-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KiDWjb7KAZoyoXOWSiF3UNwzL3C+WVX40gVjegEKHMGPPpBewFGKKaREWMQreNYh 2X/uZZZA4kVUOqemRLQwHQ== 0000030067-96-000004.txt : 19960329 0000030067-96-000004.hdr.sgml : 19960329 ACCESSION NUMBER: 0000030067-96-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DRAVO CORP CENTRAL INDEX KEY: 0000030067 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 250447860 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05642 FILM NUMBER: 96540226 BUSINESS ADDRESS: STREET 1: 3600 ONE OLIVER PLZ CITY: PITTSBURGH STATE: PA ZIP: 15222-2651 BUSINESS PHONE: 2054322651 MAIL ADDRESS: STREET 1: P O BOX 2068 CITY: MOBILE STATE: AL ZIP: 36652 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1995 Commission file number 1-5642 DRAVO CORPORATION A PENNSYLVANIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NUMBER 25-0447860 3600 ONE OLIVER PLAZA PITTSBURGH, PENNSYLVANIA 15222-2682 TELEPHONE (412) 566-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Class: Registered: Common Stock, $1.00 Par Value New York Stock Exchange Preference Stock Purchase Rights New York Stock Exchange 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, and (2) has been subject to such filing requirements for the past 90 days. Yes XX . No_____. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. XX Common shares outstanding as of March 22, 1996: 14,710,546 Aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 22, 1996: $187,559,462 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1995 are incorporated by reference to the extent set forth in Parts I, II and IV of this Report. Portions of the Proxy Statement for Annual Meeting of Shareholders on April 25, 1996 are incorporated by reference to the extent set forth in Part III of this Report. TABLE OF CONTENTS
Page PART I Item 1. Business 3 - 5 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 7 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matte 8 - 14 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8. Financial Statements and Supplementary Data 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14 PART III Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 16 Item 12. Security Ownership of Certain Beneficial Owners and Management 16 Item 13. Certain Relationships and Related Transactions 16 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17 - 23 Signatures 24 Independent Auditors' Report on Schedules 25 Schedule I. Condensed Financial Information of Registrant 26 - 33 Table of Contents for documents filed herein as Exhibits 3, 4, 10, 11, 13, 21, 23, 24 and 27 34
-2- PART I Item 1. Business (a) General Development of the Business Dravo Corporation (the Registrant) was incorporated in Pennsylvania in 1936 to consolidate several related corporations then operating various elements of a business started in 1891 by F. R. Dravo. Its corporate offices are located at 3600 One Oliver Plaza, Pittsburgh, Pennsylvania 15222-2682, and its telephone number is 412-566-3000. As used herein, the term Dravo includes its consolidated subsidiaries unless otherwise indicated. In December, 1987, Dravo's Board of Directors approved a major restructuring program which concentrated Dravo's future direction exclusively on opportunities involving its natural resources business. The plan included the sale or other disposition of the former Engineering and Construction segment, as well as the sale of the former Materials Handling and Systems segment approved earlier. All units scheduled for sale were sold by the end of 1989. The remainder of these businesses have been presented as discontinued operations in the financial statements. Late in 1994, the company sold substantially all the assets and certain liabilities of Dravo Basic Materials Company, its construction aggregates subsidiary, to Martin Marietta Materials, Inc. (Martin Marietta). As a result, Dravo is now primarily a lime company operating principally in the United States. Operations are carried on by a wholly-owned subsidiary, Dravo Lime Company (Dravo Lime). Activities include the production of lime for utility, metallurgical, pulp and paper, municipal, construction and miscellaneous chemical and industrial applications. Three major utility companies with whom the company has long-term contracts - American Electric Power, Pennsylvania Power Company and Cincinnati Gas & Electric Company - - each accounted for more than 10 percent of consolidated revenue in 1995. All of the properties on which the company's reserves are located are physically accessible for purposes of mining and processing limestone into lime. Dravo Lime, one of the nation's largest lime producers, owns and operates three integrated lime production facilities, two in Kentucky and one in Alabama. In 1995 the Black River plant in Butler, Kentucky completed a two kiln expansion. With the Black River expansion on-line, Dravo Lime's annual quicklime capacity totals approximately three million tons. This capacity will further increase to slightly over 3,300,000 ton-per-year, when a fourth 1,000 ton-per-day kiln now in the process of being engineered and constructed at its Maysville, Kentucky facility is completed in the first quarter of 1997. The Maysville plant, currently a three kiln, 1,050,000 ton-per- year facility near Maysville, Kentucky, produces a material marketed under the trade name Thiosorbicr Lime, that has a product chemistry ideally suited for removing sulfur dioxide from power plant stack gases. All of Maysville's output is committed under long-term contracts with utility companies in the Ohio Valley region. All contracts contain provisions for price escalation. Owned reserves at the Maysville site are recovered from a mine 950 feet underground and are considered adequate to sustain the future four kiln operation in excess of twenty years. Dravo Lime also holds options on additional limestone reserves to sustain production for an additional thirty year period. -3- Item 1. Business (continued) With the completion of the current two kiln expansion, Dravo Lime's Black River facility is an integrated Thiosorbicr quicklime, high calcium pebble and pulverized quicklime, and bulk and bagged hydrated lime facility. Located along the Ohio River at Butler, Kentucky, Black River has an annual quicklime capacity of 1,350,000 ton-per-year. Of that total, in excess of seventy percent is committed to utility companies and steel and paper customers under contracts with price escalation provisions. Limestone reserves at Black River are recovered from a 600-feet-deep underground mine. At Black River's expanded rate of capacity, reserves are considered adequate to sustain production levels for more than seventy-five years. The company's Longview facility, located near Birmingham, Alabama, is an integrated facility as well that produces high calcium quicklime, and bulk and bagged hydrated lime from owned limestone reserves. At this plant, Dravo Lime also produces dolomitic quicklime from limestone purchased from a nearby dolomitic stone quarry. Due to its material handling and storage capabilities and its ability to produce high calcium and dolomitic lime, the Longview facility is able to custom blend quicklime to its customers' chemical specifications. Longview's annual production capacity is approximately 570,000 ton-per-year. Limestone at the Longview operation comes from an quarry with recoverable reserves estimated to last approximately twenty years at the current production rate. Ultimately, Dravo Lime expects to convert Longview to an underground mine, providing access to additional reserves sufficient to support current production rates for over sixty years. In conjunction with the sale of Dravo Basic Materials' assets to Martin Marietta, Dravo Lime entered into agreements appointing Martin Marietta the exclusive distributor of aggregate by- products produced when limestone is crushed and screened into kiln feed. During 1995, an aggregates processing plant was constructed at the Longview facility that is expected to produce from 500,000 to 1,000,000 tons of aggregates annually for purchase by Martin Marietta. A benefit of this installation is to make a marketable by-product, which reduces the cost Dravo Lime incurs to recover the high calcium limestone reserves that are beneath the aggregate quality material. Dravo Lime products are distributed through quicklime distribution terminals located in Butler and Belle Vernon, Pennsylvania; Porterfield, Ohio; Brunswick, Georgia; and Tampa, Fort Lauderdale and Sanford, Florida. At Baton Rouge, Louisiana, Dravo Lime owns and operates a lime hydration and bagging facility from which quicklime, and bulk and bagged hydrated lime products are distributed. (b) Competitive Conditions Dravo encounters competition at all its operations but believes that its experience, strategically located reserves and technical expertise in the flue gas desulfurization industry give it certain competitive advantages. -4- Item 1. Business (continued) Dravo's research and development expenditures were $3.6 million in 1995 and $4.4 million in 1994. Research and development spending in 1996 is expected to exceed $3.1 million. The company expects the research, much of which is being conducted jointly with utility customers, to lower both the capital and operating costs associated with flue gas desulfurization (FGD). A major advancement toward that goal was achieved with the development of a second generation, proprietary ThioClearR FGD technology. An agreement in principle has been reached to develop a commercial scale demonstration using this technology at Applied Energy Services' Beaver Valley cogeneration facility in Monaca, Pennsylvania. Other research projects are aimed at developing proprietary technologies for use in reducing stack gas emissions of combined SOx/NOx and air toxins while recovering and processing salable by-products. Dravo believes that in this field its long-term contracts, accumulated experience and technical skill represent significant competitive advantages. Several firms with which Dravo competes have comparable resources and income. Dravo competes with other firms for qualified professional personnel, particularly those with technical skills. (c) Corporate Development Dravo's corporate development policy encompasses growth through investment in existing businesses, internal development and acquisition. Additionally, to the extent that business units no longer meet management's long-term profitability performance criteria and business strategies, or do not contribute significantly to corporate objectives, a policy of divestiture is followed. Continuing operations of Dravo Corporation, which are principally domestic in nature, function in one segment, a natural resource business, primarily involved in the production, processing and supply of lime for environmental, metallurgical, pulp and paper, municipal, construction and miscellaneous chemical and industrial applications as well as the development and marketing of related environmental technologies, products and services. Dravo's position as the world's leading producer of lime for flue gas desulfurization applications was enhanced by the passage of the 1990 Clean Air Act Amendments. Further information required by this item is incorporated by reference to the information set forth under the captions indicated below in the 1995 Annual Report to Shareholders which accompanies this report: Caption in Annual Report Page No.
Results of Operations 12 - 14 Note 16: Research and Development 32 Employees at Year-End 34
-5- Item 2. Properties The following is a listing of principal offices, plants and mines used in operations: Use Location Owned or Leased Executive and general Pittsburgh, Pennsylvania Leased offices Production facilities Saginaw, Alabama Owned Butler, Kentucky Owned Maysville, Kentucky Owned Distribution sites Ft. Lauderdale, Florida Leased Tampa, Florida Owned/Leased Sanford, Florida Leased Brunswick, Georgia Owned/Leased Baton Rouge, Louisiana Owned Porterfield, Ohio Leased Aliquippa, Pennsylvania Leased Butler, Pennsylvania Leased Belle Vernon, Pennsylvania Leased The following table shows a summary of the company's reserves at December 31, 1995 and tons mined by Dravo Lime in 1995. (Tons in millions)
Recoverable 1995 Reserves Production Underground Mines: Owned 466.8 5.7 Quarries: Owned 55.4 1.4 522.2 7.1
Additional information required by this item is incorporated by reference to the information set forth under Item 1(a) "General Development of the Business" on pages 3 through 5 of this Form 10- K. -6- Item 3. Legal Proceedings Information required by this item is incorporated by reference to the information set forth under the caption Note 8: "Contingent Liabilities" in the Notes to Consolidated Financial Statements on pages 25 and 26 of the 1995 Annual Report to Shareholders which accompanies this report. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders for the three months ended December 31, 1995. -7- PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Information required by this item is incorporated by reference to the information set forth under the captions indicated below in the 1995 Annual Report to Shareholders which accompanies this report: Caption in Annual Report Page No. Common Stock Market Price 15 Shareholders at year-end 34 Dividends 15, 34 Description of Dravo Capital Stock General Under its Restated Articles of Incorporation ("the Articles"), as amended, Dravo is authorized to issue 1,878,870 shares of preference stock, par value $1.00 per share, and 35,000,000 shares of common stock, par value $1.00 per share. At December 31, 1995 issued preference and common shares were 225,386 and 15,055,237, respectively and there were 347,691 shares of common stock held in the treasury. Four series of preference stock have been established by resolutions of the Board of Directors: $2.20 Cumulative Convertible Series A Preference Stock ("Series A Preference Stock"), consisting of 26,817 shares, issued on September 1, 1970; $2.475 Cumulative Convertible Series B Preference Stock ("Series B Preference Stock"), consisting of 165,516 shares, issued on June 12, 1973; Series C Preference Stock consisting of 200,000 shares, which are issuable pursuant to the exercise of the rights to purchase stock described below; and $12.35 Series D Cumulative Convertible Exchangeable Preference Stock ("Series D Preference Stock") consisting of 200,000 shares, issued on September 21, 1988. All of the shares of Series A Preference Stock were converted into shares of common stock on April 2, 1978. Presently there are 25,386 shares of Series B Preference Stock and 200,000 shares of Series D Preference Stock issued and outstanding. No shares of Series C Preference Stock have been issued or are outstanding. Other series of preference stock may be created by resolution of the Board of Directors with such dividend, liquidation, redemption, sinking fund and conversion rights as shall be specified therein. Dividend Rights The holders of the preference stock are entitled to cumulative dividends, payable quarterly, which must be paid and the next quarterly dividend set apart before any dividends (except dividends in common stock or any other -8- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Dividend Rights (continued) stock ranking after the preference stocks as to dividends and assets) are declared, or paid, or monies set apart for the payment of dividends on any class of stock ranking after the preference stock as to dividends or assets. The rate of dividends payable upon the Series B Preference Stock is $2.475 per annum. The rate of dividends payable upon the Series C Preference Stock is an amount per share (rounded to the nearest cent) equal to the greater of $10.00 or 100 times the aggregate per share amount of all cash and non-cash dividends or other distributions, other than a dividend or distribution payable in shares of common stock, paid on the common stock in the immediately preceding quarter, subject to adjustment in certain events. The rate of dividends payable upon the Series D Preference Stock is 12.35 percent per annum or $12.35 per share, which rate shall be increased by 2 percent per annum if such dividends are not paid on any quarterly dividend payment date until accrued and unpaid dividends on the Series D Preference Stock are paid. The holders of the common stock are entitled to such dividends as may be declared by the Board of Directors out of assets properly available for that purpose. No common stock dividends have been declared since April, 1987. Other information required by this item is incorporated by reference to the information set forth under the caption "Note 5: Notes Payable", in the Notes to Consolidated Financial Statements on pages 24 and 25 of the 1995 Annual Report to Shareholders which accompanies this report. Voting Rights Each share of the common stock and the preference stock is entitled to one vote, which is cumulative in the election of directors. The Board of Directors is divided into three classes, and approximately one third of the directors are elected each year for three year terms. The effect of such classification of the Board is to increase the number of shares, voted cumulatively, necessary to elect directors. If dividends on the preference stock shall be unpaid or in arrears for six quarterly dividend periods, the holders of the preference stock voting as a class shall have the right to elect two additional directors. Liquidation Rights In the event of the voluntary or involuntary liquidation or dissolution of Dravo, or the sale or other disposition of substantially all of its assets, the holders of the Series B Preference Stock shall be entitled to receive the sum of $55 per share plus all accumulated and unpaid dividends thereon; the holders of Series C Preference Stock shall be entitled to receive $100 per share plus all accrued and unpaid dividends plus an amount equal to the holder's pro rata share of the amount that would be available for distribution -9- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Liquidation Rights (continued) after payment of all liabilities, liquidation preferences and a distribution on the common stock, if any, as determined according to a formula; and the holders of Series D Preference Stock shall be entitled to receive $100 per share plus all accumulated and unpaid dividends thereon. The holders of any other series of preference stock which may be issued shall be entitled to receive the amounts provided for in the resolutions creating such series. The holders of the common stock shall share ratably in the remaining assets, if any. No Preemptive Rights and Non-assessability No preemptive rights attach to the common stock or the preference stock. Neither the holders of the common stock nor the preference stock are liable to further calls or assessment by Dravo. Redemption and Sinking Fund Provisions There are no redemption provisions with respect to the common stock. The Series B Preference Stock may be redeemed, in whole or in part, at the option of Dravo, on not less than 60 days notice, on any quarterly dividend payment date by the payment of $55 per share and all accumulated and unpaid dividends to the redemption date. The Series C Preference Stock may be redeemed as a whole, but not in part, at the option of Dravo, at any time, at a cash price per share based upon the average market value, as defined and adjusted, of the common stock plus all accrued but unpaid dividends. The Series D Preference Stock may be redeemed in whole or in part at the option of Dravo at any time after January 21, 1996, by the payment of $100 per share and all accumulated and unpaid dividends to the redemption date, so long as the current market price (as defined in the Certificate of Designations, Preferences and Rights for the Series D Preference Stock) of the common stock on the date the Board decides to redeem the shares is at least 175 percent of the then effective conversion price for the Series D Preference Stock. Commencing on the first quarterly dividend payment date after September 21, 1998 and annually thereafter, Dravo is required to redeem 50,000 shares of Series D Preference Stock in cash at the redemption price of $100 per share plus all accumulated and unpaid dividends. Dravo is also required (unless certain conditions are met) to redeem all of the then outstanding shares of Series D Preference Stock in cash at $100 per share plus all accumulated and unpaid dividends (a) if Dravo declares or pays or sets apart for payment any dividends or makes any other distribution in cash or other property on or in respect of the common stock or any other class or series of the capital stock of Dravo ranking junior to the Series D Preference Stock as to payment of dividends ("Junior Dividend Stock"), or sets apart money for any sinking fund or analogous fund for the redemption or purchase of any Junior Dividend Stock and (b) upon any merger or consolidation of Dravo if, in connection therewith, the holders of the common stock receive cash, debt instruments or preference stock of the surviving entity which ranks on a parity with or senior to the Series D Preference stock with respect to liquidation, dissolution or winding up or dividends. There are no sinking fund provisions with respect to the common stock or the Series B Preference Stock, Series C Preference Stock or Series D Preference Stock. -10- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Conversion The Series B Preference Stock is presently convertible at any time prior to redemption at the option of the holder into common stock on the basis of 3.216 shares of common stock for each share of Series B Preference Stock, subject to equitable adjustment in the event of certain changes affecting the common stock. The Series D Preference Stock is presently convertible at any time prior to redemption at the option of the holder into common stock on the basis of 8.0 shares of common stock for each share of Series D Preference Stock, subject to adjustment in the event of certain changes affecting the common stock. The Series D Preference Stock is convertible or exchangeable in whole at any time by Dravo for an equal face amount of Dravo Senior Subordinated Convertible Notes due September 21, 2001 containing the same conversion rights, transfer restrictions and other terms (other than voting rights) as the Series D Preference Stock. There are no conversion rights with respect to the Series C Preference Stock or the common stock. Rights to Purchase Series C Preference Stock The Series C Preference Stock is issuable pursuant to the exercise of rights to purchase Series C Preference Stock. On April 4, 1986, the Board of Directors declared a distribution of one right for each outstanding share of common stock to shareholders of record at the close of business on April 17, 1986 (the "Record Date") and with respect to each share of common stock that may be issued by Dravo prior to the Distribution Date described below or the earlier redemption or expiration of the rights. Each right entitles the registered holder, following the occurrence of certain events described below, to purchase from Dravo a unit consisting of one one-hundredth of a share (a "Unit") of Series C Preference Stock at a purchase price of $60 per Unit, subject to adjustment (the "Purchase Price"). The descriptions and terms of the rights are set forth in a rights agreement (the "Rights Agreement") between Dravo and PNC Bank, N. A. (formerly Pittsburgh National Bank), as the rights agent. Initially, the rights will be attached to all common stock certificates representing shares then outstanding, and no separate rights certificates will be distributed. The rights will separate from the common stock and a distribution date will occur upon the earlier of (a) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20 percent or more of the outstanding shares of common stock of Dravo (the "Stock Acquisition Date"), or (b) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 30 percent or more of such outstanding shares of common stock. Until the distribution date, (i) the rights will be evidenced by the common stock certificates and will be transferred with and only with such common stock certificates, (ii) new common stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificate for common stock outstanding will also constitute the transfer of the rights associated with the common stock represented by such certificate. -11- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Rights to Purchase Series C Preference Stock (continued) The rights are not exercisable until the distribution date and will expire at the close of business on April 17, 1996, unless earlier redeemed by Dravo as described below. In the event that, at any time following the distribution date, (a) Dravo is the surviving corporation in a merger with an Acquiring Person and its common stock is not changed or exchanged, (b) an Acquiring Person becomes the beneficial owner of 30 percent or more of the then outstanding shares of common stock, (c) an Acquiring Person engages in one or more "self- dealing" transactions as set forth in the Rights Agreement, or (d) during such time as there is an Acquiring Person, an event occurs which results in such Acquiring Person's ownership interest being increased by more than one percent (e.g., a reclassification of securities, reverse stock split or recapitalization of Dravo), each holder of a right will thereafter have the right to receive, upon exercise, common stock (or, in certain circumstances, cash, property or other securities of Dravo) having a value equal to two times the Purchase Price of the right. Notwithstanding any of the foregoing, (i) rights are not exercisable following the occurrence of any of the events set forth in this paragraph until such time as the rights are no longer redeemable by Dravo as set forth below, and (ii) following the occurrence of any of the events set forth above, all rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. In the event that, at any time following the stock acquisition date, (i) Dravo is acquired in a merger or other business combination transaction in which Dravo is not the surviving corporation (other than a merger described in the preceding paragraph), or (ii) 50 percent or more of Dravo assets or earning power is sold or transferred, each holder of a right (except rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the right. The events set forth in this paragraph and in the preceding paragraph are referred to as the "Triggering Events." The Purchase Price payable, and the number of units of Series C Preference Stock or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution. No fractional units may be issued and, in lieu thereof, an adjustment in cash may be made based on the market price of the Series C Preference Stock on the last trading date prior to the date of exercise. At any time until ten days following the stock acquisition date, Dravo may redeem the rights in whole, but not in part, at a price of $.01 per right. Under certain circumstances set forth in the Rights Agreement, the decision to redeem shall require the concurrence of a majority of the continuing directors, as defined. After the redemption period has expired and prior to the occurrence of a Triggering Event, Dravo's right of redemption may be reinstated if an Acquiring Person reduces his beneficial ownership to 10 -12- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Rights to Purchase Series C Preference Stock (continued) percent or less of the outstanding shares of common stock in a transaction or series of transactions not involving Dravo. Immediately upon action of the Board of Directors ordering redemption of the rights, with, where required, the concurrence of the continuing directors, the rights will terminate and the only right of the holders of rights will be to receive the $.01 redemption price. Until a right is exercised, the holder thereof, as such, will have no rights as a shareholder of Dravo, including, without limitation, the right to vote or to receive dividends. Other than those provisions relating to the principal economic terms of the rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors of Dravo prior to the distribution date. Thereafter, the provisions of the Rights Agreement may be amended by the Board (in certain circumstances, with the concurrence of the continuing directors) in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of rights (excluding the interests of any Acquiring Person), to suspend the effectiveness of the provision of the Rights Agreement pursuant to which certain rights become void as described above, or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption shall be made at such time as the rights are not redeemable. The rights may have the effect of preventing or discouraging some attempts to acquire control of Dravo. The rights could cause substantial dilution to a person or group that attempts to acquire control of Dravo on terms not approved by its Board of Directors, unless the offer is conditioned on a substantial percentage of rights being tendered to and acquired by the Acquiring Person. The rights should not interfere with any merger or other business combination approved by the Board of Directors prior to the expiration of the redemption period since the rights may be redeemed by Dravo prior to the expiration of such period and Dravo may suspend the provisions that in certain circumstances prevent an Acquiring Person from exercising its rights. The rights could interfere with a negotiated transaction after an acquisition of 20 percent or more voting power if the rights were not redeemed. The rights will not prevent a holder of a controlling interest from exercising control over Dravo. The Board of Directors has decided not to extend the rights past the April 17, 1996 expiration date. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Report on Form 8-K. A copy of the Rights Agreement is available free of charge from Dravo upon the request of any shareholder. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement. -13- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters (continued) Other Information Dravo may purchase shares of the Preference Stock whether or not any dividend arrearage shall exist with respect thereto, and may hold and dispose of such shares in such manner as it may elect. The holders of the preference stock who comply with applicable provisions of law and object to a merger or consolidation involving Dravo shall have all of the legal rights of objecting shareholders in a merger or consolidation whether or not they constitute a class otherwise entitled to such rights. The transfer agent and registrar for the common stock is Continental Stock Transfer & Trust Company, New York, NY. Item 6. Selected Financial Data Information required by this item, with the exception of common stock dividends declared, is incorporated by reference to the information set forth under the caption "Five-Year Summary" on page 34 of the 1995 Annual Report to Shareholders which accompanies this report. Dravo has declared no common stock dividends in the five-year period ending December 31, 1995. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this item is incorporated by reference to the information set forth under the captions "Overview", "Results of Operations", "Financial Position and Liquidity" and "Outlook" on pages 12 through 15 of the 1995 Annual Report to Shareholders which accompanies this report, to the information set forth under the caption Note 2: "Discontinued Operations" on pages 22 and 23, Note 3: "Dispositions" on pages 23 and 24, Note 7: "Commitments" on page 25, Note 8: "Contingent Liabilities" on pages 25 and 26, Note 13: "Income Taxes" on pages 30 and 31 and Note 14: "Extraordinary Item" on page 31 in the Notes to Consolidated Financial Statements of the 1995 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data Information required by this item is incorporated by reference to the financial statements and notes thereto set forth on pages 16 through 33, and the Independent Auditors' Report set forth on page 33 of the 1995 Annual Report to Shareholders which accompanies this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. -14- PART III Item 10. Directors and Executive Officers of the Registrant Information required by this Item as to Directors and nominees for Director is incorporated by reference to the information set forth under the caption "Information Concerning Directors and Nominees for Director" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 25, 1996. The following information indicates the position and age at March 22, 1996 of the non-director executive officers of Dravo Corporation and their business experience during the last five years: Marshall S. Johnson, Age 54, Vice President, Operations and Engineering since December, 1994; Vice President, Operations, Dravo Lime Company from April, 1992 to December 1994; prior thereto Regional Operations Manager, Dravo Lime Company. Ernest F. Ladd III, Age 55, Executive Vice President, Chief Financial Officer since December, 1994; Executive Vice President, Finance and Administration from December, 1989 to December, 1994. John R. Major, Age 51, Vice President, Administration since January, 1989. James J. Puhala, Age 53, Vice President, General Counsel and Secretary since September, 1987. Richard E. Redlinger, Age 44, Vice President, Corporate Development, and Treasurer since July, 1995; prior thereto Vice President, Finance and Planning, Dravo Lime Company. Donald H. Stowe, Jr., Age 44, Vice President Sales and Technology since December 1994; Executive Vice President, Sales and Technology, Dravo Lime Company from March, 1992 to December, 1994; prior thereto Sr. Vice President, Sales and Technology, Dravo Lime Company. Larry J. Walker, Age 43, Vice President and Controller since July, 1995; Controller since December, 1989. -15- Item 11. Executive Compensation Information required by this item is incorporated by reference to the information set forth under the caption "Executive Compensation" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 25, 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by this item is incorporated by reference to the information set forth under the captions "Security Ownership of Certain Beneficial Owners" and "Ownership by Management of Equity Securities" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 25, 1996. Item 13. Certain Relationships and Related Transactions Information required by this item is incorporated by reference to the information set forth under the caption "Information Concerning Directors and Nominees for Director" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 25, 1996. -16- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements The following consolidated financial statements of the Registrant are filed pursuant to Item 8 of this Form 10-K and are incorporated herein by reference to the page numbers indicated below in the 1995 Annual Report to Shareholders which accompanies this report. Description Page No.
Consolidated Balance Sheets at December 31, 1995 and 1994 16, 17 Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and 1993 18 Consolidated Statements of Retained Earnings for the years ended December 31, 1995, 1994 and 1993 19 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 20, 21 Notes to Consolidated Financial Statements 22 - 32 Independent Auditors' Report 33 2. Financial Statement Schedules The following financial statement schedules of the Registrant are required and are filed pursuant to this item in this Form 10-K. Schedule Page No. Independent Auditors' Report 25 Schedule I. Condensed Financial Information of Registrant 26 - 33
Schedules other than those listed above have been omitted because they are not applicable or because the required information is reported in the financial statements or notes. -17- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (3) Articles of Incorporation and By-laws (i) Articles of Amendment restating Dravo Corporation's Articles of Incorporation in their entirety and all subsequent amendments thereto including but not limited to the Statement with Respect to Shares of Dravo Corporation as filed with the Secretary of the Commonwealth of Pennsylvania on January 27, 1992 are incorporated by reference to Exhibit 3.1 of the February 12, 1992 Form 8-K of the Registrant. (ii) By-laws of the Registrant as amended are filed herein under separate cover. (4) Instruments Defining the Rights of Security Holders, including Indentures (i) Articles of Amendment restating Dravo Corporation's Articles of Incorporation, described in Exhibit (3)(i) in this Form 10-K of the Registrant. (ii) Shareholders' Rights Agreement dated as of April 4, 1986 between Dravo Corporation and PNC Bank, N. A. (formerly Pittsburgh National Bank), as rights agent, incorporated by reference to Exhibit (1) of the April, 1986 Form 8-K of the Registrant. (iii) Statement with Respect to Shares - Domestic Business Corporation amending Section 3(a) of the Certificate of Designations, Preferences and Rights of Series D Cumulative Convertible Exchangeable Preference Stock is incorporated by reference to exhibit (4) (ii) of the June 30, 1990 Form 10-Q of the Registrant. (iv) Form of indemnification agreement between Dravo Corporation and members of its Board of Directors incorporated by reference to Exhibit (10)(xvii) of the December 31, 1987 Form 10-K of the Registrant. (v) Statement with respect to amended rules for Form S-8 is incorporated by reference to Exhibit (4)(x) of the December 31, 1990 Form 10-K of the Registrant. -18- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (continued) (4)(vi) Credit and Note and Stock Purchase Agreement dated as of September 21, 1988 by and among Dravo Corporation, its wholly-owned subsidiaries, Dravo Lime Company and Dravo Basic Materials Company, Inc. and The Prudential Insurance Company of America and Prudential Interfunding Corp. is incorporated by reference to Exhibit (4)(i) of the September 27, 1988 Form 8-K of the Registrant and amendment dated March 13, 1990 to said agreement is incorporated by reference to Exhibit (4)(v) of the December 31, 1989 Form 10-K of the Registrant. (vii) Registration agreement dated as of September 21, 1988 between Dravo Corporation and The Prudential Insurance Company of America, is incorporated by reference to Exhibit (4)(vi) of the September 27, 1988 Form 8-K of the Registrant. (viii) (a) Revolving Line of Credit Agreement with all attendant schedules and exhibits dated as of September 20, 1990, by and among Dravo Corporation, Dravo Lime Company, Dravo Basic Materials Company, Inc., First Alabama Bank, and PNC Bank, N. A. (formerly Pittsburgh National Bank) is incorporated by reference to Exhibit (4)(i) of the September 30, 1990 Form 10-Q of the Registrant. (b) Amendment dated September 20, 1990 to Credit and Note and Stock Purchase Agreement dated as of September 21, 1988 is incorporated by reference to Exhibit (4) (ii) of the September 30, 1990 Form 10-Q of the Registrant. (c) First amendment to the Companies' Pledge Agreement dated September 20, 1990 of the Credit and Note and Stock Purchase Agreement dated September 21, 1988 is incorporated by reference to Exhibit (4)(iii) of the September 30, 1990 Form 10-Q of the Registrant. (d) First amendment to the Second Intercreditor Agreement dated September 20, 1990 of the Credit and Note and Stock Purchase Agreement dated September 21, 1988 is incorporated by reference to Exhibit (4)(iv) of the September 30, 1990 Form 10-Q of the Registrant. (e) Intercreditor Agreement dated September 20, 1990 by and among The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N. A. (formerly Pittsburgh National Bank), Mellon Bank, N. A., and the Royal Bank of Canada is incorporated by reference to Exhibit (4) (v) of the September 30, 1990 Form 10-Q of the Registrant. -19- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (continued) (4)(ix) (a) Loan Agreement dated as of December 1, 1978 between Dravo Equipment Company and County of Harrison, Ohio. The Registrant hereby agrees to furnish to the Commission upon request a copy of the instrument listed under exhibit (4)(ix). The instrument does not authorize the issuance of securities in excess of 10 percent of total assets of the Registrant and its subsidiaries on a consolidated basis. (x) Override Agreement, dated January 21, 1992, between Dravo Corporation, The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N. A. (formerly Pittsburgh National Bank) and Continental Bank, N. A. is incorporated by reference to Exhibit 10.1 of the February 12, 1992 Form 8-K of the Registrant. (xi) First Amendment, dated March 10, 1993, to the Override Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xi) of the December 31, 1992 Form 10-K of the Registrant. (xii) Second Amendment, dated March 7, 1994, to the Override Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xii) of the December 31, 1993 Form 10-K of the Registrant. (xiii) First Amendment, dated March 7, 1994, to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xiii) of the December 31, 1993 Form 10-K of the Registrant. (xiv) Four copies of the First Amendment, (one each for The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N.A. and Continental Bank N.A.), dated March 7, 1994, to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 are incorporated by reference to Exhibit 4 (xiv) of the December 31, 1993 Form 10-K of the Registrant. (xv) Amendment Agreement dated August 1, 1994 encompassing the Third Amendment to the Override Agreement dated January 21, 1992 and the Second Amendment to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is incorporated by reference to the August 18, 1994 Form 8-K of the Registrant. -20- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (continued) (4)(xvi) Amendment Agreement dated January 3, 1995 encompassing the Fourth Amendment to the Override Agreement dated January 21, 1992 and the Third Amendment to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xvii) of the December 31, 1994 Form 10-K of the Registrant. (xvii) Amendment Agreement dated December 31, 1995 encompassing the Fifth Amendment to the Override Agreement dated January 21, 1992 and the Fourth Amendment to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is filed herein under separate cover. (xviii) Amendment and Restatement of Articles IV, V, VI and Appendix A dated February 15, 1996 of the Override Agreement dated January 21, 1992 is filed herein under separate cover. (10) Material Contracts (All of the following, except item 10 (xiv), are Management Contracts or Compensatory Plans or Arrangements required to be filed as an Exhibit to this Form 10-K.) (i) Dravo Corporation Executive Death and Disability Income Executive Benefits Plan (now Executive Benefit Plan), approved by the Board of Directors on October 23, 1980, incorporated by reference to Exhibit 10 (i) of the December 31, 1980 Form 10-K of the Registrant, and amendment thereto dated July 1, 1984, incorporated by reference to Exhibit 10 (i) of the December 31, 1984 Form 10-K of the Registrant. (ii) Dravo Corporation Stock Option Plan of 1978, as amended, incorporated by reference to Exhibit 10 (vi) of the December 31, 1982 Form 10-K of the Registrant. (iii) Dravo Corporation Long-Term Incentive Award Plan of 1983, as amended, incorporated by reference to Exhibit 10 (iv) of the December 31, 1987 Form 10-K of the Registrant. (iv) Dravo Corporation Employee Stock Option Plan of 1988, incorporated by reference to the Proxy Statement for the Annual Meeting of Shareholders on April 28, 1988. (v) Dravo Corporation Incentive Compensation Plan is filed herein under separate cover. (vi) Dravo Corporation Stock Option Plan of 1994, as amended December, 1995, is filed herein under separate cover. -21- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (continued) (10)(vii) Dravo Corporation Non-Employee Directors' Retainer Fee Plan, incorporated by reference to the Registrant's Registration Statement No. 333-01689 on Form S-8 dated March 13, 1996. (viii) Dravo Corporation Stock Incentive Compensation Plan, incorporated by reference to the Registrant's Registration Statement No. 333- 01691 on Form S-8 dated March 13, 1996. (ix) Agreement dated June 1, 1993 between Dravo Corporation and Ernest F. Ladd III is incorporated by reference to Exhibit 10 (viii) of the December 31, 1993 Form 10-K of the Registrant. (x) Agreement dated June 1, 1993 between Dravo Corporation and Carl A. Gilbert is incorporated by reference to Exhibit 10 (ix) of the December 31, 1993 Form 10-K of the Registrant. (xi) Agreement dated June 1, 1993 between Dravo Corporation and John R. Major is incorporated by reference to Exhibit 10 (xi) of the December 31, 1993 Form 10-K of the Registrant. (xii) Agreement dated June 1, 1993 between Dravo Corporation and James J. Puhala is filed herein under separate cover. (xiii) Agreement dated January 1, 1995 between Dravo Corporation and Donald H. Stowe, Jr., is filed herein under separate cover. (xiv) Noncompetition and Nondisclosure Agreement dated January 3, 1995 by and among Dravo Corporation, Dravo Basic Materials Company, Inc., Dravo Lime Company and Martin Marietta Materials, Inc. is incorporated by reference to Exhibit 10.1 of the January 17, 1995 Form 8-K of the Registrant. (11) Statement Re Computation of Per Share Earnings filed under separate cover. (13) 1995 Annual Report to Shareholders attached to this report under separate cover. Except for the pages and information thereof expressly incorporated by reference in this Form 10-K, the Annual Report to Shareholders is provided solely for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Form 10-K. (21) Subsidiaries of the Registrant filed under separate cover. (23) Consent of Independent Auditors filed under separate cover. -22- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) (a) 3. Exhibits (continued) (24) Powers of Attorney are filed herein under separate cover. (b) Reports on Form 8-K There were no reports on Form 8-K for the three months ended December 31, 1995. -23- 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. DRAVO CORPORATION March 27, 1996 By:/s/ CARL A. GILBERT Carl A. Gilbert, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date /s/ CARL A. GILBERT President, Chief Executive Carl A. Gilbert Officer and Director March 27, 1996 /s/ ERNEST F. LADD III Executive Vice President, Ernest F. Ladd III Chief Financial Officer March 27, 1996 /s/ LARRY J. WALKER Vice President and Larry J. Walker Controller March 27, 1996 *ARTHUR E. BYRNES Director March 27, 1996 Arthur E. Byrnes *JAMES C. HUNTINGTON, JR. Director March 27, 1996 James C. Huntington, Jr. *WILLIAM E. KASSLING Director March 27, 1996 William E. Kassling *WILLIAM G. ROTH Director March 27, 1996 William G. Roth *KONRAD M. WEIS Director March 27, 1996 Konrad M. Weis /s/ ERNEST F. LADD III *By Ernest F. Ladd III, Attorney-in-fact -24- INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Dravo Corporation: Under date of January 24, 1996, we reported on the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1995, and 1994, and the related consolidated statements of operations, retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to shareholders. As discussed in Notes 10 and 13 to the consolidated financial statements, the company adopted the method of accounting for postemployment benefits prescribed by Statement of Financial Accounting Standards No. 112 in 1994 and the methods of accounting for postretirement benefits other than pensions and income taxes prescribed by Statements of Financial Accounting Standard Nos. 106 and 109, respectively, in 1993. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in answer to Item 14(a)(2). The financial statement schedule is the responsibility of the company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania January 24, 1996 -25- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1995 1994 ASSETS Current assets: Cash and cash equivalents $ 279 $ 254 Accounts receivable 879 1,605 Notes receivable - 1,200 Current income tax benefit from affiliates 5,694 1,941 Net assets of discontinued operations 923 - Other current assets 434 1,585 Total current assets 8,209 6,585 Investments in affiliates 140,866 195,497 Notes receivable - 1,300 Deferred income tax benefit from affiliates 24,853 24,853 Other assets 19,532 19,241 Property, plant and equipment 6,832 6,832 Less accumulated depreciation and amortization 6,824 6,818 Net property, plant and equipment 8 14 Total assets $193,468 $247,490
See accompanying notes to financial statements. -26- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable-trade $ 1,566 $ 2,404 Accrued insurance - 567 Accrued retirement contribution 2,423 2,388 Net liabilities of discontinued operations - 13,547 Other current liabilities 641 675 Total current liabilities 4,630 19,581 Advances from affiliates 73,176 116,818 Net liabilities of discontinued operations 9,517 8,445 Other liabilities 6,290 5,900 Redeemable preference stock: Par value $1, issued 200,000 shares: Series D, cumulative, convertible, exchangeable (entitled in liquidation to $20.0 million) 20,000 20,000 Shareholders' equity: Preference stock, par value $1, authorized 1,878,870 shares: Series B, $2.475 cumulative, convertible, issued 25,386 and 28,386 shares (entitled in liquidation to $1.4 million and $1.6 million); 25 28 Series D, reported above Common stock, par value $1, authorized 35,000,000 shares; issued 15,055,237 and 14,985,839 15,055 14,986 Other shareholders' equity 64,775 61,732 Total shareholders' equity 79,855 76,746 Total liabilities and shareholders' equity $193,468 $247,490
See accompanying notes to financial statements. -27- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Operations
Years ended December 31, (In thousands) 1995 1994 1993 General and administrative expenses $ (961) $ (1,433) $ (1,046) Interest expense (9) (16) -- Interest income -- 9 49 Loss from continuing operations before taxes, affiliate earnings and extraordinary item (970) (1,440) (997) Income tax benefit (provision) 3,008 (4,107) 27,834 Earnings (loss) from continuing operations before affiliate earnings 2,038 (5,547) 26,837 Equity in affiliate earnings 8,943 1,544 8,565 Earnings (loss) from continuing operations 10,981 (4,003) 35,402 Loss from discontinued operations -- (6,554) (35,303) Net earnings (loss) before cumulative effect of change in accounting principle 10,981 (10,557) 99 Cumulative effect of change in accounting for income taxes -- -- (276) Net earnings (loss) $10,981 $(10,557) $ (177)
See accompanying notes to financial statements. -28- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1995 1994 1993 Cash flows from operating activities: Earnings (loss) from continuing operations $ 10,981 $ (4,003) $ 35,402 Adjustments to reconcile earnings (loss) from continuing operations to net cash provided (used) by continuing operations activities: Depreciation and amortization 6 9 13 Equity in earnings of affiliates (8,943) (1,544) (8,565) Cumulative effect of change in accounting principle for income taxes -- -- (276) Changes in assets and liabilities: Decrease (increase) in accounts receivable 726 (1,036) 691 Decrease (increase) in deferred income tax benefits (3,753) 2,542 (6,828) Decrease (increase) in other current assets 1,151 (1,269) 334 Increase in other assets (3,517) (7,791) (1,159) Increase (decrease) in accounts payable and accrued expenses (1,404) 961 (2,012) Increase (decrease) in other liabilities 390 3,352 (224) Net cash provided (used) by continuing operations activities (4,363) (8,779) 17,376 Loss from discontinued operations -- (6,554) (35,303) Increase (decrease) in net liabilities of discontinued operations (13,099) (4,592) 21,647 Proceeds from repayment of notes receivable from sale of discontinued operations 2,200 1,600 1,992 Net cash used by discontinued operations activities (10,899) (9,546) (11,664) Net cash provided (used) by operating activities $(15,262) $(18,325) $ 5,712
See accompanying notes to financial statements. -29- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1995 1994 1993 Cash flows from investing activities: Increase (decrease) in advances from subsidiaries $(68,068) $20,778 $(2,893) Dividends received from affiliates 88,000 -- -- Other, net -- 266 (581) Net cash provided (used) by investing activities 19,932 21,044 (3,474) Cash flows from financing activities: Proceeds from issuance of common stock 557 42 101 Purchase of treasury stock (2,667) -- -- Dividends paid (2,535) (2,544) (2,554) Net cash used by financing activities (4,645) (2,502) (2,453) Net increase (decrease) in cash and cash equivalents 25 217 (215) Cash and cash equivalents at beginning of year 254 37 252 Cash and cash equivalents at end of year $ 279 $ 254 $ 37
See accompanying notes to financial statements. -30- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Notes to Financial Statements Notes 1 through 3, 5 through 15, and 17 to Dravo Corporation's Consolidated Financial Statements have relevance to the parent company financial statements and should be read in conjunction therewith. Note 1: Commitments There was no continuing operations rental expense for 1995, 1994 or 1993. The minimum future rentals under noncancelable operating leases and minimum future rental receipts from subleases to third parties as of December 31, 1995 are indicated in the table below. Of the $7.5 million net minimum payments, $5.6 million has been expensed in connection with discontinued operations. (In thousands) 1996 $10,608 1997 10,750 1998 3,629 1999 -- 2000 -- After 2000 -- Total minimum payments required24,987 Less: Minimum sublease rental receipts (17,514) Net minimum payments $ 7,473 Note 2: Income Taxes The company adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109) effective January 1, 1993. The cumulative effect of this change in accounting for income taxes of $276,000 is determined as of January 1, 1993 and is reported separately in the Statements of Operations for the year ended December 31, 1993. Prior years financial statements were not restated to apply the provisions of SFAS 109. Dravo Corporation files a consolidated federal income tax return which includes the parent and consolidated subsidiaries. Dravo Corporation parent company financial statements recognize current income tax benefits to the extent the benefits are offset by current income tax liabilities of the consolidated subsidiaries. Long-term deferred income tax benefits are recognized to the extent that it is more likely than not that the company will generate sufficient consolidated taxable income to utilize net operating loss carryforwards prior to their expiration. -31- Note 2: Income Taxes (continued) The income tax benefit (provision) for the years ended December 31 are comprised of the following: (In thousands) 1995 1994 1993
Provision to offset tax benefits of subsidiaries $ -- $(4,107) $ -- Benefit to offset tax liabilities of subsidiaries 3,008 -- 2,981 Change in net deferred tax asset -- -- 24,853 $3,008 $(4,107) $27,834
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows: (In thousands)
1995 1994 Deferred tax assets: Provision for discontinued operations $ 3,008 $ 7,477 Net operating loss carryforwards 67,229 61,713 Investment tax credit carryforwards 1,411 1,506 Other -- 721 Total gross deferred tax assets 71,648 71,417 Less valuation allowance 38,251 41,882 Net deferred tax assets after valuation allowance 33,397 29,535 Deferred tax liabilities: Pension accrual 6,151 4,682 Other 2,393 -- Total gross deferred tax liabilities 8,544 4,682 Net deferred tax asset $24,853 $24,853
Management believes it is more likely than not that the net deferred tax asset of $24.9 million will be realized through the reversal of temporary differences and through its subsidiaries future income. In order to fully realize the net deferred tax asset, the parent company and its subsidiaries will need to generate future taxable income of approximately $73.2 million prior to the expiration of its net operating loss carryforwards. There can be no assurance, however, that the parent, or its subsidiaries, will generate any earnings or any specific level of continued earnings. -32- Note 3: Dividends Cash dividends paid to the Registrant for the respective years ended December 31: (In thousands)
1995 1994 1993 Consolidated affiliates $88,000 $-0- $-0- 50 percent or less owned companies accounted for by the equity method 916 792 586
-33- EXHIBITS Table of Contents Exhibit (Exhibit No.) Page No.
