-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tOHreZLiyRocFhUzrHFTPjugQnsKfQi5aT/jPirImG56fIh+cdEkZ+n+VYSjIAAf uqWScWJ8FZleduumqjrifg== 0000950130-94-000546.txt : 19940404 0000950130-94-000546.hdr.sgml : 19940404 ACCESSION NUMBER: 0000950130-94-000546 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DRAVO CORP CENTRAL INDEX KEY: 0000030067 STANDARD INDUSTRIAL CLASSIFICATION: 1400 IRS NUMBER: 250447860 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05642 FILM NUMBER: 94519305 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 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1993 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 15, 1994: 14,851,819 Aggregate market value of the voting stock held by nonaffiliates of the registrant as of March 15, 1994: $180,078,305 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1993 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 28, 1994 are incorporated by reference to the extent set forth in Part III of this Report. ================================================================================ TABLE OF CONTENTS -----------------
Page ---- PART I Item 1. Business 3-6 Item 2. Properties 7-8 Item 3. Legal Proceedings 9-11 Item 4. Submission of Matters to a Vote 11 of Security Holders PART II Item 5. Market for the Registrant's Common Stock and 12-18 Related Stockholder Matter Item 6. Selected Financial Data 18 Item 7. Management's Discussion and Analysis of Financial 18 Condition and Results of Operations Item 8. Financial Statements and Supplementary Data 18 Item 9. Disagreements on Accounting and Financial 18 Disclosure PART III Item 10. Directors and Executive Officers of the 19 Registrant Item 11. Executive Compensation 20 Item 12. Security Ownership of Certain Beneficial Owners 20 and Management Item 13. Certain Relationships and Related Transactions 20 PART IV Item 14. Exhibits, Financial Statement Schedules and 21-26 Reports on Form 8-K Signatures 27 Independent Auditors' Report on Schedules 28 Schedule III. Condensed Financial Information of 30-37 Registrant Schedule V. Property, Plant and Equipment 38, 39 Schedule VI. Accumulated Depreciation, Depletion and 40, 41 Amortization of Property, Plant and Equipment Schedule IX. Short-term Borrowings 42, 43 Schedule X. Supplementary Income Statement Information 44 Table of Contents for documents filed herein as Exhibits 4, 10, 11, 45 13, 21, 23, and 24
-2- PART I ITEM 1. BUSINESS - ----------------- (a) General Development of the Business Dravo Corporation 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. As a result of this restructuring program, Dravo is a natural resources company operating principally in the United States. Activities include the production of aggregates for construction and industrial uses and lime for industrial, utility, municipal and construction applications. All of the properties on which the company's reserves are located are physically accessible for the purposes of mining, dredging and hauling. Operations are principally carried on by two wholly-owned subsidiaries, Dravo Basic Materials Company, Inc. (Dravo Basic Materials) and Dravo Lime Company (Dravo Lime). Dravo Basic Materials is a leading producer of construction aggregates in the Ohio Valley and Gulf Coast regions. Principal products include sand and gravel, crushed limestone, shell, slag, ready-mixed concrete, concrete block, industrial filler material and poultry feed calcium supplement. The organization markets approximately 20 million tons of aggregates annually. The company's Ohio Valley operations are located in Cincinnati, Ohio; Pittsburgh, Pennsylvania; Parkersburg, West Virginia; Cave In Rock, Illinois and Smithland, Kentucky. Activity in all of the Ohio Valley locations is historically lower in the first quarter than the remainder of the year because of a seasonal construction market and winter weather conditions. Three land-based sand and gravel quarries are owned and operated in the Cincinnati area; two in the Pittsburgh area, one owned and one leased; and one is owned in the West Virginia area. A new owned limestone quarry is currently being developed east of Cincinnati. Also, two dredges are currently operating on the Ohio River under leases held by various governmental agencies and private individuals. The Cave In Rock limestone quarry is operated under a long-term lease with Lafarge Corporation. The quarry is located next to the Ohio River approximately 100 miles from the Ohio's junction with the Mississippi River. Reserves are estimated at 82 million tons, and the facility has an ultimate production capacity in excess of four million tons per year. The company markets the Cave In Rock aggregate along the Ohio, Mississippi and Tennessee river systems and -3- ITEM 1. BUSINESS (CONTINUED) - ----------------- the Gulf Coast. The company also supplies Lafarge's cement plant at Joppa, Illinois with kiln feed stone. The company owns and operates the Smithland, Kentucky limestone quarry located on the Cumberland River near its confluence with the Ohio River. This facility has limestone reserves of approximately 204 million tons and annual production capacity of more than four million tons. Dravo Basic Materials produces and markets its products in the southern United States in a number of metropolitan and rural areas. Production facilities include three limestone quarries and five sand and gravel quarries in Alabama and one limestone quarry and a river dredging operation in Florida. Aggregates are marketed from distribution facilities in Tampa, Pensacola and Jacksonville, Florida; Brunswick and Savannah, Georgia; Mobile, Birmingham, Montgomery and Auburn, Alabama; New Orleans, Baton Rouge, Westlake, Convent, Houma and Morgan City, Louisiana. Aggregates from the Cave In Rock, Illinois and Smithland, Kentucky facilities are also being marketed in the Gulf Coast area. A crushed slag plant is operated in Tennessee. The company imports limestone from a leased quarry located in The Bahamas. Reserves at this facility are estimated at 45 million tons, while production capacity is over two million tons annually. Dravo Basic Materials Company resumed shell dredging operations along the Gulf Coast in late 1992 after reaching a joint partnership agreement late in the year with the current reef shell leaseholder. The new leaseholder replaced the operator who was awarded the lease when it was auctioned by the State of Louisiana in 1991. The joint partnership agreement allows Dravo Basic Materials to once again participate in a market in which it has had substantial success historically because of reef shell's desirability for a number of construction and chemical applications. The company completed the sale of its asphaltic concrete operation located in Mobile and Loxley, Alabama in the first half of 1992. Dravo Lime, one of the nation's largest lime producers with annual capacity of over two million tons, owns and operates two plants in Kentucky and one in Alabama. The largest, a million-ton-per-year facility in Maysville, Kentucky, produces lime that is particularly efficient in removing sulphur dioxide from power plant stack gases. Most of Maysville's output is committed under long- term contracts with utility companies in the Ohio Valley. All contracts contain provisions for price escalation. Owned reserves at the Maysville site are considered adequate to sustain the current three kiln production for approximately thirty years. The Maysville plant also has options on additional reserves adequate to sustain production in excess of fifty years. Dravo Lime's Black River integrated lime facility located along the Ohio River at Butler, Kentucky has an annual quicklime capacity of 660,000 tons-per-year. The facility is currently being expanded to increase its capacity by 700,000 tons. The increased tonnage will be used, in part, to supply 450,000 tons of lime annually -4- ITEM 1. BUSINESS (CONTINUED) - ----------------- to American Electric Power's Gavin Station under a 15-year agreement commencing the second quarter of 1995. Reserves at this facility are considered adequate to sustain current production levels in excess of one hundred years. The company's Longview plant, located near Birmingham, Alabama, completed an expansion in April, 1991 that increased its annual production capacity to approximately 550,000 tons per year. The additional production is used primarily to meet the needs of a long-term contract with Mineral Technologies, Inc., formerly Pfizer Specialty Minerals Inc., for the production of precipitated calcium carbonate for the pulp and paper industry. The remainder of Longview's production is marketed to the aluminum, steel, chemical and other industries and for use in water purification, soil stabilization and road building applications. Limestone at the Longview operation comes from an above-ground quarry with recoverable reserves estimated to last twenty-three years at the current production rate. Ultimately, Dravo Lime expects to convert Longview to an underground mine, providing access to additional reserves that would support the current production rate for over one hundred years. Dravo Lime maintains and operates distribution terminals in Aliquippa and Butler, Pennsylvania; Porterfield, Ohio; Brunswick, Georgia; Tampa, Jacksonville, Fort Lauderdale and Sanford, Florida; and Baton Rouge, Louisiana. Dravo Lime stopped marketing Calcilox/R/ in 1992 due to a shortage of suitable low cost raw material. Calcilox is a stabilizing agent used in converting sludge produced in plant air pollution reduction systems into a material suitable for landfill operations. (b) Competitive Conditions Dravo encounters substantial competition in all its operations but believes that its past experience, strategically located reserves and technical expertise gives it certain competitive advantages. Dravo, through its subsidiary Dravo Lime, is engaged in the supply of lime for use in utility sulphur dioxide stack gas scrubbers. Dravo Lime's research and development expenditures for 1993 were $4.2 million, while spending for 1994 is expected to exceed $3.3 million. The company expects the research, much of which is being conducted jointly with utility customers, to lower both the capital and operating costs of the proprietary Thiosorbic/R/ scrubbing systems. Other research projects are aimed at increasing the range of applications of proprietary reagents for use in reducing stack gas emissions and at producing and recovering a saleable by- product. Dravo believes that in this field its long-term contracts, accumulated experience and technical skill have provided it a competitive advantage. Several firms with which Dravo competes have greater resources and income. Dravo competes with other firms for qualified professional personnel, particularly those with technological 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 or balance, a policy of divestiture is followed. -5- ITEM 1. BUSINESS (CONTINUED) - ----------------- Continuing operations of Dravo Corporation, which are principally domestic in nature, function in one segment, a natural resources business, involved in the production, processing and supply of construction materials, primarily aggregates, as well as lime for environmental, chemical and metallurgical applications. 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 1993 Annual Report to Shareholders which accompanies this report:
Caption in Annual Report Page No. ------------------------ -------- Results of Operations 8 - 10 Note 15: Research and Development 29 Employees at Year-End 31
-6- ITEM 2. PROPERTIES - ------------------- The following is a listing of principal offices, plants and mines used in operations:
Owned or Use Location Leased --- -------- ------ Executive and general Mobile, Alabama Leased offices Pittsburgh, Pennsylvania Leased Production facilities: Limestone Auburn, Alabama Owned/Leased Cherokee, Alabama Leased Maylene, Alabama Owned/Leased Grand Bahamas, B.I. Leased Perry, Florida Owned/Leased Cave In Rock, Illinois Leased Smithland, Kentucky Owned/Leased Lynchburg, Ohio Owned Lime Saginaw, Alabama Owned Butler, Kentucky Owned Maysville, Kentucky Owned Sand and gravel Montgomery, Alabama and environs Owned/Leased Chattahoochee, Florida Owned/Leased Cincinnati, Ohio and environs Owned/Leased Pittsburgh, Pennsylvania and environs Owned/Leased Parkersburg, West Virginia and environs Owned/Leased Slag Mt. Pleasant, Tennessee Leased Aggregate distribution sites Mobile, Alabama Owned/Leased Jacksonville, Florida Leased Pensacola, Florida Owned Tampa, Florida Leased Brunswick, Georgia Leased Savannah, Georgia Leased Baton Rouge, Louisiana Leased Calumet, Louisiana Leased Convent, Louisiana Leased Hahnville, Louisiana Leased Harvey, Louisiana Leased Houma, Louisiana Owned/Leased Westlake, Louisiana Leased Bellaire, Ohio Leased Cincinnati, Ohio Leased Charleroi, Pennsylvania Owned McKeesport, Pennsylvania Leased
-7- ITEM 2. PROPERTIES (CONTINUED) - ------------------------------
Owned or Use Location Leased --- -------- ------ Aggregate distribution sites (continued) Neville Island, Pennsylvania Owned Charleston, West Virginia Owned Merrill, West Virginia Owned New Martinsville, West Virginia Owned Parkersburg, West Virginia Owned/Leased Ravenswood, West Virginia Leased St. Mary's, West Virginia Owned Lime distribution sites Ft. Lauderdale, Florida Leased Jacksonville, Florida Leased Sanford, Florida Leased Tampa, Florida Owned Brunswick, Georgia Owned/Leased Savannah, Georgia Leased Baton Rouge, Louisiana Owned Porterfield, Ohio Leased Aliquippa, Pennsylvania Owned Butler, Pennsylvania Leased
Offices and plants associated with businesses treated herein as discontinued operations have been excluded from this presentation. Mineral reserves include sand, gravel and limestone. The following table shows a summary of the company's reserves at December 31, 1993 and tonnage produced in 1993.
