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FORM 10 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from..........to..........
Commission file number 1-1228
STONE & WEBSTER, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 13-5416910
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 W. 34th Street, New York, N.Y. 10119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (212) 290-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock - $1 par New York Stock Exchange
Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X . No_____.
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Form 10-K 1995 Stone & Webster, Incorporated
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date
within 60 days prior to the date of filing.
$415,000,000 approximately, based on the closing price on the New
York Stock Exchange Composite Transactions as of January 31, 1996.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
Common Stock: 13,758,162 shares as of January 31, 1996.
The following documents, or portions thereof as indicated in the
following report, are incorporated by reference in the Parts of Form 10-
K indicated:
Part Document
III Proxy Statement in connection with the
registrant's 1996 Annual Meeting of
Shareholders
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Form 10-K 1995 Stone & Webster, Incorporated
PART I
Item 1. Business.
Registrant was incorporated as a Delaware corporation in
1929. Registrant, through its subsidiaries, is principally
engaged in providing professional engineering, construction and
consulting services. The Stone & Webster organization also owns
cold storage warehousing facilities in Atlanta and Rockmart,
Georgia; owns and operates the Stone & Webster office buildings in
Boston, Massachusetts, Cherry Hill, New Jersey, and Houston,
Texas; and develops, takes ownership interests in and operates
projects for which it may provide engineering, construction and
other services. Services of the nature inherent in these
businesses are provided to clients and customers.
The information relating to the business segments of the
registrant required by this Item is filed herewith under "Business
Segment Information" of the Financial Information section included
in Appendix A to this report. This information indicates the
amounts of revenues from sales to unaffiliated customers (from
which percentage of revenues information is available), operating
income and identifiable assets attributable to the registrant's
industry segments for the three years ended December 31, 1995.
Also see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" filed herein in Appendix A.
Engineering, Construction and Consulting Services
Registrant, through its subsidiaries, provides complete
engineering, design, construction and full environmental services
for power, process, governmental, industrial, transportation and
civil works projects. It also constructs from plans developed by
others, makes engineering reports and business examinations,
undertakes consulting engineering work, and offers information
management and computer systems expertise to clients. It also
offers a full range of services in environmental engineering and
sciences, including complete execution of environmental projects.
It remains active in the nuclear power business, for utility and
governmental clients, and continues to undertake a significant
amount of modification and maintenance work on existing nuclear
power plants. In addition, it offers advanced computer systems
development services and products in the areas of plant
scheduling, information systems, systems integration, computer-
aided design, expert systems, and database management. It also
develops projects in which registrant or its subsidiaries may take
an ownership position and for which other subsidiaries may provide
engineering, construction, management and operation and
maintenance services. Such projects have included those in the
power, pulp and paper, and other industries. Comprehensive
management consulting and financial services are also furnished
for business and industry, including public utility,
transportation, pipeline, land development, petroleum and
manufacturing companies, banking and financial institutions and
government agencies, and appraisals are performed for industrial
companies and utilities.
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Form 10-K 1995 Stone & Webster, Incorporated
During 1994, the registrant's engineering, construction and
consulting services segment modified its approach to its market
and strengthened its strategic plan by implementing a new
organizational structure. This organizational structure
established four "Global Business Units" (GBU) responsible for
marketing and executing projects within a sector on a worldwide
basis. Each GBU also is accountable for achieving goals
established for that market sector. These four GBUs are in the
power, process, government and industrial sectors. The new
structure enables the registrant to capitalize on its
international relationships, experience and abilities. Where
appropriate, lump sum, turnkey contracts will be employed as a
means of providing comprehensive services. Registrant's
engineering, construction and consulting business segment will
continue to focus on its strengths involving technology, for
example, in advanced applications in both refinery and ethylene
process work and in development of expert systems. In addition,
registrant's development activities will continue to involve
projects in which registrant's subsidiaries will hold equity
investments while at the same time providing engineering,
construction and plant operations opportunities for other units in
the organization.
Projects which may be wholly or jointly owned and operated
are being developed. Most projects include opportunities for
other subsidiaries of registrant to provide engineering,
construction and management services. Projects being developed
are in the power, pulp and paper, and other industries.
Cold Storage Services
Modern public cold storage warehousing, blast-freeze and
other refrigeration and consolidation services are offered in the
Atlanta, Georgia, metropolitan area to food processors and others
at three facilities with approximately 21.1 million cubic feet of
freezer and controlled temperature storage space, including a
facility in Rockmart, Georgia which has approximately 3.5 million
cubic feet of freezer and controlled temperature storage space.
In view of increased demand for services relating to food exports
this subsidiary's strategic plans resulted in the construction of
additional blast-freezing cells in 1995. During 1995, plans were
announced to expand the Rockmart facility by the addition of 3.7
million cubic feet of fully racked freezer space, which will bring
total capacity at the location to over 7 million cubic feet of
space. Construction is expected to be completed in the second
quarter of 1996. Offices and processing areas are leased to
customers. Comprehensive freezer services are offered to
customers. The Rockmart site has sufficient land to allow for
future expansion and to make additional space available to food
processors. In addition, the facility features direct loading of
product onto distribution trucks from railroad cars delivered on
two railroad lines which serve the Rockmart plant.
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Form 10-K 1995 Stone & Webster, Incorporated
Other
During 1995, registrant sold all of its natural gas and oil
properties and interests. It also sold its interests in a large
corporate office and business center in Tampa, Florida, in late
1995.
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Form 10-K 1995 Stone & Webster, Incorporated
Competition
The principal business activities of registrant in the
engineering, construction and consulting services segment are
highly competitive, with competition from a large number of well-
established concerns, some privately held and others publicly
held. Inasmuch as registrant is primarily a service organization,
it competes in its areas of interest by providing services of the
highest quality. Registrant believes it occupies a strong
competitive position but is unable to estimate with reasonable
accuracy the number of its competitors and its competitive
position in the engineering, construction and consulting services
industry.
The business activities of registrant in the cold storage
services segment are performed in the Atlanta and northwestern
areas of Georgia. Competition in this market area comes from a
relatively small number of companies offering similar types of
services. Registrant's subsidiary competes in this field by
providing services of the highest quality, emphasizing
responsiveness to the needs of its customers and to the end
receiver of the customers' product. As part of that commitment,
it provides modern data processing and communication equipment for
its customers. Registrant believes it occupies a strong
competitive position in this area.
Backlog
Backlog figures for the registrant's engineering,
construction and consulting services segment historically have not
been considered by the registrant to be indicative of any trend in
these activities nor material for an understanding of its
business. At any given date, the portion of engineering and
construction work to be completed within one year can only be
estimated subject to adjustments, which can in some instances be
substantial, based on a number of factors. Clients frequently
revise the scope of the services for which they have contracted
with subsidiaries of registrant, especially on projects subject to
regulatory approval or which require environmental
permitting/licensing. Scope increases and decreases of
substantial magnitude are commonplace on such projects and
directly affect backlog. Additionally, delays are common and
affect the timing of when backlog would be translated into
revenues. As a result, the aggregate of such figures in relation
to registrant's consolidated revenues could be misleading unless
understood in light of the foregoing contingencies.
The registrant's backlog information is calculated on the
basis of the total value to the registrant's subsidiaries of all
services to be rendered under the available contracts plus the
value of equipment, material, services and subcontracts for which
the contracting subsidiary has overall technical and commercial
responsibility. The following backlog information is provided as
of December 31, 1995 and December 31, 1994.
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Form 10-K 1995 Stone & Webster, Incorporated
The registrant's engineering subsidiaries' backlog as of
December 31, 1995 amounted to $1,917.0 million in comparison to
$1,541.8 million as of December 31, 1994. New work awards in 1995
were $1,209.1 million, approximately 33% of which came from
contract awards in the process sector. Although the majority of
the subsidiaries' contracts may be reduced or cancelled by the
client at any time, significant reductions in scope are unusual.
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Form 10-K 1995 Stone & Webster, Incorporated
The backlog at December 31, 1995 includes $251.0 million for
contracts won, but still under final negotiation.
Approximately 52% of the total backlog as of December 31,
1995 is expected to be realized within the next year.
In addition, approximately 37% of the December 31, 1995
backlog amount is from contracts with international clients.
BACKLOG
Engineering, Construction and Consulting Services
(in Millions of Dollars)
As of New Changes Revenue As of
12/31/94 Work In Scope Recognized* 12/31/95
$1,541.8 $1,209.1 $ 135.4 ($ 969.3) $1,917.0
*Revenue Recognized reflects revenues of the engineering
construction and consulting segment.
Backlog figures in the cold storage industry are not
provided since, in the registrant's opinion, such information is
not necessarily meaningful because of the nature of the food
processing, storage and distribution business where repetitive
services of short duration are the norm.
Clients
Although registrant's subsidiaries in the engineering,
construction and consulting services segment have numerous clients
and registrant historically has not had a continuing dependence on
any single client, one or a few clients has in the past and may in
the future contribute a substantial portion of the registrant's
consolidated revenues in any one year or over a period of several
consecutive years due to the size of major engineering and
construction projects. The registrant's business is not
necessarily dependent upon sustaining, and the registrant does not
necessarily expect to sustain in future years, the level of
revenues contributed by particular clients in any given year or
period of consecutive years. Once the subsidiary commences work
on a particular project, it is unlikely that the client would
terminate the involvement of the subsidiary prior to completion of
the project, unless the project itself is cancelled or postponed.
Historically the registrant's subsidiaries have provided ongoing
services to clients following completion of major projects for
them. Nonetheless, the registrant must obtain new engineering and
construction projects, whether from existing clients or new
clients, in order to generate revenues in future years as existing
projects are completed.
Consequently, the registrant has not considered the names
of clients to be material to investors' understanding of the
registrant's business taken as a whole. Prior to 1994, the
registrant reported this information on the basis of gross
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Form 10-K 1995 Stone & Webster, Incorporated
earnings (revenues less direct costs). Stated in terms of total
revenues (as described under Backlog, above), which is consistent
with registrant's financial reporting in this report, Tennessee
Valley Authority, which has been and continues to be a significant
client, accounted for approximately 22%, 18% and 13% of
consolidated revenues for 1993, 1994 and 1995, respectively. In
addition, in 1994 Indianapolis Power and Light Company contributed
11% of consolidated revenues.
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Form 10-K 1995 Stone & Webster, Incorporated
The cold storage and related activities segment had no
client who accounted for 10% or more of consolidated revenues in
1993, 1994, or 1995.
Environmental Compliance
Compliance by registrant and its subsidiaries with Federal,
State and local provisions regulating the discharge of materials
into the environment, or otherwise relating to the protection of
the environment, has had, and is expected to have, no material
adverse effect upon the capital expenditures, earnings and
competitive position of registrant and its subsidiaries. Also see
Note (L) to the consolidated financial statements as set forth
under "Notes to Consolidated Financial Statements" of the
Financial Information section filed herewith in Appendix A to this
report.
The engineering, construction and consulting services
segment has benefitted from the extensive amount of environmental
legislation and regulatory activity now in place because the
effect of such regulations on the businesses of the segment's
clients has increased the demand for environmental services
provided by registrant's subsidiaries. This demand for such
services to help clients in their own environmental compliance
efforts is expected to continue.
Employees
The registrant and its subsidiaries had approximately 5,000
regular employees as of December 31, 1995. In addition, there are
at times several thousand craft employees employed on projects by
subsidiaries of registrant. The number of such employees varies
in relation to the number and size of the projects actually
undertaken at any particular time.
10
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Form 10-K 1995 Stone & Webster, Incorporated
Executive Officers of the Registrant.
Name Age Position Held Held Since
H. Kerner Smith 51 President and 2/12/96
Chief Executive Officer
Director
Edward J. Walsh 44 Executive 8/15/95
Vice President
Director 8/31/95
Jeremiah P. Cronin 52 Executive
Vice President 3/1/95
Daniel P. Levy 47 Corporate Controller 7/19/95
Peter F. Durning 57 Secretary 7/20/94
Each of the executive officers listed above has held
executive or administrative positions with the registrant or one
or more of its subsidiaries for at least the last five years,
except that Mr. Smith, who joined the registrant in February 1996,
had been President and Chief Executive Officer of Deutsche Babcock
Technologies, Inc. and a managing director of Deutsche Babcock A G
during the last five years, Mr. Cronin, who joined the registrant
in 1995, had been Vice President-Finance and Chief Financial
Officer of Crane Co. since 1989, and Mr. Levy, who joined the
registrant in 1995, had been Vice President, Finance and
Administration, of Huttig Sash & Door Co. since 1991.
Each officer was elected to hold office until the first meeting
of the Board of Directors after the next Annual Meeting of the
Stockholders and until his successor is duly elected and qualified,
except that Mr. Levy was appointed to his office by the Board of
Directors. The next Annual Meeting of Stockholders is scheduled to
be held May 9, 1996.
Item 2. Properties.
The important physical properties of registrant and its
subsidiaries are as follows:
A. A 14 story office building with approximately 800,000
square feet of office space at 245 Summer Street, Boston,
Massachusetts, which serves as engineering headquarters
for the organization and is approximately 60% occupied by
registrant's subsidiaries with the balance held for
rental to others.
B. An 8 story office building with approximately 140,000
square feet of office space at 51 Sleeper Street, Boston,
Massachusetts, which is held for rental to others.
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Form 10-K 1995 Stone & Webster, Incorporated
C. A 6 story office building with approximately 450,000
square feet of office space at 3 Executive Campus, Cherry
Hill, New Jersey, which is approximately 50% occupied by
registrant's subsidiaries with the balance held for rental
to others.
D. A 6 story office building with approximately 320,000
square feet of office space at 1430 Enclave Parkway,
Houston, Texas which is substantially occupied by
subsidiaries of registrant.
E. Approximately 17.6 million cubic feet of cold storage
plant in two facilities in Atlanta, Georgia, and
approximately 3.5 million cubic feet of cold storage space
in a third facility near Rockmart, Georgia.
F. A 50 megawatt electrical co-generation plant in
Binghamton, New York, in which a subsidiary owns a 33%
interest.
G. A 200 ton per day paper fiber recycling plant in Auburn,
Maine, in which a subsidiary owns a 94.3% interest.
H. A plant for the production of oriented strand board
currently under construction in Miramichi, New Brunswick,
Canada, in which a subsidiary owns a 10.42% interest.
Except as specified above, all of the properties listed above
are owned in fee by subsidiaries of the registrant. In addition to
the foregoing, registrant and its subsidiaries occupy office space in
various cities, in premises leased from others for varying periods -
both long and short term - the longest of which extends to 2008.
Item 3. Legal Proceedings.
(a) Stone & Webster Engineering Corporation
("SWEC"), a subsidiary of the registrant, has been named as
a defendant, along with numerous other defendants, in a
number of complaints which seek damages arising out of
alleged personal injuries and/or wrongful death due to
exposure to asbestos products negligently utilized by the
defendants.
Many of these complaints have been dismissed or
withdrawn, and SWEC has settled many of these cases for
amounts which, when taken together, do not have a material
impact on registrant's financial condition or results of
operations. Registrant believes that there has not been,
nor is there a probability that there will be, any accrual
of a material liability of the registrant as a result of the
asbestos claims received to the present.
SWEC believes that it has strong factual and
legal defenses to the remaining claims and intends to defend
vigorously.
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Form 10-K 1995 Stone & Webster, Incorporated
(b) Stone & Webster Engineering Corporation provided
engineering services to Vista Chemical Company ("Vista") at
ts Westlake, Louisiana chemical plant. In 1991, Vista
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Form 10-K 1995 Stone & Webster, Incorporated
filed suit against another company and SWEC, contending that
the engineering work performed by SWEC was performed late
and not in accordance with the standards of professional
practice. Vista is seeking to recover costs incurred to
complete the project in excess of the original estimate,
certain costs that it incurred to operate the plant, and
lost profits from its operations, but it has not specified
in writing the total amount of damages it is seeking. SWEC
has denied the material allegations contained in the plaintiff's
petition. SWEC believes that it has valid factual and legal
defenses to the claims asserted and that limitation of liability
provisions in the engineering contracts limit the amount of
recoverable damages in this case to the proceeds from insurance
with the limits specified in the contracts, plus compensation
received by SWEC for its work under the contracts. In the
latter part of 1994, SWEC, after consultation with counsel,
determined that it is probable that it has some liability in
this action and that it has a reasonable estimate of liability of
$5,000,000. It is probable that any liability in excess of
$5,000,000 would be covered by insurance. Consistent with such
determination and as stated in Note (L) to the consolidated
financial statements filed herewith, SWEC expensed $3,800,000
and $1,200,000 in 1994 and 1993, respectively, in connection
with this matter.
(c) Registrant and two of its subsidiaries have been
named as defendants, along with another company, in one pending
legal action brought in January 1994 by Blackstone Valley Electric
Company in the United States District Court for the District of
Massachusetts, and have received other claims from private parties
seeking contribution for costs incurred or to be incurred in
remediation of sites under the Federal Comprehensive Environmental
Response, Compensation and Liability Act and similar state statutes.
These matters relate to business activities which took place
generally in the first half of this century. No governmental
authority has sought similar redress from registrant or its
subsidiaries (except in the case of one subsidiary in limited
connection with claims made primarily with respect to clients of
that subsidiary) nor has the registrant been found to be a
Potentially Responsible Party by the Federal or any state or local
governmental authority, although some information has been requested
with regard to environmental matters. Based on presently known facts
and existing laws and regulations, registrant and its subsidiaries
believe that they have valid legal defenses to such action and that
the costs associated with such matters, including legal costs,
should be mitigated by the presence of other entities which may be
Potentially Responsible Parties, by contractual indemnities, and by
insurance coverage.
Registrant and one subsidiary are plaintiffs in a separate
action to recover damages, attorneys' fees and other monetary relief
from certain of their insurance carriers in connection with such
matters. No recognition has been made in the financial statements
for any potentially recoverable amounts.
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Form 10-K 1995 Stone & Webster, Incorporated
(d) Also see Note (L) to the consolidated financial
statements as set forth under "Notes to Consolidated
Financial Statements" of the Financial Information section
filed herewith in Appendix A to this report.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.
The information required by Item 5 is filed herewith under
"Market and Dividend Information" of the Financial Information
section included in Appendix A to this report.
Item 6. Selected Financial Data.
The information required by Item 6 is filed herewith under
"Selected Financial Data" of the Financial Information section
included in Appendix A to this report.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The information required by Item 7 is filed herewith under
"Management's Discussion and Analysis" of the Financial
Information section included in Appendix A to this report.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 is filed herewith under
the Consolidated Financial Statements of Stone & Webster,
Incorporated and Subsidiaries together with the report of Coopers
& Lybrand L.L.P. dated February 20, 1996 of the Financial
Information section included in Appendix A to this report.
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.
Not applicable.
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Form 10-K 1995 Stone & Webster, Incorporated
PART III
Item 10. Directors and Executive Officers of the Registrant.
In accordance with General Instruction G(3) to Form 10-K,
the information called for in this Item 10 with respect to
Directors is not presented here since such information is included
in the definitive proxy statement which involves the election of
directors which will be filed pursuant to Regulation 14A not later
than 120 days after the close of the fiscal year, and such
information is hereby incorporated by reference from Part I of
such proxy statement.
See also the section captioned "Executive Officers of the
Registrant" under Item 1 of Part I herein.
Item 11. Executive Compensation.
In accordance with General Instruction G(3) to Form 10-K,
the information called for in this Item 11 is not presented here
since such information is included in the definitive proxy
statement which involves the election of directors which will be
filed pursuant to Regulation 14A not later than 120 days after the
close of the fiscal year, and such information is hereby
incorporated by reference from Part I of such proxy statement,
except that the information included therein which is not required
to be "filed" in accordance with Regulation S-K, Item 402(a)(8),
including the Report of the Compensation Committee and the
Performance Graph, is not incorporated by reference as part of
this report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
In accordance with General Instruction G(3) to Form 10-K,
the information called for in this Item 12 is not presented here
since such information is included in the definitive proxy
statement which involves the election of directors which will be
filed pursuant to Regulation 14A not later than 120 days after the
close of the fiscal year, and such information is hereby
incorporated by reference from Part I of such proxy statement.
Item 13. Certain Relationships and Related Transactions.
In accordance with General Instruction G(3) to Form 10-K,
the information called for in this Item 13 is not presented here
since such information is included in the definitive proxy
statement which involves the election of directors which will be
filed pursuant to Regulation 14A not later than 120 days after the
close of the fiscal year, and such information is hereby
incorporated by reference from Part I of such proxy statement.
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Form 10-K 1995 Stone & Webster, Incorporated
PART IV
Item 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K.
(a) Documents filed as part of the report:
1. Financial Statements and Financial
Statement Schedule
The following items appear in the Financial Information
section included as Appendix A to this report:
Management's Discussion and Analysis
Financial Statements:
Consolidated Statements of Operations for the Three
Years Ended December 31, 1995
Consolidated Balance Sheets as at December 31,
1995 and 1994
Consolidated Statements of Shareholders' Equity
for the Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows for the
Three Years Ended December 31, 1995
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
Selected Financial Data
Market and Dividend Information
Report of Management
Business Segment Information
Financial Statement Schedule:
Financial Statement Schedule for the Three
Years Ended December 31, 1995:
II. Valuation and Qualifying Accounts
Report of Independent Accountants
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Form 10-K 1995 Stone & Webster, Incorporated
2. Exhibits:
(3) Articles of Incorporation and By-laws -
(i) The Restated Certificate of
Incorporation of registrant which
appears in Exhibit (3)(a) to
registrant's Form 10-K for the fiscal
year ended December 31, 1990 is
hereby incorporated by reference.
(ii) The By-laws of registrant, as amended, are filed
herewith as Exhibit (3)(ii).
(4) Instruments defining the rights of security holders,
including indentures - As of December 31, 1995,
registrant and its subsidiaries had outstanding long-
term debt (excluding current portion) totaling
approximately $74,677,000 principally
in connection with mortgages relating to real
property for two subsidiaries' office buildings, for the
construction of a paper fiber recycling plant of a
limited partnership in which a subsidiary owns a 94.3%
interest, and in connection with capitalized lease
commitments for the acquisition of certain
computer equipment. None of these agreements are
filed herewith because the amount of indebtedness
authorized under each such agreement does not exceed
10% of the total assets of the registrant and its
subsidiaries on a consolidated basis; the registrant
hereby undertakes to furnish copies of such agreements
to the Commission upon request.
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Form 10-K 1995 Stone & Webster, Incorporated
(10) Material contracts -
(a) The Restricted Stock Plan of Stone & Webster,
Incorporated, approved by the Stockholders of
registrant in 1976, as amended and approved by the
Stockholders of registrant in 1988, and the form of
grant under the Restricted Stock Plan (incorporated by
reference to Exhibit (10)(a) to registrant's Form 10-K
for the fiscal year ended December 31, 1988).
(b) 1995 Stock Option Plan of Stone & Webster,
Incorporated (incorporated by reference to Exhibit 4-b
to the registrant's Registration Statement on Form S-8
filed on June 22, 1995 (File No. 33-60489)).*
(c) 1995 Stock Plan for Non-Employee Directors of Stone &
Webster, Incorporated (incorporated by reference to
Exhibit 4-b to the registrant's Registration Statement
on Form S-8 filed on June 22, 1995 (File No. 33-
60483)).*
(d) Forms of agreements between registrant and eleven(11)
officers of registrant and its subsidiaries, entered
into as of September 1, 1995, relating to certain
employment arrangements that would become operable
only in the event of a "change of control" (as defined
in the agreements) and that would have a potential
aggregate cost to registrant (assuming compensation
levels of September 1, 1995) if triggered as provided
in the agreements of less than $5 million
(incorporated by reference to Exhibit 10 to the
registrant's Form 10-Q for the quarter ended September
30, 1995).*
(e) The following forms of agreements with H. Kerner Smith
relating to employment with registrant as President
and Chief Executive Officer: a form of Employment
Agreement filed herewith as Exhibit (10) (e)(i); a
form of Change of Control Employment Agreement filed
herewith as Exhibit 10 (e)(ii); and a form of Stock
Option Grant filed herewith as Exhibit 10 (e)(iii). *
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule.
______________
* Exhibits 10 (b) through (e) are compensatory plans, contracts and
arrangements in which directors and certain executive officers
participate.
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Form 10-K 1995 Stone & Webster, Incorporated
(b) Reports on Form 8-K
Registrant filed the following reports on Form 8-K during
the last quarter of the period covered by this report:
Date of Form 8-K Description
October 19, 1995 Submitted under Item 5, Other
Events, reporting the text of a
resolution approved by the Board of
Directors of registrant to the
effect that the Board is not
evaluating any offers for the
registrant and is not seeking a sale
or merger of the registrant.
December 8, 1995 Submitted under Item 5, Other
Events, the text of registrant's
Press Release dated December 4, 1995
relating to an agreement to sell
commercial real estate business in
Tampa, Florida, and the resulting
impact on earnings for the fourth
quarter of 1995.
