<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-1228
Stone & Webster, Incorporated
(Exact name of registrant as specified in its charter)
Delaware 13-5416910
(State of Incorporation) (I.R.S. Employer Identification No.)
250 West 34th Street, New York, N.Y. 10119
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number (including area code)(212) 290-7500
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: 14,226,750 shares as of September 30, 1995.
<PAGE>
Form 10-Q 2.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated financial statements required by this Item for Stone
& Webster, Incorporated and Subsidiaries are contained in Attachment A
which is filed herewith and made a part hereof.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations required by this Item for Stone & Webster,
Incorporated and Subsidiaries is contained in Attachment A which is
filed herewith and made a part hereof.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
(a) As reported in Part I, Item 3, Legal Proceedings, in registrant's Form
10-K for the year ended December 31, 1994, in November 1990, Stone &
Webster Engineering Corporation ("SWEC") commenced an action in the
United States District Court for the District of Massachusetts against
Northbrook Insurance Company, several other insurance companies and
certain other parties. The complaint sought monetary damages,
attorneys' fees and costs, and a declaration that the insurance
company defendants must defend and indemnify SWEC against claims
asserted against it in another lawsuit which was settled in March,
1991.
In September, 1995, SWEC reached a settlement agreement with the
defendants pursuant to which SWEC received payment on claims made in
the aggregate gross amount of $16 million and the pending litigation
was dismissed.
(b) Registrant and two of its subsidiaries have been named as defendants,
along with others, in two legal actions brought by, and have received
other claims from, private parties seeking contribution for costs
incurred or to be incurred in remediation of sites under the
Comprehensive Environmental Response, Compensation and Liability Act
and similar state statutes. These matters relate to business
activities which took place generally in the first half of this
century. No governmental authority has sought similar redress from
registrant or its subsidiaries (except in the case of one subsidiary
in limited connection with claims made primarily with respect to
clients of that subsidiary) nor has the registrant been identified as
a Potentially Responsible Party by the Federal or any state or local
governmental authority, although some information has been requested
in connection with environmental matters. Based on presently known
facts and existing laws and regulations, registrant believes that it
has valid legal defenses to such actions and that the costs associated
with such matters, including legal costs, will not be material to the
business or financial condition of the registrant, and in any case
will be mitigated by the presence of other entities which will be
Potentially Responsible Parties, by contractual indemnities, and by
insurance coverage.
<PAGE>
Form 10-Q 3.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Item 1. Legal Proceedings. (Cont'd.)
In early October, 1995, one such action was settled by the filing of
mutual dismissals and the payment of $4 million by the registrant and
its subsidiaries. Certain of the insurance carriers of registrant and
its subsidiaries have made payments to the registrant and its
subsidiaries in the amount of $1.5 million relating primarily to
defense costs in connection with these actions. Registrant and one
subsidiary are plaintiffs in a separate action to recover damages,
attorneys' fees and other monetary relief from other insurance
carriers in connection with this and other such matters. No
recognition has been made in the financial statements for any
potentially recoverable amounts.
Because the facts and circumstances of the recently settled action
differ significantly from other such matters, registrant believes that
it would be inaccurate to evaluate or estimate liability based on the
recent settlement.
(c) Also see Note (C) to the consolidated financial statements filed
herewith.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index
(4) Instruments defining the rights of security holders,
including indentures - As of September 30, 1995, registrant and its
subsidiaries had outstanding long-term debt (excluding current
portion) totaling approximately $101,813,000 principally in connection
with mortgages relating to real property for a subsidiary's real
estate holdings in Tampa, Florida, for another subsidiary's office
building, and for the construction of a paper fiber recycling plant of
a limited partnership in which a subsidiary owns a 94.3% interest, and
in connection with capitalized lease commitments for the acquisition
of certain computer equipment. None of these agreements are filed
herewith because the amount of indebtedness authorized under each such
agreement does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis; the registrant hereby
undertakes to furnish copies of such agreements to the Commission upon
request.
(10) Material contracts - Forms of agreements between registrant
and eleven (11) officers of registrant and its subsidiaries relating
to certain employment arrangements that would become operable only in
the event of a "change in control" (as defined in the agreements) and
that would have a potential aggregate cost to registrant (assuming
compensation levels of September 1, 1995) if triggered as provided in
the agreements of less than $5 million, are filed herewith as Exhibit
10.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
Registrant filed the following reports on Form 8-K during the
quarter ended September 30, 1995:
Date of Form 8-K Description
August 15, 1995 Submitted under Item 5, Other Events, the
text of registrant's Press Release dated
<PAGE>
Form 10-Q 4.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
(b) Reports on Form 8-K (Cont'd.)
Date of Form 8-K Description
August 15, 1995 relating to the resignation of
Bruce C. Coles as Chairman of the Board of
Directors, President, and Chief Executive
Officer, the election of Kent F. Hansen as
non-executive Chairman of the Board, and the
appointment of Edward J. Walsh as acting
President and Chief Executive Officer.
August 18, 1995 Submitted under Item 5, Other Events, the
text of registrant's Press Release dated
August 16, 1995 relating to the completion of
a strategic asset review and an increase in a
share repurchase authorization.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONE & WEBSTER, INCORPORATED
By: JEREMIAH P. CRONIN
Dated: October 27, 1995 Jeremiah P. Cronin
Executive Vice President
(Duly authorized officer and
Chief Financial Officer)
DANIEL P.LEVY
Daniel P. Levy
Corporate Controller
(Principal Accounting Officer)
<PAGE>
Form 10-Q 5.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
ATTACHMENT A
Stone & Webster, Incorporated
and Subsidiaries
Index
Page No.
Condensed Financial Statements: (Unaudited)
Consolidated Statements of Operations -
Three Months Ended September 30, 1995 and 1994
Nine Months Ended September 30, 1995 and 1994 6
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 7-8
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 9
Notes to Consolidated Financial Statements 10-14
Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-19
<PAGE>
<TABLE>
Form 10-Q 6.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
<CAPTION>
3 Months 9 Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues (Notes A and B) $219,160 $193,783 $672,376 $574,083
Cost of revenues (Note A) 199,800 185,506 612,065 564,904
Gross Profit 19,360 8,277 60,311 9,179
Selling, general and
administrative expenses (Note A) 12,248 10,066 33,728 35,539
Operating income (loss) (Notes B, C and D) 7,112 (1,789) 26,583 (26,360)
Other income (deductions) (Note A)
Profit on investment securities (Note M) - 9,762 - 9,762
Interest income 1,674 1,119 5,094 2,611
Interest expense (958) (974) (3,073) (2,772)
Miscellaneous - net - 292 - 952
716 10,199 2,021 10,553
Income (loss) before provision (benefit)
for income taxes 7,828 8,410 28,604 (15,807)
Income tax provision (benefit) (Note E) 2,844 3,228 10,970 (4,079)
Net income (loss) (Notes C, D, F and I) $ 4,984 $ 5,182 $ 17,634 $(11,728)
Earnings (loss) per share (Notes F, I) $ .35 $ .35 $1.22 $(.78)
Dividends declared per share $ .15 $ .15 $ .45 $ .45
Average number of shares outstanding 14,326,000 14,970,000 14,439,000 14,975,000
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Form 10-Q 7.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets
(All dollar amounts, except per share amounts, are in thousands.)