(Tons in millions) Recoverable 1993 Reserves Production ----------- ---------- Underground Mines: Owned 496.9 4.5 Quarries and Other: Owned 99.1 5.5 Leased and Licensed 525.2 12.8 ------- ---- 1,121.2 22.8 ======= ====
In addition to tonnage produced, the company purchased approximately 900,000 tons of aggregate material under various agreements. 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 - 6 of this Form 10-K. -8- ITEM 3. LEGAL PROCEEDINGS - -------------------------- The company filed an action in 1981 to collect on a promissory note issued by Meladuras Portuguesa, C. A. (Melaport) and its principal, Alberto Caldera (Caldera). In 1985, Melaport and Caldera filed a counterclaim for damages alleging the company breached a contract between Melaport and the company relating to engineering and procurement services rendered between 1973 and 1978 for a sugar cane processing facility. The Fifth Civil, Mercantile and Traffic Court of First Instance for the Federal District and State of Miranda, Venezuela ruled partially in favor of Melaport's counterclaim. The ruling was upheld by the Seventh Court of Appeals in Civil, Mercantile and Traffic Matters for the Judicial Circuit of the Federal District and State of Miranda on September 25, 1992 and by the Supreme Court of Justice of Venezuela on July 8, 1993. The lower courts' ruling does not specify damages to be paid but identifies the following categories of damages to which Caldera and Melaport are entitled: (1) the losses suffered by Melaport from the time it commenced operations in 1974 to 1978; (2) the value of certain equipment and other assets which had been pledged by Melaport to secure borrowings in connection with the project; and (3) the value of approximately 540 acres of land which a corporation controlled by Caldera had mortgaged to secure the borrowing. The amount of damages in these three categories is to be established by an appraisal process conducted by the trial court; damages are to be adjusted for inflation since the counterclaim was filed in 1985 and for interest at 12 percent per year. The company is preparing to vigorously pursue the appraisal proceedings. While opposing counsel has asserted that the damages are in excess of $35 million, the company at this time cannot predict the results of the appraisal proceedings. The company has no assets in Venezuela and will challenge the enforcement in the United States if judgment is finally issued by the Venezuelan Courts. On November 2, 1993, the company filed suit against Melaport and Caldera in the United States District Court for the Western District of Pennsylvania, seeking an injunction and a declaratory judgment with respect to the proceedings in Venezuela. The company is requesting a determination that any judgment in the Venezuelan proceedings is not enforceable against the company and is also seeking indemnification for all costs, expenses, losses and damages incurred and which may be incurred by the company in the Venezuelan proceedings and the costs and expenses of the United States District Court action. On February 25, 1994, Melaport and Caldera filed a motion asking the Court to dismiss the suit based on the lack of personal jurisdiction over the defendants and based on the doctrines of forum non conveniens, res judicata and judicial estoppel. It also asked the Court to dismiss, as premature, the company's demand for injunctive and declaratory relief. The company intends to vigorously pursue this action. If the ruling of the Venezuelan Courts is successfully enforced against the company in the United States, the liability would be material to the company. The company has been notified by the U. S. Environmental Protection Agency (EPA) that the EPA considers the company as a potentially responsible party (PRP) for soil and groundwater contamination at three subsites within the Hastings Ground Water Contamination Site, Hastings, Nebraska. With respect to the Colorado Avenue subsite, in the vicinity of a fabrication facility formerly operated by the company, the EPA has issued an administrative order dated September 28, 1990, to the company and one other PRP to remedy soil contamination. The EPA has also issued a unilateral administrative order, effective March 28, 1993, directing the company and the other PRP to conduct the interim groundwater remediation required by EPA's record of decision. The company has been complying with these orders while reserving its right to seek reimbursement from the United States for its -9- ITEM 3. LEGAL PROCEEDINGS (CONTINUED) - -------------------------------------- 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 EPA. A contribution claim related to this subsite was filed by the company in the Nebraska District Court against two other parties who are named PRPs, Burlington Northern Railroad and the Zuber Company, but were not served with the EPA's orders. After the company filed its suit, the EPA, over the company's objection, entered into a de minimis settlement agreement with these two PRPs providing for, among other things, contribution protection in return for access to their contaminated property. EPA based its decision on the lack of any evidence indicating these PRPs contributed to contamination at the site, but provided for reconsideration of its decision if such evidence was uncovered. Subsequently, the District Court granted motions for summary judgment filed by these two PRPs based on the contribution protection provisions in their de minimis settlements with the EPA, and the PRPs withdrew their counterclaims. The Eighth Circuit Court of Appeals affirmed this decision on January 12, 1994. The company has also notified the EPA and each PRP of its intent to challenge the decision by the EPA to issue the de minimis order without receiving reimbursement for a share of the response and remediation costs but has not yet filed suit. The company, along with a number of others, is considered a PRP with respect to subsites at the municipally-owned North and South Landfills. The North Landfill closed before the company commenced operations but a predecessor may have used this landfill to dispose of hazardous materials. On December 31, 1991 the EPA issued a formal demand to the company and other PRPs for reimbursement of costs the EPA has incurred at this subsite and has also solicited an offer to conduct or finance remedial work at this subsite for both soil and groundwater contamination. The company has rejected the EPA's demand to reimburse the EPA for its costs and decided not to submit the offer requested. No PRP at this subsite has agreed to pay the EPA's response costs. As a result, statutory interest is being added to the EPA's response costs. Other PRPs, including the local municipality, have agreed to perform the remedial investigation and to design soil and groundwater remediation remedies at this subsite, but no party has agreed to conduct the remediation. Only minimal investigation has been conducted at the South Landfill, and it is not evident that remedial work is warranted. In January, 1994 the EPA sent a specific notice to the company that the EPA considered it and three other parties PRPs at this subsite. The letter invited the company and the other PRPs to make an offer to conduct a remedial investigation and the feasibility study (RI/FS) of this subsite and stated that the EPA was in the process of preparing a workplan for the RI/FS. In October of 1990, the company notified its primary and excess general liability insurance carriers of the claims by the EPA at the Colorado Avenue and North Landfill subsites. Although one primary carrier agreed to pay for a part of the company's defense, it has not done so and has refused to pay for expenses the company has already incurred. The company's other primary carrier has declined coverage altogether. On August 10, 1992, the company filed suit in the Alabama District Court against The Hartford Insurance Company and Liberty Mutual Insurance Company 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). This complaint is limited to the EPA's claims at the Colorado Avenue subsite. The suit has been -10- ITEM 3. LEGAL PROCEEDINGS (CONTINUED) - -------------------------------------- amended to include as a defendant Bituminous Casualty Corporation the excess liability carrier of the company's predecessor at the site. An investigation of the coverage provided by the primary carrier of the company's predecessor is also underway. An award of punitive damages is being sought against Hartford and Liberty Mutual for their bad faith in failing to investigate the company's claim and/or denying the company's claim. The case is proceeding in accordance with a case management order issued by the District Court Magistrate assigned to handle pretrial matters. In February of 1994, the company notified its primary and excess insurers of EPA's specific notice that it considered the company a PRP at the South Landfill Subsite, inviting the company to make an offer to conduct an RI/FS at the site, and notifying the company that EPA was in the process of preparing a workplan for the RI/FS. The company has joined with the other PRPs in recommending the use of regional institutional controls for remediation of groundwater at all of the Hastings Ground Water Contamination Subsites. A dispute between the company and the Southeast Resource Recovery Facility (SERRF) in Long Beach, California over a contract to design, construct and demonstrate a resource recovery facility has given rise to two lawsuits. On October 17, 1989, the company instituted an action against the SERRF Authority and the City of Long Beach seeking recovery of escrow funds and reimbursement for change orders, extra work, delays and other increased costs. On October 19, 1989, the SERRF Authority and the City of Long Beach filed suit against the company and its surety, The Insurance Company of North America, seeking among other things, damages for breach of contract. Both lawsuits are now pending in the U.S. District Court for the Central District of California. On February 25, 1994, the principal parties to these lawsuits signed a Memorandum of Intent containing the terms of settlement to be entered into among the parties. The settlement is subject to the approval of the U. S. District Court. On February 21, 1990, the company filed suit against Continental Energy Associates (CEA), the owner of a cogeneration facility in Hazleton, Pennsylvania, Continental Cogeneration Corporation (CCC), the owner's general partner, and Swiss Bank Corporation, the project's lender. The company claims damages for breach of contract and unjust enrichment arising out of the termination of the company's contract to construct, as part of the facility, a coal gasification plant. On February 23, 1990, CEA and CCC filed suit against the company which as amended seeks damages for breach of contract, negligent misrepresentation, fraud and tortious interference with the contract of surety. The lawsuits have been consolidated in the Court of Common Pleas of Luzerne County, Pennsylvania. Other 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 21 through 23 of the 1993 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, 1993. -11- 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 1993 Annual Report to Shareholders which accompanies this report:
Caption in Annual Report Page No. - ------------------------ -------- Common Stock Market Price 11 Shareholders at year-end 31 Dividends 10, 31
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, 1993 issued preference and common shares were 232,386 and 14,967,824, respectively. The Board of Directors has by resolutions established four series of preference stock: $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 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. 32,386 shares of Series B Preference Stock and 200,000 shares of Series D Preference Stock are presently 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 resolutions 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 stock ranking after -12- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER - ------------------------------------------------------------------------- MATTERS (CONTINUED) ------- Dividend Rights (continued) 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 page 20 of the 1993 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 after payment of all liabilities, -13- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER - ------------------------------------------------------------------------- MATTERS (CONTINUED) ------- Liquidation Rights (continued) 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 September 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. -14- 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. -15- 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 percent or less of the outstanding -16- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER - ------------------------------------------------------------------------ MATTERS (CONTINUED) ------- Rights to Purchase Series C Preference Stock (continued) 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. 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. 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. -17- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER - ------------------------------------------------------------------------- MATTERS (CONTINUED) ------- Other Information (continued) 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 31 of the 1993 Annual Report to Shareholders which accompanies this report. Dravo has declared no common stock dividends in the five-year period ending December 31, 1993. 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 8 through 11 of the 1993 Annual Report to Shareholders which accompanies this report, to the information set forth under the caption Note 2: "Discontinued Operations" on pages 18 and 19, Note 7: "Commitments" on page 21, Note 8: "Contingent Liabilities" on pages 21 through 23 and Note 13: "Income Taxes" on pages 26 through 28 in the Notes to Consolidated Financial Statements of the Annual Report to Shareholders, and to Item 3 - "Legal Proceedings" on pages 9 through 11 of this Form 10-K. 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 12 through 29, and the Independent Auditors' Report set forth on page 30 of the 1993 Annual Report to Shareholders which accompanies this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------------------------------------------------------------------------ FINANCIAL DISCLOSURE -------------------- Not applicable. -18- 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 28, 1994. The following information relates to Executive Officers of Dravo Corporation who are not Directors. Carl A. Gilbert, Age 52, Senior Vice President since October, 1988 and President, Dravo Lime Company since February, 1983. Ernest F. Ladd III, Age 53, Executive Vice President, Finance and Administration since December, 1989, Vice President, Finance, Treasurer and Controller from June, 1988 to December, 1989; prior thereto Executive Vice President, Dravo Natural Resources Company. John R. Major, age 49, Vice President, Administration since January, 1989; Vice President, Employee Relations from January, 1988 to January, 1989. James J. Puhala, Age 51, Vice President, General Counsel and Secretary since September, 1987. H. Donovan Ross, Age 53, Senior Vice President since October, 1988 and President, Dravo Basic Materials Company since July, 1984. Albert H. Tenhundfeld, Jr., Age 46, Vice President, Finance and Treasurer since December, 1989; prior thereto Vice President, Finance and Treasurer, Dravo Natural Resources Company. Larry J. Walker, Age 41, Controller since December, 1989; Controller, Dravo Natural Resources Company since July, 1986. -19- 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 28, 1994. 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 28, 1994. 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 28, 1994. -20- 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 1993 Annual Report to Shareholders which accompanies this report.