20
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
STONE & WEBSTER, INCORPORATED
By
JEREMIAH P. CRONIN
Jeremiah P. Cronin
Executive Vice President
(Duly Authorized Officer and
Chief Financial Officer)
DANIEL P. LEVY
Daniel P. Levy
Corporate Controller
(Principal Accounting Officer)
Date: March 8, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
March 8, 1996 H. KERNER SMITH
H. Kerner Smith
President and Chief Executive Officer
Director
" EDWARD J. WALSH
Edward J. Walsh
Executive Vice President
Director
" KENT F. HANSEN
Kent F. Hansen
Chairman of the Board
Director
" WILLIAM L. BROWN
William L. Brown
Director
21
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
March 8, 1996 FRANK J. A. CILLUFFO
Frank J. A. Cilluffo
Director
" DONNA R. FITZPATRICK
Donna R. Fitzpatrick
Director
" ELVIN R. HEIBERG III
Elvin R. Heiberg III
Director
" JOHN A. HOOPER
John A. Hooper
Director
" J. ANGUS MCKEE
J. Angus McKee
Director
" BERNARD W. REZNICEK
Bernard W. Reznicek
Director
" KENNETH G. RYDER
Kenneth G. Ryder
Director
22
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
APPENDIX A
STONE & WEBSTER, INCORPORATED AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION APPENDIX
<TABLE>
<CAPTION>
Page
<S> <C>
Management's Discussion and Analysis of Financial
Condition and Results of Operations A-2
Financial Statements:
Consolidated Statements of Operations for the Three Years Ended
December 31, 1995 A-9
Consolidated Balance Sheets as at December 31, 1995 and 1994 A-10
Consolidated Statements of Shareholders' Equity for the Three Years
Ended December 31, 1995 A-12
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1995 A-13
Summary of Significant Accounting Policies A-14
Notes to Consolidated Financial Statements A-15
Selected Financial Data and Market and Dividend Information A-25
Report of Management A-26
Business Segment Information A-27
Financial Statement Schedule:
Financial Statement Schedule for the Three Years
Ended December 31, 1995:
II - Valuation and Qualifying Accounts A-28
Report of Independent Accountants A-29
</TABLE>
A-1
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
RESULTS OF OPERATIONS
As discussed in the 1994 Annual Report to Shareholders, the Company changed its
reporting format and now reports revenue instead of gross earnings to be more
consistent with industry practice. Engineering, Construction and Consulting
revenue represents billings for the total value of all services including plant,
equipment, materials and subcontractors for which the engineering companies are
contractually responsible. In 1995, the Company further changed its reporting to
present Operating Income (Loss) and has reclassified profits on investment
securities and dividend and interest income to Other Income (Deductions) from
Revenue. (See Note A to the Consolidated Financial Statements.)
1995 COMPARED WITH 1994
The Company had consolidated net income of $1.04 per share in 1995 compared with
a net loss of $.52 per share in 1994, an increase of $1.56 per share. Revenue
increased to $1,002,819 from $779,255 due to significantly improved performance
in the Company's core Engineering, Construction and Consulting segment.
Operating income was $35,041 in 1995 compared with an operating loss of $42,097
in 1994 reflecting both improved revenue performance and the effect of the
restructuring and expense reduction actions taken in 1994. Net income was
$14,880 compared with a net loss of $7,807 in 1994.
As a continuation of the Company's announced strategy of divesting non-core and
underperforming assets, the Company sold its Real Estate Development and Oil and
Gas Production businesses. These transactions resulted in an after-tax loss of
$.52 per share in the fourth quarter of 1995. The 1994 results include a loss of
$.84 per share due to severance and restructuring costs and a gain of $1.42 per
share on sale of investment securities.
Components of earnings per share in 1995 and 1994 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Earnings per share before special items $ 1.04 $(1.64)
Severance -- (0.84)
Pension related items 0.52 0.54
Asset divestitures (0.52) 1.42
- --------------------------------------------------------------------------------
Earnings per share $ 1.04 $(0.52)
- --------------------------------------------------------------------------------
</TABLE>
RESTRUCTURING ACTIONS - 1995 AND 1994
Throughout 1994, the Company took actions to reduce staff levels and operating
expenses and to achieve a better balance of workload and staffing. In addition,
the Company established a new organizational structure in which Global Business
Units are responsible for achieving goals in a market sector on a worldwide
basis. In connection with the organizational structure adopted in 1994, the
Company incurred $20,341 of severance expenses for the elimination of
approximately 1,000 positions. The payroll-related cost savings realized in 1995
from these reductions were approximately $35,000. No significant staff
adjustments were taken in the Engineering, Construction and Consulting segment
in 1995 other than those associated with the normal start up and completion of
projects or with normal staff reassignments.
In 1995, a voluntary Incentive Retirement Program was offered to and accepted by
employees of the parent company, Stone & Webster, Incorporated. These employees,
as a group, had not been eligible for earlier incentive retirement plans. The
Company incurred costs of $2,315 in connection with this program. The effects of
this program will be to reduce parent company staff by approximately 30 percent
and expenses annually by $2,000. The early retirements under this program will
generally be effective on March 1, 1996.
ENGINEERING, CONSTRUCTION AND CONSULTING SEGMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Percent
1995 1994 Incr/(Decr) Incr/(Decr)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 969,284 $ 748,614 $ 220,670 29%
Operating Income (Loss) 38,941 (37,709) 76,650 --
Operating Margin 4.0% (5.0)%
Identifiable Assets $ 595,699 $ 492,650 $ 103,049 21%
- --------------------------------------------------------------------------------
</TABLE>
Late in 1994, the Company's principal segment was reorganized to establish four
Global Business Units serving different sectors of the market for Engineering,
Construction and Consulting services. The four Global Business Units established
under the 1994 restructuring are responsible for marketing and executing
projects within the Power, Process, Government and Industrial business sectors
on a worldwide basis. Each Global Business Unit has been held accountable for
achieving marketing and profitability plans in its sector. The improved
performance in 1995 is a direct result of the improved marketing focus and
accountability provided by the new organizational structure.
A-2
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
New orders (net of cancellations) for 1995 improved over 1994 by 72%. The new
order rate was sufficiently strong to allow both a 29% increase in revenue and a
substantial increase in backlog. Revenue, new orders and backlog in 1995 and
1994 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 % Increase
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning backlog $1,541,800 $1,509,700 --
New orders 1,344,500 780,700 72%
Revenue (969,300) (748,600) 29%
- --------------------------------------------------------------------------------
Ending backlog $1,917,000 $1,541,800 24%
- --------------------------------------------------------------------------------
</TABLE>
The revenue increase reflects an increase of $14,886 for domestic and $205,784
for export and international projects. Increases in international work were
largely in the Power business unit. The domestic and international mix of work
in 1995 and 1994 was:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
% Increase/
1995 1994 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States - domestic $629,379 $614,493 2%
United States - export 111,486 50,893 119%
International 228,419 83,228 174%
- --------------------------------------------------------------------------------
Total export and international 339,905 134,121 153%
- --------------------------------------------------------------------------------
Total engineering revenue $969,284 $748,614 29%
- --------------------------------------------------------------------------------
Percent export and international 35% 18%
- --------------------------------------------------------------------------------
</TABLE>
All of the Global Business Units achieved increases in revenue in 1995. The
effectiveness at both generating revenue and building backlog reflects the
improved market focus of the Global Business Units and their ability to
concentrate the necessary technical and management resources on both proposal
opportunities and contract execution. Major improvements in orders and revenue
in 1995 were in the domestic and international power sectors and in the domestic
process market. New orders in 1995 by business unit were:
[PIE CHART]
<TABLE>
<S> <C>
Power 47%
Process 30%
Government 15%
Industrial 8%
</TABLE>
Engineering, Construction and Consulting operating income improved to $38,941
from 1994's operating loss of $37,709, an improvement of $76,650. The turnaround
in the Company's core business is due to:
Reduced indirect and overhead cost structures.
Improved revenue performance, enabling fuller utilization of engineering
staff and a better balance of staffing with workload.
Increased management focus on profitability - particularly at the business
unit and contract execution level.
A year-to-year comparison of operating margins, adjusting for pension income and
one-time expenses or income is shown below:
<TABLE>
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 969,284 $ 748,614
- ------------------------------------------------------------------------------
Operating Income (Loss) - as reported $ 38,941 $ (37,709)
- ------------------------------------------------------------------------------
Deduct (add):
Pension related items 14,206 12,946
Severance -- (20,341)
Net recovery of insurance claim 7,220 --
Write-down of technology investment (6,500) --
Provision for settlement of lawsuits (2,500) (4,700)
- ------------------------------------------------------------------------------
Operating Income (Loss) - adjusted $ 26,515 $ (25,614)
- ------------------------------------------------------------------------------
Operating Margin - as reported 4.0% (5.0)%
Operating Margin - adjusted 2.7% (3.4)%
- ------------------------------------------------------------------------------
</TABLE>
Several nonrecurring items affected Engineering, Construction and Consulting
operating income in 1995. In the third quarter, a settlement of $16,000 was
obtained in an action taken to recover damages, attorneys' fees and other
monetary relief from insurance carriers. This settlement, after deduction for
current and deferred legal expenses, was recognized as a gain of $7,220 in the
third quarter. The Company settled two contract-related lawsuits in 1994 for
$900 and expensed $3,800 in anticipation of a loss on another contract-related
suit. A settlement was reached in the third quarter of 1995 relating to
environmental matters for which a charge of $2,500 was incurred, representing
the amount of the settlement net of cash received from insurance recoveries of
$1,500.
Also in the third quarter, the Company recorded a write-down of $6,500
in capitalized costs associated with purchased technology in a standardized,
pre-certified design for nuclear power plants. The Company had originally
estimated that this investment, which began in 1993, would be recoverable from
revenue generated over the period 1995-2000. Based on a number of external
events occurring in the third quarter that reduced the potential market for this
technology, management determined that it would be unlikely that any revenue
would be generated from this investment in the near term, necessitating a
revaluation of the net realizable value of the asset.
A-3
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
COLD STORAGE SEGMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Percent
1995 1994 Incr/(Decr) Incr/(Decr)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $21,188 $17,280 $3,908 23%
Operating Income 7,783 5,927 1,856 31%
Operating Margin 36.7% 34.3%
Identifiable Assets $35,143 $35,798 $(655) (2)%
- ------------------------------------------------------------------------------
</TABLE>
Revenue from Cold Storage and related activities increased by 23% in 1995 to
$21,188 from $17,280 in 1994. Revenue increased due to higher demand for
services relating to food exports and to increased reliance, by food processors,
on cold storage logistics services. The Cold Storage segment offers extensive
logistics services including freight consolidation and stock rotation that
enable it to compete effectively with other organizations offering only
refrigerated warehouse space. Additional blast freezing capacity was added in
1995. Operating margins improved on the higher volume. Since much of the cost of
the cold storage operation is related to capacity, as additional volume is
generated, the margin rate improves. Full utilization of existing capacity was
reached at several points during 1995.
Due to additional demand for services from frozen food manufacturers and poultry
producers, in the fourth quarter of 1995, a decision was made to add 3.7 million
cubic feet of capacity at the Company's most modern facility in Rockmart,
Georgia. This capacity is currently under construction and will be available for
commercial use in the second quarter of 1996. The cost of adding this capacity
will be approximately $8,000 and will be funded from operations. Additional
freezing capacity, when added, will use the most current energy efficient
construction and cooling processes; therefore, as capacity is added, the average
cost of the capacity declines.
OTHER SEGMENT AND GENERAL CORPORATE EXPENSES
The Other segment consists of the Oil and Gas Production and Real Estate
Development businesses, both of which were divested in the fourth quarter of
1995. Revenue from this segment declined to $12,347 in 1995 from 1994 revenue of
$13,361. Operating income improved from $395 in 1994 to $1,244 in 1995. The 1994
operating income included a write-off of goodwill of $862 in an Oil and Gas
subsidiary.
General Corporate expenses increased by $2,217 from 1994. This increase was due
primarily to the one-time cost associated with implementing the Incentive
Retirement Program. (See Note Q to the Consolidated Financial Statements.)
ASSET DIVESTITURES
In 1994, the Company announced the planned divestiture of several non-core and
underperforming assets with the intent of focusing on the Engineering,
Construction and Consulting segment. For 1994, the Company reported a gain on
the sale of investment securities of $32,102 and dividends from these securities
of $1,045.
In 1995, the Company reported a loss on the sale of assets of $12,443 consisting
of the loss on the sale of the Real Estate Development business of $18,570 and a
gain on the sale of the Oil and Gas Production business of $6,127. In the fourth
quarter, the Real Estate Development business was sold for $42,500 in cash.
Proceeds were, in part, used to retire $26,360 of related mortgage debt. The
assets sold consisted primarily of land held for resale and buildings in a 1,000
acre office park development near Tampa, Florida. In preparation for this
transaction, the Company purchased a 50% ownership interest and related mortgage
debt in one building from a joint venture partner for a net cash investment of
$2,458 and assumption of mortgage debt of $7,360. This interest was subsequently
resold to the purchaser of the property.
Also in the fourth quarter, the Company completed the sale of its Oil and Gas
Production business for $16,500 in cash. A summary of the effect of asset
divestitures in 1995 and 1994 on pre-tax and net income is:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Pre-tax gain (loss) on sale
Investment securities $ -- $32,102
Oil and Gas Production business 6,127 --
Real Estate Development business (18,570) --
- --------------------------------------------------------------------------------
Gain (loss) before provision for income tax $(12,443) $32,102
- --------------------------------------------------------------------------------
After-tax gain (loss) on sale
Investment securities -- 21,208
Oil and Gas Production business 4,434 --
Real Estate Development business (11,945) --
- --------------------------------------------------------------------------------
Net gain (loss) on asset sales $ (7,511) $21,208
- --------------------------------------------------------------------------------
Net income (loss) per share $ (0.52) $ 1.42
- --------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
PENSION RELATED ITEMS
In prior years, foreign pension plans were not separately disclosed due to
materiality considerations. For 1995, the Company has changed the presentation
of pension related items to include the foreign plans. The following table
presents total pension related items and shows, separately, the effect of net
pension credit, early retirement incentives, curtailment gains, and foreign
pension expense.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(Income)/Expense 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net pension credit as previously
reported (1) $(15,175) $(13,234) $(13,953)
Foreign pension expense (2) 752 454 636
Incentive Retirement Program 2,112 -- 8,992
Curtailment gain -- (357) (1,072)
- -------------------------------------------------------------------------------
Total pension related items as
currently reported (3) $(12,311) $(13,137) $ (5,397)
- -------------------------------------------------------------------------------
After-tax total pension related items $ (7,529) $ (8,035) $ (3,332)
- -------------------------------------------------------------------------------
Total pension related items per share $ (0.52) $ (0.54) $ (0.22)
- -------------------------------------------------------------------------------
</TABLE>
(1) SFAS No. 87 income on qualified U.S. plan.
(2) SFAS No. 87 expense on qualified foreign plans.
(3) See Note Q to the Consolidated Financial Statements.
The pension credit principally results from a plan that is funded in excess of
the projected benefit obligation. The plan is overfunded primarily due to
favorable asset performance.
INCOME TAX PROVISION
The income tax provision resulted in effective tax rates (benefits) of 36.6% in
1995 and (11.0%) in 1994, respectively. In 1995, the effective tax rate is
higher than the U.S. statutory tax rate primarily due to the 5% impact of state
and local income taxes, net of U.S. tax effect, partially offset by a (2%) net
tax benefit from international operations, and a (2%) tax benefit resulting from
a capital loss carryforward on the sale of subsidiaries. In 1994, the benefit
was lower than the U.S. statutory rate due to foreign taxes applicable to
certain foreign projects which are calculated based on gross receipts and
accounted for 12% of the 1994 increase in the effective tax rate. In addition,
the decrease in the benefit in 1994 was also due to state income taxes which
accounted for 8% of the decrease.
1994 COMPARED WITH 1993
The Company had a consolidated net loss of $7,807, or $.52 per share in 1994
compared with net income of $1,952, or $.13 per share in 1993. Revenue decreased
to $779,255 from $1,046,309 in 1993 due in part to a major contract cancellation
by the Tennessee Valley Authority. The Company reported an operating loss of
$42,097 in 1994 compared with operating income of $6,813 in 1993. The operating
loss was due to a decline in revenue, significant severance expense, lower
profit margins and intensified competition in the Company's core Engineering,
Construction and Consulting segment.
Components of earnings per share in 1994 and 1993 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Earnings per share before special items $(1.64) $ 0.08
Severance (0.84) (0.33)
Pension related items 0.54 0.22
Asset divestitures 1.42 --
Accounting changes (1) -- 0.16
- -------------------------------------------------------------------------------
Earnings per share $(0.52) $ 0.13
- -------------------------------------------------------------------------------
</TABLE>
(1) Cumulative Effect of adoption of SFAS No. 109.
The Company took actions throughout the year to reduce staff levels and
operating costs. During 1994, the Company implemented a new organizational
structure. This organizational structure established four Global Business Units,
each responsible for marketing and executing projects within a sector on a
worldwide basis. Workforce reductions were also made to achieve a better balance
of staff levels and skills with workload.
ENGINEERING, CONSTRUCTION AND CONSULTING SEGMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Percent
1994 1993 Incr/(Decr) Incr/(Decr)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $748,614 $1,013,265 $(264,651) (26)%
Operating Income (Loss) (37,709) 8,819 (46,528) --
Operating Margin (5.0)% 0.9%
Identifiable Assets $492,650 $ 477,905 $ 14,745 3%
- ------------------------------------------------------------------------------
</TABLE>
The decrease in revenue in 1994 was attributable, in large part, to a decrease
in nuclear power work with the Tennessee Valley Authority due to the reduction
in scope of its nuclear program. In addition, a
A-5
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
reduction in expenditures for plant equipment and materials purchased for
projects in the United Kingdom and Abu Dhabi and a lower level of work activity
in Malaysia and other foreign operations also contributed to the decrease in
revenue. Other factors affecting revenue in 1994 were primarily the result of a
lower volume of work available for execution from backlog. Selling, general and
administrative expenses increased by $5,793 due primarily to higher bid and
proposal expenses incurred in seeking new work.
The backlog as of December 31, 1994 amounted to $1,541,800 in comparison with
$1,509,700 as of December 31, 1993. Approximately 40% of the 1994 backlog amount
was from contracts with international clients. Although the total value of the
backlog was relatively unchanged, many of the projects were at reduced levels of
activity because they were either at the early stages of initiation or nearing
completion. Relatively fewer projects were at a stage of peak activity and many
of the current projects extended over relatively long periods with services
furnished on demand.
The revenue decrease reflects a decrease of $135,168 for domestic and $129,483
for export and international projects. Decreases in international work were
largely in the Power segment. The domestic and international mix of work in 1994
and 1993 was:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
% Increase/
1994 1993 (Decrease)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
United States - domestic $614,493 $ 749,661 (18)%
United States - export 50,893 39,041 30 %
International 83,228 224,563 (63)%
- ------------------------------------------------------------------------------
Total export and international 134,121 263,604 (49)%
- ------------------------------------------------------------------------------
Total engineering revenue $748,614 $1,013,265 (26)%
- ------------------------------------------------------------------------------
Percent export and international 18% 26%
- ------------------------------------------------------------------------------
</TABLE>
A year-to-year comparison of operating margins, adjusting for pension related
items and one-time expenses or income, is shown below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Revenue $748,614 $1,013,265
- ------------------------------------------------------------------------------
Operating Income (Loss) - as reported $(37,709) $ 8,819
- ------------------------------------------------------------------------------
Deduct (add):
Pension related items 12,946 5,311
Severance (20,341) (7,476)
Provision for settlement of lawsuits (4,700) (5,200)
- ------------------------------------------------------------------------------
Operating Income (Loss) - adjusted $(25,614) $ 16,184
- ------------------------------------------------------------------------------
Operating Margin - as reported (5.0)% 0.9%
Operating Margin - adjusted (3.4)% 1.6%
- ------------------------------------------------------------------------------
</TABLE>
The operating margin was adversely impacted in 1994 due to declining activity
levels and the need to retain staff until job obligations were complete. The
Company settled two contract-related lawsuits in 1994 for $900 and had another
case where it was probable that the final outcome would result in a loss. Based
on opinion from counsel, the Company expensed $3,800 and $1,200 in 1994 and
1993, respectively. It is probable that any liability in excess of the amounts
expensed would be fully covered and paid by applicable insurance. Losses in
excess of existing insurance coverage are considered unlikely. In 1993, the
Company offered an Incentive Retirement Program in which in excess of 200
employees elected to retire. This Program reduced net pension related items by
$8,992.
COLD STORAGE SEGMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Percent
1994 1993 Incr/(Decr) Incr/(Decr)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $17,280 $16,914 $366 2%
Operating Income 5,927 5,274 653 12%
Operating Margin 34.3% 31.2%
Identifiable Assets $35,798 $35,015 $783 2%
- -------------------------------------------------------------------------------
</TABLE>
Revenue from Cold Storage and related activities increased by 2% in 1994 to
$17,280 from $16,914 in 1993. Revenue increased primarily due to increased
demand for services by food exporters. The improvement in operating income was
attributable to higher revenue as well as a decrease in cost of revenue. Direct
labor and maintenance expense decreased due to improved warehouse management.
Selling, general and administrative expenses remained relatively constant in
1994.
OTHER SEGMENT AND GENERAL CORPORATE EXPENSES
The Other segment consists of Oil and Gas Production and Real Estate Development
businesses. Revenue of this segment declined to $13,361 in 1994 from 1993
revenue of $16,130. Operating income declined to $395 in 1994 from $1,306 in
1993. This decrease, along with the decline in segment revenues, was due
primarily to a significant decline in the number of gas marketing sales by its
natural gas gathering and transporting company. In 1994, the Company evaluated
the carrying value of the gas gathering and transporting company and wrote off
goodwill of $862.
General corporate expenses increased by $2,124 from 1993. This increase was due
primarily to increased legal expenses and fees to outside advisors.
A-6
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
PENSION RELATED ITEMS
Pension related items, which reduced operating costs, were $13,137 in 1994
compared to $5,397 for 1993. These amounts increased net income by $8,035, or
$.54 per share in 1994 and by $3,332, or $.22 per share for 1993.
DIVESTITURE AND OTHER INCOME
Other income (deductions) in 1994 included pre-tax gains of $32,102 from the
sale of investment securities. There were no such sales in the prior year.
Interest income increased in 1994 due to increased interest earned on U. S.
Government securities, partially offset by a decrease in dividend income.
INCOME TAX PROVISION
The income tax provision resulted in effective tax rates (benefit) of (11%) and
104% for 1994 and 1993, respectively. The benefit for 1994 was lower than the U.
S. statutory rate and the effective rate for 1993 was higher than the U. S.
statutory rate, primarily due to foreign taxes applicable to certain foreign
projects which are calculated based on gross receipts and which accounted for
12% and 34% increases, respectively, in the effective tax rates recorded. The
decrease in the benefit in 1994 was also due to state income taxes, which
accounted for 8% of the decrease. The increase in 1993 over the statutory rate
was also due to settlement with the IRS of prior years' federal income tax
returns, amounting to 24% and an increase in the Company's net deferred tax
liabilities, amounting to 13%, due to the change in the federal statutory income
tax rate from 34% to 35%.
In the first quarter of 1993, the Company adopted SFAS No. 109 - Accounting for
Income Taxes. As a result of this accounting change, the cumulative effect from
prior periods increased net income for 1993 by $2,322, or $.16 per share.
FINANCIAL CONDITION AND LIQUIDITY
Cash and cash equivalents, as shown in the Consolidated Statements of Cash
Flows, increased by $12,767 during 1995. Net cash used by operating activities
of $4,640 largely reflects an increase in operating working capital necessary to
support the increase in business activity. While operating working capital
increased by $42,020, the increase was in proportion to the increased volume,
since days operating working capital outstanding remained at 1994 levels.
Operating working capital and days operating working capital outstanding follow:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $ 165,836 $ 94,372
Costs and revenue recognized in excess of billings 64,494 42,542
Accounts payable (56,901) (23,996)
Billings in excess of costs and
revenue recognized (66,976) (48,485)
- -------------------------------------------------------------------------------
Operating working capital $ 106,453 $ 64,433
- -------------------------------------------------------------------------------
4th Quarter revenue $ 330,443 $ 205,172
- -------------------------------------------------------------------------------
Days operating working capital outstanding 29 29
- -------------------------------------------------------------------------------
</TABLE>
The decrease in accrued liabilities of $8,029 is largely due to the payment of
severance for which the liability was accrued in 1994. Net cash provided by
investing activities of $48,769 reflects the divestiture of non-core assets net
of investment in various development projects. Asset divestitures in the fourth
quarter of 1995 generated cash proceeds of $59,000, of which $26,360 from the
sale of the Real Estate Development business was used to satisfy related
mortgage debt. As a prerequisite to the sale of the Real Estate Development
business, the Company purchased a joint venture partner's 50% interest in a
specific building which was subsequently sold to the purchaser of the Real
Estate Development business. The cash effect of the asset divestiture
transactions in 1995 is summarized as follows:
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Proceeds from sale of Oil and Gas Production business $ 16,500
Proceeds from sale of Real Estate
Development business 42,500
- -------------------------------------------------------------------------------
Proceeds from asset divestitures 59,000
Settlement of real estate mortgage debt (26,360)
Purchase of joint venture partner's
interest in building (2,458)
Selling and other transaction costs (3,110)
- -------------------------------------------------------------------------------
Cash proceeds from asset divestitures $ 27,072
- -------------------------------------------------------------------------------
</TABLE>
The remaining cash from the asset sales was used to fund repurchases of the
Company's shares as well as for general corporate purposes.
Investments in property, plant and equipment includes approximately $17,000 for
construction of a wastepaper recycling plant in Auburn, Maine. In 1994, the
Company began construction of this facility with the objective of developing the
project and selling its majority ownership position once the facility is in
operation. As of December 31, 1995, the facility was mechanically complete and
was undergoing provisional acceptance testing. Once performance testing is
completed, the $65,000 construction loans will be converted to permanent
financing. The financing for the wastepaper recycling facility is described in
Note I to the Consolidated Financial Statements.
A-7
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
In July 1994, the Company's Board of Directors authorized the repurchase of
1,000,000 shares of the Company's common stock. In July 1995, the Company's
Board of Directors authorized the repurchase of an additional 1,500,000 shares.
The Company reserves the right to discontinue the repurchase program at any
time. (See Note M to the Consolidated Financial Statements.) Share repurchase
transactions and total shares outstanding for 1995 and 1994 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total
1995 1994 Program
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares outstanding
beginning of year 14,609,307 14,977,850 14,977,850
Shares repurchased under program (754,443) (363,324) (1,117,767)
Other share transactions 1,052 (5,219)(1) (4,167)
- --------------------------------------------------------------------------------
Shares outstanding, December 31 13,855,916 14,609,307 13,855,916
- --------------------------------------------------------------------------------
Percentage of outstanding
shares purchased 5.2% 2.4% 7.5%
Repurchase cost $ 25,370 $ 11,839 $ 37,209
Average repurchase cost per share $ 33.63 $ 32.59 $ 33.29
- --------------------------------------------------------------------------------
</TABLE>
(1) 3,219 shares purchased prior to inception of repurchase program and 2,000
shares forfeited under Restricted Stock Plan.
