<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
STONE & WEBSTER, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
STONE & WEBSTER, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
STONE & WEBSTER, INCORPORATED
250 West 34th Street
New York, New York 10119
March 23, 1995
Dear STOCKHOLDER:
We cordially invite our Stockholders to attend the 1995 Annual Meeting of
Stockholders of Stone & Webster, Incorporated which will be held at the
King/Sullivan Room, Hotel duPont, 11th and Market Streets, Wilmington, Delaware,
on Thursday, May 11, 1995, at 2:00 P.M. We would ask Stockholders who plan to
attend the Annual Meeting to mark the appropriate box on the enclosed proxy
card.
As more fully described in the accompanying Proxy Statement, the Board of
Directors recommends that you vote FOR the election of Directors, FOR the
ratification of the selection of independent accountants, FOR the proposed 1995
Stock Option Plan, FOR the proposed 1995 Stock Plan for Non-Employee Directors,
and AGAINST the proposal of a stockholder.
After more than 45 years of distinguished service with the Stone & Webster
organization, William F. Allen, Jr. is not standing for re-election. We
gratefully acknowledge his many contributions to the Corporation over the years.
We also recognize with great thanks the four decades of service of William M.
Egan, who is retiring on April 1, 1995 as Executive Vice President and a
Director. We also note with singular respect and appreciation that J. Peter
Grace, who has chosen not to stand for re-election, has completed nearly 50
years of service as a Director of the Corporation.
It is important that your shares be represented at the meeting whether or
not you are personally present. Accordingly, we ask that you sign, date and mail
the enclosed proxy promptly.
As in past years, members of management will review the performance and
prospects of the Corporation, and will be available to answer questions during
and after the meeting.
Sincerely,
BRUCE C. COLES
President and
Chief Executive Officer
<PAGE> 3
STONE & WEBSTER, INCORPORATED
------------------------
NOTICE OF MEETING
------------------------
250 West 34th Street, New York, New
York 10119
March 23, 1995
To the Stockholders of
STONE & WEBSTER, INCORPORATED:
Notice is hereby given that the 1995 Annual Meeting of Stockholders of
Stone & Webster, Incorporated (the Corporation) will be held at the
King/Sullivan Room, Hotel duPont, 11th and Market Streets, Wilmington, Delaware,
on Thursday, May 11, 1995, at 2:00 P.M., Wilmington time, for the purpose of
considering and acting upon the following:
1. The election of three Directors for a term of three years and until their
successors are duly elected and qualified.
2. The ratification of the selection by the Corporation's Board of Directors of
the firm of Coopers & Lybrand L.L.P., independent accountants, as auditor of
the Corporation and its subsidiaries for the year 1995.
3. The approval of the 1995 Stock Option Plan of Stone & Webster, Incorporated
covering certain of the Directors, officers and employees of the Corporation
and its subsidiaries.
4. The approval of the 1995 Stock Plan for Non-Employee Directors of Stone &
Webster, Incorporated.
5. A proposal submitted by a stockholder as described in the Proxy Statement
beginning on page 26.
6. Any and all other business that may properly come before the meeting.
Only Stockholders of record at the close of business on March 13, 1995 will
be entitled to vote at the meeting or any adjournment or postponement thereof.
IF YOU ARE UNABLE TO BE PERSONALLY PRESENT AT THE MEETING, YOU ARE
REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND TO RETURN IT PROMPTLY.
By order of the Board of Directors,
PETER F. DURNING
Secretary
<PAGE> 4
STONE & WEBSTER, INCORPORATED
250 West 34th Street
New York, New York 10119
PROXY STATEMENT
The following information is furnished to each stockholder (the
Stockholder) of Stone & Webster, Incorporated (the Corporation) in connection
with the foregoing notice of the 1995 Annual Meeting of the Stockholders of the
Corporation (the Annual Meeting) to be held on Thursday, May 11, 1995, and the
enclosed proxy for use at the Annual Meeting and any adjournments or
postponements thereof. This Proxy Statement and the form of the proxy are being
mailed to Stockholders commencing on or about March 23, 1995.
The enclosed proxy is being solicited by and on behalf of the Board of
Directors of the Corporation. A proxy executed on the enclosed form may be
revoked by the Stockholder at any time before the shares are voted by filing
with the Secretary of the Corporation an instrument revoking such proxy or a
duly executed proxy bearing a later date or by attending the Annual Meeting and
electing to vote in person. If a Stockholder is a participant in the
Corporation's Dividend Reinvestment Plan, the proxy represents the shares in the
Stockholder's plan account in addition to the shares registered in the
Stockholder's name. If the Stockholder is a participant in the Employee
Investment Plan, Employee Stock Ownership Plan or Payroll-based Employee Stock
Ownership Plan of Stone & Webster, Incorporated and Participating Subsidiaries,
the proxy will constitute voting instructions to the trustee under those plans
directing how the shares in the participant's accounts in the plans are to be
voted. The shares of the Corporation's Common Stock represented by all proxies
which are received by the Corporation, or voting instructions received by the
trustee under the plans, will be voted as specified. If no specification is
made, the shares represented thereby will be voted:
(1) FOR the election of the Board's nominees as Directors;
(2) FOR the ratification of the selection of Coopers & Lybrand L.L.P.,
independent accountants, as auditor of the Corporation and its
subsidiaries for the year 1995;
(3) FOR the proposal to approve the 1995 Stock Option Plan of Stone &
Webster, Incorporated covering certain of the Directors, officers
and employees of the Corporation and its subsidiaries;
(4) FOR the proposal to approve the 1995 Stock Plan for Non-Employee
Directors of Stone & Webster, Incorporated; and
(5) AGAINST the proposal submitted by a stockholder as discussed below.
The Board of Directors has adopted a policy of confidentiality regarding
the voting of shares by Stockholders. Under this policy, all Stockholder votes
by proxy or ballot will be kept permanently confidential and will not be
disclosed to the Corporation or third parties unless disclosure is required by
1
<PAGE> 5
law or the Stockholder consents to or requests disclosure, or in the case of a
contested election or other matter, where the contesting proponent does not
agree in writing to comply with the same policy. Voting instructions given to
the trustee by a participant in the Employee Investment Plan, Employee Stock
Ownership Plan or Payroll-based Employee Stock Ownership Plan of Stone &
Webster, Incorporated and Participating Subsidiaries will be mailed directly to
the trustee (or its representative) and will be kept permanently confidential
and will not be disclosed to the Corporation or third parties unless disclosure
is required by law or the participant consents to or requests disclosure.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Corporation to act as inspectors of election for
the meeting. The inspectors of election will treat shares of Common Stock
represented by proxies that specify abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. However,
abstentions will be treated as negative votes for purposes of determining the
outcome of any matter submitted to Stockholders which requires the approval of a
majority of votes entitled to be cast on such matters.
The inspectors of election will treat shares represented by proxies for
shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote and which the
broker or nominee does not have discretionary power to vote on a particular
matter (sometimes referred to as "broker non-votes") as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
However, for the purposes of determining the outcome of any matter as to which
the broker has physically indicated on the proxy that it does not have
discretionary authority to vote, those shares will be treated as not present and
not entitled to vote with respect to that matter (even though those shares are
considered entitled to vote for quorum purposes and may be entitled to vote on
other matters).
The expenses in connection with the solicitation of proxies, including the
cost of preparing, assembling and mailing proxy material, and also the payment
or reimbursement of charges of brokerage houses and other institutions, nominees
and fiduciaries in forwarding the Corporation's proxy material to beneficial
owners, will be borne by the Corporation. In addition to solicitations by mail,
some of the officers and regular employees of the Corporation and its
subsidiaries may solicit proxies personally or by telephone, facsimile or
telegraph. The Corporation has also retained D. F. King & Co., Inc. to assist in
the solicitation of proxies by the methods above referred to at an estimated
cost of $10,000 plus out-of-pocket expenses.
The Corporation had outstanding, as of March 13, 1995, 14,500,227 shares of
Common Stock (excluding 3,231,261 shares held in the treasury), each share of
which is entitled to one vote. Only Stockholders of record at the close of
business on March 13, 1995 will be entitled to vote at the Annual Meeting or any
adjournments or postponements thereof.
2
<PAGE> 6
As of March 13, 1995, the institutional trustees under the following
employee benefit plans held of record more than 5% of the outstanding Common
Stock of the Corporation:
The Employee Investment Plan of Stone & Webster, Incorporated and
Participating Subsidiaries (the Employee Investment Plan) -- 1,889,867
shares (approximately 13.0%)
and
The Employee Stock Ownership Plan of Stone & Webster, Incorporated and
Participating Subsidiaries (ESOP) -- 3,112,555 shares (approximately
21.5%).
The Committee under the Employee Investment Plan (the Plan Committee) may
be considered a beneficial owner of the shares held under the Employee
Investment Plan by reason of the definition of beneficial ownership contained in
Rule 13d-3 of the Securities and Exchange Commission (the Commission)
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
Act). The Employee Investment Plan provides that shares allocated to the
investment accounts of participants will be voted as the participants direct,
and shares not voted by participants will be voted in accordance with the
direction of the Plan Committee. To the extent that the Plan Committee shares
voting power as aforesaid, the Plan Committee may be considered a beneficial
owner under the Commission definition. The Plan Committee is presently composed
of Kenneth G. Ryder, Chairman, William F. Allen, Jr., Bruce C. Coles, Donna R.
Fitzpatrick, Kent F. Hansen, and John A. Hooper, all of whom are Directors of
the Corporation. Pursuant to the ESOP, shares allocated to the accounts of
participants are voted as the participants direct, and allocated shares not
voted by the participants and all unallocated shares are voted in the
proportions the allocated shares are voted by the participants. Shares held
under the ESOP may not be transferred by the trustee of that plan, other than to
meet distribution requirements of the ESOP or in connection with a statutory
reclassification of the Corporation's Common Stock or a statutory merger,
consolidation or sale of assets or in certain limited circumstances, upon the
direction of the participants.
As of March 13, 1995, the Payroll-based Employee Stock Ownership Plan
(PAYSOP) trust (which was merged into the ESOP trust effective as of January 1,
1995) held 68,097 shares (approximately 0.5%) of Common Stock. Shares allocated
to the accounts of participants from the PAYSOP are voted as the participants
direct, and allocated shares not voted by participants will not be voted.
3
<PAGE> 7
In addition to the foregoing, the following table sets forth information
concerning a beneficial owner of more than 5% of the outstanding Common Stock of
the Corporation:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME AND ADDRESS SHARES COMMON STOCK
------------------------------------------------- --------- -------------
<S> <C> <C>
Frank J. A. Cilluffo(1).......................... 1,531,400 10.56%
Cilluffo Associates, L.P.
717 Fifth Avenue, 23rd Floor
New York, New York 10022
</TABLE>
- ---------------
(1) Frank J. A. Cilluffo, a Director of the Corporation, reporting for himself
and Cilluffo Associates, L.P., Zenith Associates, L.P., Frank and Irja
Cilluffo Foundation, and Edward C. Meyer, has furnished information to the
Corporation which disclosed that as of March 13, 1995, such individuals and
entities beneficially owned, taken together, 1,531,400 shares. Mr. Cilluffo
disclaims beneficial ownership of the shares held by Cilluffo Associates,
L.P. and by Zenith Associates, L.P. except to the extent of his pecuniary
interest in the securities. He also disclaims beneficial ownership of 10,000
shares held by the Frank and Irja Cilluffo Foundation.
To the knowledge of the Corporation, as of March 13, 1995 no other person
beneficially owned more than 5% of the outstanding Common Stock of the
Corporation.
I. ELECTION OF DIRECTORS
(PROXY ITEM NO. 1)
In accordance with the Corporation's By-Laws, the Board of Directors will
consist of ten members and is divided into three classes. The three Directors to
be elected at this Annual Meeting will be elected to serve until the 1998 Annual
Meeting of the Stockholders, and until their successors are duly elected and
qualified. The vote of a majority of all votes entitled to be cast at the Annual
Meeting shall be sufficient to elect a Director. The Board recommends that
Stockholders vote FOR each of the nominees listed below. It is intended that
proxies and voting instructions which are executed without specification (other
than broker non-votes) will be voted for the election of the nominees listed
below, all of whom are now Directors of the Corporation:
FRANK J. A. CILLUFFO, J. ANGUS McKEE AND MEREDITH R. SPANGLER
William F. Allen, Jr., who is currently Chairman of the Board, and J. Peter
Grace will not stand for re-election to the Board when their current terms
expire in May, 1995. William M. Egan, a Director and Executive Vice President of
the Corporation, has announced that he intends to resign from the Board of
Directors in connection with his retirement on April 1, 1995; his term of office
as a Director would have expired in May, 1997.
On February 15, 1995, the Board of Directors of the Corporation approved a
plan to elect Bruce C. Coles to the additional position of Chairman of the Board
of the Corporation after the 1995 Annual Meeting.
4
<PAGE> 8
Certain information, as reported to the Corporation, respecting such
persons and other persons whose term of office as Director will continue after
the Annual Meeting, and information relating to the beneficial ownership of
Common Stock of the Corporation of other Named Executives (as hereinafter
defined) who are not Directors of the Corporation, is set forth below:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE
CORPORATION
BENEFICIALLY
BUSINESS EXPERIENCE OWNED ON
DIRECTORS AND NOMINEES FOR THE PAST FIVE YEARS, DIRECTOR MARCH 13,
AND EXECUTIVE OFFICERS AGE AND OTHER INFORMATION SINCE 1995(A)
- ------------------------- --------------------------------------- ----- -------------
<S> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 1998
Frank J. A. Cilluffo..... Managing Partner, Cilluffo Associates, 1994 1,521,400(B)
L.P. (Private investment partnership)
(51).
J. Angus McKee........... Chairman and Chief Executive Officer, 1984 400
Gulfstream Resources Canada Limited
(Oil and gas) (59).
Meredith R. Spangler..... Trustee; Chairman of C. D. Spangler 1991 100
Foundation (57).
Also Director of NationsBank
Corporation.
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Bruce C. Coles........... President of the Corporation (50). 1990 36,255(C)
William M. Egan.......... Executive Vice President of the 1991 53,635(C)(D)
Corporation (66).
Donna R. Fitzpatrick..... President and Chief Executive Officer, 1994 100
Radiance Services Company
(Microelectronics cleaning
technology); during 1985-90, Under
Secretary and Assistant Secretary,
U.S. Department of Energy (46).
Kent F. Hansen........... Professor of Nuclear Engineering, 1988 200
Massachusetts Institute of Technology
(Education) (63).
Also Director of EG&G, Inc.
Elvin R. Heiberg III..... President, Heiberg Associates, Inc. 1994 100(E)
(Consulting) (63).
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE
CORPORATION
BENEFICIALLY
BUSINESS EXPERIENCE OWNED ON
DIRECTORS AND NOMINEES FOR THE PAST FIVE YEARS, DIRECTOR MARCH 13,
AND EXECUTIVE OFFICERS AGE AND OTHER INFORMATION SINCE 1995(A)
- ------------------------- --------------------------------------- ----- -------------
<S> <C> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1996
William L. Brown......... Retired Chairman, Bank of Boston 1970 400
Corporation and The First National
Bank of Boston (Banking) (73). Also
Director of G. C. Companies, Inc.,
Ionics, Incorporated, North American
Mortgage Company, Standex
International Corporation, and
Trustee of Bradley Real Estate Trust.
John A. Hooper........... Former Vice Chairman, The Chase 1974 400
Manhattan Corporation and The Chase
Manhattan Bank, N.A. (Banking) (72).
Kenneth G. Ryder......... Chancellor, Northeastern University 1987 200
(Education) (70).
OTHER NAMED EXECUTIVES OF THE CORPORATION WHO
ARE NOT DIRECTORS OR NOMINEES
James N. White........... Executive Vice President (60). -- 18,616(C)
Kenneth F. Reinschmidt... Senior Vice President (56). -- 22,241(C)
Peter F. Durning......... Secretary (56). -- 2,534(C)
</TABLE>
- ---------------
(A) The information contained in this column reflects the definition of
beneficial ownership for the purposes of the proxy rules of the Commission.
