee in his own right. Alternate
representatives shall be appointed or changed by the appointer serving
notice to the effect upon SJE and GZA. An alternate representative
shall not be entitled to vote in his capacity as such at any meeting at
which his appointer is present.
(f) Action Without Meeting. Any action which may be taken by
the Executive Committee at a meeting thereof may be taken without a
meeting by the unanimous written consent of all members of the
Executive Committee.
ARTICLE VI SUPPORT BY MEMBERS.
6.1 SUPPORT SERVICES AGREEMENTS. With the execution of this Agreement,
each of SJE and GZA intend to execute support services agreements in
substantially similar form to those which are attached as Appendices A and B.
Such agreements will provide for the rendition
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of services to the Company on the terms stated therein. Each such agreement is
referred to as a "Support Services Agreement."
6.2 REIMBURSEMENTS TO COMMITTEE MEMBERS. Subject to limits established
in the Company's budget, reasonable travel expenses of the Executive Committee
members shall be reimbursed by the Company.
6.3 STATEMENTS TO MEMBERS FOR SERVICES RENDERED. After a period of two
years from the date a statement for services rendered under an Support Services
Agreement or for a sale of Assets is delivered to the Company, neither the
Company nor the other Member may contest the amount or validity of such
statement.
6.4 MEMBERS ACTING AS AGENT. With the prior, specific, written
authorization of the Executive Committee in each case, a Member may from time to
time in its own name but as agent for and on behalf of the Company enter into
transactions for the acquisition or disposition of Assets. Any Member which acts
as an agent of the Company pursuant to this Section 6.6 shall have the benefit
of the guarantee set forth in Section 7.3.
ARTICLE VII LIABILITIES, LIMITATION OF LIABILITIES AND INDEMNIFICATION.
7.1 LIMITATION OF LIABILITY of Members, and Executive Committee members
and Limitation of Duty Owed by Members, and Executive Committee members. It is
specifically understood and agreed that:
(a) a Member or Executive Committee member shall not be
required to devote full time to Company business;
(b) except as expressly otherwise provided herein to the
contrary regarding Transaction Opportunities, in no event shall any
doctrine similar to the doctrine of corporate opportunity apply with
regard to the actions or activities of any Member, or Executive
Committee member;
(c) in no event shall any doctrine or duty similar to the duty
of loyalty owed by corporate directors be owed by any Member or
Executive Committee member;
(d) except as expressly otherwise provided herein to the
contrary, each Member and Executive Committee member shall be free to
conduct any business or activity whatsoever, without obligation to the
Company or any other Member.
(e) except as otherwise provided by the LLC Law, the debts,
obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company
solely by reason of being a Covered Person.
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(f) except as otherwise required by law, a Member, in its
capacity as Member, shall have no liability in excess of (i) the amount
of its Capital Contributions, (ii) its share of any assets and
undistributed Profits of the Company, (iii) its obligation to make
other payments expressly provided for in this Operating Agreement, and
(iv) the amount of any distributions wrongfully distributed to it.
7.2 ACTIONS BEYOND SCOPE OF AGREEMENT. Any Member who binds or
obligates the Company for any debt or liability or causes the Company to act
except in accordance with the provisions of this Agreement shall be liable to
the Company for any such debt, liability or act.
7.3 INDEMNIFICATION.
(a) To the fullest extent permitted by law, a Member (herein the
"Indemnifying Member") shall INDEMNIFY and DEFEND the Company and the other
Member and HOLD them HARMLESS from and against all claims, losses, costs,
liabilities, damages and expenses (including, without limitation, costs of suit
or proceeding and attorneys' fees) they may incur by virtue of claims by third
parties arising out of any action of the Indemnifying Member that could obligate
or bind the Company for any debt, liability or act except as such may be
incurred in accordance with the provisions of this Agreement. For the avoidance
of doubt, the Members agree that the indemnification provided in the immediately
preceding sentence applies only to claims by third parties.
(b) To the fullest extent permitted by applicable law, a Covered Person
shall be entitled to indemnification from the Company for any loss, damage or
claim incurred by such Covered Person by reason of any act or omission performed
or omitted by such Covered Person in good faith on behalf of the Company and in
a manner reasonably believed to be within the scope of authority conferred on
such Covered Person by this Operating Agreement, except that no Covered Person
shall be entitled to be indemnified in respect of any loss, damage or claim
incurred by such Covered Person by reason of gross negligence or willful
misconduct with respect to such acts or omissions or if a judgment or other
final adjudication adverse to such Covered Person establishes that the Covered
Person's acts or omissions were in bad faith or involved intentional misconduct
or a knowing violation of law or that the Covered Person personally gained in
fact a financial profit or other advantage to which the Covered Person is not
entitled; provided, however, that any indemnity pursuant to this Section shall
be provided out of and to the extent of Company assets only, and no Covered
Person shall have any personal liability on account thereof.
(c) The Company may purchase and maintain insurance, to the extent and
in such amounts as the Executive Committee shall, in its sole discretion, deem
reasonable, on behalf of such of the Covered Persons and other Persons as the
Executive Committee shall determine, against any liability that may be asserted
against or expenses that may be incurred by any such Person in connection with
the activities of the Company or such indemnities, regardless of whether the
Company would have the power to indemnify such Person against such liability
under the provisions of this Operating Agreement. The Company may, with the
approval of the Executive Committee, enter into indemnity contracts with Covered
Persons and adopt written
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procedures pursuant to which arrangements are made for the advancement of
expenses and the funding of obligations under Section 7.3 hereof and containing
such other procedures regarding indemnification as are appropriate.
(d) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Company prior to the final disposition of such claim, demand, action suit or
proceeding upon receipt by the Company of an undertaking by or on behalf of the
Covered Person to repay such amount if it shall be determined that the Covered
Person is not entitled to be indemnified as authorized in Section 7.3 hereof.
ARTICLE VIII NO TRANSFER OF INTERESTS.
Except pursuant to a corporate reorganization of one of the Members, no
Member shall transfer, encumber, mortgage, pledge, or create a security interest
in all or any part of its Percentage Interest in the Company unless approved by
all the Members. Any purported Transfer of a Percentage Interest shall be null
and void and of no effect.
ARTICLE IX DISSOLUTION AND TERMINATION.