Description Page No. ----------- -------- Consolidated Balance Sheets at December 31, 1993 and 1992 12, 13 Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991 14 Consolidated Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991 15 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 16, 17 Notes to Consolidated Financial Statements 18 - 29 Independent Auditors' Report 30
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 28 Schedule III. Condensed Financial Information of Registrant 30 - 37 Schedule V. Property, Plant and Equipment 38, 39 Schedule VI. Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment 40, 41 Schedule IX. Short-Term Borrowings 42, 43 Schedule X. Supplementary Income Statement Information 44
-21- 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 October 22, 1992 are incorporated by reference to Exhibit (3) of the September 30, 1992 Form 10-Q of the Registrant. (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. -22- 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) to 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 to Credit and Note and Stock Purchase Agreement dated as of September 21, 1988 by and among Dravo Corporation, Dravo Lime Company, Dravo Basic Materials Company, Inc., The Prudential Insurance Company of America, and Prudential Interfunding Corp., 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. -23- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (CONTINUED) (a) 3. Exhibits (continued) -------- (4) (viii) (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. (ix) (a) Promissory Note dated as of January 4, 1979 between Southern Industries Corporation and The Prudential Insurance Company of America. (b) 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 each of the instruments listed under the exhibit (4)(ix), none of which authorizes 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 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 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 filed herein under separate cover. (xiii) First Amendment, dated March 7, 1994, to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is filed herein under separate cover. (xiv) Four copies of the First Amendment To Revolving Note, (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 filed herein under separate cover. -24- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (CONTINUED) (a) 3. Exhibits (continued) -------- (10) Material Contracts (All of the following 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 Incentive Compensation Plan is incorporated by reference to Exhibit (10)(v) of the December 31, 1990 Form 10-K of the Registrant. (v) 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. (vi) Agreement dated April 23, 1992 between Dravo Corporation and William G. Roth, incorporated by reference to Exhibit 10(x) of the December 31, 1992 Form 10-K of the Registrant. (vii) Agreement dated June 1, 1993 between Dravo Corporation and C. A. Torbert, Jr. is filed herein under separate cover. (viii) Agreement dated June 1, 1993 between Dravo Corporation and Ernest F. Ladd III is filed herein under separate cover. (ix) Agreement dated June 1, 1993 between Dravo Corporation and Carl A. Gilbert is filed herein under separate cover. (x) Agreement dated June 1, 1993 between Dravo Corporation and H. Donovan Ross is filed herein under separate cover. (xi) Agreement dated June 1, 1993 between Dravo Corporation and John R. Major is filed herein under separate cover. -25- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------------------------------------------------------------------------- (CONTINUED) (a) 3. Exhibits (continued) -------- (10) Material Contracts (xii) Dravo Corporation Stock Option Plan of 1994 is incorporated by reference to the Proxy Statement for the Annual Meeting of Shareholders on April 28, 1994. (11) Statement Re Computation of Per Share Earnings filed under this cover. (13) 1993 Annual Report to Shareholders attached to this report under this 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 this cover. (23) Consent of Independent Auditors filed under this cover. (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, 1993. -26- 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 29, 1994 By:/s/ CARL A. TORBERT, JR. ----------------------------------------------------------- Carl A. Torbert, Jr., 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 --------- ----- ---- *WILLIAM G. ROTH Chairman of the Board - ----------------------------- and Director March 29, 1994 William G. Roth /s/ CARL A. TORBERT, JR. President, Chief Executive - ----------------------------- Officer and Director March 29, 1994 Carl A. Torbert, Jr. /s/ ERNEST F. LADD III Executive Vice President, - ----------------------------- Finance & Administration March 29, 1994 Ernest F. Ladd III /s/ LARRY J. WALKER Controller March 29, 1994 - ----------------------------- Larry J. Walker *E. EUGENE BISHOP Director March 29, 1994 - ----------------------------- E. Eugene Bishop *ARTHUR E. BYRNES Director March 29, 1994 - ----------------------------- Arthur E. Byrnes *JOHN E. DOLAN Director March 29, 1994 - ----------------------------- John E. Dolan *JACK EDWARDS Director March 29, 1994 - ----------------------------- Jack Edwards *JAMES C. HUNTINGTON, JR. Director March 29, 1994 - ----------------------------- James C. Huntington, Jr. *WILLARD L. HURLEY Director March 29, 1994 - ----------------------------- Willard L. Hurley *WILLIAM E. KASSLING Director March 29, 1994 - ----------------------------- William E. Kassling *KONRAD M. WEIS Director March 29, 1994 - ----------------------------- Konrad M. Weis *ROBERT C. WILBURN Director March 29, 1994 - ----------------------------- Robert C. Wilburn /s/ ERNEST F. LADD III - ---------------------------------------- *By Ernest F. Ladd III, Attorney-in-fact
-27- INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Dravo Corporation: Under date of February 16, 1994, we reported on the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1993, and 1992, 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, 1993, as contained in the 1993 annual report to shareholders. As discussed in Notes 10 and 13 to the consolidated financial statements, effective January 1, 1993, the company adopted the methods of accounting for postretirement benefits other than pensions and for income taxes as prescribed by Statements of Financial Accounting Standard Nos. 106 and 109, respectively. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in answer to Item 14(a)(2). These financial statement schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Our audit report on the consolidated financial statements of Dravo Corporation and subsidiaries referred to above contains an explanatory paragraph that states that certain lawsuits, claims and assertions have been brought against the company for environmental costs and contract and claim disputes, the outcome of which presently cannot be determined. KPMG PEAT MARWICK New Orleans, Louisiana February 16, 1994 -28- THIS PAGE INTENTIONALLY LEFT BLANK -29- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1993 1992 -------- -------- ASSETS - ------ Current assets: Cash and cash equivalents $ 37 $ 252 Accounts receivable 569 1,260 Notes receivable 1,200 3,792 Current income tax benefit from affiliates 4,483 8,533 Other current assets 316 650 -------- -------- Total current assets 6,605 14,487 Investments in affiliates 193,954 185,435 Notes receivable 2,900 4,500 Deferred income tax benefit from affiliates 24,853 13,975 Net assets of discontinued operations -- 13,924 Other assets 11,450 10,291 Property, plant and equipment 6,832 6,832 Less accumulated depreciation and amortization 6,809 6,796 -------- -------- Net property, plant and equipment 23 36 -------- -------- Total assets $239,785 $242,648 ======== ========
See accompanying notes to financial statements. -30- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1993 1992 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 1,529 $ 4,448 Accrued insurance 1,197 1,482 Accrued retirement contribution 2,101 476 Accrued loss on leases - discontinued operations 2,448 2,779 Net liabilities of discontinued operations 2,006 6,949 Other current liabilities 246 679 -------- -------- Total current liabilities 9,527 16,813 Advances from affiliates 96,041 98,980 Accrued loss on leases - discontinued operations 7,854 9,133 Net liabilities of discontinued operations 14,276 -- Other liabilities 2,548 2,772 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 32,386 and 35,386 shares (entitled in liquidation to $1.8 million and $1.9 million); 32 35 Series D, reported above Common stock, par value $1, authorized 35,000,000 shares; issued 14,967,824 and 14,945,476 shares 14,968 14,945 Other shareholders' equity 74,539 79,970 -------- -------- Total shareholders' equity 89,539 94,950 -------- -------- Total liabilities and shareholders' equity $239,785 $242,648 ======== ========
See accompanying notes to financial statements. -31- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Statements of Operations
Years ended December 31, (In thousands) 1993 1992 1991 --------- --------- --------- General and administrative expenses $ (1,046) $(1,750) $ (491) Interest expense -- -- -- Interest income 49 60 72 -------- ------- -------- Loss from continuing operations before taxes, affiliate earnings and extraordinary item (997) (1,690) (419) Income tax benefit (provision) 27,834 448 (60) -------- ------- -------- Earnings (loss) from continuing operations before affiliate earnings and extraordinary item 26,837 (1,242) (479) Equity in affiliate earnings 8,565 11,560 12,729 -------- ------- -------- Earnings from continuing operations before extraordinary item 35,402 10,318 12,250 Loss from discontinued operations, net of income tax benefit of $0 and $3,568 (35,303) -- (38,537) Extraordinary item -- 1,573 -- -------- ------- -------- Net earnings (loss) before cumulative effect of change in accounting principle 99 11,891 (26,287) Cumulative effect of change in accounting for income taxes (276) -- -- -------- ------- -------- Net earnings (loss) $ (177) $11,891 $(26,287) ======== ======= ========
See accompanying notes to financial statements. -32- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1993 1992 1991 --------- --------- --------- Cash flows from operating activities: - ------------------------------------- Earnings from continuing operations $ 35,402 $ 10,318 $ 12,250 Adjustments to reconcile earnings from continuing operations to net cash provided (used) by continuing operations activities: Depreciation and amortization 13 14 46 Equity in earnings of affiliates (8,565) (11,560) (12,729) Cumulative effect of change in accounting principle for income taxes (276) -- -- Changes in assets and liabilities: Decrease (increase) in accounts receivable 691 (1,245) 259 Decrease in notes receivable -- 450 241 Decrease (increase) in deferred income tax benefits (6,828) 2,631 2,360 Decrease (increase) in other current assets 334 (160) (361) Decrease (increase) in other assets (1,159) 743 (3,579) Increase (decrease) in accounts payable and accrued expenses (2,012) (5,715) 875 Decrease in other liabilities (224) (26) (1,441) -------- -------- -------- Net cash provided (used) by continuing operations activities 17,376 (4,550) (2,079) Loss from discontinued operations (35,303) -- (38,537) Increase (decrease) in net liabilities of discontinued operations 21,647 (15,009) 35,502 Proceeds from repayment of notes receivable from sale of discontinued operations 1,992 2,631 11 -------- -------- -------- Net cash used by discontinued operations activities (11,664) (12,378) (3,024) Extraordinary item -- 1,573 -- -------- -------- -------- Net cash provided (used) by operating activities $ 5,712 $(15,355) $ (5,103)
See accompanying notes to financial statements. -33- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1993 1992 1991 --------- --------- --------- Cash flows from investing activities: - ------------------------------------ Increase (decrease) in advances from subsidiaries $(2,893) $17,900 $(4,920) Reduction to cash collateral account -- -- 20,506 Loan made in connection with lease termination -- -- (8,000) Other, net (581) 39 24 ------- ------- ------- Net cash provided (used) by investing activities (3,474) 17,939 7,610 Cash flows from financing activities: - ------------------------------------ Principal payments under long-term notes -- -- (135) Proceeds from issuance of common stock 101 63 68 Dividends paid (2,554) (2,561) (2,571) ------- ------- ------- Net cash used by financing activities (2,453) (2,498) (2,638) Net increase (decrease) in cash and cash equivalents (215) 86 (131) Cash and cash equivalents at beginning of year 252 166 297 ------- ------- ------- Cash and cash equivalents at end of year $ 37 $ 252 $ 166 ======= ======= =======
See accompanying notes to financial statements. -34- DRAVO CORPORATION (PARENT COMPANY) Schedule III - Condensed Financial Information of Registrant Notes to Financial Statements Notes 1 through 3, 5 through 14 and 16 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 1993, 1992 or 1991. The minimum future rentals under noncancelable operating leases and minimum future rental receipts from subleases to third parties as of December 31, 1993 are indicated in the table below. Of the $19.4 million net minimum payments, $10.1 million has been expensed in connection with discontinued operations.
(In thousands) 1994 $ 10,521 1995 10,659 1996 10,800 1997 10,946 1998 3,695 After 1998 -- -------- Total minimum payments required 46,621 Less: Minimum sublease rental receipts (27,194) -------- Net minimum payments $ 19,427 ========
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 have not been 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. -35- Note 2: Income Taxes (continued) The income tax benefit for the year ended December 31, 1993 is comprised of the following:
(In thousands) Benefit to offset liabilities of subsidiaries $ 2,981 Change in net deferred tax asset 24,853 ------- $27,834 =======
Deferred income taxes of $13.9 million at December 31, 1992 represent deferred benefits offsetting deferred income tax liabilities of the consolidated subsidiaries. Concurrent with the implementation of SFAS 109, this amount was reclassified from deferred income taxes to advances from affiliates. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 are as follows:
(In thousands) Deferred tax assets: Provision for discontinued operations $ 9,039 Accounts receivable, principally due to allowance for doubtful accounts 126 Net operating loss carryforwards 59,313 Investment tax credit carryforwards 1,748 Other 2,087 ------- Total gross deferred tax assets 72,313 Less valuation allowance 44,813 ------- Net deferred tax assets after valuation allowance 27,500 Deferred tax liabilities: Pension accrual 2,647 ------- Total gross deferred tax liabilities 2,647 ------- Net deferred tax asset $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. -36- NOTE 3: DIVIDENDS - ------------------ Cash dividends paid to the registrant for the respective years ended December 31:
(In thousands) 1993 1992 1991 ---- ---- ---- Consolidated affiliates $ -0- $ -0- $ -0- 50 percent or less owned companies accounted for by the equity method 586 612 405
-37- DRAVO CORPORATION AND SUBSIDIARIES Schedule V - Property, Plant and Equipment Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ------------------------------------------------------------------------ Column A Column B Column C - ------------------------------------------------------------------------ Balance at beginning Additions Classification of period at cost - ------------------------------------------------------------------------ Year ended December 31, 1993 - ---------------------------- Land $ 23,525 $ 236 Mine development 7,959 189 Buildings and improvements 25,804 512 Floating equipment (towboats, dredges and barges, etc.) 39,026 884 Machinery and other equipment 208,363 11,825 -------- ------- Totals $304,677 $13,646 ======== ======= Year ended December 31, 1992 - ---------------------------- Land $ 22,690 $ 866 Mine development 7,364 595 Buildings and improvements 27,091 1,490 Floating equipment (towboats, dredges and barges, etc.) 48,745 1,130 Machinery and other equipment 208,309 4,373 -------- ------- Totals $314,199 $ 8,454 ======== ======= Year ended December 31, 1991 - ---------------------------- Land $ 22,873 $ 5 Mine development 7,364 -- Buildings and improvements 19,497 667 Floating equipment (towboats, dredges and barges, etc.) 52,306 4,383 Machinery and other equipment 202,887 14,014 -------- ------- Totals $304,927 $19,660 ======== =======
-38- DRAVO CORPORATION AND SUBSIDIARIES Schedule V - Property, Plant and Equipment (continued) Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ----------------------------------------------------------------------------- Column A Column D Column E Column F - ----------------------------------------------------------------------------- Other changes add (deduct) Balance at Classification Retirements describe end of period - ----------------------------------------------------------------------------- Year ended December 31, 1993 - ---------------------------- Land $ 88 $ -- $ 23,673 Mine development -- -- 8,148 Buildings and improvements 1,467 (2,019)(1) 22,830 Floating equipment (towboats, dredges and barges, etc.) 3,578 640 (1) 36,972 Machinery and other equipment 1,368 1,379 (1) 220,199 ------- ------- -------- Totals $ 6,501 $ -- $311,822 ======= ======= ======== Year ended December 31, 1992 - ---------------------------- Land $ 31 $ -- $ 23,525 Mine development -- -- 7,959 Buildings and improvements 337 (2,440)(3) 25,804 Floating equipment (towboats, dredges and barges, etc.) 11,025 176 (3) 39,026 Machinery and other equipment 6,992 2,673 (3) 208,363 ------- ------- -------- Totals $18,385 $ 409 $304,677 ======= ======= ======== Year ended December 31, 1991 - ---------------------------- Land $ 188 $ -- $ 22,690 Mine development -- -- 7,364 Buildings and improvements 667 3,371 (1) 27,091 Floating equipment (towboats, dredges and barges, etc.) 4,383 71 (1) 48,745 Machinery and other equipment 4,748 (3,844)(1),(2) 208,309 ------- -------- -------- Total $ 9,986 $ (402) $314,199 ======= ======== ========