The nature of beneficial ownership for shares shown in this column is sole
voting and investment power, except to the extent set forth in footnotes
(B), (C) and (D).
(B) Includes shares held by Mr. Cilluffo and his associates as previously set
forth in this Proxy Statement, but excludes 10,000 shares held by the Frank
and Irja Cilluffo Foundation, Inc. Mr. Cilluffo disclaims beneficial
ownership of the shares held by Cilluffo Associates, L.P. and by Zenith
Associates, L.P. except to the extent of his pecuniary interest in such
securities.
(C) Includes (i) shares allocated under the Employee Investment Plan and which
are subject to its terms and provisions with respect to termination and
withdrawal and, in limited circumstances, to forfeiture, and held as of
December 31, 1994 by The Chase Manhattan Bank, N.A., trustee under the plan
(with respect to such shares, voting power and investment power are
determined in accordance with the provisions of the plan); (ii) shares
allocated under the ESOP and which are subject to its terms with respect to
forfeiture and held as of December 31, 1994 by The Chase Manhattan Bank,
N.A., trustee under the plan; (iii) shares allocated under the PAYSOP and
which are subject to its terms and held as of December 31, 1994 by The Chase
Manhattan Bank, N.A.,
6
<PAGE> 10
trustee under the plan; and (iv) shares awarded under the Corporation's
Restricted Stock Plan and which are subject to its terms with respect to
forfeiture. Shares held in accounts of employees in the Employee Investment
Plan, ESOP and PAYSOP, including Messrs. Coles, Allen, Egan, White,
Reinschmidt and Durning, are voted by the trustees of such plans in
accordance with the instructions of the employees; in the absence of such
instructions, such shares are voted by the trustees in accordance with the
terms of such plans.
(D) Members of Mr. Egan's family own 124 shares, beneficial ownership of which
is disclaimed by Mr. Egan. Mr. Egan is retiring as a Director and Executive
Vice President on April 1, 1995.
(E) Mr. Heiberg purchased 100 shares subsequent to March 13, 1995.
As of March 13, 1995, the Directors and officers of the Corporation, as a
group, beneficially owned 1,721,372 shares or approximately 11.9% of the
Corporation's outstanding Common Stock, including shares allocated under the
Employee Investment Plan, the ESOP and the PAYSOP. The nature of beneficial
ownership for said shares was sole voting and investment power, except (1) as
referred to in footnotes (B) through (D) above, (2) 47,211 shares were
beneficially owned by William F. Allen, Jr., a Director of the Corporation who
is not standing for re-election, (3) includes 4,368 shares held in a trust of
which Mr. Grace, a Director of the Corporation who is not standing for
re-election, is a trustee who shares voting and investment power and of which he
is a beneficiary, and 7,312 shares held in trusts for the benefit of others of
which he is a trustee who shares voting and investment power, but in which he
disclaims any beneficial interest, and (4) 16,608 shares were held under the
Employee Investment Plan and hence voting power was shared as described on page
3 of this Proxy Statement. Except for Mr. Cilluffo, no Director or officer
beneficially owned as much as 1% of the outstanding Common Stock of the
Corporation.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Corporation's Directors, its
executive officers, and persons holding (as defined in the regulations of the
Commission) more than 10% of a registered class of the Corporation's equity
securities, to file reports of ownership and reports of changes in ownership
with the Commission and the New York Stock Exchange. Directors, executive
officers, and greater than 10% Stockholders are also required by Commission
regulations to furnish the Corporation with copies of all such reports that they
file. Based solely on its review of the copies of such reports received by it
and written representations from certain reporting persons, the Corporation
believes that all filing requirements applicable to its Directors, executive
officers, and greater than 10% Stockholders were complied with during the fiscal
year ended December 31, 1994.
CERTAIN COMMITTEES, ATTENDANCE, AND COMPENSATION OF DIRECTORS
The Board has appointed an Audit Committee, a Nominating Committee, and a
Compensation Committee whose report appears below. All of the members of these
committees are non-employee Directors.
The Audit Committee consists of William L. Brown (Chairman), Donna R.
Fitzpatrick, Kent F. Hansen and J. Angus McKee. The Audit Committee, which met
three times during 1994, among other things,
7
<PAGE> 11
considers and recommends to the full Board the selection of the independent
auditor; reviews the performance of the audit function; and reviews with the
independent and the internal auditors the scope and results of the Corporation's
internal auditing procedures and the adequacy of internal accounting controls.
The Nominating Committee consists of Kent F. Hansen (Chairman), William L.
Brown, John A. Hooper and Meredith R. Spangler. The Nominating Committee, which
met nine times during 1994, considers and makes recommendations to the Board of
Directors as to criteria for Board composition and membership, and the names of
persons whom it concludes should be considered for Board membership. The
Nominating Committee will consider nominees recommended by Stockholders. Such
recommendations should be submitted to the attention of the Corporate Secretary,
Stone & Webster, Incorporated, 250 West 34th Street, 32nd Floor, P. O. Box 1244,
New York, NY 10116.
The Compensation Committee consists of John A. Hooper (Chairman), William
L. Brown, Kenneth G. Ryder and Meredith R. Spangler. The Compensation Committee
met seven times during 1994. The Compensation Committee reviews and approves the
compensation and/or method of determining compensation of the principal officers
and employees of the Corporation, considers compensation plans which are
subsequently presented to the full Board, and authorizes the grant of awards of
Common Stock under the Restricted Stock Plan. For additional information
regarding the policies and mission of the Compensation Committee, see "Report of
the Compensation Committee" below. There are no compensation committee
interlocks or insider participation relationships on the Compensation Committee.
The Board of Directors met twelve times during 1994. In 1994, each of the
Directors attended at least 93% of the total number of meetings of the Board and
of the committees of the Board on which the Director served. Directors who are
not employees of the Corporation receive an annual retainer of $8,000 and a fee
of $2,000 for each Board meeting attended and $1,000 for each committee meeting
attended, except that the Chairman of the Audit Committee receives a committee
meeting fee of $2,000 and the Chairman of each other committee receives a
committee meeting fee of $1,500. Effective July 1, 1994, a Chairman of the Board
who is not an officer or employee of the Corporation is paid a fee of $2,000 for
each meeting of the Board of Directors which he or she shall attend. Directors
are reimbursed for expenses incurred in attending Board and committee meetings.
On March 15, 1995, the Board of Directors adopted, subject to the approval
of the Stockholders at the Annual Meeting, the 1995 Stock Option Plan of Stone &
Webster, Incorporated (the Stock Option Plan) and the 1995 Stock Plan For
Non-Employee Directors of Stone & Webster, Incorporated (the Stock Plan). If
approved by the Stockholders, the Stock Plan would require that Directors who
are not officers or employees of the Corporation receive the annual retainer in
the form of shares of Common Stock of the Corporation (Common Stock), and permit
them to elect to receive all or a portion of Board and Committee meeting fees in
Common Stock in lieu of cash. If approved by the Stockholders, the Stock Option
Plan would, among other things, permit the grant of nonqualified options to
purchase 2,000 shares initially, and 1,000 shares annually thereafter, of Common
Stock to each Director who is not an officer or employee of the Corporation. The
Stock Option Plan is discussed below in Part III, and the full
8
<PAGE> 12
text of that plan is set forth in Exhibit A, of this Proxy Statement. The Stock
Plan is discussed below in Part IV, and the full text of that plan is set forth
in Exhibit B, of this Proxy Statement.
REPORT OF THE COMPENSATION COMMITTEE
Under the direction of the Compensation Committee (the Committee), the
Corporation has developed and implemented compensation plans and programs which
are designed to enhance the growth and profitability of the Corporation and the
increase of Stockholders' value. The Committee is composed of four Directors who
neither are nor have been officers or employees of any company in the Stone &
Webster organization. This Committee determines compensation for the employees
of Stone & Webster, Incorporated and reviews the recommendations of separate
Salary Committees for each of the subsidiary companies. The following is a
report on the compensation philosophy and practices of the Committee.
The Committee's fundamental approach is to compensate the Named Executives
(included in the compensation table of this Proxy Statement) at a basic level
commensurate with the responsibilities assigned to them, supplemented with
contingent remuneration which is directly related to the performance of the
Corporation as measured by consolidated net income. The objectives of the
Corporation's executive compensation practices are to attract and retain very
highly competent individuals, to encourage them to accomplish and surpass the
business goals of the Stone & Webster organization, and to link the interests of
the Corporation's executives and managers with the interests of the
Stockholders. Because of the professional nature of the Corporation, this
philosophy applies not just to the Named Executives, but to many levels within
the corporate structure.
The Corporation, through operating subsidiaries, is primarily engaged in
the engineering and construction industry. The engineering and construction
business is fundamentally cyclical in nature, with activity tending historically
to come in clusters to some extent coinciding with the general business cycle
and to some extent depending upon activity within the industries served. For
this reason, the need to limit overhead costs was recognized early in the
history of the Stone & Webster organization. At the same time, because of the
demanding technical nature of the business, it is necessary to attract and
retain professionals of the highest competence.
Accordingly, the philosophy of Stone & Webster has been to provide the
Named Executives and its professional and other supervisory employees with fixed
salaries at relatively modest levels, with the balance of their regular
compensation contingent upon the profits of the business. In this way the
professional staff is compensated in accordance with their worth, while the
requisite flexibility for the inevitable downturns in the engineering and
construction industry is retained.
In 1994 the Compensation Committee retained a compensation consulting firm
to evaluate the Corporation's executive compensation program. The firm's study
compared the Corporation's compensation levels to a comparator group of
engineering and construction companies selected by the firm, as well as to
published survey data for a broader selection of companies. Many but not all of
the companies in the comparator group are also included in the Investor's
Business Daily William O'Neil Building/Heavy
9
<PAGE> 13
Construction Industry Index shown in the performance graph which appears below
in this Proxy Statement. The consulting firm concluded that for reasons of
company size and other considerations, the comparator group better reflected the
relevant market for executive talent.
The study showed that the base salary levels of the Corporation's Chief
Executive Officer (CEO) and other Named Executives, prior to the 1994 salary
reduction discussed below, were generally at the median level of the comparator
companies. The study also concluded that, consistent with the compensation
philosophy outlined above, the recent absence of payouts under the Corporation's
contingent compensation plan has resulted in total annual compensation levels
significantly below median competitive levels. Finally, the study concluded that
the comparator companies have provided their senior executives with
significantly larger long-term incentive awards than has the Corporation.
1994 Compensation Program
Effective January 1, 1994, the Named Executives, except Mr. Allen, received
salary increases, which in the aggregate represented approximately 11% of annual
base salary. Mr. Coles' salary was increased to an annual rate of $400,000, to
recognize his increased responsibilities resulting from his then approaching
election as Chief Executive Officer. Due to the disappointing financial results
in the first half of the year, all of the Named Executives (except Mr. Allen,
who retired as of July 1, 1994) had their salary reduced for the six month
period ending December 31, 1994, with such reductions in the aggregate
representing approximately 8.5% of annual base salary; Mr. Coles' salary for the
last six months of the year was reduced by 10%. Mr. Durning's full salary was
restored in August 1994.
Under the Corporation's contingent compensation plan for 1994, the
Committee assigned units of participation to the Named Executives and other
officers and employees at the beginning of the year. The Committee considered
such factors as job performance, special expertise, experience level, potential
ability to affect financial performance, perceived competition for personnel,
and rank order-of-value to the Company when assigning units. The value of the
units of participation was dependent upon the Corporation's consolidated net
income (with certain adjustments), up to an aggregate maximum amount for all
participants. The plan required that the adjusted consolidated net income be
positive to earn a payout, and the Committee retained the discretion to reduce
the contingent amount otherwise payable if it believed such a reduction was
appropriate.
No contingent payments were made for 1994 because of the level of the
Corporation's adjusted consolidated net income.
Under the Corporation's Restricted Stock Plan, the Committee may from time
to time implement a long-term component in the compensation package by granting
restricted stock awards. Taking into account the awards made in past years and
the level of the Corporation's 1994 adjusted consolidated net income, the
Committee made no such awards to Named Executives in 1994.
Mr. Allen has an eleven month consulting agreement with the Corporation
which expires May 31, 1995. Under the terms of the agreement, which enables the
Corporation to obtain the benefit of Mr. Allen's many years of experience with
the Corporation and its subsidiaries, Mr. Allen receives a monthly
10
<PAGE> 14
payment of $25,000 for consulting services; during 1994, he received $150,000
pursuant to this agreement for services between July 1, 1994 and December 31,
1994.
1995 Compensation Program
For 1995, the Committee has approved a revised annual incentive plan.
Although still based on net income, the new plan includes a link to business
unit performance and individual objectives where appropriate. For the Named
Executives to earn a payout under the 1995 plan, the Corporation must achieve a
specified level of net income, exclusive of pension credit and other
nonoperating or unusual items.
Under this plan, the CEO can earn an amount ranging from 0% to 25% of base
salary, depending upon net income and the percentage assigned by the Committee.
The other Named Executives can earn from 0% to 20% of base salary. The Committee
believes that the maximum award levels are modest by industry standards, and
retains the discretion to increase the awards if the "maximum" profit level is
exceeded for the year. The Committee also has the discretion to reduce the
awards if appropriate.
The Committee also has determined that, in the future, the Corporation's
long-term program should include stock option awards for Named Executives and
other key employees. Stock Options only reward executives if the Corporation's
Stockholders benefit from an increase in the Corporation's stock price.
As a result, the Committee has recommended and the Board has adopted a new
Stock Option Plan, subject to Stockholder approval. The Board also has amended
the Corporation's Restricted Stock Plan to reduce the number of shares available
for future awards from 669,800 shares to 250,000 shares, effective upon
Stockholder approval of the Stock Option Plan. Also see the discussion of the
Stock Option Plan which appears below in this Proxy Statement.
Deductibility of Executive Compensation
In 1993, Congress enacted the Revenue Reconciliation Act of 1993, which
includes, among other things, a provision that denies public companies the
ability to deduct certain amounts paid as executive compensation in excess of $1
million per year (section 162(m)). Section 162(m) does not prohibit a company
from paying annual compensation in excess of $1 million but rather eliminates a
company's ability to deduct such excess amounts. The Corporation has reviewed
its compensation policies with respect to covered executives and determined that
section 162(m) had no impact on such policies in 1994 and should have no impact
on such policies in 1995, since no covered executive is expected to receive
compensation in such year in excess of the $1 million threshold.