9.1 EVENTS OF DISSOLUTION. Each of the following shall each be an
"Event of Dissolution":
(a) a unanimous decision by the Executive Committee to
dissolve the Company;
(b) the expiration of the term of the Company stated in
Section 2.2;
(c) June 1, 2002 and each June 1 thereafter, if at least six
months prior to any such date, either Member has given written notice
to the other that it elects to dissolve the Company;
(d) the giving of written notice of dissolution by either
Member to the other Member after any breach of Article XIII
(Non-Disclosure) by the other Member;
(e) a material breach of this Agreement (other than a breach
of Article XIII) or of any Support Services Agreement by a Member and
the continuation of such breach for 30 days after the other Member has
given written notice of such breach and of its election to dissolve to
the breaching Member;
(f) the expulsion, bankruptcy (which shall mean being the
subject of an order for relief under Title 11 of the United States
Code), or dissolution of a Member, or occurrence of any other event
that terminates the continued membership of a Member in the Company;
(g) a Change of Control of a Member, at the written election
of either
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Member to dissolve where:
(i) for purposes of this Section 9.1 a "Change of
Control" means:
(A) the acquisition, directly or indirectly,
of 25% or more of the voting securities of a
Member by any Person other than a Person who
owns, directly or indirectly, 25% or more of
such securities on the Effective Date, or
(B) the ability to elect a majority of the
directors of a Member by any Person other
than a Person who possesses such ability on
the Effective Date; and
(ii) notwithstanding Section 9.1(g)(i) above, a
public offering or distribution to existing shareholders of the
securities of a Member or its Affiliates or a management buyout of all
the shares of the securities of a Member shall not be deemed an Event
of Dissolution;
(h) as otherwise required by the Act, including but not limited to the
entry of a decree of judicial dissolution pursuant to the Act;
9.2 EFFECT OF DISSOLUTION.
(a) Upon the occurrence of an Event of Dissolution set forth in Section
9.1, the Executive Committee shall commence dissolution of the Company which
shall continue solely for the purpose of winding up its affairs in an orderly
manner, disposing of its Assets in a commercially reasonable manner consistent
with obtaining the fair market value thereof, and satisfying the claims of its
creditors and Members.
(b) After the occurrence of an Event of Dissolution, the obligations of
each Member to offer Transaction Opportunities to the Company shall be
terminated. The Executive Committee shall cause the Company's Assets, with the
exception of the intellectual property rights to the real-time automated air
monitoring system for which a patent is pending as identified in Section 3.4, to
be disposed of as promptly as is consistent with obtaining the fair market value
thereof (or limiting loss incurred with respect thereto). The intellectual
property rights of the real-time automated air monitoring system shall first be
offered to the Members at a price which is mutually agreeable to all the
Members. If none of the Members is interested in purchasing the intellectual
property rights to the aforementioned system, then those rights shall be
disposed of as is consistent with obtaining the fair market value thereof.
(c) The Executive Committee shall be responsible for overseeing the
winding up and dissolution of the Company, shall take full account of the
Company's liabilities
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and property, and shall cause the proceeds from the liquidation of the Company's
property, to the extent sufficient therefore, to be applied and distributed in
the following order:
(i) first, to the payment and discharge of all the
Company's debts and liabilities to creditors other than
Members or their Affiliates;
(ii) second, to the payment and discharge of all of
the Company's debts and liabilities to Members and their
Affiliates; and
(iii) third, to the Members pro rata in accordance
with their positive capital account balances, after giving
effect to all contributions, distributions, and allocations
for all periods.
No Member shall receive any additional compensation for any services performed
pursuant to this Section 9.2. Each Member understands and agrees that by
accepting the provisions of this Section 9.2 setting forth the priority of the
distribution of the assets of the Company to be made upon its liquidation, such
Member expressly waives any right which it, as a creditor of the Company, might
otherwise have under the Act to receive distributions of assets of the Company
in satisfaction of any liability of the Company, and hereby subordinates to said
creditors any such right.
(d) after an Event of Dissolution, no Member or member of the Executive
Committee shall take any action that is inconsistent with, or not appropriate
for, winding up the Company's business and affairs.
(e) To the extent not inconsistent with the foregoing, all covenants
and obligations in this Agreement shall continue in full force and effect until
such time as the Company Assets have been disposed of or distributed and the
Company's risk management contracts satisfied or terminated. When that has
occurred, the Members shall have no further obligations under this Agreement
except under Sections 13.2, 13.3 and 13.4, which shall survive dissolution and
winding up of the Company.
9.3 FILING OF ARTICLES OF CANCELLATION. Upon the completion of the
disposition of the Assets pursuant to Section 9.2, the Executive Committee shall
(or, on the failure of the Executive Committee to act, either Member may)
promptly file a Certificate of Cancellation with the office of the Delaware
Secretary of State.
9.4 RESERVE. Notwithstanding the provisions of Section 9.2, the
Executive Committee may retain such funds as it deems necessary as a reserve for
any contingent liabilities or obligations of the Company, which reserve, after
the passage of a reasonable period of time, shall be distributed pursuant to
Section 9.2(c).
ARTICLE X ACCOUNTING AND BANK ACCOUNTS.
10.1 ACCOUNTING METHOD. The books of the Company shall be kept using
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accrual accounting in accordance with generally accepted accounting principles.
10.2 BOOKS AND RECORDS The books and records of the Company shall be
maintained at the office of the Member which provides bookkeeping services under
its respective Support Services Agreement. Books and records shall be maintained
for the longer of two years or any period required by applicable statute or
regulation. In any event, the other Member, at its expense, shall have the right
during ordinary business hours and upon reasonable notice to inspect and copy
such books and records.
10.3 FINANCIAL REPORTS.
(a) The Company shall cause to be prepared and delivered to each
Member, financial statements of the Company in such detail and with such
frequency as either Member may reasonably request, together with all information
with respect to the Company necessary for the preparation of the Members'
federal, state, and local income tax returns.
(b) At either Member's request, the annual financials may be audited at
the expense of the Company.
10.4 TAX RETURNS AND ELECTIONS. The Company shall cause to be prepared
and timely filed all federal, state and local income tax returns or other
returns or statements required by applicable law. The Company shall claim all
deductions and make such elections for federal or state income tax purposes
which the Executive Committee reasonably believes will produce the most
favorable tax results for the Members.
10.5 BANK ACCOUNTS. All funds of the Company shall be deposited in a
separate bank, money market or similar account or accounts approved by the
Executive Committee and in the name of the Company. Withdrawals therefrom shall
be made only by Persons, and for purposes, authorized by the Executive
Committee.
ARTICLE XI REPRESENTATIONS AND WARRANTIES OF SJE.
SJE represents, warrants and covenants to GZA as follows:
11.1 ORGANIZATION, QUALIFICATION. SJE is a corporation duly organized
and validly existing under the laws of the State of New Jersey. SJE has all
requisite power and authority to carry on its business as and where presently
being conducted.
11.2 AUTHORIZATION AND ENFORCEABILITY. SJE has the full corporate power
and authority to make, execute, deliver and perform this Agreement, and the
execution, delivery and performance of this Agreement by SJE has been duly
authorized by all necessary corporate action, including, if necessary,
shareholder approval. This Agreement has been duly executed and delivered by SJE
and this Agreement constitutes, when executed, the legal, valid and binding
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obligation of SJE enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws relating to creditors' rights generally.
11.3 NO VIOLATION OF LAWS OR AGREEMENTS. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement and the compliance with the terms, conditions and provisions
of this Agreement by SJE will not, conflict with or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a material benefit under, or result in the creation of any lien upon
any of the business, assets or properties of SJE under, any provision of (A) its
Articles of Incorporation, Bylaws or other corporate documents, or (B) any note,
bond, mortgage, indenture, license, lease, contract, commitment, agreement or
arrangement to which SJE is a party, or (C) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to SJE or the business
assets or properties of SJE.
11.4 CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or authority, is required to be obtained or made, by or with respect
to, SJE in connection with the execution and delivery of this Agreement or the
consummation by SJE of the transactions contemplated hereby.
ARTICLE XII REPRESENTATIONS AND WARRANTIES OF GZA.