(1) Transfers between accounts. (2) $402 represents the establishment of a shell dredging equipment reserve. (3) $402 represents the write-off of shell dredging equipment against the reserve. The remaining $7 is an adjustment of asset value. -39- DRAVO CORPORATION AND SUBSIDIARIES Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ------------------------------------------------------------------- Column A Column B Column C - ------------------------------------------------------------------- Balance at Additions charged beginning to costs Classification of period and expenses - ------------------------------------------------------------------- Year ended December 31, 1993 - ---------------------------- Land $ 6,182 $ 422 Mine development 5,427 448 Buildings and improvements 16,160 1,034 Floating equipment (towboats, dredges and barges, etc.) 32,616 1,599 Machinery and other equipment 129,428 14,482 -------- ------- Totals $189,183 $17,985 ======== ======= Year ended December 31, 1992 - ---------------------------- Land $ 5,722 $ 460 Mine development 5,006 421 Buildings and improvements 16,272 1,023 Floating equipment (towboats, dredges and barges, etc.) 38,406 1,893 Machinery and other equipment 120,282 14,798 -------- ------- Totals $185,688 $18,595 ======== ======= Year ended December 31, 1991 - ---------------------------- Land $ 5,187 $ 542 Mine development 4,534 472 Buildings and improvements 14,482 815 Floating equipment (towboats, dredges and barges, etc.) 40,373 2,061 Machinery and other equipment 112,412 13,824 -------- ------- Totals $176,988 $17,714 ======== =======
-40- DRAVO CORPORATION AND SUBSIDIARIES Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment (continued) Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ---------------------------------------------------------------------------- Column A Column D Column E Column F - ---------------------------------------------------------------------------- Other changes add (deduct) Balance at Classification Retirements describe end of period - ---------------------------------------------------------------------------- Year ended December 31, 1993 - ---------------------------- Land $ -- $ -- $ 6,604 Mine development -- -- 5,875 Buildings and improvements 1,420 (399)(1) 15,375 Floating equipment (towboats, dredges and barges, etc.) 3,219 560 (1) 31,556 Machinery and other equipment 1,305 (161)(1) 142,444 ------- ------- -------- Totals $ 5,944 $ -- $201,854 ======= ======= ======== Year ended December 31, 1992 --------------------------- Land $ -- $ -- $ 6,182 Mine development -- -- 5,427 Buildings and improvements 307 (828)(2) 16,160 Floating equipment (towboats, dredges and barges, etc.) 7,761 78 (2) 32,616 Machinery and other equipment 6,405 753 (2) 129,428 ------- ------- -------- Totals $14,473 $ 3 $189,813 ======= ======= ======== Year ended December 31, 1991 - ---------------------------- Land $ 7 $ -- $ 5,722 Mine development -- -- 5,006 Buildings and improvements 620 1,595 (1) 16,272 Floating equipment (towboats, dredges and barges, etc.) 4,028 -- 38,406 Machinery and other equipment 4,359 (1,595)(1) 120,282 ------- ------- -------- Total $ 9,014 $ -- $185,688 ======= ======= ========
(1) Transfers between accounts. (2) $3 is an adjustment of asset value. -41- DRAVO CORPORATION AND SUBSIDIARIES Schedule IX - Short-term Borrowings Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ------------------------------------------------------------------- Column A Column B Column C - ------------------------------------------------------------------- Category of Weighted average aggregate Balance interest rate short-term at end at end of borrowings of period period - ------------------------------------------------------------------- Year ended December 31, 1993 - ---------------------------- Payable to banks and other financial institutions $ -- -- Year ended December 31, 1992 - ---------------------------- Payable to banks and other financial institutions $ -- -- Year ended December 31, 1991 - ---------------------------- Payable to banks and other financial institutions $ -- --
-42- DRAVO CORPORATION AND SUBSIDIARIES Schedule IX - Short-term Borrowings (continued) Years Ended December 31, 1993, 1992, and 1991
(In thousands) - ------------------------------------------------------------------------------- Column A Column D Column E Column F - ------------------------------------------------------------------------------- Category of Maximum amount Average amount Weighted average aggregate outstanding outstanding interest rate short-term during the during the during the borrowings period period period - ------------------------------------------------------------------------------- Year ended December 31, 1993 - ---------------------------- Payable to banks and other financial institutions $ -- $ -- -- Payable to banks and other financial institutions $ -- $ -- -- Payable to banks and other financial institutions $55,000 $49,840 (1) 8.57% (2)
(1) Calculated by dividing the aggregate short-term borrowings by total number of days in the year. (2) Calculated by dividing the average aggregate short-term borrowings into the related interest expense for the year. -43- DRAVO CORPORATION AND SUBSIDIARIES Schedule X - Supplementary Income Statement Information Years ended December 31, 1993, 1992 and 1991
(In thousands) - -------------------------------------------------------------------- Column A Column B - -------------------------------------------------------------------- Charged to costs and expenses Item 1993 1992 1991 - -------------------------------------------------------------------- 1. Maintenance and repairs $34,583 $35,266 $39,242 2. Depreciation and amortization of intangible assets, preoperating costs and similar deferral (1) -- -- -- 3. Taxes (other than payroll and income) 4,201 3,880 3,949 4. Royalties 2,480 2,585 4,219 5. Advertising costs (1) -- -- --
(1) Does not exceed 1% of consolidated revenues in 1993, 1992 or 1991. -44- EXHIBIT INDEX
Exhibit Page No. ------- -------- 4. Instruments Defining the Rights of Security Holders, Including Indentures (xii) Second Amendment, dated March 7, 1994, to the 1-3 Override Agreement dated January 21, 1992. (xiii) First Amendment, dated March 7, 1994, to the 4-9 Amended and Restated Revolving Credit Agreement dated January 21, 1992. (xiv) Four copies of the First Amendment To Revolving 10-17 Note (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. 10. Material Contracts (vii) Agreement dated June 1, 1993 between Dravo Corporation 1-15 and C. A. Torbert, Jr. (viii) Agreement dated June 1, 1993 between Dravo Corporation 16-30 and Ernest F. Ladd III. (ix) Agreement dated June 1, 1993 between Dravo Corporation 31-45 and Carl A. Gilbert. (x) Agreement dated June 1, 1993 between Dravo Corporation 46-60 and H. Donovan Ross. (xi) Agreement dated June 1, 1993 between Dravo Corporation 61-75 and John R. Major. 11. Statement RE Computation of Per Share Earnings 1, 2 13. 1993 Annual Report 8-33 21. Subsidiaries of the Registrant 1 23. Consent of Experts and Counsel 1 24. Powers of Attorney 1-12
45 EX-4 2 DEFINING RIGHTS EXHIBIT 4 SECOND AMENDMENT TO OVERRIDE AGREEMENT THIS SECOND AMENDMENT TO OVERRIDE AGREEMENT (the "Second Amendment") dated as of the 7th day of March, 1994, by and between FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB") CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders" and each a "Lender"), 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 hereafter collectively referred to as the "Companies"). W I T N E S S E T H: WHEREAS, Lenders, Dravo and Companies entered into that certain Override Agreement, dated as of January 21, 1992; and WHEREAS, said Override Agreement has been heretofore amended by that certain First Amendment to Override Agreement, dated March 10, 1993; and WHEREAS, the said Override Agreement, as amended by the said First Amendment to Override Agreement, shall be hereinafter referred to as the "Override Agreement"; and WHEREAS, Lenders, Dravo and Companies desire to amend the Override Agreement by modifying the terms of a covenant applicable to Dravo as set forth hereinbelow; NOW, THEREFORE, in consideration of the premises and by mutual consent, Lenders, Dravo and Companies agree to amend the Override Agreement as follows: 1. Clause (ii) of Section 4.02 (b) of the Override Agreement is deleted in its entirety and the following is substituted in place thereof: "(ii) Dravo shall cause the Discontinued Operations Fixed Charge Coverage Ratio of Dravo and its Subsidiaries as at the end of each of Dravo's fiscal quarters to equal or exceed the following values for the fiscal quarter ending during the following periods:
Minimum Discontinued Operations Relevant Period Fixed Charge Coverage Ratio - --------------- ------------------------------- Closing Date through and including December 31, 1994 1.30 January 1, 1995 and thereafter 2.00"
-1- 2. Except as modified pursuant hereto, the Override Agreement is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between the terms of the Second Amendment and the Override Agreement as in existence immediately prior to the effectiveness hereof, the terms of this Second Amendment shall control. 3. The parties to this Second Amendment expressly agree that the laws of the State of New York shall govern the validity, construction, interpretation and effect of this Second Amendment, without reference to its principles of conflicts of laws. 4. This Second Amendment may be executed in duplicate counterparts, each of which shall constitute an original for all purposes, and it shall not be necessary in making proof of this Second Amendment to produce or account for more than one such counterpart executed by each party. IN WITNESS WHEREOF, the parties have hereunto caused their names to be subscribed by their respective officers thereunto duly authorized this the day and date first hereinabove mentioned: FIRST ALABAMA BANK By: FRED W. TAUL --------------------------------- Name: Fred W. Taul Title: Executive Vice President PNC BANK, NATIONAL ASSOCIATION By: RICHARD D. RODGERS --------------------------------- Name: Richard D. Rodgers Title: Vice President CONTINENTAL BANK N.A. By: LYNN W. STETSON --------------------------------- Name: Lynn W. Stetson Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: CATHERINE A. CATES --------------------------------- Name: Catherine A. Cates Title: Vice President -2- DRAVO CORPORATION By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO LIME COMPANY By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary -3- FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ("First Amendment"), dated as of the 7th day of March, 1994, by and between DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic herein collectively referred to as "Borrowers" and each individually as a "Borrower"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB"), CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders", and each individually as a "Lender"), and FIRST ALABAMA BANK, as agent for the Lenders (in that capacity, the "Agent"). W I T N E S S E T H: WHEREAS, Borrowers, Lenders and Agent entered into that certain Amended and Restated Revolving Credit Agreement, dated as of the 21st day of January, 1992 (said agreement being referred to herein as the "Revolving Credit Agreement"); and WHEREAS, Borrowers, Lenders and Agent, being all of the parties to the Revolving Credit Agreement, desire to amend the Revolving Credit Agreement by (i) extending the maturity date thereof from January 22, 1995 to April 30, 1995, (ii) increasing the amount of the Revolving Line of Credit (as defined in the Revolving Credit Agreement) from $59,000,000.00 to $69,000,000.00, (iii) increasing the financing commitment of Continental under the Revolving Line of Credit from $10,000,000.00 to $20,000,000.00 and (iv) modifying related provisions hereinbelow set forth; NOW, THEREFORE, in consideration of the premises and by mutual consent, Borrowers, Lenders and Agent agree to amend the Revolving Credit Agreement as follows: 1. The maturity or expiry date of January 22, 1995, that is set forth in the Revolving Credit Agreement with respect to the Revolving Line of Credit (as defined in the Revolving Credit Agreement), the Letter of Credit facility set forth in Section 1.3 of the Revolving Credit Agreement, and the FAB Special Letter of Credit Facility set forth in Section 1.4 of the Revolving Credit Agreement is hereby extended to April 30, 1995. All references to the maturity or expiry date of January 22, 1995, in the Revolving Credit Agreement shall be deemed and each such reference is hereby amended to mean April 30, 1995. -4- 2. Effective as of the date hereof, the maximum amount of the Revolving Line of Credit (as defined in the Revolving Credit Agreement) set forth in the Revolving Credit Agreement is increased from $59,000,000.00 to $69,000,000.00, and the maximum financing commitment of Continental thereunder is increased from $10,000,000.00 to $20,000,000.00. 3. The first sentence of Section 1.6 of the Revolving Credit Agreement is deleted in its entirety and the following is substituted in place thereof: "Borrowers agree to pay to Lenders on a basis proportionate with such respective Lender's Revolving Line of Credit commitment hereunder non- usage fees (the "Non-Usage Fees") in an aggregate amount equal to one- half of one percent (1/2 of 1%) per annum on the unutilized portion of the $69,000,000.00 Revolving Line of Credit payable quarterly in arrears on the fifth business day following each calendar quarter during the term of this Agreement." 4. The first sentence of Section 9.1(a) of the Revolving Line of Credit is deleted in its entirety and the following is substituted in place thereof: "Lenders agree as between themselves that upon receipt of a request for an advance hereunder by Borrowers (or either of them), and so long as there shall exist no Event of Default or Default, FAB will advance 31.88% of such request, PNB will advance 24.64% of such request, Continental will advance 28.99% of such request, and Prudential will advance 14.49% of such request; provided, however, in no event shall the aggregate principal amount of the Revolving Line of Credit loans made hereunder by Lenders exceed $69,000,000.00." 5. Schedule I to the Revolving Credit Agreement is deleted in its entirety and the Schedule I attached hereto and made a part hereof is substituted in place thereof. 6. Schedule II to the Revolving Credit Agreement is deleted in its entirety and the Schedule II attached hereto and made a part hereof is substituted in place thereof. 7. The effectiveness of the amendments contained herein shall be subject to the satisfaction in the opinion of Lenders of Borrowers delivering to each respective Lender an amendment of the Borrowers' Revolving Notes (as defined in the Revolving Credit Agreement), duly executed and delivered by each Borrower, extending the maturity or expiry dates thereof as hereinabove set forth and, in the case of Continental, increasing the principal sum thereof from $10,000,000.00 to $20,000,000.00. -5- 8. Except as modified pursuant hereto, the Revolving Credit Agreement is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between the terms of the First Amendment and the Revolving Credit Agreement as in existence immediately prior to the effectiveness hereof, the terms of this First Amendment shall control. 9. The parties to this First Amendment expressly agree that the laws of the State of New York shall govern the validity, construction, interpretation and effect of this First Amendment, without reference to its principles of conflicts of laws. 10. This First Amendment may be executed in duplicate counterparts, each of which shall constitute an original for all purposes, and it shall not be necessary in making proof of this First Amendment to produce or account for more than one such counterpart executed by each party. 11. On the date hereof and in respect of the matters hereinabove set forth, Borrowers agree to pay to Lenders a credit fee of $200,000.00 ($50,000.00 to each Lender). The foregoing credit fee shall be nonrefundable, and shall further offset credit fees that will be owed by Borrowers with respect to the extension until at least January 22, 1996, that is presently under discussion and review, of the maturity or expiry date hereinabove extended to April 30, 1995. IN WITNESS WHEREOF, the parties have hereunto caused their names to be subscribed by their respective officers thereunto duly authorized this the day and date first hereinabove mentioned. FIRST ALABAMA BANK, Individually and as Agent for the Lenders under the Amended and Restated Revolving Credit Agreement By: FRED W. TAUL --------------------------------------- Name: Fred W. Taul Title: Executive Vice President PNC BANK, NATIONAL ASSOCIATION By: RICHARD D. RODGERS --------------------------------------- Name: Richard D. Rodgers Title: Vice President -6- CONTINENTAL BANK N. A. By: LYNN W. STETSON --------------------------------------- Name: Lynn W. Stetson Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: CATHERINE A. CATES --------------------------------------- Name: Catherine A. Cates Title: Vice President DRAVO LIME COMPANY By: ERNEST F. LADD III --------------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - --------------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III --------------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - --------------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary -7- SCHEDULE I SCHEDULE I TO REVOLVING CREDIT AGREEMENT Financing Commitments - --------------------- (Expressed in Millions) FIRST ALABAMA BANK - Revolving Line of Credit and Letters of Credit Facilities Combined $22.0 PNC BANK, N.A. - Revolving Line of Credit and Letters of Credit Facilities Combined 17.0 CONTINENTAL BANK N.A. - Revolving Line of Credit and Letters of Credit Facilities Combined 20.0 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA - Revolving Line of Credit and Letters of Credit Facilities Combined 10.0 ----- TOTAL $69.0 =====