THE COMPENSATION COMMITTEE
John A. Hooper, Chairman
William L. Brown
Kenneth G. Ryder
Meredith R. Spangler
11
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation awarded
to, earned by or paid to any person serving as the Corporation's Chief Executive
Officer (or any person acting in a similar capacity during the last completed
fiscal year), and each of the four most highly compensated executive officers of
the Corporation (collectively, the Named Executives), for services rendered to
the Corporation in all capacities during each of the last three fiscal years in
which such person was an executive officer of the Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION(1) AWARDS(4) PAYOUTS
------------------------------- ------------------------ -------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDER- OTHER
NAME AND COMPEN- STOCK LYING LTIP COMPEN-
PRINCIPAL (2) (2) SATION AWARD(S) OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY($) BONUS($) (3)($) ($) SARS(#) ($) ($)(5)
- --------------------------- ---- --------- -------- ------- ---------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce C. Coles(6).......... 1994 380,000 0 1,051(8) 0 0 0 5,554(9)
President and Chief 1993 349,000 0 - 306,000 0 0 6,187
Executive Officer 1992 349,000 55,249 0 0 0 6,185
William F. Allen,
Jr.(6,7)................. 1994 275,000 0 - 0 0 0 4,420
Chairman and former 1993 550,000 0 - 0 0 0 6,187
Chief Executive Officer 1992 550,000 88,399 0 0 0 6,185
William M. Egan............ 1994 329,650 0 - 0 0 0 4,420
Executive Vice 1993 327,000 0 - 0 0 0 6,187
President 1992 327,000 39,779 0 0 0 6,185
James N. White............. 1994 256,988 0 - 0 0 0 4,420
Executive Vice 1993 242,000 0 - 0 0 0 6,187
President 1992 227,000 22,099 0 0 0 6,185
Kenneth F. Reinschmidt(10). 1994 221,375 0 - 0 0 0 4,420
Senior Vice President 1993 201,400 0 - 0 0 0 5,387
1992 - - - - - -
Peter F. Durning(11)....... 1994 138,765 0 - 0 0 0 3,933
Secretary 1993 - - - - - - -
1992 - - - - - - -
---- --------- -------- ------- ---------- -- -- -------
</TABLE>
- ---------------
(1) Salaries for the years 1992, 1993 and 1994 were paid to certain employees
of the Corporation, including the Named Executives, under a plan adopted
for that year for compensating the individuals selected, in part by a fixed
amount ("Salary" in the table above) and in part by a contingent amount
("Bonus"), the latter amount being measured by a percentage, as determined
by the Compensation Committee in each individual case, of the Corporation's
Adjusted Consolidated Net Earnings determined as provided in the plan and
subject to certain limitations including a percentage limitation on the
total contingent amounts which may be paid. The Compensation Committee has
developed and the Board of Directors has adopted a new plan for the
compensation of executives of the Corporation and its subsidiaries in which
the Named Executives (except Mr. Allen) are among those selected to
participate. Under the proxy regulations of the Commission, the
12
<PAGE> 16
second column under "Annual Compensation" is required to be labeled
"Bonus"; these amounts would more accurately be described as "Contingent
Payments" because the amounts paid are dependent on the Corporation's
performance during the year, and there is no assurance that any such
amounts would be paid, as was the case both in 1993 and in 1994 when no
such payments were made. See also the Report of the Compensation Committee.
(2) Includes amounts deferred by the Named Executives under provisions of the
Employee Investment Plan pursuant to Section 401(k) of the Internal Revenue
Code.
(3) Perquisites and personal benefits paid to each Named Executive during 1992,
1993 and 1994 in each instance aggregated less than $50,000 or 10% of the
total annual salary and contingent payment set forth in the columns
entitled "Salary" and "Bonus" and, accordingly, is omitted from the table
as permitted by the rules of the Commission.
(4) Restrictions on shares awarded pursuant to the Restricted Stock Plan lapse
in five equal annual installments commencing on the first anniversary date
of each award. Pursuant to the Restricted Stock Plan, as of December 31,
1994, Mr. Coles held 9,600 shares of Common Stock with a market value of
$316,800, which includes shares awarded in 1993 as reflected in the table
above. No other Named Executive holds any shares of restricted stock which
have not fully vested under the terms of the Restricted Stock Plan.
Dividends are payable on restricted stock awards directly to the holder
of restricted stock. The Corporation did not have any plans which provide
compensation in the forms of stock options or stock appreciation rights (
SAR's) during the years covered by this table. As discussed below, a Stock
Option Plan has been adopted by the Board of Directors, subject to the
approval of the Stockholders at the Annual Meeting.
(5) Includes contributions made by the Corporation under the Employee
Investment Plan during 1994 on behalf of Messrs. Coles, Allen, Egan, White,
Reinschmidt and Durning in the amount of $1,875, $1,875, $1,875, $1,875
$1,875 and $1,735, respectively, and contributions made by the Corporation
under the ESOP during 1994 of $2,545, $2,545, $2,545, $2,545, $2,545 and
$2,198, respectively.
(6) On May 12, 1994, the Board of Directors elected Mr. Coles Chief Executive
Officer and President of the Corporation. Mr. Allen continued as Chairman
of the Board. On February 15, 1995, the Board of Directors approved a plan
to elect Mr. Coles to the additional position of Chairman of the Board
after the 1995 Annual Meeting of Stockholders.
(7) Mr. Allen is not standing for re-election to the Board when his term
expires in May 1995. Mr. Allen's compensation data in the table above is
through his July 1, 1994 retirement date. Mr. Allen has an eleven month
consulting agreement with the Corporation which expires May 31, 1995. Under
the terms of the agreement, Mr. Allen receives a monthly payment of $25,000
for consulting services; during 1994, he received $150,000 pursuant to this
agreement for services between July 1, 1994 and December 31, 1994.
(8) Includes $1,051 in tax payments made by the Corporation on behalf of Mr.
Coles in connection with the supplemental term life insurance discussed
below in the description of the Employee Retirement Plan.
(9) Includes $1,134 representing the cost in 1994 of supplemental term life
insurance purchased by the Corporation on behalf of Mr. Coles, as discussed
below in the description of the Employee Retirement Plan.
13
<PAGE> 17
(10) Mr. Reinschmidt served as an officer of subsidiaries of the Corporation
prior to July 1, 1993. Data with respect to his compensation for 1992 is
not included in the table above because he was not an Executive Officer of
the Corporation during 1992.
(11) Mr. Durning served as an Assistant Secretary of the Corporation prior to
his election as Secretary on July 20, 1994. He is also General Counsel of
the Corporation. Data with respect to his compensation for 1992 and 1993 is
not included in the table above because he was not an Executive Officer of
the Corporation during 1992 or 1993.
PERFORMANCE GRAPH
The following graph compares the five year cumulative total Stockholder
return (assuming the reinvestment of dividends) on the Corporation's Common
Stock against the cumulative total return of the Dow Jones Industrial Average
(DJIA) and the Investor's Business Daily -- Building-Heavy Construction Industry
Index published by William O'Neil for a period of five years. The graph assumes
an initial investment of $100 on December 31, 1989 in the Corporation's Common
Stock or in the underlying securities which comprise each of those market
indices.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
STONE & WEBSTER, INCORPORATED, DJIA AND THE INVESTOR'S BUSINESS DAILY --
WILLIAM O'NEIL BUILDING-HEAVY CONSTRUCTION INDEX
[CHART]
<TABLE>
<CAPTION>
WILLIAM
MEASUREMENT PERIOD O'NEIL HEAVY
(FISCAL YEAR COVERED) DJIA S&W CONSTRUCTION
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 99.00 83 93
1991 124 83 114
1992 134 71 110
1993 158 80 113
1994 167 98 94
</TABLE>
14
<PAGE> 18
RESTRICTED STOCK PLAN
Under the provisions of the Restricted Stock Plan approved by the
Stockholders in 1976, and amendments to the plan approved by the Stockholders in
1983 and 1988, shares of the Corporation's Common Stock have been awarded by the
Compensation Committee, subject to forfeiture provisions, to a limited number of
selected key employees. As approved by the Stockholders at the 1988 Annual
Meeting of Stockholders, the plan was amended to increase the number of shares
available for restricted stock awards to 2,400,000 shares and to extend the
termination date of the plan to June 1, 1998. Restrictions on awarded shares
lapse in five equal annual increments commencing on the first anniversary date
of each award. Restrictions on certain shares lapse in May of 1995; restrictions
on certain other shares lapse in 1996 through 1998 on the anniversary dates of
awards. Shares subject to restrictions may not be sold or otherwise disposed of
and must be returned to the Corporation if the employee's employment is
terminated for any reason other than death or disability occurring more than one
year after the date of the award. The 1983 amendments to the plan approved by
the Stockholders also provide that restrictions on the sale or transfer of
Common Stock of the Corporation awarded pursuant to the plan will lapse upon and
simultaneously with any change in control of the Corporation occurring without
the prior approval of the incumbent Board of Directors prior to the change in
control. Such a change in control would be deemed to have taken place if (i) a
third person, including a "group" as defined in Section 13d-3 of the Exchange
Act, acquires shares of the Corporation having 20% or more of the total number
of votes that may be cast for the election of directors of the Corporation, or
(ii) as the result of any cash tender or exchange offer, merger, consolidation,
sale of assets or other similar transaction, the persons who were Directors
before such transaction shall cease to constitute a majority of the Board or any
successor to the Corporation. In the event of such a change in control, the
lapse of restrictions on shares awarded under the plan to some or all of the
Named Executives might be deemed to constitute payments received from the
Corporation.
Upon approval by the Stockholders of the Corporation of the Stock Option
Plan referred to below, the number of shares of Common Stock available for
future awards under the Restricted Stock Plan will be reduced from 669,800
shares to 250,000 shares.
EMPLOYEE RETIREMENT PLAN
The Corporation's Employee Retirement Plan is a trusteed, non-contributory,
defined benefit plan which applies to all eligible employees of the Corporation.
Benefits are based upon the length of credited service and the amounts of annual
compensation (as defined in the plan) received during that period of service.
Normal retirement age is the employee's Social Security Retirement Age. The
formula for computing benefits provides that, for employees under the plan who
had not attained their retirement date prior to January 1, 1992, annual
retirement benefits are equal to the sum of (a) 0.75% of average annual
compensation for the years 1989, 1990 and 1991 up to $21,000 plus 1.35% of such
compensation in excess of $21,000, multiplied by the years and months of
credited service before January 1, 1992 for up to 35 years, plus (b) 1% of such
annual compensation for the years and months of credited service before January
1, 1992 in excess of 35 years, plus (c) for each year of credited service after
January 1, 1992, 1% of annual compensation up to an indexed amount (which was
$42,000 for 1994) equal to 1.75 times the "Social Security Covered Compensation"
(a 35-year average Social Security earnings base), plus 1.45% of such annual
compensation in excess of such amount; provided that employees with more than 35
years of service at retirement will be credited with a flat 1.33% of annual
compensation for each year of service after the 35th year. With respect to the
Named Executives,
15
<PAGE> 19
compensation, for purposes of calculating retirement benefits, includes both the
fixed and contingent portions of salaries shown in the Summary Compensation
Table under the Salary and Bonus headings, respectively. As of January 1, 1995,
the number of full credited years of service for Messrs. Coles, Egan, White,
Reinschmidt and Durning is 26, 39, 37, 19 and 21 years, respectively, and the
estimated annual benefit payable to them upon retirement at normal retirement
age and assuming the continuance of current rates of compensation for each until
normal retirement age is $189,294, $172,980, $109,182, $78,105 and $48,068,
respectively. These amounts do not reflect any limitations on annual benefits
which may be paid from a tax-qualified retirement plan at the time of retirement
imposed by Section 415 of the Internal Revenue Code, as amended from time to
time, nor do they reflect any limitations imposed by Section 401(a)(17) of the
Internal Revenue Code on the amount of compensation upon which benefits may be
determined. The Board of Directors has adopted a Supplemental Retirement
Program, which was amended in 1989, under which a trust has been established to
fund the payment of any benefits calculated under the provisions of the Employee
Retirement Plan which would be in excess of the limitations imposed by Sections
415 and 401(a)(17) of the Internal Revenue Code.
The Corporation has purchased supplemental term life insurance to provide
an additional death benefit to Mr. Coles' spouse in the event of his death prior
to normal retirement age, in an amount intended to reflect the value of the
additional survivors' benefit he would have earned if he lived until normal
retirement age.
Mr. Allen, who has 46 full credited years of service, is receiving annual
retirement benefits in the amount of $107,677. Pursuant to action taken by the
Board in 1986, Mr. Allen entered into an agreement with the Corporation whereby,
in consideration for his services to the Corporation, he would receive following
termination of his services as an officer, an annual amount ("Annual Amount"),
which amount was to be actuarially reduced to reflect benefits payable to his
surviving spouse, provided that such amount would be recalculated upward based
upon completion of additional service or if benefits payable generally under the
Employee Retirement Plan of the Corporation should be increased in the future.
In 1987, the Board authorized the extension of annuity and lump sum settlement
options under this agreement. Following the termination of his services as an
officer as of June 30, 1994, Mr. Allen elected to take the lump sum settlement
option under this agreement in the amount of $990,199 in lieu of the Annual
Amount .
II. SELECTION OF INDEPENDENT ACCOUNTANTS
(PROXY ITEM NO. 2)
The Stockholders will be asked to ratify the selection, on the
recommendation of the Audit Committee, by the Corporation's Board of Directors
of the firm of Coopers & Lybrand L.L.P., independent accountants, as auditor of
the Corporation and its subsidiaries for the year 1995. A representative of said
firm is expected to be present at the Annual Meeting and will have the
opportunity to make a statement if he or she desires to do so and to respond to
appropriate questions raised at the Annual Meeting.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE CORPORATION'S INDEPENDENT
ACCOUNTANTS FOR 1995. PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN FAVOR OF
THE RATIFICATION UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
16
<PAGE> 20
III. APPROVAL OF 1995 STOCK OPTION PLAN OF STONE & WEBSTER, INCORPORATED
(PROXY ITEM NO. 3)
On March 15, 1995, the Board of Directors adopted, subject to the approval
of the Stockholders, the Stock Option Plan in order to strengthen the
commonality of interest among management, the Board and Stockholders and to
provide incentives for participants in the Stock Option Plan to remain employees
or Directors, as the case may be, of the Corporation.
Upon approval by the Stockholders of the Stock Option Plan, the number of
shares of Common Stock available for future awards under the Restricted Stock
Plan will be reduced from 669,800 shares to 250,000 shares.
The following is a general summary of the Stock Option Plan which is
qualified in its entirety by reference to the full text of the Stock Option Plan
attached to this Proxy Statement as Exhibit A.
ELIGIBILITY FOR PARTICIPATION
Key employees, including officers and Directors who are employees, of the
Corporation and its subsidiaries (the Eligible Employees) who are designated by
the Committee (as defined below under the heading "Administration") are eligible
to receive grants of options under the Stock Option Plan. No determination has
been made as to the designation of Eligible Employees or as to any grants of
options to Eligible Employees under the Stock Option Plan. Therefore, it is not
possible to state the number of Eligible Employees who will receive such grants.
Furthermore, members of the Board of Directors who are not officers or
employees of the Corporation or its subsidiaries (the Eligible Directors) are
eligible to receive grants of certain options under the Stock Option Plan. As of
the close of business on the effective date of the Stock Option Plan (which
effective date is defined to be the date the Stock Option Plan is approved by
the Corporation's Stockholders) there will be 9 Eligible Directors who will be
entitled to receive grants of such options, based on the assumption that (i) the
Stock Option Plan is approved by the Stockholders at the Annual Meeting, and
(ii) all Director nominees are reelected (such 9 Eligible Directors being
referred to herein as the Expected Eligible Directors).
TYPES OF OPTIONS
Options granted under the Stock Option Plan may be either incentive stock
options (which qualify for special tax treatment under section 422 of the
Internal Revenue Code of 1986, as amended (the Code)) or nonqualified options.
Eligible Employees may be granted either incentive stock options or nonqualified
options while Eligible Directors only may be granted nonqualified options.
EXERCISE OF OPTIONS
The exercise price of any option granted under the Stock Option Plan may
not be less than the fair market value of the shares of Common Stock underlying
such option, determined as of the date of grant. If an Eligible Employee owns
more than 10% of the shares of Common Stock of the Corporation (a 10% Eligible
Employee) at the time of grant of an incentive stock option, the exercise price
may not be less
17
<PAGE> 21
than 110% of the fair market value of the shares of Common Stock underlying such
incentive stock option, determined as of the date of grant. The exercise price
of an option may be paid in cash, through the delivery of other shares of Common
Stock or through the delivery of a combination of such shares of Common Stock
and cash. If any such shares of Common Stock to be delivered in payment of an
exercise price were obtained through the previous exercise of any option granted
under the Stock Option Plan, such shares must have been held for at least six
months prior to such delivery. The Committee may provide for other methods to
pay for the exercise of an option.
The market value of a share of Common Stock on March 13, 1995 was $32.875,
based on the composite closing price for such Common Stock on the New York Stock
Exchange.
EXPIRATION OF OPTIONS
No option granted under the Stock Option Plan may be made exercisable after
the expiration of ten years from the date such option is granted. However, any
option granted to a 10% Eligible Employee may not be made exercisable after the
expiration of five years from the date the option is granted.