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 31,825 $ 55,650
U.S. Government securities, at amortized cost,
which approximates market. (Note G) 63,776 74,685
Accounts receivable (Note C) 136,308 96,624
Costs and revenues recognized in
excess of billings 78,238 42,542
Deferred income taxes (Note E) 7,545 7,825
Other 2,669 657
Total Current Assets 320,361 277,983
Fixed assets 253,347 233,869
At cost, less accumulated depreciation,
depletion and amortization of $192,316
(1994-$179,566). (Note L)
Land held for resale, at cost (Note H) 25,673 25,664
Prepaid pension cost (Note I) 112,475 101,131
Other assets (Notes C and D) 25,869 39,737
$737,725 $678,384
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Form 10-Q 8.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Balance Sheets
(All dollar amounts, except per share amounts, are in thousands.)
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt $ 15,898 $ 4,988
Accounts payable 35,855 23,996
Dividend payable 2,134 2,195
Billings in excess of costs and
revenues recognized 60,370 48,485
Accrued liabilities 55,574 55,702
Accrued taxes 11,327 6,070
Total Current Liabilities 181,158 141,436
Long-term debt (Note L) 101,813 89,642
Deferred income taxes (Note E) 53,527 48,580
Other liabilities 22,573 23,408
Shareholders' Equity:
Preferred stock - -
Authorized, 2,000,000 shares of no par value;
none issued.
Common stock, carried at (Note J) 65,210 65,171
Authorized, 40,000,000 shares of $1 par value;
issued, 17,731,488 shares, including shares held
in treasury.
Capital in excess of carrying value of common stock 2,869 2,860
Retained earnings 419,509 408,211
Cumulative translation adjustment (2,842) (3,072)
484,746 473,170
Less: Common stock in treasury, at cost (Notes J and K) 79,382 66,961
3,504,738 shares (1994-3,122,181).
Employee stock ownership and restricted
stock plans 26,710 30,891
106,092 97,852
Total Shareholders' Equity 378,654 375,318
$737,725 $678,384
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Form 10-Q 9.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
<CAPTION>
9 Months Ended September 30,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $ 17,634 $(11,728)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 14,216 14,724
Deferred income taxes 5,227 (3,913)
Prepaid pension cost (11,344) (9,472)
Pension plan curtailment gain - (504)
Profits on investment securities - (9,762)
Write-down of capitalized costs 6,500 -
Amortization of market value of shares issued
under Restricted Stock Plan 88 460
Amortization of net cost of
Employee Stock Ownership Plan 1,167 1,170
Changes in operating assets and liabilities:
Accounts receivable (40,460) (1,926)
Costs and revenues recognized
in excess of billings (35,696) 14,919
Other assets 7,332 724
Accounts payable 11,809 (6,756)
Billings in excess of costs
and revenues recognized 11,885 19,160
Accrued liabilities 2,858 2,865
Other 1,466 91
Net cash (used) provided by operating activities (7,318) 10,052
Cash Flows from Investing Activities:
Maturities of U.S. Government securities 95,340 77,102
Purchases of U.S. Government securities (83,198) (82,162)
Purchase of joint venture, net of cash acquired (2,458) -
Proceeds from sale of investment securities - 10,412
Purchases of fixed assets (23,522) (37,738)
Net cash used by investing activities (13,838) (32,386)
Cash Flows from Financing Activities:
Proceeds from long-term debt 19,302 36,297
Repayments of long-term debt (3,618) (3,658)
Increase in bank loans - 68
Decrease in bank loans - (5,745)
Payments to Employee Stock Ownership Trust (6,598) (4,046)
Payments received from Employee Stock Ownership Trust 7,217 4,464
Purchase of common stock for treasury (12,435) (1,084)
Dividends paid (6,537) (6,740)
Net cash (used) provided by financing activities (2,669) 19,556
Net Decrease in Cash and Cash Equivalents (23,825) (2,778)
Cash and Cash Equivalents at Beginning of Period 55,650 64,141
Cash and Cash Equivalents at End of Period $ 31,825 $ 61,363
Supplemental Disclosures of Investing and Financing Activities:
Fair value of assets acquired $ 10,206 $ -
Liabilities assumed 7,748 -
Cash paid for acquisition $ 2,458 $ -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Form 10-Q 10.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
(A) As discussed in the 1994 Annual Report to Stockholders, the Company changed
its presentation of reporting gross earnings to a format reflecting total
revenues, cost of revenues and selling, general and administrative expenses
to be more consistent with industry practice, primarily in its engineering,
construction and consulting business. As a result of these
reclassifications, both total revenues, previously reported as gross
earnings, cost of revenues and selling, general and administrative expenses
increased by $143,831 and $417,151 for the third quarter and nine months
ended September 30, 1994, respectively. In 1995, the Company further
changed its reporting to present operating income (loss) and has
reclassified profits on investment securities and dividend and interest
income from revenues to a new caption - Other income (deductions). Certain
other miscellaneous revenues were reclassified to operating costs. As a
result of these reclassifications, total revenues decreased by $11,611 and
$14,468, operating expenses decreased by $438 and $1,143, and other income
(deductions) increased by $11,173 and $13,325, for the three and nine
months ended September 30, 1994, respectively, with no effect on net
income.
(B) Revenues and operating income (loss) by business segment were the following
for the three and nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Engineering, construction and
consulting services $210,736 $185,876 $647,387 $551,311
Cold storage and
related activities 5,331 4,547 15,989 12,419
Other 3,093 3,360 9,000 10,353
Total revenues $219,160 $193,783 $672,376 $574,083
Operating income (loss)
Engineering, construction and
consulting services $ 6,886 $ (1,757) $ 27,928 $(24,120)
Cold storage and
related activities 1,825 1,497 6,002 3,870
Other 520 298 744 1,097
9,231 38 34,674 (19,153)
General corporate expenses (2,119) (1,827) (8,091) (7,207)
Total operating income (loss) $ 7,112 $ (1,789) $ 26,583 $(26,360)
</TABLE>
<PAGE>
Form 10-Q 11.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
(C) With respect to the legal actions referred to in Note M of the Company's
Annual Report to Stockholders for the year 1994, several matters have been
resolved. In May 1995, payment was made of $4,936 representing
satisfaction of the judgment against a subsidiary of the Company. This
payment did not affect 1995 operating results as a reserve had been
established for this settlement in prior years. In the third quarter, a
settlement was reached relating to environmental matters in which a charge
of $2,500 was incurred, representing the amount of the settlement, net of
insurance recoveries of $1,500. In another legal action taken to recover
damages, attorney's fees and other monetary relief from insurance carriers,
a settlement was reached in which $16,000 was received shortly after the
end of the third quarter. This settlement, after reduction for current and
deferred legal expenses of $8,780, was recognized as a gain of $7,220 in
the third quarter of 1995. Although the Company continues to have possible
liabilities related to environmental pollution, management believes, on the
basis of its examination of these liabilities and other legal matters,
including consultation with counsel, that neither current legal actions nor
liabilities resulting from these, if any, would have a material adverse
effect on the consolidated financial statements.
(D) In the third quarter of 1995, a subsidiary of the Company recorded a write-
down of $6,500 in capitalized costs associated with purchased technology in
a standardized, pre-certified design for nuclear power plants. The Company
had originally estimated that this investment which commenced in 1993,
would be recoverable from revenues generated over a three to five year
period beginning at the end of 1995. Based on a number of external events
that occurred in the third quarter, management has determined that it was
unlikely that any revenues would be generated from the investment in the
near term, necessitating a revaluation of the net realizable value of the
investment.