-8- SCHEDULE II SCHEDULE II TO REVOLVING CREDIT AGREEMENT Maximum Stated Amount of Letters of Credit To Be Issued (or Cause To Be Issued) by Lenders -----------------------------------------------
Stated Amount Lender's Percentage ------------- ------------------- FIRST ALABAMA BANK $3,921,240.00 31.88% PNC BANK, N.A. $3,030,720.00 24.64% CONTINENTAL BANK N.A. $3,565,770.00 28.99% THE PRUDENTIAL INSURANCE COMPANY OF AMERICA $1,782,270.00 14.49% ------ TOTAL 100.00% ======
-9- FIRST AMENDMENT TO REVOLVING NOTE WHEREAS, DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic herein collectively referred to as "Borrowers" and each individually as a "Borrower"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB"), CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders" and each individually as a "Lender"), and FIRST ALABAMA BANK, as agent for the Lenders (in that capacity, the "Agent") entered into that certain Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992 (said agreement being herein referred to as the "Revolving Credit Agreement"); and WHEREAS, pursuant to the foregoing Revolving Credit Agreement, and to evidence certain indebtedness thereunder, Borrowers executed and delivered to FAB a Revolving Note (the "Revolving Note") dated January 22, 1992, payable to the order of FAB in the principal amount of $22,000,000.00; and WHEREAS, Borrowers, Lenders and Agent have entered into that certain First Amendment to Amended and Restated Revolving Credit Agreement, of even date herewith (the "First Amendment to Revolving Credit Agreement"), that among other things extends the maturity or expiry date of the Revolving Line of Credit (as defined in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement) from January 22, 1995 to April 30, 1995; and WHEREAS, Borrowers and FAB herein agree to modify the terms of the Revolving Note by extending the maturity or expiry date therein contained from January 21, 1995 to April 30, 1995; NOW, THEREFORE, by mutual consent of the parties hereto, the Revolving Note is hereby amended as follows: 1. The maturity or expiry date of January 21, 1995, that is set forth in the Revolving Note is hereby extended to April 30, 1995. All references to the maturity or expiry date of January 21, 1995, in the Revolving Note shall be deemed and each such reference is hereby amended to mean April 30, 1995. 2. For the purposes of this First Amendment to Revolving Note, unless otherwise defined herein, all terms used herein, including, but not limited to, those terms used and/or defined in the recitals hereto, shall have the respective meanings assigned to such terms in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement. -10- 3. Except as modified pursuant hereto, the Revolving Note is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between terms of this First Amendment to Revolving Note and the Revolving Note as in existence immediately prior to the effectiveness hereof, the terms of this First Amendment to Revolving Note shall control. 4. This First Amendment to Revolving Note may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument this 7th day of March, 1994. DRAVO LIME COMPANY By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary FIRST ALABAMA BANK By: FRED W. TAUL -------------------------------- Name: Fred W. Taul Title: Executive Vice President -11- FIRST AMENDMENT TO REVOLVING NOTE WHEREAS, DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic herein collectively referred to as "Borrowers" and each individually as a "Borrower"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB"), CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders" and each individually as a "Lender"), and FIRST ALABAMA BANK, as agent for the Lenders (in that capacity, the "Agent") entered into that certain Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992 (said agreement being herein referred to as the "Revolving Credit Agreement"); and WHEREAS, pursuant to the foregoing Revolving Credit Agreement, and to evidence certain indebtedness thereunder, Borrowers executed and delivered to Prudential a Revolving Note (the "Revolving Note") dated January 22, 1992, payable to the order of Prudential in the principal amount of $10,000,000.00; and WHEREAS, Borrowers, Lenders and Agent have entered into that certain First Amendment to Amended and Restated Revolving Credit Agreement, of even date herewith (the "First Amendment to Revolving Credit Agreement"), that among other things extends the maturity or expiry date of the Revolving Line of Credit (as defined in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement) from January 22, 1995 to April 30, 1995; and WHEREAS, Borrowers and Prudential herein agree to modify the terms of the Revolving Note by extending the maturity or expiry date therein contained from January 21, 1995 to April 30, 1995; NOW, THEREFORE, by mutual consent of the parties hereto, the Revolving Note is hereby amended as follows: 1. The maturity or expiry date of January 21, 1995, that is set forth in the Revolving Note is hereby extended to April 30, 1995. All references to the maturity or expiry date of January 21, 1995, in the Revolving Note shall be deemed and each such reference is hereby amended to mean April 30, 1995. 2. For purposes of this First Amendment to Revolving Note, unless otherwise defined herein, all terms used herein, including but not limited to, those terms used/or defined in the recitals hereto, shall have the respective meanings assigned to such terms in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement. -12- 3. Except as modified pursuant hereto, the Revolving Note is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between terms of this First Amendment to Revolving Note and the Revolving Note as in existence immediately prior to the effectiveness hereof, the terms of this First Amendment to Revolving Note shall control. 4. This First Amendment to Revolving Note may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument this 7th day of March, 1994. DRAVO LIME COMPANY By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: CATHERINE A. CATES -------------------------------- Name: Catherine A. Cates Title: Vice President -13- FIRST AMENDMENT TO REVOLVING NOTE WHEREAS, DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic herein collectively referred to as "Borrowers" and each individually as a "Borrower"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB"), CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders" and each individually as a "Lender"), and FIRST ALABAMA BANK, as agent for the Lenders (in that capacity, the "Agent") entered into that certain Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992 (said agreement being herein referred to as the "Revolving Credit Agreement"); and WHEREAS, pursuant to the foregoing Revolving Credit Agreement, and to evidence certain indebtedness thereunder, Borrowers executed and delivered to Continental a Revolving Note (the "Revolving Note") dated January 22, 1992, payable to the order of Continental in the principal amount of $10,000,000.00; and WHEREAS, Borrowers, Lenders and Agent have entered into that certain First Amendment to Amended and Restated Revolving Credit Agreement, of even date herewith (the "First Amendment to Revolving Credit Agreement"), that among other things extends the maturity or expiry date of the Revolving Line of Credit (as defined in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement) from January 22, 1995 to April 30, 1995, and further increases the financial commitment of Continental thereunder from $10,000,000.00 to $20,000,000.00; and WHEREAS, Borrowers and Continental herein agree to modify the terms of the Revolving Note by extending the maturity or expiry date therein contained from January 21, 1995 to April 30, 1995, and by increasing the maximum principal amount thereunder from $10,000,000.00 to $20,000,000.00; NOW, THEREFORE, by mutual consent of the parties hereto, the Revolving Note is hereby amended as follows: 1. The maturity or expiry date of January 21, 1995, that is set forth in the Revolving Note is hereby extended to April 30, 1995. All references to the maturity or expiry date of January 21, 1995, in the Revolving Note shall be deemed and each such reference is hereby amended to mean April 30, 1995. 2. The principal amount of the Revolving Note is hereby increased from $10,000,000.00 to $20,000,000.00. 3. For purposes of this First Amendment to Revolving Note, unless otherwise defined herein, all terms used herein, including but not limited to, those terms used/or defined in the recitals hereto, shall have the respective meanings assigned to such terms in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement. -14- 4. Except as modified pursuant hereto, the Revolving Note is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between terms of this First Amendment to Revolving Note and the Revolving Note as in existence immediately prior to the effectiveness hereof, the terms of this First Amendment to Revolving Note shall control. 5. This First Amendment to Revolving Note may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument this 7th day of March, 1994. DRAVO LIME COMPANY By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary CONTINENTAL BANK N.A. By: LYNN W. STETSON -------------------------------- Name: Lynn W. Stetson Title: Vice President -15- FIRST AMENDMENT TO REVOLVING NOTE WHEREAS, DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic herein collectively referred to as "Borrowers" and each individually as a "Borrower"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNB"), CONTINENTAL BANK N.A. ("Continental"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"; FAB, PNB, Continental and Prudential herein collectively referred to as "Lenders" and each individually as a "Lender"), and FIRST ALABAMA BANK, as agent for the Lenders (in that capacity, the "Agent") entered into that certain Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992 (said agreement being herein referred to as the "Revolving Credit Agreement"); and WHEREAS, pursuant to the foregoing Revolving Credit Agreement, and to evidence certain indebtedness thereunder, Borrowers executed and delivered to PNB a Revolving Note (the "Revolving Note") dated January 22, 1992, payable to the order of PNB in the principal amount of $17,000,000.00; and WHEREAS, Borrowers, Lenders and Agent have entered into that certain First Amendment to Amended and Restated Revolving Credit Agreement, of even date herewith (the "First Amendment to Revolving Credit Agreement"), that among other things extends the maturity or expiry date of the Revolving Line of Credit (as defined in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement) from January 22, 1995 to April 30, 1995; and WHEREAS, Borrowers and PNB herein agree to modify the terms of the Revolving Note by extending the maturity or expiry date therein contained from January 21, 1995 to April 30, 1995; NOW, THEREFORE, by mutual consent of the parties hereto, the Revolving Note is hereby amended as follows: 1. The maturity or expiry date of January 21, 1995, that is set forth in the Revolving Note is hereby extended to April 30, 1995. All references to the maturity or expiry date of January 21, 1995, in the Revolving Note shall be deemed and each such reference is hereby amended to mean April 30, 1995. 2. For the purposes of this First Amendment to Revolving Note, unless otherwise defined herein, all terms used herein, including, but not limited to, those terms used and/or defined in the recitals hereto, shall have the respective meanings assigned to such terms in the Revolving Credit Agreement, as amended by the First Amendment to Revolving Credit Agreement. -16- 3. Except as modified pursuant hereto, the Revolving Note is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between terms of this First Amendment to Revolving Note and the Revolving Note as in existence immediately prior to the effectiveness hereof, the terms of this First Amendment to Revolving Note shall control. 4. This First Amendment to Revolving Note may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this instrument this 7th day of March, 1994. DRAVO LIME COMPANY By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III -------------------------------- Name: Ernest F. Ladd III Title: Executive Vice President ATTEST: By: BARBARA D. NELSON - -------------------------------- Name: Barbara D. Nelson Title: Assistant Secretary PNC BANK, NATIONAL ASSOCIATION By: RICHARD D. RODGERS -------------------------------- Name: Richard D. Rodgers Title: Vice President ATTEST: By: LOUIS K. MCLINDEN, JR. - -------------------------------- Name: Louis K. McLinden, Jr. Title: Commercial Banking Officer -17- EX-10 3 MATERIAL CONTRACTS EXHIBIT 10 AGREEMENT This Agreement made as of this 1st day of June, 1993 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and Carl A. Torbert, Jr. 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 -1- 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 -2- (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 -3- 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, the Employee Stock Option Plan of 1988, an 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 -4- 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. -5- 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: -6- (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 -7- 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 -8- 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. -9- 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. -10- (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 -11- (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. -12- (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 -13- 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. -14- (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 JAMES J. PUHALA By JOHN R. MAJOR ------------------------ --------------------------- CARL A. TORBERT, JR. --------------------------- -15- AGREEMENT This Agreement made as of this 1st day of June, 1993 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and Ernest F. Ladd, III, 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 -16- (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 -17- (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 -18- 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, the Employee Stock Option Plan of 1988, an 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; -19- (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 -20- 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 -21- 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 -22- 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 -23- 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 -24- 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 -25- 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 -26- (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. -27- (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 -28- 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. -29- (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 JAMES J. PUHALA By JOHN R. MAJOR ---------------------- ----------------------- ERNEST F. LADD III -------------------------- -30- AGREEMENT This Agreement made as of this 1st day of June, 1993 by and between Dravo Corporation, a Pennsylvania corporation the Corporation") and Carl A. Gilbert, an individual residing in the State of Alabama 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 -31- (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 -32- (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 -33- 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, the Employee Stock Option Plan of 1988, an 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; -34- (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 -35- 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 -36- 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 -37- 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 -38- (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 -39- 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 -40- 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), -41- 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 -42- 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. -43- 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 -44- 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 JAMES J. PUHALA By JOHN R. MAJOR --------------------- ------------------------ CARL A. GILBERT --------------------------- -45- AGREEMENT This Agreement made as of this 1st day of June, 1993 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and