A quarterly history of progress in the share repurchase program is shown below:
[BAR CHART]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Shares Repurchased
In Thousands
1994 1995
June Sept Dec March June Sept Dec
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Program Objective 0 1,000 1,000 1,000 1,000 2,500 2,500
Achieved 0 33 363 472 537 745 1,118
- -------------------------------------------------------------------------------------------------
</TABLE>
Management believes that the types of businesses in which the Company is engaged
require that it maintain a strong financial condition. The Company has on hand
and has access to sufficient sources of funds to meet its anticipated operating,
dividend, share repurchase and capital expenditure needs. Cash on hand and
temporary investments provide adequate operating liquidity. Additional liquidity
is provided through lines of credit and revolving credit facilities which
totaled $41,377, of which $33,177 was available at December 31, 1995.
Net cash balances (defined as cash and Government securities minus total debt)
relative to business activity for the years ended December 31, 1995 and 1994
are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash, cash equivalents
and U.S. Government securities $ 123,316 $130,335
Total debt 103,821 94,630
- -------------------------------------------------------------------------------
Net cash $ 19,495 $ 35,705
- -------------------------------------------------------------------------------
Revenue $1,002,819 $779,255
Net cash to revenue 1.9% 4.6%
- -------------------------------------------------------------------------------
</TABLE>
The level of net cash, relative to business activity has been reduced during
1995. Outstanding debt consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Mortgage debt-company occupied buildings $ 28,844 $ 32,094
Mortgage debt-real estate development -- 19,663
Construction loans 65,000 39,989
Lease debt (primarily for office equipment) 1,777 2,884
Subsidiary working capital bank loans 8,200 --
- --------------------------------------------------------------------------------
Total debt $103,821 $ 94,630
- --------------------------------------------------------------------------------
</TABLE>
During 1995, the Board of Directors approved a long-range Financial Strategic
Plan, developed in conjunction with outside advisors, oriented toward increasing
value for the Company's Shareholders. The plan anticipates, among other actions,
divestiture of non-core and underperforming assets, repurchase of up to
2,500,000 shares of common stock, continued participation, as an equity partner,
in development projects, and improved operating margins in the core Engineering,
Construction and Consulting segment. Significant actions taken in 1995 to
implement this plan include the divestiture of the Oil and Gas Production and
Real Estate Development businesses, the authorized increase in the share
repurchase program, and the improved operating margins in the Engineering,
Construction and Consulting segment.
Management expects to continue implementation of this plan with the dual
objectives of maintaining a strong capital structure and providing increased
value to Shareholders. The Company anticipates that cash flow from operations
will be sufficient to fund ongoing business activities and to proceed with the
share repurchase program as defined in the Financial Strategic Plan.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 -
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, which is effective for the fiscal years beginning after December
15, 1995. The Company believes that it will not have a material impact on the
Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 -
Accounting for Stock-Based Compensation, which is effective for the fiscal years
ending after December 15, 1996. The Company will elect to adopt the disclosure
requirements of this new accounting standard beginning in 1996.
A-8
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts, except per share amounts, are in thousands.)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue (Note A) $1,002,819 $779,255 $1,046,309
Cost of Revenue 918,169 773,479 999,485
- ------------------------------------------------------------------------------------------------------------------------------
Gross Profit 84,650 5,776 46,824
Selling, General and Administrative Expenses 49,609 47,873 40,011
- ------------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) 35,041 (42,097) 6,813
Other Income (Deductions) (Note A)
Gain (Loss) on sale of assets (Note C) (12,443) 32,102 --
Interest income 6,422 4,078 2,935
Interest expense (Note D) (5,549) (3,900) (2,606)
Miscellaneous - net -- 1,045 1,311
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Provision (Benefit) for Income Taxes 23,471 (8,772) 8,453
Income Tax Provision (Benefit) (Note E) 8,591 (965) 8,823
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Cumulative Effect of a Change in Accounting Principle 14,880 (7,807) (370)
Cumulative Effect of a Change in Accounting Principle (Note E) -- -- 2,322
- ------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 14,880 $ (7,807) $ 1,952
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Cumulative Effect of a Change in Accounting Principle Per Share $ 1.04 $ (.52) $ (.03)
Cumulative Effect of a Change in Accounting Principle Per Share (Note E) $ -- $ -- $ .16
Net Income (Loss) Per Share $ 1.04 $ (.52) $ .13
Dividends Declared Per Share $ .60 $ .60 $ .60
Average Number of Shares Outstanding (in thousands) 14,376 14,907 14,978
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements.
A-9
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(All dollar amounts, except per share amounts, are in thousands.)
<TABLE>
<CAPTION>
December 31,
ASSETS 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 68,417 $ 55,650
U. S. Government securities, at amortized cost, which approximates market (Note F) 54,899 74,685
Accounts receivable, principally trade 165,836 94,372
Costs and revenue recognized in excess of billings 64,494 42,542
Deferred income taxes (Note E) 7,202 7,825
Other 3,153 2,909
- ---------------------------------------------------------------------------------------------------------------
Total Current Assets 364,001 277,983
Fixed Assets, at cost, less accumulated depreciation, depletion and amortization (Note G) 212,596 233,869
Land Held for Resale, at cost -- 25,664
Prepaid Pension Cost (Note Q) 114,194 101,131
Other Assets 25,981 39,737
- ---------------------------------------------------------------------------------------------------------------
$716,772 $678,384
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements.
A-10
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
<TABLE>
<CAPTION>
December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Bank loans (Note H) $ 8,200 $ --
Current portion of long-term debt (Note I) 20,944 4,988
Accounts payable, principally trade 56,901 23,996
Dividend payable 2,078 2,195
Billings in excess of costs and revenue recognized 66,976 48,485
Accrued liabilities (Note J) 43,308 55,702
Accrued taxes 7,955 6,070
- -----------------------------------------------------------------------------------------------------
Total Current Liabilities 206,362 141,436
Long-Term Debt (Note I) 74,677 89,642
Deferred Income Taxes (Note E) 51,262 48,580
Other Liabilities (Note K) 22,800 23,408
Commitments and Contingencies (Note L)
Shareholders' Equity:
Preferred stock -- --
Authorized, 2,000,000 shares of no par value; none issued
Common stock (Notes N, O and P) 17,731 17,731
Authorized, 40,000,000 shares of $1 par value; issued, 17,731,488 shares,
including shares held in treasury
Capital in excess of par value of common stock (Note N) 50,360 50,300
Retained earnings 414,724 408,211
Cumulative translation adjustment (3,039) (3,072)
- -----------------------------------------------------------------------------------------------------
479,776 473,170
- -----------------------------------------------------------------------------------------------------
Less: Common stock in treasury, at cost (Notes M, O and P) 92,292 66,961
3,875,572 shares (1994 - 3,122,181)
Employee stock ownership and restricted stock plans (Note O) 25,813 30,891
- -----------------------------------------------------------------------------------------------------
118,105 97,852
- -----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 361,671 375,318
- -----------------------------------------------------------------------------------------------------
$716,772 $678,384
- -----------------------------------------------------------------------------------------------------
</TABLE>
A-11
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(All dollar amounts, except per share amounts, are in thousands.)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock (Note N):
Balance at beginning and end of year $ 17,731 $ 17,731 $ 17,731
- -----------------------------------------------------------------------------------------------------------------------
Capital in Excess of Par Value of Common Stock (Note N):
Balance at beginning of year 50,300 50,342 50,426
Excess of market value over cost of treasury shares
issued (forfeited) under Restricted Stock Plan, net 28 (17) (9)
Tax benefit (charge) for shares issued under Restricted Stock Plan, net 11 (25) (75)
Excess of market value over cost of treasury shares issued under the Stock Plan 21 -- --
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year 50,360 50,300 50,342
- -----------------------------------------------------------------------------------------------------------------------
Retained Earnings:
Balance at beginning of year 408,211 424,723 431,490
Income tax benefit of Employee Stock Ownership Plan dividends 188 227 268
Net income (loss) 14,880 (7,807) 1,952
Dividends declared (per share: 1995, 1994 and 1993 - $.60) (8,555) (8,932) (8,987)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year 414,724 408,211 424,723
- -----------------------------------------------------------------------------------------------------------------------
Unrealized Gain on Investment Securities, net:
Balance at beginning of year -- 24,975 --
Adjustment for the year -- (24,975) 24,975
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year -- -- 24,975
- -----------------------------------------------------------------------------------------------------------------------
Cumulative Translation Adjustment:
Balance at beginning of year (3,072) (2,854) (2,649)
Adjustments for the year 33 (218) (205)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year (3,039) (3,072) (2,854)
- -----------------------------------------------------------------------------------------------------------------------
Common Stock in Treasury (Notes M, O and P):
Balance at beginning of year (66,961) (54,979) (55,078)
Cost of treasury shares:
Issued under Stock Plan (shares: 1995 - 2,252) 52 -- --
Issued under Restricted Stock Plan (shares: 1995 - 6,000 and 1993 - 22,000) 131 -- 440
Forfeited under Restricted Stock Plan
(shares: 1995 - 7,200, 1994 - 2,000 and 1993 - 7,200) (144) (40) (133)
Purchased (shares: 1995 - 754,443, 1994 - 366,543 and 1993 - 7,363 ) (25,370) (11,942) (208)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year (92,292) (66,961) (54,979)
- -----------------------------------------------------------------------------------------------------------------------
Employee Stock Ownership and Restricted Stock Plans (Note O):
Balance at beginning of year (30,891) (34,560) (38,782)
Payments received from Employee Stock Ownership Trust (principal only) 4,981 3,091 3,587
Market value of shares forfeited (issued) under Restricted Stock Plan, net (15) 57 (298)
Amortization of market value of shares issued under Restricted Stock Plan 112 521 933
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year (25,813) (30,891) (34,560)
- -----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $361,671 $375,318 $425,378
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements.
A-12
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts are in thousands.)
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 14,880 $ (7,807) $ 1,952
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities:
Depreciation, depletion and amortization 19,239 19,717 20,135
Deferred income taxes 3,305 (4,343) 559
Write-down of technology investment 6,500 -- --
Cumulative effect of a change in accounting principle -- -- (2,322)
Pension plan curtailment gain -- (357) (1,072)
Pension credit (15,175) (13,234) (13,953)
Incentive Retirement Program 2,315 -- 9,081
Loss (gain) on sale of assets 12,443 (32,102) --
Amortization of market value of shares issued under Restricted Stock Plan 112 521 933
Amortization of net cost of Employee Stock Ownership Plan 1,555 1,560 1,562
Changes in operating assets and liabilities:
Accounts receivable (71,464) 12,267 15,984
Costs and revenue recognized in excess of billings (21,952) 20,071 4,133
Accounts payable 32,905 (5,143) (868)
Billings in excess of costs and revenue recognized 18,491 20,190 7,103
Accrued liabilities (8,029) 8,075 (458)
Other 235 (1,841) (3,821)
- --------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (4,640) 17,574 38,948
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Maturities of U.S. Government securities 147,050 103,032 109,289
Purchases of U.S. Government securities (126,861) (122,404) (108,301)
Proceeds from asset divestitures and disposals 59,000 35,040 1,599
Purchase of joint venture, net of cash acquired (1) (2,458) -- --
Increases in fixed assets (27,962) (52,344) (31,679)
(Purchase) sale of land held for resale -- (2,038) 731
Equity investment in joint venture -- (3,565) (5,000)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 48,769 (42,279) (33,361)
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt 25,013 68,988 20,760
Repayments of long-term debt (31,419) (3,922) (23,964)
Increase in bank loans 8,200 1,093 26,330
Decrease in bank loans -- (29,437) (4,933)
Payments to Employee Stock Ownership Trust (9,084) (4,046) (6,395)
Payments received from Employee Stock Ownership Trust 9,970 4,464 7,217
Purchase of common stock for treasury (25,370) (11,942) (208)
Dividends paid (8,672) (8,984) (8,985)
- --------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (31,362) 16,214 9,822
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 12,767 (8,491) 15,409
Cash and Cash Equivalents at Beginning of Year 55,650 64,141 48,732
- --------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 68,417 $ 55,650 $ 64,141
- --------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 5,629 $ 3,910 $ 2,558
Income taxes $ 4,740 $ 5,368 $ 7,742
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In 1995, purchase of joint venture, net of cash acquired, of $2,458 includes
fair value of assets acquired of $10,206 and liabilities assumed of $7,748.
See Summary of Significant Accounting Policies and Notes to Consolidated
Financial Statements.
A-13
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(All dollar amounts, except per share amounts, are in thousands.)
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and all subsidiaries. The accounts of subsidiaries
outside the United States and Canada are included in the consolidated financial
statements on the basis of fiscal years ending on November 30 to facilitate
timely interim and year-end financial reporting. Investments in joint ventures,
where the Company owns 50% or less, are accounted for by the equity method.
CONSOLIDATED STATEMENTS OF CASH FLOWS. The Company considers U.S. Government
securities purchased with a maturity of three months or less to be cash
equivalents.
FOREIGN CURRENCY TRANSLATION. Assets and liabilities of operations outside the
United States are translated into U.S. dollars at current exchange rates, while
income statement items are translated at average monthly exchange rates. Gains
or losses on such translations are accumulated in a separate component of
Shareholders' Equity and are excluded from net income. Transaction gains and
losses, which were not material, resulting from the settlement of receivables or
payables, or the conversion of currency, are included in the determination of
net income.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation generally is provided on
a straight-line basis (accelerated methods for income taxes) over the estimated
useful lives of the assets. Depreciation and depletion of oil and gas producing
properties and natural gas pipeline systems generally were provided on the unit
of production method. Amortization is provided for leased property and equipment
on a straight-line basis over the life of the lease.
LONG-TERM CONTRACTS. The Company recognizes engineering and construction revenue
on a percentage-of-completion method, primarily based on contract costs incurred
compared with total estimated costs. (Contract costs include both direct and
indirect costs.) When the Company is contractually responsible for materials,
craft labor, equipment and subcontractor costs, these items are included in
revenue and cost of revenue. Revisions to total estimated contract cost or
losses, if any, are recognized in the period in which they are determined.
Certain contracts contain provisions for performance incentives. Such incentives
are included in revenue when realization is assured. Contract change orders in
excess of agreed contract prices are included in revenue when approved by the
client.
Revenue recognized in excess of amounts billed is classified in current assets.
Accounts receivable include amounts representing retainages under long-term
contracts which are due within one year, and are not significant. The Company
anticipates that substantially all of its costs and revenue recognized in excess
of billings will be billed and collected over the next twelve months and there
were no significant amounts included in accounts receivable or costs and revenue
recognized in excess of billings under contracts for claims subject to
uncertainty as to their ultimate realization. Billings in excess of revenue
recognized are classified in current liabilities.
ESTIMATES. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. The most significant estimates are related to long-term contracts,
pension plans, income taxes and contingencies. Actual results could differ from
these estimates.
FOREIGN EXCHANGE CONTRACTS. The Company enters into foreign exchange forward
contracts to hedge transactions related to firm commitments to purchase
equipment in connection with engineering and procurement service contracts.
These contracts reduce currency risk from exchange movements. Gains and losses
are deferred and accounted for as part of the underlying transactions. In
entering into these contracts, the Company has assumed the risk which might
arise from the possible inability of counterparties to meet the terms of their
contracts. The Company does not expect any losses as a result of counterparty
defaults.
INCOME TAXES. Undistributed earnings of foreign subsidiaries for which the
Company has not provided deferred U.S. income taxes, because a taxable
distribution of these earnings is not anticipated, aggregated approximately
$4,178 at December 31, 1995. This amount represents the accumulated earnings of
consolidated foreign subsidiaries which are being permanently reinvested in
their operations.
INCOME PER SHARE. Per share amounts are based on the weighted average number of
common and common equivalent shares (stock options) outstanding during the year.
RECLASSIFICATIONS. Certain reclassifications have been made in the prior years'
consolidated financial statements to conform with the 1995 presentation.
A-14
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
(A) REVENUE
In 1995, the Company changed its presentation of financial results to show
operating income or loss and has reclassified certain items, previously
classified as revenue, to other captions. These changes in presentation have had
no effect on net income. A reconciliation of previously and currently reported
revenue follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue - as previously reported $818,221 $1,053,095
Less:
Gain on sale of assets 32,102 --
Dividend income 1,045 1,311
Interest income 4,078 2,935
Other 1,741 2,540
- --------------------------------------------------------------------------------
Revenue - as currently reported $1,002,819 $779,255 $1,046,309
- --------------------------------------------------------------------------------
</TABLE>
Revenue from gains on sale of assets and dividend and interest income has been
reclassified to Other Income (Deductions) in the Consolidated Statements of
Operations.
(B) SEVERANCE COSTS
In 1994 and 1993, the Company took a number of actions to lower operating costs,
including the elimination of approximately 1,000 positions. Severance costs
decreased operating income by $20,341 and $7,476, in 1994 and 1993,
respectively.
All positions were eliminated by December 31, 1994. Severance payments of
$19,226, of the $20,341 accrued in 1994, were made in 1994 and 1995.
(C) SALE OF NON-CORE ASSETS
During 1995 and 1994, the Company completed several transactions involving the
disposal of non-core and underperforming assets. In the fourth quarter of 1995,
the Company completed the divestiture of the Oil & Gas Production business and
the Real Estate Development business. Both businesses were sold for cash. In
1994, in the third and fourth quarters, the Company sold securities held for
investment. The effect of these transactions was:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
------------------------------ ----------
Oil & Gas Real Estate Investment
Production Development Total Securities
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sale proceeds $16,500 $42,500 $59,000 $34,515
Pre-tax gain (loss)
on sale 6,127 (18,570) (12,443) 32,102
After-tax gain (loss)
on sale 4,434 (11,945) (7,511) 21,208
Gain (loss) per share $ .31 $ (.83) $ (.52) $ 1.42
- --------------------------------------------------------------------------------
</TABLE>
The gain or (loss) on these transactions is reported as Other Income
(Deductions) in the Consolidated Statements of Operations.
(D) INTEREST EXPENSE
Interest expense for 1995, 1994 and 1993 excludes $3,471, $1,392 and $439,
respectively, which was capitalized as part of the construction cost for a
wastepaper recycling plant and a new office facility.
(E) INCOME TAXES
The Company reported taxable income of $5,927 in 1995 and was able to utilize
the entire federal net operating loss carryforward balance of $4,934, created in
1994, in order to reduce substantially its current federal tax liability. The
Company incurred a federal alternative minimum tax (AMT) in 1995, which produced
a credit that can be carried forward indefinitely to reduce future federal
income taxes payable. As a result, the AMT credit carryforward increased to
$5,069.
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense (benefit)
United States $1,201 $ 469 $3,528
State and local 1,407 1,458 1,355
Foreign (1) 2,678 1,451 3,381
- --------------------------------------------------------------------------------
Total current 5,286 3,378 8,264
- --------------------------------------------------------------------------------
Deferred tax expense (benefit)
United States 2,804 (706) 457
State and local 963 (3,631) 260
Foreign (462) (6) (158)
- --------------------------------------------------------------------------------
Total deferred 3,305 (4,343) 559
- --------------------------------------------------------------------------------
Total provision (benefit) $8,591 $ (965) $8,823
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes taxes, in lieu of income taxes, of $798 in 1995, $870 in 1994 and
$2,292 in 1993 on foreign projects which are calculated based on gross
receipts.
A-15
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
Deferred tax liabilities (assets) are composed of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Long-term liabilities:
Depreciation $20,201 $20,719
Retirement 47,372 44,553
Other 1,116 3,039
- --------------------------------------------------------------------------------
Total long-term liabilities 68,689 68,311
- --------------------------------------------------------------------------------
Long-term assets:
Deferred rent (2,605) (2,050)
Employee Stock Ownership Plan interest
payments and contributions (4,901) (5,801)
Incentive Retirement Program (3,458) (3,690)
AMT credit carryforward (5,069) (4,367)
Foreign net operating loss carryforward (7,058) (8,494)
Federal net operating loss carryforward -- (1,622)
State net operating loss carryforwards (4,546) (5,590)
Capital loss carryforward (561) --
Other (833) (2,201)
- --------------------------------------------------------------------------------
Total long-term assets (29,031) (33,815)
- --------------------------------------------------------------------------------
Net operating loss valuation allowance 11,604 14,084
- --------------------------------------------------------------------------------
Net long-term deferred tax liabilities $51,262 $48,580
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current liabilities:
Other $ -- $ 1,386
Current assets:
Vacation pay (3,800) (4,072)
Severance pay (760) (3,417)
State net operating loss carryforwards (402) (200)
Other (2,240) (1,522)
- --------------------------------------------------------------------------------
Total current assets (7,202) (9,211)
- --------------------------------------------------------------------------------
Net current deferred tax assets $(7,202) $(7,825)
- --------------------------------------------------------------------------------
</TABLE>
The Company had a valuation allowance of $14,084 at December 31, 1994 for the
deferred tax assets related to net operating loss carryforwards. The net change
in the valuation allowance for 1995 was a decrease of $2,480 for a total
valuation allowance of $11,604 at December 31, 1995. This decrease was caused by
the use of net operating loss carryforwards relating to one of the Company's
U.K. subsidiaries and the use of state net operating tax loss carryforwards for
which valuation allowances had previously been provided. The valuation allowance
at December 31, 1995 comprises $7,058 relating to the carryforwards of the U.K.
subsidiary and $4,546 relating to state net operating loss carryforwards.
Approximately $108,057 (with a tax benefit of $12,006) of the net operating loss
carryforwards remains at December 31, 1995, of which $21,388 (with a tax benefit
of $7,058) is applicable to foreign subsidiaries and the remaining $86,669 (with
a tax benefit of $4,948) relates to state net operating loss carryforwards. Use
of the foreign net operating loss carryforward is limited to future taxable
earnings of the U.K. subsidiary. Although this net operating loss carryforward
never expires, due to the uncertainty of the realization of this benefit, no
benefit has been recognized in the consolidated financial statements.
The state net operating loss carryforwards of $86,669 are applicable to many
states and will expire as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 3,156
1997 4,730
1998 3,798
1999 19,710
2000 1,199
2001 7,004
2002 1,128
2003 4,048
Thereafter 41,896
- --------------------------------------------------------------------------------
$86,669
- --------------------------------------------------------------------------------
</TABLE>
The Company has determined that it will be able to realize a tax benefit of $402
relating to these state net operating loss carryforwards and the remaining net
operating loss carryforwards (with a tax benefit of $4,546, which is fully
reserved for) are expected to expire unused.
The following is an analysis of the difference between the United States
statutory income tax rate and the Company's effective income tax rate:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States statutory income
tax rate 35.0% (35.0)% 35.0%
Increase (decrease) resulting from:
State and local income taxes,
net of United States tax effect 4.9 7.7 5.3
Dividend received deduction -- (2.9) (3.8)
Write-off/amortization of goodwill -- 4.9 1.7
Meals and entertainment 2.0 5.5 2.3
Difference in effective tax rate
of foreign operations and
projects, net of United States
tax effect 4.3 12.1 33.8
Adjustment of prior years'
federal income tax accruals,
net of interest effect .9 .7 23.8
Adjustment of prior years' state
income tax accruals, net of
United States tax effect -- 2.0 7.1
Utilization of net operating loss
carryforwards of
foreign operations (6.1) -- (15.9)
Deferred taxes-- impact of
increase in federal statutory
rate on prior years -- -- 12.6
Sale of subsidiaries-- capital
loss carryforward (2.4) -- --
Other (2.0) (6.0) 2.5
- --------------------------------------------------------------------------------
Effective income tax rate 36.6% (11.0)% 104.4%
- --------------------------------------------------------------------------------
</TABLE>
Income (loss) before income taxes and cumulative effect of a change in
accounting principle were:
A-16
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $15,861 $(9,548) $3,046
Foreign 7,610 776 5,407
- --------------------------------------------------------------------------------
$23,471 $(8,772) $8,453
- --------------------------------------------------------------------------------
</TABLE>
On January 1, 1993, the Company adopted SFAS No. 109 - Accounting for Income
Taxes. As a result of this accounting change, the cumulative effect from prior
periods increased net income for 1993 by $2,322, or $.16 per share.
In 1993, the Company settled all issues raised in connection with the
examination of the Company's income tax returns for the years 1985 and 1987
through 1989. The settlement of these issues resulted in an additional net
charge of $2,015 in 1993. The Company's income tax returns for years through
1991 have been examined with no significant effect on the consolidated financial
statements.
The Omnibus Budget Reconciliation Act of 1993 raised the statutory federal
income tax rate on corporations from 34% to 35%. The effect of this 1% increase
in the tax rate on the Company's net deferred tax liabilities was a charge to
income of $1,131, or $.08 per share in 1993.
(F) U.S. GOVERNMENT SECURITIES
U.S. Government securities are debt securities comprised of U.S. Treasury bills
and notes, which the Company intends to hold to maturity. These U.S. Treasury
bills and notes have maturity dates of one year or less. The aggregate fair
market value of U.S. Government securities at December 31, 1995 and 1994 was
$54,722 and $74,624, respectively, the amortized cost basis at December 31, 1995
and 1994 was $54,899 and $74,685, respectively, and the net unrealized holding
loss at December 31, 1995 and 1994 was $177 and $61, respectively.