(E) The Company had a valuation allowance of $14,084 at December 31, 1994 for
the deferred tax assets related to net operating loss carryforwards. The
valuation allowance at the end of the second quarter of 1995 was $13,432.
The net change in the third quarter of 1995 was a decrease of $162,
primarily due to the utilization of a foreign net operating loss
carryfoward which was fully reserved, for a total valuation allowance of
$13,270 at September 30, 1995. The valuation allowance at September 30,
1995 comprises $7,680 relating to the net operating loss carryforwards of
several of the Company's foreign subsidiaries and $5,590 relating to state
net operating loss carryforwards.
<PAGE>
Form 10-Q 12.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
(F) In March 1994, the Corporation announced that its subsidiary, Stone &
Webster Engineering Corporation, was taking a number of actions to further
lower operating costs. These included the elimination of approximately 350
positions resulting in a first quarter 1994 pre-tax charge of $5,500 for
severance costs, which decreased net income by $3,400, or $.23 per share.
In the second and third quarters of 1994, the subsidiary had reductions of
approximately 320 positions resulting in a pre-tax charge of $3,800 for
severance costs, which decreased net income by $2,300, or $.15 per share.
Severance payments of $6,468 of the $8,508 accrued balance at December 31,
1994 were made by Stone & Webster Engineering Corporation in the first nine
months of 1995, leaving an accrued balance of $2,040. All amounts accrued
relate to positions which were terminated as of December 31, 1994.
(G) U.S. Government securities are debt securities issued by the U.S. Treasury
comprised entirely of U.S. Treasury bills and notes, which the Company
intends to hold to maturity. These securities have maturity dates of one
year or less. The aggregate fair market value of U.S. Government
securities at September 30, 1995 and December 31, 1994 was $63,896 and
$74,624, respectively, the amortized cost basis at September 30, 1995 and
December 31, 1994 was $63,776 and $74,685, respectively, and the net
unrealized holding gain (loss) at September 30, 1995 and December 31, 1994
was $120 and $(61), respectively.
(H) Land held for resale is stated at the lower of cost or estimated net
realizable value and, in determining net realizable value, the Company uses
independent appraisals and/or internal estimates which, among other things,
include historical sales data, estimates of future sales prices and related
transactional costs.
(I) Pension plan credits, which reduced operating costs, were $3,955 and
$11,344 for the three and nine month periods of 1995 compared to $3,922 and
$9,472 for the prior year. These credits increased net income by $2,419,
or $.17 per share, and $6,938, or $.48 per share, for the three and nine
month periods of 1995 and by $2,399, or $.16 per share, and $5,793, or $.39
per share for the prior year.
(J) On May 11, 1995, the shareholders approved a 1995 Stock Option Plan and a
1995 Stock Plan. Under the 1995 Stock Option Plan, key employees are
eligible to receive options either as incentive stock options as defined
under the Internal Revenue Code, or as nonqualified options to purchase
shares of the Company's common stock. Non-employee directors only may be
granted nonqualified options. The exercise price of any option granted
under the Stock Option Plan may not be less than the fair market value as
of the date of grant and such options may not be exercisable later than ten
years from the date of grant. Nonqualified options to purchase 2,000
shares were granted to each non-employee director as of the effective date
<PAGE>
Form 10-Q 13.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
of the Stock Option Plan and will be granted to each new non-employee
director upon initial election or appointment to the Board of Directors.
Thereafter on a yearly basis, nonqualified options to purchase 1,000 shares
will be granted to each non-employee director. The total number of shares
to be issuable under the Stock Option Plan may not exceed 750,000 shares.
On May 11, 1995 and September 20, 1995, nonqualified options for 18,000
and 2,000 shares respectively, were awarded to non-employee directors at
an exercise price of $30.25 and $36.25, respectively, nonexercisable for
the first six months. On June 20, 1995, nonqualified options for 137,500
shares were awarded to designated key employees at an exercise price of
$31.00, nonexercisable for the first three years. In the third quarter of
1995, options with respect to 27,000 shares terminated unexercised. These
shares are available for future awards under the Plan. Under the 1995
Stock Plan, non-employee directors of the Company will receive grants of
shares of common stock in payment of their annual retainer and may elect to
receive director meeting fees in common stock. The total number of shares
to be issued under the Stock Plan may not exceed 100,000 shares. As of
July 1, 1995, each non-employee director became entitled to a number of
shares equivalent to one-half of the annual retainer of $8.
(K) In August 1995, the Board of Directors of the Company authorized an
increase in the share repurchase program from 1 million to 2.5 million
shares of common stock in open market transactions at prevailing prices.
The Company acquired 382,581 shares in the nine months ended September 30,
1995, bringing total purchases to 745,905 shares under this program. As of
September 30, 1995, the Company had 14,226,750 shares outstanding. The
amount and timing of stock repurchases will depend upon market conditions,
share price, as well as other factors. The Company reserves the right to
discontinue the repurchase program at any time.
(L) In the third quarter of 1995, a subsidiary of the Company acquired its
partner's 50% interest in a real estate joint venture to facilitate a
possible sale of the subsidiary. The subsidiary now wholly owns the
entity, which is included in the consolidated financial statements. The
assets, amounting to $10,206 related primarily to an office building and
land, and liabilities, amounting to $7,748 related primarily to a mortgage
loan. The net cash investment for this acquisition was $2,458. The
Company had previously co-signed a note for the mortgage loan of the 50%
owned joint venture. As a result of the acquisition of the joint venture,
the mortgage loan is included in the Company's consolidated financial
statements and the contingent liability has been removed.
(M) Profits on investment securities represents the sale of investment
securities, which after income taxes resulted in net income of $6,449 or
$.43 per share, for the three and nine months ended September 30, 1994.
The cost of securities sold is determined by average cost.
(N) Earnings per share are based on the average number of shares outstanding
during the periods.
<PAGE>
Form 10-Q 14.
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All dollar amounts, except per share amounts, are in thousands.)
(O) These statements are unaudited, and in the opinion of management, include
all adjustments, consisting of normal recurring adjustments necessary for
a fair statement of the results for the interim periods. The year-end
balance sheet data was derived from audited financial statements, but
does not include all disclosures required by generally accepted
accounting principles. Reference is made to the explanatory notes in the
Company's Annual Report to Stockholders.
Interim results of operations are not necessarily indicative of the
results for a full year.
<PAGE>
Form 10-Q 15
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts are in thousands.)
Results of Operations
As discussed in the 1994 Annual Report to Stockholders, the Company changed
its presentation of reporting gross earnings to a format reflecting total
revenues, cost of revenues and selling, general and administrative expenses
to be more consistent with industry practice, primarily in its engineering,
construction and consulting business. In 1995, the Company further changed
its reporting to present operating income. Refer to Note A to the
consolidated financial statements.
For the third quarter ended September 30, 1995, Stone & Webster reported net
income of $4,984 or $.35 per share, compared to net income of $5,182 or $.35
per share, for the same period in 1994. The 1994 results included gains from
the sale of investment securities of $6,449, or $.43 per share, and severance
expense of $400, or $.03 per share. Operating income was $7,112, an increase
of $8,901 from the third quarter of 1994, when the company had an operating
loss of $1,789. Third quarter revenues increased 13 percent to $219,160.