H. Donovan Ross, an individual residing in the State of Louisiana 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 -46- (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 -47- (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 -48- 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, the Employee Stock Option Plan of 1988, an 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; -49- (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 -50- 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 -51- 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 -52- 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 -53- (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 -54- 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 -55- 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), -56- 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 -57- 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. -58- 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 -59- 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 JAMES J. PUHALA By JOHN R. MAJOR ---------------------- ------------------------- H. DONOVAN ROSS ---------------------------- -60- AGREEMENT This Agreement made as of this 1st day of June, 1993 by and between Dravo Corporation, a Pennsylvania corporation (the "Corporation") and John R. Major, an individual residing in the State of Maryland 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 -61- (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 -62- (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 -63- 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, the Employee Stock Option Plan of 1988, an 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; -64- (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 -65- 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 determine 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 -66- 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 -67- 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 -68- (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 -69- 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 -70- 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), -71- 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 -72- 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. -73- 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 -74- 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 A. H. TENHUNDFELD, JR. By JAMES J. PUHALA ---------------------- ------------------------- JOHN R. MAJOR ---------------------------- -75- EX-11 4 EARNINGS STATEMENT EXHIBIT 11 EXHIBIT 11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS - ----------------------------------------------------------
($ in thousands, except per share amounts) Years ended December 31, ------------------------------------------ 1993 1992 1991 -------- ------- -------- Primary - ------- Earnings: Earnings from continuing operations before extraordinary item $ 35,126 $10,318 $ 12,250 Deduct dividends on preferred stock 2,554 2,561 2,571 -------- ------- -------- Earnings from continuing operations applicable to common stock 32,572 7,757 9,679 Loss from discontinued operations (35,303) -- (38,537) Earnings from extraordinary item -- 1,573 -- -------- ------- -------- Net earnings (loss) applicable to common stock $ (2,731) $ 9,330 $(28,858) ======== ======= ======== Shares: Weighted average number of common shares outstanding 14,835 14,820 14,804 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) -- (1) 13 -- (1) -------- ------- -------- Weighted average number of shares outstanding, as adjusted 14,835 14,833 14,804 ======== ======= ======== Primary earnings (loss) per share: Continuing operations $ 2.20 $ 0.52 $ 0.65 Discontinued operations (2.38) -- (2.60) Extraordinary item -- 0.11 -- -------- ------- -------- Net earnings (loss) per share $ (0.18) $ 0.63 $ (1.95) ======== ======= ======== Fully Diluted - ------------- Earnings: Net earnings (loss) $ (177) $11,891 $(26,287) Deduct dividends on preferred stock (2) 2,554 2,561 2,571 -------- ------- -------- Net earnings applicable to common stock $ (2,731) $ 9,330 $(28,858) ======== ======= ======== Shares: Weighted average number of common shares outstanding 14,835 14,820 14,804 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the higher of the ending or average market price for the year) -- (1) 25 -- (1)
-1- EXHIBIT 11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (CONTINUED) - ----------------------------------------------------------
($ in thousands, except per share amounts) ------------------------------------------ Years ended December 31, 1993 1992 1993 -------- ------- -------- Fully Diluted (continued) - ------------------------- Shares (continued): Shares issuable from assumed exercise of convertible preference stock (2) -- -- -- ------- ------- -------- Weighted average number of shares outstanding, as adjusted 14,835 14,845 14,804 ======= ======= ======== Fully diluted earnings (loss) per share: Continuing operations $ 2.20 $ 0.52 $ 0.65 Discontinued operations (2.38) -- (2.60) Extraordinary item -- 0.11 -- ------- ------- -------- Earnings (loss) per share $ (0.18) $ 0.63 $ (1.95) ======= ======= ======== Additional Fully Diluted Computation (3) - ---------------------------------------- Earnings: Net earnings (loss) $ (177) $11,891 $(26,287) ======= ======= ======== Shares: Weighted average number of common shares outstanding 14,835 14,820 14,804 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) 66 25 13 Shares issuable from assumed exercise of convertible preference stock 1,710 1,682 1,243 ------- ------- -------- Weighted average number of shares outstanding, as adjusted 16,611 16,527 16,060 ======= ======= ======== Fully diluted earnings (loss) per share $ (0.01) $ 0.72 $ (1.64) ======= ======= ========
(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 1993, 1992 and 1991. -2- EX-13 5 ANNUAL REPORT EXHIBIT 13 FINANCIAL REVIEW OVERVIEW One of the most significant events in 1993 for Dravo was the booking of a 15- year, 450,000-ton-per-year lime supply contract for American Electric Power's Gavin Station. Shipments under the contract are expected to begin in the second quarter of 1995. This major contract requires a $62 million expansion at the company's Black River lime facility located in northern Kentucky. Also, the company has pending the renewal of several existing contracts which, when finalized, will raise Dravo's utility lime sales backlog to more than $800 million. Price concessions were granted due to increased competition in the Ohio Valley utility lime market; however, the renewal was important to maintain current production cost efficiencies. Dravo Lime Company's earnings declined from the record 1992 levels principally because of temporary operating problems at the Black River and Longview facilities. Dravo Basic Materials, while having a difficult year overall, had its bright spots. The subsidiary's northern region, which includes the Pittsburgh, Parkersburg and Cincinnati areas, had a good year. Demand for construction aggregates in the Cincinnati area was especially strong. In 1993, the company brought on-line a new $5 million limestone quarry and processing facility in Lynchburg, Ohio, to provide low-cost aggregate to the rapidly growing east Cincinnati area. Discontinued operations took a toll on the company's financial results. An additional provision of $35.3 million for discontinued operations was recorded during the fourth quarter. However, management believes the primary reason for the provision, the settlement of a 5-year old multi-million dollar lawsuit on a waste-to-energy plant built for the city of Long Beach, California, is a positive event in that it removes a major uncertainty regarding the company's future financial stability and will save millions of dollars in legal fees. Earnings from continuing operations were $35.1 million, or $2.20 per share. Included in the earnings results was a $24.9 million deferred tax benefit. Loss on discontinued operations was $35.3 million or $2.38 per share. Unlike previous years, there was no extraordinary item reported for the reduction of taxes through the utilization of loss carryforwards in 1993 because of new rules governing accounting for income taxes. In 1992, earnings from continuing operations were $10.3 million, or $.52 per share. An extraordinary credit of $1.6 million, or $.11 per share, resulted from the use of loss carryforwards to offset current tax expense. In 1991, earnings from continuing operations were $12.3 million, or $.65 per share. Charges for discontinued operations, net of $3.6 million resulting from a reduction in tax liability associated with the expense provisions, were $38.5 million, or $2.60 per share. Net losses for the year were $26.2 million, or $1.95 per common share. RESULTS OF OPERATIONS CONTINUING OPERATIONS REVENUE: Revenue of $277.6 million was up $4.6 million over 1992. The increase is attributable to high demand for construction aggregate in the metropolitan Cincinnati area and West Virginia. Competition along the Mississippi River and Gulf Coast continues to be very intense and the company has been unable to increase revenues in these areas. Lime revenue was up due to continued strength in the merchant market and increased utility shipments. In 1992, revenue of $273.0 million was down $22.7 million, or nearly eight percent, from 1991. Factors contributing to the decrease were the exit from the shell business at the end of the third quarter of 1991 and asphaltic concrete business divestiture in early 1992, as well as the effects of reduced construction activity on sales tonnage and product pricing in most construction aggregates markets. Lime revenue was up slightly over 1991, reflecting strong demand in several of the merchant markets served by the company's Black River and Longview plants, and the first full year of production from a new lime kiln at the Longview plant. Although most of our utility lime customers used less lime because of reduced electrical power generation, the impact on revenue was mitigated by the first full year's effects of extraordinarily high levels of power production at the Zimmer Station of The Cincinnati Gas & Electric Company (CG&E). COSTS AND EXPENSES: Gross profit was down $2.4 million from 1992 levels. An unusual number of significant operating problems at Dravo Lime's Black River facility increased production costs during the year. The kilns and equipment at Black River are older and are requiring more maintenance. With the repairs done in 1993 and the efficiency that will come with the new kilns and equipment being installed as part of the $62 million expansion, manufacturing costs at Black River will drop significantly. Operating problems occurred at the Longview facility also, although not to the same extent as Black River, and the company had to occasionally purchase lime from outside sources to fill orders. Gross profit of $51.7 million in 1992 was down $6.0 million, or ten percent, from the previous year on lower revenue. The company closed under-performing aggregate operations located in areas with poor prospects for a short-term recovery. Personnel costs were lower in 1992 due to staff reductions following the realignment of divisions within Dravo Basic Materials. Improved efficiencies resulting from major capital expenditures such as a new lime kiln at Longview; improvements made at a Cincinnati area aggregates plant; and the availability of upgraded rolling stock helped reduce the impact of lower revenue. DRAVO CORPORATION 8 Selling expense increased $344,000 from 1992 to 1993 and $960,000 from 1991 to 1992. The 1993 increase was due primarily to higher personnel and operating costs for the company's research center. The 1992 increase was principally the result of changes in the amount of research and development expense billed to third parties. These research activities involve a variety of lime-related technologies, with particular emphasis on pollution control. Depending on the project, the company may be reimbursed by governmental agencies, public utilities or private groups for all or a portion of project costs. General and administrative expenses were down $856,000 compared to 1992. The expense reduction was partially due to lower interest charges related to the amortization of the company's non-cancelable lease obligation on a downtown Pittsburgh office building. Also, medical insurance costs were lower in 1993 due, in part, to educating employees and retirees on the prudent use of medical benefits. General and administrative expenses were down $2.3 million, or 8 percent, from 1991 to 1992. In addition to personnel reductions made in 1992, the full effect of a mid-year 1991 work force reduction was realized. And because the salary pension plan was actuarially over-funded, the company was able to record net pension income of $567,000 versus an expense in 1991 of $1.2 million. Equity in earnings of joint ventures reports the company's share in three 50- percent owned joint ventures: a shell dredging operation located off the Louisiana coast, a contract phosphate mining operation in Idaho and a small contract coke operation in Wyoming. The shell operation was negatively impacted by a six-month delay in a major highway construction project. The joint venture started shipping shell to the project in December, 1993. The contract phosphate mining operation's profitability varies depending on mining conditions and customer requirements. Other income of $692,000 represents gains on the sale of property in Baton Rouge, Louisiana and excess floating equipment, mainly barges. Other income in 1992 of $1.7 million resulted primarily from the sale of assets in two businesses the company exited in 1992: asphalt production in the Mobile area and the manufacture and sale of Calcilox. A gain was also recorded when the lessee of 34 hopper barges and covers exercised an option to purchase the equipment. Most of the other income of $698,000 reported in 1991 was derived from the sale of a parcel of land in the Cincinnati area. The decline in interest income over the last two years reflects a lower level of funds available for investment and lower interest rates. Interest expense was $9.2 million, or 13 percent, lower in 1993 than last year. The decrease was due to lower average debt outstanding and an interest rate swap agreement entered into in February, 1993 that effectively converted $41.8 million of 11.21 percent fixed rate debt to variable rate debt. Interest expense of $10.5 million in 1992 was $625,000 lower than 1991. The decrease was caused by a combination of a lower average total debt balance outstanding and lower interest rates on the company's prime rate-based line of credit. A benefit for income taxes of $24.9 million was recorded in 1993 under the provisions of Statement of Financial Accounting Standards 109 (SFAS 109), "Accounting for Income Taxes." The company was required to adopt SFAS 109 effective January 1, 1993. The Statement requires that deferred income taxes reflect the tax consequences on future years of temporary 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 (NOL), to the extent that realization of such benefits are more likely than not. At January 1, 1993, the company was in a net deferred tax asset position under SFAS 109, primarily the result of a $161.2 million NOL. At January 1, 1993, the company established a valuation allowance for the full amount of the net deferred tax asset due to uncertainties associated with unresolved issues related to its discontinued operations. In the fourth quarter of 1993, the valuation allowance was reduced, 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 the City of Long Beach SERRF litigation and the ability to quantify, relying upon advice of legal counsel, the maximum exposure of the remaining discontinued operations issues. Second, the company was awarded the AEP Gavin contract to supply 450,000 tons of lime annually for 15 years commencing in 1995. In addition, the company has pending the renewal of several existing lime supply contracts for periods of up to ten years. As a result, management believes revenues and 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. See Note 13, Income Taxes, in the Notes to Consolidated Financial Statements for further details on the determination of the valuation allowance. EFFECTS OF INFLATION: Inflation rates have been low over the past three years and as a result have not had a significant impact on the company's operations. In addition, Dravo Lime's long-term lime supply contracts provide for price increases based on government published indices and increases for specific production expenses, such as labor, fuel and electricity. The company's operations are sensitive to changes in crude oil prices since petroleum products are used for both the production and distribution of its products. DISCONTINUED OPERATIONS Management's assessment of the discontinued operations reserve led to an increase in the expense provision in 1993 of $35.3 million. The provision was primarily to cover the settlement agreement with the City of Long Beach, which included the company giving up its claim to unpaid 9 ANNUAL REPORT 1993 receivables and interest totalling $18 million. The provision also recognizes an increase in the estimated environmental cleanup costs at the company's Hastings, Nebraska, superfund site; write-off of a note receivable due to an unfavorable court ruling; additional legal fees, primarily to protect the company's interests in the Continental Energy Associates and Venezuelan matters discussed in Note 8, Contingent Liabilities; and other discontinued operations expenses. FINANCIAL POSITION AND LIQUIDITY The company's balance sheet reflects recording a deferred tax asset of $24.9 million and a discontinued operations provision of $35.3 million in the fourth quarter of 1993. 