(G) FIXED ASSETS
Following is a summary of fixed assets at December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Office buildings and other real estate $132,413 $161,571
Furniture and equipment 137,666 133,006
Cold storage property, plant and equipment 52,219 50,568
Oil and gas properties -- 29,657
Wastepaper recycling property, plant and equipment 55,418 450
Construction in progress -- 38,183
- --------------------------------------------------------------------------------
377,716 413,435
Less accumulated depreciation,
depletion and amortization 165,120 179,566
- --------------------------------------------------------------------------------
Fixed assets, net $212,596 $233,869
- --------------------------------------------------------------------------------
</TABLE>
Fixed assets includes computer equipment under capital leases of $6,934 at
December 31, 1995 and $7,037 at December 31, 1994; related amounts included in
accumulated depreciation, depletion and amortization were $4,525 at December 31,
1995 and $3,742 at December 31, 1994. Depreciation expense was $16,785 for 1995,
$18,133 for 1994, and $18,349 for 1993. At December 31, 1994 office buildings
and other real estate included property of a subsidiary's office and business
center in Tampa, Florida of $29,331 and related accumulated depreciation of
$7,439.
(H) BANK LOANS
In 1995, a subsidiary of the Company entered into a $14,750 credit agreement
with a bank for financing of the subsidiary's activities performed under a
client's contract for engineering services. The agreement was collateralized by
an assignment of the contract to the bank and payments received from the client
are applied to outstanding borrowings which incur interest based on one quarter
of one percent above the London Interbank Offered Rate (LIBOR). At December 31,
1995, there was $8,200 outstanding under the credit agreement. The weighted
average interest rate was 6.25% for 1995.
(I) LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans:
Due in 1996, interest at 9.13% $ 2,188 $ 4,180
Due in 1998, interest at 7.35% -- 19,663
Due in 2009, interest at 6.44% 26,656 27,914
Construction loans 65,000 39,989
Capitalized lease obligations 1,777 2,884
- --------------------------------------------------------------------------------
95,621 94,630
Less current portion 20,944 4,988
- --------------------------------------------------------------------------------
Total long-term debt $74,677 $89,642
- --------------------------------------------------------------------------------
</TABLE>
In March 1994, a limited partnership in which a subsidiary of the Company owns a
94.3% interest, entered into an agreement with various lending institutions for
a nonrecourse construction loan of $62,500 for the construction of a wastepaper
recycling plant with interest payable monthly on the average outstanding balance
based on LIBOR and commercial paper rates. In December 1994, an additional loan
agreement was entered into for $2,500, bringing the total construction loans to
$65,000. The loans are collateralized by the plant. As of December 31, 1995,
interest rates on outstanding borrowings ranged from 7.10% to 9.29%. As of
December 31, 1994, interest rates on outstanding borrowings ranged from 6.94% to
9.81%. Upon completion of the provisional acceptance test, the construction
loans will be converted to a senior loan and a subordinated loan. The senior
loan will have an eight-year term and be for $32,500 at either a fixed or
variable interest rate based upon current market rates at the date of
conversion. The subordinated loan will have an eleven-year term and be for
$16,250 at a fixed rate based upon current market rates at the date of
conversion. The senior loan will require principal payments of $2,600 for 1996
and $3,575 for 1997 through 2000. The balance of the construction loans will be
paid by cash equity contributions of $16,250 in 1996. This amount is included as
a component of the current portion of long-term debt.
A-17
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
The Company and its subsidiaries have mortgage loans collateralized by office
buildings and other real estate with a net book value of $49,075 at December 31,
1995. The 9.13% mortgage loan was incurred in connection with a subsidiary's
purchase of an office building and principal and interest is payable monthly. A
subsidiary of the Company has a 6.44% mortgage loan obtained to finance the
acquisition of land and the construction of an office building occupied by an
engineering subsidiary of the Company. The office building was completed and
opened in early 1994. Principal payments required on long-term debt in the years
1996 through 2000 are $4,694, $1,667, $1,750, $1,783, and $1,736, respectively.
(J) ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Salaries and benefits $15,995 $14,905
Insurance premiums 13,820 12,670
Severance 1,467 9,047
Other 12,026 19,080
- --------------------------------------------------------------------------------
Total accrued liabilities $43,308 $55,702
- --------------------------------------------------------------------------------
</TABLE>
(K) OTHER LIABILITIES
Other liabilities include the accrued cost of the Employee Stock Ownership Plan
of $11,815 at December 31, 1995 and $14,016 at December 31, 1994.
(L) COMMITMENTS AND CONTINGENCIES
Rental expense was $5,900 in 1995, $7,200 in 1994 and $12,600 in 1993. The
Company and subsidiaries have leases for office space, computer equipment and
other office equipment with varying lease terms. All noncancelable leases have
been categorized as either capital or operating and under most leasing
arrangements the Company and subsidiaries pay the property taxes, insurance and
maintenance and expenses related to the leased properties. Future minimum lease
payments, net of sublease income, under long-term leases as of December 31, 1995
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Capital Operating
Leases Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $1,239 $ 7,100
1997 253 5,500
1998 237 5,300
1999 158 4,600
2000 -- 3,800
2001 and thereafter -- 27,900
- --------------------------------------------------------------------------------
Total minimum lease payments 1,887 $54,200
-------
Amount representing interest 110
- -----------------------------------------------
Present value of minimum lease payments $1,777
- --------------------------------------------------------------------------------
</TABLE>
The current portion of the present value of the minimum lease obligations under
capital leases as of December 31, 1995 amounted to $1,170.
The Company and certain subsidiaries have been named as defendants, along with
others, in legal actions claiming damages in connection with engineering and
construction projects and other matters. Most such actions involve claims for
personal injury or property damage which occur from time to time in connection
with services performed relating to project or construction sites, and for which
coverage under appropriate insurance policies usually applies; other actions
arise in the normal course of business including employment-related claims and
contractual disputes for which insurance coverage or other contractual
provisions may or may not apply. Such contractual disputes normally involve
claims relating to the performance of equipment design or other engineering
services or project construction services provided by subsidiaries of the
Company, and often such matters may be resolved without going through a complete
and lengthy litigation process. In 1994, a subsidiary of the Company settled two
contract-related lawsuits for $900, which were expensed in 1994. In addition,
with respect to another case involving performance on a client contract, it is
probable that the final outcome of the case will result in a liability. Based on
opinion of counsel, $3,800 and $1,200 was expensed in 1994 and 1993,
respectively. Management believes it is probable that any liability in excess of
the amounts expensed would be fully covered and paid by applicable insurance
carriers. Losses in excess of existing insurance coverage are considered
unlikely.
Several of the legal matters referred to in Note M in the Annual Report to
Shareholders for the year 1994 have been resolved. In 1993, in a contract
related lawsuit, a jury returned a verdict against a subsidiary of the Company
for which a provision had been made. As a result, in May of 1995, payment was
made of $4,936 representing satisfaction of a judgment against a subsidiary of
the Company. In another legal action to recover damages, attorneys' fees and
other monetary relief from insurance carriers, a settlement in which a
subsidiary of the Company received $16,000 was reached in the third quarter of
1995. This settlement, after reduction for current and deferred legal expenses
of $8,780, was recognized as a gain of $7,220 in the third quarter of 1995.
The Company continues to have possible liabilities relating to environmental
pollution. In the third quarter of 1995, a settlement was recorded relating to
environmental matters for which a charge of $2,500 was incurred, representing
the amount of the settlement net of cash received from insurance carriers of
$1,500.
The Company and two of its subsidiaries are named as defendants, along with
others, in one legal action brought by, and have received other claims from,
private parties seeking contribution for costs incurred or to be incurred in
remediation of sites under the Federal Comprehensive Environmental Response,
Compensation and Liability Act and similar state statutes. No governmental
authority has sought similar redress from the Company or its subsidiaries
(except in the case of one subsidiary in limited connection with claims made
with respect to clients of that subsidiary) nor has the Company been found to be
a Potentially Responsible Party by the Federal or any
A-18
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
state or local governmental authority, although some information has been
requested with regard to environmental matters. Based on presently known facts
and existing laws and regulations, management believes that it has valid legal
defenses to such actions and that the costs associated with such matters,
including legal costs, should be mitigated by the presence of other entities
which may be Potentially Responsible Parties, by contractual indemnities, and by
insurance coverage.
Management believes, on the basis of its examination and consideration of these
matters and such possible liabilities, including consultation with counsel, that
none of these legal actions, nor such possible liabilities, will result in
payment of amounts, if any, which would have a material adverse effect on the
consolidated financial statements.
A subsidiary of the Company owns a 94.3% interest in a limited partnership which
is constructing a wastepaper recycling plant in Auburn, Maine. The Company has
outstanding bank letters of credit in the amount of $19,001 at December 31, 1995
in favor of the banks financing the project to assure that certain financial
obligations with respect to the project will be met.
A subsidiary of the Company is a partner in a joint venture in an electric
cogeneration facility, which commenced operations in late 1992. An additional
equity investment of $5,000 was made in 1993 resulting in a total investment of
$6,000 which approximates the carrying value at December 31, 1995. The Company
has obtained bank letters of credit amounting to $1,500 at December 31, 1995 and
1994, in favor of the bank financing the project to assure that certain
financial obligations with respect to the project will be met.
Another subsidiary of the Company is a partner in a joint venture to construct
an oriented-strand board mill in New Brunswick, Canada. An equity investment of
$3,565 was made in 1994, which approximates the carrying value at December 31,
1995. No additional investments were made in 1995.
In 1995, a subsidiary of the Company entered into an agreement with a bank for a
line of credit totaling $15,000. Borrowings under this agreement are to be used
for general corporate purposes and incur interest based on 1/4% above LIBOR. At
December 31, 1995, no amounts were outstanding under the line of credit.
Foreign subsidiaries of the Company have an overdraft banking facility of $3,100
and lines of credit totaling $8,600, which are used for general corporate
purposes. The overdraft banking facility incurs interest based on 1% over the
bank's published rate. A commitment fee of 1/8% per annum is paid to the banks
on the unused portion of the lines of credit. At December 31, 1995, no amounts
were outstanding under the lines of credit or the overdraft banking facility.
At December 31, 1995, subsidiaries of the Company have contingent liabilities of
approximately $17,735 arising from guarantees to banks for credit facilities
extended to affiliates for general operating purposes.
The Company and its subsidiaries place their cash and cash equivalents and U.S.
Government securities with high credit quality financial institutions and, by
policy, limit the amount of credit exposure to any one financial institution.
(M) TREASURY STOCK
In July 1994, the Board of Directors authorized a program to repurchase
1,000,000 shares of Company Common Stock. In July 1995, the Board of Directors
authorized an increase in the share repurchase program to 2,500,000 shares. The
amount and timing of share purchases will depend on market conditions, share
price, as well as other factors. The Company reserves the right to discontinue
the repurchase program at any time. The Company acquired 754,443 shares under
the program in 1995. In 1994, 366,543 shares were acquired, of which 363,324
represent purchases under the program.
(N) COMMON STOCK
The Company had previously credited Common Stock with the excess of market value
over the cost of treasury stock issued under the Company's various stock plans
and with certain other amounts in excess of par value received as consideration
for issued shares of Common Stock. In 1995, the Company reduced Common Stock and
increased Capital in Excess of Par Value of Common Stock with the total of the
amount in excess of the par value of all issued shares. This reclassification
resulted in a decrease in Common Stock and a corresponding increase in Capital
in Excess of Par Value of Common Stock of $47,440 at December 31, 1994 and
$47,482 at December 31, 1993, respectively. There is no change in total
Shareholders' Equity resulting from this reclassification.
(O) EMPLOYEE STOCK OWNERSHIP AND
RESTRICTED STOCK PLANS
Under the terms of the Employee Stock Ownership Plan, the Company and
participating subsidiaries make contributions to a trust which can acquire from
the Company up to 5,000,000 shares of Common Stock of the Company, for the
exclusive benefit of participating employees.
The notes receivable from the Employee Stock Ownership Trust (ESOT), received as
consideration by the Company for the 4,000,000 shares of Common Stock sold to
the Trust in prior years, are payable in level payments of principal and
interest over 20 years. The last sale of shares to the ESOT by the Company
occurred in 1985. At December 31, 1995, the balance of the notes receivable from
the Trust was $25,477. The unamortized cost of the shares is being funded by
annual contributions necessary to enable the Trust to meet its current
obligations, after taking into account dividends received on the Common Stock
held by the Trust. The net cost of the Plan is being amortized over 20-year
periods from the dates of acquisition of shares. The charge to income was $1,555
in 1995, $1,560 in 1994 and $1,562 in 1993.
A-19
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
In May 1995, the number of shares of Common Stock remaining available for future
awards under the Restricted Stock Plan was reduced. Under the terms of the Plan,
which will terminate June 1, 1998 unless extended, the Company may award up to a
total of 250,000 shares after giving effect to the reduction mentioned above of
the Common Stock of the Company to key employees. Restricted Stock Plan awards
of 6,000 shares in 1995 and 22,000 shares in 1993, previously held in the
Treasury, were granted subject to the restrictions described in the Plan. There
were no such awards granted in 1994. The market value of the shares awarded is
being charged to income over the vesting period of five years. At December 31,
1995, 1,723,000 shares have been awarded, net of shares forfeited, and the
unamortized portion of the market value was $336.
(P) STOCK OPTION PLAN AND STOCK PLAN
On May 11, 1995, the Shareholders approved the 1995 Stock Option Plan and the
1995 Stock Plan for Non-Employee Directors. Under the 1995 Stock Option Plan,
key employees are eligible to receive options either as incentive stock options
as defined under the Internal Revenue Code, or as nonqualified options to
purchase shares of the Company's Common Stock. Non-employee directors may be
granted only nonqualified options. The exercise price of any option granted
under the Stock Option Plan may not be less than the fair market value as of the
date of grant and such options may not be exercisable later than ten years from
the date of grant. Nonqualified options to purchase 2,000 shares were granted to
each non-employee director as of the effective date of the Stock Option Plan and
have been or will be granted to each new non-employee director upon initial
election or appointment to the Board of Directors. Thereafter on a yearly basis,
nonqualified options to purchase 1,000 shares will be granted to each
non-employee director. The total number of shares to be issuable under the Stock
Option Plan may not exceed 750,000 shares. During 1995, nonqualified options for
20,000 shares were awarded to non-employee directors at exercise prices ranging
from $30.25 to $36.00, nonexercisable for the first six months. Nonqualified
options for 142,500 shares were awarded to designated key employees at exercise
prices ranging from $31.00 to $36.50, and are nonexercisable for the first three
years. During 1995, options with respect to 27,000 shares terminated
unexercised.
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
<S> <C>
Outstanding January 1 --
Options granted 162,500
Options cancelled 27,000
Options exercised --
- --------------------------------------------------------------------------------
Outstanding December 31 135,500
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, options for 16,000 shares were exercisable and 614,500
shares were available for grant. Per share option prices ranged from $30.25 to
$36.50.
Under the 1995 Stock Plan, non-employee directors of the Company will receive
grants of shares of Common Stock in payment of their annual retainer and may
elect to receive director meeting fees in Common Stock. The total number of
shares to be issued under the Stock Plan may not exceed 100,000 shares. During
1995, 2,252 shares were issued to non-employee directors.
(Q) RETIREMENT PLANS
The Company and its domestic subsidiaries have a noncontributory defined benefit
plan covering executive, administrative, technical and other employees. The
benefits of this plan are based primarily on years of service and employees'
career average pay. The Company's policy is to make contributions which are
equal to current year cost plus amortization of prior service cost, except as
limited by full funding restrictions. Plan assets consist principally of common
stocks, bonds and U.S. Government obligations.
The Company's foreign subsidiaries in the United Kingdom and Canada have defined
benefit plans covering executive, administrative, technical and other employees.
The U.K. plan is contributory and the benefits are based primarily on years of
service and employees' average pay during their last ten years of service. The
Canada plan is noncontributory and the benefits are based primarily on years of
service and employees' career average pay. The Company's policy is to make
contributions which are equal to the current year cost plus amortization of
prior service cost. Plan assets consist principally of common stocks and bonds.
Pension related items for the plans include the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 Domestic Foreign Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 6,557 $1,346 $ 7,903
Interest cost on projected
benefit obligation 29,757 3,078 32,835
Actual return on assets (112,938) (3,376) (116,314)
Net amortization and deferral 61,449 (296) 61,153
- --------------------------------------------------------------------------------
Net pension cost (credit) (15,175) 752 (14,423)
Incentive Retirement Program charges 2,112 -- 2,112
- --------------------------------------------------------------------------------
Total pension related items $(13,063) $ 752 $(12,311)
- --------------------------------------------------------------------------------
</TABLE>
A-20
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 Domestic Foreign Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 7,630 $1,395 $ 9,025
Interest cost on projected
benefit obligation 28,593 2,930 31,523
Actual return on assets 1,518 329 1,847
Net amortization and deferral (50,975) (4,200) (55,175)
- --------------------------------------------------------------------------------
Net pension cost (credit) (13,234) 454 (12,780)
Curtailment gain (357) -- (357)
- --------------------------------------------------------------------------------
Total pension related items $(13,591) $ 454 $(13,137)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1993 Domestic Foreign Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost- benefits earned
during the year $ 8,561 $1,455 $10,016
Interest cost on projected
benefit obligation 27,332 2,941 30,273
Actual return on assets (56,275) (3,401) (59,676)
Net amortization and deferral 6,429 (359) 6,070
- --------------------------------------------------------------------------------
Net pension cost (credit) (13,953) 636 (13,317)
Incentive Retirement Program charges 8,992 -- 8,992
Curtailment gain -- (1,072) (1,072)
- --------------------------------------------------------------------------------
Total pension related items $(4,961) $ (436) $(5,397)
- --------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of 1995, a voluntary Incentive Retirement Program was
offered to and accepted by employees of the parent company, Stone & Webster,
Incorporated. Total Program costs of $2,315 ($1,416, or $.10 per share, after
tax), including $203 for incentive benefits from a nonqualified Supplemental
Retirement Plan, representing the actuarially determined present value of
Program benefits, were charged to costs and expenses with corresponding offsets
to prepaid pension cost of $2,112 and $203 to accrued liabilities.
In 1994, the Company recorded a curtailment gain of $357 resulting from employee
terminations. The curtailment was determined as of July 1, 1994. The employee
terminations caused a significant reduction in defined benefit accruals for
present employees' future services. The net credit of $357 attributable to the
curtailment comprises two components: a curtailment gain of $4,206 resulting
from a reduction in the projected benefit obligation of the curtailed group and
a loss of $3,849 due to accelerated recognition of prior service costs for the
terminated employees.
In 1993, the Company offered an Incentive Retirement Program for employees of
two of its subsidiaries. In excess of two hundred employees elected to retire
under this Program. Total Program costs of $9,081 ($5,460, or $.36 per share,
after tax), including $89 for incentive benefits from a nonqualified
Supplemental Retirement Plan, representing the actuarially determined present
value of Program benefits, were charged to costs and expenses with a
corresponding offset to prepaid pension cost of $8,992 and $89 to accrued
liabilities.
In 1993, a foreign subsidiary of the Company recorded a curtailment gain of
$1,072, resulting from employee terminations. The terminations caused a
significant reduction in defined benefit accruals for present employees' future
services.
Fluctuations in the actual return on plan assets reflect fluctuations in the
market prices of equity securities as well as debt securities owned by the
pension plan. These fluctuations account for most of the variation in the net
amortization and deferral component of pension cost. This component also
includes amortization of the transition asset amounting to $10,383.
A reconciliation of the domestic plan's funded status to the balance sheet
prepaid pension cost is as follows at December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Vested benefit obligation $(413,459) $(330,993)
- --------------------------------------------------------------------------------
Accumulated benefit obligation $(417,779) $(333,719)
- --------------------------------------------------------------------------------
Projected benefit obligation $(437,128) $(348,706)
Plan assets at fair value 545,734 454,757
- --------------------------------------------------------------------------------
Excess of assets over projected
benefit obligation 108,606 106,051
Unrecognized prior service cost 14,268 16,061
Unrecognized net loss 21,735 19,818
Unrecognized net transition (asset) (30,415) (40,799)
- --------------------------------------------------------------------------------
Prepaid pension cost $ 114,194 $ 101,131
- --------------------------------------------------------------------------------
</TABLE>
The plan's funded status as of any measurement date is based on prevailing
market conditions as to discount rate and plan assets, and is accordingly
subject to volatility. The projected benefit obligation was determined using
assumed discount rates of 7.25% at December 31, 1995, and 8.75% at December 31,
1994 and assumed long-term rate of compensation increases of 4.5%, and 5% at
December 31, 1995, and December 31, 1994, respectively. Pension cost was
determined using an assumed long-term rate of return on plan assets of 9.75% at
January 1, 1995, 9.75% at July 1, 1994 and 9.5% at January 1, 1994 and 10% for
1993.
A-21
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
A reconciliation of the foreign plans' funded status to the balance sheet
accrued pension cost is as follows at December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Vested benefit obligation $(34,898) $(31,909)
- --------------------------------------------------------------------------------
Accumulated benefit obligation $(34,898) $(31,909)
- --------------------------------------------------------------------------------
Projected benefit obligation $(42,265) $(37,796)
Plan assets at fair value 42,625 39,606
- --------------------------------------------------------------------------------
Excess of assets over projected
benefit obligation 360 1,810
Unrecognized prior service cost 193 227
Unrecognized net loss 1,530 304
Unrecognized net transition (asset) (2,371) (2,693)
- --------------------------------------------------------------------------------
Accrued pension cost $ (288) $ (352)
- --------------------------------------------------------------------------------
</TABLE>
Accrued pension cost is included in the consolidated balance sheets in accrued
liabilities. The plans' funded status as of any measurement date is based on
prevailing market conditions as to discount rate and plan assets, and is
accordingly subject to volatility. The projected benefit obligation was
determined using an assumed weighted discount rate of 8% at December 31, 1995
and 1994, and an assumed weighted long-term rate of compensation increase of
6.1%. Pension cost was determined using an assumed long-term rate of return on
plan assets of 8.7% for 1995, 1994 and 1993.
(R) INTERNATIONAL SUBSIDIARIES
The net income (loss) and net assets of international subsidiaries amounted to
$5,173 and $14,153 in 1995, $(844) and $8,959 in 1994 and $2,551 and $10,615 in
1993, respectively.
(S) BUSINESS SEGMENTS
The Company, through its subsidiaries, is principally engaged in providing
professional engineering, design, construction, consulting and full
environmental services for power, process, industrial and governmental projects
worldwide. The Company's cold storage business offers consolidated distribution
of frozen products for food processors and others throughout the southeastern
United States. Although the Company has numerous clients and is not dependent on
any single client, one or a few clients may contribute a substantial portion of
the Company's consolidated revenue in any one year or over a period of several
consecutive years due to the size of major engineering and construction projects
and the progress accomplished on those projects in that year or period of years.
The Engineering, Construction and Consulting services segment had clients who
accounted for 10% or more of consolidated revenue as follows: one client in 1995
- - 13%; two clients in 1994 - 11% and 18% and one client in 1993 - 22%. The Cold
Storage and related activities business segment had no single client providing
10% or more of consolidated revenue.
Information regarding business segments is shown on page A-27 and is
incorporated herein.
A-22
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
(T) QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1995 First Second Third Fourth Total
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $222,529 $230,687 $219,160 $330,443 $1,002,819
Operating Income 7,534 11,937 7,112 8,458 35,041
Income (Loss) before Income Taxes 8,376 12,400 7,828 (5,133) 23,471
Net Income (Loss) 4,704 7,946 4,984 (2,754)(2) 14,880
Net Income (Loss) per Share (1) 0.32 0.55 0.35 (0.18) 1.04
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net income (loss) per share includes the following special items:
<TABLE>
<S> <C> <C> <C> <C> <C>
Pension related items 0.15 0.14 0.16 0.07 0.52
Asset divestitures -- -- -- (0.52) (0.52)
- ------------------------------------------------------------------------------------------------------
Total special items 0.15 0.14 0.16 (0.45) --
</TABLE>
(2) Includes after-tax loss on sale of Oil and Gas Production and Real Estate
Development businesses of $7,511.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1994 First Second Third Fourth Total
Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $190,882 $189,418 $193,783 $205,172 $779,255
Operating Income (19,688) (4,883) (1,789) (15,737) (42,097)
Income (Loss) before Income Taxes (19,454) (4,763) 8,410 7,035 (8,772)
Net Income (Loss) (12,921) (3,989) 5,182(4) 3,921(4) (7,807)
Net Income (Loss) per Share (3) (0.86) (0.27) 0.35 0.26 (0.52)
- -------------------------------------------------------------------------------------------------------
</TABLE>
(3) Net income (loss) per share includes the following special items:
<TABLE>
<S> <C> <C> <C> <C> <C>
Severance (0.25) (0.14) (0.03) (0.42) (0.84)
Pension related items 0.11 0.11 0.18 0.14 0.54
Asset divestitures -- -- 0.43 0.99 1.42
- -------------------------------------------------------------------------------------------------------
Total special items (0.14) (0.03) 0.58 0.71 1.12
</TABLE>
(4) Includes after-tax gain on sale of investment securities of $6,449 in the
third quarter and $14,759 in the fourth quarter.
A substantial portion of the Company's business is derived from long-term
engineering and construction contracts. Revenue is determined on the
percentage-of-completion method. Under this method, revisions to earnings
estimates recorded in any quarterly period may be adjustments to revenue and
cost of revenue recognized in prior periods and may in turn be further adjusted
during subsequent quarters. Accordingly, historical results may vary from
quarter to quarter.
A-23
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
(U) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments at December 31,
1995 follow:
The carrying amounts for cash and cash equivalents and U.S. Government
securities approximate their fair values because of the short maturity of the
instruments.
Long-term debt, excluding capital lease obligations, consists of construction
loans relating to a wastepaper recycling plant in Auburn, Maine and mortgage
loans relating to office buildings. The fair value of the construction loans
approximates the carrying value at December 31, 1995. The carrying value of the
mortgage loans for a subsidiary's office buildings was $28,844 compared with a
fair value of $28,564 based on quoted market prices for similar issues or on
current rates available to the Company for debt with similar terms and
maturities.