Before the expiration date of an option, such option is exercisable by an
Employee Optionee (i) while he is an Employee Optionee, or (ii) so long as such
option was then exercisable at the date of termination of employment for reasons
other than death, retirement, or termination for cause, within three months
after the termination of such employment. In the event of such termination
because of death while an option is exercisable by an Employee Optionee, the
option will terminate on the earlier of the expiration date of such option and
the expiration of one year after such death. In the event of such termination
because of retirement or disability while an option is exercisable by an
Employee Optionee, the option will terminate on the earlier of the expiration
date of such option and the expiration of three years after termination of
employment due to retirement or disability. In the event of termination for
cause, the option will terminate as of such date of termination even if such
option was then exercisable.
With respect to nonqualified options granted to an Eligible Director prior
to the six month period preceding termination of directorship: (i) such
nonqualified option is exercisable by an Eligible Director before the earlier of
the expiration date of such option and the expiration of the three month period
after the termination of directorship for reasons other than death, disability
or termination for certain causes, (ii) in the event of such termination because
of death, the nonqualified option will terminate on the earlier of the
expiration date of such option and the expiration of one year after such death,
(iii) in the event of such termination because of disability, the nonqualified
option will terminate on the earlier of the expiration date of such option and
the expiration of three years after termination of directorship due to
disability, and (iv) in the event of termination for certain causes, the
nonqualified option will terminate as of such date of termination.
Options which are not exercisable by an Eligible Employee at the time of
termination of employment will terminate as of the date of the Eligible
Employee's termination of employment. Options which are granted to an Eligible
Director within the six months preceding the date of termination of directorship
will terminate as of the date of the Eligible Director's termination of
directorship.
18
<PAGE> 22
GRANTS OF NONQUALIFIED OPTIONS TO ELIGIBLE DIRECTORS
Nonqualified options to purchase 2,000 shares of Common Stock of the
Corporation will be granted to each Eligible Director who is an Eligible
Director as of the close of business on the effective date of the Stock Option
Plan and to each other Eligible Director upon the initial election or
appointment to the Board. Thereafter on a yearly basis, nonqualified options to
purchase 1,000 shares of Common Stock of the Corporation will be granted to each
person who is an Eligible Director on the date of the grant of such options.
CORPORATE CHANGE
Upon a Corporate Change (as defined in the Stock Option Plan), all
outstanding options, including options which are then not exercisable, will
become exercisable in full; provided that the consent of a holder of an
accelerated incentive stock option is required if such acceleration will cause
such incentive stock option not to be treated as an incentive stock option under
the Code.
LIMITATION ON SHARES AVAILABLE UNDER STOCK OPTION PLAN
Subject to certain adjustments permitted under the Stock Option Plan, the
aggregate number of shares of Common Stock to be delivered upon exercise of all
options granted under the Stock Option Plan may not exceed 750,000 shares of the
Corporation's Common Stock as now constituted. The shares of Common Stock
issuable upon exercise of options granted under the Stock Option Plan may be
authorized and unissued shares or reacquired shares. If the number of shares to
be delivered upon the exercise in full of any option granted under the Stock
Option Plan is reduced for any reason whatsoever or if any option granted under
the Stock Option Plan for any reason shall expire or shall terminate unexercised
as to all or any shares covered thereby, the number of shares no longer subject
to any such option will be released from such option and will be available to be
re-optioned under the Stock Option Plan.
LIMITATION ON GRANTS TO ELIGIBLE EMPLOYEES
There are statutory limits on the number of shares of Common Stock for
which incentive stock options may be granted to a Key Employee in any calendar
year. Currently, the aggregate fair market value of such shares of Common Stock
(determined at the time the incentive stock option is granted) may not exceed
$100,000 for all shares covered by incentive stock options awarded to a Key
Employee which become exercisable for the first time in any calendar year.
Furthermore, grants of options under the Stock Option Plan to an Eligible
Employee will be limited to options to purchase no more than 100,000 shares of
Common Stock per calendar year.
ADMINISTRATION
The Stock Option Plan will be administered by the Compensation Committee or
such other committee of the Board of Directors which succeeds to the functions
and responsibilities of the Compensation Committee (the Committee). The
Committee will have the authority to (i) determine the individuals to whom
options will be granted under the Stock Option Plan and the terms and provisions
of such options, (ii) interpret the Stock Option Plan and all options granted
under the Stock Option Plan, (iii) adopt, amend or rescind such rules as it
deems necessary for the proper administration of the Stock Option Plan, (iv)
make all other determinations necessary or advisable for the administration of
the Stock
19
<PAGE> 23
Option Plan, and (v) correct any defect or supply any omission or reconcile any
inconsistency in the Stock Option Plan or in any option granted under the Stock
Option Plan in the manner and to the extent that the Committee deems desirable
to carry the Stock Option Plan or any option into effect.
In determining which Eligible Employees will be granted options under the
Stock Option Plan, the Committee may consider such factors as the office or
position of an Eligible Employee, the degree of responsibility for, and
contribution to, the growth and success of the Corporation by such Eligible
Employee, the length of service, promotions, and potential of such Eligible
Employee as well as any other factors which the Committee may deem relevant.
AMENDMENTS
The Board of Directors may amend, suspend or terminate the Stock Option
Plan; provided, however, that each such amendment of the Stock Option Plan (i)
extending beyond ten years the period within which options may be granted
thereunder, (ii) increasing the aggregate number of shares of Common Stock to be
optioned under the Stock Option Plan except as otherwise permitted in the Stock
Option Plan, (iii) materially modifying the requirements as to eligibility of
Eligible Employees or changing the class of Eligible Employees to whom options
may be granted, (iv) materially increasing the benefits to optionees under the
Stock Option Plan, (v) modifying the provisions relating to the granting of
nonqualified options to Eligible Directors, or (vi) granting options to Eligible
Directors other than pursuant to the provisions referred to in clause (v), will,
in each case, be subject to approval by the Stockholders of the Corporation;
provided, further, however, that no amendment, suspension or termination of the
Stock Option Plan may cause the Stock Option Plan to fail to meet the
requirements of Rule 16b-3
(Rule 16b-3) under the Exchange Act, or may, without the consent of the holder
of an option, terminate such option or adversely affect such person's rights in
any material respect (except as set forth in the Stock Option Plan). The Board
of Directors may alter, amend, suspend, discontinue or terminate the Stock
Option Plan and any option granted thereunder, without the approval of the
Stockholders of the Corporation or any holder of any option thereby affected, if
necessary in order to comply with Rule 16b-3 or sections 422 or 162(m) of the
Code.
TERM OF STOCK OPTION PLAN
The Stock Option Plan will terminate ten years following the effective date
of the Stock Option Plan (the Termination Date), unless terminated by the Board
of Directors at an earlier date. No options will be granted under the Stock
Option Plan after the Termination Date, although the exercise periods for
previously granted options may extend beyond the Termination Date.
NONTRANSFERABILITY
No option is transferable by the optionee except by will or the laws of
descent and distribution.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Upon the grant of an incentive stock option, the
optionee will not recognize any taxable income and the Corporation will not be
entitled to a tax deduction. Upon the exercise thereof while the optionee is
employed by the Corporation or a subsidiary or within 3 months after termination
of employment, the optionee will not recognize taxable income if certain holding
period requirements under the Code are met; however, under certain
circumstances, the excess of the fair
20
<PAGE> 24
market value of the shares of Common Stock acquired upon such exercise over the
exercise price may be subject to the alternative minimum tax.
If the shares of Common Stock acquired pursuant to the exercise of an
incentive stock option are held for at least 2 years from the date of grant and
at least 1 year from the date of exercise, the optionee's gain or loss upon a
disposition of such shares of Common Stock will be a long-term capital gain or
loss and the Corporation will not be entitled to any tax deduction. If such
shares are disposed of prior to the expiration of these holding periods, the
optionee will recognize ordinary income on certain amounts in excess of the
option price and the Corporation will be entitled to a corresponding tax
deduction.
Nonqualified Options. Upon the grant of a nonqualified option, the
optionee will not recognize any taxable income. Upon the exercise thereof, the
optionee will recognize taxable income in an amount equal to the difference
between (i) the fair market value of the shares of Common Stock acquired upon
such exercise, and (ii) the exercise price. At that time, the Corporation will
be entitled to a corresponding tax deduction.
Upon a subsequent disposition of shares of Common Stock acquired upon the
exercise of a nonqualified option, the optionee will recognize long-term or
short-term capital gain or loss, depending on the holding period of such shares.
NEW PLAN BENEFITS
As stated above, the Committee has the authority to determine the amounts,
terms and grant dates of options to be granted to Eligible Employees under the
Stock Option Plan. To date, no such determinations have been made and, as a
result, it is not possible to state such information.
The following table sets forth the options that would be received in 1995
by each Expected Eligible Director and by all Expected Eligible Directors as a
group under the Stock Option Plan.
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME VALUE1 OPTIONS
-------------------------------------------------------------- ------------ ---------
<S> <C> <C>
Each Expected Eligible Director............................... $ 65,750 2,000
All Expected Eligible Directors............................... $591,750 18,000
</TABLE>
- ---------------
(1) The dollar values of the options are based on the composite closing price
for the Corporation's Common Stock on March 13, 1995 on the New York Stock
Exchange of $32.875. Under the Stock Option Plan, the dollar value would be
calculated as of the trading day immediately preceding the date of grant.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the proposal to
approve the 1995 Stock Option Plan is required to approve the Plan.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 1995
STOCK OPTION PLAN. PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN FAVOR OF THE
APPROVAL OF THE PLAN UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
21
<PAGE> 25
IV. APPROVAL OF 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS OF
STONE & WEBSTER, INCORPORATED
(PROXY ITEM NO. 4)
On March 15, 1995, the Board of Directors adopted, subject to the approval
of the Stockholders, the Stock Plan in order to promote the long-term growth and
financial success of the Corporation by attracting and retaining non-employee
Directors of outstanding ability and by promoting a greater identity of interest
between its non-employee Directors and its Stockholders.
The following is a general summary of the Stock Plan which is qualified in
its entirety by reference to the full text of the Stock Plan attached to this
Proxy Statement as Exhibit B.
ELIGIBILITY FOR PARTICIPATION
Members of the Board of Directors who are not officers or employees of the
Corporation or its subsidiaries (the Eligible Directors) are eligible to receive
grants of shares of Common Stock under the Stock Plan. As of the close of
business on the effective date of the Stock Plan (which effective date is
defined to be the date the Stock Plan is approved by the Stockholders), there
will be 9 Eligible Directors who will be entitled to receive such grants, based
on the assumption that (i) the Stock Plan is approved by the Stockholders at the
Annual Meeting, and (ii) all Director nominees are reelected (such 9 Eligible
Directors being referred to herein as the Expected Eligible Directors).
GRANTS
Annual Retainer Stock Grant. As soon as practicable, but no later than 30
days after July 1 of each calendar year beginning with 1996, (i) each person who
is an Eligible Director at any such July 1 will receive that number of shares of
Common Stock having an aggregate fair market value as of such July 1 equal to
the amount calculated by multiplying $8,000 by a fraction, the numerator of
which is the sum of (a) the number of whole months such person served as an
Eligible Director prior to July 1 in such calendar year, and (b) 6, and the
denominator of which is 12, and (ii) each person who was an Eligible Director at
any time during such calendar year prior to such July 1 (but was not an Eligible
Director as of such July 1) will receive that number of shares of Common Stock
having an aggregate fair market value as of such July 1 equal to the amount
calculated by multiplying $8,000 by a fraction, the numerator of which is the
number of whole months such person served as an Eligible Director prior to July
1 in such calendar year, and the denominator of which is 12.
A person who becomes an Eligible Director at any time after July 1 of any
such calendar year will receive that number of shares of Common Stock having an
aggregate fair market value as of such July 1 equal to the amount calculated by
multiplying $8,000 by a fraction, the numerator of which is the number of whole
months such person served as an Eligible Director after July 1 of such calendar
year, and the denominator of which is 12. Such shares will be received by any
such Eligible Director as soon as practicable, but no later than 30 days after
the December 31 immediately following such July 1.
22
<PAGE> 26
With respect to 1995, each person who is an Eligible Director at July 1,
1995 will receive that number of shares of Common Stock having an aggregate fair
market value as of such July 1 equal to $4,000. Such shares will be received by
any such Eligible Director as soon as practicable, but no later than 30 days
after July 1, 1995.
Share amounts granted under the Stock Plan will be rounded up to the next
whole share if a fractional share results from the calculations set forth above.
Furthermore, service by an Eligible Director for at least 15 days in any month
will be considered service for a whole month for purposes of the calculations
set forth above.
Election to Receive Director Meeting Fees in Stock in Lieu of Cash. Except
as set forth in the Stock Plan, an Eligible Director may elect to receive all or
a portion of Director meeting fees (defined to include all fees earned by an
Eligible Director by attendance at meetings of the Board of Directors and at
meetings of any committee of the Board of Directors of which such Eligible
Director is a member) in the form of shares of Common Stock, with such shares of
Common Stock being paid in arrears on a calendar quarter basis. The number of
shares for a calendar quarter payable to an Eligible Director (or to any person
who was an Eligible Director for a portion of such calendar quarter) who has
elected to receive Director meeting fees in the form of shares (i) will be in an
amount having the aggregate fair market value, as of the last day of any such
calendar quarter, equal to the amount of Director meeting fees which have been
earned in such quarter and which were elected to be paid in shares of Common
Stock, and (ii) will be received by the Eligible Director (or any person who was
an Eligible Director for a portion of such calendar quarter) as soon as
practicable, but no later than 30 days after the end of such calendar quarter.
Elections. All elections for the payment of all or a portion of Director
meeting fees in the form of Common Stock will be made in writing and delivered
to the Secretary of the Corporation and will be irrevocable for the calendar
year next succeeding such election (or, in the case of any person who becomes an
Eligible Director during a calendar year, for that portion of a calendar year
during which such Director meeting fees are to be paid to such Eligible Director
in shares of Common Stock). All such elections shall be made annually before
December 31 of the year prior to the year in which Director meeting fees are to
be earned (or, in the case of any person who becomes an Eligible Director during
a calendar year, at least six months prior to the date any such Director meeting
fees are to be paid to such Eligible Director in shares of Common Stock).
Notwithstanding the foregoing, for the first calendar year of the Stock Plan,
each Eligible Director may elect, on or prior to July 1, 1995, to receive all or
a portion of Director meeting fees for the remainder of such calendar year in
shares of Common Stock.
LIMITATION ON SHARES AVAILABLE UNDER STOCK PLAN
Subject to certain adjustments permitted under the Stock Plan, the total
number of shares of Common Stock to be issued under the Stock Plan may not
exceed 100,000 shares of the Corporation's Common Stock as now constituted. The
shares of Common Stock deliverable under the Stock Plan may be authorized and
unissued shares or reacquired shares.
23
<PAGE> 27
RULE 16B-3 AND STOCK PLAN OPERATION
It is intended that the Stock Plan will be in compliance with the
requirements of Rule 16b-3(c)(2)(ii) of the Exchange Act so that the
distribution of shares of Common Stock under the Stock Plan would be exempt from
the operation of Section 16(b) of the Exchange Act. As a result, the Stock Plan
is intended to be self-governing and nondiscretionary. To the extent necessary
to administer the Stock Plan, the Compensation Committee (or such other
committee of the Board of Directors which shall succeed to the functions and
responsibilities of the Compensation Committee) will have the authority to
interpret the provisions of the Stock Plan.
AMENDMENTS
The Board of Directors may amend, suspend or terminate the Stock Plan;
provided, however, that (i) the provisions of the Stock Plan may not be amended
more than once every six months, other than to comport with changes in the Code
or the rules thereunder, and (ii) any amendment from and after the effective
date of the Stock Plan shall be approved by the Stockholders if the amendment
would (a) materially increase the benefits accruing to participants under the
Stock Plan, (b) materially increase the number of securities which may be issued
under the Stock Plan (except as provided in the Stock Plan), or (c) materially
modify the requirements as to eligibility for participation in the Stock Plan.