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. At year-end 1993, net current liabilities for discontinued operations were estimated to be $4.5 million versus $9.7 million at December 31, 1992. Net long-term liabilities were estimated to be $22.1 million at year-end 1993 compared to net assets of $4.8 million at December 31, 1992. Despite the size of the discontinued operations liabilities, they do not pose a threat to the company's liquidity because cash payments needed to satisfy them will be spread over several years. Working capital of $59.5 million was down $608,000 from 1992. Inventories were down $6.3 million primarily due to an inventory reduction plan implemented by Dravo Basic Materials. Capital expenditures were $13.6 million in 1993. Additions to property, plant and equipment included $2.8 million for a new aggregate quarry and production plant near Cincinnati, routine equipment improvements and rolling stock replacements. The company has on hand and access to sufficient funds to meet its anticipated operating and capital needs. Cash and cash equivalents were $808,000 and $970,000 at yearend 1993 and 1992, respectively. 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 a revolving credit facility agreement. The $59 million revolving credit/letter of credit facility is provided by a consortium of lenders that includes First Alabama Bank, PNC Bank, N.A., Continental Bank, N.A. and The Prudential Insurance Company of America. Interest on the revolver is equal to First Alabama Bank's base lending rate plus 1.25 percent. The credit facility, originally scheduled to expire on January 21, 1995, has been extended to April 30, 1995 as an interim measure; however, simultaneously with the closing of the $62 million lease financing for the Black River expansion, discussed below, the company expects to increase the facility to $64 million and extend the term to January 21, 1996. At December 31, 1993, $36.5 million of revolver debt and $10 million in letters of credit were borrowed against the $59 million debt capacity. In February, 1993, the company entered into an interest rate swap agreement with Continental Bank, N.A. on $41.8 million of 11.21 percent fixed rate long-term notes payable. The swap converts the fixed rate debt to variable rate debt determined by adding 6.57 percent to the three month London Interbank Offered Rate. The swap agreement reduced 1993's interest expense $474,000. The company is currently negotiating the terms of a $62 million leveraged operating lease to be used to finance an expansion project at Dravo Lime's Black River facility. The expansion will increase production capacity by 700,000 tons- per-year, the majority to be used to supply the new AEP Gavin contract. While final documentation has not yet been completed, the basic terms of the lease provide for a 20-year rental schedule with options to renew for an additional 12 years. The company will have a fixed price option to purchase the equipment at the end of 32 years. The financing is expected to close in April, 1994 and have an effective interest rate of approximately 9 percent. Obligations under the company's January, 1992 debt restructuring are secured by a pledge of the stock of Dravo Basic Materials Company and Dravo Lime Company along with their accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River, Three Rivers and Longview plants, excluding a new kiln at Longview completed in 1991, have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company on a consolidated basis, and Dravo Basic Materials and Dravo Lime on a combined basis, to maintain minimum working capital levels; restrict incurrence of debt, liens, and lease obligations; restrict the sale of significant assets; and as to Dravo Basic Materials and Dravo Lime, limit payment of dividends or making of loans to the company. At December 31, 1993, approximately $157.4 million of Dravo Basic Materials and Dravo Lime net assets were restricted as to payment of dividends or loans to the company. These restrictions are not expected to have an adverse impact on the ability of the company to meet its cash obligations. In November, 1992, the Financial Accounting Standards Board (FASB) issued Statement 112, "Employers' Accounting for Postemployment Benefits." See Note 10, Postretirement and Postemployment Benefits, in the Notes to Consolidated Financial Statements for a discussion of the statement and its impact on the company's financial condition. DIVIDENDS The company may not declare common stock dividends until cumulative earnings from continuing operations after September 30, 1991, excluding gains from the sale of capital assets, exceed $40 million or cumulative losses from discontinued operations after September 30, 1991, whichever is higher, and then only to the extent of 50 percent of such earnings. At December 31, 1993, cumulative DRAVO CORPORATION 10 earnings from continuing operations since September 30, 1991 exceeded cumulative discontinued operations losses during the same time period by $1.8 million. No common stock dividends were declared in 1993 nor are any contemplated. Dividends on the $3.0875 cumulative, convertible, exchangeable, Series D Preference Stock were declared quarterly throughout 1993, 1992 and 1991. Quarterly dividends were also declared on the $2.4750 cumulative convertible Series B Preference Stock in each of the last three years. All declared preference dividends have been paid timely. COMMON STOCK MARKET PRICE The principal market on which Dravo's common stock is traded is the New York Stock Exchange. The high and low common stock sales prices for each quarterly period in 1993 and 1992 as reported for New York Stock Exchange composite transactions were:
1993 1992 QUARTER HIGH LOW HIGH LOW - ------- ------ ------ ------ ----- First 10 1/4 8 3/4 10 1/2 7 5/8 Second 11 3/4 8 3/4 10 1/4 7 3/4 Third 12 3/8 9 3/8 8 7/8 6 5/8 Fourth 12 1/2 10 1/8 9 5/8 7 3/8
OUTLOOK CONTINUING OPERATIONS: The long awaited clean air standards for power plant sulfur dioxide emissions enacted by Congress in 1990 become effective January 1, 1995. Dravo will spend nearly $62 million in 1994 increasing the production capacity of its Black River mine and processing plant to provide lime that its customers will need to meet the new standards. In 1993, our lime business faced aggressive price competition for utility lime contracts. While it was important for Dravo to win the new Gavin contract, it was equally important to maintain the customer base already existing from long-term lime supply contracts that were approaching expiration. Those contracts are being renegotiated, all at lower prices that will impact 1994 profit margins. Although Dravo Basic Materials continues to face intense competition in all its markets, aggressive price competition is expected to remain particularly fierce in the Gulf Coast and Mississippi River corridor markets. An improving economy and increased appropriations for highway, bridge and other infrastructure repairs and improvements should provide some support for earnings. In a move designed to complement the traditional road building and construction markets that the company has relied upon for many years, Dravo Basic Materials has identified industrial uses for its aggregates products. The company anticipates seeing results from those efforts, as well as new initiatives, in 1994. For Dravo to achieve its earnings goal in 1994, expenses must be reduced. A company-wide program of consolidation and expense reduction will call upon operating and administrative employees to lower expenses wherever possible. DISCONTINUED OPERATIONS: The company formerly operated a 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 cleanup of soil and groundwater contamination at three subsites in the Hastings area. The company held talks with the EPA in 1992 as to the scope of cleanup required and to determine if the EPA would be willing to accept an amount, to be paid by the company, other PRPs and the company's insurance carriers, over time, that would discharge the company from any further cleanup at the subsites. The company discontinued the discussions with the EPA when its insurance carriers refused coverage responsibility. The company has since brought legal action against its insurance carriers whom it believes had coverage responsibility for the time the company owned the Hastings facility. Two insurance carriers have approached the company concerning a settlement. The company intends to pursue a settlement of this matter which will involve a group of named PRPs and insurance carriers. See Note 2, Discontinued Operations, in the Notes to Consolidated Financial Statements for further discussion of the company's estimate of total cleanup costs and its share of those costs. No progress was made toward settling disputes between the company and Continental Energy Associates (CEA) regarding construction of a coal gasification facility in Hazleton, Pennsylvania. The company is preparing for litigation in this matter. The Venezuelan Supreme Court upheld a lower court ruling in the litigation with Alberto Caldera and Meladuras Portuguesa C.A. (Melaport). Under Venezuelan law, damages are to be established by an appraisal process. The company has filed suit in United States District Court challenging the enforcement of any judgment in the United States which may result from the Venezuelan litigation. See Note 8, Contingent Liabilities, in the Notes to Consolidated Financial Statements for further discussion of these and other discontinued operations activities. Management believes the company's provision for losses on discontinued operations is adequate at this time. However, in establishing the provision and monitoring it, management has estimated the costs of exiting discontinued businesses and pursuing the company's rights through litigation. 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. 11 ANNUAL REPORT 1993 CONSOLIDATED BALANCE SHEETS DRAVO CORPORATION AND SUBSIDIARIES
DECEMBER 31, (IN THOUSANDS) 1993 1992 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 808 $ 970 Accounts receivable, net of allowance for uncollectibles of $897 and $777 44,225 38,815 Notes receivable (Note 14) 3,318 6,718 Inventories (Note 4) 57,536 63,847 Other current assets 2,417 3,138 -------- -------- Total current assets 108,304 113,488 Advances to and equity in joint ventures 4,348 2,193 Notes receivable (Note 14) 6,870 8,130 Net assets of discontinued operations (Notes 2 and 14) -- 13,924 Other assets 17,729 15,924 Deferred income taxes 24,853 -- Property, plant and equipment: Land 23,673 23,525 Mine development 8,148 7,959 Building and improvements 22,830 25,804 Floating equipment 36,972 39,026 Machinery and other equipment 220,199 208,363 -------- -------- 311,822 304,677 Less accumulated depreciation and amortization 201,854 189,813 -------- -------- Net property, plant and equipment 109,968 114,864 -------- -------- Total assets $272,072 $268,523 ======== ========
See accompanying notes to consolidated financial statements. DRAVO CORPORATION 12 CONSOLIDATED BALANCE SHEETS DRAVO CORPORATION AND SUBSIDIARIES
DECEMBER 31, (IN THOUSANDS) 1993 1992 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term notes (Notes 5 and 14) $ 4,488 $ 4,717 Accounts payable--trade 28,622 29,135 Income taxes 23 43 Accrued insurance 3,049 3,395 Accrued retirement contribution 2,101 476 Net liabilities of discontinued operations (Note 2) 2,006 6,949 Accrued loss on leases--discontinued operations (Note 2) 2,448 2,779 Other current liabilities 6,113 5,932 -------- -------- Total current liabilities 48,850 53,426 Long-term notes (Notes 5 and 14) 88,520 88,052 Other liabilities 3,033 2,962 Net liabilities of discontinued operations (Note 2) 14,276 -- Accrued loss on leases--discontinued operations (Note 2) 7,854 9,133 Redeemable preference stock (Notes 6 and 14): 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 32,386 and 35,386 shares (entitled in liquidation to $1.8 million and $1.9 million); Series D, reported above 32 35 Common stock, par value $1, authorized 35,000,000 shares; issued 14,967,824 and 14,945,476 shares 14,968 14,945 Other capital 63,260 65,960 Retained earnings 13,119 15,850 Treasury stock at cost; common shares 119,221 (1,840) (1,840) -------- -------- Total shareholders' equity 89,539 94,950 -------- -------- Total liabilities and shareholders' equity $272,072 $268,523 ======== ========
See accompanying notes to consolidated financial statements. 13 ANNUAL REPORT 1993 CONSOLIDATED STATEMENTS OF OPERATIONS DRAVO CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1993 1992 1991 -------- -------- -------- Revenue $277,590 $272,979 $295,684 Cost of revenue 228,266 221,232 237,964 -------- -------- -------- Gross profit 49,324 51,747 57,720 Selling expenses 7,602 7,258 6,298 General and administrative expenses 24,058 24,914 27,189 -------- -------- -------- Earnings from operations 17,664 19,575 24,233 Other income (expense): Equity in earnings (loss) of joint ventures (18) 411 383 Other income 692 1,683 698 Interest income 1,327 1,598 1,977 Interest expense (9,194) (10,548) (11,173) -------- -------- -------- Net other expense (7,193) (6,856) (8,115) -------- -------- -------- Earnings before taxes from continuing operations 10,471 12,719 16,118 Income tax expense (benefit) (Note 13) (24,655) 2,401 3,868 -------- -------- -------- Earnings from continuing operations 35,126 10,318 12,250 Loss on discontinued operations, net of income tax benefit of $0 and $3,568 (Note 2) 35,303 -- 38,537 -------- -------- -------- Earnings (loss) before extraordinary item (177) 10,318 (26,287) Extraordinary item (Note 13) -- 1,573 -- -------- -------- -------- Net earnings (loss) (177) 11,891 (26,287) Preference dividends 2,554 2,561 2,571 -------- -------- -------- Net earnings (loss) available for common stock $ (2,731) $ 9,330 $(28,858) -------- -------- -------- Weighted average shares outstanding 14,835 14,833 14,804 -------- -------- -------- Primary earnings (loss) per share: Continuing operations $ 2.20 $ 0.52 $ 0.65 Discontinued operations (2.38) -- (2.60) Extraordinary item -- 0.11 -- -------- -------- -------- Net earnings (loss) $ (0.18) $ 0.63 $ (1.95) ======== ======== ========
See accompanying notes to consolidated financial statements. DRAVO CORPORATION 14 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS DRAVO CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1993 1992 1991 ------- ------- ------- Retained earnings at beginning of year $15,850 $ 6,520 $ 35,378 Net earnings (loss) (177) 11,891 (26,287) ------- ------- ------- $15,673 18,411 9,091 Dividends declared: 1993 1992 1991 - ------------------- ------- ------- ------- Series B preference stock $ 2.475 $ 2.475 $ 2.475 84 91 101 Series D preference stock 12.350 12.350 12.350 2,470 2,470 2,470 ------- ------- -------- 2,554 2,561 2,571 ------- ------- -------- Retained earnings at end of year $13,119 $15,850 $ 6,520 ======= ======= ========
See accompanying notes to consolidated financial statements. 15 ANNUAL REPORT 1993 CONSOLIDATED STATEMENTS OF CASH FLOWS DRAVO CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, (IN THOUSANDS) 1993 1992 1991 -------- -------- -------- Cash flows from operating activities: Earnings from continuing operations $ 35,126 $ 10,318 $ 12,250 Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations activities: Depreciation and amortization 17,985 18,595 17,714 Gain on sale of assets (692) (1,683) (698) Equity in joint ventures (2,155) 49 21 Changes in assets and liabilities: Decrease (increase) in accounts receivable (5,410) 1,638 (1,321) Decrease (increase) in notes receivable 1,008 (647) 321 Decrease (increase) in inventories 6,311 (4,197) (1,477) Decrease (increase) in other current assets 721 (400) 367 Increase in other assets (2,373) (680) (3,795) Increase in deferred income taxes (24,853) -- -- Increase (decrease) in accounts payable and accrued expenses 947 (5,322) 3,362 Decrease in income taxes payable (20) (575) (553) Increase (decrease) in other liabilities 71 329 (1,199) -------- -------- -------- Total adjustments (8,460) 7,107 12,742 -------- -------- -------- Net cash provided by continuing operations activities 26,666 17,425 24,992 -------- -------- -------- Loss from discontinued operations (35,303) -- (38,537) Increase (decrease) in net liabilities of discontinued operations 21,647 (15,009) 35,502 Proceeds from repayment of notes receivable from sale of discontinued operations 1,992 2,631 11 -------- -------- -------- Net cash used by discontinued operations activities (11,664) (12,378) (3,024) -------- -------- -------- Net cash provided by extraordinary item -- 1,573 -- -------- -------- -------- Net cash provided by operating activities 15,002 6,620 21,968 -------- -------- -------- Cash flows from investing activities: Proceeds from sale of assets 1,249 5,591 1,670 Additions to property, plant and equipment (13,646) (8,454) (19,660) Reductions to cash collateral account -- -- 20,506 Loans made in connection with lease termination -- -- (8,000) Other, net (553) (363) 1,082 -------- -------- -------- Net cash used by investing activities $(12,950) $ (3,226) $ (4,402) -------- -------- --------