To manage its exposure to fluctuations in foreign currency exchange rates, a
subsidiary of the Company entered into several foreign exchange forward
contracts in connection with the purchase of equipment under engineering and
procurement service contracts. The foreign exchange forward contracts have
varying maturities with none exceeding one year. As of December 31, 1995 the
notional amount of foreign exchange forward contracts outstanding was $3,397.
The fair value and unrealized loss on these contracts was $142 and $220,
respectively, at December 31, 1995.
The Company and its subsidiaries have entered into other financial agreements in
the normal course of business. These agreements, which by their nature contain
potential risk of loss, include lines of credit, letters of credit, performance
bonds and performance guarantees. The fair values of the lines of credit,
letters of credit, performance bonds and performance guarantees are estimated at
$265 based on the fees paid to obtain the obligations.
(V) RECLASSIFICATIONS
In 1995, the Company changed its reporting to present Operating Income (Loss)
and has reclassified profits on investment securities and dividend and interest
income from revenue to a new caption - Other Income (Deductions). Certain other
miscellaneous revenue was reclassified to operating costs. As a result of these
reclassifications, total revenue decreased by $38,966 and $6,786, operating
expenses decreased by $1,741 and $2,540, and other income (deductions) increased
by $37,225 and $4,246, for 1994 and 1993, respectively, with no effect on net
income.
In 1995, the Company restated its Common Stock account to reflect the amount
equal to the par value of the shares issued. The account Capital in Excess of
Par Value of Common Stock reflects the excess over par value of the amount of
consideration received for issued shares and the excess of the market value over
the cost of shares issued from treasury stock under Company plans. There is no
change in total Shareholders' Equity.
In 1994, the Company changed its presentation of reporting gross earnings to a
format reflecting total revenue, costs of revenue and selling, general and
administrative expenses to be more consistent with industry practice, in its
Engineering, Construction and Consulting business.
A-24
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
SELECTED FINANCIAL DATA
(All dollar amounts, except per share amounts, are in thousands.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Years ended December 31,
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue: (6)
Engineering, Construction and Consulting services $ 969,284 $ 748,614 $ 1,013,265 $ 944,787 $ 927,226
Cold Storage and related activities 21,188 17,280 16,914 15,698 15,348
Other 12,347 13,361 16,130 15,689 16,211
- ---------------------------------------------------------------------------------------------------------------------------
Total revenue $ 1,002,819 $ 779,255 $ 1,046,309 $ 976,174 $ 958,785
- ---------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) (4 and 6) $ 35,041 $ (42,097) $ 6,813 $ 17,335 $ 24,447
Income (Loss) from Continuing Operations $ 14,880 $ (7,807) $ (370) $ 9,340 $ 16,417
Net Income (Loss) (1, 2, 3 and 4) $ 14,880 $ (7,807) $ 1,952 $ 12,815 $ 17,605
- ---------------------------------------------------------------------------------------------------------------------------
Average Number of Shares Outstanding 14,376,000 14,907,000 14,978,000 14,999,000 15,055,000
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations Per Share $ 1.04 $ (.52) $ (.03) $ .62 $ 1.08
Net Income (Loss) Per Share (1, 2, 3 and 4) $ 1.04 $ (.52) $ .13 $ .85 $ 1.17
- ---------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ .60 $ .60 $ .60 $ .60 $ .60
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets (5) $ 716,772 $ 678,384 $ 683,579 $ 623,493 $ 609,828
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 74,677 $ 89,642 $ 47,739 $ 24,768 $ 28,022
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Reflects gain or loss on sale of assets, which decreased net
income by $7,511, or $.52 per share in 1995, increased net income
by $21,208, or $1.42 per share in 1994 as explained in Note C to
the Consolidated Financial Statements and $2,802, or $.19 per
share in 1992.
(2) Includes an extraordinary item from utilization of foreign
subsidiaries' net operating loss carryforwards, which increased
net income by $246, or $.02 per share in 1992, and $1,188, or $.09
per share in 1991.
(3) Includes cumulative effect of a change in accounting principle,
which increased net income by $2,322, or $.16 per share in 1993
and $3,229, or $.21 per share in 1992.
(4) Includes costs associated with the Incentive Retirement Program of
$1,416, or $.10 per share in 1995, pension curtailment gains which
increased net income by $218, or $.02 per share in 1994 and by
$1,072, or $.07 per share in 1993, severance costs which decreased
net income by $12,596, or $.84 per share in 1994, $4,967, or $.33
per share in 1993 and by $1,881, or $.13 per share in 1992, and
costs which decreased net income in 1993 as follows: $5,460, or
$.36 per share, associated with the Incentive Retirement Program;
$1,131, or $.08 per share, relating to an increase in the
statutory federal income tax rate on corporations from 34% to 35%;
$2,340, or $.16 per share, relating to a judgment against a
subsidiary of the Company and $2,015, or $.13 per share, relating
to an IRS settlement in connection with prior years' income tax
returns .
(5) Total assets at December 31, 1993 includes an increase of $38,423,
as a result of carrying investment securities at a fair market
value of $40,836, due to the adoption of SFAS No. 115 - Accounting
for Certain Investments in Debt and Equity Securities.
(6) Certain reclassifications have been made in the prior years' data
to conform with the 1995 presentation. See Notes A and V to the
Consolidated Financial Statements.
- --------------------------------------------------------------------------------
MARKET AND DIVIDEND INFORMATION
- --------------------------------------------------------------------------------
Principal Market - New York Stock Exchange
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SALES PRICE OF DIVIDENDS PAID
COMMON SHARES PER SHARE
- --------------------------------------------------------------------------------
1995 1994 1995 1994
- --------------------------------------------------------------------------------
Quarter High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First 34 1/8 31 1/4 31 5/8 27 1/4 $.15 $.15
Second 32 27 1/4 33 7/8 29 5/8 .15 .15
Third 40 29 1/2 33 3/4 31 7/8 .15 .15
Fourth 38 1/8 32 5/8 34 31 3/4 .15 .15
- --------------------------------------------------------------------------------
</TABLE>
The Company has purchased and may continue to purchase from time to time
additional shares of its Common Stock for general corporate purposes on the New
York Stock Exchange, or otherwise. However, there is no assurance that the
Company will continue to purchase shares of its Common Stock. Also see Note M to
the Consolidated Financial Statements. The approximate number of record holders
of Common Stock as of December 31, 1995 was 6,200. The Common Stock is also
listed for trading on the Boston Stock Exchange.
A-25
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
REPORT OF
MANAGEMENT
The management of Stone & Webster, Incorporated is responsible for the
preparation of the financial statements and related notes included in this
annual report to shareholders. The financial statements have been prepared in
conformity with generally accepted accounting principles and accordingly include
certain amounts which represent management's best estimates and judgments.
Management maintains internal systems to assist it in fulfilling its
responsibility for financial reporting, including careful selection of
personnel, segregation of duties and the maintenance of formal accounting and
reporting policies and procedures. While no system can ensure elimination of all
errors and irregularities, the systems have been designed to provide reasonable
assurance that assets are safeguarded, policies and procedures are followed and
transactions are properly executed and reported. These systems are reviewed and
modified in response to changing conditions. Management believes that the
Company's system of internal controls is adequate to accomplish the objectives
discussed herein.
The system is supported by an internal auditing function that operates worldwide
and reports its findings to management throughout the year. The Company's
independent accountants are engaged to express an opinion on the year-end
financial statements. The independent accountants review and test the system of
internal accounting controls and the data contained in the financial statements
to the extent required by generally accepted auditing standards as they deem
necessary to arrive at an opinion on the fairness of the financial statements
presented herein.
The Audit Committee of the Board of Directors, which is comprised of outside
directors, meets regularly with management, the internal auditors and the
independent accountants to discuss the adequacy of internal controls, the
reported financial results and the results of the auditors' examinations. The
internal auditors and the independent accountants have direct access to the
Audit Committee and meet privately with the Committee.
Edward J. Walsh Jeremiah P. Cronin
Acting President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
A-26
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
BUSINESS SEGMENT INFORMATION
(See Note S to Consolidated Financial Statements.
All dollar amounts are in thousands.)
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE (1)
Engineering, Construction and
Consulting services $ 969,284 $748,614 $1,013,265
Cold Storage and related
activities 21,188 17,280 16,914
Other (2) 12,347 13,361 16,130
- --------------------------------------------------------------------------------
Total Revenue $1,002,819 $779,255 $1,046,309
- --------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (3)
Engineering, Construction and
Consulting services $ 38,941 $(37,709) $ 8,819
Cold Storage and related
activities 7,783 5,927 5,274
Other (2) 1,244 395 1,306
General Corporate (12,927) (10,710) (8,586)
- --------------------------------------------------------------------------------
Operating Income (Loss) $ 35,041 $(42,097) $ 6,813
- --------------------------------------------------------------------------------
Interest and Dividend Income 6,422 5,123 4,246
Interest Expense (5,549) (3,900) (2,606)
Gain (Loss) on sale of assets (12,443) 32,102 --
- --------------------------------------------------------------------------------
Income before Taxes $ 23,471 $ (8,772) $ 8,453
- --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS (4)
Engineering, Construction and
Consulting services $ 595,699 $492,650 $ 477,905
Cold Storage and related
activities 35,143 35,798 35,015
Other (2) 1,273 68,679 68,981
General Corporate 84,657 81,257 101,678
- --------------------------------------------------------------------------------
Total Identifiable Assets $ 716,772 $678,384 $ 683,579
- --------------------------------------------------------------------------------
DEPRECIATION, DEPLETION
AND AMORTIZATION
Engineering, Construction and
Consulting services $ 14,219 $ 14,904 $ 15,182
Cold Storage and related
activities 1,972 1,951 2,025
Other (2) 3,048 2,862 2,928
- --------------------------------------------------------------------------------
Total Depreciation, Depletion
and Amortization $ 19,239 $ 19,717 $ 20,135
- --------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Engineering, Construction and
Consulting services $ 24,127 $ 47,637 $ 29,389
Cold Storage and related
activities 1,715 2,439 863
Other (2) 2,120 2,268 1,427
- --------------------------------------------------------------------------------
Total Capital Expenditures $ 27,962 $ 52,344 $ 31,679
- --------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
United States - Domestic $ 659,926 $642,321 $ 780,032
United States - Export (5) 111,486 50,893 39,041
- --------------------------------------------------------------------------------
United States - Total 771,412 693,214 819,073
- --------------------------------------------------------------------------------
International (5) 231,407 86,041 227,236
- --------------------------------------------------------------------------------
Total Revenue $1,002,819 $779,255 $1,046,309
- --------------------------------------------------------------------------------
OPERATING INCOME (LOSS)
United States $ 40,660 $(32,386) $ 9,766
International 7,308 999 5,633
General Corporate (12,927) (10,710) (8,586)
- --------------------------------------------------------------------------------
Operating Income (Loss) $ 35,041 $(42,097) $ 6,813
- --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS (4)
United States $ 567,843 $553,096 $ 539,378
International 64,272 44,031 42,523
General Corporate 84,657 81,257 101,678
- --------------------------------------------------------------------------------
Total Identifiable Assets $ 716,772 $678,384 $ 683,579
- --------------------------------------------------------------------------------
</TABLE>
(1) Total segment revenue includes revenue from unaffiliated customers as
reported in the Consolidated Statements of Operations.
(2) The Other segment includes the Oil and Gas Production and Real Estate
Development businesses.
(3) The pension related items included in Operating Income (Loss) are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Income) Expense 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Engineering, Construction and
Consulting services $(14,206) $(12,946) $(5,311)
Cold Storage and related activities 91 81 144
Other (65) (68) (71)
General Corporate 1,869 (204) (159)
- --------------------------------------------------------------------------------
Total pension related items $(12,311) $(13,137) $(5,397)
- --------------------------------------------------------------------------------
</TABLE>
Pension related items include the effect of curtailment gains and incentive
retirement programs. Domestic and foreign pension related items are
presented in Note Q to the Consolidated Financial Statements.
(4) Identifiable assets are those assets used in the operation of each segment.
General corporate assets are composed primarily of cash and U.S. Government
securities. General corporate assets at December 31,1993, includes an
increase of $38,423 as a result of carrying investment securities at fair
market value.
(5) Revenue principally to Asia/Pacific Rim, Canada, Europe and Middle East.
Revenue did not exceed 10% of total revenue for any one geographic area.
(6) Certain reclassifications have been made in prior years' data to conform
with the 1995 presentation. See Notes A and V to the Consolidated Financial
Statements.
A-27
<PAGE>
Stone & Webster, Incorporated and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
(All dollar amounts are in thousands.)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at Charged Charged Balance at
Beginning of to Costs to Other End of
Description Period and Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Allowance deducted from
asset to which it applies:
Allowance for doubtful
accounts:
Year ended December 31, 1995 $3,723 $712 $ -- $ 668 (A) $3,767
Year ended December 31, 1994 2,957 647 289 170 (A) 3,723
Year ended December 31, 1993 4,529 498 354 2,424 (A) 2,957
Note A - Uncollected receivables written off, net of recoveries
</TABLE>
A-28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Directors of Stone & Webster, Incorporated:
We have audited the consolidated financial statements and the financial
statement schedule of Stone & Webster, Incorporated and Subsidiaries listed in
the index on page A-1 of the Form 10-K. These financial statements and the
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Stone & Webster,
Incorporated and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. In addition , in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
As discussed in Note E to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993.
Coopers & Lybrand L.L.P.
New York, New York
February 20, 1996
A-29
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
EXHIBIT INDEX
No. Exhibit
(3) (i) Restated Certificate of Incorporation
(incorporated by reference)
(ii) By-Laws (filed herewith)
(10) (a) Material contracts - Restricted Stock
Plan and form of grant (incorporated by reference)
(b) Material contracts - 1995 Stock Option Plan
(incorporated by reference)
(c) Material contracts - 1995 Stock Plan for Non-Employee
Directors (incorporated by reference)
(d) Material contracts - Form of change of control
agreement (incorporated by reference)
(e) Material contracts - Forms of agreement with H. Kerner
Smith relating to (i) Employment Agreement; (ii) Change
of Control Employment Agreement; and (iii) Stock Option
Grant (filed herewith)
(21) Subsidiaries of the Registrant (filed herewith)
(23) Consent of Independent Accountants (filed herewith)
(27) Financial Data Schedule (filed herewith)
23
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (3) (ii)
B Y - L A W S
OF
STONE & WEBSTER, INCORPORATED
AS AMENDED EFFECTIVE
FEBRUARY 12, 1996
1
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
BY - LAWS
OF
STONE & WEBSTER,
INCORPORATED
_________________
ARTICLE I
Name
The name of the corporation (hereinafter referred to as
this Corporation) is Stone & Webster, Incorporated.
ARTICLE II
Stockholders' Meetings
Meetings of the stockholders may be held in such
locations within or without the State of Delaware as shall be designated
by the Board of Directors or set forth in the notice of such meeting.
ARTICLE III
Annual Stockholders' Meeting
The Annual Meeting of the stockholders of this
Corporation shall be held at the time set forth in the notice of such
meeting on the second Thursday in May in each year if not a legal
holiday, and if a legal holiday, then at the time set forth in said
notice on the next succeeding Thursday not a legal holiday. In the event
that such Annual Meeting is omitted by oversight or otherwise on the
date herein provided for, the Directors shall cause a meeting in lieu
thereof to be held as soon thereafter as conveniently may be, and any
business transacted or elections held at such meeting shall be as valid
as if transacted or held at the Annual Meeting. Such subsequent meeting
shall be called in the same manner as provided for Special Stockholders'
Meetings.
ARTICLE IV
Special Stockholders' Meetings
Special Meetings of the stockholders of this Corporation
shall be held whenever called in the manner required by law for purposes
as to which there are special statutory provisions and for other
purposes whenever called by the Chairman of the Board of Directors or by
the President or by the Chairman of the Executive Committee or by vote
of the Board of Directors.
2
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
ARTICLE V
Notice of Stockholders' Meetings
Notice of all stockholders' meetings stating the time and place,
and, in the case of Special Meetings, the objects for which such meetings are
called, shall be given by the Chairman of the Board of Directors or the
President or the Chairman of the Executive Committee or a Vice-President or
the Secretary or an Assistant Secretary, by mail, to each stockholder of
record having voting power in respect of the businesss to be transacted
thereat, at his or her registered address at least ten (10) days prior to the
date of the meeting, and the person giving such notice shall make affidavit in
relation thereto.
Any meeting at which all stockholders having voting power in
respect of the business to be transacted thereat are present, either in
person, or by proxy, or of which those not present shall at any time waive
or have waived notice in writing, shall be a legal meeting for the
transaction of business, notwithstanding that notice has not been given as
hereinbefore provided.
ARTICLE VI
Waiver of Notices
Whenever any notice whatever is required to be given by these
By-laws, or the Restated Certificate of Incorporation of this Corporation, or
any of the laws of the State of Delaware, a waiver thereof in writing, signed
by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
Quorum at Stockholders' Meetings
At any meeting of the stockholders, a majority in interest of all
the capital stock issued and outstanding and entitled to vote, represented by
such stockholders of record in person or by proxy, shall constitute a quorum,
but a less interest may adjourn any meeting from time to time and the meeting
may be held as adjourned without further notice. When a quorum is present at
any meeting, a majority in interest of the stock entitled to vote represented
thereat shall decide any question brought before such meeting, unless the
question is one upon which by express provision of law or of the Restated
Certificate of Incorporation or of these By-laws a larger or different vote is
required, in which case such express provision shall govern and control the
decision of such question.
ARTICLE VIII
Proxy and Voting
Stockholders of record entitled to vote may vote at any meeting
either in person or by proxy in writing, which shall be filed with the
Secretary of the meeting before being voted. Such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting, but shall not be
valid after the final adjournment thereof. Stockholders entitled to vote may
also be represented by a general power of attorney produced at any meeting
until
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Form 10-K 1995 Stone & Webster, Incorporated
it is revoked. No proxy or power of attorney shall be voted on after three
years from its date, unless said proxy or power of attorney provides for a
longer period.
ARTICLE IX
Board of Directors
A Board of Directors shall be elected by ballot at the
Annual Meeting of the stockholders or at any meeting held in place
thereof as hereinbefore provided. No director shall be elected by
stockholders except by the vote of a majority of all votes entitled to
be cast in such election by all of the outstanding shares of all classes
of capital stock of the Corporation. The number of Directors of this
Corporation shall be eleven (11), but the number may be increased or
decreased at any time by amendment of these By-laws adopted by vote of
two-thirds of all of the Directors of this Corporation at the time in
office or by vote of at least two-thirds of the votes at the time
entitled to be cast generally in the election of directors by all of the
outstanding shares of all classes of capital stock of the Corporation,
provided that the number of Directors shall always be not less than
three. Directors need not be stockholders of this Corporation.
The Directors of the Corporation shall be divided into
three classes with the number of Directors fixed by or in accordance
with the By-laws divided equally so far as possible among the three
classes. Except as otherwise provided in Article XXIII, following
adoption of this By-law provision,
(a) one-third of the number of Directors shall be
elected to serve until the 1973 Annual Meeting of
the stockholders,
(b) one-third of the number of Directors shall be
elected to serve until the 1974 Annual Meeting of
the stockholders,
(c) one-third of the number of Directors shall be
elected to serve until the 1975 Annual Meeting of
the stockholders,
and until their successors are duly elected and qualified. At each
annual election after the 1972 election, the successors to the Directors
of each class whose term shall expire in that year shall be elected to
hold office for a term of three years from the date of their election
and until their successors are duly elected and qualified. In case of
any increase in the number of Directors, the additional Directors shall
be distributed among the several classes as nearly equally as possible.
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Form 10-K 1995 Stone & Webster, Incorporated
ARTICLE X
Chairman of the Board of Directors
A Chairman of the Board of Directors may be appointed by
the Board of Directors from among its members at the first meeting after
the Annual Meeting of the stockholders or at any other meeting of the
Board of Directors, and a meeting may be held without notice for this
purpose immediately after the Annual Meeting of the stockholders and at
the same place.
The Chairman of the Board of Directors shall preside at
the meetings of the Board of Directors and may call meetings of the
Board of Directors and of any committee thereof whenever he deems it
necessary, and he shall call to order and act as chairman of all
meetings of the stockholders of this Corporation. In addition, he shall
have such other powers and duties as the Board of Directors shall
designate from time to time.
ARTICLE XI
Power of Directors
The Board of Directors shall have the entire management
of the business of this Corporation. In the management and control of
the property, business and affairs of this Corporation, the Board of
Directors is hereby vested with all the powers possessed by this
Corporation itself, so far as this delegation of authority is not
inconsistent with the laws of the State of Delaware, with the Restated
Certificate of Incorporation of this Corporation, or with these By-laws.
The Board of Directors shall have authority from time to time to set
apart out of any assets of this Corporation otherwise available for
dividends a reserve or reserves as working capital or for any other
proper purpose or purposes, and to abolish or add to any such reserve or
reserves from time to time as the Board may deem to be in the interests
of this Corporation and the Board shall likewise have power to determine
in its discretion what part of the assets of this Corporation available
for dividends in excess of such reserve or reserves shall be declared in
dividends and paid to the stockholders of this Corporation.
ARTICLE XII
Executive and Other Committees
The Board of Directors may designate by resolution
passed by a majority of the whole Board two or more of its number who
shall constitute an Executive Committee, which Committee shall, when the
Board of Directors is not in session, have and may, subject to any
limitation imposed by the laws of the State of Delaware, exercise any or
all of the powers of the Board of Directors in the management of the
business and affairs of this Corporation, and have power to authorize
the seal of this Corporation to be affixed to all papers which may
require it. A Chairman of the Executive Committee (who shall preside at
the meetings of the Executive Committee, may call meetings thereof
whenever he deems it necessary and shall have such other powers and
duties as the Board of Directors shall designate from time to time)
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Form 10-K 1995 Stone & Webster, Incorporated
shall be appointed by the Board of Directors at the time it designates
members of the Executive Committee. The Secretary of this Corporation,
or, in his absence, an Assistant Secretary or any other person
designated by the Committee, shall act as Secretary of the Committee.
The Executive Committee, except as otherwise herein provided, shall fix
its own rules of procedure and shall keep a record of its acts and
proceedings and report the same from time to time to the Board of
Directors. Any vacancy in the Executive Committee shall be filled by
the vote of the majority of the whole Board of Directors. The Board of
Directors may appoint one or more of its members as ex-officio members
of the Executive Committee, who shall have the privilege of attending
meetings of the Executive Committee, but who shall not be entitled to
vote upon any matters brought before the Executive Committee and shall
not be counted as a member of the Executive Committee for the purpose of
determining the number necessary to constitute a quorum, or for the
purpose of determining whether a quorum is present. Notice of meetings
to ex-officio members shall not be deemed to be required under law, the
Restated Certificate of Incorporation or these By-laws.
The Board of Directors likewise may appoint from their
number or from the stockholders other committees from time to time, the
number (not less than two) composing such committees and the powers
conferred upon the same to be determined by a vote of the Board of
Directors.
ARTICLE XIII
Directors' Meetings
Regular Meetings of the Board of Directors shall be held
at such places within or without the State of Delaware and at such times
as the Board by vote may determine from time to time, and if so
determined no notice thereof need be given. Special Meetings of the
Board of Directors may be held at any time or place either within or
without the State of Delaware, whenever called by the Chairman of the
Board of Directors, the President, the Chairman of the Executive
Committee, a Vice-President, the Secretary, an Assistant Secretary or
three or more Directors, notice thereof being given to each Director by
the Secretary or an Assistant Secretary or officer calling the meeting,
or at any time or place without formal notice, provided all the
Directors are present or waive notice thereof as provided in Article VI
hereof. Notice of Special Meetings, stating the time and place thereof,
shall be given by mailing the same to each Director at his residence or
business address at least two days before the meeting, or by delivering
the same to him personally or telephoning or telegraphing the same to
him at his residence or business address at least one day before the
meeting, unless, in case of exigency, the Chairman of the Board of
Directors or the President or the Chairman of the Executive Committee or
in their absence the Secretary shall prescribe a shorter notice to be
given personally or by telephoning or telegraphing each Director at his
residence or business address. Such Special Meetings shall be held at
such times and places as the notice thereof or waiver shall specify.
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Form 10-K 1995 Stone & Webster, Incorporated
ARTICLE XIV
Quorum at Directors' Meetings
One-third of the number of Directors, but not less than
four members of the Board of Directors, shall constitute a quorum for
the transaction of business, but a less number may adjourn any meeting
from time to time and the meeting may be held as adjourned without
further notice. When a quorum is present at any meeting a majority of
the members present thereat shall decide any question brought before
such meeting, except as otherwise provided by law, by the Restated
Certificate of Incorporation or by these By-laws.
ARTICLE XV
Officers
The officers of this Corporation shall be a President,
one or more Vice-Presidents, a Secretary and a Treasurer. The officers
shall be elected by the Board of Directors at the first meeting after
the Annual Meeting of the stockholders, and a meeting may be held
without notice for this purpose immediately after the Annual Meeting of
the stockholders and at the same place.
ARTICLE XVI
Eligibility of Officers
The President may, but need not, be a stockholder but
shall be a Director of this Corporation. The Vice-Presidents,
Secretary, Treasurer and such other officers as may be elected or
appointed may, but need not, be stockholders or Directors of this
Corporation. Any person may hold more than one office provided the
duties thereof can be consistently performed by the same person,
provided, however, that no one person shall, at the same time, hold the
three offices of President or Vice-President and Secretary and
Treasurer.
ARTICLE XVII
Additional Officers and Agents
The Board of Directors, at its discretion, may appoint a
Corporate Controller, one or more Assistant Corporate Controllers, one
or more Assistant Treasurers, and one or more Assistant Secretaries, and
such other officers or agents as it may deem advisable, and prescribe
the duties thereof.