GZA represents, warrants and covenants to SJE as follows:
12.1 ORGANIZATION, QUALIFICATION. GZA is a corporation duly organized
and validly existing under the laws of the Commonwealth of Massachusetts. GZA
has all requisite power and authority to carry on its business as and where
presently being conducted.
12.2 AUTHORIZATION AND ENFORCEABILITY. GZA has the full corporate power
and authority to make, execute, deliver and perform this Agreement, and the
execution, delivery and performance of this Agreement by GZA has been duly
authorized by all necessary corporate action, including, if necessary,
shareholder approval. This Agreement has been duly executed and delivered by GZA
and this Agreement constitutes, when executed, the legal, valid and binding
obligation of GZA enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws relating to creditors' rights generally.
12.3 NO VIOLATION OF LAWS OR AGREEMENTS. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement and the compliance with the terms, conditions and provisions
of this Agreement by GZA will not, conflict with or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
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or loss of a material benefit under, or result in the creation of any lien upon
any of the business, assets or properties of GZA under, any provision of (A) its
Articles of Incorporation, Bylaws or other corporate documents, or (B) any note,
bond, mortgage, indenture, license, lease, contract, commitment, agreement or
arrangement to which GZA is a party, or (C) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to GZA or the business,
assets or properties of GZA.
12.4 CONSENTS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or authority, is required to be obtained or made, by or with respect
to, GZA in connection with the execution and delivery of this Agreement or the
consummation by GZA of the transactions contemplated hereby.
ARTICLE XIII NON-DISCLOSURE.
13.1 COMPANY-INFORMATION. From the date of this Agreement, each Member
hereby agrees to use only on behalf of the Company and not otherwise disclose
information regarding the business and finances of the Company until the later
of the dissolution of the Company or the extinguishment of both Members'
obligations under Section 9.2, except that a Member may disclose such
confidential information of the Company at any time to:
(a) a regulatory or judicial authority when given under
appropriate confidentiality arrangements; and
(b) Affiliates of either Member except those Affiliates which
from time to time compete with the Company.
After the later of dissolution of the Company or the extinguishment of both
Members' obligations under Section 9.2, no restrictions on disclosure or use of
such Company information shall continue.
13.2 MEMBER INFORMATION. From the date of this Agreement, each Member
hereby agrees to keep confidential all information regarding the business and
finances of the other Member, except that a Member may disclose confidential
information about the Company at any time to a regulatory or judicial authority
when given under appropriate confidentiality arrangements.
13.3 GENERALLY AVAILABLE INFORMATION. Notwithstanding Sections 13.1 and
13.2, the obligation of non-disclosure shall not apply to any information
relating to the business and finances of the Company which is or becomes
generally available to the public through no fault of any Person owing an
obligation of non-disclosure or confidentiality to the Company.
13.4 BREACH AND RECOURSE. Each Member hereby acknowledges and agrees
that a breach of this covenant of non-disclosure may cause immediate and
irreparable injury to the
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Company and its Members and will authorize recourse by the Company and Members
to injunction and/or specific performance, as well as all other available legal
or equitable remedies.
ARTICLE XIV ARBITRATION.
14.1 RESOLUTION OF DISPUTES BY ARBITRATION AND SELECTION OF
ARBITRATORS. Any and all good faith differences and disputes of whatsoever
nature arising out of this Agreement shall be resolved and finally settled by
binding arbitration. The Members shall each appoint one arbitrator, and the two
arbitrators so appointed will select a third arbitrator, all of such arbitrators
to be qualified by education, knowledge, and experience to resolve the
difference or dispute.
14.2 JURISDICTION OF ARBITRATORS AND RULES APPLIED TO ARBITRATION. The
jurisdiction of the arbitrators will be limited to the issue(s) referred to
arbitration, and the arbitration shall be conducted pursuant to the rules of the
American Arbitration Association and the substantive laws of Delaware; provided,
however, that should there be any conflict between such guidelines and the
procedures set forth in this Agreement, the terms of this Agreement shall
control.
14.3 INDIVIDUAL ISSUE RESOLUTION AND DISCOVERY. Within 15 days
following selection of the third arbitrator, each Member shall furnish the
arbitrators in writing its position regarding the issue being arbitrated. In the
event multiple issues are in dispute, each Member shall submit its position
regarding each issue and the arbitrators shall resolve each issue individually
unless the Members otherwise agree. The arbitrators may, if they deem necessary
or desirable, convene a hearing regarding the issue(s) being arbitrated.
Discovery shall be permitted by the arbitrators to the extent that, though
requested by a Member, witnesses do not agree to appear or do not appear at the
arbitration or documents are not produced at least 20 days before the
arbitration. Within 30 days following the later of the appointment of the third
arbitrator or of the hearing, if one is held, the arbitrators shall notify the
Members in writing as to which position of the two Members on each issue is most
consistent with the applicable provision(s) of this Agreement, if any, which are
relevant to the dispute. Such decision shall be binding on the Members hereto
until and unless changed in accordance with the provisions of this Agreement.
14.4 ENFORCEMENT of the award may be entered in any court having
jurisdiction over the Members.
14.5 EXPENSES. Each Member will pay the expenses of the arbitrator
selected by or for it, and its counsel, witnesses and employees and the
presentation of its case. All other costs of arbitration will be divided equally
between the Members.
14.6 INJUNCTION AND SPECIFIC PERFORMANCE. Notwithstanding anything to
the contrary contained in Sections 14.1 through 14.5, in the event interim
judicial relief (including, without limitation, that referred to in Section
13.4) is necessary prior to rendition of any arbitral award in order to avoid
irreparable injury to either Member, then such Member may seek interim measures
of protection, including without limitation orders of injunction, specific
performance or other equitable relief, from any court of competent jurisdiction.
The provisions of this Section 14.6 shall not be deemed to preclude the awards.
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ARTICLE XVI MISCELLANEOUS PROVISIONS.
15.1 NOTICES. Any notice, demand or communication required or permitted
to be given by any provision of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally to the
party or to an executive officer of the party to whom the same is directed or if
sent by registered or certified mail, postage and charges prepaid, return
receipt requested, or by overnight courier of national reputation or transmitted
by telecopy with evidence of the telephone number to which sent, in each case
addressed to the Member's and/or Company's address or telecopier number, as
appropriate, which is set forth in the books and records of the Company. Any
such notice shall be deemed to be given as of the date so delivered or
telecopied if delivered or telecopied during regular business hours, as of the
next business day if delivered by overnight courier or delivered or telecopied
after regular business hours, and if sent by mail, three business days after the
date on which the same was deposited in a regularly maintained receptacle for
the deposit of United States mail, addressed and sent as aforesaid.
15.2 GOVERNING LAW. This Agreement and all questions with respect to
its construction, enforcement or interpretation, the rights and obligations of
the parties hereto, or the formation, administration, or termination of the
Company shall be governed by the Act and other applicable laws of the State of
Delaware without regard to Delaware's conflict of law rules.
15.3 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such documents or instruments as may be necessary to comply with
applicable laws, rules, or regulations.
15.4 CONSTRUCTION. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural
and vice versa, and the neuter gender shall include the masculine and feminine
genders and vice versa.