The Company's net income for the first nine months of 1995 was $17,634, or
$1.22 per share, compared to a net loss of $11,728 or $.78 per share, in the
same period a year ago. The 1994 results included gains from the sale of
investment securities of $6,449, or $.43 per share, and severance costs of
$5,700, or $.38 per share. Operating income was $26,583 compared to an
operating loss of $26,360. Revenues in the first nine months of 1995 were
$672,376, an increase of 17 percent from $574,083 in the first nine months of
1994.
This is the third consecutive quarter that the Company has reported higher
revenues and operating income than in the comparable period in the prior year.
The Company's principal business segment - Engineering, Construction and
Consulting - is continuing to experience significant improvement.
ENGINEERING, CONSTRUCTION AND CONSULTING
The Engineering, Construction and Consulting segment reported operating income
of $6,886 for the third quarter ended September 30, 1995 compared to a loss
of $1,757 for the same period last year. Third quarter revenues increased 13
percent to $210,736. For the nine month period, operating income was $27,928
compared to a loss of $24,120 in 1994 on a 17 percent improvement in revenues
to $647,387. The improvement in revenues for both periods is primarily due
to an increase in materials expenditures for clients where the Company is
responsible for procuring such materials under contracts with its clients.
In the third quarter, a settlement was reached relating to environmental
matters, in which a charge of $2,500 was incurred, representing the amount of
the settlement, net of insurance recoveries of $1,500. In another legal
<PAGE>
Form 10-Q 16
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts are in thousands.)
Results of Operations (Continued)
action taken to recover damages, attorney's fees and other monetary relief
from insurance carriers, a settlement was reached in which $16,000 was
received shortly after the end of the third quarter. This settlement, after
reduction for current and deferred legal expenses of $8,780, was recognized
as a gain of $7,220 in the third quarter of 1995.
A subsidiary of the Company recorded a write-down of $6,500 in capitalized
costs associated with purchased technology in a standardized, pre-certified
design for nuclear power plants. The Company had originally estimated that
this investment which commenced in 1993 would be recoverable from revenues
generated over a three to five year period beginning at the end of 1995.
Based on a number of external events that occurred in the third quarter,
management has determined that it was unlikely that any revenues would be
generated from the investment in the near term, necessitating a revaluation
of the net realizable value of the investment.
Included in last year's third quarter and nine months results were pre-tax
charges of $700 and $9,300, respectively, for severance costs associated with
workforce reductions in the Company's largest subsidiary, Stone & Webster
Engineering Corporation. The subsidiary continues to expect that
approximately $35,000 of payroll-related cost savings will be realized in 1995
from staff reductions implemented throughout 1994. It is estimated that
approximately $30,000 in payroll-related cost savings were realized in the
first nine months of 1995, which helped contain the increase in cost of
revenues and lowered selling, general and administrative expenses. The
savings expected over the remainder of 1995 will not be in proportion to the
savings experienced during the first nine months because the cost reduction
actions initiated in the first nine months of 1994 resulted in reduced costs
for the fourth quarter of 1994. The third quarter 1995 results continue to
reflect the improvement in operating income experienced in the first half and
are a result of a better balance of staffing and workload and improved
contract execution. Operating income margins are running at a rate of 4.3
percent of revenues through nine months of 1995. The Process and Power
business units continued to be strong during the first nine months of 1995,
primarily due to increased international work in the Middle East and Pacific
Rim. The Power business unit's performance was also strong in North America.
New orders for the engineering, construction and consulting segment for the
third quarter and first nine months of 1995 were $234,000 and $794,000,
respectively, primarily from work in the Power and Process business units.
New orders for the third quarter of 1994 were $468,000. New orders for the
first nine months of 1994 and backlog at September 30, 1994 were adversely
affected due to the reduction of scope in the amount of $319,000 at a
Tennessee Valley Authority plant during the first quarter of 1994.
<PAGE>
Form 10-Q 17
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts are in thousands.)
Results of Operations (Continued)
Backlog on September 30, 1995 was $1,688,000 compared to $1,437,000 on
September 30, 1994 and $1,542,000 at year end.
COLD STORAGE AND RELATED ACTIVITIES
The Cold Storage segment reported operating income of $1,825 and $6,002 for
the quarter and nine months of 1995 compared to $1,497 and $3,870 for the
prior year periods. Revenues were up by 17 percent in the third quarter and
29 percent in the nine month period, due largely to increased demand for
freezing services for food destined for export. Lower labor and other direct
costs improved cold storage operating margins, resulting in substantially
higher operating income compared to 1994.
OTHER
Operating income of the "Other" segment was $222 higher in the third quarter
of 1995 compared to 1994 but decreased for the nine month period, from $1,097
in 1994 to $744 in 1995. This decrease was primarily due to the abandonment
of two gas wells and the continued decrease in gas prices in the oil and gas
operations. The decrease in the "Other" segment revenues for both periods in
1995 was also attributed to the decline in oil and gas activity due to the
continuing decrease in gas prices. As previously announced, the Company is
pursuing the sale of its real estate and oil and gas subsidiaries which
comprise the "Other" business segment.
Pension plan credits, which reduced operating costs, were $3,955 and $11,344
for the three and nine month periods in 1995 compared to $3,922 and $9,472 for
the same periods in the prior year. These credits increased net income by
$2,419 or $.17 per share, and $6,938, or $.48 per share for the three and nine
month periods in 1995 and by $2,399, or $.16 per share, and $5,793, or $.39
per share for the prior year. The increase in the pension credit for both
periods in 1995 was primarily due to a change in the discount rate used to
calculate the projected benefit obligation. Favorable asset performance in
the past ten years is the primary reason that the pension plan is overfunded.
Other income (deductions) decreased during the third quarter and first nine
months of 1995 because both prior year periods included pre-tax gains of
$9,762 from the sale of investment securities.
The income tax provision (benefit) resulted in effective rates of 36 percent
and 38 percent for the third quarter and nine months ended September 30, 1995,
respectively, and 38 percent and (26 percent) for the third quarter and nine
months ended September 30, 1994, respectively. The effective tax rate for the
nine months ended September 30, 1995 was higher than the U. S. statutory rate
primarily due to state income taxes which accounted for a 3 percent increase,
<PAGE>
Form 10-Q 18
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts are in thousands.)
Results of Operations (Continued)
net of federal benefit. The effective tax rate for the three months ended
September 30, 1994 was higher than the U. S. statutory rate primarily due to
foreign taxes which are based on gross receipts and accounted for a 4 percent
increase in the effective tax rate recorded. The effective rate (benefit) for
the nine months ended September 30, 1994 was lower than the U. S. statutory
rate primarily due to foreign taxes applicable to certain foreign projects
which are calculated based on gross receipts which accounted for a 3 percent
reduction in the effective tax rate (benefit) recorded. State income taxes,
net of federal benefit, also impacted the effective rate by 2 percent for the
nine months ended September 30, 1994.