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ARTICLE XVIII
President
The President shall be the chief executive officer of
this Corporation, and, as such, shall have supervision of its policies,
business, and affairs, and such other powers and duties as are commonly
incident to the office of chief executive officer. The President also
shall have such powers and duties as are commonly incident to the office
of president. He shall also have such other powers and duties as the
Board of Directors shall designate from time to time. He may call
meetings of the Board of Directors and of any committee thereof whenever
he deems it necessary. The President, unless some other person is
thereunto specifically authorized by vote of the Board of Directors,
shall have power to sign all certificates of stock, bonds, deeds and
contracts of this Corporation.
ARTICLE XIX
Vice-Presidents
The Vice-Presidents shall each possess such powers and
perform such duties, in addition to those expressly provided herein, as
the Board of Directors may from time to time determine.
ARTICLE XX
Secretary
The Secretary shall keep accurate minutes of all
meetings of the stockholders, the Board of Directors and the Executive
Committee, respectively, shall perform all the duties commonly incident
to his office, and shall perform such other duties and have such other
powers as the Board of Directors shall designate from time to time. The
Secretary shall have power, together with the President or a Vice-
President, to sign certificates of stock of this Corporation. In his
absence at any meeting an Assistant Secretary or a Secretary Pro Tempore
shall perform his duties thereat. The Secretary, any Assistant
Secretary and any Secretary Pro Tempore shall be sworn to the faithful
discharge of their duties.
ARTICLE XXI
Treasurer
The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the moneys, funds,
valuable papers and documents of this Corporation (other than his own
bond which shall be in the custody of the President) and shall have and
exercise, under the supervision of the Board of Directors, all the
powers and duties commonly incident to his office, and shall, if
required by the Board of Directors, give bond in such form and with such
sureties as it may require. He shall deposit all funds of this
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Form 10-K 1995 Stone & Webster, Incorporated
Corporation in such bank or banks, trust company or trust companies or
with such firm or firms doing a banking business, as the Directors shall
designate and shall have power to borrow from time to time at his
discretion moneys for the corporate needs of this Corporation and cause
to be issued as evidence thereof notes of this Corporation. He may
endorse for deposit or collection all checks, notes, et cetera, payable
to this Corporation or to its order, may accept drafts on behalf of this
Corporation, and, together with the President or a Vice-President, may
sign certificates of stock. All the property in his possession, shall
be subject at all times to the inspection and control of the Board of
Directors. The Treasurer shall be subject in every way to the order of
the Board of Directors.
All checks, drafts, notes, bonds, or other obligations
for the payment of money shall be signed by the Treasurer and/or such
other officer or officers, agent or agents, as the Board of Directors
shall by resolution direct. The Board of Directors may, in its
discretion, also provide by resolution for countersignature or
registration of checks, drafts, notes and/or bonds of this Corporation.
Checks for the total amount of any pay roll may be drawn in accordance
with the foregoing provisions and deposited in a special fund. Checks
upon this fund may be drawn by such person as the Treasurer shall
designate and need not be countersigned.
ARTICLE
Corporate Controller
The Corporate Controller shall keep accurate books of
account of this Corporation's transactions which shall be the property
of this Corporation, subject at all times to the inspection and control
of the Board of Directors, shall perform all the duties commonly
incident to the office, and shall perform such other duties and have
such other powers as the Board of Directors shall designate from time to
time.
ARTICLE XXIII
Resignations and Removals
Any Director, officer or agent of this Corporation may
resign at any time by giving written notice to the Board of Directors or
to any elected officer of this Corporation and any member of any
committee may resign by giving written notice either as aforesaid or to
the committee of which he is a member or the chairman thereof. Any such
resignation shall take effect at the time specified therein or, if the
time be not specified, upon receipt thereof; and, unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Any Director may be removed from office, but only for
cause, at a meeting called for the purpose and by the affirmative
approval of holders of shares of capital stock of the Corporation
entitled to cast at least a majority of the votes at the time entitled
to be cast generally in the election of directors by all of the
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Form 10-K 1995 Stone & Webster, Incorporated
outstanding shares of all classes of capital stock of the Corporation,
considered for the purposes of this paragraph of this Article as one
class; provided, however, that if the Board of Directors, by vote of
two-thirds of all the Directors then in office, shall have recommended
removal of a Director, then stockholders may remove such Director from
office by the foregoing procedure without cause. If any Director shall
be removed pursuant to this paragraph of this Article, then the
stockholders of the Corporation may, at the meeting at which such
removal is effected, elect his successor.
The Board of Directors, by vote of not less than a
majority of all the Directors of the Corporation at the time in office,
may remove from office any officer, agent or member of any committee,
elected or appointed by it.
ARTICLE XXIV
Vacancies
If the office of any Director, one or more, becomes
vacant by reason of death, resignation, removal, disqualification or
otherwise, then (except where such vacancy results from removal and is
filled by the stockholders as provided in the Restated Certificate of
Incorporation) the Directors at the time in office may, by vote of a
majority of the Directors then in office, elect a successor or
successors who shall hold office for the unexpired term, and even if
there be less than a quorum of the Directors at the time in office, said
Directors may by a majority vote elect a successor or successors who
shall hold office for the unexpired term. Vacancies in the Board of
Directors may be filled for an unexpired term by the stockholders having
voting power at a meeting of the stockholders called for that purpose,
by the vote required in Article IX hereof, unless such vacancy shall
have been filled by the Directors in the manner provided in this
Article. Vacancies resulting from an increase in the number of
Directors shall be deemed to be vacancies to be filled in the manner
provided in this Article.
If the office of any officer or agent, one or more,
becomes vacant for any of the aforesaid reasons, the successor or
successors shall be elected or appointed by the Board of Directors.
This Article may not be amended or repealed except by
the affirmative approval of holders of shares of capital stock of the
Corporation entitled to cast at least two-thirds of the votes at the
time entitled to be cast generally in the election of directors by all
of the outstanding shares of all classes of capital stock of the
Corporation, considered for the purposes of this Article as one class,
or by resolution adopted by a vote of two-thirds of all the Directors of
the Corporation at the time in office.
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Form 10-K 1995 Stone & Webster, Incorporated
ARTICLE XXV
Capital Stock
The maximum amount of capital stock shall be as fixed in
the Restated Certificate of Incorporation or in any lawful amendments
thereto from time to time.
ARTICLE XXVI
Certificates of Stock
Every stockholder shall be entitled to a certificate or
certificates of the capital stock of this Corporation in such form as
may be prescribed by the Board of Directors, duly numbered and setting
forth the number and kind of shares. Such certificates shall be signed
by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary. The
Board of Directors may also appoint one or more Transfer Agents and/or
Registrars for its stock of any class or classes and may require stock
certificates to be countersigned by one or more of them. If
certificates of capital stock of this Corporation are manually signed by
the Registrar, the signatures thereon of the Transfer Agent and of the
President or a Vice-President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, of this
Corporation, may be facsimiles, engraved or printed. Any provisions of
these By-laws with reference to the signing of stock certificates shall
include in cases above permitted, such facsimile signatures. In case
any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates, shall cease to be such officer or officers of this
Corporation, whether because of death, resignation or otherwise, before
such certificate or certificates shall have been delivered by this
Corporation, such certificate or certificates may nevertheless be
adopted by the Board of Directors of this Corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been
used thereon had not ceased to be such officer or officers of this
Corporation.
ARTICLE XXVII
Transfer of Stock
Shares of stock may be transferred by delivery of the
certificate accompanied either by an assignment in writing on the back
of the certificate or by a written power of attorney to sell, assign and
transfer the same on the books of this Corporation, signed by the person
appearing by the certificate to be the owner of the shares represented
thereby, and shall be transferable on the books of this Corporation upon
surrender thereof so assigned or endorsed. The person registered on the
books of this Corporation as the owner of any shares of stock shall
exclusively be entitled as the owner of such shares to receive dividends
and to vote as such owner, in respect thereof. It shall be the duty of
every stockholder to notify this Corporation of his post office address.
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Form 10-K 1995 Stone & Webster, Incorporated
ARTICLE XXVIII
Transfer Books
The Board of Directors shall have power to close the
stock transfer books of this Corporation for a period not exceeding
sixty (60) days preceding the date of any meeting of stockholders or the
date for payment of any dividend or the date for the allotment of rights
or the date when any change or conversion or exchange of capital stock
shall go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in
advance a date, not exceeding sixty (60) days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice
of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such case only
such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting
and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, as the
case may be, notwithstanding any transfer of any stock on the books of
this Corporation after any such record date fixed as aforesaid. Except
where the transfer books of the Corporation shall have been closed or a
date shall have been fixed as a record date for the determination of the
stockholders entitled to vote, as hereinbefore provided, no share of
stock shall be voted on at any election for Directors which shall have
been transferred on the books of the Corporation within twenty (20) days
next preceding such election of Directors.
ARTICLE XXIX
Loss of Certificates
In case of the loss, mutilation or destruction of a
certificate of stock, a duplicate certificate may be issued upon such terms
as the Board of Directors shall prescribe.
ARTICLE XXX
Seal
The seal of this Corporation shall consist of a flatfaced
circular die with the words and figures "Stone & Webster, Incorporated
Corporate Seal 1929 Delaware" cut or engraved thereon.
ARTICLE XXXI
Books and Records
Unless otherwise expressly required by the laws of
Delaware, the books and records of this Corporation may be kept outside
of the State of Delaware at such places as may be designated from time
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Form 10-K 1995 Stone & Webster, Incorporated
to time by the Board of Directors.
ARTICLE XXXII
Voting of Stock Held
Unless otherwise provided in the Restated Certificate of
Incorporation of this Corporation or by resolution of the Board of
Directors, the President may from time to time appoint an attorney or
attorneys or agent or agents of this Corporation, in the name and on
behalf of this Corporation to cast the votes which this Corporation may
be entitled to cast as a stockholder or otherwise in any other
corporation or association, any of whose stock or securities may be held
by this Corporation, at meetings of the holders of the stock or other
securities of such other corporations or associations, or to consent in
writing to any action by any such other corporation or association, and
may instruct the person or persons so appointed as to the manner of
casting such votes or giving such consent, and may execute or cause to
be executed on behalf of this Corporation and under its corporate seal,
or otherwise, such written proxies, consents, waivers or other
instruments as he may deem necessary or proper in the premises; or the
President, or his attorney or agent, may attend any meeting of the
holders of stock or other securities of any such other corporation or
association and thereat vote or exercise any or all other powers of this
Corporation as the holder of such stock or other securities of such
other corporation or association.
ARTICLE XXXIII
Amendments
Except as otherwise expressly provided in a By-law
adopted by the stockholders at the time having voting power, all By-laws
of this Corporation shall be subject to amendment or repeal, and new By-
laws may be adopted, either by the affirmative approval of holders of
shares of capital stock of the Corporation entitled to cast at least a
majority of the votes at the time entitled to be cast generally in the
election of directors by all of the outstanding shares of all classes of
capital stock of the Corporation, considered for the purposes of this
Article as one class, given at an Annual Meeting or at any Special
Meeting, provided notice of the proposed amendment or repeal or of the
proposed new By-laws be included in the notice of such meeting, or by
the affirmative vote of a majority of all of the Directors of the
Corporation at the time in office given at a regular or special meeting
of the Board of Directors, provided notice of the proposed amendment or
repeal or of the proposed new By-laws be included in the notice of such
meeting or waiver thereof or all of the Directors at the time in office
be present at such meeting. Except as aforesaid, By-laws made or
amended by the stockholders or by the Board of Directors shall be
subject to amendment or repeal by the stockholders entitled to vote or
by the Board of Directors.
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Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (10) (e) (i)
EMPLOYMENT AGREEMENT
AGREEMENT by and between STONE & WEBSTER,
INCORPORATED, a Delaware corporation (the "Company"), and H. KERNER
SMITH (the "Executive"), dated as of February 12, 1996.
WHEREAS, the Company desires to employ the Executive and to enter
into an agreement embodying the terms of such employment (this "Agreement")
and the Executive desires to enter into this Agreement and to accept such
employment, subject to the terms of this Agreement; and
WHEREAS, in addition to providing in this Agreement for the
terms of the Company's employment of the Executive, the Board of Directors of
the Company (the "Board"), has determined that it is in the best interests of
the Company and its shareholders to enter into a Change of Control Employment
Agreement with the Executive, dated as of the date hereof (the "Change of
Control Employment Agreement"), simultaneously with the execution and delivery
of this Agreement, so as to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined in the Change of Control
Employment Agreement) of the Company. NOW, THEREFORE, in consideration of the
mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, the Company and the Executive agree as follows:
1. Term of Employment.
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, for the period (the "Term of Employment") commencing
February 12, 1996 and continuing until the earlier of (a) February 11, 1999,
or (b) the termination of the Executive's employment in accordance with the
terms of this Agreement; provided however, that the Term of Employment shall
terminate, and (except as otherwise specifically provided herein) this
Agreement shall terminate and be of no further force or effect, immediately
upon the occurrence of the Effective Date under the Change of Control
Employment Agreement.
2. Positions, Duties and Responsibilities.
(a) Board Positions. Simultaneously with the execution and
delivery of this Agreement, the Executive is being elected to the Board as a
member of the class of directors with the term expiring in 1997. If the
current Chairman of the Board does not seek reelection as, or is not reelected
as, Chairman of the Board
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Form 10-K 1995 Stone & Webster, Incorporated
immediately following the annual meeting of stockholders
of the Company in 1996 (or any meeting of stockholders held in lieu of such
meeting), it is the intention of the Board, the Company and the Executive that
the Executive shall be considered for election as Chairman of the Board at such
time. It is also the intention of the Board, the Company and the Executive
that the Executive shall be elected Chairman of the Board immediately following
the annual meeting of stockholders of the Company in 1997 (or any meeting of
stockholders held in lieu of such meeting).
(b) Executive Positions and Duties. During the Term of
Employment, the Executive shall serve as the President and Chief Executive
Officer of the Company and shall perform the duties incident to such offices,
including the general management of the affairs of the Company, and such other
executive duties as may from time to time be assigned to the Executive by the
Board. The Executive shall report directly to the Board and shall be subject
to its direction. The Executive agrees to devote his full-time and best
efforts to the performance and discharge of his duties and responsibilities
and, subject to Section 2(d) of this Agreement, agrees not to engage in any
other business activity whatsoever during the Term of Employment, whether or
not for profit.
(c) Acceptance of Services for Affiliates. The Executive agrees
to serve as an officer or director of any Affiliate (as hereinafter defined) if
elected to any such position by the Board or by the board of directors or
similar governing body of an Affiliate, and to perform such services for any
such Affiliate as may be assigned or as may be necessary as a result of such
position, without additional compensation therefor other than that specified
in this Agreement; provided, however, that the Executive shall be indemnified
by the Company or such Affiliate in serving in such positions or performing
such services to the same extent as the Executive is indemnified by the Company
in serving as a member of the Board or officer of the Company.
(d) Other Activities. Nothing in this Agreement shall preclude
the Executive from:
(i) serving on the boards of directors of a reasonable number
of other corporations or the boards of a reasonable number of trade
associations or charitable organizations;
(ii) engaging in charitable activities and community affairs;
(iii)managing his personal investments and affairs;
(iv) fulfilling his obligations under the Consultancy Agreement
dated September 30, 1994 with his former employer; and
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Form 10-K 1995 Stone & Webster, Incorporated
(v) managing, or engaging in activities arising out of, his
wholly-owned company with respect to matters or projects initiated prior
to the date of this Agreement,
provided that (A) such activities do not materially interfere with the
performance of the Executive's duties and responsibilities as the Company's
President and Chief Executive Officer, (B) such activities do not conflict
with the Company's policies concerning conflicts of interest or with the
business of the Company or any Affiliate in any way, and (C) the Executive
keeps the Board informed about any such directorship or if any such
activities can reasonably be expected to generate publicity. The executive has
delivered to the Chairman of the Board (and a copy has been circulated to
members of the Compensation Committee of the Board) a letter describing his
obligations under the Consultancy Agreement referred to in Section 2(d)(iv) of
this Agreement and the matters or projects referred to in Section 2(d)(v) of
this Agreement.
3. Place of Employment/Relocation Expenses.
(a) The Company acknowledges and accepts that the Executive
intends to continue his personal residency in Massachusetts and the Company
shall not require the Executive to relocate his personal residence during the
Term of Employment. The Company shall pay or reimburse the Executive for (i)
all reasonable living costs incurred in the New York City area and (ii)
reasonable expenses incurred by the Executive in commuting between the Boston
metropolitan area and the New York City metropolitan area. At the election of
the Executive, reasonable living costs in the New York City area may include
the rental of an apartment in New York City provided that the aggregate monthly
costs related to such rental shall not exceed $5,000 per month. The Company
will maintain for the Executive an office and related support staff and
assistance in both the Company's principal executive offices in New York City
and in the executive offices of the Company's Major Subsidiary (as hereinafter
defined) in Boston.
(b) If during the Term of Employment, the Executive should decide to
relocate his personal residence in Massachusetts to the New York City
metropolitan area, the following shall apply:
(i) The Company shall pay all reasonable costs of
moving incurred by the Executive in connection with the Executive's relocation
of his principal residence to the New York City metropolitan area, including
packing, unpacking, insurance and the movement of household items and family
vehicles.
(ii) With respect to the sale of the Executive's present
home in Massachusetts, the Company shall arrange for the payment in cash to
the Executive of the difference between the appraised fair market value of
such present residence and the existing mortgage loan relating to such
residence prior to the actual sale of said residence. Such payment may be made
through arrangements made by the Company with a relocation service.
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Form 10-K 1995 Stone & Webster, Incorporated
(iii)The Company shall reimburse the Executive for
reasonable expenses incurred by the Executive and his spouse in travelling to
and residing in the New York City area in connection with the Executive's
eventual relocation, including meals, lodging, transportation, and incidental
expenses for the purpose of locating a new residence.
(c) The Executive shall furnish the Company with reasonably
detailed receipts or other written evidence for all expenses of the Executive
to be paid by the Company or for which the Executive shall be entitled to
reimbursement, pursuant to this Section 3.
(d) It is the intention of the Company and the Executive that
all expenses to be paid by the Company or for which the Executive
shall be entitled to reimbursement pursuant to this Section 3 are
to be treated as reasonable business expenses of the Company and
that such payment or reimbursement shall not result in taxable
income to the Executive. If, notwithstanding such intention and
the taking by both the Company and the Executive of all reasonable
and appropriate steps to implement such intention, it shall be
determined that the payment or reimbursement of any expense
pursuant to this Section 3 shall have subjected the Executive to
the payment of any federal, state or local tax (which, together
with any interest or penalties imposed with respect to such taxes,
is herein called "Taxes on Reimbursement"), then the Executive
shall be entitled to receive an additional payment (a
"Reimbursement Gross-Up Payment") in an amount such that after
payment by the Executive of all Taxes on Reimbursement and all
taxes (including any interest or penalties) with respect to the
Reimbursement Gross-Up Payment, the Executive shall not suffer
any after-tax cost as a result of the payment or reimbursement of
expenses pursuant to this Section 3.
4. Compensation.
(a) Base Salary. During the first year of the Term of
Employment, the Company shall pay the Executive an annual base salary ("Base
Salary") of Five Hundred Thousand Dollars ($500,000), payable in arrears in
equal periodic installments in accordance with the normal payroll policies of
the Company from time to time in effect, subject to withholding for Federal,
state and local income taxes, FICA, FUTA and other legally required withholding
taxes. During the Term of Employment, the Base Salary shall be subject to
review at least annually by the Board provided that such review shall not
result in a decrease in Base Salary unless such decrease is in conjunction
with an across-the-board decrease in base salary applicable to all senior
executives of the Company and its Major Subsidiary.
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(b) Annual Bonuses. In addition to Base Salary, the Executive
shall be awarded, for each fiscal ending during the Term of Employment, an
annual bonus ("Annual Bonus") in cash of not less than (i) Two Hundred and
Fifty Thousand Dollars ($250,000) for the fiscal year ending December 31, 1996
and (ii) 50% of Base Salary, as in effect on the last day such fiscal year,
for the fiscal years ending December 31, 1997 and 1998. The amount of each
such Annual Bonus may be larger based upon the Executive's performance and
the discretion of the Board. Each such Annual Bonus shall be paid no later
than March 31 of the year next following the fiscal year for which the Annual
Bonus is awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus. It is the intent of the parties that a new long-term
performance plan (the "New LTPP") based upon the Company's financial strategic
plan and long-term objectives will be developed for the Company by the
management of the Company (under the direction of the Compensation Committee
of the Board and in consultation with the Company's compensation consultants)
and presented to the Board for approval and that the New LTPP will provide
for minimum, target (equalling a significant portion of the base salary of
the participants therein) and maximum awards based upon the extent to which
performance goals determined by the Compensation Committee of the Board are
achieved. If the New LTPP is adopted and the Executive is awarded an award
thereunder payable with respect to the fiscal years ending December 31, 1997
or 1998 then such award (regardless of the amount) shall substitute for the
Annual Bonus provided for in this Section 4(b) for such fiscal year.
(c) Stock Option Award. Simultaneously with the execution
and delivery of this Agreement, the Company is granting the Executive a ten-year
option, in the form attached to this Agreement as Exhibit A, to purchase 100,000
shares of Company Common Stock at an exercise price equal to the fair market
value per share of Common Stock at the time of grant (the "Stock Option Grant").
5. Plans and Fringe Benefits.
(a) During the Term of Employment, the Executive (i) shall be
entitled to participate in all incentive, savings and retirement plans,
practices, policies, and programs applicable generally to other senior level
executives of the Company and its Major Subsidiary (including, but not
limited to, the Company's Restricted Stock Plan, Employee Investment Plan,
Employee Stock Ownership Plan, Payroll-based Employee Stock Ownership Plan,
Employee Retirement Plan, Supplemental Retirement Plan and Stock Option Plan)
and (ii) shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company and its Major Subsidiary (including, without limitation, medical,
prescription, dental, disability, employee life (and, if applicable,
supplemental term life insurance), group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other senior level executives of the Company and its Major Subsidiary.
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Form 10-K 1995 Stone & Webster, Incorporated
(b) The Compensation Committee of the Board shall undertake
a study by the end of 1996 to review the perquisites accorded chief executives
of companies comparable to the Company in terms of industry, size and
financial performance for the purpose of considering the adoption of
perquisite plans and policies for the Executive comparable to those of such
companies, including, without limitation, with respect to tax and financial
planning services, supplemental insurance, club dues, an automobile and
transportation and related expenses.
6. Supplemental Pension.
The Company shall provide the Executive with a supplemental employee
retirement plan designed to provide the Executive with an annual pension benefit
(payable to and during the life of the Executive in equal monthly installments
and after his death to the spouse of the Executive to whom he is married as of
the date of this Agreement, if she survives the Executive, in equal monthly
installments in the same amount as the monthly installments payable during the
life of the Executive) commencing when the Executive reaches age 60, which
annual pension benefit (a) if the Executive remains employed by the Company
until the Executive reaches age 60, will be equal to 25% of the average
annual total compensation paid to the Executive during the three fiscal years
immediately prior to the date on which the Executive reaches age 60 and (b) if
the Executive's employment with the Company should terminate for any reason
prior to the date on which the Executive reaches age 60, will be equal to the
percentage (as hereinafter determined) of the average annual total compensation
paid to the Executive during the three (or such fewer number of years that the
Executive shall have been employed with the Company) fiscal years immediately
prior to the date on which the Executive's employment with the Company shall
have terminated, with such percentage equal to the product of (i) 3.125% and
(ii) a fraction, the numerator of which shall be the number of months from
the date hereof to the date on which the Executive's employment with the
Company shall have terminated and the denominator of which is 12. The Company's
obligation under this Section 6 shall be offset by any other pension benefits
paid to the Executive under other pension plans of the Company or its
Affiliates. The Executive's rights to the accrued benefits under this Section
6 shall become fully vested immediately regardless of the period of the
Executive's employment under this Agreement and the circumstances of the
termination of the Executive's employment. The obligations of the Company
under this Section 6 shall survive any termination of the Term of Employment or
this Agreement.
7. Reimbursement of Business and Other Expenses.
The Company shall pay or reimburse the Executive for all reasonable,
ordinary and necessary business expenses incurred or paid by the Executive
during the Term of Employment in the performance of the Executive's services
under this Agreement, in accordance with the operating policies of the Company
and its Major Subsidiary as in effect from time to time, upon presentation of
proper expense statements or vouchers or such other supporting documentation as
the Company may reasonably require.
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Form 10-K 1995 Stone & Webster, Incorporated
8. Vacation.
During the Term of Employment, the Executive shall be entitled to paid
vacation in accordance with the most favorable plans, policies, programs and
practices of the Company and its Major Subsidiary but not less than four (4)
weeks paid vacation each year.
9. Termination.
(a) General. The Executive's employment with the Company
may be terminated during the Term of Employment only as provided in this Section
(b) Termination Events. The Executive's employment with the
Company shall terminate during the Term of Employment on the happening of the
first to occur of the following:
(i) the death, retirement or resignation of the Executive;
(ii) the termination by the Company of the Executive's
employment with the Company for Disability (as hereinafter defined);
(iii)the termination by the Company of the Executive's
employment with the Company for Cause (as hereinafter defined);
provided, however, that a termination for Cause shall not take effect
unless and until the following procedures are complied with:
(A) the Executive shall be given notice by the Board of
the Company's intention to terminate the Executive's
employment with the Company for Cause, which
notice shall (x) state in detail the particular act or
acts or failure or failures to act that constitute the
grounds on which the proposed termination for
Cause is based and (y) be given within six
(6) months of the Board's learning of such act or
acts or failure or failures to act;
(B) the Executive shall have ten (10) calendar days
following the Executive's receipt of the notice
referred to in Section 9(b)(iii)(A) of this Agreement
to give notice to the Company of a request for a
hearing before the Board regarding the grounds on
which the proposed termination for Cause is based,
which hearing shall be held within twenty (20)
calendar days following the Executive's receipt of
the notice referred to in Section 9(b)(iii)(A) of this
Agreement and at which hearing the Executive shall
be given an opportunity, together with counsel, to be
heard before the Board; and
(C) if, within five (5) calendar days following such
hearing, there shall have been delivered to the
Executive a copy of a resolution, duly adopted by
the affirmative vote of a majority of the entire
membership of the Board at the meeting of the Board
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Form 10-K 1995 Stone & Webster, Incorporated
referred to in Section 9(b)(iii)(B) of this Agreement,
finding that, in the good faith opinion of the Board,
grounds for termination for Cause on the basis of the
notice referred to in Section 9(b)(iii)(A) of this
Agreement exist.