15.5 HEADINGS. The headings in this Agreement are for convenience only
and are in no way intended to describe, interpret, define, or limit the scope,
extent, or intent of this Agreement or any of its provisions.
15.6 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not constitute a waiver of any subsequent violation or of the
right to so insist.
15.7 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Agreement are cumulative, and also are provided in addition to any other
rights the parties may have by law, statute, ordinance, or otherwise.
15.8 SEVERABILITY. Any provision of this Agreement that is invalid,
illegal, or unenforceable in any jurisdiction shall be ineffective only in such
jurisdiction and only to the extent of such invalidity, illegality, or
unenforceability, and without rendering ineffective the remaining provisions of
the Agreement in any jurisdiction.
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15.9 SUCCESSORS AND ASSIGNS. The rights, duties and obligations of a
Member under this Agreement may not be assigned without the prior written
consent of the other Member which may be given or withheld in its sole
discretion. To the extent that such consent is given, each and all of the
covenants, terms, provisions, and agreements contained in this Agreement shall
be binding upon and inure to the benefit their successors in interest.
15.10 NO THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement shall be construed to be for the benefit of or enforceable by any
Person other than the parties hereto and, to the extent permitted by this
Agreement, their successors in interest.
15.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.
15.12 FACSIMILE SIGNATURES. The Members agree that a facsimile
signature will serve as an original, and that the Statute of Frauds will be
waived as to any claim associated with transmittal or acceptance of the
facsimile signature.
15.13 ENTIRE AGREEMENT. This Agreement, including any exhibits, is the
entire agreement between the parties regarding the subject matter of the
formation and operation of the limited liability company. It supersedes any
other representations or agreements, whether oral or written and specifically
supersedes and nullifies the January 21, 1999 Letter of Intent as it pertains to
the formation of the limited liability company between the parties. The
contractual documents that underlie the transactions regarding automated air
monitoring services provided to customers prior to formation of the limited
liability company are to be given full force and effect and are not affected by
the formation of the limited liability company. This paragraph is not intended
to supersede or nullify those documents.
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<PAGE> 32
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective the date first noted above.
SOUTH JERSEY ENERGY COMPANY
BY:
--------------------------------
TITLE:
-----------------------------
DATE OF EXECUTION:
GZA GEOENVIRONMENTAL INC.
BY:
--------------------------------
TITLE:
-----------------------------
DATE OF EXECUTION:
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<PAGE> 33
Exhibit A
SUPPORT SERVICES AGREEMENT
BETWEEN
SOUTH JERSEY ENERGY COMPANY
AND
AIRLOGICS, L.L.C.
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<PAGE> 34
SUPPORT SERVICES AGREEMENT
This Agreement is made as of April 1, 2000 by and between SOUTH JERSEY
ENERGY COMPANY, a New Jersey corporation with its principal place of business at
One South Jersey Plaza, Route 54, Folsom, NJ 08037 ("SJE"), and AIRLOGICS,
L.L.C., a Delaware Limited Liability Company with its principal place of
business at 1 South Jersey Plaza, Folsom, NJ 08037 ("AIRLOGIC").
WHEREAS, SJE is willing to provide support services to AIRLOGICS; and
WHEREAS, AIRLOGICS requires support services and desires to use and
purchase such services from SJE; and
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I - GENERAL SCOPE OF SERVICES
1. SJE shall provide, as needed, support services to AIRLOGICS,
enumerated in Exhibit A, attached hereto and made a part hereof, subject to the
applicable provisions of this Agreement; provided, however, that SJE and
AIRLOGICS shall not be responsible for policy or management decisions of the
other, such functions being reserved exclusively for each party to this
Agreement, respectively.
2. SJE shall provide support services using personnel from within its
own organization. In addition, SJE may use persons from outside its organization
with the other party's approval, such approval not to be unreasonably withheld.
ARTICLE II - PAYMENT FOR SERVICES
1. All of the support services rendered under this Agreement shall be
charged to the other in accordance with the fee schedule identified in Exhibit
B. Support services that benefit both SJE and AIRLOGICS shall be fairly and
equitably allocated between the parties. The methods of determining the costs
and the allocation may be modified or changed by either party with the prior
written approval of the other party. If either party objects, in writing, to the
proposed changes or modifications, the parties agree to make a good faith effort
to renegotiate the terms and conditions of Exhibit B. If no agreement can be
reached within sixty (60) days of the proposal to modify Exhibit B, the proposed
modifications will not take effect and either party may terminate this Agreement
as provided herein.
2. SJE shall submit itemized invoices for services rendered,
including, when requested or required by AIRLOGICS, all sales, use, excise, or
similar taxes that may be applicable to such services, as soon as practicable
after the close of each month. All invoices submitted by SJE shall have adequate
documentation to justify all labor and material costs. AIRLOGICS shall pay such
invoice within thirty days after receipt, to the extent the costs are not
disputed. Such disputes must be raised within eighteen (18) months after receipt
of the invoice with the disputed
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cost. Simple annual interest at the prime rate then in effect at Bank Boston,
plus 1.5%, shall accrue on any undisputed invoice items not paid within thirty
days after receipt by the other, interest computed from the 31st day following
the date of receipt.
3. Upon the written request of AIRLOGICS, SJE shall permit AIRLOGICS
reasonable access to its books and records for the purpose of auditing charges
billed by SJE.
ARTICLE III - TERM OF CONTRACT
This Agreement shall commence on the date first written above and
continue until terminated by either party by at least two (2) months prior
written notice to the other.
ARTICLE IV - CHANGES
No waiver, alteration, amendment, consent, or modification of any of
the provisions of this Agreement shall be binding unless in writing and signed
by a duly authorized representative of both parties.
ARTICLE V - ASSIGNMENT
Neither SJE nor AIRLOGICS may assign any of its rights or obligations
hereunder, except with the prior written consent of the other; provided,
however, SJE shall be entitled to use affiliates, as its agent, to provide
services hereunder.
ARTICLE VI - FORCE MAJEURE
Force Majeure means an event that is beyond the reasonable control
of, and without the fault or negligence of, the party claiming Force Majeure,
which delays, hinders, or prevents performance of that party's obligations under
this Agreement. SJE or AIRLOGICS shall not be liable to the other for loss or
damage resulting from (1) any delay in performance, in whole or in part, or (2)
nonperformance of its contractual obligations, in whole or in part, insofar as
such delay or nonperformance is caused by Force Majeure, provided that the party
invoking Force Majeure provides written notice to the other party of the
circumstances giving rise to such delay or nonperformance within a reasonable
time after learning of such circumstances and, to the extent possible, takes
reasonable steps to correct or alleviate the circumstances that led to the Force
Majeure event.
ARTICLE VII - INSURANCE AND INDEMNIFICATION
1. SJE may, with respect to the services performed under this
Agreement, self-insure or obtain insurance coverage with respect to its
facilities and shall maintain the following coverage, naming the other party to
this Agreement as an additional insured, as applicable:
a) Workers' Compensation Insurance that complies with
the provisions of applicable law.