3. Articles of Incorporation and By-laws (ii) By-laws of the Registrant as amended (3) 1-11 4. Instruments Defining the Rights of Security Holders, Including Indentures (xvii) Amendment Agreement dated December 31, 1995 encompassing the Fifth Amendment to the Override Agreement and the Fourth Amendment to the Amended and Restated Revolving Credit Agreement. (4xvii) 1-45 (xviii) Amendment and Restatement of Articles IV, V, VI and Appendix A dated February 15, 1996 of the Override Agreement. (4xviii) 1-31 10. Material Contracts (v) Dravo Corporation Incentive Compensation Plan (10v) 1-5 (vi) Dravo Corporation Stock Option Plan of 1994, as amended December, 1995. (10vi) 1-11 (xii) Agreement between Dravo Corporation and James J. Puhala. (10xii) 1-16 (xiii) Agreement between Dravo Corporation and Donald H. Stowe, Jr. (10xiii) 1-16 11. Statement RE Computation of Per Share Earnings (11) 1, 2 13. 1995 Annual Report (13) 12-35 21. Subsidiaries of the Registrant (21) 1 23. Consent of Experts and Counsel (23) 1 24. Powers of Attorney (24) 1-5 27. Financial Data Schedule (EDGAR filing only) (27) 1
-34- EX-3 2 AMENDED BY-LAWS BY-LAWS As Amended April 27, 1995 ARTICLE I Board of Directors SECTION 1. The Board of Directors shall consist of not less than two and not more than twelve persons to be elected by the shareholders as herein provided, the exact number to be determined from time to time by proper resolution of the Board of Directors. The Directors shall be classified with respect to the time during which they shall severally hold office, by dividing them into three classes, each consisting as nearly as possible of the same number of Directors. At each annual meeting of the shareholders, Directors in the number for those whose terms then expire shall be elected to serve for terms of three years, except that the number of Directors to be elected to such terms shall be adjusted if the number of Directors shall have been decreased as provided herein so as to eliminate the place of a Director whose term then expires. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of the Corporation entitled to notice of, and to vote at, any meeting called for the election of Directors. Nominations, other than those made by or on behalf of the Board of Directors of the Corporation, shall be noticed in writing and shall be received by the Secretary of the Corporation not later than (i) with respect to an election of directors to be held at an annual meeting of shareholders, ninety (90) days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election of directors to be held at a special meeting of shareholders, the close of business on the fifteenth (15th) day following the date on which notice of such meeting is first given to shareholders or public disclosure of the meeting is made. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and residence address of each proposed nominee and of the notifying shareholder; (b) the principal occupation of each proposed nominee; (c) a representation that the notifying shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) the total number of shares of the Corporation that will be voted for each proposed nominee; (e) the total number of shares of the Corporation owned by the notifying shareholder; (f) a description of all arrangements or understandings between the notifying shareholder and each nominee and any other person or persons (naming such person or persons) relating to such nomination or nominations by the notifying shareholder; (g) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed with the Securities and Exchange Commission; and (h) the consent of each nominee to serve as a director of the Corporation if so elected. If the information submitted to the Corporation within the time prescribed above is determined by the Chairman of the Board of the Corporation to be deficient in any manner, the Chairman shall advise the notifying shareholder in writing of such deficiencies not Page 2 By-Laws later than the close of business on the fifth (5th) day following the date that the Corporation first received written notice of the nomination made by the notifying shareholder. The notifying shareholder must thereafter cure such deficiencies by sending a revised notification to the Secretary of the Corporation setting forth the required information which must be received by the Secretary in writing not later than the fifth (5th) day following the date that the notifying shareholder received notice from the Corporation of the deficiencies in the notifying shareholder's written nomination. Notwithstanding the above, these nominating procedures shall not apply to any special meeting of the shareholders of the Corporation called for the election of directors for which notice of the meeting was not given to shareholders at least twenty (20) days prior to the meeting. The chairman may disregard and refuse to recognize any nomination determined by him not to have been made in accordance with the foregoing procedures. If a vacancy occurs in the Board of Directors from any cause, including any increase in the number of Directors in the manner prescribed in this Section, a majority of the remaining members of the Board of Directors, though less than a quorum, shall have the power to elect a Director to fill such vacancy to serve for the balance of the unexpired term of the vacating director and until his or her successor has been elected and qualified. In the case of an increase in the number of Directors in the manner specified in this Section, the additional offices so created shall be assigned by the Board of Directors to the appropriate class so that the three classes shall continue to consist, as nearly as possible, of the same number of Directors. At any shareholders' meeting at which Directors are to be elected, separate elections shall be held for the Directors of each class then to be elected. The Directors shall hold office during the terms for which they have been elected and until their successors are elected and qualified. SECTION 2. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the Directors of the Corporation. Standing committees shall include the Audit and Finance Committee and the Compensation and Nominating Committee, each of which shall be comprised exclusively of Directors who are not current employees of the Corporation. Page 3 By-Laws SECTION 3. The Board of Directors, as soon as reasonably possible after each annual meeting of shareholders, shall hold a meeting to organize, elect officers of the Corporation and transact other business. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors and may be adjourned by the members present to any other time and place. Special meetings may be called at any time by the chief executive officer or any two members of the Board of Directors upon at least 24 hours' notice, which need not be in writing. A majority of the Directors in office shall constitute a quorum for the transaction of business. If all the Directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid corporate action as though it had been authorized at a meeting of the Board of Directors. One or more Directors may participate in a meeting of the Board of Directors, or of a committee thereof, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. SECTION 4. The Board of Directors shall have the right to adopt such rules and regulations for the conduct of business, and from time to time alter and amend the same, as to them may seem proper. SECTION 5. The Board of Directors (or the Compensation Committee by delegation from the Board), shall fix the compensation of the officers of the Corporation and such other employees who are designated by the Board of Directors as holding major positions of authority in the Corporation. ARTICLE II Officers SECTION 1. The officers of the Corporation to be elected by the Board of Directors shall consist of a Chairman, one or more Vice Chairman (any one or more of whom may have added to his title another word or words specially designating the further powers and duties assigned to that officer), a President, one or more Vice Presidents (any one or more of whom may be designated an Executive Vice President, Senior Vice President, Group Vice President or have added to his title another word or words specifically designating the further powers and Page 4 By-Laws duties assigned to that officer), a Treasurer, a Controller and a Secretary, who shall hold office until their respective successors are duly elected and qualified or until the earlier death, resignation or removal from office of any of them. SECTION 2. Subordinate officers to be appointed by the Board of Directors shall include one or more assistant secretaries and one or more assistant treasurers. ARTICLE III Duties of the Chairman SECTION 1. The Chairman, who shall be elected from among the Directors, shall preside at all meetings of the shareholders and of the Board of Directors at which he shall be present. ARTICLE IV Duties of the Vice Chairmen SECTION 1. The Vice Chairmen, who shall be elected from among the Directors, shall perform such duties as shall be prescribed time to time by the Board of Directors or the chief executive officer. ARTICLE V Duties of the President SECTION 1. The President, who shall be elected from among the Directors, shall be the chief executive officer of the Corporation, and be subject to the control of the Board of Directors, shall be in general and active charge of the business affairs of the Corporation, shall establish the various Divisions and units of the Corporation, and shall appoint and designate the duties of the Managers of Divisions of the Corporation. In the absence or inability to act of the President, the officer or officers designated from time to time by the Board of Directors shall perform the duties pertaining to the office of President. ARTICLE VI Duties of the Vice Presidents SECTION 1. The Vice Presidents shall perform such duties as shall be prescribed from time to time by the Board of Directors or the chief executive officer. Page 5 By-Laws ARTICLE VII Duties of the Secretary SECTION 1. The Secretary shall, under the direction of the chief executive officer, record the proceeding of all meetings of the Board of Directors and of the shareholders for presentation in a suitable book. The Secretary shall notify the shareholders of all annual and special meetings and the members of the Board of Directors of all special meetings, have charge of the corporate seal and perform all the duties which are customary and incident to the office of Secretary of like companies. ARTICLE VIII Duties of the Treasurer SECTION 1. The Treasurer shall, under the direction of the Vice President in charge of financial affairs, have general charge of the funds of the Corporation and shall make such reports of the receipts and disbursements in such form and manner as the Board of Directors may direct. He shall if so directed by the chief executive officer, attend any or all meetings of the Board of Directors and report on his activities as the chief executive officer may prescribe. ARTICLE IX Duties of the Controller SECTION 1. The Controller shall, under the direction of the Vice President in charge of financial affairs, maintain adequate records of all assets, liabilities and transactions of the Corporation; cause adequate audits to be currently and regularly made; prepare financial, cost and tax reports and other reports of a financial and accounting nature required by governmental agencies; and in conjunction with other officers and heads of departments initiate and enforce controls and procedures whereby the business of the Corporation shall be conducted with the maximum of efficiency and economy. He shall, if so directed by the chief executive officer, attend any or all meetings of the Board of Directors and report on his activities as the chief executive officer may prescribe. ARTICLE X Checks, Notes and Contracts SECTION 1. All checks drawn upon the funds of the Corporation and all promissory notes, drafts, bills of exchange or other negotiable instruments shall be signed in the name of the Corporation by such person or persons as the Board of Directors may from time to time designate. Page 6 By-Laws SECTION 2. All written contracts other than those mentioned in Section 1 of this Article shall be signed in the name of the Corporation by the Chairman or a Vice Chairman or the President or a Vice President, unless otherwise directed by the Board of Directors. ARTICLE XI Elections SECTION 1. In elections of directors by shareholders, voting need not be by ballot unless required by vote of the shareholders before the voting for election of directors begins. Election of officers shall be in such manner as a majority of the Directors present and voting at a duly organized meeting may determine. ARTICLE XII Offices SECTION 1. The registered office of the Corporation shall be in the City of Pittsburgh, County of Allegheny, State of Pennsylvania, but the Board of Directors may establish another office or other offices at any place or places in the state of Pennsylvania or elsewhere. ARTICLE XIII Seal SECTION 1. The seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its creation, the name of the State under whose laws it was created and the words "Corporate Seal". ARTICLE XIV Meetings of the Shareholders SECTION 1. Meetings of the shareholders may be held at such places within or without the State of Pennsylvania as may be fixed by the Board of Directors. The annual meeting of the shareholders of the Corporation for the election of Directors shall be held on such date and at such time and place as may be fixed from time to time by the Board of Directors, provided, however, that in fixing the date, time and place of said meeting the Board of Directors shall comply with all applicable statutes and regulations as well as the rules of the New York Stock Exchange. Page 7 By-Laws SECTION 2. Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board or the President of the Corporation. Notice shall be given by the Secretary of the time and place of holding the annual and any special meeting of the shareholders by mailing such notice to the addresses of said shareholders, as shown by the share register or the records of the Corporation, at least five days prior to the date of the meeting, except when a longer period of notice is required by law. SECTION 3. Unless otherwise provided in a resolution of the Board of Directors with respect to any meeting of shareholders and stated in the notice of the meeting, the presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for purposes of consideration and action on the matter. If no quorum be present at any meeting so called, the holders of less than a majority of said shares may meet and adjourn the meeting from time to time until a quorum be present or until action may be taken in the absence of a quorum in the manner prescribed by law. ARTICLE XV Share Certificates SECTION 1. Share certificates shall be issued to the shareholders and transfers thereof shall be made by a transfer agent, if one or more transfer agents are appointed by the Board of Directors, otherwise by the Secretary or Assistant Secretary. Transfers shall be made in person or by power of attorney on the books of the Corporation on the surrender of the certificates. The share certificates shall be signed by the Chairman, the President or a Vice President or other officer designated by the Board of Directors, countersigned by the Treasurer or Assistant Treasurer or other officers designated by the Board of Directors and sealed with the seal of the Corporation. One or more transfer agents and registrars of the shares of stock of the Corporation may be appointed by the Board of Directors. The signatures, countersignatures, and seal, or any of them on the share certificates may be executed in facsimile, engraved or printed, provided that the share certificates are signed or countersigned by a corporate transfer agent or by a corporate registrar other than the Corporation itself, appointed by the Board of Directors. ARTICLE XVI Resignations SECTION 1. Any Director or officer may resign his office at any time, such resignation to be in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the said resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. Page 8 By-Laws ARTICLE XVII Indemnification SECTION 1. The Corporation shall indemnify every person who is or was a party or is threatened to be made a party to or is involved (as a witness or otherwise) in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether or not by or in the right of the Corporation or otherwise (hereafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer or employee of the Corporation, or is or was serving at the request of the Corporation as a Director, officer or trustee or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, or by reason of any action alleged to have been taken or not taken by him or her while acting in any such capacity, against expenses (including attorneys' fees) and all liability and loss, including judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement (whether with or without court approval), actually and reasonable incurred by him or her in connection with such threatened, pending or completed action, suit or proceeding, except to the extent prohibited by law as the same exists or may hereafter be amended (except in the case of any such amendment which has the effect of narrowing indemnification rights that the Corporation was permitted to provide prior to such amendment); provided, however, that except with respect to claims described in Section 2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof), initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Subject to the foregoing indemnification, the right to indemnification conferred in this Section shall include the right to be paid by the Corporation expenses incurred; provided, however, that to the extent required by law, the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon receipt of an undertaking by or on behalf of such person to repay such amounts if it shall ultimately be determined that he or she is not entitled to be indemnified under this Article or otherwise. SECTION 2. If a claim under Section 1 is not paid in full by the Corporation within forty-five (45) days after a written claim has been received by the Corporation, the claimant may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim. The claimant shall also be entitled to be paid the expenses of prosecuting such claim to the extent he or she is successful in whole or in part on the merits or otherwise in establishing his or her right to indemnification or to the advancement of expenses. Page 9 By-Laws SECTION 3. The right to indemnification, including the right to the advancement of expenses, conferred in this Article shall not be exclusive of any other rights to which a person seeking indemnification or advancement of expenses hereunder may be entitled under any by-law, agreement, vote of shareholders, or directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity while holding that office. SECTION 4. The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations, including its obligation to advance expenses, whether arising under or pursuant to this Article or otherwise. SECTION 5. The Corporation shall have the express authority to enter into such agreements as the Board of Directors deem appropriate for the indemnification of, including the advancement of expenses to, present or future Directors, officers and employees of the Corporation in connection with their service to, or status with, the Corporation or any other corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, for whom such person is serving at the request of the Corporation. SECTION 6. The right to indemnification, including the right to the advancement of expenses provided herein, shall be a contract right, shall continue as to a person who has ceased to be a director, officer, employee, or to serve in any other of the capacities described herein, and shall inure to the benefit of the heirs, executors and administrators of such person. Notwithstanding any amendment, alteration or repeal of this Article or any of its provisions or the adoption of any provision inconsistent with this Article or any of its provisions, any person who is or was a director, officer or employee or is or was serving at the request of the Corporation as a director, officer, employee, or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be entitled to indemnification, including the right to the advancement of expenses, in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal or the adoption of such inconsistent provision except to the extent such amendment, alteration, repeal or inconsistent provisions provides broader rights with respect to indemnification, including the advancement of expenses, than the Corporation was permitted to provide prior to the amendment, alteration, repeal, or the adoption of such inconsistent provision or to the extent otherwise prescribed by law. Page 10 By-Laws ARTICLE XVIII By-Laws--Adoption, Alteration, Amendment and Repeal SECTION 1. The By-Laws of the Corporation may be adopted, altered, amended or repealed by a majority vote of the shareholders present and voting at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the Board of Directors present and voting at any regular or special meeting, subject always to the power of the shareholders to change any such action taken by the Board of Directors. ARTICLE XIX Limitation on Director Liability SECTION 1. A director of the Corporation shall not be personally liable for monetary damages for any action taken or failure to take any action unless the director has breached or failed to perform the duties of his office under Section 8363 of the Directors' Liability Act and such breach or failure to perform constitutes self-dealing, willful misconduct or recklessness; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director (i) for any responsibility or liability of such director pursuant to any criminal statute, or (ii) for any liability of a director for the payment of taxes pursuant to local, State or Federal law. This Article XIX shall not apply to any actions filed prior to January 27, 1987 or to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. SECTION 2. Notwithstanding any other provision of law, the Articles of Incorporation or the By-Laws of the Corporation, the affirmative vote of shareholders entitled to cast at least a majority of the votes which all shareholders would be entitled to cast in an annual election of directors (or such greater percentage of votes as shall be required by law) shall be required to adopt any amendment, alteration or repeal of, or to adopt any provision inconsistent with, this Article XIX or any of its provision, including this Section 2. Neither the repeal or modification of this Article XIX or any of its provisions nor the adoption of any provision inconsistent with this Article XIX or any of its provisions shall adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification or the adoption of such inconsistent provision. Page 11 By-Laws ARTICLE XX Applicability of Certain provisions of the Pennsylvania Business Corporation Law SECTION 1. Subchapters G (relating to Control Share Acquisitions), H (relating to Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control), I (relating to Severance Compensation for Employees Terminated Following Certain Control-Share Acquisitions), and J (relating to the Status of Labor Contracts Following Certain Business Combination Transactions) of Chapter 25 of the Pennsylvania Business Corporation Law shall not be applicable to the Corporation. EX-4 3 LOAN AMENDMENT AGREEMENT EXECUTION COUNTERPART AMENDMENT AGREEMENT This AMENDMENT AGREEMENT (this "Agreement" or this "Amendment"), dated as of December 31, 1995, is entered into by and among DRAVO CORPORATION, a Pennsylvania corporation ("Dravo"), DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic", together with Lime referred to herein as the "Companies"), FIRST ALABAMA BANK, a subsidiary of Regions Financial Corporation ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNC"), BANK OF AMERICA ILLINOIS (formerly known as Continental Bank and Continental Bank N.A.) ("BAI"; FAB, PNC and BAI collectively referred to herein as "Banks"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential" and the Banks collectively referred to as "Lenders" and each a "Lender"), and FAB, as agent for the Banks (in such capacity, together with its successors and assigns, the "Agent") and BAI, as documentation agent for the Banks (in such capacity, together with its successors and assigns, the "Documentation Agent"). PRELIMINARY STATEMENTS (1) The Companies, Dravo and the Lenders have entered into an Override Agreement, dated as of January 21, 1992, as amended by the First Amendment to Override Agreement, dated March 10, 1993, the Second Amendment to Override Agreement, dated as of March 7, 1994, the Amendment Agreement, dated as of August 1, 1994 and the Amendment Agreement, dated as of January 3, 1995 (as so amended, the "Override Agreement"). In addition, the Companies, the Agent and the Lenders have entered into an Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, by the Amendment Agreement dated as of August 1, 1994 and the Amendment Agreement dated as of January 3, 1995 (as so amended, the "Revolving Credit Agreement"). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Override Agreement, as amended hereby. (2) The parties hereto desire to amend the Revolving Credit Agreement, the Override Agreement and certain other Operative Documents to reflect certain covenant changes, among other things. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I FIFTH AMENDMENT TO OVERRIDE AGREEMENT SECTION 1.01. Amendments to Override Agreement. The Override Agreement shall be, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, amended as follows: (a) Amendments to Article IV. Article IV shall be amended as follows: (i) Section 4.01(a) is amended by deleting the word "and" and the semicolon following clause (viii), adding a period at the end of clause (viii), and deleting in its entirety the following clause (ix): "(ix) promptly upon receipt or transmission thereof, a copy of each report (financial or otherwise), notice (including, without limitation, any notice disclosing any default), certificate or statement received or provided by it or any of its Subsidiaries pursuant to any Transaction Document, to the extent not provided to the Lenders by any Dravo Party pursuant to clauses (i) through (viii) above." (ii) Section 4.01(b) is amended by deleting in its entirety the phrase "(other than Lime SPV)" in each place in which it appears therein; (iii) Section 4.01(b) is further amended by deleting in its entirety the following sentences at the end thereof: "The inspection rights of the Lenders with respect to Lime SPV shall be governed by the Master Common Facilities Agreement as in effect on the Initial Funding Date. Each of the Dravo Parties further covenants that, so long as a Lender shall hold any Note or Notes or any Secured Obligation shall remain outstanding, it will permit one of the Lenders and its representatives to perform an annual collateral audit with respect to the Collateral, at the expense of the Dravo Parties, which collateral audit shall be conducted in accordance with such Lender's then existing practices and procedures relating to collateral audits." (iv) Section 4.01(d) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, the SPV General Partner and the SPV Limited Partner)". (v) Section 4.01(e) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, the SPV General Partner and the SPV Limited Partner)". (vi) Section 4.01(f) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, the SPV General Partner and the SPV Limited Partner)". (vii) Section 4.01(g) is amended by deleting in its entirety the parenthetical phrase "(other than Discontinued Subsidiaries, Lime SPV, the SPV General Partner and the SPV Limited Partner)" in each place in which it appears therein and substituting therefor in each case the new parenthetical phrase "(other than Discontinued Subsidiaries)". (viii) Section 4.01(h) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, the SPV General Partner and the SPV Limited Partner)". (ix) Section 4.01(l) is amended by deleting in its entirety the parenthetical phrase "(other than any properties acquired by Lime SPV for use in the Project)". (x) Section 4.01 is amended by deleting in its entirety each of the following subsections (m), (n), (o), (p), (q), (r) and (s) and relettering subsections (t), (u), (v), (w) as (m), (n), (o) and (p), respectively. "(m) Direct Ownership of Lime SPV, the SPV General Partner and the SPV Limited Partner. Lime shall maintain direct 100% ownership of all capital stock (other than the Class B Common Stock of the SPV General Partner) of the SPV General Partner and the SPV Limited Partner, and shall cause the SPV General Partner and the SPV Limited Partner to maintain direct 100% ownership of all of the partnership interests of Lime SPV. (n) Lime SPV, SPV General Partner and SPV Limited Partner Organizational Documents. Lime shall not, without the prior written consent of the Lenders, permit Lime SPV, the SPV General Partner and the SPV Limited Partner to amend, supplement, replace, restate or otherwise modify any of the organizational documents of such Person, including, without limitation, (i) the limited partnership agreement and certificate of limited partnership of Lime SPV and (ii) the articles of incorporation of the SPV General Partner and the SPV Limited Partner. (o) Issuance of Additional Capital Stock by the SPV General Partner and the SPV Limited Partner. Except for (i) one share of Class B Common Stock issued by the SPV General Partner to PruPower and (ii) any shares of capital stock issued by the SPV General Partner and the SPV Limited Partner to Lime on or before the Initial Funding Date, Lime shall not permit the SPV General Partner or the SPV Limited Partner to issue, sell or otherwise dispose of (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) any shares of any class of its capital stock. (p) Distributions Under Deposit and Disbursement Agreement. Lime shall cause Lime SPV, the SPV General Partner and the SPV Limited Partner to distribute immediately to Lime all funds received by Lime SPV pursuant to the Deposit and Disbursement Agreement. (q) Amendments to Master Common Facilities Agreement and Deposit and Disbursement Agreement. Lime shall not, without the prior written consent of the Lenders, enter into any amendment of (i) the provisions of the Master Common Facility Agreement set forth in Section 9.1 of the Project Intercreditor Agreement or (ii) the requirement set forth in Section 2.2(b)(ii) of the Deposit and Disbursement Agreement that Lime shall receive all remaining amounts after all other required payments (including, without limitation, required payments resulting from any amendment to said Section 2.2(b)(ii)) have been made pursuant thereto. (r) Replacement of Lime as Operator of the Black River Facility. Lime agrees and acknowledges that the Lenders shall have the right to replace Lime as the operator of the Black River Facility in accordance with the terms of the Master Common Facilities Agreement. (s) Indemnity of Lime SPV Against Lime. Notwithstanding anything to the contrary contained in the Master Common Facilities Agreement, Lime (in its capacity as "Operator" thereunder) shall have no obligation to indemnify Lime SPV with respect to any amounts due and payable on the Notes (as defined in the Note Purchase Agreement) (including, without limitation, any principal, interest, fees or Make- Whole Amount (as defined in the Note Purchase Agreement)), except to the extent of any amounts realized upon the sale, foreclosure or other disposition of the Shared Collateral (as defined in Annex A to the Project Intercreditor Agreement)." (xi) Section 4.02(b) is amended in its entirety to read as follows: "Fixed Charge Test. Dravo shall cause the Fixed Charge Coverage Ratio of Dravo and its Subsidiaries as at the end of each of Dravo's fiscal quarters to equal or exceed 1.25 from the Effective Date to and including December 31, 1996 and 1.5 thereafter. (b) Amendments to Article V. Article V shall be amended as follows: (i) Section 5.01(a), Working Capital and Current Ratio Requirements, is amended by deleting such Section in its entirety and substituting therefor the following new Section 5.01(a): "(a) Net Worth Requirement. Dravo will not permit its Consolidated Net Worth at any time to be less than $90,784,000 (the "Base Amount") as of the Effective Date hereof and as of each quarter ending thereafter to be less than a sum equal to the Base Amount plus 50% of Consolidated Net Earnings available to common shareholders (to the extent this is a positive number) for each quarter ending after the Effective Date." (ii) Section 5.01(b) is amended in its entirety to read as follows: "(b) Dividend Restrictions. Dravo shall not: (x) pay or declare any dividend on any class of its stock or make any other distribution on account of any class of its stock (referred to herein collectively as "Dividends") or (y) make, directly or indirectly (including by Subsidiary of Dravo), any Excess Redemption (all Dividends and Excess Redemptions collectively referred to herein as "Dravo Restricted Payments") if such Dravo Restricted Payments, taken together with all other Dravo Restricted Payments made on or after September 30, 1995, would exceed 25% of Consolidated Net Earnings from Continuing Operations after September 30, 1995. There shall not be included in Dravo Restricted Payments (x) Dividends paid, or distributions made, in stock of Dravo; or (y) exchanges of stock of one or more classes of Dravo for common stock of Dravo or for stock of Dravo of the same class, except to the extent that cash or other value is involved in such exchange; or (z) the payment of regularly scheduled dividends on the Shares or the Preference Stock Series B originally issued to the Mechling estate (the "Mechling Shares"). The term "stock" as used in this Section 5.01(b) shall include warrants or options to purchase stock. Notwithstanding the foregoing, Dravo shall not make a Dravo Restricted Payment if a Default or Event of Default has occurred or would occur as a result of such Dravo Restricted Payment. As used herein, the term "Excess Redemption" means any redemption, purchase or other acquisition of any shares of the capital stock (including without limitation any preferred stock) of Dravo in an amount exceeding the cash proceeds received by Dravo in connection with any issuance or sale of any capital stock of Dravo (net of all reasonable costs and expenses incurred by Dravo in connection with such issuance of capital stock) occurring after September 30, 1995. (iii) Section 5.01(c) is amended in its entirety to read as follows: "(c) Debt. Dravo shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist: (i) any Debt in excess of 50% of Dravo Consolidated Net Tangible Assets from the Effective Date hereof to and including December 31, 1996 and 45% of Dravo Consolidated Net Tangible Assets thereafter; or (ii) any Debt so that the ratio of Debt to EBDIAT would exceed 3.25 to 1.0 from the Effective Date hereof to and including December 31, 1996 and 3.0 to 1.0 thereafter. (iv) Section 5.01(d) is amended by deleting the phrase "(other than (A) the Secured Obligations, (B) any Debt incurred in connection with the Project pursuant to the Note Purchase Agreement and the other Financing Documents and (C) any Debt permitted by Section 5.01(e) hereof)" in its entirety and substituting therefor the new phrase "(other than the Secured Obligations)". (v) Section 5.01 is amended by deleting in its entirety the following subsection (e): "(e) Maximum Project Debt. Dravo shall not permit Lime SPV, the SPV General Partner and the SPV Limited Partner to create, incur, assume or suffer to exist at any time subsequent to the Initial Funding Date, any Debt for borrowed money or any guaranties of Debt for borrowed money (other than the outstanding principal amount of the Notes (as defined in the Note Purchase Agreement), which in no event shall exceed $50,000,000) in an aggregate amount in excess of the sum of (i) $10,000,000, (ii) the amount of any Debt incurred to finance capital expenditures required to enable such Persons to comply with Applicable Law (including, without limitation, Environmental Laws (as defined in the Note Purchase Agreement)) and (iii) the amount of any Debt incurred by such Persons upon the occurrence and during the continuance of an Event of Default (as defined in Annex A to the Project Intercreditor Agreement)." (vi) Section 5.02(a) is amended by deleting such Section in its entirety. (vii) Section 5.02(b) is amended by deleting such Section in its entirety. (viii) Section 5.02 is amended by deleting in its entirety the following subsection (d) at the end thereof: "(d) Lime shall not permit Lime SPV to enter into any lime supply agreements other than (i) Economically Similar Contracts (as defined in Annex A to the Project Intercreditor Agreement) and (ii) other lime supply agreements that are approved in writing by the Lenders." (ix) The introductory paragraph of Section 5.03 is amended in its entirety to read as follows: "Section 5.03. Dravo Parties Negative Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, each of the Dravo Parties shall comply with each of the following:" (x) Section 5.03(a)(i)(H) is amended in its entirety to read as follows: "(H) Liens created or permitted by any Operative Document entered into in connection with this Agreement (including, without limitation, Permitted Liens (as defined in the Note Purchase Agreement)), and" (xi) Section 5.03(a)(ii) is amended by deleting in its entirety the following proviso at the end thereof: "provided, however, that (a) notwithstanding the foregoing, Lime may (i) make advances to Lime SPV pursuant to Section 1.4(d) of the Master Common Facilities Agreement and (ii) make capital contributions (including, without limitation, the Investment (as defined in the Note Purchase Agreement)) to, and pay any other amount (including, without limitation, any amount required to be paid by Lime pursuant to Section 3.15 of the Lime Security Agreement (as defined in the Note Purchase Agreement) as in effect on the Initial Funding Date) on behalf of, Lime SPV, the SPV General Partner and the SPV Limited Partner (x) on or before the Conversion Date (as defined in Annex A to the Project Intercreditor Agreement) pursuant to the Financing Documents, in an aggregate amount not to exceed the sum of (A) $12,400,000 in the aggregate on the Initial Funding Date and (B) $5,300,000 in the aggregate for amounts required to be contributed by Lime to Lime SPV pursuant to Section 3.15(b) of the Lime Security Agreement (as defined in the Note Purchase Agreement) as in effect on the Initial Funding Date, and (y) from time to time after said Conversion Date, in an aggregate amount not to exceed the lesser of (1) $4,000,000 and (2) the amount disbursed to Lime SPV from the Construction Account (as defined in Annex A to the Project Intercreditor Agreement) on the Conversion Date pursuant to Section 2.1(b) of the Deposit and Disbursement Agreement as in effect on the Initial Funding Date, and (b) the foregoing provisions of this Section 5.03(a)(ii) shall not apply to Lime SPV, the SPV General Partner and the SPV Limited Partner." (xii) Section 5.03(a)(iii) is amended by deleting in its entirety the phrase "shall not apply to any Discontinued Subsidiary, Lime SPV, the SPV General Partner or the SPV Limited Partner" and substituting therefor the new phrase "shall not apply to any Discontinued Subsidiary". (xiii) Section 5.03(a)(iv) is amended by deleting in its entirety the phrase "except that (1) Lime SPV, the SPV General Partner and the SPV Limited Partner may sell or otherwise dispose of assets in the ordinary course of business (including, without limitation, the sale or other disposition of worn-out or obsolete equipment), (2) Lime SPV, the SPV General Partner and the SPV Limited Partner may sell or otherwise dispose of any assets to the Lenders (on behalf of the Companies) or, in the event that the Lenders have been given a right of first refusal to purchase such assets and have declined to exercise such right, to any other Person, (3) Lime SPV, the SPV General Partner and the SPV Limited Partner may merge or consolidate with or into any Person if the continuing or surviving entity is Lime SPV, the SPV General Partner or the SPV Limited Partner, and (4) so long as no Default" and substituting therefor the phrase "except that so long as no Default". (xiv) Section 5.03(a)(iv) is further amended by deleting in its entirety the following proviso at the end thereof: provided, however, that any decision by the Lenders to purchase assets from Lime SPV, the SPV General Partner or the SPV Limited Partner pursuant to clause (2) above shall be made by the Majority Lenders (provided, that any Lender that does not concur in the decision of the Majority Lenders shall not be obligated to provide any funds for the purchase price of such assets, unless such funds are otherwise available to be borrowed by the Companies from such Lender pursuant to the Revolving Credit Agreement and the Companies so request such borrowing pursuant to the terms thereof); (xv) Section 5.03(a)(v) is deleted in its entirety. (c) Amendments to Article VI. Article VI shall be amended as follows: (i) Section 6.01(c) is amended by deleting in its entirety from the first and second line thereof the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)" and from the seventeenth and eighteenth lines thereof the phrase "other than Lime SPV, SPV General Partner and SPV Limited Partner". (ii) Section 6.01(e) is amended by deleting the references to "4.01(m)" and "4.01(o)". (iii) Section 6.01(g) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)". (iv) Section 6.01(h) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)". (v) Section 6.01(i) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)" in each place in which it appears therein. (vi) Section 6.01(j) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)" in each place in which it appears therein. (vii) Section 6.01(l) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)". (viii) Section 6.01(m) is amended by deleting in its entirety the parenthetical phrase "(other than Lime SPV, SPV General Partner and SPV Limited Partner)". (ix) Section 6.01(o) is amended in its entirety to read as follows: "(o) at any time, the aggregate commitment for advances (excluding any sublimit or commitment for the issuance of letters of credit) under all revolving credit facilities of the Companies having a revolving term with an expiration date later than six calendar months after such time shall be less than $40,000,000," (x) Section 6.01 is amended by deleting in its entirety each of the following subsections (q), (r) and (s): "(q) an "Event of Default" shall have occurred under the Note Purchase Agreement and the Notes (as defined in the Note Purchase Agreement) shall have been declared due and payable pursuant to the terms thereof; or (r) any event or condition (unless due to Uncontrollable Forces (as defined in Article 4 of the Master Common Facilities Agreement as in effect on the Initial Funding Date)) affecting the Project (other than the Project Kilns (as defined in Annex A to the Project Intercreditor Agreement)) shall have occurred that has had, or could reasonably be expected to have, a material adverse effect on the operation of the Black River Facility, and either (i) Lime SPV shall not have commenced remedial action, within 60 days after the occurrence of such event or condition, to cure such event or condition in such manner as shall be necessary to cause such adverse effect to cease to be material (or to cause such expectation to cease to be reasonable) or (ii) such remedial action shall not have been completed within 90 days after the occurrence of such event or condition, if reasonably susceptible to cure within such period, or, if not reasonably susceptible to cure within such period, Lime SPV shall not be diligently pursuing the steps necessary to effect such cure; or (s) Lime shall have failed to make a Capacity Payment (as defined in the Note Purchase Agreement) and the Collateral Agent shall have received a written notice from the Required Holders (as defined in the Note Purchase Agreement) directing it to take action to realize upon the Assigned Lime Contract Collateral (as defined in Annex A to the Project Intercreditor Agreement) as a result of such failure;" (xi) Section 6.01 is amended by deleting the phrase "clauses (a) through (f), inclusive, or (k) through (s)" in its entirety and substituting therefor the new phrase "clauses (a) through (f), inclusive, or (k) through (p)". (d) Amendment to Article VII. Article VII shall be amended as follows: (i) Section 7.01 is amended by deleting in its entirety each of the following subsections (q) and (r): "(q) Ownership of Lime SPV, the SPV General Partner and the SPV Limited Partner. Lime owns directly 100% of all capital stock (other than one share of Class B Common Stock of the SPV General Partner that is owned by PruPower) of the SPV General Partner and the SPV Limited Partner, and the SPV General Partner and the SPV Limited Partner own directly 100% of the partnership interests of Lime SPV. (r) Project Improvements. The real estate improvements described in Exhibit A to the Improvements Deed, dated as of August 1, 1994, between Lime and Lime SPV, have been constructed for use by the Project and were purchased with proceeds from the issuance of the Construction Notes and with additional funds made available to Lime SPV as equity contributions." (ii) Section 7.01 is further amended by adding as a new subsection (q) the following: "(q) The Dravo Parties shall fail on or prior to February 15, 1996 to grant to the Collateral Agent on behalf of the Lenders a first-priority lien and/or security interest in the property described in Schedule 7.01(q) under security agreements, mortgages and other instruments satisfactory to Lenders, together with such opinions and other requirements deemed necessary by the Lenders. SECTION 1.02. Amendments to Appendix A. Appendix A shall be amended as follows: (a) The definition "Consolidated Net Earnings" is amended in its entirety to read as follows: "Consolidated Net Earnings" shall mean the consolidated net income (as determined in accordance with GAAP), without giving effect to any gains (net of expenses and taxes applicable thereto) in excess of losses resulting from the sale, conversion or other disposition of capital assets (i.e., assets other than current assets), any gains resulting from the write-up of assets, any extraordinary gains (except for gains resulting from the use of net operating loss carryforwards), any items of gain (or plus any items of loss) that were included in determining such consolidated net income and were not realized in the ordinary course of business (whether or not classified as "ordinary" by GAAP), any equity of such Person or any of its Subsidiaries in the unremitted earnings of any corporation which is not a Subsidiary, any earnings of any Person acquired by such Person or any of its Subsidiaries through purchase, merger or consolidation or otherwise for any