Financial Condition
Cash and cash equivalents, as shown in the Consolidated Statements of Cash
Flows, decreased by $23,825 during the first nine months of 1995. Net cash
used by operating activities of $7,318 reflected increases in accounts
receivable and costs and revenues recognized in excess of billings primarily
resulting from increased business activity. The increase in accounts
receivable includes $17,200 of receivables related to insurance recoveries on
legal settlements. Cash outlays for amounts previously included in accrued
liabilities include $4,936 representing satisfaction of a judgment in a
lawsuit and severance payments of $6,468. These items were partially offset
by net cash provided by income from operations and increases in accounts
payable for expenditures related to job materials and equipment and increases
in billings in excess of costs and revenues recognized due to the timing of
billing milestones on lump sum jobs compared with the timing of costs
incurred. In addition, other assets decreased due to a reduction in deferred
legal costs and the write-down of capitalized costs. Severance payments of
$6,468 of the $8,508 accrued balance at December 31, 1994 were made by Stone
& Webster Engineering Corporation in the first nine months of 1995, leaving
an accrued balance of $2,040 which will be funded from cash on hand and
temporary investments. Net cash used by investing activities of $13,838
primarily reflects purchases of fixed assets related to expenditures for the
construction of a paper fiber recycling plant and the purchase of a joint
venture. The recycling plant is a development type project in which a
subsidiary of the Company, holds an ownership interest. Net cash used by
financing activities of $2,669 is primarily due to repayments of long-term
debt, purchases of common stock for treasury as explained in Note K to the
consolidated financial statements and dividends paid, offset in part by
proceeds from long-term debt representing construction loans to finance the
paper fiber recycling plant previously discussed.
<PAGE>
Form 10-Q 19
For the quarter ended September 30, 1995 Stone & Webster, Incorporated
Stone & Webster, Incorporated and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts are in thousands.)
Financial Condition (Continued)
The Company believes that the types of businesses in which it is engaged
require that it maintain a strong financial condition. The Company has on
hand and has access to sufficient sources of funds to meet its anticipated
operating, dividend and capital expenditure needs. Cash on hand and temporary
investments provide adequate operating liquidity. Additional liquidity is
provided through lines of credit and revolving credit facilities which total
$26,921, all of which were available at September 30, 1995. The Company and
its subsidiaries have obtained financing for their real estate operations and
the construction of a paper fiber recycling plant. A subsidiary of the
Company owns a 94.3 percent interest in a limited partnership for construction
of this plant. The cost of the plant, which is collateral for the construction
loan, is expected to be $65,000. Upon completion of construction, which is
expected to be December 1995, the construction loans will be paid by term debt
of $48,750 and the partners will make an equity investment of $16,250, of
which the subsidiary of the Company's share is $15,324. The Company's share
will be funded by cash on hand and temporary investments. The Company intends
to pursue additional development projects such as this, which will involve
additional equity investments.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which is effective for the fiscal years beginning
after December 15, 1995. The Company is presently analyzing this new
accounting standard as to the impact it may have on the Company's financial
position or results of operations.
In October 1995, the Financial Accounting Standards Board issued statement No.
123 - Accounting for Stock - based Compensation, which is effective for the
fiscal years ending after December 15, 1996. The Company is presently
analyzing this new accounting standard and believes that it would not have a
material impact on the Company's financial position or results of operations.
<PAGE>
EXHIBIT 10
S&W "FORM"
EMPLOYMENT AGREEMENT
AGREEMENT by and between STONE & WEBSTER, INCORPORATED
a Delaware corporation (the "Company"), and
(the "Executive"), dated as of the 31st
day of August, 1995.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions. A. The "Effective Date" shall
mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
B. The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
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II. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
A. The beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of 20% or more of either (i) the
then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following accumulations
and acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Company, (ii) any acquisition
or accumulation by the Company, (iii) any acquisition or
accumulation by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, (iv) any acquisition or accumulation
by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2,
or (v) the beneficial ownership of 20% or more of either the
Outstanding Company Common Stock or the Outstanding Company
Voting Securities by a Person if such beneficial ownership occurs
solely because (x) of a change in the aggregate number of shares
of Outstanding Company Common Stock or Outstanding Company Voting
Securities since the last date on which such Person acquired
beneficial ownership of any Outstanding Company Common Stock or
Outstanding Company Voting Securities or (y) such Person acquired
such beneficial ownership in the good faith belief that such
acquisition would not cause such beneficial ownership to equal or
exceed 20% of the Outstanding Company Common Stock or Outstanding
Company Voting Securities then outstanding and such Person relied
in good faith in computing the percentage of its beneficial
ownership on publicly filed reports or documents of the Company
which are inaccurate or out-of-date; or
B. Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies by or on behalf of a Person other than
the Board; or
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C. Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
D. Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding clause (v) of subsection (a) of this Section 2,
if any Person whose beneficial ownership is not a Change of
Control due to such clause (v) does not reduce such Person's
percentage of beneficial ownership of Outstanding Company Common
Stock or Outstanding Company Voting Securities to less than 20%
by the close of business on the fifth business day after notice
from the Company (the date of notice being the first day) that
such Person's beneficial ownership of Outstanding Company Common
Stock or Outstanding Company Voting Securities equals or exceeds
20%, such Person's beneficial ownership shall be a Change of
Control at the end of such five business day period (and such
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clause (v) shall no longer apply); provided, however, that if
such Person asserts in writing to the Company by the end of such
five business day period that a reduction in such Person's
percentage of beneficial ownership would subject such reduction
to the operation of Section 16(b) of the Exchange Act ("Section
16(b)") the period of time during which the beneficial ownership
of such Person must be reduced to less than 20% so as not to
constitute a Change in Control shall be extended to the date that
is the third business day immediately following the date which is
the earlier of (i) six (6) months following the receipt by such
Person of the notice from the Company of beneficial ownership of
20% or more or (ii) the date upon which such reduction would no
longer be subject to Section 16(b). For purposes of this
definition, the determination whether any Person acted in "good
faith" shall be conclusively determined by the Board, acting by a
vote of those directors of the Company who, at such time, shall
constitute the Incumbent Board.
III. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the [third] * anniversary of
such date (the "Employment Period").
IV. Terms of Employment. A. Position and Duties.
1. During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
2. During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
* This would be the second anniversary for certain Executives
covered by this Agreement.
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engagements or teach at educational institutions, and (C)
manage personal investments, so long as such activities do
not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company
in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
B. Compensation. 1. Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
2. Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus
under the Company's annual contingent (or incentive) compensation
plans or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
3. Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer
executives of the Company and its affiliated companies
(including, but not limited to, the Company's Restricted Stock
Plan, Employee Investment Plan, Employee Stock Ownership Plan,
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Payroll-based Employee Stock Ownership Plan, Employee Retirement
Plan, Supplemental Retirement Plan and Stock Option Plan), but in
no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as
in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
4. Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life (and, if applicable, supplemental term
life insurance), group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies
and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to the other peer executives of the Company and
its affiliated companies.
5. Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
6. Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
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time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
7. Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
8. Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
V. Termination of Employment. A. Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement
of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean
the absence of the Executive from the Executive's duties with the
Company on a full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
B. Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
1. the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
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failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
2. the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially
and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board (or, if applicable, upon the
instructions of the Chief Executive Officer or a senior officer
of the Company) or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests
of the Company. Anything in this Section 5(b) or elsewhere in
this Agreement to the contrary notwithstanding, the employment of
the Executive shall in no event be considered to have been
terminated by the Company for Cause if termination of the
Executive's employment took place (a) as the result of bad
judgment or negligence on the part of the Executive, or (b) as
the result of an act or omission without the intent of gaining
therefrom directly or indirectly a profit to which the Executive
was not legally entitled, or (c) because of an act or omission
believed by the Executive in good faith to have been in or not
opposed to the interests of the Company, or (d) for any act or
omission in respect of which a determination could properly be
made that the Executive met the applicable standard of conduct
prescribed for indemnification or reimbursement or payment of
expenses under the By-laws of the Company or the laws of the
State of Delaware or the directors' and officers' liability
insurance of the Company, in each case as in effect at the time
of such act or omission, or (e) as the result of an act or
omission which occurred more than twelve calendar months prior to
the Executive's having been given notice of the termination of
the Executive's employment for such act or omission unless the
commission of such act or such omission could not at the time of
such commission or omission have been known to a member of the
Board (other than the Executive, if the Executive is then a
member of the Board), in which case more than twelve calendar
months from the date that the commission of such act or such
omission was or could reasonably have been so known, or (f) as
the result of a continuing course of action which commenced and
was or could reasonably have been known to a member of the Board
(other than the Executive) more than twelve calendar months prior
to notice having been given to the Executive of the termination
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of the Executive's employment.