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<PAGE> 36
b) Employer's Liability Insurance with limits not less
than $1,000,000 each occurrence;
c) General Liability Insurance with limits not less than
$2,000,000 combined bodily injury and property damage
liability;
d) Automobile Liability Insurance with limits not less
than $1,000,000 combined bodily injury and property
damage.
e) Professional Liability Insurance with limits not less
than $3,000,000 per claim and annual aggregate
including coverage for damages resulting from a
release of pollutants
2. SJE shall defend (at the other's option), indemnify, and hold
harmless AirLogics, its directors, officers, employees, contractors, agents,
successors, and assigns from and against, any actions, penalties, claims, costs
(including, but not limited to, reasonable attorney's fees), or damages of any
nature caused in whole or in part by any act or omission of SJE related to the
services performed by SJE pursuant to this Agreement and resulting in personal
injury or property damage.
3. SJE shall defend (at the other's option), indemnify, and hold
harmless AirLogics, its directors, officers, employees, contractors, agents,
successors, and assigns from and against, any actions, penalties, claims, costs
(including, but not limited to, reasonable attorney's fees), or damages of any
nature caused by SJE's negligent professional acts, errors and omissions. SJE
shall in no case be required to pay an amount disproportionate to SJE's
negligence, nor shall SJE be required to pay any amount or sum levied against
AirLogics to recognize more than actual and/or reasonable damages.
4. SJE shall name AirLogics as an "Additional Insured" on its General
Liability and Automobile Liability Insurance policies. Certified copies of said
policies or certificates evidencing such insurance shall be filed with
AirLogics.
ARTICLE VIII - GENERAL LIMITATIONS OF LIABILITY AND WAIVER
1. SJE shall provide well-qualified and experienced staff to perform
services covered by this Agreement. Names and backgrounds of said personnel
shall be provided to AIRLOGICS on request.
2. Services provided by SJE hereunder shall be performed in a
prudent, professional, and workmanlike manner. If any such services provided by
SJE fail to conform to this standard, AIRLOGICS shall, at its option, have the
right to correct or re-perform such services, the cost of which shall be
deducted from the monies owed to SJE.
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3. Except for the obligation in (2) above to correct or re-perform
services, SJE shall not be liable for any reason to the other for claims for
incidental, indirect, consequential, or other damages of any nature connected
with or resulting from the performance or non-performance of this Agreement by
SJE or AIRLOGICS, whether or not due to negligence by SJE or AIRLOGICS.
4. Except for the obligation imposed upon it for the payment of
support services pursuant to Article III, neither party shall be liable to the
other for claims for direct, incidental, indirect, consequential, or other
damages of any nature connected with or resulting from performance or
non-performance of this Agreement by SJE or AIRLOGICS, whether or not due to
negligence by SJE or AIRLOGICS.
5. EXCEPT AS MAY BE PROVIDED IN PARAGRAPHS 1 AND 2 OF THIS ARTICLE,
NO WARRANTIES OF ANY KIND WHETHER STATUTORY, WRITTEN, ORAL OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, SHALL APPLY TO SERVICES PERFORMED HEREUNDER.
ARTICLE IX - NOTICE
1. All communications and notices by AIRLOGICS to SJE under this
Agreement shall be sent to and addressed as follows:
South Jersey Energy Company
One South Jersey Plaza
Route 54
Folsom, NJ 08037
ATTN: Joseph A. Rodio
2. All communications and notices by SJE to AIRLOGICS under this
Agreement shall be sent to and addressed as follows:
AirLogics, LLC AirLogics, L.L.C.
1 South Jersey Plaza C/O GZA GeoEnvironmental, Inc.
Folsom, NJ 08037 320 Needham Street
ATTN: Edward J. Graham Newton, MA 02446-1594
Attn: M. Joseph Celi
3. Either party may change the address set forth by written notice to
the other.
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ARTICLE X - APPLICABLE LAW
1. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware except that its conflict of law shall not
apply.
2. This Agreement shall be subject to approval by any regulatory body
whose approval is a legal prerequisite to its execution, delivery, or
performance.
3. This Agreement constitutes the entire Agreement between the
parties for the services to be provided hereunder, and supersedes all prior
representations and Agreements, whether written or oral, between the parties as
to such services.
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their duly authorized representatives, to become
effective as of the date first written above.
SOUTH JERSEY ENERGY COMPANY
By: _______________________________
Its: _______________________________
AIRLOGICS, LLC
By: ________________________________
Its: ________________________________
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<PAGE> 40
EXHIBIT A
to
Support Services Agreement
GENERAL DESCRIPTION OF SOUTH JERSEY ENERGY COMPANY
SUPPORT SERVICES
The services available under this Agreement that are to be provided under this
Agreement and are the services normally furnished by AIRLOGICS are as follows:
1. Accounting
2. Administrative Support including billing, collection,
clerical, records management, and legal
3. Tax and insurance services
4. Insurance
5. Technical support
6. Sales, client development & relations, proposal preparation
7. Marketing support
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EXHIBIT B
TO
SUPPORT SERVICES AGREEMENT
DETERMINATION OF COST OF SERVICE AND ALLOCATION THEREOF
SJE shall bill AIRLOGICS for costs incurred on behalf of
performing services as described using the fixed hourly/monthly rates outlined
below. These rates are in effect for the year ending December 31, 2000 and may
be adjusted annually thereafter to reflect inflation and other cost-of-living
increases.
Where services performed by SJE benefit other entities, SJE shall
equitably allocate the costs of such services among the entities benefiting from
such services.
SJE shall maintain records adequate to support the costs to be
charged to AIRLOGICS. These records shall be made available to the other for
audit as requested.
Services in support of equipment fabrication will be separated to
allow capitalization of these costs with the equipment.
SERVICE PROVIDED - FEE
1. Accounting - $71.45 per hour
2. Administrative Support including billing, collection,
clerical, records - $46.16 per hour
3. Tax and insurance services - $84.60 per hour
4. Technical support - $ 130.45 per hour
5. Sales, client development & relations, proposal preparation -
$6,500 plus comm. per month
6. Marketing support - $109.34 per hour
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<PAGE> 42
EXHIBIT B
SUPPORT SERVICES AGREEMENT
BETWEEN
GZA GEOENVIRONMENTAL INC.
AND
AIRLOGICS, L.L.C.
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<PAGE> 43
SUPPORT SERVICES AGREEMENT
This Agreement is made as of April 1, 2000 by and between GZA
GEOENVIRONMENTAL INC., a Massachusetts corporation with its principal place of
business at 320 Needham St., Newton Upper Falls MA 02464 ("GZA"), and AIRLOGICS,
L.L.C., a Delaware Limited Liability Company with its principal place of
business 1 South Jersey Plaza, Folsom, New Jersey 08037 ("AIRLOGIC").
WHEREAS, GZA is willing to provide support services to AIRLOGICS; and
WHEREAS, AIRLOGICS requires support services and desires to use and
purchase such services from GZA; and
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I - GENERAL SCOPE OF SERVICES
1. GZA shall provide, as needed, support services to AIRLOGICS,
enumerated in Exhibit A, attached hereto and made a part hereof, subject to the
applicable provisions of this Agreement; provided, however, that GZA and
AIRLOGICS shall not be responsible for policy or management decisions of the
other, such functions being reserved exclusively for each party to this
Agreement, respectively.