year prior to the year of acquisition, or any deferred credit representing the excess of equity in any of its Subsidiaries at the date of acquisition over the cost of the investment in such, all determined in accordance with GAAP; provided, however, that any increase in earnings arising out of the recognition after December 31, 1994 of a deferred tax asset in an amount not to exceed $27,000,000 in the aggregate and any deduction from earnings or equity from the write off of any prepaid pension assets in an amount not to exceed $27,000,000 in the aggregate shall not be taken into account in determining Consolidated Net Earnings. (b) The definition "Discontinued Operations Fixed Charge Coverage Ratio" is amended by deleting such definition in its entirety. (c) The definition "Fixed Charge Coverage Ratio" is amended in its entirety to read as follows: "Fixed Charge Coverage Ratio" shall mean, for any fiscal quarter of Dravo, the ratio obtained by dividing (a) EBITDAR of Dravo and its Subsidiaries for the three immediately preceding fiscal quarters of Dravo and the quarter of determination (the "Relevant Preceding Period") by (b) the sum of: (i) the amount of interest paid or accrued (including all imputed or capitalized interest) on all Debt of Dravo and its Subsidiaries during the Relevant Preceding Period (including all imputed interest on Capitalized Lease Obligations), plus (ii) all installments of Funded Debt (excluding the indebtedness incurred by the Companies under the Revolving Credit Agreement) scheduled to become due in the immediately succeeding four fiscal quarters of Dravo (the "Relevant Succeeding Period"), plus (iii) the regularly scheduled dividends to be paid to the holders of the Shares or any other preferred stock of Dravo or any of its Subsidiaries during the Relevant Succeeding Period, plus (iv) the regularly scheduled redemptions of the Shares or any other preferred stock, if any, of Dravo or any of its Subsidiaries to be made by Dravo during the Relevant Succeeding Period, plus (v) net rentals as reflected on the most recently delivered financial statements. (d) The definition "Funded Debt" is amended in its entirety to read as follows: "Funded Debt shall mean, without duplication, any: (i) obligation payable more than one year from the date of the creation thereof, which under GAAP is shown on the balance sheet as a liability (including without limitation Capitalized Lease Obligations and excluding reserves for deferred income taxes and other reserves to the extent that such reserves do not constitute an obligation), plus (ii) the aggregate amount of indebtedness of public authorities incurred in connection with industrial revenue bond and pollution control revenue bond financings of plant facilities or equipment to be leased to or operated by such Person, plus (iii) all off-balance sheet indebtedness (including without limitation guaranty obligations and indebtedness incurred in connection with sale/leaseback transactions), other than obligations under operating leases, plus (iv) all Guarantees, endorsements (other than endorsements of negotiable instruments for collection in the ordinary course of business) and other contingent liabilities (whether direct or indirect) in connection with the obligations, stock or dividends of any Person, plus (v) obligations under any other contract in connection with any borrowed money which in effect is substantially equivalent to a Guaranty." (e) The definition "Notes" is amended by deleting in its entirety the phrase "the Additional Notes". (f) The definition "Operative Documents" is amended by deleting in its entirety the phrase "the SPV Stock Pledge Agreement, the SPV Partner Pledge Agreement, the Project Intercreditor Agreement, the Assignment and Security Agreement," immediately following the phrase "the Basic Mortgage," and inserting the punctuation and phrase ", the Dravo Guaranty" immediately following the phrase "the Environmental Indemnity Agreement". (g) The definition "Security Documents" is amended by deleting in its entirety the phrase "the SPV Stock Pledge Agreement, the SPV Partner Pledge Agreement, the Assignment and Security Agreement," immediately following the phrase "the Basic Mortgage,". (h) The following new definitions shall be inserted in alphabetical order in Appendix A: "Consolidated Net Worth" shall mean, for any Person, the Consolidated stockholders' equity, as defined in accordance with GAAP, plus the book value of the Shares, plus charges for additional minimum liabilities related to qualified pension plans, provided however, that any increase in Consolidated Net Worth arising out of the recognition after December 31, 1994 of a deferred tax asset in an amount not to exceed $27,000,000 in the aggregate and any deduction in Consolidated Net Worth from the write off of any prepaid pension assets in an amount not to exceed $27,000,000 in the aggregate shall not be taken into account in determining Consolidated Net Worth. "Dravo Guaranty" shall mean that certain Guaranty Agreement dated as of December 31, 1995, executed in favor of the Collateral Agent on behalf of the Lenders, as it may be amended, modified or supplemented from time to time in accordance with its terms. "EBITDAR" shall mean, for any period, Consolidated Net Earnings from Continuing Operations adjusted by adding thereto the amount of all amortization of intangibles, interests, taxes (after taking into account the use of net operating loss carryforwards), depreciation and rents that were deducted in arriving at Consolidated Net Earnings for such period. "Effective Date" shall mean October 1, 1995. (i) Each of the following definitions shall be deleted in its entirety: "Additional Notes" shall mean those certain Revolving Notes attached as Exhibits A-5, A-6, A-7 and A-8 to the Revolving Credit Agreement, executed by each of Basic and Lime in favor of each of the Lenders, respectively, and each Note delivered in substitution or exchange for any such Note. "Assignment and Security Agreement" means the Assignment and Security Agreement, dated as of August 1, 1994, by Lime in favor of the Collateral Agent, as the same may be amended, modified or supplemented from time to time in accordance with its terms. "Black River Facility" shall have the meaning set forth in Annex A to the Project Intercreditor Agreement. "Construction Notes" shall have the meaning set forth in the Note Purchase Agreement. "Deposit and Disbursement Agreement" shall mean the Deposit and Disbursement Agreement, dated as of August 1, 1994, among Wilmington Trust Company, as Collateral Agent, Wilmington Trust Company, as Disbursement Agent, and Lime SPV, as said Agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof and the terms of the other Transaction Documents. "Financing Documents" shall have the meaning set forth in Annex A to the Project Intercreditor Agreement. "Initial Funding Date" shall have the meaning set forth in the Note Purchase Agreement. "Lime SPV" shall mean Dravo Black River Limited Partnership, a Delaware limited partnership. "Master Common Facilities Agreement" shall mean that certain Master Common Facilities Agreement, dated as of August 1, 1994, between Lime and Lime SPV, as said Agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof and the terms of the other Transaction Documents. "Note Purchase Agreement" shall mean that certain Note Purchase Agreement, dated as of August 1, 1994, by and between Lime SPV and PruPower, as said Agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof and the terms of the other Transaction Documents. "Project" shall have the meaning set forth in Annex A to the Project Intercreditor Agreement. "Project Intercreditor Agreement" shall mean the Intercreditor Agreement, dated as of August 1, 1994, by and among Wilmington Trust Company, PruPower, the Collateral Agent, FAB, PNC, BAI and Prudential, as consented to and acknowledged by Lime and Lime SPV, as such Agreement may be amended, modified or supplemented from time to time in accordance with its terms. "Prudential" shall mean The Prudential Insurance Company of America, acting through Prudential Capital Group, and its successors and assigns. "PruPower" shall mean The Prudential Insurance Company of America, as purchaser of the Construction Notes of Lime SPV pursuant to the Note Purchase Agreement, and its successors and assigns. "SPV General Partner" shall mean DBR General Inc., a Delaware corporation. "SPV Limited Partner" shall mean Dravo Black River Limited Inc., a Delaware corporation. "SPV Partner Pledge Agreement" shall mean the Partner Security Agreement, dated as of August 1, 1994, by the SPV General Partner and the SPV Limited Partner in favor of the Collateral Agent, as it may be amended, modified or supplemented from time to time in accordance with its terms. "SPV Stock Pledge Agreement" shall mean the Stock Pledge Agreement, dated as of August 1, 1994, by Lime in favor of the Collateral Agent, as it may be amended, modified or supplemented from time to time in accordance with its terms. "Transaction Documents" shall have the meaning set forth in Annex A to the Project Intercreditor Agreement. "Unavailable Cash" shall mean any and all Project Revenues (as defined in Annex A of the Project Intercreditor Agreement) that, pursuant to the terms of the Deposit and Disbursement Agreement or any other Transaction Document, are not available for distribution to Lime (other than any amounts paid for Debt Service (as defined in Annex A to the Project Intercreditor Agreement) and Operation and Maintenance Costs (as defined in Article 4 of the Master Common Facilities Agreement as in effect on the Initial Funding Date)); provided, however, that Unavailable Cash shall include any expenditures made by Lime SPV for Capital Additions or Modifications (as defined in Article 4 of the Master Common Facilities Agreement as in effect on the Initial Funding Date), or for any adjustments, alterations or other physical changes to the Project of any kind whatsoever, in excess of $1,500,000 in any calendar year to the extent that such excess was not funded with (i) additional Debt of Lime SPV or (ii) any equity contribution by Lime to Lime SPV made in accordance with Section 5.03(a)(ii) of the Override Agreement. ARTICLE II FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT SECTION 2.01. Amendments to Revolving Credit Agreement. The Revolving Credit Agreement shall be, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, amended as follows: (a) Amendments to Article I. Article I shall be amended as follows: (i) Section 1.1 is amended in its entirety to read as follows: "SECTION 1.1. Revolving Line of Credit Facility. (a) Commitment. Subject to all the terms and conditions hereof, including without limitation Section 1.3, and so long as there shall exist no Event of Default or Default, Lenders, subject to the terms and conditions hereof, agree to lend to Borrowers such sums as Borrowers may request, from time to time, and at any time, on a revolving basis until July 31, 1997 (as such date may be extended pursuant to Section 1.9, the "Maturity Date"), provided that, after giving effect to the making of any such loans and the issuance of any Letter of Credit, the aggregate principal amount of outstanding revolving line of credit loans (including any loans deemed to be made pursuant to Section 11.2 as a result of a drawing on any Letter of Credit) plus the Stated Amount of all outstanding Letters of Credit (calculated after giving effect to any such drawing) made pursuant to this Agreement shall not at any time exceed the sum of SIXTY-FIVE MILLION AND NO/100THS DOLLARS ($65,000,000.00), and provided further that the aggregate principal amount of outstanding revolving line of credit loans (including any loans deemed to be made pursuant to Section 11.2 as a result of a drawing on any Letter of Credit) plus the Stated Amount of all outstanding Letters of Credit (calculated after giving effect to any such drawing) made by a Lender pursuant to this Agreement shall not exceed the maximum limitation for each Lender shown opposite the name of each Lender and designated the "Revolving Line of Credit and Letters of Credit Facilities Combined" on Schedule I attached hereto and made a part hereof (calculated after giving effect to any termination of a Lender's Commitment (as defined in Section 1.9) pursuant to Section 1.9). All such revolving loans shall be referred to herein as the "Revolving Line of Credit". Subject to the terms and conditions hereof, advances under the Revolving Line of Credit, with respect to a Base Rate Loan, shall be equal to at least ONE HUNDRED THOUSAND AND NO/100THS DOLLARS ($100,000.00) or an integral multiple thereof and with respect to a Eurodollar Rate Loan, shall be equal to at least FIVE MILLION AND NO/100THS DOLLARS ($5,000,000.00) or an integral multiple of $1,000,000. Subject to all the terms and conditions hereof, Borrowers may borrow, repay and reborrow at any time or from time to time from the date hereof to but excluding July 31, 1997 (unless extended in writing pursuant to Section 1.9) or the termination of the revolving aspects of this Agreement with respect to advances pursuant to Section 8.1, whichever is earlier. (b) Conversion to Term Loan. (i) The Borrowers may, on the Maturity Date and so long as no Event of Default has occurred and is continuing, elect to convert (the "Term Loan Option") all or a portion of the Revolving Line of Credit outstanding on the Maturity Date in an amount not to exceed SEVENTEEN MILLION AND NO/100THS DOLLARS ($17,000,000.00) and in no event less than $10,000,000 (the "Converted Amount") into a Term Loan (the "Term Loan"). (ii) If the Borrowers exercise the Term Loan Option, interest on the Term Loan shall accrue at a rate per annum as specified in Section 9.3. The Term Loan shall be repaid in 20 substantially equal quarterly installments, due and payable on the last day of January, April, July and October of each year and shall be due and payable in full on July 31, 2002. (iii) The notice, if any, of the exercise of the Term Loan Option shall be submitted by the Borrowers in writing to the Agent at least 60 Business Days prior to the Maturity Date, and shall specify the portion of the Revolving Line of Credit for which the Term Loan Option is being exercised and the initial Interest Period, if any. Any notice shall be irrevocable once given. (iv) On the date of conversion to a Term Loan, the Borrowers shall pay to Lenders in immediately available funds a fee equal to .25 of 1% of the Converted Amount. Such fee shall be shared pro rata by Lenders. (c) Notes. (i) Revolving Notes. All sums advanced pursuant to the Revolving Line of Credit shall be payable, as to both principal and interest, and shall bear interest, at the rate and in the manner provided herein and in the Revolving Notes of Borrowers, copies of which are attached hereto, marked Exhibits A-1, A-2 and A-3, and expressly made a part hereof as though fully set forth herein (the "Revolving Notes"). Borrower shall execute and deliver to Lenders the Revolving Notes in an aggregate sum of SIXTY-FIVE MILLION AND NO/100THS ($65,000,000.00) DOLLARS; provided, however, the liability of Borrowers to Lenders for the principal indebtedness of the Revolving Line of Credit shall be limited to the net principal amount actually advanced by Lenders to Borrowers under the Revolving Notes. All advances under the Revolving Note shall be evidenced by Lenders' records with respect to such advances, which records shall be prime facie evidence as to the amount at any time due such Lender hereunder. All advances under the Revolving Line of Credit shall be made pursuant to the procedures set forth hereinbelow in Article IX. Borrowers irrevocably authorize Lenders to disburse any Revolving Line of Credit loans made hereunder for the account of the Borrowers either to Lime or to Dravo Natural Resources Company ("DNRC") pursuant to the DNRC Agency Agreement. (ii) Term Notes. All sums advanced pursuant to the Term Loan Option shall be payable, as to both principal and interest, and shall bear interest, at a rate and in the manner provided herein and the Term Notes, executed and delivered by each of the Borrowers and in form and substance satisfactory to each of the Lenders (the "Term Notes"). (ii) The fourth sentence of Section 1.3 is amended by deleting the date "April 30, 1996" and substituting therefor the date "July 31, 1997". (iii) The last sentence of Section 1.5 is amended by deleting the date "June 30" and substituting therefor the date "July 31". (iv) The first sentence of Section 1.6 is amended by deleting the figure "$75,000,000" and substituting therefore the figure "$65,000,000". (v) Section 1.9(a) is amended in its entirety to read as follows: "(a) At least 10 but not more than 60 days before each May 31, commencing May 31, 1996, the Borrowers may, by delivering a written request to the Agent (each such request being irrevocable), request that each Lender extend for one year the Maturity Date with respect to such Lender's Revolving Line of Credit commitment and commitment to issue (or cause to be issued) Letters of Credit (such commitments referred to herein collectively, with respect to each Lender, as such Lender's "Commitment"). The Agent shall, upon its receipt of such a request, promptly notify each Lender thereof, and request that each Lender promptly advise the Agent of its approval or rejection of such request." (b) Amendment to Article V. Section 5.1(b)(1) is amended by deleting the phrase "and in the Note Purchase Agreement" immediately following the phrase "the representations and warranties of the Dravo Parties set forth herein". (c) Amendments to Article IX. Article IX shall be amended as follows: (i) Section 9.1 is amended by deleting in its entirety each of the following subsections (c), (d) and (e): (c) Notwithstanding subsections (a) and (b) above, in the event that any Lender does not agree to provide any funds (to the extent that such funds are not otherwise available to be borrowed by the Borrowers from such Lender pursuant to this Agreement) for (i) the cure of any defaults pursuant to Article 6 of the Project Intercreditor Agreement or (ii) the purchase price of any assets sold by Lime SPV in connection with the exercise by the Lenders of any right of first refusal pursuant to Section 5.03(a)(iv)(2) of the Override Agreement, the Lenders that agree to provide such funds (the "Funding Lenders") shall advance such funds on a pro rata basis, based on the proportion of each Funding Lender's Commitment to the aggregate amount of the Commitments of the Funding Lenders. So long as no Event of Default shall have occurred and be continuing, notwithstanding Section 11.7, any amounts of principal prepaid or repaid by the Borrowers pursuant to this Agreement shall be applied, first, to the repayment of all advances made by the Funding Lenders pursuant to clauses (i) and (ii) above (on a pro rata basis based on the amount of advances made by each of the Funding Lenders) and second, to the repayment of all other amounts owing to the Lenders hereunder (on a pro rata basis in accordance with their respective percentages set forth in subsection (a) above), in each case otherwise in accordance with this Agreement. Upon the occurrence and during the continuance of an Event of Default, any amounts of principal prepaid or repaid by the Borrowers or otherwise realized pursuant to any Security Document shall be applied on a pro rata basis in accordance with the percentages of the Lenders set forth in subsection (a) above. Any funds provided by a Funding Lender pursuant to clauses (i) and (ii) above shall be deemed to be a Revolving Line of Credit advance made by such Lender to the Borrowers, and the Borrowers shall be obligated to repay such advances pursuant to the terms hereof. In furtherance of the foregoing, any purchase of assets pursuant to clause (ii) above shall be made on behalf of Lime, and Lime shall be the legal and beneficial owner of such assets. (d) In connection with any advances made by the Funding Lenders pursuant to subsection (c) above, the Companies shall execute such agreements, documents and instruments (including, without limitation, additional promissory notes), and take such further actions, as any Funding Lender may reasonably request. (e) Notwithstanding anything to the contrary contained herein, in order to effect the cure of any default pursuant to Article 6 of the Project Intercreditor Agreement, the Lenders shall have the right (but not the obligation) to advance funds on behalf of the Borrowers and to make any payments directly to any Persons (other than the Borrowers) to the extent necessary to cure such default. (ii) Section 9.2 is amended in its entirety to read as follows: "SECTION 9.2. Manner of Revolving Line of Credit Participation. Unless otherwise specifically provided in this Agreement, Agent shall receive from Borrowers at least three business days', with respect to Eurodollar Rate Loans, and one business day, with respect to Base Rate Loans, prior written, telex, telecopier or telegraphic notice of Borrowers' intention to borrow hereunder, specifying the date, the total amount of the loan that Borrowers request under this Agreement, the type of loan and if a Eurodollar Rate Loan, the Interest Period therefor. Upon receipt of such request from Borrowers, Agent shall forthwith give Lenders (excluding itself if Agent is also a Lender) telex, telecopier or telegraphic notice of Borrower's request and shall specify the amount of each such Lender's proposed participation in the loan based on the information each Lender has furnished Agent with respect to the outstanding Revolving Line of Credit loans made by each Lender and the outstanding Letters of Credit applicable to each Lender. Unless Lenders correct said information prior to funding, which correction shall be confirmed in writing by such Lender to Agent, the Lenders shall deposit such amount, or cause such amount to be deposited, with Agent in lawful money of the United States of America in immediately available funds by 11:00 A.M. (Central time) on the date of the proposed loan by wire transfer to Agent in the case of each Lender that is not Agent, and by deposit with Agent in immediately available funds in the case of a Lender that is also the Agent, and Agent shall thereafter deposit in Borrowers' or DNRC's account or accounts at Agent the requested funds by 11:30 A.M. (Central time) on the date of the proposed loan." (iii) Article IX is further amended by adding the following new Sections 9.3 and 9.4 at the end thereof. SECTION 9.3. Interest. (a) Each Borrower shall, and hereby jointly and severally agrees to, pay interest on the unpaid principal amount of each loan from the date of such loan until such principal is paid in full at the applicable rate set forth below. (b) Rate of Interest. All loans shall bear interest on the unpaid principal amount thereof from the date such loans are made until paid in full, except as otherwise provided in Section 9.3(e), as follows: (i) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of (a) the Eurodollar Rate determined for the applicable Interest Period plus (b) the Interest Rate Margin; and (ii) If a Base Rate Loan, at a rate per annum equal to the sum of (A) the Base Rate plus (B) the Interest Rate Margin. The applicable basis for determining the rate of interest on the loans shall be selected at the time a borrowing notice or a conversion/continuation notice, as contemplated by subsection (d) below, is delivered by the Borrowers to the Agent. If on any day any loan is outstanding with respect to which notice has not been timely delivered to the Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest on that day, then for that day that loan shall be deemed to be a Base Rate Loan. (c) Interest Payments. (i) Interest accrued on each Base Rate Loan shall be payable in arrears (A) on each Interest Payment Date applicable to such Loan, (B) upon the prepayment thereof in full or in part, (C) upon conversion thereof to a Eurodollar Rate Loan, and (D) if not theretofore paid in full, at maturity (whether by acceleration or otherwise) of such Base Rate Loan. (ii) Interest accrued on each Eurodollar Rate Loan shall be payable in arrears (A) on each Interest Payment Date applicable to such Loan, (B) upon the payment or prepayment thereof in full or in part, and (C) if not theretofore paid in full, at maturity (whether by acceleration or otherwise) of such Eurodollar Rate Loan. (d) Conversion or Continuation. (i) The Borrowers shall have the option (A) to convert at any time (1) all or any part of outstanding Base Rate Loans to Eurodollar Rate Loans or (2) all or any part of Eurodollar Rate Loans to Base Rate Loans; or (B) to continue all or any part of outstanding Eurodollar Rate Loans, having Interest Periods which expire on the same date as Eurodollar Rate Loans, and the succeeding Interest Period of such continued Loans shall commence on such expiration date; provided, however, (I) no portion of any such outstanding Loan may be continued as (and shall be immediately converted into a Base Rate Loan), or be converted into, a Eurodollar Rate Loan (x) if the continuation of, or the conversion into, would violate any of the provisions of Section 9.4 or (y) if an Event of Default has occurred and is continuing, and (II) if the option set forth in clause (B) of this Section is not exercised, in accordance with the terms of this Section 9.3, in respect of a Eurodollar Rate Loan, such Eurodollar Rate Loan shall convert automatically into a Base Rate Loan on the final date of the applicable Interest Period. (ii) To convert or continue a loan, the Borrowers shall deliver a written notice to the Agent at least three business days in advance of the proposed conversion/continuation date. Upon receipt of such request from Borrowers, the Agent shall forthwith give such notice to each Lender. Such notice shall specify the proposed conversion/continuation date (which shall be a business day), the principal amount to be converted/continued, whether such borrowing shall be converted and/or continued, if applicable, and the requested Interest Period. Any notice for conversion to, or continuation of, a loan shall be irrevocable, and the Borrowers shall be bound to convert or continue in accordance therewith. (e) Certain Defined Terms. The following capitalized terms used in this Agreement shall have the following meanings: "Base Eurodollar Rate" means, with respect to any Interest Period, the interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) determined by the Reference Bank to be the rate per annum at which deposits in immediately available United States dollars are offered to the Reference Bank in the London interbank market at approximately 11:00 a.m. (London time) on the date two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the Eurodollar Rate Loan requested by the Borrowers for such Interest Period. "Base Rate" means, for any period, a fluctuating interest rate per annum equal to the higher of (i) the rate per annum as shall be established by the Agent from time to time, as the Agent's base rate and (ii) the sum of (A) one-half of one percent (0.5%) and (B) the Federal Funds Rate. "Base Rate Loans" means all loans which bear interest at a rate determined by reference to the Base Rate. "Eurodollar Rate" means, with respect to any Interest Period applicable to a Eurodollar Rate Loan, an interest rate per annum obtained by dividing (i) the Base Eurodollar Rate applicable to that Interest Period by (ii) a percentage equal to one hundred percent (100%) minus the Eurodollar Reserve Percentage. "Eurodollar Rate Loans" means those loans which bear interest at a rate determined by reference to the Eurodollar Rate. "Eurodollar Reserve Percentage" means, for any day, that percentage which is in effect on such day, as prescribed by the Federal Reserve Board for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York, New York in respect of "Eurocurrency Liabilities" as set forth in Regulation D of the Federal Reserve Board (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Rate Loans is determined). "Federal Funds Rate" means an interest rate per annum equal to the rate per annum at which the Reference Bank, in its sole discretion, may acquire federal funds in the interbank term federal funds market in New York City through brokers of recognized standing. "Interest Payment Date" means (i) with respect to any Base Rate Loan, the last day of each calendar month commencing on the first such day following the making of such Base Rate Loan, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan. "Interest Rate Margin" means, as of any date, a rate equal to, with respect to any Eurodollar Rate Loan, 2.00% per annum and with respect to any Base Rate Loan, 0% per annum. "Reference Bank" means the Agent. SECTION 9.4. Special Provisions Governing Eurodollar Rate Loans. With respect to Eurodollar Rate Loans: (a) Determination of Interest Period. The period between the date on which each Eurodollar Rate Loan is made and the date of payment in full of such Loan shall be divided into successive periods, each such period being an "Interest Period" for such Loan. The initial Interest Period for each Loan shall begin on the date of such Loan and end on the last day of such period as selected by the Borrowers, and thereafter, each subsequent Interest Period for such Loan shall begin on the last day of the immediately preceding Interest Period for such Loan and end on the last day of such period as selected by the Borrowers. The duration of each such Interest Period for each Eurodollar Rate Loan shall be one, two or three months, provided, however, that: (i) the duration of any Interest Period for any Loan that commences before the repayment date for such Loan and otherwise ends after such repayment date shall end on such repayment date; (ii) In the case of immediately successive Interest Periods applicable to a borrowing of Eurodollar Rate Loans, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) If any Interest Period would otherwise expire on a day which is not a business day, such Interest Period shall be extended to expire on the next succeeding business day unless such next succeeding business day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day; (iv) Borrowers may not select an Interest Period as to any Eurodollar Rate Loan if such Interest Period terminates later than the Maturity Date; and (v) There shall be no more than ten Interest Periods in effect at any one time. (b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that at least one business day before the commencement of an Interest Period, a Lender determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate, then being determined is to be fixed, then such Lender shall forthwith give notice thereof to the Borrowers and the Agent, whereupon (until such Lender notifies the Borrowers and the Agent that the circumstances giving rise to such suspension no longer exist, which such Lender shall do promptly after it determines that such circumstances no longer exist) the right of all Borrowers to elect to have loans from such Lender bear interest based upon the Eurodollar Rate shall be suspended and all outstanding Eurodollar Rate Loans from such Lender shall be converted into Base Rate Loans on the last day of the then current Interest Period therefor, notwithstanding any prior election by the Borrowers to the contrary. (c) Illegality. (i) If at any time a Lender determines (which determination shall, absent manifest error, be final and conclusive and binding upon all parties) that the making or continuation of any Eurodollar Rate Loan has become, as a result of any event occurring after the date hereof (A) unlawful or (B) impermissible by compliance by such Lender with any law, governmental rule, regulation or order of any governmental authority (whether or not having the force of law and whether or not failure to comply therewith would be unlawful or would result in costs or penalties), then such Lender may give notice of that determination to the Agent and the Borrowers. (iii) When notice is given by a Lender under this Section, (A) the Borrowers' right to request from such Lender and such Lender's obligation, if any, to make Eurodollar Rate Loans shall be immediately suspended, and such Lender shall make a Base Rate Loan in lieu of any requested Eurodollar Rate Loans (on which such Base Rate Loan the interest and principal shall be payable contemporaneously with the related Eurodollar Rate Loans of the other Lenders) and (B) if Eurodollar Rate Loans are then outstanding, the Borrowers shall immediately, or if permitted by applicable law, no later than the last date permitted thereby, upon at least one business day's prior notice to such Lender, convert each such Loan into a Base Rate Loan (on which such Base Rate Loan the interest and principal shall be payable contemporaneously with the related Eurodollar Rate Loans of the other Lenders). (iii) If at any time after a Lender gives notice under this Section, such Lender determines that it may lawfully make Eurodollar Rate Loans, such Lender shall promptly give notice of that determination to the Borrowers and the Agent. The Borrowers' right to request, and such Lender's obligation, if any, to make Eurodollar Rate Loans shall thereupon be restored. (d) Compensation. In addition to all amounts required to be paid by the Borrowers pursuant to Section 9.3, the Borrowers shall jointly and severally compensate each Lender, within thirty days of written notice, for all losses, expenses and liabilities (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by each such Lender to fund or maintain such Lender's Eurodollar Rate Loans to the Borrowers) which such Lender may sustain (i) if for any reason not the fault of such Lender, a loan, conversion into or continuation of Eurodollar Rate Loans does not occur on a date specified therefor in any notice given by the Borrowers or a successive Interest Period does not commence after notice therefor is given, or (ii) if for any reason any Eurodollar Rate Loan is prepaid on a date which is not the last day of the applicable Interest Period, or (iii) as a consequence of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of the events indicated in Section 9.4, or (iv) as a consequence of any failure by the Borrowers to repay Eurodollar Rate Loans when required by the terms of this Agreement. Such Lender's written notice shall set forth in reasonable detail the basis for such compensation and shall be conclusive as to the amount of compensation due to such Lender, absent manifest error. (e) Exhibits. Exhibits A-1, A-2 and A-3 to the Revolving Credit Agreement are deleted in their entirety and Exhibits A-1, A-2 and A-3 attached hereto are substituted therefor, respectively. (f) Amendments to Article XII. Article XII shall be amended by adding the following Section 12.3: "Section 12.3 Documentation Agent. (a) BAI shall act as Documentation Agent and in such capacity will advise and consult with the Agent, from time to time on an as needed basis and as may be mutually satisfactory to the Agent and BAI, including with respect to the amendment of the Operative Documents. (b) The Documentation Agent shall have no duties or responsibilities other than those expressly set forth in clause (a) above. Neither the Documentation Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it or them as such hereunder or under any other Operative Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Documentation Agent shall be mechanical and administrative in nature. The Documentation Agent shall not have by reason of this Agreement or any other Operative Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Operative Document, express or implied, is intended to or shall be so construed as to impose upon the Documentation Agent any obligations or liabilities in respect of this Agreement or any other Operative Document except as expressly set forth above. ARTICLE III AMENDMENTS TO INTERCREDITOR AGREEMENT SECTION 3.01. Amendments to Intercreditor Agreement. The Intercreditor Agreement shall be, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, amended as follows: (a) Amendments to Section 1. Section 1 shall be amended by deleting in its entirety each of the following subsections (j), (k), (l), (m), (n) and (o): "(j) Notwithstanding the terms of the Override Agreement or any Transaction Document, in the event that the Collateral Agent receives notice pursuant to the first sentence of Article 5 of the Project Intercreditor Agreement, the Collateral Agent shall take actions pursuant to said Article 5 only at the direction of the Majority Lenders; provided, however, that any Secured Party that does not concur in the directions of the Majority Lenders shall not be obligated to provide any funds for the purchase price of the "Existing Creditors Call Option" (as defined in said Article 5), unless such funds are otherwise available to be borrowed by the Companies from such Secured Party pursuant to the Revolving Credit Agreement and the Companies so request such borrowing pursuant to the terms thereof. (k) Notwithstanding the terms of the Override Agreement or any Transaction Document, the Collateral Agent shall take actions pursuant to Article 6 of the Project Intercreditor Agreement only at the direction of the Majority Lenders; provided, however, that any Secured Party that does not concur in the directions of the Majority Lenders shall not be obligated to provide any funds for the cure of any defaults pursuant to said Article 6, unless such funds are otherwise available to be borrowed by the Companies from such Secured Party pursuant to the Revolving Credit Agreement and the Companies so request such borrowing pursuant to the terms thereof. (l) Notwithstanding the terms of the Override Agreement or any Transaction Document, the Collateral Agent shall take actions pursuant to Section 3.3(vi) of the Project Intercreditor Agreement only at the direction of the Majority Lenders. (m) Notwithstanding the terms of the Override Agreement or any Transaction Document, the Collateral Agent shall agree to amendments of (i) Article III of the Master Common Facilities Agreement only with the consent or at the direction of all of the Secured Parties, (ii) any provisions in the Master Common Facilities Agreement regarding the use or disposition of any Collateral only with the consent or at the direction of all of the Secured Parties, and (iii) any other provisions in the Master Common Facility Agreement only with the consent or at the direction of the Majority Lenders. (n) The Secured Parties hereby consent to the execution and delivery by the Collateral Agent of the following documents on or before the Initial Funding Date: (i) amendments to the Basic Mortgage and the Lime Mortgages, in substantially the form of Exhibits B-1, B-2, B-3 and B-4 attached to the Amendment Agreement, dated as of August 1, 1994, among the Dravo Parties, the Lenders and FAB, as agent for the Lenders; (ii) the Mortgage Subordination Agreement, dated as of August 1, 1994, by and between the Collateral Agent and Lime SPV; (iii) the Assignment and Security Agreement; (iv) the SPV Stock Pledge Agreement; (v) the SPV Partner Pledge Agreement; (vi) UCC-1 financing statements with respect to the collateral described in the Assignment and Security Agreement, the SPV Partner Pledge Agreement and the amendments described in clause (i) above; (vii) a Deed of Partial Release (the "Release") with respect to certain improvements located on the Site (as defined in the Note Purchase Agreement) that will be owned by Lime SPV; and (viii) UCC-3 financing statement amendments with respect to the property described in the Release and in the Warranty Bill of Sale and Assignment, dated as of August 1, 1994, by Lime to Lime SPV. (o) Each Secured Party shall have the right, but not the obligation, to provide funds for the purchase price of the "Existing Creditors Call Option" (as defined in Article 5 of the Project Intercreditor Agreement) in an amount equal to such Secured Party's Percentage (as defined in Section 9.1(a) of the Revolving Credit Agreement) of such purchase price (or such lesser or greater amount as such Secured Party may agree to provide)." (b) Amendments to Section 6. Section 6 shall be amended as follows: (i) The definition of "Collateral", "Security Documents" and "Sharing Payments" shall be amended to read as follows: "Collateral" shall mean all real and personal property in or upon which a Dravo Party or other third Person has granted to the Collateral Agent on behalf of the Secured Parties or to any Secured Party, pursuant to the Security Documents, a lien, security interest or other encumbrance to secured the Secured Obligations and the Dravo Guaranty. "Security Documents" means the Security Agreement, the Dravo Pledge Agreement, the Companies Pledge Agreement, the Dravo Security Agreement, the Lime Patent Security Agreement, the Lime Mortgages, the Dravo Guaranty and all documents and instruments executed and delivered in connection therewith and any other document or instrument pursuant to which a Dravo Party or any other Person grants to the Collateral Agent or a Secured Party a security interest in, or lien or encumbrance upon, any real or personal property to secure the payment or performance of the Secured Obligations. "Sharing Payment" means a payment with respect to a Secured Obligation, whether by way of a direct payment to a Secured Party from a Dravo Party, including without limitation any payment under the Dravo Guaranty, or other Person or through the exercise by a Secured Party of any right of setoff, bankers' lien or similar right; provided, however, that a distribution to the Secured Parties of Proceeds as contemplated in Section 2 hereof shall not constitute a "Sharing Payment" hereunder. (ii) The following new definition shall be inserted in alphabetical order: "Dravo Guaranty" means that certain Guaranty Agreement dated as of December 31, 1995, executed in favor of the Collateral Agent on behalf of the Lenders, as it may be amended, modified or supplemented from time to time in accordance with its terms. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.01. Conditions of Effectiveness. This Amendment shall become effective when, and only when, (a) the Agent shall have received counterparts of this Amendment executed by each of the Dravo Parties and the Lenders, (b) all accrued but unpaid interest, fees and expenses under the terms of the Revolving Credit Agreement, as amended hereby, and all outstanding fees and expenses of counsel to the Agent and the Lenders, shall have been paid in full to the extent due and payable after giving effect to this Amendment, (c) the Agent additionally shall have received all of the following documents, each (unless otherwise indicated) being dated the date of receipt thereof by the Agent (which date shall be the same for all such documents), in form and substance satisfactory to the Agent and the Lenders: (i) Copies of (A) all documents evidencing all requisite corporate action of each Dravo Party (including any and all resolutions of the Board of Directors of each Dravo Party) authorizing the execution, delivery and performance of this Amendment and the matters contemplated hereby and thereby, (B) all documents evidencing all Governmental Approvals, if any, with respect to this Amendment and the matters contemplated hereby and thereby, and (C) the certificate or articles of incorporation (certified as of a recent date by the Secretary of the State of its jurisdiction of incorporation) and by-laws of each Dravo Party. (ii) A good standing certificate issued by the Secretary of State of its incorporation and certificates of qualification to do business as a foreign corporation for each Dravo Party issued by the Secretary of State of each State in which such Dravo Party is required by law to be qualified to do business, each dated as of a date not more than five days prior to the date hereof. (iii) A certificate of the Secretary or an Assistant Secretary of each Dravo Party certifying the names and true signatures of the officers authorized to sign this Amendment on behalf of such Dravo Party and any other documents to be delivered by such Dravo Party hereunder. (iv) Duly executed copies of the Notes, in substantially the forms of Exhibits A-1, A-2 and A-3 attached hereto. (v) Duly executed unconditional and irrevocable guaranty of Dravo, in form and substance satisfactory to the Lenders. (vi) A favorable opinion of Buchanan Ingersoll, Professional Corporation, special counsel for the Dravo Parties, in form and substance satisfactory to the Lenders. (vii) Such other documents, instruments, approvals (and, if required by the Agent, certified duplicates of executed copies thereof) or opinions as the Agent or any Lender may reasonably request. (d) The representations and warranties contained herein shall be true on and as of the Effective Date; there shall exist on the Effective Date, no Event of Default or Default; there shall exist no material adverse change in the financial condition, business operation or prospects of any Dravo Party or its Subsidiaries since December 31, 1994; and each Dravo Party shall have delivered to the Lenders an Officer's Certificate, dated the Effective Date, to such effect. ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties of the Dravo Parties. (a) Each of the Dravo Parties hereby repeats and confirms each of the representations and warranties made by it in Article VII of the Override Agreement, as amended hereby, as though made on and as of the date hereof, with each reference therein to "this Agreement", the "Operative Documents", "hereof", "hereunder", "thereof", "thereunder" and words of like import being deemed to be a reference to the Override Agreement and the Operative Documents, in each case as amended hereby. (b) Each of the Dravo Parties represents and warrants as follows: (i) Such Dravo Party and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified to do business in, and is in good standing in, all other jurisdictions where the nature of its business or the nature of property owned or used by it makes such qualification necessary. (ii) The execution, delivery and performance by such Dravo Party of this Amendment are within its corporate powers, have been duly authorized by all necessary corporate action and do not contravene (A) such Dravo Party's charter or by-laws, (B) law or (C) any legal or contractual restriction binding on or affecting such Dravo Party; and such execution, delivery and performance do not or will not result in or require the creation of any Lien upon or with respect to any of its properties. (iii) No Governmental Approval is required for the due execution, delivery and performance by such Dravo Party of this Amendment, except for such Governmental Approvals as have been duly obtained or made and which are in full force and effect on the date hereof and not subject to appeal. (iv) This Amendment constitutes the legal, valid and binding obligations of such Dravo Party enforceable against such Dravo Party in accordance with its terms; subject to the qualifications, however, that the enforcement of the rights and remedies herein is subject to bankruptcy and other similar laws of general application affecting rights and remedies of creditors and that the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceedings therefor may be brought. (v) Except as set forth in the Form 10-Q dated September 30, 1995, there are no pending or threatened actions, suits or proceedings affecting such Dravo Party or any of its Subsidiaries or the properties of such Dravo Party or any of its Subsidiaries before any court, governmental agency or arbitrator, that may, if adversely determined, materially adversely affect the financial condition, properties, business, operations or prospects of such Dravo Party and it Subsidiaries, considered as a whole, or affect the legality, validity or enforceability of the Override Agreement or any other Operative Document, in each case as amended by this Amendment. ARTICLE VI WAIVER OF COVENANTS SECTION 6.01. Waiver. Subject to the effectiveness of this Amendment Agreement, the Lenders, pursuant to the request of the Dravo Parties, hereby waive solely with respect to the quarter ending December 31, 1994 and the period commencing January 1, 1995 and ending on the Effective Date hereof, the negative covenants contained in Sections 4.02(b)(ii), 5.01(a), 5.02(a) and 5.02(b) of the Override Agreement. ARTICLE VII MISCELLANEOUS SECTION 7.01. Reference to and Effect on the Operative Documents. (a) Upon the effectiveness of this Amendment, on and after the date hereof each reference in the Revolving Credit Agreement and the Override Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Revolving Credit Agreement and the Override Agreement, respectively, and each reference in the other Operative Documents to "the Revolving Credit Agreement", "the Override Agreement", "thereunder", "thereof" or words of like import referring to the Revolving Credit Agreement and the Override Agreement, shall mean and be a reference to the Revolving Credit Agreement and the Override Agreement, respectively, as amended hereby. (b) Except as specifically amended above, the Revolving Credit Agreement, the Override Agreement and the Notes, and all other Operative Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Security Documents and all of the Collateral described therein do and shall continue to secure the payment of all obligations of the Dravo Parties under the Revolving Credit Agreement, the Notes and the other Operative Documents, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Operative Documents, nor constitute a waiver of any provision of any of the Operative Documents. SECTION 7.02. Costs and Expenses. The Dravo Parties jointly and severally agree to pay on demand all costs and expenses incurred by the Agent and the Lenders in connection with the preparation, execution and delivery of this Amendment and the other documents to be delivered hereunder and thereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent and the Lenders with respect thereto and with respect to advising the Agent and the Lenders as to their rights and responsibilities under this Amendment. The Dravo Parties jointly and severally further agree to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses of counsel), incurred by the Agent and the Lenders in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment, the Transaction Documents and the other documents to be delivered hereunder and thereunder, including, without limitation, counsel fees and expenses in connection with the enforcement of rights under this Section 7.02. SECTION 7.03. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. SECTION 7.04. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. [Signatures Commence on Next Page.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. FIRST ALABAMA BANK, individually and as Agent By /s/ PETER P. GAILLARD Name: Peter P.Gaillard Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ MICHAEL J. BEYER Name: Michael J.Beyer Title: Vice President BANK OF AMERICA ILLINOIS, individually and as Documentation Agent By /s/ MICHAEL J. MCKENNEY Name: Michael J. McKenney Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By s/s KEVIN J. KRASKA Name: Kevin J. Kraska Title: Vice President DRAVO CORPORATION By /s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President DRAVO LIME COMPANY By /s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. By /s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President EX-4 4 AMENDED AND RESTATED LOAN AGREEMENT [EXECUTION COPY] AMENDMENT AND RESTATEMENT OF ARTICLES IV, V AND VI OF THE OVERRIDE AGREEMENT and AMENDMENT AND RESTATEMENT OF APPENDIX A, DEFINITIONS dated as of February 15, 1996 by and among DRAVO CORPORATION DRAVO LIME COMPANY DRAVO BASIC MATERIALS COMPANY, INC. FIRST ALABAMA BANK PNC BANK, NATIONAL ASSOCIATION BANK OF AMERICA ILLINOIS THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AMENDMENT AND RESTATEMENT THIS AMENDMENT AND RESTATEMENT, dated as of February 15, 1996 is entered into by and among FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (f/k/a Pittsburgh National Bank) ("PNC"), BANK OF AMERICA ILLINOIS ("BAI"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"); FAB, PNC, BAI and Prudential herein collectively referred to as "Lenders" and each a "Lender") and DRAVO CORPORATION, a Pennsylvania corporation ("Dravo"), DRAVO LIME COMPANY, a Delaware corporation ("Lime") and DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic are sometimes hereinafter collectively referred to as the "Companies"). PRELIMINARY STATEMENTS (1) The Companies, Dravo and the Lenders have entered into an Override Agreement, dated as of January 21, 1992, as amended by the First Amendment to Override Agreement, dated March 10, 1993, the Second Amendment to Override Agreement, dated as of March 7, 1994, the Amendment Agreement, dated as of August 1, 1994, the Amendment Agreement, dated as of January 3, 1995 and the Amendment Agreement dated as of December 31, 1995 (as so amended and amended, modified or supplemented from time to time, the "Override Agreement"). In addition, the Companies, the Agent and the Lenders have entered into an Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, by the Amendment Agreement dated as of August 1, 1994, the Amendment Agreement dated as of January 3, 1995 and the Amendment Agreement dated as of December 31, 1995 (as so amended and amended, modified or supplemented from time to time, the "Revolving Credit Agreement"). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Override Agreement, as amended hereby. (2) The parties hereto desire to amend and restate Articles IV, V and VI of the Override Agreement and Appendix A. In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree to amend and restate Articles IV, V and VI of the Override Agreement as follows and Appendix A as attached hereto. ARTICLE I AMENDMENT AND RESTATEMENT SECTION 1.01. Amendment and Restatement of Articles IV, V and VI. Each of the following Articles IV, V and VI of the Override Agreement shall be amended and restated in full as follows: ARTICLE IV UNIFORM AFFIRMATIVE COVENANTS SECTION 4.01. Dravo Parties Affirmative Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, the Dravo Parties shall comply with the following: (a) Financial Statements. Each of the Dravo Parties will deliver in triplicate to each Lender (or any other holder of any Note or Notes) so long as such Lender (or holder) shall hold any Note or Notes: (i) as soon as practicable and in any event within 45 days after the end of each quarterly period in each fiscal year, consolidating and consolidated statements of income and cash flows, of such corporation and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidating and consolidated balance sheet of such corporation and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by an authorized financial officer of such corporation, subject to changes resulting from normal year-end adjustments; (ii) as soon as practicable and in any event within 90 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows and a consolidated statement of stockholders' equity of such corporation and its Subsidiaries for such year, and a consolidating and consolidated balance sheet of such corporation and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding annual audit, all in reasonable detail and satisfactory in form to each of the Lenders and, as to the consolidated statements, reported on by independent public accountants of recognized national standing selected by such Dravo Party whose report shall be without limitation as to the scope of the audit and satisfactory in substance to the Majority Lenders and, as to the consolidating statements, certified by an authorized financial officer of such Dravo Party; (iii) promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its stockholders and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission); (iv) as soon as is practicable and in any event prior to the end of each fiscal year, a projected income statement, balance sheet and cash flow statement for each of the Dravo Parties for the ensuing fiscal year, setting forth in each case figures on an annual basis in reasonable detail and certified by an authorized financial officer of each such corporation; (v) promptly upon receipt thereof, a copy of each other report submitted to such corporation or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of such corporation or any Subsidiary; (vi) upon the request of a holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as Dravo is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this clause (vi), the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act; (vii) with reasonable promptness, such other financial data as any Lender may reasonably request; and (viii) a report, delivered not less frequently than once during each period of four consecutive months, of the General Counsel of Dravo that describes and evaluates all pending litigation against any Dravo Party where the amount of potential loss could exceed $5,000,000. Each such report should include a brief description of the events that have occurred in such litigation since the date of the last report, including, without limitation, the occurrence and/or outcome of any motions for summary judgment, discovery motions, substantive discovery responses, or motions for final adjudication. In addition, at the request of any Lender, each Dravo Party shall, at its expense, provide each Lender, and its outside counsel, an opportunity to receive copies of all documentation received or prepared in connection with any such litigation, and to discuss the status thereof with the General Counsel of Dravo and the outside counsel of any such Dravo Party handling such matter. Notwithstanding the foregoing, at no time shall any Dravo Party or its counsel be required to make any disclosure or provide any access to information pursuant to this paragraph which would result in the loss to such Dravo Party of any privilege against disclosure generally recognized under law. Together with each delivery of financial statements required by clauses (i) and (ii) above, each of the Dravo Parties will deliver to each Lender (addressed to it) a Compliance Certificate, in the form of Exhibit O hereto, demonstrating (with computations in reasonable detail except to the extent specifically set forth in such financial statements) compliance by the Dravo Parties with Section 4.02(b), 5.01(a), (b), (c)(i), (c)(ii) and (d), and stating that there exists no Default or Event of Default, or, if any such Default or Event of Default exists, specifying the nature thereof, the period of existence thereof and what action such corporation proposes to take with respect thereto. Together with each delivery of financial statements required by clause (ii) above, each of the Dravo Parties will deliver to each Lender a certificate of said accountants stating that, in making the audit necessary to the certification of such financial statements they have obtained no knowledge of any Default or Event of Default, or, if any such Default or Event of Default exists, specifying the nature and period of existence thereof. Such accountants, however, shall not be liable to anyone by reason of their failure to obtain knowledge of any Default or Event of Default which would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards. Each Lender is hereby authorized to deliver a copy of any financial statement delivered to such Lender pursuant to this Section 4.01(a) to any regulatory body having jurisdiction over such Lender. Each of the Dravo Parties also covenants that forthwith upon the chief executive officer, principal financial officer or principal accounting officer of such Dravo Party obtaining knowledge of: (i) a Default or an Event of Default; (ii) a material adverse change in the financial condition, business or operations of such Dravo Party and its Subsidiaries, taken as a whole; (iii) the institution of legal proceedings against such Dravo Party and/or any Subsidiary, which has a reasonable possibility of materially adversely affecting the financial condition, business or operations of such Dravo Party and its Subsidiaries, taken as a whole or which in any manner draws into question the validity of or has a reasonable possibility of impairing the ability of such Dravo Party to perform its obligations under this Agreement or any of the other Operative Documents to which it is a party; (iv) the occurrence of any default under any agreement or note evidencing borrowed money; (v) the occurrence of any other event that reasonably could impair the ability of such Dravo Party to meet its obligations hereunder or under any other Operative Document; or (vi) any (A) Environmental Liabilities, (B) pending, threatened or anticipated Environmental Proceedings, (C) Environmental Notices, (D) Environmental Judgments and Orders, or (E) Environmental Releases at, on, in, under or in any way materially affecting the Properties; such Dravo Party will deliver to the Lenders an Officer's Certificate specifying the nature and period of existence thereof and what action such Dravo Party has taken, is taking or proposes to take with respect thereto. (b) Inspection of Property. Each of the Dravo Parties covenants that, so long as a Lender shall hold any Note or Notes, any of them will permit any person designated by such Lender in writing, at the expense of such Dravo Party, to visit and inspect any of the properties of any such Dravo Party and its Subsidiaries, to examine the corporate books and financial records of any such Dravo Party and its Subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of any such corporation with the principal officers and independent public accountants of such corporation, all at such reasonable times and upon such reasonable notice and as often as such Lender may reasonably request. (c) Secure Notes Equally. Each of the Dravo Parties covenants that, if any of the Dravo Parties creates or assumes any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of Section 5.03(a)(i) (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 8.02), it will make or cause to be made effective provisions whereby the Notes then outstanding will be further secured by such Lien equally and ratably with any and all other debt thereby secured as long as such other debt shall be so secured. (d) Guaranteed Obligations. Each of the Dravo Parties covenants that if, at any time after the date hereof, it or any of its Subsidiaries incurs or permits to exist any Debt or other obligation guaranteed or collateralized in any other manner by any Person, it will simultaneously cause such Person to execute and deliver to each holder of any Note a guaranty agreement in form and substance satisfactory to such holder guaranteeing payment of the principal amount of the Notes and any premium and interest thereon, which bears the same ratio to the total unpaid principal amount of the Notes as the amount of such other obligation which is guaranteed bears to the total unpaid principal amount of such other obligation, or if such other obligation is collateralized, to collateralize the Notes equally and ratably with such other obligation. (e) Maintenance of Insurance. Each of the Dravo Parties will maintain, and will cause each of its Subsidiaries to maintain, with responsible insurers, insurance with respect to its properties and business against such casualties and contingencies (including public liability, larceny, embezzlement or other criminal misappropriation) and in such amounts as is customary in the case of similarly situated corporations engaged in the same or similar businesses, and, if requested in writing by a Lender, together with each delivery of financial statements under clause (ii) of Section 4.01(a) each of the Dravo Parties will deliver an Officer's Certificate specifying the details of such insurance in effect. (f) Taxes. Neither Dravo nor either of the Companies nor any Subsidiary thereof will file, or cause to be filed, any federal income tax return inconsistent with the representation contained in Section 7.01(e). (g) Maintenance of Corporate Existence/Compliance with Law/Preservation of Property. Except as allowed under Section 5.03(a)(iii) or 5.03(a)(iv), each of the Dravo Parties covenants that it and each Subsidiary (other than Discontinued Subsidiaries) will do or cause to be done all things necessary to preserve, renew and keep in full force and effect the corporate existence of such Dravo Party and its Subsidiaries (other than Discontinued Subsidiaries) and comply in all material respects with all laws and regulations (including, without limitation, laws and regulations relating to equal employment opportunity and employee safety) applicable to it and its Subsidiaries (other than Discontinued Subsidiaries), the failure with which to comply would have a reasonable possibility of materially adversely affecting the business, operations or financial condition of such Dravo Party and its Subsidiaries (other than Discontinued Subsidiaries), taken as a whole; at all times maintain, preserve and protect all material intellectual property of such Dravo Party and its Subsidiaries (other than Discontinued Subsidiaries), and preserve all the remainder of its material property used or useful in the conduct of its business and keep the same in good repair, working order and condition. (h) Compliance with Environmental Laws. Each of the Dravo Parties will, and will cause each of its Subsidiaries to, comply in a timely fashion with, or operate pursuant to valid waivers of the provisions of, all Environmental Requirements including, without limitation, the emission of wastewater effluent, solid and hazardous waste and air pollution, and establishing general environmental conditions, together with any other applicable requirements for conducting, on a timely basis, periodic tests and monitoring for contamination of ground water, surface water, air and land and for biological toxicity of the aforesaid, and diligently comply with the regulations (except to the extent such regulations are waived by appropriate governmental authorities) of the Environmental Protection Agency or other relevant federal, state or local governmental authority, except where the failure to do so would not have a reasonable possibility of materially adversely affecting the business, operations or financial condition of such Dravo Party and its Subsidiaries, taken as a whole. (i) Appraisals. From time to time, a Lender or Lenders may commission or obtain an appraisal of the property covered by the Lime Mortgages by an appraiser satisfactory to such Lender or Lenders and in compliance with the standards of the Member Appraisal Institute and may commission or obtain such other valuations as a Lender or Lenders may reasonably require from time to time. (j) Additional Mortgage Conveyances. Upon the acquisition by any Dravo Party of any additional properties located adjacent to, or used or usable in connection with the operations of the Dravo Parties on, the property covered by the Lime Mortgages or the commencement of any such operations thereon by the Dravo Parties, then, upon the request of a Lender or Lenders, the Dravo Parties shall convey or cause to be conveyed duly authorized, executed and delivered mortgages on such properties (or, at the option of Lenders, modifications to the existing mortgages) in order to cause such additional properties to be subjected to the lien and encumbrance of the applicable Lime Mortgages. In connection with any such conveyance, the Dravo Parties shall also deliver the items described in Section 3.01(e), "Real Estate Documents", hereof with respect to such additional property and the mortgage conveyance of such additional property. (k) Consents. The Dravo Parties will obtain on or prior to March 31, 1996 the consent of (1) Ohio Power Company to the assignment by Dravo Black River Limited Partnership to Lime of the Lime Supply Agreement dated June 21, 1993 between Lime and Ohio Power Company and (2) Svedala Industries, Inc. to the assignment by Dravo Black River Limited Partnership to Lime of the Agreement, dated as of August 27, 1993, as amended, by and between Svedala Industries, Inc., through its Kennedy Van Saun division, and Lime. SECTION 4.02 Dravo Additional Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, Dravo shall comply with the following. (a) Ancillary Reports. Dravo shall deliver to each Lender the following reports in triplicate: (i) a monthly balance sheet, income statement and cash flow statement for Dravo and its Subsidiaries prepared by Dravo, within thirty days after the close of each calendar month; provided, however, that delivery of the Directors Report shall be deemed to satisfy the requirements of this clause; and (ii) for each of Dravo's fiscal quarters commencing with the fiscal quarter ending March 31, 1996, a report listing all letters of credit then issued and outstanding on behalf of Dravo and its Subsidiaries, as well as the amount of and issuing institution for each such letter of credit, within thirty days after the close of each such quarter. (b) Fixed Charge Test. Dravo shall cause the Fixed Charge Coverage Ratio of Dravo and its Subsidiaries as at the end of each of Dravo's fiscal quarters to equal or exceed 1.25 from the Effective Date to and including December 31, 1996 and 1.5 thereafter. (c) Mandatory Payments of Note Receivable. Dravo shall make the repayments required under the Note Receivable. ARTICLE V UNIFORM NEGATIVE COVENANTS SECTION 5.01. Dravo Negative Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, Dravo shall comply with each of the following. (a) Net Worth Requirements. Dravo will not permit its Consolidated Net Worth at any time to be less than $90,784,000 (the "Base Amount") as of the Effective Date hereof and as of each quarter ending thereafter to be less than a sum equal to the Base Amount plus 50% of Consolidated Net Earnings available to common shareholders (to the extent this is a positive number) for each quarter ending after the Effective Date. (b) Dividend Restrictions. Dravo shall not: (x) pay or declare any dividend on any class of its stock or make any other distribution on account of any class of its stock (referred to herein collectively as "Dividends") or (y) make, directly or indirectly (including by a Subsidiary of Dravo), any Excess Redemption (all Dividends and Excess Redemptions collectively referred to herein as "Dravo Restricted Payments") if such Dravo Restricted Payments, taken together with all other Dravo Restricted Payments made on or after September 30, 1995, would exceed 25% of Consolidated Net Earnings from Continuing Operations after September 30, 1995. There shall not be included in Dravo Restricted Payments (x) Dividends paid, or distributions made, in stock of Dravo; or (y) exchanges of stock of one or more classes of Dravo for common stock of Dravo or for stock of Dravo of the same class, except to the extent that cash or other value is involved in such exchange; or (z) the payment of regularly scheduled dividends on the Shares or the Preferred Stock Series B originally issued to the Mechling estate ("Mechling Shares"). The term "stock" as used in this Section 5.01(b) shall include warrants or options to purchase stock. Notwithstanding the foregoing, Dravo shall not make a Dravo Restricted Payment if a Default or Event of Default has occurred or would occur as a result of such Dravo Restricted Payment. As used herein, the term "Excess Redemption" means any redemption, purchase or other acquisition of any shares of the capital stock of Dravo in an amount exceeding the cash proceeds received by Dravo in connection with any issuance or sale of any capital stock (including without limitation any preferred stock) of Dravo in an amount exceeding cash proceeds received by Dravo (net of all reasonable costs and expenses incurred by Dravo in connection with such issuance of capital stock) occurring after September 30, 1995. (c) Debt. Dravo shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist; (i) any Debt in excess of 50% of Dravo Consolidated Net Tangible Assets from the Effective Date hereof to and including December 31, 1996 and 45% of Dravo Consolidated Net Tangible Assets thereafter; or (ii) any Debt so that the ratio of Debt to EBDIAT would exceed 3.25 to 1.0 from the Effective Date hereof to and including December 31, 1996 and 3.0 to 1.0 thereafter. (d) Secured Debt. Dravo shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist at any time the aggregate of (i) any secured Debt (other than the Secured Obligations) plus (ii) an amount equal to the greater of the fair market value or acquisition cost of any additional real estate (plus improvements) acquired by a Person (other than a Dravo Party) for the benefit of any Dravo Party or any affiliate thereof located adjacent to, or used or usable in connection with the operations of the Dravo Parties on, the property covered by the Lime Mortgages, in excess of 7% of Dravo Consolidated Net Tangible Assets. SECTION 5.02. Companies Negative Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, neither of the Companies shall make any payment to Dravo with respect to or on account of the Dravo affiliated group's consolidated federal income tax liability ("Dravo Consolidated Tax Liability") in excess of the amount of such tax liability that would have been apportioned to such Company had Section 1552(a)(1) of the Code and Treasury Regulation 31.155201(a)(1) been used to determine each such Company's tax liability. In addition, no payment shall be made by any Other Subsidiary or any Subsidiary of the Companies to Dravo with respect to or on account of the Dravo Consolidated Tax Liability. No intercompany account or indebtedness owing from the Companies or their Subsidiaries shall be created in connection with any tax sharing agreement or arrangement with respect to or on account of the Dravo Consolidated Tax Liability and any such intercompany account or indebtedness that may have been created prior to the date hereof shall be, and hereby is, contributed to the capital of the Companies and each such Company is thereby released from any further liability arising in connection with such intercompany account or indebtedness. SECTION 5.03. Dravo Parties Negative Covenants. So long as a Lender shall hold any Note or Notes or any Secured Obligation remains outstanding, each of the Dravo Parties shall comply with each of the following: (a) Liens and Other Restrictions. None of the Dravo Parties will, nor will any of them permit any Subsidiary to: (i) Liens. Create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired (whether or not provision is made for the equal and ratable securing of the Notes in accordance with the provisions of Section 4.01(c)), except (A) Liens for taxes not yet due or that (a) are being actively contested in good faith by appropriate proceedings diligently contesting such obligations, and (b) would not have a material and adverse effect on the business, conditions, operations or prospects of such corporation in the event that the underlying obligations for such Liens were not paid, (B) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business, (C) Liens on property or assets of a Subsidiary to secure its obligations to the Dravo Party (other than Dravo) of which it is a Subsidiary or another Subsidiary of such Dravo Party (other than Dravo), (D) any Lien existing on any property of any corporation at the time it becomes a Subsidiary of such Dravo Party, or existing prior to the time of acquisition upon any property acquired by such Dravo Party or any Subsidiary of such Dravo Party through purchase, merger or consolidation or otherwise, whether or not assumed by such Dravo Party or such Subsidiary, or placed upon property at the time of acquisition by such Dravo Party or any Subsidiary of such property to secure all or a portion of (or to secure Debt incurred to pay all or a portion of) the purchase price thereof, provided that (a) any such Lien shall not encumber any other property of such Dravo Party or such Subsidiary, and (b) the amount secured by each such Lien shall not exceed, at the time such corporation becomes a Subsidiary of such Dravo Party or at the time of acquisition of such property by such Dravo Party or a Subsidiary of such Dravo Party or at the time of any renewal, extension or refunding of such Lien, 75% of the lower of either the cost or market value of the property being acquired, (E) any liens securing Debt of such Dravo Party or a Subsidiary of such Dravo Party incurred in connection with an industrial revenue bond or pollution control revenue bond financing of the facilities or equipment to be occupied or operated by such Dravo Party or such Subsidiary, (F) any Lien renewing, extending or refunding any Lien permitted by clauses (D) and (E) of this Section 5.03(a)(i), provided that the amount secured shall not be increased, and the Lien shall not be extended to other property, (G) Liens created or permitted by any Operative Document entered into in connection with this Agreement , and (H) Liens set forth in Schedule 5.03(a)(i) hereto; (ii) Loans, Advances, Investments and Contingent Liabilities. Make or permit to remain outstanding any loan or advance to, or Guarantee, endorse or otherwise be or become contingently liable, directly or indirectly, in connection with the obligations, stock or dividends of, or own, purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, except that such Dravo Party or any Subsidiary of such Dravo Party may (A) own, purchase or acquire stock, obligations or securities of a Subsidiary of such Dravo Party or of a corporation which immediately after such purchase or acquisition will be a Subsidiary of such Dravo Party, (B) acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to such Dravo Party or any Subsidiary of such Dravo Party, (C) own, purchase or acquire prime commercial paper and certificates of deposit in United States commercial banks (having capital surplus in excess of $100,000,000), in each case due within one year from the date of purchase and payable in the United States in Dollars, obligations of the United States Government or any agency thereof, and obligations guaranteed by the United States Government, and repurchase agreements of such banks for terms of less than one year in respect to the foregoing certificates and obligations, (D) endorse negotiable instruments for collection in the ordinary course of business, (E) guarantee Debt of a Subsidiary of such Dravo Party which is permitted by Section 5.01(d), (F) make or permit to remain outstanding travel and other like advances to officers and employees in the ordinary course of business, (G) make or permit to remain outstanding loans or advances to, or Guarantee, endorse or otherwise be or become contingently liable in connection with the obligations, stock or dividends of, or own, purchase or acquire stock, obligations or securities of, any other Person, provided that the aggregate principal amount of such loans and advances, excluding the aggregate amount of all loans made pursuant to clause (H) of this Section 5.03(a)(ii), plus the aggregate amount of such contingent liabilities, plus (without duplication) the aggregate amount of liabilities permitted by clauses (A) and (E) of Section 5.03(a)(viii), plus the aggregate amount of the investment (at original cost) in such stock, obligations and securities shall not exceed $5,000,000 for the Dravo Parties and their Subsidiaries on a combined basis (excluding from such amount those letters of credit for which the Dravo Parties are liable on the Closing Date as set forth in Schedule 5.03(a)(ii)(G) hereto as well as any term obligation or obligations into which such letters of credit may be converted) at any time outstanding, and further provided that no Subsidiary of such Dravo Party shall make any loan or advance to, or acquire any stock, obligations or securities of, such Dravo Party, (H) with respect to the Companies, make loans to Dravo from time to time to the extent permitted under Section 5.02(a)(iv) hereof; provided, however, that notwithstanding anything to the contrary provided in this Section, all such loans made by the Companies, and Dravo's obligations to the Companies resulting from such loans, shall be evidenced at all times by a note or notes which (i) shall be in form and substance satisfactory to the Majority Lenders, and (ii) shall be pledged to the Collateral Agent on behalf of the Lenders pursuant to the Companies Pledge Agreement, (I) allow to exist loans, guarantees, investments or contingent liabilities outstanding on the Closing Date and set forth on Schedule 5.03(a)(ii)(I); (iii) Sale of Stock and Debt of Subsidiaries. Sell or otherwise dispose of, or part with control of, any shares of stock or Debt of any Subsidiary of such Dravo Party, except to such Dravo Party or another Subsidiary of such Dravo Party, and except that all shares of stock and Debt of any Subsidiary of such Dravo Party at the time owned by or owed to such Dravo Party and its Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Board of Directors of such Dravo Party) at the time of sale of the shares of stock and Debt so sold, provided that the assets of such Subsidiary do not constitute more than 10% of the consolidated assets of Dravo and all of its Subsidiaries and that the earnings of such Subsidiary shall not have contributed more than 10% of the Consolidated Net Earnings of Dravo and its Subsidiaries for any of the three fiscal years then most recently ended, and further provided that, at the time of such sale, such Subsidiary shall not own, directly or indirectly, any shares of stock or Debt of any other Subsidiary of such Dravo Party (unless all of the shares of stock and Debt of such other Subsidiary owned, directly or indirectly, by such Dravo Party and all of its Subsidiaries are simultaneously being sold in a transaction permitted by this Section 5.03(a)(iii)); provided, however, that the foregoing provisions of this Section 5.03(a)(iii) shall not apply to any Discontinued Subsidiary. (iv) Merger and Sale of Assets. Merge or consolidate with any other corporation or sell, lease or transfer or otherwise dispose of assets constituting more than 10% of the consolidated assets of the Dravo Parties and their Subsidiaries on a combined basis, or assets which shall have contributed more than 10% of the Dravo Consolidated Net Earnings for any of the three fiscal years then most recently ended, to any Person, except that so long as no Default or Event of Default shall have occurred and be continuing; (A) any Subsidiary of Basic or Lime may merge with that Company of which it is a Subsidiary (provided that such Company shall be the continuing or surviving corporation) or with any one or more other Subsidiaries of such Company, (B) any Subsidiary of Basic or Lime may sell, lease, transfer or otherwise dispose of any of its assets to that Company of which it is a Subsidiary or another Subsidiary of such Company, (C) any Subsidiary may sell or otherwise dispose of all or substantially all of its assets to any Person other than Dravo subject to the conditions specified in Section 5.03(a)(iii) with respect to a sale of the stock of such Subsidiary, and (D) a Dravo Party may merge or consolidate with any other corporation, provided that (i) such Dravo Party shall be the continuing or surviving corporation or the continuing or surviving corporation shall assume all obligations of such Dravo Party under the Operative Documents (pursuant to documents acceptable to the Lenders) and, in any case, the merged or consolidated corporation is at the time of such merger or consolidation in a line of business related to that of such Dravo Party or any Subsidiary thereof, and (ii) such corporation as the continuing or surviving corporation shall not, immediately after such merger or consolidation, be in default under this Agreement or the other Operative Documents, including all covenants herein and therein contained; (v) Sale and Lease-Back. Enter into or permit to remain in effect any arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by a Dravo Party or any Subsidiary thereof of real or personal property which has been or is to be sold or transferred by such Dravo Party or any Subsidiary thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or rental obligations of such Company or any Subsidiary thereof; (vi) Sale or Discount of Receivables. Sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable except for those notes or accounts receivable which have been past due for 90 days or more and transferred in the ordinary course for collection purposes; (vii) Certain Contracts. Enter into or be a party to (A) any contract providing for the making of loans, advances or capital contributions to any Person other than a Subsidiary of such Dravo Party (except where the obligation is limited to a fixed maximum amount which is within the limitations of clause (H) of Section 5.03(a)(ii), or the obligation is one incurred in connection with the making of any loan or loans pursuant to clause (I) of Section 5.03(a)(ii)), or for the purchase of any property from any Person, in each case in order to enable such Person to maintain working capital, net worth or any other balance sheet condition or to pay debts, dividends or expenses, or (B) any contract for the purchase of materials, supplies or other property or services if such contract (or any related document) requires that payment for such materials, supplies or other property or services shall be made regardless of whether or not delivery of such materials, supplies or other property or services is ever made or tendered, or (C) any contract to rent or lease (as lessee) any real or personal property if such contract (or any related document) provides that the obligation to make payments thereunder is absolute and unconditional under conditions not customarily found in commercial leases then in general use or requires that the lessee purchase or otherwise acquire securities or obligations of the lessor, or (D) any contract for the sale or use of materials, supplies or other property, or the rendering of services, if such contract (or any related document) requires that payment for such materials, supplies or other property, or the use thereof, or payment for such services, shall be subordinated to any indebtedness (of the purchaser or user of such materials, supplies or other property or the Person entitled to the benefit of such services) owed or to be owed to any Person, or (E) any other contract which, in economic effect, is substantially equivalent to a Guarantee, except as permitted by clause (D) of Section 5.03(a)(ii) or where the obligation is limited to a fixed maximum amount which is within the limitations of clause (H) of Section 5.03(a)(ii); (viii) Transactions With Stockholders. Directly or indirectly purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise deal with, in the ordinary course of business or otherwise (i) any Affiliate, or (ii) any Substantial Stockholder, provided that (a) such acts and transactions prohibited by this Section 5.03(a)(viii)) may be performed or engaged in if made upon terms not less favorable to a Company than if no such relationship described in clauses (i) and (ii) above existed, (b) a Company may sell to, or purchase (within the limitations of Section 5.03(b)) from any such Person shares of such Company stock, and (c) such Company may pay management fees (within the limitations of Section 5.03(b)) to any such Person; (b) Issuance of Stock. Neither of the Companies (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) will issue, sell or otherwise dispose of any shares of any class of its stock, except to Dravo or the other Company, and Dravo and the Companies will at all such times own l00% of the issued and outstanding stock of all classes of each of the Companies, and neither of the Companies will permit any of its Subsidiaries (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) to issue, sell or otherwise dispose of any shares of any class of its stock except to such Company or another Subsidiary of such Company. (c) Environmental Matters. Each of the Dravo Parties covenants that it will not, and will not permit any Third Party to, use, produce, manufacture, process, generate, store, dispose of, manage at, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials used, produced, manufactured, processed, generated, stored, disposed of, released or managed in the ordinary course of business in compliance in all material respects with all applicable Environmental Requirements and except for Hazardous Materials released in amounts which do not require investigation or remediation pursuant to applicable Environmental Requirements. (d) Liabilities of DNRC. Each of the Dravo Parties covenants that it will not allow DNRC to incur liabilities for any purpose other than as set forth in Section 1 of the DNRC Agency Agreement or allow any Person other than DNRC to perform the duties set forth in Section 1 of the DNRC Agency Agreement or amend the DNRC Agency Agreement without the prior written consent of the Lenders. ARTICLE VI UNIFORM EVENTS OF DEFAULT SECTION 6.01. Uniform Events of Default. If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): (a) either of the Companies defaults in the payment of any principal of any Note when the same shall become due, either by the terms thereof or otherwise as herein provided; or (b) either of the Companies defaults in the payment of any interest or premium, if any, on any Note or any other amount due under any Operative Document for more than 10 days after the date due; or (c) any of the Dravo Parties or any Subsidiary of any of the Dravo Parties defaults in payment of principal of or interest on any other obligation for money borrowed of $100,000 or more, including, without limitation, on any obligation arising under the Convertible Notes (or any Capitalized Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto, or defaults in the performance or observance of any other agreement, term or condition contained in any agreement under which any such obligation is created (or if any other default under any such agreement shall occur and be continuing) and the effect of such default is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due (or to be defeased or repurchased by a Dravo Party or any Subsidiary) prior to its stated maturity; or (d) any representation or warranty made by any of the Dravo Parties herein or in any other Operative Document or in connection with this Agreement or any other Operative Document shall be false in any material respect on the date as of which made; or (e) any Dravo Party defaults in the performance or observance of any of the covenants contained in Section 4.01(c), 4.01(d), 4.02(b) or Article V; or (f) any Dravo Party defaults in the performance or observance of any other agreement, term or condition contained herein, and such default shall not have been remedied within 30 days after any officer of such Dravo Party obtains actual knowledge thereof; or (g) any of the Dravo Parties or any Subsidiary thereof makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or (h) any order, judgment or decree is entered under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law whether now or hereafter in effect (herein called the "Bankruptcy Law") of any jurisdiction adjudicating any of the Dravo Parties or any Subsidiary thereof bankrupt or insolvent or that is an order for relief; or (i) any of the Dravo Parties or any Subsidiary thereof petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official, of such Dravo Party or any Subsidiary thereof, or of any substantial part of the assets of such Dravo Party or any Subsidiary thereof, or commences a voluntary case under the Bankruptcy Law of the United States or any proceedings (other than proceedings for the voluntary liquidation or dissolution of a Subsidiary of such Dravo Party) relating to such Dravo Party or any Subsidiary thereof under the Bankruptcy Law of any other jurisdiction, whether now or hereafter in effect, or shall take any corporate action in furtherance of any of the foregoing; or (j) any such petition or application is filed, or any such proceedings are commenced, against any of the Dravo Parties or any Subsidiary thereof or any of the Dravo Parties or any Subsidiary thereof by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order for relief is entered in an involuntary case under the Bankruptcy Law of the United States, as now or hereafter constituted, or an order, judgment or decree is entered appointing any such trustee, receiver, custodian, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 30 days; or (k) any order, judgment or decree is entered in any proceedings against any of the Dravo Parties decreeing the dissolution of any of the Dravo Parties and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (l) any order, judgment or decree is entered in any proceedings against any of the Dravo Parties or any Subsidiary thereof decreeing a split-up of such Dravo Party or such Subsidiary which requires the divestiture of 10%, or the divestiture of the stock of a Subsidiary whose assets constitute 10% of the consolidated assets of Dravo and its Subsidiaries determined in accordance with GAAP or which requires the divestiture of assets, or stock of a Subsidiary of such Dravo Party, which shall have contributed l0% of the Consolidated Net Earnings of Dravo and its Subsidiaries determined in accordance with GAAP for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than 60 days; or (m) a judgment in an amount in excess of $5,000,000 is rendered against any of the Dravo Parties or any Subsidiary thereof and within 60 days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged; or (n) any of the Dravo Parties shall fail to comply with the terms of any of the Operative Documents or any Hedging Arrangement to which it is a party beyond applicable grace periods, if any, specified in such Operative Documents or any such Hedging Arrangement; or (o) at any time, the aggregate commitment for advances (excluding any sublimit or commitment for the issuance of letters of credit) under all revolving credit facilities of the Companies having a revolving term with an expiration date later than six calendar months after such time shall be less than $40,000,000; or (p) the DNRC Agency Agreement shall cease to be in full force and effect or DNRC shall fail to comply with the DNRC Agency Agreement; then (i) if such event is an Event of Default specified in clause (g), (h), (i), or (j) of this Section 6.01, all of the Notes at the time outstanding shall automatically become immediately due and payable at par together with interest accrued thereon, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Companies, and (ii) if such event is an Event of Default specified in clause (a) or (b) of this Section 6.01, any holder of any Note may at its option during the continuance of such Event of Default, by notice in writing to the Companies, declare all of the Notes held by such holder to be, and all of the Notes held by such holder shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Premium, if any, with respect to each such Term Note, without presentment, demand, protest or notice of any kind, all of which are hereby waived by each of the Companies and (iii) if such event is any other Event of Default, the Requisite Lenders may, at their option, by notice in writing to the Companies, declare the Notes or any of them, as the case may be, to be, and the Notes or any of them, as the case may be, shall thereupon be and become, immediately due and payable together with the Yield-Maintenance Premium, if any, with respect to each Term Note, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Companies, provided that the Yield-Maintenance Premium, if any, with respect to each Term Note shall be due and payable upon such declaration only if (x) such event is an Event of Default specified in any of clauses (a) through (f), inclusive, or (k) through (p), inclusive, of this Section 6.01, (y) Prudential shall have given to the Companies at least ten Business Days' written notice before such declaration stating its intention so to declare the Term Notes to be immediately due and payable and identifying one or more such Events of Default whose occurrence on or before the date of such notice permits such declaration and (z) one or more of the Events of Default so identified shall be continuing at the time of such declaration. If any Note shall have been declared to be due and payable pursuant to clause (ii) or (iii) above, any holder of any other Note may at anytime thereafter, regardless of whether any Event of Default shall at such time be continuing, by notice in writing to the Companies, declare all of the Notes held by such holder to be, and all of the Notes held by such holder shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Premium, if any, with respect to each such Term Note, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Companies, provided that the Yield-Maintenance Premium, if any, with respect to each Term Note shall be due and payable upon any declaration pursuant to this Section 6.01 as provided in the foregoing. SECTION 6.02. Rescission of Defaults. If, at any time after the outstanding principal amount of the Notes shall have become due and payable pursuant to Section 6.01, and no judgment or decree for any amounts so becoming due and payable shall have been entered, (a) all amounts of principal and interest which shall have become due and payable in respect of all of the Notes otherwise than pursuant to Section 6.01 shall have been paid in full, together with interest on all such overdue principal and (to the extent permitted by applicable law) interest at the rate specified in such Note or Notes, and an amount sufficient to cover all costs and expenses of collection incurred by or on behalf of the Lenders (including counsel fees and expenses) and (b) every other Default (whether or not constituting an Event of Default) shall have been remedied or waived, then the Majority Lenders may, by written notice to the Companies, rescind and annul such acceleration and its consequences, but no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon, and no such rescission and annulment shall require Lenders to repay any interest, principal or premium actually received as a result of such acceleration. SECTION 6.03. Other Remedies. If any Event of Default or Default shall occur and be continuing, each Lender may proceed to protect and enforce its rights under this Agreement and the Operative Documents, as the case may be, by exercising such remedies as are available to them in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement or the Operative Documents. No remedy conferred in this Agreement upon a Lender is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now hereafter existing at law or in equity or by statute or otherwise. SECTION 1.02. Amendment and Restatement of Appendix A. Appendix A shall be amended and restated in full to read as the Appendix A attached hereto. ARTICLE II CONDITIONS PRECEDENT SECTION 2.01. Conditions of Effectiveness. This Amendment and Restatement shall become effective when, and only when, (a) King & Spalding shall have received counterparts of this Amendment and Restatement executed by each of the Dravo Parties and the Lenders and all of the following documents, each (unless otherwise indicated) being dated the date of receipt thereof by King & Spalding (which date shall be the same for all such documents), in form and substance satisfactory to the Lenders: (i) Copies of (A) all documents evidencing all requisite corporate action of each Dravo Party (including any and all resolutions of the Board of Directors of each Dravo Party) authorizing the execution, delivery and performance of this Amendment and Restatement and the matters contemplated hereby and thereby, (B) all documents evidencing all Governmental Approvals, if any, with respect to this Amendment and Restatement and the matters contemplated hereby and thereby, and (C) the certificate or articles of incorporation and by-laws of each Dravo Party. (ii) A good standing certificate issued by the Secretary of State of its incorporation for each Dravo Party, each dated as of a date not more than five days prior to the date hereof. (iii) A certificate of the Secretary or an Assistant Secretary of each Dravo Party certifying the names and true signatures of the officers authorized to sign this Amendment and Restatement on behalf of such Dravo Party and any other documents to be delivered by such Dravo Party hereunder. (iv) Amendment to the First Mortgage and Security Agreement, dated as of January 21, 1992, by Lime in favor of the Collateral Agent, recorded in Pendleton County, Kentucky, duly executed by Lime and the Collateral Agent. (v) A signed copy of a commitment for title insurance providing for a date-down endorsement to the title insurance policy issued by Commonwealth Land Title Insurance Company, Loan Policy Number E0835807, covering the land utilized by the Project in Pendleton County, Kentucky, containing such exceptions as the Lenders may determine to be acceptable. (vi) A Warranty Bill of Sale and Assignment, pursuant to which all of the personal property conveyed by Lime to Dravo Black River Limited Partnership (the "SPV") under the Warranty Bill of Sale and Assignment, dated as of August 1, 1994, by Lime to the SPV, is conveyed back to Lime, duly executed by Lime and the SPV. (vii) An Improvements Deed, pursuant to which all of the Improvements conveyed by Lime to the SPV under the Improvements Deed, dated as of August 1, 1994, by Lime to the SPV, are conveyed back to Lime, duly executed by Lime and the SPV. (viii) Financing Statements on Form UCC-1 covering the personal property conveyed under the Warranty Bill of Sale and Assignment delivered pursuant to clause (vi) above, to be filed in all jurisdictions as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests of the Collateral Agent therein. (ix) A Termination of Ground Lease, pursuant to which the Ground Lease, dated as of August 1, 1994, between Lime and the SPV will be terminated of record, duly executed by Lime and the SPV. (x) A Termination of Easement Agreement, pursuant to which the Easement Agreement, dated as of August 1, 1994, between Lime and the SPV will be terminated of record, duly executed by Lime and the SPV. (xi) A Termination of Mortgage Subordination Agreement, pursuant to which the Mortgage Subordination Agreement, dated as of August 1, 1994, by the Collateral Agent in favor of the SPV will be terminated of record, duly executed by the Collateral Agent and the SPV. (xii) A favorable opinion of Buchanan Ingersoll, Professional Corporation, special counsel for the Dravo Parties, in form and substance satisfactory to the Lenders. (xiii) Such other documents, instruments, approvals (and, if required by the Agent, certified duplicates of executed copies thereof) or opinions as the Agent or any Lender may reasonably request. (b) The representations and warranties contained herein shall be true on and as of the date hereof; there shall exist on the date hereof, no Event of Default or Default; there shall exist no material adverse change in the financial condition, business operation or prospects of any Dravo Party or its Subsidiaries since December 31, 1994; and each Dravo Party shall have delivered to the Lenders an Officer's Certificate, dated the date hereof, to such effect. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Representations and Warranties of the Dravo Parties. (a) Each of the Dravo Parties hereby repeats and confirms each of the representations and warranties made by it in Article VII of the Override Agreement as though made on and as of the date hereof, with each reference therein to "this Agreement", the "Operative Documents", "hereof", "hereunder", "thereof", "thereunder" and words of like import being deemed to be a reference to the Override Agreement, as amended hereby. (b) Each of the Dravo Parties further represents and warrants as follows: (i) Such Dravo Party and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified to do business in, and is in good standing in, all other jurisdictions where the nature of its business or the nature of property owned or used by it makes such qualification necessary. (ii) The execution, delivery and performance by such Dravo Party of this Amendment and Restatement are within its corporate powers, have been duly authorized by all necessary corporate action and do not contravene (A) such Dravo Party's charter or by-laws, (B) law or (C) any legal or contractual restriction binding on or affecting such Dravo Party; and such execution, delivery and performance do not or will not result in or require the creation of any Lien upon or with respect to any of its properties. (iii) No Governmental Approval is required for the due execution, delivery and performance by such Dravo Party of this Amendment, except for such Governmental Approvals as have been duly obtained or made and which are in full force and effect on the date hereof and not subject to appeal. (iv) This Amendment and Restatement constitutes the legal, valid and binding obligations of such Dravo Party enforceable against such Dravo Party in accordance with its terms; subject to the qualifications, however, that the enforcement of the rights and remedies herein is subject to bankruptcy and other similar laws of general application affecting rights and remedies of creditors and that the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceedings therefor may be brought. (v) Except as set forth in the Form 10-Q dated September 30, 1995, there are no pending or threatened actions, suits or proceedings affecting such Dravo Party or any of its Subsidiaries or the properties of such Dravo Party or any of its Subsidiaries before any court, governmental agency or arbitrator, that may, if adversely determined, materially adversely affect the financial condition, properties, business, operations or prospects of such Dravo Party and it Subsidiaries, considered as a whole, or affect the legality, validity or enforceability of the Override Agreement or any other Operative Document, as amended hereby. [Signatures Begin on Next Page.] IN WITNESS WHEREOF, each of the parties hereto have caused this Amendment and Restatement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. FIRST ALABAMA BANK By: /s/ PETER P. GAILLARD Name: Peter P. Gaillard Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION (f/k/a Pittsburgh National Bank) By:/s/ DALE A. STEIN Name: Dale A. Stein Title: Vice President BANK OF AMERICA ILLINOIS By:/s/ MICHAEL J. MCKENNEY Name: Michale J. McKenney Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By:/s/ KEVIN J. KRASKA Name: Kevin J. Kraska Title: Vice President DRAVO CORPORATION By:/s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President DRAVO LIME COMPANY By:/s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. By:/s/ ERNEST F. LADD III Name: Ernest F. Ladd III Title: Executive Vice President EX-10 5 INCENTIVE COMPENSATION PLAN (5) Dravo Corporation Incentive Compensation Plan (Revised December 1995) The Dravo Corporation Incentive Compensation Plan provides senior managers and other key employees the opportunity to earn incentive income each year by achieving or surpassing predetermined, preapproved objectives. Objectives The objectives of the Incentive Compensation Plan are to: 1. Promote individual ownership and accountability in the ongoing success of the corporation, while focusing team efforts on overall corporate earnings objectives. 2. Encourage and reward management achievements that contribute to the value of the corporation. 3. Communicate key corporate and divisional priorities through the plan. 4. Provide senior managers and other key employees with a competitive compensation opportunity. Plan Summary The Dravo Corporation Incentive Compensation Plan (ICP) is a target incentive plan that provides for the establishment of target, threshold and optimum incentive awards based upon performance against specific predetermined performance objectives. Prior to the beginning of each plan year, target, threshold and optimum performance levels will be established and approved for Corporate and Dravo Lime divisional performance. Those employees who function across divisional locations will have a single Corporate component (100%). Those who are assigned to an individual operating unit will have both a Corporate component (70%) and a Divisional component (30%). At the beginning of each year each participant will be provided with a Participant's Guide, which will give them an overview of the plan and specify their target award and award components. Shareholder Protection Provisions To assure that ICP awards are related to acceptable corporate earnings, the following shareholder protection provisions will apply: In developing each year's Plan, the sum of all projected ICP awards will not be allowed to exceed 8% of projected after tax earnings from continuing operations. If the total of all projected ICP awards exceeds 8% of the projected after tax earnings from continuing operations, then either the number of participants and/or the individual target percentages are to be reduced until the total is 8% or less. If the Corporation fails to achieve threshold EPS performance, no incentive awards will be made under the plan at any level for any component for any participant. Eligibility Participation in the plan may be extended to Corporate and Dravo Lime senior managers and other key employees. Prior to the beginning of each plan year, eligible participants are recommended by the President and Chief Executive Officer (CEO) and approved by the Compensation Committee of the Board of Directors (Committee). Individual Target Awards Target awards are established so as to pay competitive levels of incentive compensation for achievement of the targeted performance levels. Target awards will equal a specified percentage of the Midpoint salary of the job grade for each participant in the plan. Percentages may vary within the job grade based on accountability of the job as recommended by the CEO and approved by the Committee each year. Range of Awards The target award will be paid at the targeted level of performance on any component of the plan. The threshold award, equal to 50 percent of the target award, will be paid at the threshold level of performance on any component of the plan. If performance fails to meet the threshold, no award will be made for that component. The optimum award, equal to 150 percent of the target award, will be paid for performance equal to or above the optimum level of performance on any component of the Plan. Allocation of Awards Among Components Awards will be allocated to reflect the organizational level where the participant has the greatest level of influence on business results. For all participants awards the greatest weight will be given to corporate performance. For participants assigned to a specific operating division, a portion of their award will be allocated to reflect the performance of their respective division. Corporate Component All participants at the Corporate level, and those participants who are not assigned to a specific operating division will receive 100% of their award through the Corporate component. Employees who are assigned to a specific operating division location will receive 70% of their award through the Corporate component. The performance measure for the Corporate component is Earnings Per Share (EPS) from continuing operations. The CEO will recommend to the Committee for approval threshold, target and optimum levels of EPS performance for the Plan Year for use in determining awards. Performance at the threshold level will result in an award of 50% of the target for this component. At the target level of performance, the target award will be made and at the optimum level, the optimum award of 150% of target will be made. For intermediate results, awards will be interpolated. The Corporate component may be adjusted, with the approval of the Committee, to reflect the impact of extraordinary events on Corporate EPS. Divisional Component Participants employed in the various operating divisions - - Black River, Maysville and Longview -- will receive 30% of their awards through a Divisional component that is based upon the results attained by their respective operating division. The performance measure for the Divisional component is earnings before interest and taxes (EBIT). The CEO will recommend to the Committee for approval threshold, target and optimum levels of EBIT performance for each operating division for the plan year for use in determining awards. The relationship of actual results to awards is determined in the same way as described above for the Corporate component. The Divisional component may be adjusted, with the approval of the Committee, to reflect the impact of extraordinary events on an operating division's EBIT. Payment of Incentive in Dravo Corporate Stock For participants in job grade level 24 and above having a target percentage of 15% or more, the ICP award may be paid in a combination of cash and stock. The maximum percentage of stock will be specified for each applicable job grade. The actual amount of the award paid in stock will be recommended by the CEO and approved by the Committee. Such stock award will be a grant to the employee, and it is expected that the employee will retain ownership of the stock while in a management position with the Corporation. The amount of incentive award to be used for stock will be determined by first tax adjusting the employee's total incentive award and then applying the percentage to that tax adjusted amount. The number of shares of stock awarded will be calculated using the average between the high and low price of the stock on the date the award is made, and using the full market value of the stock. Partial Year Payments A new employee, hired into an approved ICP position, will have his target percentage and component allocation established in accordance with the Plan. The employee's award will be calculated at the end of the year along with other participants, but the award will be prorated based on the number of months of employment. Terminations Employees who terminate from the company prior to December 31 of the plan year for any reason, with the exception of lay off, change of control termination, retirement, disability, or death, will forfeit their incentive compensation for that year. Employees who leave the company prior to December 31 due to lay off, change of control termination, retirement, disability, or in the event of death, will receive a prorated incentive for those months actually worked. Employees who leave the company after December 31 will be paid their award, if any, when other ICP payments are distributed. Promotions Employees promoted into an ICP position from a non-ICP position, or employees who are promoted into a position having a higher salary grade, target percentage and/or different component allocation, will receive an award prorated for the number of months spent in the new position. If an ICP award has been earned in their previous position, that award will be prorated by the number of months spent in the previous position. Plan Administration The plan is administered by the Compensation Committee of the Board of Directors. The Committee is authorized to interpret the plan, to establish and amend rules for its administration and to make discretionary adjustments in awards due to extraordinary events. Recommendations as to the operation of the plan, eligible participants, target percentages, component allocations, type (cash and/or restricted stock) and amount of awards, performance criteria, and extraordinary adjustments may be made to the Committee by the CEO. EX-10 6 STOCK OPTION PLAN OF 1994 (REVISED) 11 DRAVO CORPORATION STOCK OPTION PLAN OF 1994 Section 1. Establishment of the Plan. There is hereby established the Dravo Corporation Stock Option Plan of 1994 (hereinafter called the "Plan"), pursuant to which officers, other key employees and non-employee directors of Dravo Corporation and its subsidiaries may be granted options to purchase shares of common stock of the Corporation or rights to share in the improvement in the Corporation's stock price performance, in order to provide a long-range incentive and a shareholder's perspective to those persons principally responsible for the continued growth and financial success of the Corporation. Section 2. Definitions. For purposes of the Plan, the following definitions shall control: (a) Corporation - Dravo Corporation and its Subsidiaries. (b) Board - the Board of Directors of Dravo Corporation. (c) Change in Control - a change in control of the Corporation of such a nature that it would be required to be reported by the Corporation in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof ("Exchange Act"); provided, however, that without respect to the foregoing, such a change in control shall be deemed to have occurred if i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or ii) during any period of three consecutive years, individuals who at the beginning of such period constitute the Board, cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (d) Committee - the Compensation Committee appointed by the Board consisting of directors who are not present or former employees of the Corporation. The Committee shall be constituted so that at all relevant times it meets the then applicable requirements of Rule 16b-3 (or its successor) promulgated under the Securities Exchange Act of 1934, as amended. (e) Common Stock - the $1.00 par value shares of common stock of the Corporation. (f) Employee Participant - any employee who has met the eligibility requirements set forth in Section 7(a) hereof and to whom a grant has been made and is outstanding under the Plan. (g) Fair Market Value - the mean between the highest and lowest quoted selling prices of the Common Stock on the New York Stock Exchange on the relevant date for valuation, or, if no sale of Common Stock shall have been made on that day, the next preceding day on which there was such a sale. If the Common Stock is not listed on the New York Stock Exchange, the Fair Market Value of the Common Stock shall be as determined by the Committee in its discretion. (h) IRC - Internal Revenue Code of 1986, as amended. (i) Incentive Stock Option - an option which meets the qualifications of Section 422 of the IRC. (j) Non-Statutory Stock Option - an option which is not an Incentive Stock Option. (k) Retirement - retirement at or after age 55 under a retirement plan of the Corporation. (l) SAR or Stock Appreciation Right - an award under which the grantee may earn additional compensation based upon the market performance of the Common Stock. (m) Subsidiary - a corporation the majority of the outstanding voting stock of which is directly or indirectly owned by the Corporation. Section 3. Types of Options. Options granted pursuant to the Plan may be either Incentive Stock Options or Non-Statutory Stock Options. Incentive Stock Options and Non-Statutory Stock Options shall be granted separately hereunder. Subject to the provisions of the Plan, the Committee, in its sole discretion, shall determine whether and to what extent options granted under the Plan shall be designated as Incentive Stock Options or Non-Statutory Stock Options. Section 4. Duration. All awards granted under this Plan must be granted within ten years from the effective date set forth in Section 25 hereof. Any awards outstanding after the expiration of such ten-year period may be exercised within the option periods prescribed for such options. Section 5. Administration. The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or the acts approved in writing by a majority of the Committee, shall be deemed the acts of the Committee. Subject to the provisions of the Plan and to policies determined by the Board of Directors, the Committee is authorized to interpret the Plan, adopt such rules and regulations and take such action in the administration of the Plan as it shall deem proper. Decisions of the Committee shall be binding on all persons claiming rights under the Plan. Subject to the provisions of the Plan, recommendations as to the operation and administration of the Plan, eligible employees, type and amount of incentive awards and performance criteria may be made by a Management Compensation Committee which shall consist of senior executives of the Corporation selected by the Committee. Section 6. Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full and final authority to determine the persons to whom options and SARs shall be awarded and the number of shares to be covered by each option or SAR. The Committee may determine that options or SARs shall be exercisable in one or more installments during the term of the option or SAR and the right to exercise may be cumulative as determined by the Committee. Section 7. Eligibility. (a) Officers and other key employees of the Corporation (including officers and other employees who are directors of the Corporation) who, in the opinion of the Committee, are mainly responsible for the continued growth and development and future financial success of the business shall be eligible to participate in the Plan. The Committee shall, in its sole discretion, from time to time select from such eligible persons those to whom options or SARs shall be granted and determine the type of option and the number of shares to be included in such option or SAR. No officer or other employee shall have any right to receive an option or SAR except as the Committee in its discretion shall determine. (b) Non-employee directors shall be eligible to receive awards only pursuant to and in accordance with Section 12 of the Plan. Section 8. Shares Subject to the Plan. The total number of shares of Common Stock which may be issued or on which SARs may be calculated pursuant to the Plan shall be One Million (1,000,000) shares of Common Stock (subject to adjustment as provided in Section 13), which may be either authorized and unissued shares or shares held in the treasury of the Corporation, and which shares are hereby reserved for the purposes of the Plan. To the extent that options or SARs granted under the Plan shall expire or terminate without being exercised, shares covered thereby shall remain available for purposes of the Plan. To the extent that options are terminated by reason of the exercise of a related SAR, the shares covered by such option shall not be available for grant of further options or SARs under the Plan. Section 9. Terms of Options and SARs Awarded to Employee Participants. Each option and SAR granted to an Employee Participant under the Plan shall be evidenced by a stock option or Stock Appreciation Rights agreement between the Corporation and the grantee and shall be subject to the following terms and conditions: (a) Subject to adjustment as provided in Section 13 of the Plan, the price at which each share covered by an option or SAR may be purchased shall be determined in each case by the Committee but shall not be less than the Fair Market Value thereof at the time the option is granted. If a grantee owns (or is deemed to own under applicable provisions of the IRC and rules and regulations promulgated thereunder) more than 10% of the combined voting power of all classes of the stock of the Corporation (or any parent or Subsidiary corporation of the Corporation) and an option granted to such grantee is intended to qualify as an Incentive Stock Option, the option price shall be not less than 110% of the Fair Market Value of the shares covered by the option on the date the option is granted. (b) During the lifetime of the grantee, the option or SAR may be exercised only by the grantee or by his or her guardian or legal representative. The option or SAR shall not be transferable by the grantee otherwise than by will or by the laws of descent and distribution. (c) Except as otherwise provided herein, an option or SAR may be exercised in whole at any time, or in part from time to time, within such period or periods from the granting of the option or SAR as may be determined by the Committee and set forth in the stock option or Stock Appreciation Rights agreement (such period or periods being hereinafter referred to as the exercise period), provided that except as otherwise provided in Section 11 hereof, options and SARS may not be exercisable prior to one (1) year from the date of grant and the exercise period shall not exceed ten years. Notwithstanding the foregoing: i) An option or SAR may be exercised during the lifetime of the grantee only while he or she is in the employ of the Corporation or within three (3) months following termination of employment and only to the extent that the option or SAR would be exercis- able by the grantee at the time of termination. Notwithstanding the foregoing, in the event that termination is by reason of Retirement, permanent disability or death, the option or SAR may be exercised in whole or in part until the earlier of (1) the expiration of the term of the option or SAR, or (2) five years after said termination. In the event the grantee dies within five years following Retirement or termination by reason of permanent disability,his or her estate may exercise the option or SAR until the earlier of(1)the expiration of the term of the option or SAR, or(2)five years after said employee's retirement or termination. For this purpose, the grantee may designate to the Committee the person or persons to whom his or her rights under the option or SAR shall pass in the event of his or her death; ii) The option or SAR may not be exercised for more shares (subject to adjustment as provided in Section 13) after the termination of the grantee's employment or his or her death than the grantee was entitled to acquire thereunder at the time of the termination of the grantee's employment or his or her death; iii) If a grantee owns (or is deemed to own under applicable provisions of the IRC and rules and regulations promulgated thereunder) more than 10% of the combined voting power of all classes of the stock of the Corporation (or any parent or Subsidiary corporation of the Corporation) and an option granted to such grantee is intended to qualify as an Incentive Stock Option, the option by its terms may not be exercisable after the expiration of five years from the date such option is granted. (d) Subject to the limitations herein set forth, the option or SAR may be exercised in whole or in part from time to time by written request made to the Corporation in the manner determined from time to time by the Committee. Payment in full for the number of shares purchased upon exercise of an option shall be made to the Corporation at the time of each exercise. Payment may be made in cash or by delivering to the Corporation shares of Common Stock of the Corporation or any combination of such shares and cash, having in any case an aggregate Fair Market Value equal to the option price of the shares being purchased pursuant to the exercise of the option, or by delivering to the Corporation a notice of exercise with an irrevocable direction to a registered broker-dealer under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price. (e) No grantee may be granted Incentive Stock Options to purchase Common Stock of the Corporation in any year to the extent that the aggregate Fair Market Value of the Common Stock, determined at the time of grant, with respect to which Incentive Stock Options are exercisable for the first time by the grantee (under all plans of the Corporation) exceeds $100,000 during such calendar year. If any option designated as an Incentive Stock Option either alone or in conjunction with any other option or options exceeds the foregoing limitation, options in excess of such limitation shall automatically be reclassified as Non-Statutory Stock Options by whole number of shares, with later granted options being so reclassified first. (f) The Committee, in its discretion, may provide that any option intended to be an Incentive Stock Option shall also be subject to such additional or more restrictive terms and conditions as may, from time to time, be required to constitute such option an Incentive Stock Option under the provisions of Section 422 of the IRC. This Plan shall be construed in a manner consistent with Section 422 of the IRC and Treasury Regulations promulgated or proposed thereunder. (g) The Committee may include such other terms and conditions not inconsistent with the foregoing as the Committee shall approve. Without limiting the generality of the preceding sentence, the Committee shall be authorized to impose conditions to the exercise of options relating to the performance of the Corporation or any Subsidiary or of grantee(s) or any combination of the foregoing. The Committee shall, in its sole judgment, determine whether such conditions have been fulfilled and may require that the Committee receive from the Corporation a written certificate as to the fulfillment of such conditions before shares are issued and sold pursuant to options or SARs which have been exercised. Section 10. Stock Appreciation Rights. (a) The Committee, in its discretion, may provide that any option granted to an Employee Participant includes a tandem Stock Appreciation Right; provided, however, that a grantee may elect to exercise the tandem Stock Appreciation Right with respect to an Incentive Stock Option only when the Fair Market Value of the shares subject to such option exceeds the option price. The right to elect such Stock Appreciation Right granted in tandem with an option shall entitle the grantee to receive an amount equal to the excess of the Fair Market Value of one share of Common Stock over the option price per share, multiplied times the number of shares as to which the option, or portion thereof, is surrendered. This amount shall be paid in cash or in Common Stock, or in such combination of Common Stock and cash as the Committee shall from time to time determine, having in any case an aggregate Fair Market Value equal to the amount required to be paid. All SARs granted in tandem with options shall be subject to the same terms and conditions as the related option. (b) The Committee, in its discretion, may grant Stock Appreciation Rights which do not relate to an option. Such "stand-alone" SARs shall be governed by the provisions of the Plan relating to Non- Statutory Stock Options and by the terms of a Stock Appreciation Rights Agreement between the Corporation and the grantee setting forth the number of shares as to which such stand-alone SARs are granted and such other terms and conditions as the Committee may determine. Upon exercise of a stand-alone SAR, the grantee shall be entitled to receive an amount equal to the excess of the Fair Market Value of one share of Common Stock determined at the date of exercise over the Fair Market Value of one share of Common Stock determined at the date of grant, multiplied times the number of shares as to which the SAR was granted. This amount shall be paid in cash or in Common Stock, or in such combination of Common Stock and cash as the Committee shall from time to time determine, having in any case an aggregate Fair Market Value equal to the amount required to be paid. Section 11. Acceleration of Right of Exercise. Except with respect to options granted to non-employee directors, any option or SAR granted hereunder shall become immediately exercisable in the event of a Change in Control unless otherwise provided by the Committee at the time of grant. Section 12. Provisions Applicable to Non-employee Directors Options. (a) Each non-employee director shall automatically receive a Non- Statutory Stock Option to purchase 1,500 shares of Common Stock on the first Friday following the Corporation's Annual Meeting of Shareholders at which such director is elected to serve and on the first Friday following each Annual Meeting of Shareholders thereafter so long as such director continues as a member of the Board. Any non-employee director whose initial term commenced prior to the effective date of this Plan who is serving as a director on such effective date shall automatically receive a Non- Statutory Stock Option to purchase 1500 shares of common stock on the first Friday following each Annual Meeting of Shareholders so long as such director continues as a member of the Board. (b) Each option granted to a non-employee director shall be evidenced by written documentation containing its terms and conditions. (c) The exercise price for options granted to non-employee directors shall not be less than 100% of the Fair Market Value of the underlying shares of Common Stock on the date the stock option is granted. (d) Stock options granted to non-employee directors under this Plan shall become exercisable one year after the date of grant, shall expire ten years after the date of grant and shall not be transferable otherwise than by will or by the laws of descent and distribution. (e) Payment may be made in cash or by delivering to the Corporation shares of Common Stock of the Corporation or any combination of such shares and cash, having in any case an aggregate Fair Market Value equal to the option price of the shares being purchased pursuant to the exercise of the option or by delivering to the Corporation a notice of exercise with an irrevocable direction to a registered broker-dealer under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price. (f) Upon cessation of service of a non-employee director (other than for death), only those options exercisable at the date of cessation of service shall continue to be exercisable by the grantee. Such options must be exercised within 90 days of cessation of service, but in no event after the expiration of the option period. (g) Upon the death of a non-employee director, those options which were exercisable on the date of death may be exercised within 36 months from the date of death, but in no event after the expiration of the option period, by the grantee's estate. For this purpose, the grantee may designate to the Committee the person or persons to whom his or her rights under the option shall pass in the event of his death. Section 13. Adjustment of Number and Price of Shares. (a) In the event that a dividend shall be declared upon the Common Stock of the Corporation payable in shares of said stock, the number of shares of Common Stock covered by each outstanding option and SAR and the number of shares available for issuance pursuant to the Plan but not covered by options or SARs shall be adjusted by adding thereto the number of shares which would have been distributable thereon if such shares had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend. (b) In the event that the outstanding shares of Common Stock of the Corporation shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Corporation or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for the shares of Common Stock covered by each outstanding option and SAR and for the shares available for issuance pursuant to the Plan but not covered by an option or SAR, the number and kind of shares of stock or other securities which would have been substituted therefor if such shares had been outstanding on the date fixed for determining the shareholders entitled to receive such changed or substituted stock, SAR or other securities. (c) In the event there shall be any change, other than specified above in this Section 13, in the number or kind of outstanding shares of Common Stock of the Corporation or of any stock or other securities into which such Common Stock shall be changed or for which it shall have been exchanged, then if the Committee shall determine, in its discretion, that such change equitably requires an adjustment in the number or kind of shares covered by outstanding options or SARs or which are available for issuance pursuant to the Plan but not covered by options or SARs, such adjustment shall be made by the Committee and shall be effective and binding for all purposes of the Plan and on each outstanding stock option and SAR agreement. (d) In the event that, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board of Directors shall authorize the issuance or assumption of a stock option or stock options in a transaction to which Section 424(a) of the IRC applies, then, notwithstanding any other provision of the Plan, the Committee may grant an option or options upon such terms and conditions as it may deem appropriate for the purpose of assumption of the old option, in conformity with the provisions of such Section 424(a) and the regulations thereunder, as they may be amended from time to time; provided, however, that no such grant may be made to a non-employee director. (e) No adjustment or substitution provided for in this Section 13 shall require the Corporation to issue or to sell a fractional share under any stock option or Stock Appreciation Rights agreement and the total adjustment or substitution with respect to each stock option or Stock Appreciation Rights agreement shall be limited accordingly. (f) In the case of any adjustment or substitution provided for in this Section 13, the price per share in each stock option and SAR agreement shall be equitably adjusted by the Committee to reflect the greater or lesser number of shares of stock or other securities into which the stock covered by the option or SAR may have been changed or which may have been substituted therefor. Section 14. Amendment and Termination. The Board of Directors may modify, amend, or terminate the Plan at any time except that, to the extent then required by applicable law, rule, or regulation, approval of the holders of a majority of shares of Common Stock represented in person or by proxy at a meeting of the stockholders will be required to increase the maximum number of shares of Common Stock available for distribution under the Plan (other than increases due to adjustments in accordance with the Plan and a one time increase that would not increase the amount of Common Stock issuable under the Plan by more than 10%). Notwithstanding the foregoing, an amendment revising the price, date of exercisability, option period of or amount of shares under a Stock Option granted to a non-employee director shall not be made more frequently than once every six months unless necessary to comply with the IRC or with the Employee Retirement Income Security Act of 1974, as amended, or the Rules promulgated thereunder, respectively. No modification, amendment, or termination of the Plan shall adversely affect the rights of a participant under a grant previously made to him without the consent of such participant. Section 15. Compliance with Governmental Regulations. Notwithstanding any provision of the Plan or the terms of any stock option or SAR agreement issued under the Plan, the Corporation shall not be required to issue any shares hereunder prior to the registration of the shares subject to the Plan under the Securities Act of 1933 or the Securities Exchange Act of 1934, if such registration shall be necessary, or before compliance by the Corporation or any participant with any other provisions of either of those acts or of regulations or rulings of the Securities and Exchange Commission thereunder, or before compliance with all other applicable Federal and state laws and regulations and rulings thereunder. The Corporation shall use its best efforts to effect such registrations and to comply with such laws, regulations and rulings forthwith upon advice by its counsel that any such registration or compliance is necessary. Section 16. Compliance with Rule 16b-3. It is the Corporation's intent that the Plan comply in all respects with Rule 16b-3 of the Exchange Act and any regulations promulgated thereunder. If any provision of this Plan is later found not to be in compliance with the Rule, the provisions shall be deemed null and void. All grants and exercises of options under this Plan by individuals subject to Section 16 of the Exchange Act shall be executed in accordance with the requirements of Section 16, as amended, and any regulations promulgated thereunder. Section 17. Tax Withholding. (a) Whenever shares are to be issued under the Plan, the Corporation shall have the right to require the grantee to remit to the Corporation an amount sufficient to satisfy Federal, state and local tax withholding requirements prior to the delivery of any certificate for such shares. If a grantee makes a disposition of shares acquired upon the exercise of an Incentive Stock Option within either two years after grant or one year after the receipt of Common Stock by the grantee, the grantee shall promptly notify the Corporation and the Corporation shall have the right to require the grantee to pay to the Corporation an amount sufficient to satisfy Federal, state and local tax withholding requirements. Whenever payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy Federal, state and local tax withholding requirements and authorized deductions. (b) A grantee who is obligated to pay to the Corporation an amount required to be withheld under applicable income tax laws in connection with the exercise of Non-Statutory Stock Options under the Plan may elect to satisfy this withholding obligation, in whole or in part, by requesting that the Corporation withhold shares of Common Stock otherwise issuable to the grantee upon exercise of the option or by delivering to the Corporation already owned shares of Common Stock of the Corporation having a Fair Market Value on the date on which the amount of tax to be withheld is determined (the "Tax Date") equal to the amount of the tax required to be withheld. Any fractional amount shall be paid to the Corporation by the grantee in cash or shall be withheld from the grantee's next regular paycheck. (c) An election by a grantee to have shares of Common Stock withheld or to deliver to the Corporation already owned shares of Common Stock of the Corporation to satisfy Federal, state and local tax withholding requirements pursuant to subparagraph (b) above (the "Election"), shall be subject to the following restrictions: i) The Election must be in writing and delivered to the Corporation prior to the Tax Date; ii) The Election shall be irrevocable by the grantee; and iii) The Election shall be subject to approval by the Committee, which approval may be granted or withdrawn at any time prior to the Tax Date. (d) Notwithstanding the provisions of subparagraphs (a)-(c) above, if a grantee is an officer or director of the Corporation, as defined for purposes of Rule 16b-3 under the Exchange Act, as amended, and withholding of any Federal, state or local taxes is required, the Corporation shall hold back from the shares of Common Stock to be delivered that number of shares having a Fair Market Value equal to the amount of tax to be withheld to satisfy the tax withholding obligation. Section 18. Governing Law. The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the Commonwealth of Pennsylvania applicable to contracts entered into and performed entirely in such state. Section 19. Designation of Beneficiary. An Employee Participant may designate, in a writing delivered to the Corporation before his or her death, a person or persons to receive, in the event of the Employee Participant's death, any rights to which he or she would be entitled under the Plan. An Employee Participant may also designate an alternate beneficiary to receive payments if the primary beneficiary does not survive the Employee Participant. An Employee Participant may designate more than one person as his or her beneficiary or alternate beneficiary, in which case such persons would receive payments as joint tenants with a right of survivorship. A beneficiary designation may be changed or revoked by an Employee Participant at any time by filing a written statement of such change or revocation with the Corporation. If an Employee Participant fails to designate a beneficiary, then his estate shall be deemed to be his beneficiary. Section 20. Employment Rights. Neither the Plan nor any action taken hereunder shall be construed as giving any employee of the Corporation the right to become a Employee Participant, and a grant under the Plan shall not be construed as giving any Employee Participant any right to be retained in the employ of the Corporation. Section 21. Expenses. The expenses of administering the Plan shall be borne by the Corporation. Section 22. Indemnification. Service on the Committee shall constitute service as a member of the Board so that members of the Committee shall be entitled to indemnification and reimbursement as directors of the Corporation pursuant to its Articles of Incorporation, By-Laws, or resolutions of the Board or shareholders. Section 23. Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any retirement, group insurance, or other employee benefit plan of the Corporation. The Plan shall not preclude the shareholders of the Corporation, the Board or any committee thereof, or the Corporation from authorizing or approving other employee benefit plans or forms of incentive compensation, nor shall it limit or prevent the continued operation of other incentive compensation plans or other employee benefit plans of the Corporation or the participation in any such plans by Employee Participants in the Plan. Section 24. No Trust or Fund Created. Neither the Plan nor any grant made hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and an Employee Participant or any other person. To the extent that any person acquires a right to receive payments from the Corporation pursuant to a grant under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Section 25. Effective Date of the Plan. The Plan shall become effective immediately upon approval of the Plan by the Board provided that the Plan shall thereafter be approved by a majority of the outstanding shares of the Corporation at the Annual Meeting of the Shareholders of the Corporation on April 28, 1994. No options shall be granted hereunder until the Committee shall have been advised by the Corporation's counsel that all applicable legal requirements have been satisfied and that appropriate rulings, if any, which are required from governmental agencies, have been obtained. As amended effective December 12, 1995. EX-10 7 PUHALA AGREEMENT (Page ) AGREEMENT This Agreement made as of this 1st day of June , 1993 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and James J. Puhala an individual residing in the State of Alabama and an employee of the Corporation (the "Executive"). WITNESSETH: WHEREAS, the Board of Directors of the Corporation has determined that it is in the best interests of the Corporation to enter into this Agreement with the Executive; and WHEREAS, the Executive desires to obtain certain benefits in the event his employment is terminated due to a Change-in-Control of the Corporation; NOW, THEREFORE, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Definition of Terms. The following terms when used in this Agreement shall have the meaning hereafter set forth: (a) "Annual Salary Adjustment Percentage" shall mean the mean average percentage increase in base salary for all elected officers of the Corporation during the two full calendar years immediately preceding the time to which such percentage is being applied; provided, however, that if after a Change-in-Control, as hereinafter defined, there should be a significant change in the number of elected officers of the Corporation or in the manner in which they are compensated, then the foregoing definition shall be changed by substituting for the phrase "elected officers of the Corporation" the phrase "persons then performing the functions formerly performed by the elected officers of the Corporation." (b) "Cause for Termination" shall mean (i) the deliberate and intentional failure by the Executive to devote substantially his entire business time and best efforts to the performance of his duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or disability) after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Corporation which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties, or (ii) the deliberate and intentional engaging by the Executive in gross misconduct materially and demonstrably injurious to the Corporation. For purposes of this definition, no act, or failure to act, on the Executive's part shall be considered "deliberate and intentional" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Corporation. (c) "Change-in-Control" shall mean a change in control of the Corporation of such a nature that it would be required to be reported by the Corporation in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof ("Exchange Act"); provided, however, that without respect to the foregoing, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (ii) during any period of three consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation (the "Board") cease for any reason to constitute at least a Majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (d) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after a Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive's duties on a full time basis during such thirty (30) day period); (ii) if the Executive's employment terminates due to his death or Retirement, the date of death or Retirement, respectively; (iii) if the Executive terminates employment upon Good Reason for Termination, the date specified for termination in any notice delivered to the Corporation by the Executive; or (iv) if the Executive's employment is terminated for any other reason, the date on which a termination becomes effective pursuant to a Notice of Termination; provided, however, that if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). (e) "Disability" shall mean such incapacity due to physical or mental illness or injury as causes the Executive to be absent from his principal office for the entire portion of 90 consecutive business days. (f) "Good Reason for Termination" shall mean: (i) without the Executive's express written consent, the assignment to the Executive of any duties inconsistent with his positions, duties, responsibilities and status with the Corporation immediately prior to a Change-in- Control, or a change in his reporting responsibilities, titles or offices as in effect immediately prior to a Change-in- Control, or any removal of the executive from or any failure to re-elect the Executive to any of such positions, except in connection with the termination of the Executive's employment due to a Cause for Termination, Disability or Retirement (as hereinafter defined) or as a result of the Executive's death; (ii) a reduction by the Corporation in the Executive's base salary as in effect immediately prior to the Change-in-Control or as the same may be increased from time to time or the failure by the Corporation to increase such base salary each year after the year in which the Change-in-Control occurs by an amount which at least equals, on a percentage basis, the Annual Salary Adjustment Percentage; (iii) a failure by the Corporation to continue to provide incentive compensation comparable to that provided by the Corporation's Incentive Compensation Plan as the same may from time to time prior to a Change-in-Control be modified or superseded by another plan (the "Incentive Compensation Plan"), or a failure by the Corporation to continue the Executive as a participant in the Incentive Compensation Plan on at least the basis and according to the standards in effect immediately prior to the Change-in-Control or to pay the Executive when due any deferred portion of a previous award under the Incentive Compensation Plan; (iv) the Corporation's requiring the Executive to be based anywhere other than the Corporation's executive offices at which the Executive has his principal office immediately prior to the Change-in-Control, except for required travel on the Corporation's business to an extent substantially consistent with the Executive's present business travel obligations immediately prior to the Change-in- Control, or, in the event the Executive consents to any such relocation of the Corporation's principal executive offices, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change of the Executive's principal residence in connection with such relocation and to indemnify the Executive against any loss (defined as the difference between the actual sale price of such residence and the higher of (a) the Executive's aggregate investment in such residence or (b) the fair market value of such residence as determined by a real estate appraiser designated by the Executive and reasonably satisfactory to the Corporation) realized in the sale of the Executive's principal residence in connection with any such change of residence; (v) the failure by the Corporation to continue in effect any benefit or compensation plan (including but not limited to the Corporation's Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978, Employee Stock Option Plan of 1988, Stock Option Plan of 1994, and the Executive Benefit Plan), pension plan, life insurance plan, health and accident plan or disability plan in which the Executive is participating immediately prior to the Change-in-Control (provided, however, that there shall not be deemed to be any such failure if the Corporation substitutes for the discontinued plan, a plan providing the Executive with substantially similar benefits), the taking of any action by the Corporation which would adversely affect the Executive's participation in or materially reduce the Executive's benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change-in- Control, or the failure by the Corporation to provide the Executive with the number of paid vacation days to which the Executive is then entitled on the basis of years of service with the Corporation in accordance with the Corporation's normal vacation policy all as and to the extent they are in effect immediately prior to the Change-in-Control; (vi) the failure of the Corporation to obtain the assumption of this Agreement by any successor as contemplated in Section 9(c) hereof; or (vii) any purported termination of the employment of the Executive by the Corporation which is not (A) due to the Executive's Disability, death, Retirement (as hereinafter defined) or in accordance with section 2 hereof, or (B) effected pursuant to a Notice of Termination satisfying the requirements of subsection (g) below; (viii) notwithstanding the foregoing, it shall not be deemed Good Reason for Termination if the Corporation, acting in good faith, makes changes to any compensation or benefits plan or program that is made available on a nondiscriminatory basis to the salaried employees of the Corporation, which changes do not apply disproportionately to the elected officers of the Corporation or those persons then performing the functions formerly performed by the elected officers of the Corporation. (g) "Notice of Termination" shall mean a written statement which sets forth the specific reason for termination and, if such is claimed to be Cause for Termination, in reasonable detail the facts and circumstances which indicate that such is Cause for Termination together with notice of the time and place of the meeting of the Board of Directors of the Corporation called to consider such matter in accordance with section 2 hereof. (h) "Options" shall mean any stock options issued pursuant to the Corporation's Employee Stock Option Plan of 1988, Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978 or any future stock option plan. (i) "Retirement" shall mean a termination of the Executive's employment after age 65 or in accordance with any mandatory retirement arrangement with respect to an earlier age agreed to by the Executive. (j) "Stock Appreciation Rights" shall mean any stock appreciation rights issued pursuant to the Corporation's Employee Stock Option Plan of 1988, Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978 or any future stock appreciation rights plan. 2. "Termination by the Corporation Due to Cause for Termination." If the Corporation desires to terminate the Executive's employment due to Cause for Termination, the Corporation shall first deliver a Notice of Termination to the Executive. Thereafter, the Board of Directors at a meeting held not less than two weeks nor more than four weeks after the delivery of the Notice Of Termination shall consider whether cause for Termination exists. Cause for Termination shall not be deemed to exist under this Agreement unless and until the Board determines in good faith by the affirmative vote of not less than three- quarters of the entire membership of the Board that the Executive has engaged in conduct which is Cause for Termination. Should the Board determine that Cause for Termination exists, the Board may at that time or during a period of two weeks thereafter terminate the Executive's employment due to Cause for Termination by adopting at such time or during such period by a similar three- quarters vote a resolution terminating the Executive's employment. If the Board fails to adopt within such two- week period a resolution terminating the Executive's employment, then the Corporation shall be deemed to have waived its right to terminate the Executive due to those circumstances which constituted the Cause for Termination previously found to exist by the Board. 3. Termination Payments Following Change-in-Control. (a) If, during the term of this Agreement, a Change- in-Control shall have occurred and the Executive's employment with the Corporation shall be terminated (i) due to the Executive's death, (ii) by the Executive unless terminated for Good Reason for Termination, or (iii) by the Corporation in accordance with section 2 hereof or for Disability or Retirement, then the Corporation shall have no obligations hereunder to the Executive and the only obligations of the Corporation to the Executive shall be in accordance with any other employment agreement applicable to the Executive and the then various policies, practices and benefit plans of the Corporation. (b) If during the term of this Agreement both a Change-in- Control shall have occurred and the Executive's employment with the Corporation shall have terminated other than under the circumstances above described in Subsection 3(a), then the Corporation shall pay or cause to be paid on or before the fifth day following the Date of Termination in cash to the Executive the following sums: (i) any unpaid portion of the Executive's full base salary for the period from the last period for which the Executive was paid to the Date of Termination; (ii) any then deferred portions of cash awards (including deferred awards which but for this provision would not be payable until subsequent to the Date of Termination) made to the Executive under the Executive incentive Compensation Plan; and (iii) an amount as liquidated damages for lost future remuneration equal to the product obtained by multiplying (A) the lesser of (1) three or (2) a number equal to the number of calendar months remaining from the Date of Termination to the date on which the Executive is 65 years of age (or, if earlier, the age agreed to by the Executive pursuant to any prior arrangement) divided by twelve times (B) the sum of (1) the greater of (i) the Executive's base salary for the year in effect on the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the earliest event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination) or (ii) the Executive's base salary for the year in effect on the date of the Change-in-Control; provided that "base salary for the year" shall be the amount of base salary for the year established by the Board of Directors at the beginning of the fiscal year in question in accordance with the compensation policies and practices of the Corporation, without regard to any reduction in the amount actually paid to the Executive during such year as a result of any plan of the Corporation to reduce compensation due to economic considerations, and without regard to any deferral of compensation payable to the Executive for services rendered during such year to a subsequent year. plus (2) the greater of (i) the average annual cash award received by the Executive under the Executive Incentive Compensation Plan for the two calendar years immediately preceding the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination; or (ii) the average annual cash award received by the Executive under the Incentive Compensation Plan for the two calendar years immediately preceding the date of the Change-in-Control. (c) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive pursuant to the terms of this Agreement or otherwise (collectively the "Total Payments") would not be deductible, in whole or part, as a result of section 280G of the Internal Revenue Code of 1986, as amended (the "Code") by the Corporation, an affiliate or other person making such payment or providing such benefit, the payments due under this Agreement (the "Contract Payments") shall be reduced until no portion of the Total Payments is not deductible, or the Contract Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments the receipt or enjoyment of which you shall have effectively waived in writing prior to the date of payment of the Contract Payments shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you does not constitute a "parachute payment" within the meaning of section 280G(b)(2) of the Code, (iii) the Contract Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (i) or (ii) in their entirety constitute reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel referred to in clause (ii); and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. 4. Stock Appreciation Rights and Stock Options. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof, then, in lieu of Stock Appreciation Rights granted to the Executive (and whether or not they are in tandem with any Options, but provided that this subsection shall not apply to any Stock Appreciation Rights in tandem with incentive stock options) that were outstanding for at least six months prior to the Date of Termination and that were neither subsequently exercised nor expired by their terms prior to the Date of Termination (which rights and any related in tandem options shall be cancelled upon the making of the payment hereafter described), the Executive shall receive an amount in cash on or before the fifth day following the Date of Termination equal to the difference, if positive, obtained by (i) taking the product obtained by multiplying (A) the number of such stock appreciation rights times (B) the greater of (1) the mean between the highest and lowest quoted selling prices for the Corporation's common stock on the composite tape for the New York Stock Exchange on the trading day immediately preceding the Date of Termination; or (2) the highest price paid per share for the Corporation's common stock in the transaction resulting in the actual Change-in-Control. and (ii) subtracting therefrom the aggregate of the products obtained by multiplying the mean between the highest and lowest quoted selling prices for the Corporation's Common Stock on the composite tape for the New York Stock Exchange on each date of grant of such Stock Appreciation Rights times the number of such Stock Appreciation Rights granted on such date. (b) If the Executive's employment should terminate under such circumstances as entitle the Executive to payments pursuant to Section 3(b) hereof then the Executive may elect, during the 60-day period from and after a Change of Control (other than a Change of Control initiated by the Executive), to surrender his rights in any of the options granted to the Executive provided that this subsection shall not apply to any Options accompanied by a Stock Appreciation Right that were outstanding for at least six months prior to the Date of Termination and that were neither subsequently exercised nor expired by their terms prior to the Date of Termination and, upon such surrender, the Corporation shall pay to the Executive an amount of cash with respect to each such option equal to the difference, if positive, obtained by (i) taking the product obtained by multiplying (A) the number of shares of common stock as to which the option is exercisable times (B) the greater of (1) the mean between the highest and lowest quoted selling prices for the Corporation's Common Stock on the composite tape for the New York Stock Exchange on the trading day immediately preceding the Date of Termination or (2) the highest price paid per share for Corporation's Common Stock in the transaction resulting in the actual Change-in-Control and (ii) subtracting therefrom the option price for such Shares of Common Stock. (c) In the event the Executive's employment should terminate under such circumstances as entitle the Executive to payments pursuant to Section 3(b) hereof, the Corporation agrees to accelerate and make immediately exercisable in full all unmatured options held by the Executive at the Date of Termination, whether or not otherwise exercisable, effective as of the Date of Termination. In the event that the Executive has been granted Incentive Stock Options pursuant to Section 422A(b)(7) of the Internal Revenue Code of 1986 (the "Code") which would otherwise become immediately exercisable hereunder but for the limitation imposed by Code Section 422A(b)(7), such options shall only become exercisable as to the maximum number of shares permitted by Code Section 422A(b)(7) and the balance of such options shall become exercisable at the earliest date or dates thereafter permitted by Code Section 422A(b)(7), with those options with the lowest exercise prices becoming exercisable at the earliest date or dates. 5. Retirement Benefits. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof, then, notwithstanding such termination, the Executive shall be deemed to continue as an active employee participant in the Corporation's pension plan for salaried employees, and the benefits payable to him, his surviving spouse or contingent annuitant shall be calculated as if he had been continuously employed by the Corporation for those years (including parts thereof) subsequent to the Date of Termination and prior to the earlier of (i) three years subsequent to the Date of Termination, and (ii) the Executive's death or attainment of age 65 (or, if earlier, the age agreed to by the Executive pursuant to any prior arrangement), at the covered remuneration set forth in the following sentences of this subsection. The covered remuneration for any part of a year remaining after the Date of Termination shall equal the number of months remaining in such year times the sum determined pursuant to section 3(b)(iv)(B) hereof and divided by twelve. The covered remuneration for the first full credited year following the Date of Termination shall equal the sum determined pursuant to section 3(b)(iv)(B) hereof. The covered remuneration for the first full credited year after the first full credited year shall equal the sum of (i) the covered remuneration for the immediately preceding year plus (ii) the product of the Annual Salary Adjustment percentage for such credited years times the covered remuneration for the immediately preceding year. (b) If for any reason whether by law or the terms of the Corporation's pension plan, such pension plan cannot either use the above credited years of service and remuneration above described in subsection 5(a) for purposes of the Executive's pension benefits (including surviving spouse and contingent annuitant benefits) or cannot pay the full amount of benefits which would result from the foregoing subsections, then the Corporation hereby contractually agrees to pay the difference between (i) the benefits which would be payable if the pension plan had been able to pay such benefits based upon the credited years of service and covered remuneration above described in subsection 5(a), and (ii) the benefits, if any, actually paid to the Executive, his surviving spouse or contingent annuitant by the pension plan. The Corporation shall not be required to fund its obligation to pay the foregoing difference. 6. Other Benefit Plans. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof and if the Executive is a participant in the Corporation's Executive Benefit Plan (or a plan providing comparable benefits) shall be in effect prior to the Change-in-Control, then the Executive will be deemed for purposes of such Plan (or, if applicable, the plan providing comparable benefits) to have continuously remained in the employ of the Corporation until the earlier of (i) three years subsequent to the Date of Termination, and (ii) his death or attainment of age 65 (or the age agreed to by the Executive pursuant to any prior arrangement), at a total compensation equal to his total compensation in effect on the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the earliest event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination) and to have made any required contributions due thereunder. The Executive will be eligible to receive all benefits under such Plan (or, if applicable, the plan providing comparable benefits) payable as though he had so remained in the Corporation's employ and had made any required contributions notwithstanding that he neither was so employed nor made any such contributions. (b) Except with respect to (i) any Stock Appreciation Rights and Stock Options, as to which payment is provided in Section 4(a) hereof, (ii) the Corporation's pension plan, which is governed by paragraph 5 hereof, (iii) the Executive Benefit Plan, and (iv) the Incentive Compensation Plan, the Executive shall be deemed for purposes of all employee benefits to have remained in the continuous employment of the Corporation for a period of three years following the Date of Termination and shall be entitled to all of the benefits provided by such plans as though he had so remained in the employment of the Corporation. (c) If for any reason, whether by law or provisions of the Corporation's employee benefit plans, any benefits which the Executive would be entitled to under the foregoing subsections of this section 6 cannot be paid pursuant to such employee benefit plans, then the Corporation hereby contractually agrees to pay to the Executive the difference between the benefits which the Executive would have received in accordance with the foregoing subsections of this section if the relevant employee benefit plan could have paid such benefit and the amount of benefits, if any, actually paid by such employee benefit plan. The Corporation shall not be required to fund its obligation to pay the foregoing difference. 7.Other Employment. (a) The Executive shall have no duty to seek any other employment after termination of his employment with the Corporation and the Corporation hereby waives and agrees not to raise or use any defense based on the position that the Executive had a duty to mitigate or reduce the amounts due him hereunder by seeking other employment whether suitable or unsuitable. (b) Should the Executive obtain other employment, then the only effect of such on the obligations of the Corporation hereunder shall be that the Corporation shall be entitled to credit against any payments which would otherwise be made pursuant to sections 5, 6(a) or 6(b) hereof, any comparable payments to which the Executive is entitled under the pension or other employee benefit plans maintained by the Executive's other employers after termination of his employment with the Corporation. In no event shall any sums received by the Executive from any other employment be credited against or otherwise reduce the amounts payable by the Corporation pursuant to Sections 3 or 4 hereof. 8.Term. (a) This Agreement shall be for a term expiring August 31, 1998 and shall automatically be extended for successive five year terms at the end of each preceding term unless termination occurs pursuant to subsection (b) or (c) below, whichever is applicable. (b) If a Change-in-Control has occurred, this Agreement shall remain in effect until terminated on the date which is three years from the Change-in- Control. (c) If a Change-in-Control has not occurred, this Agreement shall terminate if the Executive's employment with the Corporation terminates for any reason whether such termination of employment is by the Corporation or by the Executive. Otherwise, prior to a Change-in-Control, this Agreement may only be terminated by the Corporation upon the giving by the Corporation of notice of termination at least thirty days prior to the end of the then term, in which event this Agreement shall terminate at the end of such term. 9. Miscellaneous. (a) This Agreement shall be construed under the laws of the Commonwealth of Pennsylvania. (b) This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and may only be amended or modified by written agreement signed by the parties hereto. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the executive, to expressly assume and agree to perform this Agreement in the same manner required of the Corporation and to perform it as if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to terminate employment due to Good Reason for Termination. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this subsection (c) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (d) This Agreement shall inure to the benefit of and be enforceable by the Executive or his legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or if there be no such designee, to his estate. (e) Any notice or other communication provided for in this Agreement shall be in writing and, unless otherwise expressly stated herein, shall be deemed to have been duly given if mailed by United States registered mail, return receipt requested, postage prepaid addressed in the case of the Executive to his office at the Corporation with a copy to his residence and in the case of the Corporation to its principal executive offices, attention of the Chief Executive Officer. (f) No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and approved by resolution of the Board of Directors of the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Except for any employment agreement with the Executive, no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. To the extent that the provisions of this Agreement are in conflict with any such employment agreement, following a Change-in-Control the employment agreement shall automatically be amended in accordance with this Agreement and the provisions of this Agreement shall govern. (g) The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (h) This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, this Agreement has been executed on the date first above written. ATTEST: DRAVO CORPORATION /s/ A. H. TENHUNDFELD, JR. By /s/ JOHN R. MAJOR /s/ JAMES J. PUHALA EX-10 8 STOWE AGREEMENT (Page ) AGREEMENT This Agreement made as of this 1st day of January , 1995 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and Donald H. Stowe, Jr., an individual residing in the State of Pennsylvania and an employee of the Corporation (the "Executive"). WITNESSETH: WHEREAS, the Board of Directors of the Corporation has determined that it is in the best interests of the Corporation to enter into this Agreement with the Executive; and WHEREAS, the Executive desires to obtain certain benefits in the event his employment is terminated due to a Change-in-Control of the Corporation; NOW, THEREFORE, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Definition of Terms. The following terms when used in this Agreement shall have the meaning hereafter set forth: (a) "Annual Salary Adjustment Percentage" shall mean the mean average percentage increase in base salary for all elected officers of the Corporation during the two full calendar years immediately preceding the time to which such percentage is being applied; provided, however, that if after a Change-in-Control, as hereinafter defined, there should be a significant change in the number of elected officers of the Corporation or in the manner in which they are compensated, then the foregoing definition shall be changed by substituting for the phrase "elected officers of the Corporation" the phrase "persons then performing the functions formerly performed by the elected officers of the Corporation." (b) "Cause for Termination" shall mean (i) the deliberate and intentional failure by the Executive to devote substantially his entire business time and best efforts to the performance of his duties (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or disability) after a demand for substantial performance is delivered to the Executive by the Board of Directors of the Corporation which specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties, or (ii) the deliberate and intentional engaging by the Executive in gross misconduct materially and demonstrably injurious to the Corporation. For purposes of this definition, no act, or failure to act, on the Executive's part shall be considered "deliberate and intentional" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Corporation. (c) "Change-in-Control" shall mean a change in control of the Corporation of such a nature that it would be required to be reported by the Corporation in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof ("Exchange Act"); provided, however, that without respect to the foregoing, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or (ii) during any period of three consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation (the "Board") cease for any reason to constitute at least a Majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (d) "Date of Termination" shall mean (i) if the Executive's employment is terminated for Disability, thirty (30) days after a Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive's duties on a full time basis during such thirty (30) day period); (ii) if the Executive's employment terminates due to his death or Retirement, the date of death or Retirement, respectively; (iii) if the Executive terminates employment upon Good Reason for Termination, the date specified for termination in any notice delivered to the Corporation by the Executive; or (iv) if the Executive's employment is terminated for any other reason, the date on which a termination becomes effective pursuant to a Notice of Termination; provided, however, that if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). (e) "Disability" shall mean such incapacity due to physical or mental illness or injury as causes the Executive to be absent from his principal office for the entire portion of 90 consecutive business days. (f) "Good Reason for Termination" shall mean: (i) without the Executive's express written consent, the assignment to the Executive of any duties inconsistent with his positions, duties, responsibilities and status with the Corporation immediately prior to a Change-in- Control, or a change in his reporting responsibilities, titles or offices as in effect immediately prior to a Change-in- Control, or any removal of the executive from or any failure to re-elect the Executive to any of such positions, except in connection with the termination of the Executive's employment due to a Cause for Termination, Disability or Retirement (as hereinafter defined) or as a result of the Executive's death; (ii) a reduction by the Corporation in the Executive's base salary as in effect immediately prior to the Change-in-Control or as the same may be increased from time to time or the failure by the Corporation to increase such base salary each year after the year in which the Change-in-Control occurs by an amount which at least equals, on a percentage basis, the Annual Salary Adjustment Percentage; (iii) a failure by the Corporation to continue to provide incentive compensation comparable to that provided by the Corporation's Incentive Compensation Plan as the same may from time to time prior to a Change-in-Control be modified or superseded by another plan (the "Incentive Compensation Plan"), or a failure by the Corporation to continue the Executive as a participant in the Incentive Compensation Plan on at least the basis and according to the standards in effect immediately prior to the Change-in-Control or to pay the Executive when due any deferred portion of a previous award under the Incentive Compensation Plan; (iv) the Corporation's requiring the Executive to be based anywhere other than the Corporation's executive offices at which the Executive has his principal office immediately prior to the Change-in-Control, except for required travel on the Corporation's business to an extent substantially consistent with the Executive's present business travel obligations immediately prior to the Change-in- Control, or, in the event the Executive consents to any such relocation of the Corporation's principal executive offices, the failure by the Corporation to pay (or reimburse the Executive for) all reasonable moving expenses incurred by the Executive relating to a change of the Executive's principal residence in connection with such relocation and to indemnify the Executive against any loss (defined as the difference between the actual sale price of such residence and the higher of (a) the Executive's aggregate investment in such residence or (b) the fair market value of such residence as determined by a real estate appraiser designated by the Executive and reasonably satisfactory to the Corporation) realized in the sale of the Executive's principal residence in connection with any such change of residence; (v) the failure by the Corporation to continue in effect any benefit or compensation plan (including but not limited to the Corporation's Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978, Employee Stock Option Plan of 1988, Stock Option Plan of 1994, and the Executive Benefit Plan), pension plan, life insurance plan, health and accident plan or disability plan in which the Executive is participating immediately prior to the Change-in-Control (provided, however, that there shall not be deemed to be any such failure if the Corporation substitutes for the discontinued plan, a plan providing the Executive with substantially similar benefits), the taking of any action by the Corporation which would adversely affect the Executive's participation in or materially reduce the Executive's benefits under any of such plans or deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to the Change-in- Control, or the failure by the Corporation to provide the Executive with the number of paid vacation days to which the Executive is then entitled on the basis of years of service with the Corporation in accordance with the Corporation's normal vacation policy all as and to the extent they are in effect immediately prior to the Change-in-Control; (vi) the failure of the Corporation to obtain the assumption of this Agreement by any successor as contemplated in Section 9(c) hereof; or (vii) any purported termination of the employment of the Executive by the Corporation which is not (A) due to the Executive's Disability, death, Retirement (as hereinafter defined) or in accordance with section 2 hereof, or (B) effected pursuant to a Notice of Termination satisfying the requirements of subsection (g) below; (viii) notwithstanding the foregoing, it shall not be deemed Good Reason for Termination if the Corporation, acting in good faith, makes changes to any compensation or benefits plan or program that is made available on a nondiscriminatory basis to the salaried employees of the Corporation, which changes do not apply disproportionately to the elected officers of the Corporation or those persons then performing the functions formerly performed by the elected officers of the Corporation. (g) "Notice of Termination" shall mean a written statement which sets forth the specific reason for termination and, if such is claimed to be Cause for Termination, in reasonable detail the facts and circumstances which indicate that such is Cause for Termination together with notice of the time and place of the meeting of the Board of Directors of the Corporation called to consider such matter in accordance with section 2 hereof. (h) "Options" shall mean any stock options issued pursuant to the Corporation's Employee Stock Option Plan of 1988, Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978 or any future stock option plan. (i) "Retirement" shall mean a termination of the Executive's employment after age 65 or in accordance with any mandatory retirement arrangement with respect to an earlier age agreed to by the Executive. (j) "Stock Appreciation Rights" shall mean any stock appreciation rights issued pursuant to the Corporation's Employee Stock Option Plan of 1988, Long-Term Incentive Award Plan of 1983, Stock Option Plan of 1978 or any future stock appreciation rights plan. 2. "Termination by the Corporation Due to Cause for Termination." If the Corporation desires to terminate the Executive's employment due to Cause for Termination, the Corporation shall first deliver a Notice of Termination to the Executive. Thereafter, the Board of Directors at a meeting held not less than two weeks nor more than four weeks after the delivery of the Notice Of Termination shall consider whether cause for Termination exists. Cause for Termination shall not be deemed to exist under this Agreement unless and until the Board determines in good faith by the affirmative vote of not less than three- quarters of the entire membership of the Board that the Executive has engaged in conduct which is Cause for Termination. Should the Board determine that Cause for Termination exists, the Board may at that time or during a period of two weeks thereafter terminate the Executive's employment due to Cause for Termination by adopting at such time or during such period by a similar three- quarters vote a resolution terminating the Executive's employment. If the Board fails to adopt within such two- week period a resolution terminating the Executive's employment, then the Corporation shall be deemed to have waived its right to terminate the Executive due to those circumstances which constituted the Cause for Termination previously found to exist by the Board. 3. Termination Payments Following Change-in-Control. (a) If, during the term of this Agreement, a Change- in-Control shall have occurred and the Executive's employment with the Corporation shall be terminated (i) due to the Executive's death, (ii) by the Executive unless terminated for Good Reason for Termination, or (iii) by the Corporation in accordance with section 2 hereof or for Disability or Retirement, then the Corporation shall have no obligations hereunder to the Executive and the only obligations of the Corporation to the Executive shall be in accordance with any other employment agreement applicable to the Executive and the then various policies, practices and benefit plans of the Corporation. (b) If during the term of this Agreement both a Change-in- Control shall have occurred and the Executive's employment with the Corporation shall have terminated other than under the circumstances above described in Subsection 3(a), then the Corporation shall pay or cause to be paid on or before the fifth day following the Date of Termination in cash to the Executive the following sums: (i) any unpaid portion of the Executive's full base salary for the period from the last period for which the Executive was paid to the Date of Termination; (ii) any then deferred portions of cash awards (including deferred awards which but for this provision would not be payable until subsequent to the Date of Termination) made to the Executive under the Executive incentive Compensation Plan; and (iii) an amount as liquidated damages for lost future remuneration equal to the product obtained by multiplying (A) the lesser of (1) three or (2) a number equal to the number of calendar months remaining from the Date of Termination to the date on which the Executive is 65 years of age (or, if earlier, the age agreed to by the Executive pursuant to any prior arrangement) divided by twelve times (B) the sum of (1) the greater of (i) the Executive's base salary for the year in effect on the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the earliest event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination) or (ii) the Executive's base salary for the year in effect on the date of the Change-in-Control; provided that "base salary for the year" shall be the amount of base salary for the year established by the Board of Directors at the beginning of the fiscal year in question in accordance with the compensation policies and practices of the Corporation, without regard to any reduction in the amount actually paid to the Executive during such year as a result of any plan of the Corporation to reduce compensation due to economic considerations, and without regard to any deferral of compensation payable to the Executive for services rendered during such year to a subsequent year. plus (2) the greater of (i) the average annual cash award received by the Executive under the Executive Incentive Compensation Plan for the two calendar years immediately preceding the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination; or (ii) the average annual cash award received by the Executive under the Incentive Compensation Plan for the two calendar years immediately preceding the date of the Change-in-Control. (c) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive pursuant to the terms of this Agreement or otherwise (collectively the "Total Payments") would not be deductible, in whole or part, as a result of section 280G of the Internal Revenue Code of 1986, as amended (the "Code") by the Corporation, an affiliate or other person making such payment or providing such benefit, the payments due under this Agreement (the "Contract Payments") shall be reduced until no portion of the Total Payments is not deductible, or the Contract Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments the receipt or enjoyment of which you shall have effectively waived in writing prior to the date of payment of the Contract Payments shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to you does not constitute a "parachute payment" within the meaning of section 280G(b)(2) of the Code, (iii) the Contract Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (i) or (ii) in their entirety constitute reasonable compensation for services actually rendered within the meaning of section 280G(b)(4) of the Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel referred to in clause (ii); and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. 