The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
C. Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason.
1. For purposes of this Agreement, "Good Reason" shall
mean the following involuntary circumstances:
i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
iii) the Company's requiring the Executive to be based
at any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to
travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;
iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c)(i), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
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2. For purposes of this Agreement, "Good Reason" shall
also mean the following voluntary circumstance: Anything in this
Agreement to the contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period immediately
following the first anniversary of the Effective Date shall be
deemed to be a termination for Good Reason for all purposes of
this Agreement.
D. Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
E. Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
VI. Obligations of the Company upon Termination. A.
Good Reason; Other Than for Cause, Death or Disability.
(i) If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for
Good Reason as defined in Section 5(c)(i) of this Agreement,
then, subject to the provisions of Section 9 of this Agreement:
A. the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
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(1) the sum of (a) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (b) the product of (x) the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less
than twelve full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount
being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 and (c) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described
in clauses (a), (b), and (c) shall be hereinafter referred to as
the "Accrued Obligations"); and
(2) the amount equal to the product of (a) [three]*
and (b) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus; and
(3) an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan immediately
prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together,
the "SERP") which the Executive would receive if the Executive's
employment continued for [three]* years after the Date of
Termination assuming for this purpose that all accrued benefits
are fully vested, and, assuming that the Executive's compensation
in each of the [three]* years is that required by Section 4(b)(i)
and Section 4(b)(ii), over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
B. for [three]* years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement as if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
* This would be [two] , as the multiplier or years, for certain
of the Executives covered by an Agreement.
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families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until [three]* years after
the Date of Termination and to have retired on the last day of
such period;
C. for [three]* years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this
Section 6(a)(i)C in any one calendar year shall not exceed 10% of
the Executive's Annual Base Salary; and
D. for [three]* years after the Executive's Date of
Termination, to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy
or practice or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(ii) If, during the Employment Period, the Executive
shall terminate employment for Good Reason as defined in Section
5(c)(ii) of this Agreement, then, subject to the provisions of
Section 9 of this Agreement:
A. the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
Accrued Obligations;
B. the Company shall pay in thirty-six (36)**
monthly installments at the end of each month commencing with the
month next following the month in which the Date of Termination
shall have occurred and continuing for a total of thirty-six
(36)** monthly payments, an aggregate amount equal to the sum of
(1) an amount equal to the product of (x) three (3)* and (y) the
sum of (i) the Executive Annual Base Salary and (ii) the
Executive's Highest Annual Bonus and (2) the amount determined by
the application of Section 6(a)(i)A(3) above, with the amount of
each such monthly installment being such aggregate amount divided
by thirty-six (36)**;
* This would be [two] , as the multiplier or years, for certain
of the Executives covered by an Agreement.
** Twenty-Four (24) months for certain Executives covered by
the Agreement.
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<PAGE>
C. for [three]* years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement as if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until [three] years after
the Date of Termination and to have retired on the last day of
such period;
D. for [three]* years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this
Section 6(a)(ii)D in any one calendar year shall not exceed [10%]
of the Executive's Annual Base Salary;
E. for [three]* years after the Executive's Date of
Termination, to the extent not theretofore paid or provided to
the Executive, any Other Benefits; and
F. The Company's obligation to make any particular
installment payment required by Section 6(a)(ii)B above will be
offset, on a dollar for dollar basis, by any of the following
amounts (to the extent that they have not theretofore been the
basis for an offset) that shall have been received by the
Executive prior to the date on which such installment is due to
be paid by the Company: (x) the amount of any cash compensation
received by the Executive from another employer; (y) the amount
* This would be two (2) years for certain Executives covered
by the Agreement.
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<PAGE>
of any cash payment received by the Executive as a result of
self-employment activities by the Executive; and (z) the amount
of any employment or self-employment compensation which, although
not paid, has been guaranteed to the Executive as of the date of
such installment. The Executive agrees (1) to notify the Company
promptly upon securing employment or becoming self-employed
during any period during which installment payments are payable
by the Company pursuant to Section 6(a)(ii)B above and (2) to
furnish the Company written evidence of compensation earned for
such employment or self-employment as the Company may from time
to time reasonably request.
(a) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term "Other
Benefits" as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if
any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its affiliated companies and
their beneficiaries.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term "Other
Benefits" as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
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<PAGE>
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) the Executive's Annual Base Salary through the
Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) other benefits, in
each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision
of Other Benefits. In such case, all Accrued Obligations shall
be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement.
(a) No Set-Off. Except as provided for in Section
6(a)(ii)F, the Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company may have against the Executive or others.
(b) No Mitigation Obligation. The Executive's benefits
hereunder shall be considered severance pay in consideration of
the Executive's past service, and pay in consideration of the
Executive's continued service from the date hereof and in no
event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this
Agreement and, except as provided for in Section 6(a)(ii)F, such
amounts shall not be reduced whether or not the Executive obtains
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<PAGE>
other employment.
(c) Expenses. In order that the purpose of this
Agreement not be frustrated, it is the intent of the Company that
the Executive not be required to incur the expenses associated
with the enforcement of the Executive's rights under this
Agreement by litigation or other legal action because the cost
and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder, nor be bound
to negotiate any settlement of the Executive's rights hereunder
under threat of incurring such expenses. Accordingly, if
following the Effective Date it should appear to the Executive
that the Company has failed to comply with any of its obligations
under this Agreement or, if at any time, in the event that the
Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or to recover from,
the Executive the benefits intended to be provided to the
Executive hereunder, and that the Executive has complied with all
of the Executive's obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to time to retain
counsel of the Executive's choice at the expense of the Company
as provided in this Section 8(c), to represent the Executive in
connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel,
and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and
such counsel. The Company agrees to pay as incurred, to the full
extent permitted by law, all costs and expenses which the
Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of
performance thereof (including, without limitation, as a result
of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"). Included within such costs and expenses
shall be the reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove provided, which
fees and expenses shall be paid or reimbursed to the Executive by
the Company on a regular, periodic basis upon presentation by the
Executive of a statement or statements prepared by such counsel
in accordance with its customary practices.
9. Certain Reductions of Payments to the Executive and
Certain Additional Payments by the Company. (a) (i) Anything in
this Agreement to the contrary notwithstanding and except as set
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forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code
(such excise tax is hereinafter referred to as the "Excise Tax"),
then the Payments shall be reduced, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments
will not give rise to any Excise Tax, it being the intention of
the Company and the Executive that no Payment made pursuant to
this Agreement be deemed an "excess parachute payment" pursuant
to Section 280G of the Code.