(iv) the termination by the Company of the Executive's
employment other than for Cause; or
(v) the termination by the Executive of the Executive's
employment with the Company for Constructive Termination Without
Cause (as hereinafter defined); provided, however, that a termination
for Constructive Termination Without Cause shall not take effect unless
and until the Company shall be given notice by the Executive of the
particular grounds on which the termination for Constructive
Termination Without Cause is based.
(c) Termination Definitions.
(i) Disability. The term "Disability," as used herein
shall mean the Executive's inability to perform substantially his duties
hereunder because of physical or mental disability for a cumulative
period of one hundred eighty (180) consecutive days or two hundred
forty (240) days in any consecutive twelve (12) month period during the
Term of Employment.
(ii) Cause. The term "Cause" as used herein shall mean
(A) the willful and continued failure of the Executive to perform
substantially his duties hereunder (other than any such failure
resulting from incapacity due to physical or mental disability) after
a written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in
which the Board believes that the Executive has not substantially
performed the Executive's duties or (B) the Executive personally
engaging (as opposed to having acts or omissions of others attributed
to him) in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company. For purposes of this definition
of Cause, no act or failure to act, on the part of the Executive, shall
be considered "willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company.
(iii)Constructive Termination Without Cause. The term
"Constructive Termination Without Cause" as used herein shall mean:
(A) a decrease in the Executive's Base Salary, a decrease
in the Executive's Annual Bonus (or the amount the
Executive's award under the New LTPP substituting
for such Annual Bonus pursuant to Section 4(b) of
this Agreement) or the termination of, or material
reduction in, any incentive, savings, retirement,
welfare benefit or perquisite plan, practice, policy or
program enjoyed by the Executive, except any such
decrease, termination or reduction therein made in
conjunction with an across-the-board decrease,
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Form 10-K 1995 Stone & Webster, Incorporated
termination or reduction therein applicable to all
senior executives of the Company and its Major
Subsidiary;
(B) the failure to elect the Executive as Chairman of the
Board immediately following the annual meeting of
stockholders of the Company in 1997 (or any
meeting of stockholders held in lieu of such annual
meeting); or
(C) a material diminution in the Executive's duties or the
assignment to the Executive of duties which are
materially inconsistent with his duties or which
materially impair the Executive's ability to function
as the President and Chief Executive Officer of the
Company.
(iv) Date of Termination. The term "Date of
Termination" as used herein shall mean:
(A) with respect to termination due to death, retirement
or resignation (other than for a Constructive
Termination Without Cause) of the Executive, the
date of death, retirement or resignation;
(B) with respect to termination due to Disability, fifteen
(15) calendar days following the giving of notice by
the Company to the Executive terminating the
Executive's employment for Disability;
(C) with respect to termination due to termination by the
Company for Cause, five (5) calendar days following
(x) the last day of the period during which the
Executive may request a hearing before the Board
pursuant to Section 9(b)(iii)(B) of this Agreement
with respect to any notice of intent to terminate the
Executive's employment for Cause given pursuant to
Section 9(b)(iii)(A) of this Agreement or (y) if the
Executive requests a hearing before the Board
pursuant to Section 9(b)(iii)(B) of this Agreement,
then the date on which there shall have been
delivered to the Executive a copy of the resolution
required by Section 9(b)(iii)(C) of this Agreement
(and if the copy of the resolution required by Section
9(b)(iii)(C) of this Agreement is not delivered to the
Executive within the period set forth therein, no
Date of Termination shall occur with respect to such
notice of intent to terminate the Executive's
employment for Cause);
(D) with respect to termination due to termination by the
Company other than for Cause, five (5) calendar
days following the giving of notice by the Company
to the Executive terminating the Executive's
employment for other than Cause; and
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(E) with respect to termination due to termination by the
Executive for Constructive Termination Without
Cause, fifteen (15) calendar days following the
giving of the notice by the Executive to the
Company terminating the Executive's employment
for Constructive Termination Without Cause
pursuant to Section 9(b)(v) of this Agreement.
(d) Obligations of the Company upon Termination.
(i) Other than for Cause or Constructive Termination
Without Cause. If, during the Term of Employment, the Company shall
terminate the Executive's employment other than for Cause or the
Executive shall terminate the Executive's employment for Constructive
Termination Without Cause, then:
(A) the Company shall pay to the Executive in a
lump sum in cash within thirty (30) days after the Date of
Termination the sum of the following amounts (w) the
Executive's Base Salary then in effect through the Date of
Termination to the extent not theretofore paid, (x) the
product of (I) the Executive's Annual Bonus in effect for
the fiscal year in which the Date of Termination occurs (or
if the New LTPP is in effect and the Executive has been
awarded an award thereunder with respect to the fiscal year
in which the Date of Termination occurs, then the amount
of the Executive's maximum award under the LTPP
substituting for such Annual Bonus pursuant to Section 4(b)
of this Agreement) and (II) a fraction, the numerator of
which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of
which is three hundred and sixty-five (365), (y) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not
theretofore paid and (z) any other amounts earned, accrued
or owing but not yet paid or reimbursed under Section 3, 4,
5 or 7 of this Agreement (the sum of the amounts described
in this Section 9(d)(i)(A) (w), (x), (y) and (z) shall be
hereinafter referred to as the "Accrued Obligations");
(B) the Company shall pay in thirty-six (36)
monthly installments in cash at the end of each month
commencing with the month next following the month in
which the Date of Termination shall have occurred and
continuing for a total of thirty-six (36) monthly installments
an aggregate amount equal to the product of (x) three (3)
and (y) the sum of (I) the Executive's Base Salary then in
effect and (II) the Executive's Annual Bonus in effect for
the fiscal year in which the Date of Termination occurs (or
if the New LTPP is in effect and the Executive has been
awarded an award thereunder with respect to the fiscal year
in which the Date of termination occurs, then the amount of
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Form 10-K 1995 Stone & Webster, Incorporated
the Executive's maximum award under the LTPP
substituting for such Annual Bonus pursuant to Section 4(b)
of this Agreement, with the amount of each such monthly
installment being such aggregate amount divided by thirty-
six (36); provided, however, that at the Executive's election
made within thirty (30) days after the Date of Termination,
the Company shall pay the Executive the present value of
the aggregate of the monthly installment payments provided
for in this Section 9(d)(i)(B) in a lump sum (using as the
discount rate the applicable Federal Rate for short-term
Treasury obligations as published by the Internal Revenue
Service for the month in which the Date of Termination
occurs) in cash within thirty (30) days after the notice by
the Executive of his election to be so paid;
(C) for three (3) years after the Date of
Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or
policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to
those which would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 5(a)(ii) of this Agreement as if the
Executive's employment had not been terminated, provided,
however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement
of benefits) of the Executive for retiree benefits pursuant to
such plans, practices, programs and policies of the
Company, the Executive shall be considered to have
remained employed by the Company until three (3) years
after the Date of Termination and to have retired on the last
day of such period;
(D) for three (3) years after the Executive's Date
of Termination, to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company or any of its Affiliates (other
than any severance plan, program, policy or practice or
contract or agreement not provided for in this Agreement);
(E) for three (3) years after the Executive's Date
of Termination, the Executive shall be entitled to a
continuation of an accrual of credited service for the
purpose of the pension benefit provided pursuant to
Section 6 of this Agreement; and
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(F) the Executive's benefits under this Section
9(d)(i) shall be considered severance pay in consideration of
the Executive's past service and pay in consideration of the
Executive's continued service from the date hereof, and in
no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be
reduced whether or not the Executive obtains other
employment.
(ii) Death, Retirement or Resignation. If the
Executive's employment is terminated by reason of the Executive's
death, retirement or resignation (other than for a Constructive
Termination without Cause) during the Term of Employment, this
Agreement shall terminate without further obligations to the
Executive or the Executive's legal representative under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of any amounts or benefits required to
be paid or provided or which the Executive is eligible to receive
under any plan, program, policy, practice, contract or agreement of
the Company or any of its Affiliates, including, without
limitation, those amounts or benefits to be paid or provided
pursuant to the plans, programs, practices, policies, agreements
or contracts referred to in Section 5(a), 5(b) or 6 of this
Agreement (collectively, "Other Benefits"). Accrued Obligations
shall be paid to the Executive or the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within thirty
(30) days of the Date of Termination.
(iii)Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Term
of Employment, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum
in cash within thirty (30) days of the Date of Termination.
(iv) Cause. If the Executive's employment shall be
terminated for Cause during the Term of Employment, this
Agreement shall terminate without further obligations to the
Executive, other than (A) the payment of (x) the Executive's Base
Salary through the Date of Termination, (y) the amount of any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid, and (z) and
any other amounts earned, accrued owing, but not yet paid, under
Sections 3 or 7 of this Agreement and (B) the timely payment or
provision of Other Benefits.
(e) Survival of the Obligations of the Company Upon Termination.
The obligations of the Company under this Section 9 upon termina-
tion of the Executive's employment under this Section 9 shall sur-
vive any termination of the Term of Employment or this Agreement.
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10. Term of Employment and Post-Employment Conduct.
During the Term of Employment and for one (1) year from the Date of
Termination if such termination results from the Executive's resignation (other
than for a Constructive Termination without Cause) or the termination by the
Company of the Executive's employment with the Company for Cause, the
Executive will not, directly or indirectly: (a) engage, participate or be
interested in as owner, officer, director, manager, employee, consultant or
otherwise or have any financial interest in, or aid or assist anyone else in
the conduct of, any business or activity in any jurisdiction which is at the
time competitive with the business of the Company or its Affiliates as carried
on as of such Date of Termination or is actively being considered as an
additional business of the Company or its Affiliates on such Date of
Termination (provided, however, that neither (A) the Executive's ownership of
not more than 5% of the securities of any corporation or other entity which are
traded on any securities exchange or in the over-the-counter market or (B) the
Executive's engaging in the activities permitted under Section 2(d) of this
Agreement shall constitute a violation of this Section 10(a); or (b) offer
employment to, or consulting services to, or be employed by, or engage in
consulting services with, persons (other than secretarial and clerical
personnel) who were employed by the Company or its Affiliates during the twelve
(12) month period preceding such Date of Termination.
11. Confidential Information.
The Executive shall not, during the Term of Employment or at any time
thereafter, use for his own benefit or for the benefit of others, divulge,
furnish or make accessible to anyone other than the Company or its Affiliates
or their respective directors, officers or employees, otherwise than in the
regular course of the business of the Company, any knowledge or information
coming into the Executive's possession during his employment with respect to
(a) confidential or secret documents, processes, plans, formulae, devices or
material relating to the business and activities of the Company or its
Affiliates, or (b) any other confidential or secret aspect of the business of
the Company or its Affiliates, including, without limitation, any lists or
other information with respect to any customers of the Company or its
Affiliates, unless (i) any such information becomes generally available to the
public other than as a result of disclosure by the Executive or (ii) the
Executive is requested or required (by oral question, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process) to disclose any such information, in which case the Executive will
(A) promptly notify the Company of such request or requirement, so that the
Company may seek an appropriate protective order, and (B) cooperate with the
Company, at its expense, in seeking such an order.
Upon termination of the Executive's employment under this Agreement, the
Executive, at the request of the Board, shall promptly deliver to the Company
all written confidential or secret information of the Company or any of its
Affiliates.
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12. Unique Services.
The Executive acknowledges and agrees that a breach by him of Section
10 or 11 of this Agreement will cause the Company irreparable injury and
damage. The Executive, therefore, expressly agrees that the Company shall be
entitled to injunctive or other equitable relief to prevent an anticipatory or
continuing breach of Section 10 or 11 of this Agreement. Nothing herein shall
be construed as a waiver by the Company of any right it may now have or
hereafter acquire to monetary damages by reason of any injury to its property,
business or reputation or otherwise arising out of any wrongful act or
omission of the Executive.
13. Scope of Restrictions.
While the restrictions and covenants set forth in Sections 10 and 11 of
this Agreement are considered by the parties to be reasonable in all
the circumstances it is recognized that restrictions and covenants of
the nature in question may fail for technical reasons unforeseen, and
accordingly it is hereby agreed and declared that if any of such
restrictions or covenants shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection of the
interests of the Company or any of its Affiliates but would be valid if
part of the wording hereof were deleted or the periods (if any) thereof
reduced or the range of activities or area dealt with hereby reduced in
scope, the said restriction or covenant shall apply with such
modifications as may be necessary to make it valid and effective.
14. Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
"Accrued Obligations" - see Section 9(d)(i)A of this Agreement.
"Affiliate" shall mean an entity that, directly or indirectly, controls
or is controlled by or under common control with the Company. For the
purposes of this definition, the concept of "control," when used with
respect to any specified person, shall signify the possession of the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities or
partnership or other ownership interests, by contract or otherwise;
provided that, in any event, any person which owns directly or
indirectly 20% or more of the securities having ordinary voting power
for the election of directors or other governing body of a corporation
or 20% or more of the partnership or other ownership interests of any
other person is deemed to control such corporation or other person.
"Agreement" - see the first Whereas clause of this Agreement.
"Annual Bonus" - see Section 4(b) of this Agreement.
"Base Salary" - see Section 4(a) of this Agreement.
"Board" - see the second Whereas clause of this Agreement.
"Cause" - see Section 9(c)(ii) of this Agreement.
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Form 10-K 1995 Stone & Webster, Incorporated
"Change of Control Employment Agreement" - see the second Whereas
clause of this Agreement.
"Company" - see heading paragraph of this Agreement and Section 15(c)
of this Agreement.
"Constructive Termination Without Cause" - see Section 9(c)(iii) of this
Agreement.
"Date of Termination" - see Section 9(c)(iv) of this Agreement.
"Disability" - see Section 9(c)(i) of this Agreement.
"Executive" - see heading paragraph of this Agreement.
"Major Subsidiary" shall mean Stone & Webster Engineering
Corporation.
"New LTPP" - see Section 4(b) of this Agreement.
"Other Benefits" - see Section 9(d)(ii) of this Agreement.
"Reimbursement Gross-Up Payment" - see Section 3(d) of this
Agreement.
"Stock Option Grant" - see Section 4(c) of this Agreement.
"Taxes on Reimbursement" - see Section 3(d) of this Agreement.
"Term of Employment" - see Section 1 of this Agreement.
15. Successors. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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Form 10-K 1995 Stone & Webster, Incorporated
16. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: H. Kerner Smith
48 Carriage Way
Sudbury, Massachusetts 01776
If to the Company: Stone & Webster, Incorporated
250 West 34th Street
New York, New York 10119
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Constructive
Termination Without Cause pursuant to this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that this
Agreement, together with the executed and delivered Stock Option Grant and
Change of Control Employment Agreement, constitute the entire agreement of the
parties hereto with respect to the Executive's employment by the Company.
(g) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original hereof but all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
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Form 10-K 1995 Stone & Webster, Incorporated
STONE & WEBSTER, INCORPORATED
H. KERNER SMITH
By:
Name:
Title:
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Form 10-K 1995 Stone & Webster, Incorporated
Exhibit A
STOCK OPTION GRANT
(NON-QUALIFIED OPTIONS)
To Purchase Shares of Common Stock of
STONE & WEBSTER, INCORPORATED
THIS CERTIFIES that on February 12, 1996 (the "Date of Grant"), H.
Kerner Smith (the "Holder") was granted an option (the "Option") to purchase
all or any part of One Hundred Thousand (100,000) fully paid and non-assessables
shares (the "Shares") of Common Stock (the "Common Stock"), par value $1.00 per
share, of Stone & Webster, Incorporated, a Delaware corporation
(the "Corporation"), at an exercise price of $[Insert Exercise Price] per Share
(the "Exercise Price"), upon and subject to the terms and conditions of the
1995 Stock Option Plan of Stone & Webster, Incorporated (the "Plan") and
subject to the following provisions.
The Option and this Stock Option Grant shall not be treated as an
"Incentive Stock Option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
This Option may be exercised, in whole or in part, from time to time,
during the period beginning on the Date of Grant and ending on February 11, 2006
(the "Expiration Date").
To the extent that the Option shall not have been exercised in full
prior to the Expiration Date, the Option shall immediately terminate on
the Expiration Date and become void and of no further force or effect.
All or any part of the Option then exercisable shall terminate (i) at
the time the Holder's employment is terminated if the Holder's
employment is terminated because he is discharged for fraud, theft or
embezzlement committed against the Corporation or a subsidiary, affiliated
entity or customer of the Corporation, or for conflict of interest (other than
legitimate competition), (ii) at the expiration of a period of one year after
the Holder's death (but in no event later than the Expiration Date) if the
Holder's employment is terminated by reason of his death, (iii) unless it is
otherwise specifically provided herein, in the event of the Holder's retirement
or disability, at the expiration of a period of three years after the Holder's
employment is terminated because of retirement under the Employee Retirement
Plan of Stone & Webster, Incorporated and Participating Subsidiaries or any
successor plan thereto or disability (but in no event later than the Expiration
Date), or (iv) at the expiration of a period of three months after the Holder's
employment is terminated (but in no event
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Form 10-K 1995 Stone & Webster, Incorporated
later than the Expiration Date) if the Holder's
employment is terminated for any reason other than the reasons specified in
clauses (i) through (iii) above.
If prior to the complete exercise of the Option, the outstanding Shares
of Common Stock are changed into or exchanged for a different number or kind
of shares of the Corporation or other securities of the Corporation 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 the Option, to the end that after such event the Shares subject to the
Option shall be maintained as if the Holder had exercised the Option before
the occurrence of such event. Such adjustment in the Option shall be made
without change in the total price applicable to the Option or the unexercised
portion thereof (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Exercise Price.
The Option and all rights granted hereunder shall be non-transferable
unless by will or by the laws of descent and distribution, and during the
lifetime of the Holder, the Option shall be exercisable only by the Holder.
Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of,
or to subject to execution, attachment or similar process, the Option or any
right granted hereunder, contrary to the provisions of the Plan, 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 Option with
respect to the shares involved in such attempt.
The Option shall be exercised by the delivery of a written notice duly
signed by the Holder, together with this Stock Option Grant, and the full
purchase price of the Shares purchased pursuant to the exercise of the Option,
including any required withholding tax, to the Secretary of the Corporation or
such other officer of the Corporation appointed for the purpose of receiving
the same. The Option may not be exercised at any time when such Option, or the
exercise thereof, may result in the violation of any state or Federal law or
of the rules or regulations of any governmental regulatory body.
Payment for the Shares purchased pursuant to the exercise of the Option
shall be made in full to the Corporation at the time of the exercise of the
Option by any one or more of the following methods: (i) in cash (including
check, bank draft or money order), (ii) by delivery of other Shares of Common
Stock (which Shares shall be endorsed in blank or accompanied by executed stock
powers with signatures guaranteed by a recognized financial institution or a
member of a national securities exchange), (iii) by delivery of any combination
of cash and such other Shares, and (iv) by delivery of a properly executed
notice of exercise together with irrevocable instructions to a broker-dealer to
sell or margin a sufficient portion of the Shares and deliver the sale or
margin loan proceeds to the Corporation to pay for the full purchase price of
the Shares and applicable withholding taxes. If any such other
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Form 10-K 1995 Stone & Webster, Incorporated
Shares of Common Stock delivered as
provided above were acquired through the previous exercise of any Option
granted to the Holder under the Plan, such Shares must have been held for at
least six months prior to such delivery.
If the Option shall have been exercised with respect to less than all
of the Shares subject to the Option, the Corporation shall cause to be
delivered to the person entitled thereto a new Stock Option Grant in replacement
of this Stock Option Grant, if surrendered at the time of the exercise of the
Option, indicating the number of Shares with respect to which the Option
remains available for exercise, or this Stock Option Grant shall be endorsed to
give effect to the partial exercise of the Option.
In the event that the Holder elects to exercise the Option or any part
thereof, and if the Corporation shall be required to withhold any amounts by
reason of any Federal, state or local tax laws, rules or regulations with
respect to the issuance of Shares to the Holder pursuant to the Option, the
Corporation shall be entitled to deduct and withhold such amounts from any
payments to be made to the Holder. In any event, the Holder shall make
available to the Corporation, promptly when requested by the Corporation,
sufficient funds to meet the requirements of such withholding; and the
Corporation shall be entitled to take and authorize such steps as it may deem
advisable to make such funds available to the Corporation out of any funds or
property due or to become due to the Holder.
The Holder shall not be entitled to any rights as a stockholder of the
Corporation with respect to any Shares subject to the Option until he shall have
become the beneficial owner of such Shares.
Nothing contained herein shall be construed as limiting any right which
the Corporation or any subsidiary of the Corporation may have to terminate at an
y time, with or without cause, the service of the Holder to the Corporation or
any such subsidiary.
Before issuing and delivering any Shares to the Holder, upon the
exercise of the Option, the Committee may (i) require the Holder to deliver a
written representation that the 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, or (ii) condition the exercise of the Option or
the issuance and delivery of Shares upon the listing, registration or
qualification of the Shares covered by the Option upon any securities exchange
or under any state or Federal law or upon the consent or approval of any
governmental regulatory body and any such listing, registration, qualification,
consent or approval shall be free of any conditions not acceptable to the
Committee.
The Committee, with the consent of the Holder, may amend at any time
or from time to time, the terms and conditions of the Option and this Stock
Option Grant. The Committee may at any time or from time to time, in its
discretion,
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Form 10-K 1995 Stone & Webster, Incorporated
accelerate the time or times at which the Option may be exercised to an
earlier time or times.
Any notice which either party hereto may be required or permitted to
give to the other shall be in writing, and may be delivered personally or by
mail, postage prepaid, addressed as follows: to the Corporation, any officer
of the Corporation, the Board of Directors or any member thereof, or the
Committee or any member thereof, at the Corporation's offices at 250 West 34th
Street, New York, New York 10119, or at such other address as the Corporation,
or any other such person, by notice to the Holder, may designate in writing
from time to time; to the holder, at the address shown below his signature on
this Stock Option Grant, or at such other address as the Holder, by notice to
the Corporation, may designate in writing from time to time. Notices shall be
effective upon receipt.
The Option and this Stock Option Grant are issued pursuant to, and are
subject to all of the terms and conditions of, the Plan, the terms, conditions
and definitions of which are hereby incorporated as though set forth at length,
and the receipt of a copy of which the Holder hereby acknowledges by his
signature below.
Unless otherwise indicated to the contrary herein, defined terms used in
the Stock Option Grant shall have the meaning as used in the Plan.
WITNESS, the seal of the Corporation and the signatures of this
Corporation's duly authorized officers and the Holder.
Dated: February 12, 1996
STONE & WEBSTER, INCORPORATED
By:
ATTEST:
By:
ACCEPTED:
By:
H. Kerner Smith
Holder
48 Carriage Way
Sudbury, Massachusetts 01776
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Form 10-K 1995 Stone & Webster, Incorporated
FOR USE BY HOLDER FOR CORPORATION USE ONLY
Purchase Number Unexercised
Price Signature of Shares Portion of
Date Herewith of Holder Date Issued Option Countersign
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Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (10) (e) (ii)
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between STONE & WEBSTER,
INCORPORATED, a Delaware corporation (the "Company"), and H. KERNER
SMITH (the "Executive"), dated as of February 12, 1996 (this "Agreement").
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (a
s defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation and benefits arrangements upon
a Change of Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and which are competitive with
those of other corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement
simultaneously with the execution and delivery of an Employment Agreement,
dated as of the date hereof (the "Employment Agreement"), which provides for
the terms of the Company's employment of the Executive until the Effective Date
(as defined below) of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
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Form 10-K 1995 Stone & Webster, Incorporated
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control.
For the purpose of this Agreement, a "Change of Control" shall
mean:
(a) The beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by any individual, entity or group (within the meaning of Section 13(d)
(3) or 14(d)(2) of the Exchange Act) (a "Person") of 20% or more of either (i)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a),the following
accumulations and acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Company, (ii) any acquisition or accumulation
by the Company, (iii) any acquisition or accumulation by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (iv) any acquisition or accumulation by
any corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2, or (v) the beneficial ownership
of 20% or more of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities by a Person if such beneficial ownership occurs solely
because (x) of a change in the aggregate number of shares of Outstanding Company
Common Stock or Outstanding Company Voting Securities since the last date on
which such Person acquired beneficial ownership of any Outstanding Company
Common Stock or Outstanding Company Voting Securities or (y) such Person
acquired such beneficial ownership in the good faith belief that such
acquisition would not cause such beneficial ownership to equal or exceed 20% of
the Outstanding Company Common Stock or Outstanding Company Voting Securities
then outstanding and such Person relied in good faith in computing the
percentage of its beneficial ownership on publicly filed reports or documents of
the Company which are inaccurate or out-of-date; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a
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Form 10-K 1995 Stone & Webster, Incorporated
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies by or on behalf
of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then-outstanding shares of common stock
and the combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors, as the case may be,
of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively,
the then-outstanding shares of common stock, or the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination, except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding clause (v) of subsection (a) of this Section 2, if any Person
whose beneficial ownership is not a Change of Control due to such clause (v)
does not reduce such Person's percentage of beneficial ownership of Outstanding
Company Common Stock or Outstanding Company Voting Securities to less than 20%
by the close of business on the fifth business day after notice from the Company
(the date of notice being the first day) that such Person's beneficial
ownership of Outstanding Company Common Stock or Outstanding Company Voting
Securities equals or exceeds 20%, such Person's beneficial ownership shall be a
Change of Control at the end of such five business day period (and such clause
(v) shall no longer apply);
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Form 10-K 1995 Stone & Webster, Incorporated
provided, however, that if such Person asserts in writing to the Company by the
end of such five business day period that a reduction in such Person's
percentage of beneficial ownership would subject such reduction to the
operation of Section 16(b) of the Exchange Act ("Section 16(b)") the period of
time during which the beneficial ownership of such Person must be reduced to
less than 20% so as not to constitute a Change in Control shall be extended to
the date that is the third business day immediately following the date which is
the earlier of (i) six (6) months following the receipt by such Person of the
notice from the Company of beneficial ownership of 20% or more or (ii) the date
upon which such reduction would no longer be subject to Section 16(b). For
purposes of this definition, the determination whether any Person acted in "good
faith" shall be conclusively determined by the Board, acting by a vote of those
directors of the Company who, at such time, shall constitute the Incumbent
Board.