4. Stock Appreciation Rights and Stock Options. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof, then, in lieu of Stock Appreciation Rights granted to the Executive (and whether or not they are in tandem with any Options, but provided that this subsection shall not apply to any Stock Appreciation Rights in tandem with incentive stock options) that were outstanding for at least six months prior to the Date of Termination and that were neither subsequently exercised nor expired by their terms prior to the Date of Termination (which rights and any related in tandem options shall be cancelled upon the making of the payment hereafter described), the Executive shall receive an amount in cash on or before the fifth day following the Date of Termination equal to the difference, if positive, obtained by (i) taking the product obtained by multiplying (A) the number of such stock appreciation rights times (B) the greater of (1) the mean between the highest and lowest quoted selling prices for the Corporation's common stock on the composite tape for the New York Stock Exchange on the trading day immediately preceding the Date of Termination; or (2) the highest price paid per share for the Corporation's common stock in the transaction resulting in the actual Change-in-Control. and (ii) subtracting therefrom the aggregate of the products obtained by multiplying the mean between the highest and lowest quoted selling prices for the Corporation's Common Stock on the composite tape for the New York Stock Exchange on each date of grant of such Stock Appreciation Rights times the number of such Stock Appreciation Rights granted on such date. (b) If the Executive's employment should terminate under such circumstances as entitle the Executive to payments pursuant to Section 3(b) hereof then the Executive may elect, during the 60-day period from and after a Change of Control (other than a Change of Control initiated by the Executive), to surrender his rights in any of the options granted to the Executive provided that this subsection shall not apply to any Options accompanied by a Stock Appreciation Right that were outstanding for at least six months prior to the Date of Termination and that were neither subsequently exercised nor expired by their terms prior to the Date of Termination and, upon such surrender, the Corporation shall pay to the Executive an amount of cash with respect to each such option equal to the difference, if positive, obtained by (i) taking the product obtained by multiplying (A) the number of shares of common stock as to which the option is exercisable times (B) the greater of (1) the mean between the highest and lowest quoted selling prices for the Corporation's Common Stock on the composite tape for the New York Stock Exchange on the trading day immediately preceding the Date of Termination or (2) the highest price paid per share for Corporation's Common Stock in the transaction resulting in the actual Change-in-Control and (ii) subtracting therefrom the option price for such Shares of Common Stock. (c) In the event the Executive's employment should terminate under such circumstances as entitle the Executive to payments pursuant to Section 3(b) hereof, the Corporation agrees to accelerate and make immediately exercisable in full all unmatured options held by the Executive at the Date of Termination, whether or not otherwise exercisable, effective as of the Date of Termination. In the event that the Executive has been granted Incentive Stock Options pursuant to Section 422A(b)(7) of the Internal Revenue Code of 1986 (the "Code") which would otherwise become immediately exercisable hereunder but for the limitation imposed by Code Section 422A(b)(7), such options shall only become exercisable as to the maximum number of shares permitted by Code Section 422A(b)(7) and the balance of such options shall become exercisable at the earliest date or dates thereafter permitted by Code Section 422A(b)(7), with those options with the lowest exercise prices becoming exercisable at the earliest date or dates. 5. Retirement Benefits. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof, then, notwithstanding such termination, the Executive shall be deemed to continue as an active employee participant in the Corporation's pension plan for salaried employees, and the benefits payable to him, his surviving spouse or contingent annuitant shall be calculated as if he had been continuously employed by the Corporation for those years (including parts thereof) subsequent to the Date of Termination and prior to the earlier of (i) three years subsequent to the Date of Termination, and (ii) the Executive's death or attainment of age 65 (or, if earlier, the age agreed to by the Executive pursuant to any prior arrangement), at the covered remuneration set forth in the following sentences of this subsection. The covered remuneration for any part of a year remaining after the Date of Termination shall equal the number of months remaining in such year times the sum determined pursuant to section 3(b)(iv)(B) hereof and divided by twelve. The covered remuneration for the first full credited year following the Date of Termination shall equal the sum determined pursuant to section 3(b)(iv)(B) hereof. The covered remuneration for the first full credited year after the first full credited year shall equal the sum of (i) the covered remuneration for the immediately preceding year plus (ii) the product of the Annual Salary Adjustment percentage for such credited years times the covered remuneration for the immediately preceding year. (b) If for any reason whether by law or the terms of the Corporation's pension plan, such pension plan cannot either use the above credited years of service and remuneration above described in subsection 5(a) for purposes of the Executive's pension benefits (including surviving spouse and contingent annuitant benefits) or cannot pay the full amount of benefits which would result from the foregoing subsections, then the Corporation hereby contractually agrees to pay the difference between (i) the benefits which would be payable if the pension plan had been able to pay such benefits based upon the credited years of service and covered remuneration above described in subsection 5(a), and (ii) the benefits, if any, actually paid to the Executive, his surviving spouse or contingent annuitant by the pension plan. The Corporation shall not be required to fund its obligation to pay the foregoing difference. 6. Other Benefit Plans. (a) If the Executive's employment should terminate under such circumstances as entitle the Executive to receive payments pursuant to section 3(b) hereof and if the Executive is a participant in the Corporation's Executive Benefit Plan (or a plan providing comparable benefits) shall be in effect prior to the Change-in-Control, then the Executive will be deemed for purposes of such Plan (or, if applicable, the plan providing comparable benefits) to have continuously remained in the employ of the Corporation until the earlier of (i) three years subsequent to the Date of Termination, and (ii) his death or attainment of age 65 (or the age agreed to by the Executive pursuant to any prior arrangement), at a total compensation equal to his total compensation in effect on the Date of Termination (provided that in the case of Termination for Good Reason by the Executive the date immediately preceding the date of the earliest event which gave rise to the Termination for Good Reason by the Executive shall be used instead of the Date of Termination) and to have made any required contributions due thereunder. The Executive will be eligible to receive all benefits under such Plan (or, if applicable, the plan providing comparable benefits) payable as though he had so remained in the Corporation's employ and had made any required contributions notwithstanding that he neither was so employed nor made any such contributions. (b) Except with respect to (i) any Stock Appreciation Rights and Stock Options, as to which payment is provided in Section 4(a) hereof, (ii) the Corporation's pension plan, which is governed by paragraph 5 hereof, (iii) the Executive Benefit Plan, and (iv) the Incentive Compensation Plan, the Executive shall be deemed for purposes of all employee benefits to have remained in the continuous employment of the Corporation for a period of three years following the Date of Termination and shall be entitled to all of the benefits provided by such plans as though he had so remained in the employment of the Corporation. (c) If for any reason, whether by law or provisions of the Corporation's employee benefit plans, any benefits which the Executive would be entitled to under the foregoing subsections of this section 6 cannot be paid pursuant to such employee benefit plans, then the Corporation hereby contractually agrees to pay to the Executive the difference between the benefits which the Executive would have received in accordance with the foregoing subsections of this section if the relevant employee benefit plan could have paid such benefit and the amount of benefits, if any, actually paid by such employee benefit plan. The Corporation shall not be required to fund its obligation to pay the foregoing difference. 7.Other Employment. (a) The Executive shall have no duty to seek any other employment after termination of his employment with the Corporation and the Corporation hereby waives and agrees not to raise or use any defense based on the position that the Executive had a duty to mitigate or reduce the amounts due him hereunder by seeking other employment whether suitable or unsuitable. (b) Should the Executive obtain other employment, then the only effect of such on the obligations of the Corporation hereunder shall be that the Corporation shall be entitled to credit against any payments which would otherwise be made pursuant to sections 5, 6(a) or 6(b) hereof, any comparable payments to which the Executive is entitled under the pension or other employee benefit plans maintained by the Executive's other employers after termination of his employment with the Corporation. In no event shall any sums received by the Executive from any other employment be credited against or otherwise reduce the amounts payable by the Corporation pursuant to Sections 3 or 4 hereof. 8.Term. (a) This Agreement shall be for a term expiring August 31, 1998 and shall automatically be extended for successive five year terms at the end of each preceding term unless termination occurs pursuant to subsection (b) or (c) below, whichever is applicable. (b) If a Change-in-Control has occurred, this Agreement shall remain in effect until terminated on the date which is three years from the Change-in- Control. (c) If a Change-in-Control has not occurred, this Agreement shall terminate if the Executive's employment with the Corporation terminates for any reason whether such termination of employment is by the Corporation or by the Executive. Otherwise, prior to a Change-in-Control, this Agreement may only be terminated by the Corporation upon the giving by the Corporation of notice of termination at least thirty days prior to the end of the then term, in which event this Agreement shall terminate at the end of such term. 9. Miscellaneous. (a) This Agreement shall be construed under the laws of the Commonwealth of Pennsylvania. (b) This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and may only be amended or modified by written agreement signed by the parties hereto. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to the executive, to expressly assume and agree to perform this Agreement in the same manner required of the Corporation and to perform it as if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to terminate employment due to Good Reason for Termination. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this subsection (c) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (d) This Agreement shall inure to the benefit of and be enforceable by the Executive or his legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or if there be no such designee, to his estate. (e) Any notice or other communication provided for in this Agreement shall be in writing and, unless otherwise expressly stated herein, shall be deemed to have been duly given if mailed by United States registered mail, return receipt requested, postage prepaid addressed in the case of the Executive to his office at the Corporation with a copy to his residence and in the case of the Corporation to its principal executive offices, attention of the Chief Executive Officer. (f) No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and approved by resolution of the Board of Directors of the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Except for any employment agreement with the Executive, no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. To the extent that the provisions of this Agreement are in conflict with any such employment agreement, following a Change-in-Control the employment agreement shall automatically be amended in accordance with this Agreement and the provisions of this Agreement shall govern. (g) The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (h) This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, this Agreement has been executed on the date first above written. ATTEST: DRAVO CORPORATION /s/ JAMES J. PUHALA By /s/ JOHN R. MAJOR /s/ DONALD H. STOWE, JR. EX-11 9 COMPUTATION OF EPS Exhibit 11. Statement Re Computation of Per Share Earnings
($ in thousands, except per share amounts) Years ended December 31, 1995 1994 1993 Primary Earnings: Earnings from continuing operations before extraordinary item $ 10,981 $ 4,930 $ 35,126 Deduct dividends on preferred stock 2,535 2,544 2,554 Earnings from continuing operations applicable to common stock 8,446 (2,386) 32,572 Loss from discontinued operations -- (6,554) (35,303) Earnings (loss) from extraordinary item -- (7,572) -- Cumulative accounting change -- (1,361) -- Net earnings (loss) applicable to common stock $ 8,446 $(13,101 )$ (2,731) Shares: Weighted average number of common shares outstanding 14,756 14,859 14,835 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the average market price for the year) 119 --(1) --(1) Weighted average number of shares outstanding, as adjusted 14,875 14,859 14,835 Primary earnings (loss) per share: Continuing operations $ 0.57 $ 0.16 $ 2.20 Discontinued operations -- (0.44) (2.38) Extraordinary item -- (0.51) -- Cumulative accounting change -- (0.09) -- Net earnings (loss) per share $ 0.57 $ (0.88) $ (0.18) Fully Diluted Earnings: Net earnings (loss) $ 10,981 $(10,557) $ (177) Deduct dividends on preferred stock (2) 2,535 2,544 2,554 Net earnings (loss) applicable to common stock $ 8,446 $(13,101) $ (2,731) Shares: Weighted average number of common shares outstanding 14,756 14,859 14,835 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the higher of the ending or average market price for the year) 119 --(1) --(1) 11-1 Exhibit 11. Statement Re Computation of Per Share Earnings (continued) ($ in thousands, except per share amounts) Years ended December 31, 1995 1994 1993 Fully Diluted (continued) Shares (continued): Shares issuable from assumed exercise of convertible preference stock (2) -- -- -- Weighted average number of shares outstanding, as adjusted 14,875 14,859 14,835 Fully diluted earnings (loss) per share: Continuing operations $ 0.57 $ 0.16 $ 2.20 Discontinued operations -- (0.44) (2.38) Extraordinary item -- (0.51) -- Cumulative accounting change -- (0.09) -- Earnings (loss) per share $ 0.57 $ (0.88) $ (0.18) Additional Fully Diluted Computation (3) Earnings: Net earnings (loss) $ 10,981 $ (10,557) $ (177) Shares: Weighted average number of common shares outstanding 14,756 14,859 14,835 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the higher of the ending or average market price for the year) 119 87 66 Shares issuable from assumed exercise of convertible preference stock 1,685 1,697 1,710 Weighted average number of shares outstanding, as adjusted 16,560 16,643 16,611 Fully diluted earnings (loss) per share $ 0.66 $ (0.63) $ (0.01)
(1) The inclusion of outstanding options and rights in this computation would have an anti-dilutive effect on earnings per share. (2) The inclusion of preference stock in the fully dilutive computation would have an anti-dilutive effect on earnings per share. (3) This calculation is submitted in accordance with Securities Exchange Act of 1934 Regulation S-K, paragraph 229.601 (b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result in 1995, 1994 and 1993. 11-2 EX-13 10 1995 ANNUAL REPORT FINANCIAL REVIEW OVERVIEW Dravo Corporation's financial results following its first year operating as a lime company were positive. Demand was robust throughout the year in most lime markets, and spot market pricing was strong. Earnings from continuing operations increased not only compared to 1994's actual results, which included Dravo Basic Materials (DBM), the construction aggregates operation that was divested at the end of 1994, but on a pro forma basis as well. Dampening 1995 performance, however, were a series of startup problems and delays encountered in connection with the expansion of the company's Black River facility in northern Kentucky. Production levels and operational cost targets were not met during the initial startup period. However, toward the end of the year and continuing through early 1996, production rates and costs were more in line with expectations. Progress continued in resolving discontinued operations issues. A contract dispute with Continental Energy Associates (CEA) related to CEA's Hazleton Gasification Facility was resolved. The company paid $2.8 million as its share of the settlement. CEA had claimed damages as high as $35 million. The settlement was within the amount provided in the previously established reserve for discontinued operations for legal fees anticipated to litigate the claim and, therefore, did not impact current earnings. Earnings for the year were $11.0 million, or $0.57 per share. In 1994, Dravo reported a net loss of $10.6 million, or $0.88 per share. A charge to discontinued operations of $6.5 million was recorded in 1994 for legal fees and to provide for the settlement of a lawsuit brought in Venezuela for contract services provided in the mid-1970s. Also, an extraordinary charge of $7.6 million, or $0.51 per share, was recorded to reflect the write-off of fees associated with debt instruments that were prepaid or substantially altered as a result of the DBM asset sale. A one- time charge of $1.4 million, or $0.09 per share, reflects the cumulative accounting effect of the adoption of Statement of Financial Accounting Standards No. 112, "Employers Accounting for Postemployment Benefits." In 1993, earnings from continuing operations were $35.1 million, or $2.20 per share. Included in the 1993 earnings results was a $24.9 million deferred tax benefit. Loss on discontinued operations was $35.3 million, or $2.38 per share. The net loss of $177,000 equaled $0.18 per share after payment of preferred dividends. RESULTS OF OPERATIONS CONTINUING OPERATIONS Revenue: Revenue in 1995 was $146.1 million compared to $278.1 million in 1994, which included DBM for the entire year. Lime revenue in 1994 was $125.7 million. The increased lime revenue in 1995 was mainly due to first-year shipments to American Electric Power's Gavin station under a 15-year supply contract. Shipments under a new supply agreement with the Henderson Municipal Power and Light Station operated by Big Rivers Electric Cooperative and strong spot market pricing in 1995 also contributed to the revenue increase. Revenue of $278.1 million during 1994 was up slightly over 1993's level. Lime revenue of $125.7 million was down compared to 1993 due to price concessions granted in return for multi-year extensions of long-term lime supply contracts and weather-related problems in the first quarter. The impact of these items was partially mitigated, however, by increased demand for non-utility lime in 1994. Demand was especially strong for metallurgical lime used in making steel and aluminum. Costs and Expenses: Gross profit of $36.5 million was $7.5 million lower in 1995 than in 1994, which included DBM. Margins, however, were much improved: 25 percent in 1995 versus 16 percent last year. The improved margins reflect the dilutive effect the aggregates business had on the company's margins before the divestiture. Gross margins on lime sales were slightly higher than last year's pro forma results, but the increase was less than expected because of start-up related production costs at Black River. Gross profit of $44.0 million in 1994 was down $5.3 million from 1993. Lime and aggregates operations located in the Ohio River Valley were negatively affected by a severe winter that caused operating difficulties during the first quarter. Price concessions on long-term lime supply contracts impacted gross profit, as did an unscheduled seven-week outage at one of the company's electric utility customer's generating stations. Production costs at the Black River operation were higher as personnel were added in preparation for expanded underground mining and start-up of the two new lime kilns. Also, the write- off of equipment being replaced as part of the plant expansion and modernization project affected profit margins. -12- Selling expense of $5.0 million was lower primarily due to the DBM sale. Selling expense also varies due to amounts of research and development expense that can be billed to third parties. These research activities involve a variety of lime-related technologies, with particular emphasis on air pollution control. Depending on the project, reimbursement may be made by governmental agencies, public utilities or private groups for all or a portion of project costs. Research and development costs and billings to third parties are detailed in Note 16, Research and Development, in the Notes to Consolidated Financial Statements. General and administrative expenses were $6.3 million lower in 1995 than last year due to personnel reductions following the DBM sale and consolidation of the company's administrative functions at Dravo's Pittsburgh headquarters. On a pro forma basis, administrative expenses were higher because of differences between actual experience and the assumptions used in preparing the pro forma analysis. Expenses in 1994 were reduced by more than six percent from 1993. The reduction reflects lower staffing levels, employee and retiree medical expenses, and travel expenses, as well as lower charges related to the amortization of a non-cancelable lease obligation on a downtown Pittsburgh office building. Equity in earnings of joint ventures includes, in 1995, the company's share in two 50-percent owned joint ventures: a contract phosphate rock mining operation in Idaho and a small contract coke operation in Wyoming. Prior to 1995, the company also had a 50-percent share in a shell dredging operation located off the Louisiana coast. Earnings from joint ventures were down $1.1 million from 1994 due to higher maintenance expense at the Idaho facility and the sale of the shell dredging operation as part of the DBM transaction. In 1994, results for the shell dredging operation were significantly improved over 1993. The phosphate mining operation's profitability varies depending on mining conditions and its single contract customer's requirements. Strong demand led to improved results in 1994 over 1993. Other income includes the gain on the sale of property, plant and equipment. In 1995, the amount is insignificant. The $1.1 million gain in 1994 includes the sale of the company's airplane, $324,000, and $487,000 from the sale, after accrued expenses, of DBM's assets. See Note 3, Dispositions, in the Notes to Consolidated Financial Statements for a further discussion of the DBM sale transaction. In 1993, a gain was recognized on the sale of property in Baton Rouge, Louisiana, and excess floating equipment, mainly barges. The decline in interest income from 1994 reflects the collection, early in 1995, of an interest bearing note receivable. In 1994, interest income was lower due to a lower balance on this same note receivable and the cessation of an interest accrual on another note. Interest expense of $4.8 million in 1995 was significantly lower than 1994's expense of $12.4 million. The reduction reflects lower debt levels as the company prepaid $85.5 million of loans early in 1995 from cash received from the DBM transaction. Lower interest rates and the capitalization of interest associated with the Black River expansion also lowered expense. Interest expense in 1994 was $3.2 million higher than 1993. The higher expense was due to higher interest rates on a prime rate-based line of credit and fees paid to a prospective lender whose participation in the Black River financing package was terminated by the company. Capitalized interest on major capital projects amounted to $2.8 million and $1.4 million in 1995 and 1994, respectively. No interest was capitalized in 1993. Income tax expense of $340,000 represents an accrual for state income taxes. Significant net operating loss carryforwards (NOLs) exist that shelter the company's income from most federal, and some state, income taxes. In 1994, income tax expense of $597,000 included an accrual of $300,000 for federal alternative minimum tax arising from the sale of DBM assets. In 1993, a benefit for income taxes of $24.9 million was recorded under the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Management believes that, due to the large proportion of revenue generated by long- term supply contracts, income can be reasonably projected for purposes of determining whether the realization of the asset resulting from the utilization of NOLs in future years is more likely than not. The amount of the net deferred tax asset reflects that portion of the gross deferred tax asset that management believes, based on current projections and estimates, is more likely than not to be realized. After the recognition of all NOLs have been reflected in the consolidated financial statements, the company's tax rate will return to a more normal, higher effective rate In conjunction with the sale of DBM's assets, existing loan agreements were substantially altered, including a $35 million reduction in the amount available under a revolving credit facility. Also, while negotiating a $50 million financing agreement with Prudential Power Funding for the Black River expansion, the company purchased a call option that enabled it to prepay on May 17, 1995, without penalty, amounts outstanding under the financing agreement. With Prudential Power Funding's consent, the entire amount borrowed was prepaid. The fees associated with these agreements were written off as extraordinary items in 1994. -13- Effects of inflation: Inflation rates have been low over the past three years and as a result have not had a significant effect on the company's operations. In addition, Dravo Lime's long-term lime supply contracts provide for price increases for specific production expenses, such as labor, fuel and electricity. DISCONTINUED OPERATIONS A contract dispute with Continental Energy Associates (CEA) was resolved in 1995. The company's share of the settlement, $2.8 million, did not necessitate an additional provision for discontinued operations. In 1994, a previously established provision for discontinued operations was increased $6.6 million. The additional charge was taken to cover a $4.5 million settlement involving an alleged breach of contract by the company for work performed between 1973 and 1978 in Venezuela. The balance of the provision was, for the most part, estimated legal fees for the CEA dispute and an insurance claim. As noted, the CEA dispute was subsequently settled. The second matter involves the company's assertion that it is entitled to a defense and indemnity under its contracts of insurance for environmental clean-up costs in Hastings, Nebraska. See Note 8, Contingent Liabilities, in the Notes to Consolidated Financial Statements for a further discussion of the Hastings matter. In 1993, a $35.3 million charge was recorded. The provision was primarily to cover a settlement agreement with the City of Long Beach, California, which included the company giving up its claim to unpaid receivables and interest totaling $18 million. The provision also recognized an increase in the estimated environmental clean-up costs at the Hastings superfund site, write-off of a note receivable due to an unfavorable court ruling and additional legal fees. FINANCIAL POSITION AND LIQUIDITY Significant changes on the company's balance sheet from December 31, 1994 to year-end 1995 resulted principally from the collection of a $120.5 million receivable from Martin Marietta Materials, Inc. (Martin Marietta) relating to the sale of DBM. The company completed negotiations on December 30, 1994 for the sale of substantially all the assets and certain liabilities of DBM to Martin Marietta effective January 3, 1995. The balance sheet at December 31, 1994, reflected the effect of the sale transaction, in that the assets and liabilities sold were removed and a $120.5 million receivable from Martin Marietta recorded. In early 1995, the receivable was satisfied with cash, a portion of which was used to prepay $85.5 million of debt. The substantial reduction in accounts payable resulted from the satisfaction of DBM payables outstanding at December 31, 1994. Long-term debt increased $21.8 million from year-end 1994 due to $27.9 million borrowed under a revolving credit facility, partially offset by $6.1 million reclassified from long-term debt to a current obligation. The increase in the outstanding debt under the revolving credit facility is due primarily to funding the Black River expansion project. The company has sufficient funds and borrowing capacity to meet its anticipated operating and capital needs. To minimize interest charges, cash balances are kept low through a banking arrangement that uses excess cash held in the company's accounts to reduce the amount of overnight borrowing on the revolving credit agreement. Effective October 1, 1995, a revolving credit/letter of credit facility provided by a consortium of lenders that includes First Alabama Bank; PNC Bank, N.A.; and Bank of America Illinois was increased to $65 million. Interest on the revolver equals either the base lending rate of Regions Financial Corporation, First Alabama Bank's parent, or, at the option of the company, the Eurodollar interest rate plus two percent. The facility expires July 31, 1997, but includes renewal provisions. The company intends to use a portion of the line of credit to finance construction of a new kiln and related material-handling equipment at its Maysville facility. On July 31, 1997, up to $17 million borrowed under the facility may be converted to a five- year term loan. Also on July 31, 1997, the amount available under the revolver will be reduced from $65 million to $45 million. Obligations under the revolving credit/letter of credit facility and senior term notes are secured by a pledge of the stock of Dravo Lime Company and Dravo Basic Materials Company along with Dravo Lime Company's accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River and Longview plants have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company to maintain minimum net worth levels and fixed charge ratios on a consolidated basis; restrict incurrence of debt, liens and lease obligations; restrict the sale of significant assets; and limit payment of dividends. These restrictions are not expected to have an adverse impact on the company's ability to meet its obligations. All known outstanding discontinued operations items have been classified as current or long-term based on the estimated timing of future cash receipts and disbursements. The discontinued operations liabilities do not have a material adverse impact on liquidity because cash payments needed to satisfy them are spread over several years. -14- In January, 1995, the Board of Directors approved a program whereby the company was authorized to purchase up to 250,000 shares of its common stock on the open market. During the year, over 228,000 shares were repurchased. The shares are being held in the treasury and will be used for general corporate purposes. DIVIDENDS The company's loan agreement contains a covenant that limits common stock dividend payments. A common stock dividend may not be declared if that dividend plus all other common dividends paid after September 30, 1995, exceeds 25 percent of cumulative earnings from continuing operations after September 30, 1995. Cumulative earnings exclude gains from the sale of capital assets, extraordinary gains and unremitted earnings of joint ventures. At December 31, 1995, cumulative earnings since September 30, 1995, from which dividends could be declared totaled $2.8 million. No dividends on common stock were declared. Dividends on the $3.0875 cumulative, convertible, exchangeable, Series D Preference Stock and the $2.475 cumulative convertible Series B Preference Stock were declared quarterly throughout each of the last three years. All declared preference dividends have been paid on a timely basis. COMMON STOCK MARKET PRICE The principal market on which Dravo's common stock is traded is the New York Stock Exchange under the symbol, DRV. The high and low common stock sales prices for each quarterly period in 1995 and 1994 as reported for New York Stock Exchange composite transactions were: 1995 1994
Quarter High Low High Low First 11 3/4 10 13 3/8 10 1/4 Second 14 3/4 10 1/4 12 1/4 10 Third 14 3/4 12 1/2 12 5/8 9 1/2 Fourth 13 5/8 11 1/2 12 9 3/4
OUTLOOK Continuing operations: Dravo Corporation successfully completed its first year operating as a lime business. With over two- thirds of production capacity committed under long-term utility and merchant lime contracts, and the balance expected to be sold into strong spot markets, the company foresees building on the progress made in 1995. A major expansion at Black River, despite delays and start-up problems, is now performing at the level envisioned in the project design. The next major capital project, the installation of a new kiln and related material-handling equipment at the company's Maysville, Kentucky, facility, is scheduled for completion in early 1997. The project will cost approximately $20 million and will add 350,000 tons of annual capacity. A smaller, but important project, will be the refurbishing of an older-existing kiln at Black River. The project will increase production of the kiln while significantly reducing its production costs. The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" (SFAS 123) in October, 1995. Financial statements presented for fiscal 1996 will measure the fair value of stock-based compensation awarded to employees in 1995 and thereafter. SFAS 123 allows companies a choice between continuing to account for stock-based awards using the intrinsic value, as prescribed by Accounting Principles Board Opinion No. 25 (APB 25), or the fair value. If the company chooses to continue following APB 25, the pro forma effect the fair value methodology would have had on net income and earnings per share will be disclosed. The company has not yet determined the magnitude of the difference between the intrinsic value and fair value approaches nor the method it will choose to account for stock-based compensation. The FASB also issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). SFAS is effective for fiscal years beginning after December 31, 1995. The effect of adopting SFAS 121 will be immaterial to the company. Discontinued operations: The company formerly operated a metal fabrication facility in Hastings, Nebraska. The federal Environmental Protection Agency (EPA) has notified the company it believes the company is a potentially responsible party (PRP) for the clean-up of soil and groundwater contamination at four sub- sites in the Hastings area. See Note 8, Contingent Liabilities, in the Notes to Consolidated Financial Statements for further discussion of the company's estimate of total clean-up costs and its share of those costs. Management believes the provision for losses on discontinued operations is adequate at this time. However, in establishing the provision and monitoring it, the costs of exiting discontinued businesses and pursuing the company's rights through litigation were estimated. A ruling by the courts or a settlement of the disputes that is adverse to Dravo's position, or other unforeseen developments, could require a future additional provision for discontinued operations. -15- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 1994
(In thousands) ASSETS Current assets: Cash and cash equivalents $ 1,086 $ 2,027 Receivable from sale of Dravo Basic Materials Company (Note 3) -- 120,464 Accounts receivable, net of allowance for uncollectibles of $934 and $108 24,251 20,138 Notes receivable (Note 15) 1,296 2,803 Inventories (Note 4) 14,194 12,638 Net assets of discontinued operations (Note 2) 923 -- Other current assets 1,322 2,067 Total current assets 43,072 160,137 Advances to and equity in joint ventures 2,466 2,536 Notes receivable (Note 15) 3,497 5,061 Other assets 23,205 21,281 Deferred income taxes (Note 13) 24,853 24,853 Property, plant and equipment: Land 6,164 6,127 Mine development 9,218 8,376 Building and improvements 11,562 9,722 Machinery and other equipment 198,891 171,108 225,835 195,333 Less accumulated depreciation and amortization 109,667 101,872 Net property, plant and equipment 116,168 93,461 Total assets $213,261 $307,329
See accompanying notes to consolidated financial statements. -16- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31,
1995 1994 (In thousands, except share amounts) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term notes (Notes 5 and 15) $ 6,099 $ 85,077 Accounts payable - trade 17,969 36,257 Accrued insurance 1,639 2,265 Accrued retirement contribution 2,423 2,388 Net liabilities of discontinued operations (Note 2) -- 13,547 Other current liabilities 5,177 14,264 Total current liabilities 33,307 153,798 Long-term notes (Notes 5 and 15) 64,292 42,440 Other liabilities 6,290 5,900 Net liabilities of discontinued operations (Note 2) 9,517 8,445 Redeemable preference stock (Notes 6 and 15): Par value $1, issued 200,000 shares: cumulative, convertible, exchangeable Series D (entitled in liquidation to $20.0 million) 20,000 20,000 Shareholders' equity (Notes 6 and 12): Preference stock, par value $1, authorized 1,878,870 shares: Series B, $2.475 cumulative, convertible, issued 25,386 and 28,386 shares (entitled in liquidation to $1.4 million and $1.6 million); Series D, reported above 25 28 Common stock, par value $1, authorized 35,000,000 shares: issued 15,055,237 and 14,985,839 shares 15,055 14,986 Other capital 60,818 63,554 Retained earnings 8,464 18 Treasury stock at cost; 347,691 and 119,221 common shares (4,507) (1,840) Total shareholders' equity 79,855 76,746 Total liabilities and shareholders' equity $213,261 $307,329
See accompanying notes to consolidated financial statements. -17- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations
Years ended December 31, (In thousands, except per share data) 1995 1994 1993 Revenue $146,067 $278,052 $277,590 Cost of revenue 109,541 234,018 228,266 Gross profit 36,526 44,034 49,324 Selling expenses 5,009 7,116 7,602 General and administrative expenses 16,228 22,497 24,058 Earnings from operations 15,289 14,421 17,664 Other income (expense): Equity in earnings (loss) of joint ventures 572 1,672 (18) Other income 182 1,088 692 Interest income 85 754 1,327 Interest expense (4,807) (12,408) (9,194) Net other expense (3,968) (8,894) (7,193) Earnings before taxes from continuing operations 11,321 5,527 10,471 Income tax expense (benefit) (Note 13) 340 597 (24,655) Earnings from continuing operations 10,981 4,930 35,126 Loss on discontinued operations (Note 2) -- 6,554 35,303 Earnings (loss) before extraordinary item and cumulative accounting change 10,981 (1,624) (177) Extraordinary item (Note 14) -- (7,572) -- Cumulative effect of accounting change (Note 10) -- (1,361) -- Net earnings (loss) 10,981 (10,557) (177) Preference dividends 2,535 2,544 2,554 Net earnings (loss) available for common stock $ 8,446 $(13,101) $ (2,731) Weighted average shares outstanding 14,875 14,859 14,835 Primary earnings (loss) per share: Continuing operations $ 0.57 $ 0.16 $ 2.20 Discontinued operations -- (0.44) (2.38) Extraordinary item -- (0.51) -- Cumulative effect of accounting change -- (0.09) -- Net earnings (loss) $ 0.57 $ (0.88) $ (0.18)
See accompanying notes to consolidated financial statements. -18- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Retained Earnings
Years ended December 31, (In thousands, except per share data) 1995 1994 1993 Retained earnings at beginning of year $ 18 $ 13,119 $ 15,850 Net earnings (loss) 10,981 (10,557) (177) 10,999 2,562 15,673 Dividends declared: 1995 1994 1993 Series B preference stock $ 2.475 $ 2.475 $ 2.475 65 74 84 Series D preference stock 12.350 12.350 12.350 2,470 2,470 2,470 2,535 2,544 2,554 Retained earnings at end of year $ 8,464 $ 18 $13,119
See accompanying notes to consolidated financial statements. -19- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 1995 1994 1993 Cash flows from operating activities: Earnings from continuing operations $ 10,981 $ 4,930 $ 35,126 Adjustments to reconcile earnings from continuing operations to net cash provided (used) by continuing operations activities: Depreciation and amortization 9,536 17,626 17,985 Change in accounting principle -- (1,361) -- Gain on sale of assets (182) (1,088) (692) Equity in joint ventures 70 (116) (2,155) Changes in assets and liabilities, net of effects from DBM disposition: Increase in accounts receivable (4,113) (143) (5,410) Decrease in notes receivable 568 464 1,008 Decrease (increase) in inventories (1,556) 3,909 6,311 Decrease (increase) in other current assets 745 (869) 721 Increase in other assets (5,150) (6,302) (2,373) Increase in deferred income taxes -- -- (24,853) Increase (decrease) in accounts payable and accrued expenses (27,142) 7,873 947 Increase (decrease) in income taxes payable (144) 329 (20) Increase in other liabilities 390 3,178 71 Total adjustments (26,978) 23,500 (8,460) Net cash provided (used) by continuing operations activities (15,997) 28,430 26,666 Loss from discontinued operations -- (6,554) (35,303) Increase (decrease) in net liabilities of discontinued operations (13,099) (4,592) 21,647 Proceeds from repayment of notes receivable from sale of discontinued operations 2,200 1,600 1,992 Net cash used by discontinued operations activities (10,899) (9,546) (11,664) Net cash used by extraordinary item -- (7,572) -- Net cash provided (used) by operating activities $(26,896) $11,312 $ 15,002
See accompanying notes to consolidated financial statements -20- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 1995 1994 1993 Cash flows from investing activities: Proceeds from sale of assets $120,867 $ 2,148 $ 1,249 Additions to property, plant and equipment (33,144) (44,757) (13,646) Other, net 3 509 (553) Net cash provided (used) by investing activities 87,726 (42,100) (12,950) Cash flows from financing activities: Net borrowing under revolving credit agreements 27,948 19,300 4,600 Principal payments under long-term notes (85,259) (4,736) (4,446) Principal payments under capital lease obligations -- -- (306) Proceeds from issuance of long-term notes 185 19,945 391 Proceeds from issuance of common stock 557 42 101 Purchase of treasury stock (2,667) -- -- Dividends (2,535) (2,544) (2,554) Net cash provided (used) by financing activities (61,771) 32,007 (2,214) Net increase (decrease) in cash and cash equivalents (941) 1,219 (162) Cash and cash equivalents at beginning of year 2,027 808 970 Cash and cash equivalents at end of year $ 1,086 $ 2,027 $ 808 Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest (net of amount capitalized) $ 5,695 $12,408 $ 9,195 Income tax 175 (143) 487