TERM OF STOCK PLAN
The Stock Plan will become effective as of the date the Plan is approved by
the Stockholders of the Corporation. Once effective, the Stock Plan will operate
and remain in effect until terminated by action of the Board of Directors as
provided in the Stock Plan.
NONASSIGNABILITY
No right to receive any shares of Common Stock under the Stock Plan shall
be assignable or transferable by such Eligible Director other than by will or
the laws of descent and distribution.
NEW PLAN BENEFITS
Since the number of shares to be earned and paid to each Eligible Director
under the Stock Plan for the remainder of 1995 and subsequent years will be
dependent on, among other things, the future market price of the Common Stock as
well as each Eligible Director's individual election to receive all or a portion
of Director meeting fees in the form of shares of Common Stock, it is not
possible to calculate the number of shares of Common Stock that will be received
by each Eligible Director and all Eligible Directors as a group.
If the Stock Plan had been in effect as of January 1, 1994, the Expected
Eligible Directors and all Expected Eligible Directors as a group would have
received the aggregate number of shares of Common Stock set forth in the table
below based on the conversion of the cash amounts of the annual retainer and of
the Director meeting fees that would have been earned by each such Expected
Eligible Director in
24
<PAGE> 28
1994. The amounts set forth in the table are based on the assumptions that (i)
each Expected Eligible Director served as a Director for the full year and was a
member of the relevant committees for the full year, (ii) each Expected Eligible
Director attended all meetings of the Board of Directors and all meetings of any
Board committee of which such Expected Eligible Director is a member, and (iii)
each Expected Eligible Director elected to receive 100% of Director meeting fees
in shares of Common Stock.
<TABLE>
<CAPTION>
DIRECTOR
MEETING
ANNUAL RETAINER FEES TO BE AGGREGATE
TO BE CONVERTED CONVERTED TO NUMBER OF
NAME OF EXPECTED ELIGIBLE DIRECTOR TO SHARES(1) SHARES(2) SHARES
- ----------------------------------------------- --------------- ------------ ---------
<S> <C> <C> <C>
William L. Brown............................... $ 8,000 $ 46,000 1,685
Frank J. A. Cilluffo........................... 8,000 24,000 994
Donna R. Fitzpatrick........................... 8,000 27,000 1,090
Kent F. Hansen................................. 8,000 40,500 1,515
Elvin R. Heiberg, III.......................... 8,000 24,000 994
John A. Hooper................................. 8,000 43,500 1,603
J. Angus McKee................................. 8,000 27,000 1,090
Kenneth G. Ryder............................... 8,000 31,000 1,212
Meredith R. Spangler........................... 8,000 40,000 1,496
All Expected Eligible Directors................ $72,000 $303,000 11,679
</TABLE>
- ---------------
(1) Converted on the basis of a fair market value (as calculated in accordance
with the definition thereof in the Stock Plan) per share of Common Stock
equal to $32.75. Such annual retainer under the Stock Plan must be paid in
shares of Common Stock.
(2) Converted as of the end of each fiscal quarter on the basis of a fair market
value (as calculated in accordance with the definition thereof in the Stock
Plan) per share of Common Stock equal to $30.125, $33.00, $32.375 and
$33.25, respectively. All or a portion of such Director meeting fees may be
paid in shares of Common Stock under the Stock Plan.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the proposal to
approve the 1995 Stock Plan is required to approve the Plan.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 1995
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS. PROXIES AND VOTING INSTRUCTIONS WILL BE
VOTED IN FAVOR OF THE APPROVAL OF THE PLAN UNLESS THE STOCKHOLDER SPECIFIES
OTHERWISE.
25
<PAGE> 29
V. PROPOSAL OF A STOCKHOLDER
(PROXY ITEM NO. 5)
Alan Russell Kahn, Trustee U/A 5 of W/O Samuel Adason Jaffe Trust, 49
Overhill Road, Forest Hills, NY 11375, has provided certification to the
Corporation indicating that he is the beneficial owner of 1,200 shares of the
Common Stock of this Corporation, and that he intends to introduce the following
proposal at the Annual Meeting:
Resolved it is strongly recommended that the Board of Directors retain
an independent investment banking firm to evaluate options for divestment
of any or all company assets, and that a summary of its report be made
available to shareholders no later than three months before the 1996 annual
meeting.
In support of this proposal, the proponent has submitted the following
statement:
Supporting statement:
Many large companies, including Sears, American Express, and Kodak,
have recently enhanced shareholder values by selling or spinning off
divisions unrelated to the companies' core business. We believe that Stone
& Webster should do the same. For some years, Stone & Webster has held a
large portfolio of liquid and nonliquid assets not directly used in its
primary business of Engineering and Contracting. As of year-end 1993, these
assets included $64 million in cash and cash equivalents, $54 million in US
Government bonds, and $40 million in investment securities. The returns
earned by the company on these assets are nominal. There is no indication
that the Company's core business of engineering and contracting require
such large balances of non-productive liquid assets. On the contrary, the
presence of these assets provides the management of the company with a cash
cushion to absorb operating losses in the Company's ongoing businesses
without facing the ordinary consequences of such performance. A
distribution of 100 percent of these nonproductive assets to the Company's
shareholders would result in a dividend of $10.00 per share(1), and leave
the company leaner and more responsive to market forces. Under these
circumstances, the Company board and management should be required to
consider an independent outside evaluation of whether overall return to the
Company's owners would be maximized by divestment of at least some of these
assets and distribution of the proceeds to the shareholders. We understand
that the company has retained Goldman, Sachs, but that they have not been
directed or authorized to evaluate divestiture. We believe that they, or
another investment banking firm, should be retained to analyze the options
and report back to the board.
- ---------------
1 Without reduction for federal taxes.
26
<PAGE> 30
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS STOCKHOLDER
PROPOSAL FOR THE FOLLOWING REASONS:
First, the Corporation has already retained an investment banking firm and,
together with this firm, has been and is engaged in an ongoing evaluation of its
assets.
As discussed with Stockholders at the Corporation's 1994 Annual Meeting, in
February 1994, the Corporation retained an investment banking firm, the well
regarded firm of Goldman, Sachs & Co., to act as financial advisor in connection
with the ongoing evaluation of the Corporation's financial condition. The
ongoing evaluation includes a continuing review of the level and quality of
corporate assets and is being conducted with a view to maximizing long-term
Stockholder value. Specifically under constant consideration is the amount of
cash, cash equivalents and investments in U.S. Government and other securities
deemed necessary to be retained by the Corporation in order to meet anticipated
dividend payments and operating and capital expenditure needs and, more
specifically, to permit the Corporation's engineering and construction
subsidiaries (i) to present the strong financial position required to obtain new
business in today's competitive market, (ii) to invest in joint ventures and
other forms of equity participation in domestic and international projects,
particularly those with significant potential for engineering and construction
business, and (iii) to obtain payment and performance bonds for certain
engineering and construction projects. The Corporation is of the opinion, and
has frequently publicly stated, that the types of businesses it is engaged in
require the Corporation to maintain a strong balance sheet with a high degree of
financial flexibility.
Second, the Corporation has already taken action as a result of its ongoing
evaluation of its assets and financial condition.
As a result of this review, the Corporation: (i) made a decision, announced
in July 1994, to dispose of its substantial holdings of investment securities
and completed such sales in November 1994; (ii) publicly announced at the
Corporation's 1994 Annual Meeting that it was intensifying its efforts to sell
its real estate holdings in Tampa, Florida; and (iii) publicly announced in July
1994 a stock repurchase program for up to 1,000,000 shares of its Common Stock
and, as announced in the Corporation's 1994 Annual Report to Stockholders,
purchased 363,324 shares as of December 31, 1994 under the program.
Third, to commission another report would be a waste of the Corporation's
assets.
To have the Board of Directors repeat the process of retaining another
investment banking firm to make another study of the Corporation would be a
waste of corporate assets and management's time and would be a major distraction
to management in the performance of its efforts to improve the Corporation's
operating results.
27
<PAGE> 31
Fourth, to limit the scope of a financial advisor's assignment to divestment
issues only is an unwarranted interference in the responsibility of the Board to
direct the affairs of the Corporation.
The proposed resolution limits the purpose of the report to an evaluation
of options for divestment of any or all of company assets. In serving the
interests of the Corporation's Stockholders, the management and Board of
Directors of the Corporation have the responsibility to determine the structure
of the Corporation, how its assets are to be deployed, and how capital is to be
invested in its businesses. Discharging this responsibility involves an ongoing
analysis of all business segments of the Corporation and a consideration of all
options to determine whether the current structure and operation enhances
Stockholder value.
The Board of Directors believes that the Board and management of the
Corporation can best discharge their responsibilities to Stockholders by
continuing the practice of reviewing corporate assets and operations on an
ongoing basis -- without the need for a new, expensive and more limited report
from another investment banking firm.
Fifth, to require publication, even in summary form, of such a report just does
not make good business sense.
Management and the Board of Directors believe that the Board's compliance
with the resolution's provisions that it undertake another similar study and
publicize the results, could create great uncertainty during the term of any
such study. This could have unpredictable effects on share price, deployment of
assets and other operations. Moreover, premature disclosure of recommendations
which may be under consideration by the Corporation would place the Corporation
at a competitive disadvantage if it chooses to move forward with any such
recommendation. Studies of the Corporation's structure should, as they are at
present, be conducted confidentially and conclusions should not be publicized
unless and until it would serve Stockholder interests to do so.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the stockholder
proposal is required to approve the proposal.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "AGAINST" THIS PROPOSAL.
PROXIES AND VOTING INSTRUCTIONS WILL BE SO VOTED IF THE PROPOSAL IS PRESENTED AT
THE ANNUAL MEETING UNLESS YOU SPECIFY OTHERWISE.
VI. AS TO OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
Management knows of no business which will be presented to the Annual
Meeting other than as set forth in the accompanying Notice of Meeting. However,
if any other matters properly come before the Annual Meeting or any adjournments
or postponements thereof, it is intended that the persons named in the enclosed
form of proxy, or their respective substitutes, shall have authority to vote
said proxy in
28
<PAGE> 32
accordance with their judgment on such matters. In the event that one or more of
the nominees for election as Directors should become unavailable for election
for any reason, it is intended that the persons named in said proxy, or their
respective substitutes, shall have authority to vote according to their judgment
for other persons in lieu thereof. Management has no present knowledge that any
of the nominees for election as a Director will be unavailable to serve.
VII. LAST DATE TO SUBMIT STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
November 27, 1995 is the date by which proposals of Stockholders intended
to be presented at the 1996 Annual Meeting of Stockholders must be received by
the Corporation to the attention of the Corporate Secretary, Stone & Webster,
Incorporated, 250 West 34th Street, 32nd Floor, P. O. Box 1244, New York, N.Y.
10116, in order to be considered for inclusion in the Corporation's Proxy
Statement and form of proxy relating to that meeting.
- --------------------------------------------------------------------------------
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, WILL BE FURNISHED UPON REQUEST WITHOUT CHARGE TO ANY PERSON WHO WAS A
BENEFICIAL OWNER OF COMMON STOCK OF THE CORPORATION AS OF MARCH 13, 1995, THE
RECORD DATE FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS. ALL REQUESTS SHOULD BE
DIRECTED TO THE CORPORATION TO THE ATTENTION OF THE CORPORATE SECRETARY, STONE &
WEBSTER, INCORPORATED, 250 WEST 34TH STREET, 32ND FLOOR, P.O. BOX 1244, NEW
YORK, N.Y. 10116.
- --------------------------------------------------------------------------------
29
<PAGE> 33
EXHIBIT A
1995 STOCK OPTION PLAN
OF
STONE & WEBSTER, INCORPORATED
ARTICLE I
1. PURPOSE. Stone & Webster, Incorporated (the "Company") proposes to
grant to selected key employees (including officers and directors who are
employees) of the Company and its subsidiaries (hereinafter referred to as
"Employee Optionees") options to purchase shares of common stock, par value $1
per share, of the Company ("Common Stock") for the purposes of (i) furnishing to
such Employee Optionees maximum incentive to improve operations and increase
profits of the Company, and (ii) encouraging such Employee Optionees to accept
or continue employment with the Company and its subsidiaries. Such options will
be granted pursuant to the plan herein set forth, which shall be known as the
1995 Stock Option Plan of Stone & Webster, Incorporated (herein referred to as
the "Plan").
The Company also proposes to grant to members of the Board of Directors of
the Company (the "Board of Directors") who are not officers or employees of the
Company or its subsidiaries at the time of a grant (hereinafter referred to as
"Non-Employee Directors") options to purchase shares of Common Stock pursuant to
the Plan. The purpose of such grants is to (i) provide incentives for highly
qualified individuals to stand for election to the Board of Directors and
continue service on the Board of Directors, (ii) provide maximum incentive to
promote long-term stockholder value, and (iii) promote a greater identity of
interest between Non-Employee Directors and the Company's stockholders.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Article I, Paragraph 4, Article II, Paragraph 3(e), Article III, Paragraph 3(e),
and Article IV, Paragraph 4(e), the aggregate number of shares of Common Stock
to be delivered upon exercise of all options granted under the Plan shall not
exceed 750,000 shares. The shares of Common Stock issuable upon exercise of
options granted under the Plan may be authorized and unissued shares or
reacquired shares. In the event the number of shares to be delivered upon the
exercise in full of any option granted under the Plan is reduced for any reason
whatsoever or in the event any option granted under the Plan for any reason
shall expire or shall terminate unexercised as to all or any shares covered
thereby, the number of shares no longer subject to any such option shall
thereupon be released from such option and shall thereafter be available to be
re-optioned under the Plan. Shares issued pursuant to the exercise of options
granted under the Plan shall be fully paid and nonassessable.
3. ADMINISTRATION OF THE PLAN. Subject to the provisions of the Plan, the
Compensation Committee of the Board of Directors or such other committee of the
Board of Directors which shall succeed to the functions and responsibilities of
the Compensation Committee (the "Committee") shall have the authority to (a)
determine the provisions of the options to be granted under the Plan, (b)
interpret the Plan and all options granted under the Plan, (c) adopt, amend or
rescind such rules as it deems
A-1
<PAGE> 34
necessary for the proper administration of the Plan, (d) make all other
determinations necessary or advisable for the administration of the Plan, and
(e) correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any option granted under the Plan in the manner and to the extent
that the Committee deems desirable to carry the Plan or any option into effect.
The Board of Directors shall have the power to add or remove members of the
Committee from time to time, to fill vacancies thereon arising by resignation,
death, removal, or otherwise, and shall designate a chairman from among the
members of the Committee, which chairman shall preside at all meetings of the
Committee. Meetings shall be held at such times and places as shall be
determined by the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any question brought before
that meeting. The actions of the Committee in exercising all of the rights,
powers and authorities set out in the Plan, when performed in good faith and in
its sole judgment, shall be final and conclusive. When appropriate, the Plan
shall be administered in order to qualify certain of the options granted
hereunder as "incentive stock options" described in section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
The Committee shall consist of at least two members of the Board of
Directors. Other than options granted to Non-Employee Directors pursuant to
Article IV, no options may be granted under the Plan to any member of the
Committee during his term of membership on the Committee. No person shall be
eligible to serve on the Committee unless such person is then a "disinterested
person" within the meaning of Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934, as amended (the "Act"), or any similar or
successor rule. The members of the Committee shall be solely "outside
directors," within the meaning of section 162(m) of the Code and applicable
interpretive authority thereunder.