2. GZA shall provide support services using personnel from within its
own organization. In addition, GZA may use persons from outside its organization
with the other party's approval, such approval not to be unreasonably withheld.
ARTICLE II - PAYMENT FOR SERVICES
1. All of the support services rendered under this Agreement shall be
charged to the other in accordance with schedule in Exhibit B. Support services
that benefit both GZA and AIRLOGICS shall be fairly and equitably allocated
between the parties. The methods for determining fees for support services may
be modified or changed by either party with the prior written approval of the
other party. If either party objects, in writing, to the proposed changes or
modifications, the parties agree to make a good faith effort to renegotiate the
terms and conditions of Exhibit B. If no agreement can be reached within sixty
(60) days of the proposal to modify Exhibit B, the proposed modifications will
not take effect and either party may terminate this Agreement as provided
herein.
2. GZA shall submit itemized invoices for services rendered,
including, when requested or required by AIRLOGICS, all sales, use, excise, or
similar taxes that may be applicable to such services, as soon as practicable
after the close of each month. All invoices submitted by GZA shall have adequate
documentation, where applicable, to justify all labor and material costs.
AIRLOGICS shall pay such invoice within thirty days after receipt, to the extent
the costs are not
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<PAGE> 44
disputed. Such disputes must be raised within eighteen (18) months after receipt
of the invoice with the disputed cost. Simple annual interest at the prime rate
then in effect at Bank Boston, plus 1.5%, shall accrue on any undisputed invoice
items not paid within thirty days after receipt by the other, interest computed
from the 31st day following the date of receipt.
3. Upon the written request of AIRLOGICS, GZA shall permit AIRLOGICS
reasonable access to its books and records for the purpose of auditing charges
billed by GZA.
ARTICLE III - TERM OF CONTRACT
This Agreement shall commence on the date first written above and
continue until terminated by either party by at least two (2) months prior
written notice to the other.
ARTICLE IV - CHANGES
No waiver, alteration, amendment, consent, or modification of any
of the provisions of this Agreement shall be binding unless in writing and
signed by a duly authorized representative of both parties.
ARTICLE V - ASSIGNMENT
Neither GZA nor AIRLOGICS may assign any of its rights or
obligations hereunder, except with the prior written consent of the other;
provided, however, GZA shall be entitled to use affiliates, as its agent, to
provide services hereunder.
ARTICLE VI - FORCE MAJEURE
Force Majeure means an event that is beyond the reasonable control
of, and without the fault or negligence of, the party claiming Force Majeure,
which delays, hinders, or prevents performance of that party's obligations under
this Agreement. GZA or AIRLOGICS shall not be liable to the other for loss or
damage resulting from (1) any delay in performance, in whole or in part, or (2)
nonperformance of its contractual obligations, in whole or in part, insofar as
such delay or nonperformance is caused by Force Majeure, provided that the party
invoking Force Majeure provides written notice to the other party of the
circumstances giving rise to such delay or nonperformance within a reasonable
time after learning of such circumstances and, to the extent possible, takes
reasonable steps to correct or alleviate the circumstances that led to the Force
Majeure event.
ARTICLE VII - INSURANCE AND INDEMNIFICATION
1. GZA may, with respect to the services performed under this
Agreement, self-insure or obtain insurance coverage with respect to its
facilities and shall maintain the following coverage, naming the other party to
this Agreement as an additional insured, as applicable:
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<PAGE> 45
a) Workers' Compensation Insurance that complies with the
provisions of applicable law.
b) Employer's Liability Insurance with limits not less than
$1,000,000 each occurrence;
c) General Liability Insurance with limits not less than
$2,000,000 combined bodily injury and property damage
liability; and
d) Automobile Liability Insurance with limits not less than
$1,000,000 combined bodily injury and property damage.
e) Umbrella Liability with limits not less than $5,000,000 per
claim and aggregate
f) Professional Liability Insurance with limits not less than
$3,000,000 per claim and annual aggregate including coverage
for damages resulting from a release of pollutants
2. GZA shall defend (at the other's option), indemnify, and hold
harmless AirLogics, its directors, officers, employees, contractors, agents,
successors, and assigns from and against, any actions, penalties, claims, costs
(including, but not limited to, reasonable attorney's fees), or damages of any
nature caused in whole or in part by any act or omission of GZA related to the
services performed by GZA pursuant to this Agreement and resulting in personal
injury or property damage.
3. GZA shall defend (at the other's option), indemnify, and hold
harmless AirLogics, its directors, officers, employees, contractors, agents,
successors, and assigns from and against, any actions, penalties, claims, costs
(including, but not limited to, reasonable attorney's fees), or damages of any
nature caused by GZA's negligent professional acts, errors and omissions. GZA
shall in no case be required to pay an amount disproportionate to GZA's
negligence, nor shall GZA be required to pay any amount or sum levied against
AirLogics to recognize more than actual and/or reasonable damages.
4. GZA shall name AirLogics as an "Additional Insured" on its General
Liability and Automobile Liability Insurance policies. Certified copies of said
policies or certificates evidencing such insurance shall be filed with
AirLogics.
ARTICLE VIII - GENERAL LIMITATIONS OF LIABILITY AND WAIVER
1. GZA shall provide well-qualified and experienced staff to perform
services covered by this Agreement. Names and backgrounds of said personnel
shall be provided to AIRLOGICS on request.
2. Services provided by GZA hereunder shall be performed in a
prudent, professional, and workmanlike manner. If any such services provided by
GZA fail to conform to this standard,
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<PAGE> 46
AIRLOGICS shall, at its option, have the right to correct or re-perform such
services, the cost of which shall be deducted from the monies owed to GZA.
3. Except for the obligation in (2) above to correct or re-perform
services, GZA shall not be liable for any reason to the other for claims for
incidental, indirect, consequential, or other damages of any nature connected
with or resulting from the performance or non-performance of this Agreement by
GZA or AIRLOGICS, whether or not due to negligence by GZA or AIRLOGICS.
4. Except for the obligation imposed upon it for the payment of
support services pursuant to Article III, neither party shall be liable to the
other for claims for direct, incidental, indirect, consequential, or other
damages of any nature connected with or resulting from performance or
non-performance of this Agreement by GZA or AIRLOGICS, whether or not due to
negligence by GZA or AIRLOGICS.
5. EXCEPT AS MAY BE PROVIDED IN PARAGRAPHS 1 AND 2 OF THIS ARTICLE,
NO WARRANTIES OF ANY KIND WHETHER STATUTORY, WRITTEN, ORAL OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, SHALL APPLY TO SERVICES PERFORMED HEREUNDER.
ARTICLE IX - NOTICE
1. All communications and notices by AIRLOGICS to GZA under this
Agreement shall be sent to and addressed as follows:
GZA Geoenvironmental Technologies, Inc.
320 Needham St.
Newton Upper Falls, MA 02464
Attn.: Joseph Celi
2. All communications and notices by GZA to AIRLOGICS under this
Agreement shall be sent to and addressed as follows:
AIRLOGICS, L.L.C. AIRLOGICS, L.L.C.