See accompanying notes to consolidated financial statements. -21- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Description of Business: The consolidated financial statements include the accounts of Dravo Corporation and its majority-owned subsidiaries (the company). The principal subsidiary is Dravo Lime Company, one of the nation's largest lime producers. Lime is sold to electric utility companies under long-term contracts and to the pulp and paper, metals, chemicals, municipal and construction markets. Three major utility companies, with whom the company has long-term contracts, each accounted for more than 10 percent of consolidated revenue in 1995. The company completed a transaction on December 30, 1994 in which it sold substantially all the assets and certain liabilities of Dravo Basic Materials Company, Inc. (DBM), a former principal subsidiary. The assets and liabilities sold are removed from the company's December 31, 1995 and 1994 consolidated balance sheets. The December 31, 1994 and 1993 consolidated statements of operations and consolidated statements of cash flows include the results of DBM for the entire year. Principles of Consolidation: Significant intercompany balances and transactions have been eliminated in the consolidation process. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: For purposes of reporting cash flows, the company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Inventories: Inventories are valued at average production cost or market, whichever is lower. The cost of products produced includes raw materials, direct labor and operating overhead. Property, Plant, Equipment and Depreciation: Property, plant and equipment are stated at cost. The cost of buildings, equipment and machinery is depreciated over estimated useful lives on a straight-line basis. Expenditures for maintenance and repairs which do not materially extend the lives of assets are expensed currently. The asset cost and accumulated depreciation are removed from the accounts for assets sold or retired, and any resulting gain or loss is included in other income and expense. DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (continued) Income Taxes: Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits are more likely than not. Earnings Per Share: Primary earnings per share are based on net earnings less preference dividends declared in the year, divided by the weighted average sum of common shares outstanding during the year and common share equivalents. Shares exercisable as employee stock options and stock appreciation rights are considered common share equivalents except when their inclusion would be anti-dilutive. Primary common share equivalents are calculated based on the average common stock price for the year. Fully diluted earnings per share are based on net earnings, divided by the sum of the weighted average number of common shares outstanding during the year, weighted average number of shares resulting from the assumed conversion of issued preference shares to common shares and common share equivalents. Fully diluted common share equivalents are calculated based on the higher of the average or ending common stock price for the year. Fully diluted earnings per share are anti-dilutive in 1995, 1994 and 1993 and are not presented. Note 2: Discontinued Operations In December, 1987, Dravo's Board of Directors approved a major restructuring program which concentrated the company's future direction exclusively on opportunities involving its natural resources business. An additional charge of $6.5 million was taken in 1994 for discontinued operations. The charge included $4.5 million to settle a claim that alleged the company breached a contract relating to engineering and procurement services rendered between 1973 and 1978 for a sugar cane processing facility in Venezuela. The provision also included amounts for legal fees anticipated to pursue -22- various lawsuits and claims, the most significant being the Hastings insurance litigation discussed in Note 8, Contingent Liabilities, and a contract dispute with Continental Energy Associates (CEA). The CEA dispute was settled in 1995 and did not exceed the amount provided in the discontinued operations provision. A $35.3 million provision for discontinued operations expenses was recorded in 1993. The provision covered the write-off of receivables and accrual of a settlement relating to a resource recover facility built in Long Beach, California; updated estimates of the potential costs to clean-up soil and groundwater contamination at a former operation located in Hastings, Nebraska; write-down of a receivable from a Portland, Maine, utility to reflect a jury award; and estimated legal fees. The company received cash proceeds of $2.2 million in 1995, $1.6 million in 1994 and $2.0 million in 1993 from the repayment of notes received from the previous sales of discontinued businesses. The remaining discontinued operations' assets and liabilities for the respective years ended December 31 relate to non-cancelable leases, environmental, insurance, legal and other matters associated with exiting the engineering and construction business and are presented below: (In thousands) 1995 1994
Current assets: Accounts and retainers receivable $ 122 $ 24 Other 7,185 -- Total current assets 7,307 24 Accounts and retainers receivable 333 444 Other 309 5,121 Total assets $ 7,949 $ 5,589 Current liabilities: Accounts and retainers payable $ 140 $ 63 Accrued loss on leases 2,240 2,315 Other 4,004 11,193 Total current liabilities 6,384 13,571 Accrued loss on leases 3,328 5,632 Other 6,831 8,378 Total liabilities $16,543 $27,581 Net liabilities and accrued loss on leases of discontinued operations $(8,594) $(21,992)
DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 3: Dispositions The company completed a transaction on December 30, 1994 in which it sold to Martin Marietta Materials, Inc. (Martin Marietta), effective January 3, 1995, substantially all the assets of its construction aggregates business. Assets sold included the assets, properties and leases of Dravo Basic Materials Company, Inc. (DBM), a wholly owned subsidiary of the company, and Atchafalaya Mining Company, Inc. (AMC), a wholly owned subsidiary of DBM, used in the production, marketing, distribution and sale of various aggregate products. Also sold was the capital stock of Dravo Bahama Rock Limited (DBR), a wholly owned foreign subsidiary of DBM. The company, DBM and AMC retained substantially all obligations and liabilities which arose from, or in connection with, operations prior to the sales transaction. After expenses, a net pre-tax gain of $487,000 was recorded as other income. The assets and liabilities sold to Martin Marietta were removed from the company's December 31, 1994 balance sheet, and a corresponding receivable from the sale of DBM of $120.5 million was recorded. The December 31, 1994 consolidated statement of operations includes the results of DBM for the entire year. The following pro forma consolidated statement of operations presents the results of operations assuming the disposition of DBM had been completed as of the beginning of 1994. Adjustments have been made to exclude the results of DBM, to decrease interest expense for loans prepaid in early 1995 from the sale proceeds, and to record interest income at overnight investment rates for cash assumed to have been received in excess of liabilities paid. Pro forma data is provided for comparative purposes only and does not purport to be indicative of the results which actually would have been obtained if the disposition had taken place prior to the pro forma dates. -23- (In thousands, except per share data)
December 31, 1995 1994 Actual Pro Forma (Unaudited) Revenue $146,067 $125,661 Cost of revenue 109,541 94,859 Gross profit 36,526 30,802 Selling expenses 5,009 4,530 General and administrative expenses 16,228 12,872 Earnings from operations 15,289 13,400 Other income (expense): Equity in earnings of joint ventures 572 1,115 Other income 182 199 Interest income 85 1,727 Interest expense (4,807) (5,717) Net other expense (3,968) (2,676) Earnings before taxes from continuing operations 11,321 10,724 Income tax expense 340 489 Earnings from continuing operations $ 10,981 $ 10,235 Earnings per share, continuing operations$ 0.57 $ 0.52
Note 4: Inventories Inventories for the respective years ended December 31 are classified as follows:
(In thousands) 1995 1994 Finished goods $ 1,677 $ 1,834 Materials and supplies 12,517 10,804 Net inventories $14,194 $12,638
Note 5: Notes Payable Notes payable at December 31 include the following:
(In thousands) 1995 1994 Short-term: Current portion of long-term notes $ 6,099 $ 85,077 Total short-term 6,099 85,077 Long-term: Variable rate revolving line of credit 27,950 55,800 Variable rate note -- 6,297 9.95% notes -- 2,800 10.13% notes -- 19,944 11.21% notes, payable through 2002 41,800 41,800 Other notes, payable through 2005 641 876 70,391 127,517 Deduct: Current portion of notes 6,099 85,077 Total long-term notes $64,292 $ 42,440
The following is a description of the terms and conditions of the company's major debt instruments: The $27.9 million note payable was borrowed under a $65.0 million revolving credit/letter of credit facility with First Alabama Bank; PNC Bank, N.A.; and Bank of America Illinois. Interest on the revolver equals either the base lending rate of Regions Financial Corporation, First Alabama Bank's parent, or , at the option of the company, the Eurodollar interest rate plus two percent. The facility expires July 31, 1997, but includes renewal provisions. The company intends to use a portion of the line of credit to finance construction of a new kiln and related material- handling equipment at its Maysville facility. On July 31, 1997, up to $17.0 million borrowed under the facility may be converted to a five-year term loan. Also on July 31, 1997, the amount available under the revolver will be reduced from $65.0 million to $45.0 million. The variable rate note, 9.95 percent promissory notes and 10.13 percent construction notes were prepaid early in 1995 from a portion of the Dravo Basic Materials sale proceeds. The 11.21 percent term notes require quarterly interest payments and annual principal repayments in the amount of $6.0 million beginning January, 1996. Obligations under the revolving credit/letter of credit facility and the 11.21 percent term notes are secured by a pledge of the stock of Dravo Lime Company and Dravo Basic Materials Company along with Dravo Lime Company's accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River and Longview plants have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company to maintain minimum net worth levels and fixed charge ratios on a consolidated basis; restrict incurrence of debt, liens and lease obligations; restrict the sale of significant assets, and limit payment of dividends. The company may not declare a common stock dividend if that dividend plus all other common dividends paid after September 30, 1995, exceed 25 percent of cumulative earnings from continuing operations after September 30, 1995. Cumulative earnings exclude gains from the sale of capital assets, extraordinary gains and unremitted earnings of joint ventures. At December 31, 1995, cumulative earnings since September 30, 1995, from which dividends could be declared totaled $2.8 million. No dividends on common stock were declared. Assets pledged under certain notes and leases had a book value of $133.4 million at December 31, 1995. In February, 1993, the company entered into an interest rate swap agreement with Continental Bank, N.A. on the $41.8 million fixed rate long-term notes payable. The transaction was accounted for as a hedge of those notes. On December 30, 1994, the company paid $1.4 million to terminate the swap agreement. Amounts payable on long-term debt due in 1996 and thereafter are: 1996, $6.1 million; 1997, $6.1 million; 1998, $6.1 million; 1999, $6.0 million; 2000, $6.0 million; and after 2000, $12.1 million. Note 6: Redeemable Preference Stock The company has outstanding 200,000 shares of cumulative, convertible, exchangeable, Series D Preference Stock. Cumulative dividends of $3.0875 per share are payable quarterly. Each share of preference stock may be converted, at the option of the holder, into 8.0 shares of common stock. The stock is also exchangeable, at the option of the company, for 12.35 percent Senior Subordinated Convertible notes due September 21, 2001. The 12.35 percent Senior Subordinated Notes would contain the same conversion rights, restrictions and other terms as the preference stock. The company may redeem the Series D Preference Stock, in whole or in part, after January 21, 1996, for $100 per share plus accrued dividends, provided that the market price of common stock as of the date of the decision to redeem the shares, as defined in the Certificate of Designations, Preferences and Rights for the Series D Preference Stock, shall be at least equal to 175 percent of the conversion price for the preference stock. Mandatory annual redemption of the lesser of 50,000 shares or the number of shares then outstanding begins September 21, 1998, at $100 per share plus accrued dividends. In the event of liquidation of the company, the holders of outstanding Series D Preference Stock shall be entitled to receive a distribution of $100 per share plus all accumulated and unpaid dividends. The company had outstanding 25,386 and 28,386 shares of cumulative, convertible Series B Preference Stock on December 31, 1995 and 1994, respectively. Cumulative annual dividends of $2.475 per share are payable quarterly. Each share of Series B Preference Stock may be converted at the option of the holder to 3.216 shares of common stock. In the event of the company's liquidation, the holders of the Series B Preference Stock are entitled to $55 per share plus all accumulated and unpaid dividends. Note 7: Commitments Total rental expense for 1995, 1994, and 1993 was $3.1 million, $35.2 million and $34.4 million, respectively. The minimum gross rentals under non-cancelable operating leases for these years were $13.0 million, $17.3 million and $17.5 million, respectively. Of these amounts, $10.5 million, $10.5 million and $10.4 million in 1995, 1994 and 1993, respectively, were provided for in the discontinued operations provision. The minimum future rentals under non-cancelable operating leases and future rental receipts from subleases to third parties as of December 31, 1995 are indicated in the following table. Of the $10.7 million net minimum payments, $5.6 million relates to, and has been expensed as part of, discontinued operations. Minimum Future Rentals and Rental Receipts
(In thousands) 1996 $ 12,382 1997 12,051 1998 3,757 1999 -- 2000 -- After 2001 -- Total minimum payments required 28,190 Less: Sublease rental receipts (17,514) Net minimum payments $ 10,676
A joint venture phosphate mining operation, in which the company is a 50 percent partner, has credit available under a bank loan agreement for equipment purchases. The company would be required to repay the entire loan in the event of a failure of both the joint venture and the other partner. At December 31, 1995 and 1994, $4.6 million and $2.9 million, respectively, was borrowed under the agreement. At December 31, 1995 and 1994, the company had outstanding letters of credit totaling $5.0 million and $7.5 million, respectively. Note 8: Contingent Liabilities The company has been notified by the federal Environmental Protection Agency (EPA) that the EPA believes the company is a potentially responsible party (PRP) for the clean-up of soil and groundwater contamination at four sub-sites in Hastings, Nebraska. The Hastings site is one of the EPA's priority sites for taking remedial action under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). At one of these sub-sites, a municipal landfill, the company believes it could not have disposed of hazardous wastes at the particular sub-site because the landfill was -25- closed prior to the time the company and its predecessor initiated the operation which generated the type of hazardous substances found at this sub-site. Other PRPs, including the local municipality, have agreed to perform the remedial investigation and to design soil and groundwater remedies at this sub-site. The company has agreed to participate in an EPA-initiated allocation proceeding for this sub-site. The company has also been notified by the EPA that the EPA considers it a PRP at another municipal landfill in Hastings. At least three other parties (including the City of Hastings) are considered by the EPA to be PRPs at this second sub-site. At this sub-site, the company has concluded that the City of Hastings is responsible for a proper closure of the landfill and the remediation of any release of hazardous substances. In January, 1994, EPA invited the company and the other PRPs to make an offer to conduct a remedial investigation and feasibility study (RI/FS) of this sub-site and stated that the EPA was in the process of preparing a work plan for the RI/FS. None of the PRPs has volunteered to undertake the RI/FS. With respect to the third sub-site, the company and two other PRPs have been served with administrative orders directing them to undertake soil remediation and interim groundwater remediation at that sub-site. The company is currently complying with these orders while reserving its right to seek reimbursement from the United States for its costs if it is determined it is not liable for response costs or if it is required to incur costs because of arbitrary, capricious or unreasonable requirements imposed by the EPA. The EPA has taken no legal action with respect to its demand that the company and the other PRPs pay its past response costs. A total of five parties have been named by the EPA as PRPs at this sub- site, but two of them have been granted de minimis status. The company believes other persons should also be named as PRPs. The fourth sub-site is a former naval ammunition depot which was subsequently converted to an industrial park. The company and its predecessor owned and operated a manufacturing facility in this industrial park. To date, the company's investigation indicates that it did not cause the release of hazardous substances in this sub-site during the time it owned and operated the facility. The United States has undertaken to conduct the remediation of this sub-site. In addition to sub-site clean-up, the EPA is seeking a clean-up of area-wide contamination associated with all of the sub-sites in and around Hastings, Nebraska. The company, along with other Hastings PRPs, has recommended that the EPA adopt institutional controls as the area-wide remedy in Hastings. The EPA has indicated some interest in this proposal but has decided to first conduct an area-wide remedial investigation before choosing a remedy. On August 10, 1992 the company filed suit in the Alabama District Court against its primary liability insurance carriers and one of its predecessor's insurers, seeking a declaratory judgment that the company is entitled to a defense and indemnity under its contracts of insurance (including certain excess policies provided by one of the primary carriers) with regard to the third Hastings sub-site. The company has settled the claim against its predecessor's insurer, but the case against the company's insurers is still in litigation. An award of punitive damages is also being sought against the company's insurers for their bad faith in failing to investigate the company's claim and/or denying the company's claim. The company has notified its primary and excess general liability carrier, as well as the excess carrier of its predecessor, of the receipt of its notice of potential liability at the first, second and fourth sub-sites. Estimated total clean-up costs, including capital outlays and future maintenance costs for soil and groundwater remediation of approximately $18 million, are based on independent engineering studies. Included in the discontinued operations provision is the company's estimate that it will participate in 33 percent of these remediation costs. The company's estimated share of the costs is based on its assessment of the total clean-up costs, its potential exposure, and the viability of other named PRPs. Other claims and assertions made against the company will be resolved, in the opinion of management, without material additional charges to earnings. The company has asserted claims that management believes to be meritorious, but no estimate can be made at present of the timing or the amount of recovery. Note 9: Retirement Plans The company has several defined benefit plans covering substantially all employees. Benefits for the salaried plan are based on salary and years of service, while hourly plans are based on negotiated benefits and years of service. The company's funding policy is to make contributions as are necessary to provide assets sufficient to meet the benefits to be paid to plan members in accordance with the requirements of the Employee Retirement Income Security Act of 1974. Plan assets are composed primarily of government securities and corporate debt and equities. -26- The status of combined employee pension benefit plans as of December 31, 1995 and 1994 is shown below:
1995 1994 Plans which have Plans which have Plans which have Plans which have funded assets accumulated funded assets accumulated in excess of benefit in excess of benefit accumulated obligations accumulated obligations benefit in excess of benefit in excess of (In thousands) obligations funded assets obligations funded assets Actuarial present value of projected benefit obligation: Vested employees $179,649 $27,100 $147,801 $21,567 Non-vested employees 277 855 284 1,710 Accumulated benefit obligation 179,926 27,955 148,085 23,277 Effect of projected future salary increases 3,264 1,410 2,130 398 Total projected benefit obligation 183,190 29,365 150,215 23,675 Plan assets 182,661 19,555 148,303 18,357 Assets less than projected benefit obligation (529) (9,810) (1,912) (5,318) Unamortized net (asset) liability existing at transition date 0 325 (687) 367 Unrecognized net loss from actuarial experience 22,450 7,187 20,888 2,755 Adjustment to recognize minimum liability -- (6,175) -- (2,922) Prepaid (accrued) pension expense $ 21,921 $(8,473) $ 18,289 $ (5,118)
The sale of Dravo Basic Materials' assets resulted in the termination of employment for essentially all Dravo Basic Materials employees and certain executive and administrative employees of a subsidiary company. As a result, the company recognized a charge in 1994 for pension curtailment and special termination benefits expense. The components of 1995, 1994 and 1993 net periodic pension (income) expense are as follows: Years ended December 31, 1995 1994 1993 (In thousands)
Service cost of benefits earned during the year $ 470 $ 1,023 $ 901 Interest cost on projected benefit obligation 14,356 13,981 14,431 Actual (return) loss on plan assets (52,972) 14,570 (30,951) Net amortization (deferral) 38,446 (29,521) 15,566 Curtailment and special termination benefits expense -- 921 -- Net pension (income) expense for year $ 300 $ 974 $ (53) Expected long-term rate of return on assets used to determine net pension (income) expense 9.0% 8.0% 9.0%
The following assumptions were used for the valuation of the pension obligations as of December 31: 1995 1994 1993
Discount rate 7.25% 8.55% 7.5% Rate of increase in compensation levels 5.0% 5.0% 5.0%
Note 10: Postretirement and Postemployment Benefits The company provides health care and life insurance benefits for retired employees. Employees may become eligible for certain benefits if they meet eligibility qualifications while working for the company. Previously, the company paid all cost increases for employees who retired prior to 1985 and who did not elect to participate in a plan in which they paid cost increases, in exchange for expanded benefits, in excess of a specified amount. For employees retiring after 1984, the company's liability was limited to a fixed contribution amount for each participant or dependent. Recently, the company communicated to all Medicare- eligible retirees that, commencing in 1996, it will participate in various Medicare HMOs. The retiree will have the option of joining a Medicare HMO or selecting other health care plans; however, the company will contribute a fixed amount toward the cost of the coverage regardless of the plan selected. The accumulated postretirement benefit obligation (APBO) at December 31, 1995, as presented in the following table, reflects the implementation of this initiative. The provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," were adopted effective January 1, 1993. The company accrues for the expected cost of providing postretirement benefits to -27- the employee and the employee's beneficiaries and covered dependents during the years of employment service. Expense in 1994 includes a $471,000 curtailment loss resulting from the termination of essentially all Dravo Basic Materials employees and certain executive and administrative employees of a subsidiary company due to the Dravo Basic Materials asset sale. No funds are segregated for future postretirement obligations. The company is amortizing its accumulated postretirement benefit obligation (APBO) over a 20-year period. The APBO was calculated using a discount rate of 7.25 percent and a health care cost trend rate of 9.0 percent in 1996, gradually declining to 5.25 percent in 2001. An increase in the health care cost trend rate of one percent would increase the APBO at December 31, 1995, by $331,000 and the total service and interest rate components of the 1995 postretirement benefit cost by $90,000. Postretirement benefit cost for 1995, 1994 and 1993 includes the following components: (In thousands) 1995 1994 1993
Service cost - benefits earned during the period $ 44 $ 105 $ 177 Interest cost on accumulated postretirement benefit obligation 2,683 2,659 2,887 Amortization of accumulated postretirement benefit obligation 1,705 1,789 1,789 Curtailment loss -- 471 -- Postretirement benefit cost $4,432 $5,024 $4,853
The postretirement benefit plans' funded status reconciled with the amount included in the company's consolidated balance sheets at December 31 is as follows:
(In thousands) 1995 1994 Accumulated postretirement benefit obligation: Retirees and related beneficiaries $ 21,505 $ 30,248 Other fully eligible participants 1,284 1,601 Other active participants not fully eligible 866 747 Accumulated postretirement benefit obligation: 23,655 32,596 Unrecognized transition obligation (15,122) (30,822) Unrecognized net loss (6,536) (134) Accrued postretirement benefit liability $ 1,997 $ 1,640
The company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS 112) effective January 1, 1994. SFAS 112 requires accrual of the estimated cost of benefits provided by the employer to former or inactive employees, including their beneficiaries and covered dependents, after employment but before retirement. A charge of $1.4 million was recorded in the first quarter as a cumulative effect for a change in accounting principle to recognize the company's estimated liability for postemployment benefits covered by SFAS 112. Note 11: Stock Options, Stock Appreciation Rights and Performance Shares The company has outstanding to executives and key employees common stock options and stock appreciation rights (collectively, rights) under four plans: the 1978 Plan, the 1983 Plan, the 1988 Plan and the 1994 Plan. Under the 1988 and 1994 Plans, options may be granted either alone or in tandem with related stock appreciation rights, or stock appreciation rights may be granted separately. The 1983 Plan provided for the granting of options, stock appreciation rights (either separate or in tandem with a related option) and performance shares. The price of stock options and the basis of stock appreciation rights so granted is the fair market value on the date of grant. Rights cannot be exercised until one year after the grant date and expire ten years from date of grant. Any incremental value of stock appreciation rights and performance shares granted is recognized as expense, while a decline in the market value of the stock is recognized as a reduction in expense to the extent previously recognized. There was no change in the incremental value during the last three years. The exercise of options does not necessitate a charge or credit to income. No additional grants can be made from the 1978 or 1983 Plans, both of which have expired. There were no performance shares outstanding at December 31, 1995 and 1994. Prices per share of outstanding rights at December 31, 1994 were $5.94 to $19.31. During 1995 grants were awarded at prices of $10.69 to $14.06, rights were exercised at $5.94 to $11.88 and rights were forfeited at $10.25 to $19.31. Rights outstanding at December 31, 1995, are exercisable at prices ranging from $5.94 to $19.31 per share. -28- The following summary shows the changes in outstanding rights:
1978 1983 1988 1994 Plan Plan Plan Plan Total Outstanding at December 31, 1994 53,200 239,050 982,300 12,000 1,286,550 Granted -- -- -- 417,500 417,500 Exercised -- (1,250) (58,500) -- (59,750) Forfeited (33,750) (42,000) (90,000) (6,000) (171,750) Outstanding at December 31, 1995 19,450 195,800 833,800 423,500 1,472,550 Rights exercisable: December 31, 1994 53,200 239,050 919,800 -- 1,212,050 December 31, 1995 19,450 195,800 833,800 6,000 1,055,050 Shares available for future grant: December 31, 1994 -- -- -- 988,000 988,000 December 31, 1995 -- -- 90,000 576,500 666,500
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" (SFAS 123) in October, 1995. Financial statements presented for fiscal 1996 will measure the fair value of stock-based compensation awarded to employees in 1995 and thereafter. SFAS 123 allows companies a choice between continuing to account for stock-based awards using the intrinsic value, as prescribed by Accounting Principles Board Opinion No. 25 (APB 25), or the fair value. If the company chooses to continue following APB 25, the pro forma effect the fair value methodology would have had on net income and earnings per share will be disclosed. The company has not yet determined the magnitude of the difference between the intrinsic value and fair value approaches nor the method it will choose to account for stock-based compensation. Note 12: Shareholders' Equity Components of shareholders' equity at December 31 (except retained earnings which is set forth in the Consolidated Statements of Retained Earnings) are presented below:
Preference Common Other Treasury (In thousands) Stock Stock Capital Shares Balance, January 1, 1993 $35 $14,945 $65,960 $(1,840) Common shares issued through: Retirement of Series B preference stock (9,648) (3) 10 (7) Common stock options exercised (12,700) 13 88 Recognition of minimum liability on pension plan (2,781) Balance, December 31, 1993 $32 $14,968 $63,260 $(1,840) Common shares issued through: Retirement of Series B preference stock (12,864) (4) 13 (9) Common stock options exercised (5,151) 5 37 Recognition of minimum liability on pension plan 266 Balance, December 31, 1994 $28 $14,986 $63,554 $(1,840) Common shares issued through: Retirement of Series B preference stock (9,648) (3) 9 (6) Common stock options exercised (59,750) 60 496 Purchase of treasury shares (228,470) (2,667) Recognition of minimum liability on pension plan (3,226) Balance, December 31, 1995 $25 $15,055 $60,818 $(4,507)
-29- Note 13: Income Taxes Income before taxes and provisions for income tax expense (benefit) from continuing operations at December 31 are:
(In thousands) 1995 1994 1993 Income before taxes $11,321 $ 5,527 $ 10,471 Current federal income taxes $ -- $ 350 $ -- Deferred federal income taxes -- -- (24,853) Current state income taxes 340 247 198 Total $ 340 $ 597 $(24,655)
The actual income tax expense attributable to earnings from continuing operations for the years ended December 31, 1995, 1994 and 1993 differed from the amounts computed by applying the U. S. federal tax rate of 34 percent to pretax earnings from continuing operations as a result of the following:
(In thousands) 1995 1994 1993 Computed "expected" tax expense $3,849 $ 1,879 $ 3,560 Alternative minimum tax -- 300 -- Percentage depletion (992) (1,880) (3,374) State income taxes, net of federal income tax benefit 224 163 131 Other items 51 135 (119) Benefit of operating loss carryforwards (2,792) -- (24,853) Provision (benefit) for income tax $ 340 $ 597 $(24,655)
The significant components of the deferred income tax benefit attributable to income from continuing operations for the years ended December 31 are as follows: (In thousands) 1995 1994 1993
Deferred tax (benefit) expense (exclusive of the effects of other components listed below) $ (6,058) $ 1,340 $ (2,431) Increase (decrease) in balance of the valuation allowance for deferred tax assets 6,058 (1,340) (22,422) Total $ -- $ -- $(24,853)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows:
1995 1994 Deferred tax assets: Provision for discontinued operations $ 3,008 $ 7,477 Accounts receivable, principally due to allowance for doubtful accounts 302 296 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 19 215 Compensated absences, principally due to accrual for financial reporting purposes 500 745 Net operating loss carryforwards 67,229 61,713 Investment tax credit carryforwards 1,722 2,543 Other 1,022 721 Total gross deferred tax assets 73,802 73,710 Less valuation allowance (36,381) (30,323) Net deferred tax assets 37,421 43,387 Deferred tax liabilities: Properties and equipment, principally due to depreciation 6,417 13,682 Pension accrual 6,151 4,682 Other -- 170 Total gross deferred tax liabilities 12,568 18,534 Net deferred tax asset $ 24,853 $ 24,853
The net change in the total valuation allowance for the years ended December 31, 1995 and 1994 was an increase of $6.1 million and a decrease of $1.3 million, respectively. The company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109), effective January 1, 1993. The statement requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their bases for financial reporting purposes. In addition, SFAS 109 requires the recognition of future tax benefits, such as net operating loss carryforwards (NOLs), to the extent that realization of such benefits are more likely than not. There was no cumulative effect of this accounting change at the time of adoption. -30- The company had NOLs of approximately $192.1 million at December 31, 1995, because of losses associated with discontinued businesses. These NOLs expire as follows:
(In thousands) 2002 $ 18,039 2003 76,662 2004 39,012 2005 17,428 2006 7,336 2007 1,629 2008 15,031 2009 12,171 2010 4,776
Tax benefits of $4.9 million for investment tax credits expiring in 1996 and later are also being carried forward. Under the provisions of SFAS 109, NOLs represent temporary differences that enter into the calculation of deferred tax assets and liabilities. At January 1, 1993, primarily as a result of the NOLs, the company was in a net deferred tax asset position under SFAS 109. The full amount of the deferred tax asset was offset by a valuation allowance due to uncertainties associated with unresolved issues related to discontinued operations. In the fourth quarter of 1993, the company reduced its valuation allowance resulting in a net deferred tax asset of $24.9 million. Two factors contributed to the reduction in the valuation allowance. First was the resolution of long-standing litigation between the company and the City of Long Beach, California, regarding a waste-to-energy plant the company built for the city and the ability to quantify, relying upon advice of legal counsel, the potential financial impact of the remaining uncertainties associated with previously discontinued operations. Second, the company was awarded a contract to supply American Electric Power's Gavin plant with 450,000 tons of lime annually for 15 years commencing in 1995. In addition, the company had pending the renewal of existing contracts which were finalized in 1994 and raised utility lime sales backlog to $800 million. With these contracts in place, nearly 65 percent of the company's annual revenue was projected to be generated from long-term contracts. As a result, the company believed that revenue and income from its lime subsidiary could be reasonably projected over the life of its long-term contracts. The amount of the net deferred tax asset was not adjusted in 1995. In assessing the valuation allowance, estimates were made as to the potential financial impact on the company should resolution of the remaining substantive uncertainty associated with discontinued operations substantially exceed management's estimates. The uncertainty involves the Hastings, Nebraska, environmental matter and is discussed more fully in Note 8, Contingent Liabilities. Management's position is to vigorously pursue its claims against other PRPs and to contest the liability for environmental clean-up. In determining the appropriate valuation allowance, however, management has used the upper limit of the potential financial impact estimated for this matter. Also, operating profits were lower than forecasted in 1995 primarily due to higher-than-expected expenses incurred during start-up of the Black River expansion project. The lower profit, expenses related to discontinued operations and recognition for tax purposes of fees and expenses totaling $9.5 million associated with loans prepaid from funds received from the sale of Dravo Basic Materials' assets created a tax loss and generated additional NOLs. Management believes that, with the resolution of the Black River start-up problems, the company will generate sufficient future taxable income to realize the entire deferred tax asset prior to expiration of any NOLs and that the realization of a $24.9 million net deferred tax asset is more likely than not. Income projections for the contract lime business are based on historical information adjusted for contract terms. In order to fully realize the net deferred tax asset, the company will need to generate future taxable income of approximately $73.2 million prior to the expiration of the NOLs. Historically, Dravo Lime's cumulative taxable earnings for the past five years total $55.5 million. There can be no assurance, however, that the company will generate any earnings or any specific level of continuing earnings. Note 14: Extraordinary Item In conjunction with the sale of Dravo Basic Materials' assets, existing loan agreements were substantially altered, including a $35 million reduction in the amount available under a revolving credit facility. Also, while negotiating a financing agreement with Prudential Power Funding for the Black River expansion, the company purchased a call option that enabled it to prepay on May 17, 1995, without penalty, amounts outstanding under the financing agreement. Cash received from the Dravo Basic Materials asset sale equaling the outstanding principal on the Prudential Power Funding facility, interest through May 16, 1995 and an exit fee was placed in escrow. With Prudential Power Funding's consent, the entire amount borrowed was prepaid. The fees associated with these agreements were written off as extraordinary items in 1994. -31- Note 15: Fair Value of Financial Instruments The fair value of financial instruments without extended maturities equals their carrying values. The estimated fair value of financial instruments with extended maturities at December 31 is presented below: (In thousands)
1995 1994 Carrying Fair Carrying Fair Value Value Value Value Notes payable $70,391 $72,124 $127,517 $126,220 Series D Preference Stock 20,000 23,242 20,000 21,347
The carrying amounts of notes receivable approximate fair value. The fair value of notes payable and the Series D Preference Stock is based upon the amount of future cash flows associated with each instrument discounted using the company's estimated borrowing rate for similar debt instruments of comparable maturity. The Preference Stock fair value also includes an estimated factor to value the conversion feature. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Note 16: Research and Development Research and development activity for the years ended December 31 is as follows:
(In thousands) 1995 1994 1993 Total research and development expense $3,558 $4,393 $4,166 Billings to third parties 1,255 2,361 1,915 Net research and development expense $2,303 $2,032 $2,251
Note 17: Interim Financial Information (Unaudited, in millions, First Second Third Fourth except earnings per share) Quarter Quarter Quarter Quarter
1995 Revenue $33.9 $35.7 $37.8 $38.6 Gross profit 8.7 9.5 9.5 8.8 Earnings before taxes from continuing operations 2.7 2.9 3.1 2.6 Provision (benefit) for income taxes 0.2 0.2 0.2 (0.3) Net earnings 2.5 2.7 2.9 2.9 Earnings per share: Net earnings 0.13 0.14 0.15 0.15 1994 Revenue $57.7 $72.6 $75.3 $72.5 Gross profit 7.6 12.6 12.7 11.1 Earnings (loss) before taxes from continuing operations (1.3) 3.8 3.7 (0.7) Provision (benefit) for income taxes -- 0.6 (0.2) 0.2 Earnings (loss) from continuing operations (1.3) 3.2 3.9 (0.9) Discontinued operations -- -- -- (6.5) Earnings (loss) before extraordinary item and cumulative accounting change (1.3) 3.2 3.9 (7.4) Extraordinary item -- -- -- (7.5) Cumulative effect of accounting change (1.4) -- -- -- Net earnings (loss) (2.7) 3.2 3.9 (14.9) Earnings (loss) per share: Continuing operations (0.13) 0.17 0.22 (0.10) Discontinued operations -- -- -- (0.44) Extraordinary item -- -- -- (0.51) Cumulative accounting change (0.09) -- -- -- Net earnings (loss) (0.22) 0.17 0.22 (1.05)
-32- Management's Report The consolidated financial statements and other financial information appearing in this Annual Report were prepared by the management of Dravo Corporation, which is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on informed judgments and estimates of the expected effects of events and transactions. Dravo maintains a system of internal controls to provide reasonable assurance as to the reliability of the financial records and the protection of assets. This internal control system is supported by careful selection and training of qualified personnel, and a broad program of internal audits. In addition, the company's business ethics policy requires employees to maintain the highest level of ethical standards in the conduct of the company's business, and their compliance is regularly monitored. The company's financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. As stated in their report, their audit was made in accordance with generally accepted auditing standards and included such study and evaluation of the company's system of internal accounting controls as they considered necessary to determine the nature, timing and extent of the auditing procedures required for expressing an opinion on the company's financial statements. The Board of Directors, acting through its Audit Committee composed exclusively of outside directors, reviews and monitors the company's financial reports and accounting practices. The Board of Directors, upon the recommendation of the Audit Committee, appoints the independent certified public accountants subject to ratification by the shareholders. The Audit Committee meets periodically with management, the internal auditors and the independent auditors. These meetings include discussions of internal accounting control, results of audit work and the quality of financial reporting. Financial management as well as the internal auditors and independent auditors have full and free access to the Audit Committee. [KPMG Peat Marwick LLP logo] Independent Auditors' Report The Board of Directors and Shareholders Dravo Corporation: We have audited the accompanying consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dravo Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Notes 10 and 13 to the consolidated financial statements, the company adopted the method of accounting for postemployment benefits prescribed by Statement of Financial Accounting Standards No. 112 in 1994 and the methods of accounting for postretirement benefits other than pensions and income taxes prescribed by Statements of Financial Accounting Standards Nos. 106 and 109, respectively, in 1993. /s/ KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Pittsburgh, Pennsylvania January 24, 1996 -33- Five-Year Summary Years ended December 31, 1995 1994 1993 1992 1991
(Amounts in millions, except per share data and average mineral resource prices) Summary of operations: Revenue $146.1 $278.1 $277.6 $273.0 $295.7 Gross profit 36.5 44.0 49.3 51.7 57.7 Interest expense 4.8 12.4 9.2 10.5 11.2 Depreciation expense 9.5 17.6 18.0 18.6 17.7 Earnings before taxes from continuing operations 11.3 5.5 10.5 12.7 16.1 Provision (benefit) for income taxes 0.3 0.6 (24.6) 2.4 3.9 Earnings from continuing operations 11.0 4.9 35.1 10.3 12.2 Loss from discontinued operations, net of income taxes -- (6.5) (35.3) -- (38.5) Extraordinary item -- (7.5) -- 1.6 -- Cumulative accounting change -- (1.4) -- -- -- Net earnings (loss) 11.0 (10.5) (0.2) 11.9 (26.3) Preferred dividends declared 2.5 2.5 2.6 2.6 2.6 Capital expenditures 33.1 44.8 13.6 8.5 19.7 Employees at year end 756 768 1,416 1,421 1,556 Summary of financial position: Total assets $213.3 $307.3 $272.1 $268.5 $271.8 Working capital 9.8 6.3 59.5 60.1 45.6 Long-term obligations and redeemable preference stock 84.3 62.4 108.5 108.1 109.7 Total debt and redeemable preference stock 90.4 147.5 113.0 112.8 114.4 Property, plant and equipment, net 116.2 93.5 110.0 114.9 128.5 Shareholders' equity 79.9 76.7 89.5 95.0 85.5 Per common share data: Earnings from continuing operations $ 0.57 $ 0.16 $ 2.20 $ 0.52 $ 0.65 Loss from discontinued operations -- (0.44) (2.38) -- (2.60) Extraordinary item -- (0.51) -- 0.11 -- Cumulative accounting change -- (0.09) -- -- -- Net earnings (loss) 0.57 (0.88) (0.18) 0.63 (1.95) Book value 5.33 5.06 6.15 6.27 5.63 Shareholders at year end 2,924 3,192 3,442 3,736 3,893 Mineral resources (in millions of tons): Proven and probable reserves Total reserves 522.2 502.1 1,121.2 1,142.1 1,074.7 Tons mined 7.1 23.2 22.8 25.4 24.7 Average market price $ 3.3 $ 5.80 $ 6.01 $ 5.85 $ 6.31
-34- Board of Directors Principal Executives Carl A. Gilbert Carl A. Gilbert * President and Chief Executive Officer, President and Dravo Corporation Chief Executive Officer Arthur E. Byrnes Ernest F. Ladd III * Chairman, Executive Vice President and Deltec Asset Management Corporation Chief Financial Officer James C. Huntington, Jr. Marshall S. Johnson * Retired Senior Vice President, Vice President, American Standard, Inc. Operations and Engineering William E. Kassling John R. Major * Chairman, Chief Executive Officer Vice President, Administration and President, Westinghouse Air Brake Company James J. Puhala * Vice President, William G. Roth General Counsel and Secretary Retired Chairman, Dravo Corporation Richard E. Redlinger * Vice President, Corporate Konrad M. Weis Development, and Treasurer Retired President and Chief Executive Officer, Donald H. Stowe, Jr. Bayer USA, Inc. Vice President, Sales and Technology Larry J. Walker Vice President and Controller *Member of Management Executive Committee -35- EX-21 11 SUBSIDIARIES Exhibit 21. Subsidiaries of the Registrant Percentage State or country of voting in which securities incorporated owned
Registrant: Dravo Corporation Pennsylvania -- Subsidiaries of Dravo Corporation: Dravo Basic Materials Company, Inc. Alabama 100% Dravo Equipment Company Delaware 100 Dravo Lime Company Delaware 100 Princeton Ridge, Inc. New Jersey 100 Subsidiary of Dravo Basic Materials Company, Inc.: Dravo Natural Resources Company Delaware 50 Subsidiary of Dravo Lime Company: Dravo Natural Resources Company Delaware 50
21-1 EX-23 12 ACCOUNTANTS' CONSENT Exhibit 23. Consents of Experts and Counsel CONSENT OF INDEPENDENT AUDITORS The Board of Directors Dravo Corporation: We consent to incorporation by reference in registration statements Nos. 33-23632, 2-84462, 2-64137, 33-54179, 333-01689 and 333-01691 on Form S-8, No. 33-17356 on Form S-3, Amendment No. 1 to No. 2-87555 on Form S-8/S-3, and No. 2-71993 on Form S- 16 amended by Form S-3 of Dravo Corporation, of our report dated January 24, 1996 relating to the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of operations, retained earnings, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1995 which report appears in, or is incorporated by reference in, the December 31, 1995 annual report on Form 10-K of Dravo Corporation. Our report refers to the adoption of the methods of accounting for postretirement benefits other than pensions, income taxes and postemployment benefits prescribed by Statements of Financial Accounting Standards Nos. 106, 109 and 112, respectively. /s/ KPMG PEAT MARWICK LLP Pittsburgh, Pennsylvania March 27, 1996 23-1 EX-24 13 POWERS OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 25th day of January, 1996. /s/ ARTHUR E. BYRNES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 25th day of January, 1996. s/s JAMES C. HUNTINGTON, JR. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 25th day of January, 1996. s/s WILLIAM E. KASSLING POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 25th day of January, 1996. /s/ WILLIAM G. ROTH POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 25th day of January, 1996. /s/ KONRAD M. WEIS EX-27 14 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRAVO CORPORATION'S DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1995 DEC-31-1995 1086 0 26481 934 14194 43072 225835 109667 213261 33307 0 15055 20000 25 64775 213261 146067 146067 109541 109541 0 0 4807 11321 340 10981 0 0 0 10981 .57 0
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