4. AMENDMENT AND DISCONTINUANCE OF THE PLAN. The Board of Directors may
amend, suspend or terminate the Plan; provided, however, that each such
amendment of the Plan (a) extending the period within which options may be
granted under the Plan, (b) increasing the aggregate number of shares of Common
Stock to be optioned under the Plan except as provided in Article II, Paragraph
3(e), Article III, Paragraph 3(e), Article IV, Paragraph 4(e) and the next
succeeding sentence, (c) materially modifying the requirements as to eligibility
of employees receiving options under, or changing the eligibility of employees
or class of employees to whom options may be granted under, Article II or III,
(d) materially increasing the benefits to optionees under the Plan, (e)
modifying the provisions of Article IV, or (f) granting options to Non-Employee
Directors other than pursuant to Article IV, shall, in each case, be subject to
approval by the stockholders of the Company; provided, further, however, that no
amendment, suspension or termination of the Plan may cause the Plan to fail to
meet the requirements of Rule 16b-3 (including, without limitation, the
requirements of Rule 16b-3(c)(2)(i)(A) and Rule 16b-3(c)(2)(ii)) or may, without
the consent of the holder of an option granted under Article II, III, or IV,
terminate such option or adversely affect such person's rights in any material
respect (except as set forth in the Plan). The Board of Directors may increase
the aggregate number of shares of Common Stock that may be issued under the Plan
provided that the number of shares to be issuable in connection with such
increase to persons subject to Section 16(a) of the Act shall not, in the
aggregate, exceed 75,000 shares.
A-2
<PAGE> 35
Furthermore, the Board of Directors may alter, amend, suspend, discontinue or
terminate the Plan and any option granted hereunder, without the approval of the
stockholders of the Company or any holder of any option thereby affected, if
necessary in order to (a) enable the Plan and any option granted hereunder
intended to be so qualified, to qualify for (i) the exemption provided by Rule
16b-3, (ii) the benefits provided under section 422 of the Code, or (iii) the
exclusion for qualified performance-based compensation under section 162(m) of
the Code and the applicable interpretive authority thereunder, and (b) comply
with changes in the Code, the Employee Retirement Income Security Act or any
other applicable law (including, with respect to any of the foregoing, changes
in any rule, regulation or other interpretive authority).
5. GRANTING OF OPTIONS TO EMPLOYEES. The Committee shall have authority to
grant, prior to the expiration date of the Plan, to Employee Optionees options
to purchase, on the terms and conditions hereinafter set forth in Article II and
III, authorized but unissued, or reacquired, shares of Common Stock, provided
such grants shall be made only to those Employee Optionees, in such amounts and
at such times as determined in the discretion of the Committee, and, for this
purpose, the Committee may consider the Employee Optionee's office or position,
degree of responsibility for, and contribution to, the growth and success of the
Company, length of service, promotions, potential and any other factors which it
may deem relevant.
Options granted to Employee Optionees under Article III shall be "incentive
stock options" within the meaning of section 422(b) of the Code, and are
hereinafter referred to as "incentive stock options." All other options granted
to Employee Optionees under the Plan shall be granted pursuant to Article II,
and are hereinafter referred to as "nonqualified options." Notwithstanding the
foregoing, grants of options to any one Employee Optionee under the Plan shall
be limited to options to purchase no more than 100,000 shares of Common Stock
per calendar year.
6. GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. All options granted to
Non-Employee Directors shall be options to purchase, on the terms and conditions
hereinafter set forth in Article IV, authorized but unissued, or reacquired,
shares of Common Stock and shall be nonqualified options.
7. OPTION AGREEMENTS. Each option granted under the Plan shall be
evidenced by a written agreement between the Company and the applicable optionee
and shall contain such terms and conditions, and may be exercisable for such
periods, as may be approved by the Committee, which terms and conditions need
not be identical but which must be in compliance with the terms and provisions
hereof.
8. EFFECTIVE DATE. The Plan shall become effective as of the date the
Plan is approved by the stockholders of the Company (the "Effective Date").
Except with respect to options then outstanding, if not sooner terminated under
the provisions of Paragraph 4 of this Article, the Plan shall terminate upon,
and no further options shall be granted after, the expiration of ten years from
the Effective Date.
9. MISCELLANEOUS. All references in the Plan to "Articles," "Paragraphs,"
and other subdivisions refer to the corresponding Article, Paragraph, and
subdivisions of the Plan.
A-3
<PAGE> 36
10. RULE 16B-3 COMPLIANCE. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
(b) that participation by Non-Employee Directors under Article IV will
not prohibit them from being "disinterested persons" within the meaning of
Rule 16b-3 with respect to administration of the Plan or with respect to
administration of any other plan of the Company;
(c) that transactions of the type specified in the first paragraph of
Rule 16b-3 by Non-Employee Directors pursuant to Article IV will be exempt
from the operation of Section 16(b) of the Act; and
(d) that transactions of the type specified in the first paragraph of
Rule 16b-3 by officers of the Company (whether or not they are directors)
pursuant to the Plan will be exempt from the operation of Section 16(b) of
the Act. In all cases, the terms, provisions, conditions and limitations of
the Plan shall be construed and interpreted consistent with the Company's
intent as stated in Paragraph 10 of this Article.
11. RECAPITALIZATION OR REORGANIZATION. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board of Directors (each such event is referred to
herein as a "Corporate Change"), then all outstanding options, including those
not then currently exercisable, shall become exercisable in full; provided,
however, in no event shall any incentive stock option, without the consent of
the holder thereof, first become exercisable pursuant hereto if the result would
be to cause such option, when granted, not to be treated as an incentive stock
option (whether or not by reason of the possible future violation of the annual
limitation set forth in Article III, Paragraph 3 or otherwise).
12. FOREIGN OPTIONS AND RIGHTS. The Committee may grant options to
Employee Optionees and Non-Employee Directors who are subject to the tax laws of
nations other than the United States, which options may have terms and
conditions as determined by the Committee as necessary to comply with applicable
foreign laws. The Committee may take any action which it deems advisable to
obtain approval of any such option by the appropriate foreign governmental
entity; provided, however, that no such option may be granted pursuant to this
Paragraph 12 and no action may be taken which would result in a violation of the
Act, the Code or any other applicable law.
A-4
<PAGE> 37
ARTICLE II
NONQUALIFIED OPTIONS
1. ELIGIBLE EMPLOYEES. All Employee Optionees shall be eligible to receive
nonqualified options under this Article II.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under Article II shall be equal to the fair market value per share of
Common Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal (or any successor publication thereto), and shall be equal to the per
share price of the last sale of Common Stock on the trading day immediately
preceding the date of grant of such option. The exercise price for each
nonqualified option shall be subject to adjustment as provided in Paragraph 3(e)
of this Article.
3. TERMS AND CONDITIONS OF OPTIONS. Nonqualified options granted under
this Article II shall be in such form as the Committee may from time to time
approve, shall be subject to the following terms and conditions and may contain
such additional terms and conditions, not inconsistent with this Article II, as
the Committee shall deem desirable:
(a) Option Period and Conditions and Limitations on Exercise. Subject
to Paragraph 4 of this Article, no nonqualified option shall be exercisable
by an Employee Optionee later than the date which is the date determined by
the Committee upon the grant thereof (the "Nonqualified Option Expiration
Date") which shall be no later than ten years after the date of grant. To
the extent not prohibited by other provisions of the Plan, each
nonqualified option granted to an Employee Optionee shall be exercisable at
such time or times as the Committee in its discretion may, at or prior to
the time such option is granted, determine (unless otherwise extended by
the Committee pursuant to Paragraph 3(b)(2)(iii) of this Article). In the
event the Committee makes no such determination, each nonqualified option
granted to an Employee Optionee shall be exercisable from time to time, in
whole or in part, at any time prior to the Nonqualified Option Expiration
Date.
(b) Termination of Employment; Death. For purposes of this Article II
and each nonqualified option granted under this Article II, an Employee
Optionee's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which such Employee
Optionee is no longer for any reason whatsoever (including the death of
such Employee Optionee) employed by the Company or a subsidiary of the
Company. An Employee Optionee shall be considered to be in the employment
of the Company or a subsidiary of the Company as long as such Employee
Optionee remains an employee of the Company or a subsidiary of the Company,
whether active or on any authorized leave of absence. Any question as to
whether and when there has been a termination of such employment, and the
cause of such termination, shall be determined by the Committee and its
determination shall be final and conclusive. If an Employee Optionee's
employment is terminated for any reason whatsoever (including the death of
such Employee Optionee),
A-5
<PAGE> 38
each nonqualified option thereunto granted under this Article II and all
rights thereunder shall wholly and completely terminate as follows:
(1) With respect to nonqualified options not then exercisable, at
the time the Employee Optionee's employment is terminated; and
(2) With respect to nonqualified options then exercisable:
(i) At the time the Employee Optionee's employment is terminated
if the Employee Optionee's employment is terminated because he is
discharged for fraud, theft or embezzlement committed against the
Company or a subsidiary, affiliated entity or customer of the
Company, or for conflict of interest (other than legitimate
competition); or
(ii) At the expiration of a period of one year after the
Employee Optionee's death (but in no event later than the
Nonqualified Option Expiration Date) if the Employee Optionee's
employment is terminated by reason of his death. Any such
nonqualified option may be exercised by the Employee Optionee's
estate or by the person or persons who acquire the right to exercise
such nonqualified option by bequest or inheritance; or
(iii) Unless it is otherwise provided in the option agreement or
otherwise extended in the discretion of the Committee in the event of
the Employee Optionee's retirement or disability, at the expiration
of a period of three years after the Employee Optionee's employment
is terminated because of retirement under the Employee Retirement
Plan of Stone & Webster, Incorporated and Participating Subsidiaries
or any successor plan thereto (the "Retirement Plan") or disability
(but in no event later than the Nonqualified Option Expiration Date);
or
(iv) At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the Nonqualified Option Expiration Date) if the Employee
Optionee's employment is terminated for any reason other than his
death, retirement, disability or the reasons specified in Paragraph
3(b)(2)(i) of this Article.
(c) Manner of Exercise. In order to exercise all or a portion of a
nonqualified option granted under this Article II and certain options
granted under Article III as described in Paragraph 3(b) thereof, the
person or persons entitled to exercise it shall deliver to the Company
payment in full of the shares then being purchased, together with any
required withholding tax. The payment of such exercise price and any
required withholding tax shall either be in cash or through delivery to the
Company of shares of Common Stock, or by any combination of cash or shares;
provided that if any such shares of Common Stock so delivered were obtained
through the previous exercise of any option granted under the Plan, such
shares must have been held for at least six months prior to such delivery.
The value of each share of Common Stock so delivered shall be deemed to be
equal to the per share price of the last sale of Common Stock on the
trading day immediately preceding the date the nonqualified option is
exercised, based on the composite transactions in the Common Stock as
A-6
<PAGE> 39
reported in The Wall Street Journal (or any successor publication thereto).
If the Committee so requires, such person or persons shall also deliver a
written representation that all shares being purchased are being acquired
for investment and not with a view to, or for resale in connection with,
any distribution of such shares. An option agreement may, in the discretion
of the Committee, provide for other methods to pay for, or otherwise
exercise, a nonqualified option. An option agreement also may, in the
discretion of the Committee, provide for the withholding of Federal, state
or local income tax upon exercise of a nonqualified option from any cash or
stock remuneration (from the Plan or otherwise) then or thereafter payable
by the Company to the Employee Optionee.
(d) Option not Transferable. No nonqualified option granted under
this Article II shall be transferable otherwise than by will or by the laws
of descent and distribution and, during the lifetime of the Employee
Optionee to whom any such nonqualified option is granted, such nonqualified
option shall be exercisable only by the Employee Optionee. Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of, or to
subject to execution, attachment or similar process, any nonqualified
option granted under this Article II, or any right thereunder, contrary to
the provisions hereof, shall be void and ineffective, shall give no right
to the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the nonqualified option with respect to
the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or
combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares subject to this
Article II (including shares as to which all outstanding nonqualified
options granted under this Article II, or portions thereof then
unexercised, shall be exercisable), to the end that after such event the
shares subject to this Article II and each Employee Optionee's
proportionate interest shall be maintained as if such Employee Optionee had
exercised the option before the occurrence of such event. Such adjustment
in an outstanding nonqualified option granted under this Article II shall
be made without change in the total price applicable to such nonqualified
option or the unexercised portion of such nonqualified option (except for
any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in
exercise price per share. Any such adjustment made by the Committee shall
be final, conclusive and binding upon all Employee Optionees, the Company,
and all other interested persons.
(f) Listing and Registration of Shares. Each nonqualified option
granted under this Article II shall be subject to the requirement that if
at any time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such nonqualified
option upon any securities exchange or under any state or Federal law, or
the consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, such nonqualified option may not be
exercised in whole or in
A-7
<PAGE> 40
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained and the same shall have been free of
any conditions not acceptable to the Committee.
4. AMENDMENTS. The Committee may, with the consent of the person or
persons entitled to exercise any outstanding nonqualified option granted under
this Article II, amend such nonqualified option; provided, however, that any
such amendment shall be subject to stockholder approval when required in Article
I, Paragraph 4. The Committee may at any time or from time to time, in its
discretion, in the case of any nonqualified option previously granted under this
Article II which is not then immediately exercisable in full, accelerate the
time or times at which such option may be exercised to any earlier time or
times.
5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
a nonqualified option granted under this Article II shall not be entitled
to any rights as a stockholder of the Company with respect to any shares
subject to such nonqualified option until he shall have become the
beneficial owner of such shares.
(b) No nonqualified option granted under this Article II shall be
construed as limiting any right which the Company or any subsidiary of the
Company may have to terminate at any time, with or without cause, the
employment of any person to whom such nonqualified option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under this Article II, the Company shall not be
required to issue any shares hereunder or thereunder if such issuance
would, in the judgment of the Committee, constitute a violation of any
state or Federal law or of the rules or regulations of any governmental
regulatory body.
ARTICLE III
INCENTIVE STOCK OPTIONS
1. ELIGIBLE EMPLOYEES. All Employee Optionees shall be eligible to receive
incentive stock options under this Article III.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each incentive stock option
granted hereunder shall be equal to the fair market value per share of Common
Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal (or any successor publication thereto), and shall be equal to the per
share price of the last sale of Common Stock on the trading day immediately
preceding the date of grant of such incentive stock option; provided, however,
that in the case of an Employee Optionee who, at the time such incentive stock
option is granted, owns more than 10% of the total combined voting power of all
classes of stock of the Company or any subsidiary corporation, within the
meaning of section 422(b)(6) of the Code (a "10% Employee Optionee"), the
exercise price per share shall be at least 110% of the fair market value per
A-8
<PAGE> 41
share of Common Stock at the time of grant. The exercise price for each
incentive stock option shall be subject to adjustment as provided in Paragraph
3(e) of this Article.
3. TERMS AND CONDITIONS OF OPTIONS. Incentive stock options shall be in
such form as the Committee may from time to time approve, shall be subject to
the following terms and conditions and may contain such additional terms and
conditions, not inconsistent with this Article III, as the Committee shall deem
desirable:
(a) Option Period and Conditions and Limitations on Exercise. Subject
to Paragraph 4 of this Article, no incentive stock option shall be
exercisable with respect to any of the shares subject to such incentive
stock option later than the date which is the date determined by the
Committee upon the grant thereof (the "ISO Expiration Date"), which shall
be no later than ten years after the date of grant; provided, however, that
in the case of any 10% Employee Optionee, the ISO Expiration Date of any
incentive stock option granted thereto shall not be later than five years
after the date of such grant. To the extent not prohibited by other
provisions of the Plan, each incentive stock option shall be exercisable at
such time or times as the Committee in its discretion may determine at or
prior to the time such incentive stock option is granted (unless otherwise
extended by the Committee pursuant to Paragraph 3(b)(2)(iii) of this
Article). In the event the Committee makes no such determination, each
incentive stock option shall be exercisable from time to time, in whole or
in part, subject to the monetary limitations set forth in Paragraph 3(g) of
this Article, at any time prior to the ISO Expiration Date.