(ii) If, notwithstanding the intention of the Company
and the Executive that no Payment made pursuant to this Agreement
be deemed an "excess parachute payment" pursuant to Section 280G
of the Code and that no Excise Tax be payable by the Executive as
a result of any Payment and the operation of Section 9(a)(i)
above, it shall be determined that a Payment is subject to the
Excise Tax, then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including the computation of the Reduced Amount, whether and when
a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determinations, shall be made by Coopers & Lybrand L.L.P. or such
other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
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<PAGE>
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
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<PAGE>
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or to contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
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anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Stone & Webster, Incorporated
250 West 34th Street
New York, New York 10119
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
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(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)A-E of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
STONE & WEBSTER, INCORPORATED [Executive]
By:
Name:
Title:
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SWEC "FORM"
EMPLOYMENT AGREEMENT
AGREEMENT by and between STONE & WEBSTER ENGINEERING
CORPORATION a Massachusetts corporation (the "Company"), and
(the "Executive"), dated as of the 31st
day of August, 1995.
The Company has determined that it is in the best
interests of the Company, its shareholder parent, Stone &
Webster, Incorporated (the "Corporation"), and the Corporation's
shareholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of
the Corporation. The Company believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's
full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements
upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Company
has entered into this Agreement.
The Board of Directors of the Corporation (the
"Corporation Board"), has determined that it is in the best
interests of the Corporation and its shareholders to assure that
the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Corporation. The
Corporation Board agrees with the Company in believing that it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Corporation Board has caused the Corporation to
guarantee the performance of the Company under this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
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shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of 20% or more of either (i) the
then-outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (ii) the combined
voting power of the then-outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this subsection (a), the
following accumulations and acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition or accumulation by the
Corporation, (iii) any acquisition or accumulation by any
employee benefit plan (or related trust) sponsored or maintained
by the Corporation or any corporation controlled by the
Corporation, (iv) any acquisition or accumulation by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Section 2, or (v)
the beneficial ownership of 20% or more of either the Outstanding
Corporation Common Stock or the Outstanding Corporation Voting
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Securities by a Person if such beneficial ownership occurs solely
because (x) of a change in the aggregate number of shares of
Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities since the last date on which such Person
acquired beneficial ownership of any Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities or (y)
such Person acquired such beneficial ownership in the good faith
belief that such acquisition would not cause such beneficial
ownership to equal or exceed 20% of the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities then
outstanding and such Person relied in good faith in computing the
percentage of its beneficial ownership on publicly filed reports
or documents of the Corporation which are inaccurate or out-of-
date; or
(b) Individuals who, as of the date hereof, constitute
the Corporation Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Corporation
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Corporation's shareholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other
actual or threatened solicitation of proxies by or on behalf of a
Person other than the Corporation Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding Corporation
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
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trust) of the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then-outstanding shares of
common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the
Corporation Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Corporation of
a complete liquidation or dissolution of the Corporation.
Notwithstanding clause (v) of subsection (a) of this Section 2,
if any Person whose beneficial ownership is not a Change of
Control due to such clause (v) does not reduce such Person's
percentage of beneficial ownership of Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities to less
than 20% by the close of business on the fifth business day after
notice from the Corporation (the date of notice being the first
day) that such Person's beneficial ownership of Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities equals or exceeds 20%, such Person's beneficial
ownership shall be a Change of Control at the end of such five
business day period (and such clause (v) shall no longer apply);
provided, however, that if such Person asserts in writing to the
Corporation by the end of such five business day period that a
reduction in such Person's percentage of beneficial ownership
would subject such reduction to the operation of Section 16(b) of
the Exchange Act ("Section 16(b)") the period of time during
which the beneficial ownership of such Person must be reduced to
less than 20% so as not to constitute a Change in Control shall
be extended to the date that is the third business day
immediately following the date which is the earlier of (i) six
(6) months following the receipt by such Person of the notice
from the Corporation of beneficial ownership of 20% or more or
(ii) the date upon which such reduction would no longer be
subject to Section 16(b). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be
conclusively determined by the Corporation Board, acting by a
vote of those directors of the Corporation who, at such time,
shall constitute the Incumbent Board.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
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on the Effective Date and ending on the [third]** anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (C)
manage personal investments, so long as such activities do
not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company
in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
** This would be the second anniversary for certain Executives
covered by this Agreement.
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immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the Executive's highest bonus
under the Company's annual contingent (or incentive) compensation
plans or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies
(including, but not limited to, the Company's Restricted Stock
Plan, Employee Investment Plan, Employee Stock Ownership Plan,
Payroll-based Employee Stock Ownership Plan, Employee Retirement
Plan, Supplemental Retirement Plan and Stock Option Plan), but in
no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as
in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
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may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life (and, if applicable, supplemental term
life insurance), group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies
and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to the other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
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(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or Disability.
The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement
of its intention to terminate the Executive's employment. In
such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean
the absence of the Executive from the Executive's duties with the
Company on a full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially
and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered "willful"
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unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board of Directors of the Company
(the "Company Board") (or, if applicable, upon the instructions
of the Chief Executive Officer or a senior officer of the
Company) or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and in the best interests of the
Company. Anything in this Section 5(b) or elsewhere in this
Agreement to the contrary notwithstanding, the employment of the
Executive shall in no event be considered to have been terminated
by the Company for Cause if termination of the Executive's
employment took place (a) as the result of bad judgment or
negligence on the part of the Executive, or (b) as the result of
an act or omission without the intent of gaining therefrom
directly or indirectly a profit to which the Executive was not
legally entitled, or (c) because of an act or omission believed
by the Executive in good faith to have been in or not opposed to
the interests of the Company, or (d) for any act or omission in
respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under the
By-laws of the Company or the laws of the State of Massachusetts
or the directors' and officers' liability insurance of the
Company, in each case as in effect at the time of such act or
omission, or (e) as the result of an act or omission which
occurred more than twelve calendar months prior to the
Executive's having been given notice of the termination of the
Executive's employment for such act or omission unless the
commission of such act or such omission could not at the time of
such commission or omission have been known to a member of the
Company Board (other than the Executive, if the Executive is then
a member of the Company Board), in which case more than twelve
calendar months from the date that the commission of such act or
such omission was or could reasonably have been so known, or (f)
as the result of a continuing course of action which commenced
and was or could reasonably have been known to a member of the
Board (other than the Executive) more than twelve calendar months
prior to notice having been given to the Executive of the
termination of the Executive's employment.
The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the
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conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason.
(i) For purposes of this Agreement, "Good Reason"
shall mean the following involuntary circumstances:
A. the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
B. any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
C. the Company's requiring the Executive to be based
at any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to
travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;
D. any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
E. any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c)(i), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(ii) For purposes of this Agreement, "Good Reason"
shall also mean the following voluntary circumstance: Anything
in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period
immediately following the first anniversary of the Effective Date
shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the
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Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability.