3. Employment Period.
The Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the Company subject to
the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the
"Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was performing services
immediately preceding the Effective Date or any office or location less
than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach
at educational
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Form 10-K 1995 Stone & Webster, Incorporated
institutions, (C) manage personal investments and (D) engage in
activities permitted under Section 2(d) of the Employment Agreement, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has
been earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any
increase in Annual Base Salary shall not serve to limit or reduce any
other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual
Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest bonus under the Employment Agreement or the Company's
annual contingent (or incentive) compensation plans or any comparable bonus
under any predecessor or successor plan, for the last three full fiscal years
prior to the Effective Date (annualized in the event that the Executive was
not employed by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive,
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Form 10-K 1995 Stone & Webster, Incorporated
savings and retirement plans, practices, policies and programs applicable genera
lly to other peer executives of the Company and its affiliated companies (inclu
ding, but not limited to, the Company's Restricted Stock Plan, Employee Investme
nt Plan, Employee Stock Ownership Plan, Payroll-based Employee Stock Ownership
Plan, Employee Retirement Plan, Supplemental Retirement Plan and Stock Option
Plan), but in no event shall such plans, practices, policies and programs provi
de the Executive with incentive opportunities (measured with respect to both reg
ular and special incentive opportunities, to the extent, if any, that such disti
nction is applicable), savings opportunities and retirement benefit opportuniti
es, in each case, less favorable in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the Executive un
der such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life (and, if applicable, supplemental term life
insurance), group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to the other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding
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Form 10-K 1995 Stone & Webster, Incorporated
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
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Form 10-K 1995 Stone & Webster, Incorporated
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board (or, if applicable, upon the instructions of the
Chief Executive Officer or a senior officer of the Company) or based upon the
advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Company. Anything in this Section 5(b) or elsewhere in this Agreement
to the contrary notwithstanding, the employment of the Executive shall in no
event be considered to have been terminated by the Company for Cause if
termination of the Executive's employment took place (a) as the result of bad
judgment or negligence on the part of the Executive, or (b) as the result of
an act or omission without the intent of gaining therefrom directly or
indirectly a profit to which the Executive was not legally entitled, or (c)
because of an act or omission believed by the Executive in good faith to have
been in or not opposed to the interests of the Company, or (d) for any act or
omission in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for indemnification
or reimbursement or payment of expenses under the By-laws of the Company
or the laws of the State of Delaware or the directors' and officers' liability
insurance of the Company, in each case as in effect at the time of such act or
omission, or (e) as the result of an act or omission which occurred more than
twelve calendar months prior to the Executive's having been given notice of the
termination of the Executive's employment for such act or omission unless the
commission of such act or such omission could not at the time of such
commission or omission have been known to a member of the Board (other than
the Executive, if the Executive is then a member of the Board), in which case
more than twelve calendar months from the date that the commission of such act
or such omission was or could reasonably have been so known, or (f) as the
result of a continuing course of action which commenced and was or could
reasonably have been known to a member of the Board (other than the Executive)
more than twelve calendar months prior to notice having been given to the
Executive of the termination of the Executive's employment.
The cessation of employment of the Executive shall not be deemed
to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in detail.
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Form 10-K 1995 Stone & Webster, Incorporated
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason.
(i) For purposes of this Agreement, "Good Reason" shall mean
the following involuntary circumstances:
A. the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
B. any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
C. the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or to
relocate his personal residence or the Company's requiring the Executive to
travel on Company business to a substantially greater extent than required
immediately prior to the Effective Date;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c)(i), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
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Form 10-K 1995 Stone & Webster, Incorporated
(ii) For purposes of this Agreement, "Good Reason" shall also
mean the following voluntary circumstance: Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability.
(i) If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason as defined in Section 5(c)
(i) of this Agreement, then, subject to the provisions of Section 9 of this
Agreement:
A. the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
(1) the sum of (a) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (b) the product of (x)
the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less than twelve
full months), for the most recently completed fiscal year during the Employment
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Form 10-K 1995 Stone & Webster, Incorporated
Period, if any (such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of
which is 365 and (c) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (a), (b), and (c) shall be hereinafter referred
to as the "Accrued Obligations"); and
(2) the amount equal to the product of (a) three and (b) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
(3) an amount equal to the excess of (a) the actuarial equivalent
of the benefit under the Company's qualified defined benefit retirement plan
(the "Retirement Plan") (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's Retirement Plan
immediately prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates pursuant to the Employment
Agreement or otherwise (together, the "SERP") which the Executive would receive
if the Executive's employment continued for three years after the Date of
Termination assuming for this purpose that all accrued benefits are fully vested
, and, assuming that the Executive's compensation in each of the three years is
that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the Date of Termination;
B. for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this Agreement as if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period;
C. for three years after the Executive's Date of Termination,
the Company shall, at its sole expense as incurred, provide the Executive with
outplacement services the scope and provider of which shall be selected by the
Executive in the Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this Section 6(a)
(i)C in any one calendar year shall not exceed 10% of the Executive's Annual
Base Salary; and
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Form 10-K 1995 Stone & Webster, Incorporated
D. for three years after the Executive's Date of Termination, to
the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy or practice or contract or agreement of the Company and its affiliated
companies.
(ii) If, during the Employment Period, the Executive shall
terminate employment for Good Reason as defined in Section 5(c)(ii) of this
Agreement, then, subject to the provisions of Section 9 of this Agreement:
A. the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the Accrued Obligations;
B. the Company shall pay in thirty-six (36) monthly
installments at the end of each month commencing with the month next following
the month in which the Date of Termination shall have occurred and continuing
for a total of thirty-six monthly payments, an aggregate amount equal to the
sum of (1) an amount equal to the product of (x) three (3) and (y) the sum of
(i) the Executive's Annual Base Salary and (ii) the Executive's Highest Annual
Bonus and (2) the amount determined by the application of Section 6(a)(i)A(3)
above, with the amount of each such monthly installment being such aggregate
amount divided by thirty-six (36);
C. for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this Agreement as if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after the Date
of Termination and to have retired on the last day of such period;
D. for three years after the Executive's Date of Termination,
the Company shall, at its sole expense as incurred, provide the Executive with
outplacement services the scope and provider of which shall be selected by the
Executive in the Executive's sole discretion provided, however that the maximum
amount of expense to be incurred by the Company pursuant to this Section 6(a)
(ii)D in any one calendar year shall not exceed 10% of the Executive's Annual
Base Salary;
E. for three years after the Executive's Date of Termination, to
the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy or practice or contract or agreement of the Company and its affiliated
companies; and 12
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Form 10-K 1995 Stone & Webster, Incorporated
F. The Company's obligation to make any particular installment
payment required by Section 6(a)(ii)B above will be offset, on a dollar for
dollar basis, by any of the following amounts (to the extent that they have not
theretofore been the basis for an offset) that shall have been received by the
Executive since the Executive's Date of Termination (with respect to activities
initiated by the Executive after such Date of Termination) and prior to the
date on which such installment is due to be paid by the Company: (x) the amount
of any cash compensation received by the Executive from another employer
employing the Executive after such Date of Termination; (y) the amount of any
cash payment received by the Executive as a result of self-employment activities
by the Executive initiated by the Executive after such Date of Termination; and
(z) the amount of any employment or self-employment compensation with respect to
employment or self-employment of the nature described in clause (x) or (y),
respectively, which, although not paid, has been guaranteed to the Executive
as of the date of such installment. The Executive agrees (1) to notify the
Company promptly upon securing employment or becoming self-employed during any
period during which installment payments are payable by the Company pursuant to
Section 6(a)(ii)B above and (2) to furnish the Company written evidence of
compensation earned for such employment or self-employment as the Company may
from time to time reasonably request.
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of any amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy, practice, contract or agreement of the Company or any of its affiliated
companies, including, without limitation, those amounts or benefits to be paid
or provided pursuant to the plans, programs, practices, policies, agreements or
contracts referred to in Section 4(b)(iii) or (iv) of this Agreement or Section
6 of the Employment Agreement (collectively, the Other Benefits"). Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term "Other Benefits" as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term "Other Benefits" as utilized in this
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Form 10-K 1995 Stone & Webster, Incorporated
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and
its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally with respect
to other peer executives of the Company and its affiliated companies and their
families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) the Executive's Annual Base
Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) other benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall
be paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Nonexclusivity of Rights.
Nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor, subject to Section 12(f), shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any such plan, policy, practice or program of or any such
contract or agreement with the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
8. Full Settlement.
(a) No Set-Off. Except as provided for in Section 6(a)(ii)F, the
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any set-
off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others.
(b) No Mitigation Obligation. The Executive's benefits hereunder
shall be considered severance pay in consideration of the Executive's past
service, and pay in consideration of the Executive's continued service from
the date hereof and in no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
provided for in Section 6(a)(ii)F, such amounts shall not be reduced whether
or not the Executive obtains other employment.
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Form 10-K 1995 Stone & Webster, Incorporated
(c) Expenses. In order that the purpose of this Agreement not be
frustrated, it is the intent of the Company that the Executive not be required
to incur the expenses associated with the enforcement of the Executive's rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder, nor be bound to negotiate any settlement
of the Executive's rights hereunder under threat of incurring such expenses.
Accordingly, if following the Effective Date it should appear to the Executive
that the Company has failed to comply with any of its obligations under this
Agreement or, if at any time, in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable, or institutes
any litigation or other legal action designed to deny, diminish or to recover
from, the Executive the benefits intended to be provided to the Executive
hereunder, and that the Executive has complied with all of the Executive's
obligations under this Agreement, the Company irrevocably authorizes the
Executive from time to time to retain counsel of the Executive's choice at the
expense of the Company as provided in this Section 8(c), to represent the
Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel (other than a counsel acting on behalf of the Company
in connection with this Agreement), the Company irrevocably consents to the
Executive's entering into an attorney-client relationship with such counsel,
and in that connection the Company and the Executive agree that a confidential
relationship shall exist between the Executive and such counsel. The Company
agrees to pay as incurred, to the full extent permitted by law, all costs and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including, without
limitation, as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"). Included within
such costs and expenses shall be the reasonable fees and expenses of counsel
selected from time to time by the Executive as hereinabove provided, which fees
and expenses shall be paid or reimbursed to the Executive by the Company on a
regular, periodic basis upon presentation by the Executive of a statement or
statements prepared by such counsel in accordance with its customary practices.
9. Certain Reductions of Payments to the Executive and Certain
Additional Payments by the Company.
(a) (i) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code (such excise tax is hereinafter
referred to as the "Excise Tax"), then the Payments shall be reduced, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments will not give rise to any Excise Tax, it being the intention of the
Company and the Executive that no Payment made pursuant to this Agreement be
deemed an "excess parachute payment" pursuant to Section 280G of the Code.
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Form 10-K 1995 Stone & Webster, Incorporated
(ii) If, notwithstanding the intention of the Company and the
Executive that no Payment made pursuant to this Agreement be deemed an "excess
parachute payment" pursuant to Section 280G of the Code and that no Excise Tax
be payable by the Executive as a result of any Payment and the operation of
Section 9(a)(i) above, it shall be determined that a Payment is subject to the
Excise Tax, then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including the computation of the
Reduced Amount, whether and when a Gross-Up Payment is required and the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determinations, shall be made by Coopers & Lybrand L.L.P. or such other
certified public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to the Executive within five days of the receipt
of the Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made here
under. In the event that the Company exhausts its remedies pursuant to Section
9(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
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Form 10-K 1995 Stone & Webster, Incorporated
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or to contest
the claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
17
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
18
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive H. Kerner Smith
48 Carriage Way
Sudbury, Massachusetts 01776
If to the Company: Stone & Webster, Incorporated
250 West 34th Street
New York, New York 10119
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)A-E of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that the
employment of the Executive by the Company is currently subject to the terms and
conditions of the Employment Agreement and, subject to Section 1(a) of this
Agreement and the Employment Agreement, the Executive's employment may be
terminated by either the Executive or the Company prior to the Effective Date,
in which case the Executive shall have no further rights under this Agreement.
From and after the Effective Date, except as otherwise specifically provided
in the Employment Agreement, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
STONE & WEBSTER, INCORPORATED
H. KERNER SMITH
By:
Name:
Title:
19
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (10) (e) (iii)
STOCK OPTION GRANT
(NON-QUALIFIED OPTIONS)
To Purchase Shares of Common Stock of
STONE & WEBSTER, INCORPORATED
THIS CERTIFIES that on February 12, 1996 (the "Date of Grant"), H.
Kerner Smith (the "Holder") was granted an option (the "Option") to purchase
all or any part of One Hundred Thousand (100,000) fully paid and non-assessable
shares (the "Shares") of Common Stock (the "Common Stock"), par value $1.00 per
share, of Stone & Webster, Incorporated, a Delaware corporation (the
"Corporation"), at an exercise price of $34.875 per Share (the "Exercise
Price"), upon and subject to the terms and conditions of the 1995 Stock Option
Plan of Stone & Webster, Incorporated (the "Plan") and subject to the following
provisions.
The Option and this Stock Option Grant shall not be treated as an
"Incentive Stock Option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
This Option may be exercised, in whole or in part, from time to time,
during the period beginning on the Date of Grant and ending on February 11, 2006
(the "Expiration Date").
To the extent that the Option shall not have been exercised in full
prior to the Expiration Date, the Option shall immediately terminate on
the Expiration Date and become void and of no further force or effect.
All or any part of the Option then exercisable shall terminate (i) at
the time the Holder's employment is terminated if the Holder's employment
is terminated because he is discharged for fraud, theft or embezzlement
committed against the Corporation or a subsidiary, affiliated entity or
customer of the Corporation, or for conflict of interest (other than
legitimate competition), (ii) at the expiration of a period of one year
after the Holder's death (but in no event later than the Expiration
Date) if the Holder's employment is terminated by reason of his death,
(iii) unless it is otherwise specifically provided herein, in the event
of the Holder's retirement or disability, at the expiration of a period
of three years after the Holder's employment is terminated because of
retirement under the Employee Retirement Plan of Stone & Webster,
Incorporated and Participating Subsidiaries or any successor plan thereto
or disability (but in no event later than the Expiration Date), or (iv) at
the expiration of a period of three months after the Holder's employment
is terminated (but in no event later than the Expiration Date) if the
Holder's employment is terminated for any reason other than the reasons
specified in clauses (i) through (iii) above.
1
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
If prior to the complete exercise of the Option, the outstanding Shares
of Common Stock are changed into or exchanged for a different number or
kind of shares of the Corporation or other securities of the Corporation 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 the Option, to the end that after such event the Shares subject to the
Option shall be maintained as if the Holder had exercised the Option before
the occurrence of such event. Such adjustment in the Option shall be made
without change in the total price applicable to the Option or the unexercised
portion thereof (except for any change in the aggregate price resulting from
rounding -off of share quantities or prices) and with any necessary
corresponding adjustment in the Exercise Price.
The Option and all rights granted hereunder shall be non-transferable
unless by will or by the laws of descent and distribution, and during the
lifetime of the Holder, the Option shall be exercisable only by the Holder.
Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of,
or to subject to execution, attachment or similar process, the Option or any
right granted hereunder, contrary to the provisions of the Plan, 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 Option
with respect to the shares involved in such attempt.
The Option shall be exercised by the delivery of a written notice duly
signed by the Holder, together with this Stock Option Grant, and the full
purchase price of the Shares purchased pursuant to the exercise of the Option,
including any required withholding tax, to the Secretary of the Corporation
or such other officer of the Corporation appointed for the purpose of receiving
the same. The Option may not be exercised at any time when such Option, or the
exercise thereof, may result in the violation of any state or Federal law or
of the rules or regulations of any governmental regulatory body.
Payment for the Shares purchased pursuant to the exercise of the Option
shall be made in full to the Corporation at the time of the exercise of the
Option by any one or more of the following methods: (i) in cash (including
check, bank draft or money order), (ii) by delivery of other Shares of Common
Stock (which Shares shall be endorsed in blank or accompanied by executed
stock powers with signatures guaranteed by a recognized financial institution
or a member of a national securities exchange), (iii) by delivery of any
combination of cash and such other Shares, and (iv) by delivery of a properly
executed notice of exercise together with irrevocable instructions to a
broker-dealer to sell or margin a sufficient portion of the Shares and
deliver the sale or margin loan proceeds to the Corporation to pay for the
full purchase price of the Shares and applicable withholding taxes. If any
such other Shares of Common Stock delivered as provided above were acquired
through the previous exercise of any Option granted to the Holder under the
Plan, such Shares must have been held for at least six months prior to such
delivery.
If the Option shall have been exercised with respect to less than all of
the Shares subject to the Option, the Corporation shall cause to be delivered
to the person entitled thereto a new Stock Option Grant in replacement of this
Stock Option Grant, if surrendered at the time of the exercise of the Option,
2
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
indicating the number of Shares with respect to which the Option remains
available for exercise, or this Stock Option Grant shall be endorsed to give
effect to the partial exercise of the Option.
In the event that the Holder elects to exercise the Option or any part
thereof, and if the Corporation shall be required to withhold any amounts by
reason of any Federal, state or local tax laws, rules or regulations with
respect to the issuance of Shares to the Holder pursuant to the Option, the
Corporation shall be entitled to deduct and withhold such amounts from any
payments to be made to the Holder. In any event, the Holder shall make
available to the Corporation, promptly when requested by the Corporation,
sufficient funds to meet the requirements of such withholding; and the
Corporation shall be entitled to take and authorize such steps as it may deem
advisable to make such funds available to the Corporation out of any funds or
property due or to become due to the Holder.
The Holder shall not be entitled to any rights as a stockholder of the
Corporation with respect to any Shares subject to the Option until he shall have
become the beneficial owner of such Shares.
Nothing contained herein shall be construed as limiting any right which
the Corporation or any subsidiary of the Corporation may have to terminate at
any time, with or without cause, the service of the Holder to the Corporation or
any such subsidiary.
Before issuing and delivering any Shares to the Holder, upon the
exercise of the Option, the Committee may (i) require the Holder to deliver a
written representation that the 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, or (ii) condition the exercise of the Option or
the issuance and delivery of Shares upon the listing, registration or
qualification of the Shares covered by the Option upon any securities exchange
or under any state or Federal law or upon the consent or approval of any
governmental regulatory body and any such listing, registration, qualification,
consent or approval shall be free of any conditions not acceptable to the
Committee.
The Committee, with the consent of the Holder, may amend at any time
or from time to time, the terms and conditions of the Option and this Stock
Option Grant. The Committee may at any time or from time to time, in its
discretion, accelerate the time or times at which the Option may be exercised
to an earlier time or times.
Any notice which either party hereto may be required or permitted to
give to the other shall be in writing, and may be delivered personally or by
mail, postage prepaid, addressed as follows: to the Corporation, any officer
of the Corporation, the Board of Directors or any member thereof, or the
Committee or any member thereof, at the Corporation's offices at 250 West 34th
Street, New York, New York 10119, or at such other address as the Corporation,
or any other such person, by notice to the Holder, may designate in writing
from time to time; to the holder, at the address shown below his signature on
this Stock Option Grant, or at such other address as the Holder, by notice to
the Corporation, may designate in writing from time to time.
Notices shall be effective upon receipt.
3
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
The Option and this Stock Option Grant are issued pursuant to, and are
subject to all of the terms and conditions of, the Plan, the terms, conditions
and definitions of which are hereby incorporated as though set forth at length,
and the receipt of a copy of which the Holder hereby acknowledges by his
signature below.
Unless otherwise indicated to the contrary herein, defined terms used in
the Stock Option Grant shall have the meaning as used in the Plan.
WITNESS, the seal of the Corporation and the signatures of this
Corporation's duly authorized officers and the Holder.
Dated: February 12, 1996
STONE & WEBSTER, INCORPORATED
By:
ATTEST:
By:
ACCEPTED:
By:
H. Kerner Smith
Holder
48 Carriage Way
Sudbury, Massachusetts 01776
4
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
FOR USE BY HOLDER FOR CORPORATION USE ONLY
Purchase Number Unexercised
Date Price Signature of Shares Portion of
Herewith of Holder Date Issued Option Countersign
5
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (21) Subsidiaries of Registrant
Subsidiaries of Registrant on December 31, 1995 included:
<TABLE>
<CAPTION>
PLACE OF
NAME OF SUBSIDIARY INCORPORATION
<S> <C>
Commercial Cold Storage, Inc. Georgia
Stone & Webster Advanced Systems Development
Services, Inc. Delaware
Stone & Webster Development Corporation Delaware
Stone & Webster Auburn Corporation Delaware
Auburn VPS General Corporation Delaware
Auburn VPS Limited Corporation Delaware
Stone & Webster Binghamton Corporation Delaware
Stone & Webster Engineering Corporation Mass.
DSS Engineers, Inc. Florida
Fast Supply Corporation Delaware
Rockton Associates, Incorporated Delaware
Stone & Webster Civil and Transportation
Services, Inc. Mass.
Stone & Webster Construction Company, Inc. Delaware
Stone & Webster Management Consultants, Inc. New York
Stone & Webster of Argentina Corporation Delaware
Stone & Webster Overseas Consultants, Inc. Delaware
Stone & Webster Michigan, Inc. Michigan
Stone & Webster Operating Corporation Delaware
Stone & Webster Power Projects Corporation Delaware
Stone & Webster Worldwide Engineering Corporation Delaware
3 Executive Campus Corporation Delaware
245 Summer Street Corporation Mass.
1430 Enclave Parkway Corporation Delaware
Stone & Webster Overseas Group, Inc. Delaware
Associated Engineers & Consultants, Inc. New York
Rockton Technical Services Corporation Delaware
Stone & Webster Abu Dhabi (United Arab Emirates),
Inc. Delaware
Stone & Webster Asia Corporation Delaware
Stone & Webster Bharat, Incorporated Delaware
Stone & Webster Dominican Republic, Incorporated Delaware
Stone & Webster Far East Technical Services Corp. Delaware
Stone & Webster Group Limited England
Stone & Webster Construction Limited England
Stone & Webster Engineering Limited England
Stone & Webster Services Limited England
Stone & Webster Services Sdn. Bhd. Malaysia
Stone & Webster Engineering and Field
Services Limited England
Stone & Webster Engineering (Mauritius)
Limited Mauritius
Stone & Webster Management Consultants England
Limited
Stone & Webster United Arab Emirates Limited England
Stone & Webster Indonesia Corporation Delaware
Stone & Webster International Corporation Delaware
Stone & Webster International Projects Corporation Delaware
6
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
Stone & Webster Italia, Incorporated Delaware
Stone & Webster Korea Corporation Delaware
Stone & Webster Kuwait, Incorporated Delaware
Stone & Webster Lithuania Corporation Delaware
Stone & Webster of Mexico Engineering Corporation Delaware
Stone & Webster Middle East Engineering Services
Corporation Delaware
Stone & Webster Pacific Corporation Delaware
Stone & Webster Power Engineering Corporation Delaware
Stone & Webster Puerto Rico, Incorporated Delaware
Stone & Webster Saudi Arabia, Incorporated Delaware
Stone & Webster Taiwan Corporation Delaware
Stone & Webster Technology Corporation Delaware
Stone & Webster Technology B.V. Netherlands
Stone & Webster Thailand Limited Thailand
Stone & Webster Canada Limited Canada
Rockton Field Services of Canada Ltd. Canada
Stone & Webster St. Jerome Limited Canada
Stone & Webster Worldwide, Incorporated Delaware
<PAGE>
FORM 10-K 1994 Stone & Webster, Incorporated
SAW Construction Corporation Delaware
SAW Consulting Services, Inc. Delaware
Sleeper Street Realty Corporation Delaware
Summer Street Realty Corporation Mass.
3 Executive Campus Realty, Inc. Delaware
Enclave Parkway Realty, Inc. Delaware
7
</TABLE>
<PAGE>
Form 10-K 1995 Stone & Webster, Incorporated
Exhibit (23)
Coopers & Lybrand L. L. P.
a professional services firm
COOPERS
& LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
____________
We consent to the incorporation by reference in the registration
statements of Stone & Webster, Incorporated on Form S-8 (File Nos. 33-
23594, 33-60489 and 33-60483) of our report dated February 20, 1996, on
our audits of the consolidated financial statements and financial
statement schedule of Stone & Webster, Incorporated and Subsidiaries as
of December 31, 1995 and 1994, and for each of the three years in the
period ended December 31, 1995, which report is included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
March 19, 1996
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 68417
<SECURITIES> 54899
<RECEIVABLES> 165836
<ALLOWANCES> 3767
<INVENTORY> 0
<CURRENT-ASSETS> 364001
<PP&E> 377716
<DEPRECIATION> 165120
<TOTAL-ASSETS> 716772
<CURRENT-LIABILITIES> 206362
<BONDS> 74677
<COMMON> 17731
0
0
<OTHER-SE> 343940
<TOTAL-LIABILITY-AND-EQUITY> 716772
<SALES> 0
<TOTAL-REVENUES> 1002819
<CGS> 0
<TOTAL-COSTS> 918169
<OTHER-EXPENSES> 49609
<LOSS-PROVISION> 712
<INTEREST-EXPENSE> 5549
<INCOME-PRETAX> 23471
<INCOME-TAX> 8591
<INCOME-CONTINUING> 14880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14880
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