(b) Termination of Employment; Death. For purposes of this Article
III and each incentive stock option granted hereunder, an Employee
Optionee's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which such Employee
Optionee is no longer for any reason whatsoever (including the death of
such Employee Optionee) employed by the Company or a subsidiary of the
Company. An Employee Optionee shall be considered to be in the employment
of the Company or a subsidiary of the Company as long as such Employee
Optionee remains an employee of the Company or a subsidiary of the Company,
whether active or on any authorized leave of absence. Any question as to
whether and when there has been a termination of such employment, and the
cause of such termination, shall be determined by the Committee and its
determination shall be final and conclusive. If an Employee Optionee's
employment is terminated for any reason whatsoever (including the death of
such Employee Optionee), each incentive stock option thereunto granted
hereunder and all rights thereunder shall wholly and completely terminate
as follows:
(1) With respect to incentive stock options not then exercisable,
at the time the Employee Optionee's employment is terminated; and
(2) With respect to incentive stock options then exercisable:
(i) At the time the Employee Optionee's employment is terminated
if his employment is terminated because he is discharged for fraud,
theft or embezzlement committed against
A-9
<PAGE> 42
the Company or a subsidiary, affiliated entity or customer of the
Company, or for conflict of interest (other than legitimate
competition); or
(ii) At the expiration of a period of one year after the
Employee Optionee's death (but in no event later than the ISO
Expiration Date) if the Employee Optionee's employment is terminated
by reason of his death. An incentive stock option granted under this
Article III may be exercised by the Employee Optionee's estate or by
the person or persons who acquire the right to exercise such
incentive stock option by bequest or inheritance; or
(iii) Unless it is otherwise provided in the option agreement or
otherwise extended in the discretion of the Committee after the date
which is three months after the Employee Optionee's retirement or
disability, at the expiration of a period of three years after the
Employee Optionee's employment is terminated because of retirement
under the Retirement Plan or disability (but in no event later than
the ISO Expiration Date); or
(iv) At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the ISO Expiration Date) if the Employee Optionee's employment
is terminated for any reason other than his death, retirement,
disability or the reasons specified in Paragraph 3(b)(2)(i) of this
Article.
In the event and to the extent that an incentive stock option granted
under this Article III is not exercised (i) within three months after the
Employee Optionee's employment is terminated because of retirement or
disability not within the meaning of section 22(e)(3) of the Code, or (ii)
within one year after the Employee Optionee's employment is terminated
because of disability within the meaning of section 22(e)(3) of the Code,
such option shall be taxed as a nonqualified option and shall be subject to
the manner of exercise provisions described in Article II, Paragraph 3(c).
(c) Manner of Exercise. In order to exercise all or a portion of an
incentive stock option granted under this Article III, the person or
persons entitled to exercise it shall deliver to the Company payment in
full for the shares then being purchased. The payment of such exercise
price shall either be in cash or through delivery to the Company of shares
of Common Stock, or by any combination of cash or shares; provided that if
any such shares of Common Stock so delivered were obtained through the
previous exercise of any option granted under the Plan, such shares must
have been held for at least six months prior to such delivery. The value of
each share of Common Stock delivered shall be deemed to be equal to the per
share price of the last sale of Common Stock on the trading day immediately
preceding the date the incentive stock option is exercised, based on the
composite transactions in the Common Stock as reported in The Wall Street
Journal (or any successor publication thereto). If the Committee so
requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares. An option agreement may, in the discretion of
the Committee, provide for other methods to pay for, or otherwise exercise,
an incentive stock option. An option agreement also may, in the discretion
of the Committee, provide for the withholding of Federal, state or local
income tax upon exercise of any
A-10
<PAGE> 43
incentive stock option from any cash or stock remuneration (from the Plan
or otherwise) then or thereafter payable by the Company to the Employee
Optionee.
(d) Options not Transferable. No incentive stock option shall be
transferable otherwise than by will or by the laws of descent and
distribution and, during the lifetime of the Employee Optionee to whom any
incentive stock option is granted, such incentive stock option shall be
exercisable only by such Employee Optionee. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any incentive stock option, or
any right thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the incentive
stock option with respect to the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or
combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares subject to this
Article III (including shares as to which all outstanding incentive stock
options, or portions thereof then unexercised, shall be exercisable), to
the end that after such event the shares subject to this Article III and
each Employee Optionee's proportionate interest shall be maintained as if
such Employee Optionee had exercised the option before the occurrence of
such event. Such adjustment in an outstanding incentive stock option shall
be made without change in the total price applicable to such incentive
stock option or the unexercised portion of such incentive stock option
(except for any change in the aggregate price resulting from rounding-off
of share quantities or prices) and with any necessary corresponding
adjustment in exercise price per share. Any such adjustment made by the
Committee shall be final, conclusive and binding upon all Employee
Optionees, the Company, and all other interested persons. Any adjustment of
an incentive stock option under this Paragraph (e) shall be made in such
manner as not to constitute a "modification" within the meaning of section
424(h)(3) of the Code.
(f) Listing and Registration of Shares. Each incentive stock option
shall be subject to the requirement that if at any time the Committee
determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such incentive stock option upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the issue or purchase of shares
thereunder, such incentive stock option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained and the same shall have been free of
any conditions not acceptable to the Committee.
(g) Limitation on Amount. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time an
incentive stock option is granted, based upon the calculation of the
exercise price as provided in Paragraph 2 of this Article) of the Common
Stock with respect to which incentive stock options are exercisable for the
first time by an Employee
A-11
<PAGE> 44
Optionee, under all incentive stock option plans of the Company and its
subsidiaries, during any calendar year cannot exceed $100,000 or such other
maximum amount permitted under section 422(d) of the Code. If the date on
which one or more of such incentive stock options could first be exercised
would be accelerated pursuant to any provision of the Plan or any option
agreement, and the acceleration of such exercise date would result in a
violation of the monetary restriction set forth in the preceding sentence,
then, notwithstanding any such provision, but subject to the provisions of
the next succeeding sentence, the exercise dates of such incentive stock
options shall be accelerated only to the date or dates, if any, that do not
result in a violation of such restriction and, in such event the exercise
date of the incentive stock options with the lowest option prices shall be
accelerated to the earliest such dates. The Committee may, in its
discretion, authorize the acceleration of the exercise date of one or more
incentive stock options even if such acceleration would violate the
monetary restriction set forth in the first sentence of this Paragraph (g)
and even if such incentive stock options were thereby converted in whole or
in part to nonqualified options.
4. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding incentive stock option, amend such
incentive stock option; provided, however, that any such amendment shall be
subject to stockholder approval when required in Article I, Paragraph 4. Subject
to Paragraph 3(g) of this Article, the Committee may at any time or from time to
time, in its discretion, in the case of any incentive stock option previously
granted hereunder which is not then immediately exercisable in full, accelerate
the time or times at which such incentive stock option may be exercised to any
earlier time or times.
5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
an incentive stock option shall not be entitled to any rights as a
stockholder of the Company with respect to any shares subject to such
incentive stock option until he shall have become the beneficial owner of
such shares.
(b) No incentive stock option shall be construed as limiting any right
which the Company or any subsidiary of the Company may have to terminate at
any time, with or without cause, the employment of any person to whom such
incentive stock option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
incentive stock option, the Company shall not be required to issue any
shares hereunder if such issuance would, in the judgment of the Committee,
constitute a violation of any state or Federal law or of the rules or
regulations of any governmental regulatory body.
(d) The Committee may require any person who exercises an incentive
stock option to give prompt notice to the Company of any disposition of
shares of Common Stock acquired upon exercise of an incentive stock option
within one year after the transfer of shares to such person.
A-12
<PAGE> 45
ARTICLE IV
NON-EMPLOYEE DIRECTOR OPTIONS
1. ELIGIBLE PERSONS. Non-Employee Directors shall be eligible to receive
options under, and solely under, this Article IV and any such options shall be
nonqualified options.
2. INITIAL AND ANNUAL GRANTING OF NONQUALIFIED OPTIONS TO NON-EMPLOYEE
DIRECTORS. Subject to the limitation of the number of shares of Common Stock
set forth in Article I, Paragraph 2, (a) a nonqualified option to purchase 2,000
shares of Common Stock will be granted to each Non-Employee Director who is a
Non-Employee Director as of the close of business on the Effective Date (which
date shall be the date of grant for purposes hereof), (b) a nonqualified option
to purchase 2,000 shares of Common Stock will be granted to each Non-Employee
Director who is initially elected or appointed to the Board of Directors after
the Effective Date and prior to the expiration of the Plan, effective on the
date of his initial election or appointment (which date shall be the date of
grant for purposes hereof), and (c) a nonqualified option to purchase 1,000
shares of Common Stock will be granted annually, effective as of the anniversary
date of the Effective Date in each year after the Effective Date until the
expiration of the Plan, to each person who is a Non-Employee Director on each
such anniversary date (which date shall be the date of grant for purposes
hereof).
3. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under this Article IV shall be equal to the fair market value per share
of Common Stock at the time of grant as determined by the Committee, based on
the composite transactions in the Common Stock as reported by The Wall Street
Journal (or any successor publication thereto), and shall be equal to the per
share price of the last sale of Common Stock on the trading day immediately
preceding the date of grant of such nonqualified option. The exercise price for
each option granted under this Article IV shall be subject to adjustment as
provided in Paragraph 4(e) of this Article.
4. TERMS AND CONDITIONS OF NONQUALIFIED OPTIONS. Subject to the provisions
of Paragraph 4 of this Article, nonqualified options granted under this Article
IV shall be in such form as the Committee may from time to time approve.
Nonqualified options granted under this Article IV shall be subject to the
following terms and conditions:
(a) Option Period and Conditions and Limitations on Exercise. Each
nonqualified option granted under this Article IV shall be exercisable from
time to time, in whole or in part, at any time after six months from the
date of grant and prior to the date determined by the Committee upon the
grant thereof (the "Option Expiration Date"), which shall be no later than
ten years after the date of grant.
(b) Termination of Directorship; Death. For purposes of this Article
IV and each nonqualified option granted under this Article IV, a
Non-Employee Director's directorship shall be deemed to have terminated at
the close of business on the day preceding the first date on which he
ceases to be a member of the Board of Directors for any reason whatsoever
(including the death of such Non-
A-13
<PAGE> 46
Employee Director). If a Non-Employee Director's directorship is terminated
for any reason (including the death of such Non-Employee Director), each
nonqualified option thereunto granted under this Article IV and all rights
thereunder shall wholly and completely terminate as follows:
(1) With respect to each nonqualified option granted within the six
month period preceding such termination, at the time the Non-Employee
Director's directorship is terminated; and
(2) With respect to each nonqualified option granted prior to the
six month period preceding such termination:
(i) At the time the Non-Employee Director's directorship is
terminated if his directorship is terminated as a result of his
removal from the Board of Directors for cause (other than
disability); or
(ii) At the expiration of a period of one year after the
Non-Employee Director's death (but in no event later than the Option
Expiration Date) if the Non-Employee Director's directorship is
terminated by reason of his death. A nonqualified option granted
under this Article IV may be exercised by the Non-Employee Director's
estate or by the person or persons who acquire the right to exercise
such nonqualified option by bequest or inheritance; or
(iii) At the expiration of a period of three years after the
Non-Employee Director's directorship is terminated as a result of
such person's resignation or removal from the Board of Directors
because of disability (but in no event later than the Option
Expiration Date); or
(iv) At the expiration of a period of three months after the
Non-Employee Director directorship is terminated (but in no event
later than the Option Expiration Date) if the Non-Employee Director's
directorship is terminated for any reason other than the reasons
specified in Paragraphs 4(b)(2)(i) through 4(b)(2)(iii) of this
Article.
(c) Manner of Exercise. In order to exercise all or a portion of a
nonqualified option granted under this Article IV, the person or persons
entitled to exercise it shall deliver to the Company payment in full for
the shares then being purchased, together with any required withholding
tax. The payment of such exercise price and any required withholding tax
shall either be in cash or through delivery to the Company of shares of
Common Stock, or by any combination of cash or shares; provided that if any
such shares of Common Stock so delivered were obtained through the previous
exercise of any option granted under the Plan, such shares must have been
held for at least six months prior to such delivery. The value of each
share of Common Stock delivered shall be deemed to be equal to the per
share price of the last sale of Common Stock on the trading date
immediately preceding the date the nonqualified option is exercised, based
on the composite transactions in the Common Stock as reported in The Wall
Street Journal (or any successor publication thereto). If the Committee so
requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in
A-14
<PAGE> 47
connection with, any distribution of such shares. An option agreement may,
in the discretion of the Committee, provide for other methods to pay for,
or otherwise exercise, a nonqualified option. An option agreement also may,
in the discretion of the Committee, provide for the withholding of Federal,
state or local income tax upon exercise of a nonqualified option from any
cash or stock remuneration (from the Plan or otherwise) then or thereafter
payable by the Company to the Non-Employee Director.
(d) Nonqualified Options Not Transferable. No nonqualified option
granted under this Article IV shall be transferable otherwise than by will
or by the laws of descent and distribution and, during the lifetime of the
NonEmployee Director to whom any such nonqualified option is granted, such
nonqualified option shall be exercisable only by such Non-Employee
Director. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of, or to subject to execution, attachment or similar process, any
nonqualified option granted under this Article IV, or any right thereunder,
contrary to the provisions hereof, shall be void and ineffective, shall
give no right to the purported transferee, and shall, at the sole
discretion of the Committee, result in forfeiture of the nonqualified
option with respect to the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, or combination of shares, the Committee shall make an appropriate
and equitable adjustment in the number and kind of shares subject to this
Article IV (including shares as to which all outstanding nonqualified
options granted under this Article IV, or portions thereof then
unexercised, shall be exercisable), to the end that after such event the
shares subject to this Article IV of the Plan and each Non-Employee
Director's proportionate interest shall be maintained as if such
Non-Employee Director had exercised the option before the occurrence of
such event. Such adjustment in an outstanding nonqualified option granted
under this Article IV shall be made without change in the total price
applicable to the nonqualified option or the unexercised portion of the
nonqualified option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in exercise price per share. Any such adjustment
made by the Committee shall be final, conclusive and binding upon all
Non-Employee Directors, the Company, and all other interested persons.
(f) Listing and Registration of Shares. Each nonqualified option
granted under this Article IV shall be subject to the requirement that if
at any time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such nonqualified
option upon any securities exchange or under any state or Federal law, or
the consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, such nonqualified option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained and
the same shall have been free of any conditions not acceptable to the
Committee.
A-15
<PAGE> 48
5. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under this
Article IV, amend such nonqualified option; provided, however, that any such
amendment shall be subject to stockholder approval when required in Article I,
Paragraph 4.
6. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
a nonqualified option granted under this Article IV shall not be entitled
to any rights as a stockholder of the Company with respect to any shares
subject to such nonqualified option until he shall have become the
beneficial owner of such shares.
(b) No nonqualified option granted under this Article IV shall be
construed as limiting any right which either the stockholders of the
Company or the Board of Directors may have to remove at any time, with or
without cause, any Non-Employee Director to whom such nonqualified option
has been granted from the Board of Directors.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under this Article IV, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or Federal
law or of the rules or regulations of any governmental regulatory body.
(d) Notwithstanding any provision of the Plan, the Committee may not
exercise any discretion with respect to this Article IV which would be
inconsistent with the intent that (i) the Plan meet the requirements of
Rule 16b-3 and (ii) any Non-Employee Director who is eligible to receive a
grant or to whom a grant is made pursuant this Article IV will not for such
reason cease to be a "disinterested person" within the meaning of such Rule
16b-3 with respect to the Plan and other stock related plans of the Company
or any of its affiliates. Specifically, in the event of a Corporate Change,
as defined in Article I, Paragraph 11, the Committee may, with respect to
nonqualified options under this Article IV, only exercise the alternative
in clause (2) of Article I, Paragraph 11, or such other alternatives
specified in Article I, Paragraph 11 as would not, in the opinion of legal
counsel of the Company, violate the limitations contained in the
immediately preceding sentence. If any Plan provision is found not to be in
compliance with Rule 16b-3 or if any Plan provision would disqualify any
Non-Employee Director from remaining a "disinterested person", that
provision shall be deemed amended so that the Plan does so comply and the
Plan participants remain disinterested, to the extent permitted by law and
deemed advisable by the Committee, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
A-16
<PAGE> 49
EXHIBIT B
1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
OF
STONE & WEBSTER, INCORPORATED
1. PURPOSE
The purpose of the 1995 Stock Plan for Non-Employee Directors of Stone &
Webster, Incorporated (the "Plan") is to promote the long-term growth and
financial success of Stone & Webster, Incorporated (the "Company") by attracting
and retaining non-employee directors of outstanding ability and by promoting a
greater identity of interest between its non-employee directors and its
stockholders.