(i) If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause
or Disability or the Executive shall terminate employment for
Good Reason as defined in Section 5(c)(i) of this Agreement,
then, subject to the provisions of Section 9 of this Agreement:
A. the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(1) the sum of (a) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (b) the product of (x) the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve
33
<PAGE>
full months or during which the Executive was employed for less
than twelve full months), for the most recently completed fiscal
year during the Employment Period, if any (such higher amount
being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 and (c) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described
in clauses (a), (b), and (c) shall be hereinafter referred to as
the "Accrued Obligations"); and
(2) the amount equal to the product of (a) [three]*
and (b) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus; and
(3) an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to the Executive than
those in effect under the Company's Retirement Plan immediately
prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together,
the "SERP") which the Executive would receive if the Executive's
employment continued for [three]* years after the Date of
Termination assuming for this purpose that all accrued benefits
are fully vested, and, assuming that the Executive's compensation
in each of the [three]* years is that required by Section 4(b)(i)
and Section 4(b)(ii), over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
B. for [three]** years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement as if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes
* This would be [two] , as the multiplier or years, for certain
of the Executives covered by an Agreement.
** This would be [two], as the multiplier or years, for certain
of the executives covered by an Agreemnet
34
<PAGE>
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until [three]* years after
the Date of Termination and to have retired on the last day of
such period;
C. for [three]* years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this
Section 6(a)(i)C in any one calendar year shall not exceed 10% of
the Executive's Annual Base Salary; and
D. for [three]* years after the Executive's Date of
Termination, to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy
or practice or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(ii) If, during the Employment Period, the Executive
shall terminate employment for Good Reason as defined in Section
5(c)(ii) of this Agreement, then, subject to the provisions of
Section 9 of this Agreement:
A
sum in cash within 30 days after the Date of Termination the
Accrued Obligations;
B. the Company shall pay in thirty-six (36)** monthly
installments at the end of each month commencing with the month
next following the month in which the Date of Termination shall
have occurred and continuing for a total of thirty-six (36)**
monthly payments, an aggregate amount equal to the sum of (1) an
amount equal to the product of (x) three (3)* and (y) the sum of
(i) the Executive Annual Base Salary and (ii) the Executive's
Highest Annual Bonus and (2) the amount determined by the
application of Section 6(a)(i)A(3) above, with the amount of each
such monthly installment being such aggregate amount divided by
thirty-six (36)**;
** Twenty-Four (24) months for certain Executives covered by the
Agreement.
* This would be two (2) years for certain Executives covered by
the Agreement.
35
<PAGE>
C. for [three]* years after the Executive's Date of
Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement as if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until [three]* years after
the Date of Termination and to have retired on the last day of
such period;
D. for [three]* years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the
Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this
Section 6(a)(ii)D in any one calendar year shall not exceed [10%]
of the Executive's Annual Base Salary;
E. for [three]* years after the Executive's Date of
Termination, to the extent not theretofore paid or provided to
the Executive, any Other Benefits; and
F. The Company's obligation to make any particular
installment payment required by Section 6(a)(ii)B above will be
offset, on a dollar for dollar basis, by any of the following
amounts (to the extent that they have not theretofore been the
basis for an offset) that shall have been received by the
Executive prior to the date on which such installment is due to
be paid by the Company: (x) the amount of any cash compensation
received by the Executive from another employer; (y) the amount
of any cash payment received by the Executive as a result of
* This would be two (2) years for certain Executives covered by the
Agreement.
36
<PAGE>
self-employment activities by the Executive; and (z) the amount
of any employment or self-employment compensation which, although
not paid, has been guaranteed to the Executive as of the date of
such installment. The Executive agrees (1) to notify the Company
promptly upon securing employment or becoming self-employed
during any period during which installment payments are payable
by the Company pursuant to Section 6(a)(ii)B above and (2) to
furnish the Company written evidence of compensation earned for
such employment or self-employment as the Company may from time
to time reasonably request.
(a) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term "Other
Benefits" as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if
any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other
peer executives of the Company and its affiliated companies and
their beneficiaries.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term "Other
Benefits" as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
37
<PAGE>
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) the Executive's Annual Base Salary through the
Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) other benefits, in
each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision
of Other Benefits. In such case, all Accrued Obligations shall
be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which
the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement.
(a) No Set-Off. Except as provided for in Section
6(a)(ii)F, the Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company may have against the Executive or others.
(b) No Mitigation Obligation. The Executive's benefits
hereunder shall be considered severance pay in consideration of
the Executive's past service, and pay in consideration of the
Executive's continued service from the date hereof and in no
event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts
38
<PAGE>
payable to the Executive under any of the provisions of this
Agreement and, except as provided for in Section 6(a)(ii)F, such
amounts shall not be reduced whether or not the Executive obtains
other employment.
(c) Expenses. In order that the purpose of this
Agreement not be frustrated, it is the intent of the Company that
the Executive not be required to incur the expenses associated
with the enforcement of the Executive's rights under this
Agreement by litigation or other legal action because the cost
and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder, nor be bound
to negotiate any settlement of the Executive's rights hereunder
under threat of incurring such expenses. Accordingly, if
following the Effective Date it should appear to the Executive
that the Company has failed to comply with any of its obligations
under this Agreement or, if at any time, in the event that the
Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or to recover from,
the Executive the benefits intended to be provided to the
Executive hereunder, and that the Executive has complied with all
of the Executive's obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to time to retain
counsel of the Executive's choice at the expense of the Company
as provided in this Section 8(c), to represent the Executive in
connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel,
and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and
such counsel. The Company agrees to pay as incurred, to the full
extent permitted by law, all costs and expenses which the
Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of
performance thereof (including, without limitation, as a result
of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"). Included within such costs and expenses
shall be the reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove provided, which
fees and expenses shall be paid or reimbursed to the Executive by
the Company on a regular, periodic basis upon presentation by the
Executive of a statement or statements prepared by such counsel
39
<PAGE>
in accordance with its customary practices.
9. Certain Reductions of Payments to the Executive and
Certain Additional Payments by the Company. (a) (i) Anything in
this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code
(such excise tax is hereinafter referred to as the "Excise Tax"),
then the Payments shall be reduced, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments
will not give rise to any Excise Tax, it being the intention of
the Company and the Executive that no Payment made pursuant to
this Agreement be deemed an "excess parachute payment" pursuant
to Section 280G of the Code.
(ii) If, notwithstanding the intention of the Company
and the Executive that no Payment made pursuant to this Agreement
be deemed an "excess parachute payment" pursuant to Section 280G
of the Code and that no Excise Tax be payable by the Executive as
a result of any Payment and the operation of Section 9(a)(i)
above, it shall be determined that a Payment is subject to the
Excise Tax, then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including the computation of the Reduced Amount, whether and when
a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determinations, shall be made by Coopers & Lybrand L.L.P. or such
other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
40
<PAGE>
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
41
<PAGE>
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or to contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the
42
<PAGE>
Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
43
<PAGE>
If to the Company:
Stone & Webster Engineering Corporation
245 Summer Street
Boston, Massachusetts 02210
Attention: Secretary/General Counsel
with a copy to:
Stone & Webster, Incorporated
250 West 34th Street
New York, New York 10119
Attention: Secretary/General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)A-E of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with
respect to the subject matter hereof.
44
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
STONE & WEBSTER ENGINEERING [Executive]
CORPORATION
By:
Name:
Title:
Guarantee
by
Stone & Webster, Incorporated
Stone & Webster, Incorporated, pursuant to the
authorization from its Board of Directors, has caused these
presents to be executed in its name on its behalf, all as of the
day and year first above written, as evidence of the guaranty by
Stone & Webster, Incorporated of the performance by Stone &
Webster Engineering Corporation of its obligations under the
foregoing Employment Agreement.
STONE & WEBSTER, INCORPORATED
By:
Name:
Title:
45
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<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-30-1995
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