1 South Jersey Plaza. C/O GZA GeoEnvironmental, Inc.
Folsom, NJ 08037 320 Needham Street
ATTN: Edward J. Graham Newton, MA 02464-1594
Attn: William R. Beloff
3. Either party may change the address set forth by written notice to
the other.
ARTICLE X - APPLICABLE LAW
-46-
<PAGE> 47
1. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware except that its conflict of law shall not
apply.
2. This Agreement shall be subject to approval by any regulatory body
whose approval is a legal prerequisite to its execution, delivery, or
performance.
3. This Agreement constitutes the entire Agreement between the
parties for the services to be provided hereunder, and supersedes all prior
representations and Agreements, whether written or oral, between the parties as
to such services.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their duly authorized representatives, to become
effective as of the date first written above.
GZA GEOENVIRONMENTAL, INC.
By: ____________________________
Title: ____________________________
AIRLOGICS, LLC
BY: _______________________________
TITLE:______________________________
-47-
<PAGE> 48
EXHIBIT A
to
Support Services Agreement
GENERAL DESCRIPTION OF GZA GEOENVIRONMENTAL TECHNOLOGIES, INC
SUPPORT SERVICES
The services available under this Agreement that are to be provided under this
Agreement and are the services normally furnished by AIRLOGICS are as follows:
- - Patent Application and Support
- - Air Monitoring Equipment Design/Configuration
- - Fabrication Oversight
- - Procurement and Expediting Support
- - Regulatory Support
- - Equipment Mobilization
- - System Start-up and Troubleshooting
- - Operations - Field Technicians, Supervision and Technical Support
- - Engineering, Design and Consulting Services
- - Marketing and Proposal Preparation
- - Data Management and Record Management
- - Client Development and Relations
-48-
<PAGE> 49
EXHIBIT B
TO
SUPPORT SERVICES AGREEMENT
DETERMINATION OF COST OF SERVICE AND ALLOCATION THEREOF
GZA shall bill AIRLOGICS for costs incurred on behalf of
performing services as described using the fixed hourly rates outlined below.
These rates are in effect for the year ending December 31, 2000 and may be
adjusted annually thereafter to reflect inflation and other cost-of-living
increases.
Where services performed by GZA benefit other entities, GZA shall
equitably allocate the costs of such services among the entities benefiting from
such services.
GZA shall maintain records adequate to support the costs to be
charged to AIRLOGICS. These records shall be made available to the other for
audit as requested.
Services in support of equipment fabrication will be separated to
allow capitalization of these costs with the equipment.
<TABLE>
<CAPTION>
<S> <C>
- Principal-in-Charge $105.40
- Technical Project Manager 83.80
- Assistant Project Manager 61.70
- Engineer I 55.70
- Engineer II 36.90
- Engineer Technician, Lead 55.90
- Engineering Field Technician 48.90
- Technician II 36.90
- Administrative Staff 38.20
</TABLE>
GZA shall hire, or assign temporarily, two Technician II personnel for the
AirLogics at a reduced multiplier of 1.7 times raw salary commencing April 1,
2000. Each Technician will be full-time chargeable (minimum of 40 hours/week)
for a period of one year to AirLogics. Costs to hire, train and certify these
new employees will be shared equally by the AirLogics members.
-49-
<PAGE> 1
Exhibit 10.60
THIRD LOAN MODIFICATION AGREEMENT
This Third Loan Modification Agreement ("this Agreement") is made as of
February 25, 2000 by and among Fleet National Bank (the "Bank") (the Bank being
the successor by merger to Fleet National Bank of Massachusetts, said Fleet
National Bank of Massachusetts being formerly known as "Shawmut Bank, N.A."),
GZA GeoEnvironmental Technologies, Inc., a Delaware corporation ("GZA"), GZA
GeoEnvironmental, Inc., a Massachusetts corporation ("GZA Associates"), GZA
Drilling, Inc., a Massachusetts corporation ("GZA Drilling"), GZA Remediation,
Inc., a Massachusetts corporation ("GZA Remediation"), GZA Securities Corp., a
Massachusetts corporation ("GZA Securities"), Delta Geotechnical Services, Inc.,
a Massachusetts corporation ("Delta"), Grover Enterprises, Inc., a Massachusetts
corporation ("Grover") and Goldberg Zoino Associates of New York, P.C. ("GZA New
York") (GZA, GZA Associates, GZA Drilling, GZA Remediation, GZA Securities,
Delta, Grover and GZA New York being hereinafter referred to collectively as the
"Borrowers" and individually as a "Borrower"). For good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrowers and the Bank act and agree as follows:
1. Reference is made to: (i) that certain Revolving Credit and Term Loan
Agreement dated as of February 28, 1994 among Shawmut Bank, N.A. and the
Borrowers, as amended (as so amended, the "Loan Agreement"), the Bank having
succeeded by merger to the rights of Shawmut Bank, N.A. thereunder; (ii) that
certain $5,500,000 face principal amount promissory note dated August 7, 1997,
as amended (as so amended, the "1997 Line of Credit Note") made by the Borrowers
and payable to the order of the Bank; (iii) those promissory notes
(collectively, the "Term Notes") made by GZA (or, in certain cases, GZA and
another Borrower) which have heretofore been issued and may hereafter be issued
pursuant to Section 1.02(B) of the Loan Agreement (the Borrowers hereby
representing and agreeing that the obligations of those Borrowers named in each
such Term Note are joint and several); (iv) those certain guaranties
(collectively, the "Guaranties") executed and delivered in favor of Shawmut
Bank, N.A. by each of the Borrowers pursuant to clause (iii) of Section 3.01(b)
of the Loan Agreement, the Bank having succeeded by merger to the rights of
Shawmut Bank, N.A. thereunder; and (v) that certain $5,500,000 face principal
amount promissory note of even date herewith (the "2000 Line of Credit Note")
made by the Borrowers and payable to the order of the Bank. The Loan Agreement,
the 2000 Line of Credit Note, the Term Notes and the Guaranties are hereinafter
collectively referred to as the "Financing Documents". As used herein, "1997
Modification" refers to the Second Loan Modification Agreement dated as of
August 7, 1997 by and among the Bank and the Borrowers.
2. The Loan Agreement is hereby amended:
a. By deleting from Section 1.01(C) of the Loan Agreement the words
"`Expiration Date' means July 31, 1999" (such words having been inserted by the
1997 Modification) and by substituting in their stead the following:
"`Expiration Date' means August 31, 2000"
<PAGE> 2
b. By deleting from Section 1.01(D) of the Loan Agreement the words
"`Maturity Date' means July 31, 2004" (such words having been inserted by the
1997 Modification) and by substituting in their stead the following:
"`Maturity Date' means August 31, 2005"
c. By deleting from Section 1.03(a) of the Loan Agreement (such Section
having been inserted by the 1997 Modification) the definition of "Prime Rate"
contained therein and by substituting in its stead the following:
"`Prime Rate' - That variable rate of interest per annum designated by
the Lender from time to time as its `prime rate', it being understood
that such rate is merely a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer."
d. By inserting into Section 1.03(d) of the Loan Agreement (such Section
having been inserted by the 1997 Modification), immediately after the seventh
sentence thereof, the following:
"Notwithstanding the foregoing, after the occurrence and during the
continuance of any Event of Default, interest will, at the option of
the Lender, accrue and be payable on each Loan at a rate per annum
which at all times shall be equal to the sum of (i) four (4%) percent
per annum PLUS (ii) the per annum rate otherwise applicable to such
Loan (but in no event in excess of the maximum rate permitted by then
applicable law)."
e. By changing the Bank's notice address, pursuant to Section 7.06 of the
Loan Agreement, to the following:
"Fleet National Bank
100 Federal Street
Mail Code: MA BOS 01-07-06
Boston, MA 02110
Attention: Thomas F. Brennan, Vice President"
f. By deleting in its entirety Exhibit A to the Loan Agreement and by
substituting in its stead Exhibit A in the form attached hereto.
g. By deleting in its entirety Exhibit B to the Loan Agreement and by
substituting in its stead Exhibit B in the form attached hereto. Said Exhibit B
in the form attached hereto will be used for all future Term Loans.