2. DEFINITIONS
The following capitalized terms used herein have the following meanings:
"Annual Retainer" means the annual compensation paid to each Non-Employee
Director in shares of Common Stock under the Plan calculated in accordance with
Section 6(a) hereof on the basis of a monetary amount not to exceed $8,000.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors or
such other committee of the Board of Directors which shall succeed to the
functions and responsibilities of the Compensation Committee.
"Common Stock" means the Company's Common Stock, $1.00 par value per share.
"Director Meeting Fees" means fees earned by Non-Employee Directors by
attendance at meetings of the Board of Directors and at meetings of any
committee of the Board of Directors of which such Non-Employee Director is a
member.
"Fair Market Value" means, as of any date of the determination thereof, the
per share price of the last sale of Common Stock on the trading date immediately
preceding such date of determination, based on the composite transactions in the
Common Stock as reported by The Wall Street Journal (or any successor
publication thereto).
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Non-Employee Director" means a member of the Board of Directors who is not
an officer or employee of the Company or any subsidiary thereof.
B-1
<PAGE> 50
3. TERM
The Plan shall become effective as of the date the Plan is approved by the
stockholders of the Company. Once effective, the Plan shall operate and shall
remain in effect until terminated by action of the Board of Directors as
provided in Section 9 hereof.
4. PLAN OPERATION
The Plan is intended to meet the requirements of Rule 16b-3(c)(2)(ii)
promulgated under the 1934 Act and, accordingly, is intended to be
self-governing and nondiscretionary. To the extent necessary to administer the
Plan, the Committee shall have the power and authority to construe and interpret
the provisions of the Plan. Decisions of the Committee shall be final and
conclusive.
5. PARTICIPATION
All Non-Employee Directors shall be eligible to participate in the Plan.
6. GRANTS
(a) Annual Retainer Stock Grant. As soon as practicable, but no later
than 30 days after July 1 of each calendar year beginning with 1996, (i)
each person who is a Non-Employee Director at any such July 1 shall receive
that number of shares (rounded up to the next whole share in the event of a
fractional share) of Common Stock having an aggregate Fair Market Value as
of such July 1 equal to the amount calculated by multiplying $8,000 by a
fraction, the numerator of which is the sum of (a) the number of whole
months such person served as a Non-Employee Director prior to July 1 in
such calendar year (with service by any such Non-Employee Director for at
least 15 days in any month being considered service for a whole month), and
(b) 6, and the denominator of which is 12, and (ii) each person who was a
Non-Employee Director at any time during such calendar year prior to such
July 1 (but was not a Non-Employee Director as of such July 1) shall
receive that number of shares (rounded up to the next whole share in the
event of a fractional share) of Common Stock having an aggregate Fair
Market Value as of such July 1 equal to the amount calculated by
multiplying $8,000 by a fraction, the numerator of which is the number of
whole months such person served as a Non-Employee Director prior to July 1
in such calendar year (with service by any such Non-Employee Director for
at least 15 days in any month being considered service for a whole month),
and the denominator of which is 12.
A person who becomes a Non-Employee Director at any time after July 1
of any such calendar year shall receive that number of shares (rounded up
to the next whole share in the event of a fractional share) of Common Stock
having an aggregate Fair Market Value as of such July 1 equal to the amount
calculated by multiplying $8,000 by a fraction, the numerator of which is
the number of whole months such person served as a Non-Employee Director
after July 1 of such calendar year (with service by any such Non-Employee
Director for at least 15 days in any month being considered service for a
whole month), and the denominator of which is 12. Such shares shall be
received by any such Non-Employee Director as soon as practicable, but no
later than 30 days after the December 31 immediately following such July 1.
B-2
<PAGE> 51
With respect to 1995, each person who is a Non-Employee Director at
July 1, 1995 shall receive that number of shares (rounded up to the next
whole share in the event of a fractional share) of Common Stock having an
aggregate Fair Market Value as of such July 1 equal to $4,000. Such shares
shall be received by any such Non-Employee Director as soon as practicable,
but no later than 30 days after July 1, 1995.
(b) Election to Receive Director Meeting Fees in Stock in Lieu of
Cash. Except as set forth in the Plan, a Non-Employee Director may elect
to receive all or a portion of Director Meeting Fees in the form of shares
of Common Stock, with such shares of Common Stock being paid in arrears on
a calendar quarter basis. The number of shares (rounded up to the next
whole share in the event of a fractional share) for a calendar quarter
payable to a Non-Employee Director (or to any person who was a Non-Employee
Director for a portion of such calendar quarter) who has elected to receive
Director Meeting Fees in the form of shares (i) shall be in an amount
having the aggregate Fair Market Value, as of the last day of any such
calendar quarter, equal to the amount of Director Meeting Fees which have
been earned in such quarter and which were elected to be paid in shares of
Common Stock, and (ii) shall be received by the Non-Employee Director (or
any person who was a Non-Employee Director for a portion of such calendar
quarter) as soon as practicable, but no later than 30 days after the end of
such calendar quarter.
(c) Elections. All elections under Section 6(b) for the payment of
all or a portion of Director Meeting Fees in the form of Common Stock (i)
shall be made in writing, (ii) shall be delivered to the Secretary of the
Company, (iii) shall be irrevocable for the calendar year next succeeding
such election (or, in the case of any person who becomes a Non-Employee
Director during a calendar year, for the remainder of such calendar year
during which such Director Meeting Fees are to be paid to such Non-Employee
Director in shares of Common Stock), and (iv) shall specify the portion (in
25% increments) of such Director Meeting Fees to be paid in shares of
Common Stock. All such elections shall be made annually before December 31
of the year prior to the year in which Director Meeting Fees are to be
earned (or, in the case of any person who becomes a Non-Employee Director
during a calendar year, at least six months prior to the date any such
Director Meeting Fees are to be paid to such Non-Employee Director in
shares of Common Stock). Notwithstanding the foregoing, for the first
calendar year of the Plan, each Non-Employee Director may elect, on or
prior to July 1, 1995, to receive Director Meeting Fees for the remainder
of such calendar year in shares of Common Stock.
7. LIMITATIONS AND CONDITIONS
(a) Total Number of Shares. The total number of shares of Common
Stock that may be issued to Non-Employee Directors under the Plan is
100,000 shares. The shares of Common Stock deliverable under the Plan may
be authorized and unissued shares or reacquired shares. The foregoing
number may be increased or decreased by the events set forth in Section 8
below. No fractional shares shall be issued hereunder. In the event a
Non-Employee Director is entitled to a fractional share, such share amount
shall be rounded upward to the next whole share amount.
(b) No Additional Rights. Nothing contained herein shall be deemed to
create a right in any Non-Employee Director to remain a member of the Board
of Directors, to be nominated for reelection
B-3
<PAGE> 52
or to be reelected as such or, after ceasing to be such a member, to
receive any cash or shares of Common Stock under the Plan, except as set
forth in the Plan.
8. STOCK ADJUSTMENTS
In the event that at any time after the effective date of the Plan the
outstanding shares of Common Stock are changed into or exchanged for a different
number or kind of shares of the Company or other securities of the Company by
reason of merger, consolidation, recapitalization, reclassification, stock
split, stock dividend, combination of shares or any similar corporate event, the
Committee may make such adjustments in (i) the aggregate number of shares of
Common Stock that may be issued under the Plan as set forth in Section 7(a), or
(ii) the class of shares that may be issued under the Plan.
9. AMENDMENT AND TERMINATION
This Plan may be amended, suspended or terminated by action of the Board of
Directors; provided, however, that (a) the provisions of the Plan may not be
amended more than once every six months, other than to comport with changes in
the Code, or the rules thereunder, and (b) any amendment from and after the
effective date of the Plan shall be approved by the stockholders of the Company
if the amendment would:
(i) materially increase the benefits accruing to participants under
the Plan;
(ii) materially increase the number of securities which may be
issued under the Plan (except as provided in Section 8); or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
10. NONASSIGNABILITY
No right to receive any shares of Common Stock under the Plan shall be
assignable or transferable by such Non-Employee Director other than by will or
the laws of descent and distribution.
11. RULE 16B-3 COMPLIANCE
It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the 1934 Act and that Plan
participants remain disinterested persons ("Disinterested Persons") for purposes
of administering other employee benefits plans of the Company and having such
other plans be exempt from Section 16(b) of the 1934 Act. Therefore, if any Plan
provision is found not to be in compliance with Rule 16b-3 or if any Plan
provision would disqualify Plan participants from remaining Disinterested
Persons, that provision shall be deemed amended so that the Plan does so comply
and the Plan participants remain disinterested, to the extent permitted by law
and deemed advisable by the Committee, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
B-4
<PAGE> 53
IN KEEPING WITH OUR CONCERN FOR THE ENVIRONMENT,
THIS PROXY STATEMENT IS PRINTED ON RECYCLED PAPER.
(LOGO)
<PAGE> 54
STONE & WEBSTER, INCORPORATED
250 West 34th Street
New York, New York 10119
March 23, 1995
To Participants in the Employee Investment Plan,
Employee Stock Ownership Plan, and
Payroll-based Employee Stock Ownership
Plan of Stone & Webster, Incorporated and
Participating Subsidiaries
VOTING RIGHTS
As a participant in the Employee Investment Plan, Employee Stock Ownership
Plan, and Payroll-based Employee Stock Ownership Plan, you may instruct The
Chase Manhattan Bank, N.A., Trustee under the Plans, to vote the shares of Stone
& Webster, Incorporated standing to your credit under the Plans at the Annual
Stockholders' Meeting of the Corporation to be held May 11, 1995.
Enclosed for your information and use are:
1. Combined Notice and Proxy Statement.
2. A form of Voting Instructions to Trustee card.
3. A postage-paid, pre-addressed envelope to return your card directly
to the Trustee in care of its tabulator of Voting Instructions.
To vote, please mark and sign the enclosed Voting Instructions card and
return it to the Trustee in the enclosed envelope.
Voting rights with respect to shares in the Employee Investment Plan Trust
not exercised by participants will be exercised by the Trustee in accordance
with the directions of the Committee under the Employee Investment Plan. With
respect to shares in the Employee Stock Ownership Plan Trust, shares allocated
to the accounts of participants are voted as the participants direct, and
allocated shares not voted by the participants and all unallocated shares are
voted in the proportions the allocated shares are voted by the participants.
Allocated shares in the Payroll-based Employee Stock Ownership Plan Trust are
voted as the participants direct, and allocated shares not voted by participants
will not be voted.
A copy of the Corporation's 1994 Annual Report to Stockholders has been
furnished to you.
PLEASE NOTE: THE CORPORATION HAS ALWAYS HAD AND CONTINUES TO MAINTAIN A
STRICT POLICY OF PERMANENT CONFIDENTIALITY REGARDING THE VOTING OF SHARES IN
THESE THREE EMPLOYEE BENEFIT PLANS. NO EMPLOYEE OF THE STONE & WEBSTER
ORGANIZATION HAS ACCESS TO THE VOTING INSTRUCTIONS OF ANY PLAN PARTICIPANT,
WHICH ARE AVAILABLE ONLY TO THE TRUSTEE AND ITS INDEPENDENT VOTING INSTRUCTIONS
TABULATOR. DISCLOSURE TO THE CORPORATION OR TO THIRD PARTIES IS NOT PERMITTED
UNLESS REQUIRED BY LAW OR THE PARTICIPANT REQUESTS OR CONSENTS TO DISCLOSURE.
Employee Benefits Committee
Stone & Webster, Incorporated
<PAGE> 55
STONE & WEBSTER, INCORPORATED
250 West 34th Street
New York, New York 10119
A REMINDER
Dear Stockholder:
Proxy material for the Annual Meeting of Stockholders was sent to you under
date of March 23, 1995.
Our proxy tabulator's records indicate that your proxy for this meeting,
which will be held on Thursday, May 11, 1995, has not yet been received.
Regardless of the number of shares you may own, it is important that they be
represented.
Since the time remaining is short, we urge you to sign, date and mail the
enclosed proxy promptly.
Sincerely,
PETER F. DURNING
Secretary
IF YOU HAVE ALREADY MAILED YOUR PROXY, PLEASE
ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
<PAGE> 56
Please mark your votes as this /X/
This proxy will be voted FOR Items (1), (2), (3) and (4) and AGAINST Item
(5) unless a contrary choice is specified Bowne of New York
/ / FOR / / WITHHOLD AUTHORITY
1. The election of Frank J. A. Cilluffo, J. Angus McKee and Meredith R.
Spangler as Directors to serve until the 1998 Annual Meeting of
Stockholders.
You may withhold authority to vote for any nominee by writing his or her
name on the line below:
---------------------------------------------------------------------------
FOR / / ABSTAIN / / AGAINST / /
2. The ratification of the selection of Coopers & Lybrand L.L.P., independent
accountants, as auditor for the year 1995.
3. Approval of the 1995 Stock Option Plan.
4. Approval of the 1995 Stock Plan for Non-Employee Directors.
5. The Proposal of a stockholder as described in the Proxy Statement.
6. Upon all such other matters as may properly come before said meeting.
/ / Please check box if you plan to attend the Annual Meeting.
Signature(s) Date , 1995
---------------------------------------- ----------------
NOTE: Please sign name as it appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
STONE & WEBSTER, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints BRUCE C. COLES, PETER F. DURNING and JAMES
N. WHITE, or any one of them, as attorneys, with full power of substitution, for
and in the name of the undersigned, to vote, or withhold from voting, all shares
of the undersigned in Stone & Webster, Incorporated at the Annual Meeting of its
Stockholders to be held, in accordance with notice and proxy statement received,
in Wilmington, Delaware, on May 11, 1995, and at any and all adjournments and
postponements thereof:
(continued and to be SIGNED on the Reverse Side)
<PAGE> 57
Please mark your votes as this /X/
These Voting Instructions will be voted FOR Items (1), (2), (3) and (4) and
AGAINST Item (5) unless a contrary choice is specified
FOR / / WITHHOLD AUTHORITY / /
1. The election of Frank J. A. Cilluffo, J. Angus McKee and Meredith R.
Spangler as Directors to serve until the 1998 Annual Meeting of
Stockholders.
You may withhold authority to vote for any nominee by writing his or her
name on the line below:
---------------------------------------------------------------------------
FOR / / AGAINST / / ABSTAIN / /
2. The ratification of the selection of Coopers &Lybrand L.L.P., independent
accountants, as auditor for the year 1995.
3. Approval of the 1995 Stock Option Plan.
4. Approval of the 1995 Stock Plan for Non-Employee Directors.
5. The proposal of a stockholder as described in the Proxy Statement.
6. Upon all such other matters as may properly come before said meeting.
/ / Please check box if you plan to attend the Annual Meeting.
Signature Date , 1995
------------------------------------------- -----------------
STONE & WEBSTER EMPLOYEE INVESTMENT PLAN TRUST
STONE & WEBSTER EMPLOYEE STOCK OWNERSHIP PLAN TRUST
STONE & WEBSTER PAYROLL-BASED EMPLOYEE STOCK OWNERSHIP PLAN TRUST
VOTING INSTRUCTIONS TO TRUSTEE
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
To the Trustee:
In accordance with provisions of the Employee Investment Plan, the Employee
Stock Ownership Plan, and the Payroll-based Employee Stock Ownership Plan of
Stone &Webster, Incorporated and Participating Subsidiaries, I hereby instruct
you, as Trustee, to vote or cause to be voted at the Annual Meeting of
Stockholders of Stone &Webster, Incorporated to be held, on May 11, 1995 and at
any and all adjournments and postponements thereof, all shares in said
Corporation standing to my credit in each of the trusts under the foregoing
Plans in which I may be a participant and which I am entitled to vote at such
meeting as follows:
(continued and to be SIGNED on the Reverse Side)