-2-
<PAGE> 3
3. Whenever in any Financing Document, or in any borrowing request,
certificate or opinion to be delivered in connection therewith, reference is
made to a "Loan Agreement" (or, in the case of a request for a Term Loan, to the
"Agreement"), from and after the date hereof same will be deemed to refer to the
Loan Agreement, as hereby amended. The 2000 Line of Credit Note is being issued
this day in replacement of the 1997 Line of Credit Note. Whenever in any
Financing Document, or in any borrowing request, certificate or opinion to be
delivered in connection therewith, reference is made to a "Line of Credit Note",
"Unsecured Revolving Credit Note" or "Unsecured Line of Credit Note", from and
after the date hereof same will be deemed to refer to the 2000 Line of Credit
Note.
4. In order to induce the Bank to enter into this Agreement, the
Borrowers further jointly and severally represent and warrant to the Bank as
follows:
a. The execution, delivery and performance of this Agreement, the 2000
Line of Credit Note and each Term Note to be delivered hereafter have been duly
authorized by each Borrower by all necessary corporate and other action, will
not require the consent of any third party and will not conflict with, violate
the provisions of, or cause a default or constitute an event which, with the
passage of time or the giving of notice or both, could cause a default on the
part of any Borrower under its charter documents or by-laws or under any
contract, agreement, law, rule, order, ordinance, franchise, instrument or other
document, or result in the imposition of any lien or encumbrance on any property
or assets of any Borrower.
b. Each Borrower has duly executed each of this Agreement and the 2000
Line of Credit Note and has delivered same to the Bank.
c. Each of this Agreement and the 2000 Line of Credit Note is the legal,
valid and binding obligation of the Borrowers, enforceable jointly and severally
against each of the Borrowers in accordance with its respective terms. Each Term
Note will (when issued) be the legal, valid and binding obligation of the
Borrower or Borrowers named therein, enforceable against each of them in
accordance with its terms.
d. The representations and warranties made in the Loan Agreement continue
to be correct as of the date hereof, except as supplemented and/or modified on
the attached Supplemental Disclosure Schedule.
e. The covenants and agreements of the Borrowers contained in the Loan
Agreement (as amended hereby) have been compiled with on and as of the date
hereof.
f. No event which constitutes or which, with notice or lapse of time, or
both, could constitute, an Event of Default (as defined in the Loan Agreement)
has occurred and is continuing.
g. No material adverse change has occurred in the financial condition of
the Borrowers from that disclosed in the financial statements of GZA as at
November 30, 1999, heretofore provided to the Bank.
-3-
<PAGE> 4
5. Except as expressly affected hereby, the Loan Agreement and each of
the other Financing Documents remains in full force and effect as heretofore.
Each Borrower hereby agrees that the respective Guaranty heretofore given by
such Borrower (i) remains in full force and effect, (ii) runs to the benefit of
Fleet National Bank and (iii) includes, as obligations guaranteed thereunder,
the Loan Agreement (as amended by this Agreement), the 2000 Line of Credit Note
and all Term Notes.
6. Nothing contained herein will be deemed to constitute a waiver or a
release of any provision of any of the Financing Documents. Nothing contained
herein will in any event be deemed to constitute an agreement to give a waiver
or release or to agree to any amendment or modification of any provision of any
of the Financing Documents on any other or future occasion.
-4-
<PAGE> 5
Executed, as an instrument under seal, as of the date and year first above
written.
FLEET NATIONAL BANK
By:____________________________________
Name:
Title:
GZA GEOENVIRONMENTAL
TECHNOLOGIES, INC.
By:____________________________________
Name:
Title:
GZA GEOENVIRONMENTAL, INC.
By:____________________________________
Name:
Title:
GZA DRILLING, INC.
By:____________________________________
Name:
Title:
GZA REMEDIATION, INC.
By:____________________________________
Name:
Title:
-5-
<PAGE> 6
GZA SECURITIES CORP.
By:____________________________________
Name:
Title:
DELTA GEOTECHNICAL SERVICES, INC.
By:____________________________________
Name:
Title:
GROVER ENTERPRISES, INC.
By:____________________________________
Name:
Title:
GOLDBERG ZOINO ASSOCIATES OF NEW
YORK, P.C.
By:____________________________________
Name:
Title:
-6-
<PAGE> 7
SUPPLEMENTAL DISCLOSURE SCHEDULE
[To be provided by Borrowers, if needed]
<PAGE> 1
Exhibit 22.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of
- ------------------ Incorporation
-------------
<S> <C>
1. GZA GeoEnvironmental, Inc. Massachusetts
2. GZA Securities Corporation Massachusetts
3. GZA Drilling, Inc. (a wholly owned Massachusetts
subsidiary of GZA GeoEnvironmental, Inc.)
4. GZA Texas, Inc. (a wholly owned subsidiary of GZA Massachusetts
GeoEnvironmental, Inc.)
</TABLE>
43
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File No. 33-63940, File No. 33-75688 and File No.
333-24423) of GZA GeoEnvironmental Technologies, Inc. of our report dated May 5,
2000, except as to Note 17, for which the date is May 17, 2000, relating to the
financial statements, which appears in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report dated May 5, 2000,
except as to Note 17, for which the date is May 17, 2000 relating to the
financial statement schedule and reference to us under the heading "Selected
Financial Data", which appears in this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
May 26, 2000
44
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF THE REGISTRANT AT FEBRUARY 29, 2000 AND
FEBRUARY 28, 1999 AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME OF THE REGISTRANT FOR THE TWELVE MONTHS ENDED FEBRUARY 29, 2000,
FEBRUARY 28, 1999 AND FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS IN FORM 10K FOR THE TWELVE MONTH PERIOD ENDED
FEBRUARY 29, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 5,966,000
<SECURITIES> 3,829,000
<RECEIVABLES> 13,924,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,002,000
<PP&E> 5,973,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,359,000
<CURRENT-LIABILITIES> 12,226,000
<BONDS> 0
0
0
<COMMON> 41,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 38,359,000
<SALES> 0
<TOTAL-REVENUES> 72,083,000
<CGS> 0
<TOTAL-COSTS> 70,283,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> 2,094,000
<INCOME-TAX> 819,000
<INCOME-CONTINUING> 1,275,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,275,000
<EPS-BASIC> .35
<EPS-DILUTED> .35
</TABLE>