See accompanying notes to consolidated financial statements. DRAVO CORPORATION 16 CONSOLIDATED STATEMENTS OF CASH FLOWS DRAVO CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, (IN THOUSANDS) 1993 1992 1991 -------- -------- -------- Cash flows from financing activities: Net borrowing (repayment) under revolving credit agreements $ 4,600 $ 3,700 $ (4,700) Principal payments under long-term notes (4,446) (5,702) (4,005) Principal payments under long-term notes secured by future mineral production -- -- (7,342) Principal payments under capital lease obligations (306) (142) (1,045) Proceeds from issuance of long-term notes 391 122 2,819 Proceeds from borrowing under capital lease obligations -- 388 -- Proceeds from issuance of common stock 101 63 68 Dividends (2,554) (2,561) (2,571) -------- -------- -------- Net cash used by financing activities (2,214) (4,132) (16,776) -------- -------- -------- Net increase (decrease) in cash and cash equivalents (162) (738) 790 Cash and cash equivalents at beginning of year 970 1,708 918 -------- -------- -------- Cash and cash equivalents at end of year $ 808 $ 970 $ 1,708 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest (net of amount capitalized) $ 9,195 $ 10,722 $ 11,208 Income tax 487 1,333 1,119 ======== ======== ========
See accompanying notes to consolidated financial statements. 17 ANNUAL REPORT 1993 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 subsidiaries are Dravo Basic Materials Company, Inc., and Dravo Lime Company. Dravo Basic Materials is a leading producer of construction aggregates in the Ohio Valley and Gulf Coast regions. Dravo Lime is one of the nation's largest lime producers. PRINCIPLES OF CONSOLIDATION: Significant intercompany balances and transactions have been eliminated in the consolidation process. 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. For income tax purposes, depreciation is calculated principally on an accelerated 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. INTANGIBLE ASSETS: Intangible assets include agreements, goodwill, and unrecognized prior service cost on the company's pension plans. Amortization is on a straight line basis, generally five to ten years, over estimated useful lives, or in the case of unrecognized prior service costs, the average future service period. INCOME TAXES: Effective January 1, 1993, the company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." 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 financial reporting amounts. Prior to 1993, provisions were made for deferred income taxes where differences existed between the time transactions affected taxable income and the time those transactions entered into the determination of income for financial statement purposes. 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 1993, 1992 and 1991 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. The company took an additional provision of $35.3 million related to discontinued operations in the fourth quarter of 1993. In 1985, the company contracted with a governmental authority to design, construct and operate a resource recovery facility in Long Beach, California. A dispute arose with the authority as to whether the design and construction contract was, in fact, properly completed and whether certain retainers and escrows were owed to the company. The company's sale of its contractual interest to operate the Long Beach resource recovery facility spawned a lawsuit filed by the purchaser seeking to avoid payments of the purchase price. Early in 1994, the company reached a Memorandum of Intent to settle all litigation with the facility's owner and its operator. The agreement, which is subject to final approval by the United States District Court, necessitated the write-off of receivables from the owner and payables to the operator netting $16 million. In addition, the company will pay the owner $498,000, and the operator $55,000, annually for 20 years starting in 1999 and 1995, respectively. The estimated present value of the payments, or $4.7 million, is included in the discontinued operations provision. The company has received updated estimates of the potential soil and groundwater cleanup costs at its former operations in Hastings, Nebraska. The company and several other entities have been named by the U.S. DRAVO CORPORATION 18 Environmental Protection Agency (EPA) as Potentially Responsible Parties (PRPs) at the Hastings site. Estimated total cleanup costs, including capital outlays and future maintenance costs for soil and groundwater remediation of approximately $17 million, are based on independent engineering studies. Currently there are five named PRPs, including the company, at the Hastings site. Two have entered de minimis agreements with the EPA. The company has assumed that it will participate in 33 percent of the soil and groundwater cleanup costs. The company believes, based on its investigation, that there are a number of other firms who could be named as PRPs in the future. The discontinued operations provision included an additional $2.3 million to reflect the company's estimated share of the revised cleanup cost estimates. The company's estimated share of the costs is based upon its assessment of the total cleanup costs, its potential exposure, and the viability of the other named PRPs. The company has commenced litigation against several insurance carriers who maintained liability coverage for the Hastings plant while the company owned the facility. Two carriers recently requested settlement discussions. No assumed recovery from insurance carriers has been included in the provision for discontinued operations. The company had previously recorded a receivable of $2.2 million, plus interest, from Regional Waste System (RWS) of Portland, Maine related to the settlement of disputes over construction of a waste-to-energy plant. RWS paid $2.2 million into an escrow account and filed a claim against the company alleging that certain obligations undertaken by the company in the settlement had not been properly completed. Early in 1994, a jury ruled in RWS's favor and awarded it $1.7 million of the escrow balance. The discontinued operations provision included the write-down of the receivable to reflect the jury award. An additional amount was also provided for estimated legal fees anticipated to pursue various lawsuits and claims, the most significant of which are the Hastings insurance litigation, Continental Energy Associates (CEA) and Venezuelan matters discussed in Note 8, Contingent Liabilities. No loss provision has been made for the CEA and Venezuelan disputes because it is not possible to determine the outcome of these matters or to estimate with any degree of probability the range of potential costs which may be involved. Claims against the company, which management believes are grossly overstated, exceed $45 million. The company received cash proceeds of $2.0 million in 1993, $2.6 million in 1992 and $11,000 in 1991 from the repayment of notes received from the previous sales of discontinued businesses. The remaining assets and liabilities at December 31, 1993 and December 31, 1992 of the discontinued operations 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) 1993 1992 -------- -------- Current assets: Accounts and retainers receivable $ 23 $ 23 Other 3,512 2,925 -------- -------- Total current assets 3,535 2,948 -------- -------- Accounts and retainers receivable 472 18,268 Other 309 4,765 Total assets $ 4,316 $ 25,981 ======== ======== Current liabilities: Accounts and retainers payable $ 178 $ 758 Accrued loss on leases 2,448 2,779 Other 5,363 9,139 -------- -------- Total current liabilities 7,989 12,676 -------- -------- Accounts and retainers payable 4,745 2,012 Accrued loss on leases 7,854 9,133 Other 10,312 7,097 -------- -------- Total liabilities $ 30,900 $ 30,918 ======== ======== Net liabilities and accrued loss on leases of discontinued operations $(26,584) $ (4,937) ======== ========
NOTE 3: ACQUISITIONS AND DISPOSITIONS In March, 1992, the company sold its asphaltic concrete operation in Loxley, Alabama to Mobile Asphalt Company (MAC). During the second quarter of 1992, MAC completed the terms of the sales agreement by purchasing certain assets related to the company's asphalt operation in Mobile, Alabama. A pre-tax gain of $894,000 was recognized for these transactions. NOTE 4: INVENTORIES Inventories for the respective years ended December 31 are classified as follows:
(IN THOUSANDS) 1993 1992 ------- ------- Finished goods $40,660 $45,225 Work in process 3,092 2,908 Materials and supplies 13,784 15,714 ------- ------- Net inventories $57,536 $63,847 ======= =======
19 ANNUAL REPORT 1993 NOTE 5: NOTES PAYABLE Notes payable at December 31 include the following:
(IN THOUSANDS) 1993 1992 ------- ------- Short-term: Current portion of long-term notes $ 4,488 $ 4,411 Current portion of obligations under capital leases -- 306 ------- ------- 4,488 4,717 Long-term: Variable rate revolving line of credit, due 1995 36,500 31,900 9.95% notes, payable through 1995 5,200 7,600 11.21% notes, payable through 2002 41,800 41,800 Variable rate note, payable through 1996 8,139 9,982 Other notes, payable through 2008 1,369 1,181 Obligations under capital leases -- 306 ------- ------- 93,008 92,769 Deduct: Current portion of notes and leases 4,488 4,717 ------- ------- Total $88,520 $88,052 ======= =======
The following is a description of the terms and conditions of the company's major debt instruments: The $36.5 million note payable is borrowed under a $59.0 million revolving credit/letter of credit facility with First Alabama Bank, PNC Bank, N.A., Continental Bank, N.A. and The Prudential Insurance Company of America. Interest on the revolver is equal to First Alabama Bank's base lending rate plus 1.25 percent. The credit facility is scheduled to expire on April 30, 1995. The 9.95 percent promissory notes require quarterly interest payments and annual principal repayments of $2.4 million. The agreement provides for optional prepayments, within certain limits. 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, the 11.21 percent term notes and the 9.95 percent promissory notes are secured by a pledge of the stock of Dravo Basic Materials Company and Dravo Lime Company along with their accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River, Three Rivers and Longview plants (except the kiln pledged under the variable rate note) have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company on a consolidated basis, and Dravo Basic Materials and Dravo Lime on a combined basis, to maintain minimum working capital levels; restrict incurrence of debt, liens and lease obligations; restrict the sale of significant assets and as to Dravo Basic Materials and Dravo Lime, limit payment of dividends or making of loans to the company. The company may not declare common stock dividends until cumulative earnings from continuing operations after September 30, 1991, excluding gains from the sale of capital assets, exceed $40.0 million or cumulative losses from discontinued operations after September 30, 1991, whichever is higher, and then only to the extent of 50 percent of such earnings. At December 31, 1993, cumulative earnings from continuing operations since September 30, 1991 exceeded cumulative discontinued operations losses during the same time period by $1.8 million. No dividends on common stock were declared nor are any contemplated. The variable rate note is secured by a lime kiln at the company's Longview lime facility. Principal payments of $154,000 plus interest on the outstanding balance are due monthly through May, 1996. A balloon payment of $3.8 million will be due June, 1996. The note was converted to a variable rate from a fixed rate of 11.0 percent in July, 1992. Interest on the note is equal to First Alabama Bank's base lending rate plus 2.5 percent with a floor of 8.0 percent and a ceiling of 11.5 percent. At December 31, 1993 approximately $157.4 million of Dravo Basic Materials and Dravo Lime net assets were restricted as to payment of dividends or loans to the company. Assets pledged under certain notes and leases had a book value of $146.1 million at December 31, 1993. 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. This transaction has been accounted for as a hedge of those notes. The swap provides that Continental will pay the company interest at 11.21 percent based on a notional amount of $41.8 million. In return, the company will pay Continental the three month London Interbank Offered Rate (LIBOR) plus 6.57 percent on the same $41.8 million notional amount. The company's rate, which is adjusted on the twenty-third day of each February, May, August, and November, is currently 10.02 percent. The company can unwind the swap at anytime prior to its expiration in February, 1996. If the swap is unwound prior to the expiration date, the company would record either a gain or loss based on the bond yield on the termination date. On December 31, 1993, the company was in a gain position. Differences between the fixed rate paid to the company and the floating rate paid by the company will be accounted for as adjustments to interest expense while the swap is in force. Amounts payable on long-term debt due in 1994 and thereafter are: 1994, $4.5 million; 1995, $4.9 million; 1996, $10.7 million; 1997 $6.2 million; 1998, $6.1 million; and after 1998, $24.1 million. DRAVO CORPORATION 20 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 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 accrued dividends. The company had outstanding 32,386 and 35,386 shares of cumulative, convertible Series B Preference Stock on December 31, 1993 and 1992, 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 expenses for 1993, 1992 and 1991 were $34.4 million, $33.1 million and $35.8 million, respectively. The minimum rentals under noncancelable operating leases for these years were $17.5 million, $18.9 million and $21.1 million, respectively. The minimum future rentals under noncancelable operating leases and future rental receipts from subleases to third parties as of December 31, 1993 are indicated in the following table. Of the $35.6 million net minimum payments, $10.1 million has been expensed in connection with discontinued operations.
(IN THOUSANDS) 1994 $ 16,437 1995 14,693 1996 13,549 1997 12,513 1998 4,737 After 1998 915 -------- Total minimum payments required 62,844 Less: Sublease rental receipts (27,194) -------- Net minimum payments $ 35,650 ========
At December 31, 1993 and 1992, the company had outstanding letters of credit totaling $10.0 million. 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 cleanup of soil and groundwater contamination at three subsites in Hastings, Nebraska, 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 subsites, a municipal landfill, the company, after a limited investigation, has determined that it believes it disposed of no hazardous substances at the particular site and has so informed the EPA. On December 31, 1991, the EPA sent a formal demand to the company as well as other PRPs at this subsite demanding that they reimburse the EPA for already incurred response costs in the amount of $1.2 million, and requesting that the PRPs submit a good faith proposal to perform soil and groundwater remediation at this subsite. The company has rejected the EPA's demand and decided not to submit the offer requested by the EPA. No PRP at this subsite has agreed to pay the EPA's response costs. As a result, statutory interest is being added to the EPA's response costs. Other PRPs, including the local municipality, have agreed to perform the remedial investigation and to design soil and groundwater remediation remedies at this subsite, but no party has agreed to conduct the remediation. At the second subsite, the company, again after a limited investigation, concluded that release of contaminants from this subsite is not sufficient to warrant the taking of remedial action. In January, 1994 the EPA sent a specific notice to the company that the EPA considered it and three other parties PRPs at this subsite. The letter invited the company and the other PRPs to make an offer to conduct a remedial investigation and feasibility study (RI/FS) of this subsite and stated that the EPA was in the process of preparing a workplan for the RI/FS. With respect to the third subsite, the company, along with one other PRP, has been served with administrative orders directing it to undertake soil remediation and interim 21 ANNUAL REPORT 1993 groundwater remediation at that subsite. 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 issuance of the order concerning interim groundwater remediation followed many months of unresolved negotiations with the EPA, the other PRP and the company's insurers with respect to the EPA's demands that the company and the other PRP either finance or voluntarily undertake the interim groundwater remediation as well as their liability to complete the soil remediation and to pay for past response costs. The EPA has taken no legal action with respect to its demand that the company and the other PRP pay its past response costs. A third PRP has been notified by the EPA that the EPA regards it as potentially liable under Section 107(a) of CERCLA for costs the EPA has incurred or will incur in responding to the release and threat of release at this subsite. A total of five parties have been named by the EPA as PRPs at this subsite. A contribution claim related to this subsite against two of the PRPs was dismissed by the Nebraska District Court after they entered a de minimis settlement with the EPA providing for, among other things, contribution protection in return for access to their property. The Eighth Circuit Court of Appeals recently affirmed the dismissal. The de minimis settlement agreement does provide for the loss of contribution protection if evidence is developed that these two PRPs contributed to contamination at this subsite. The company may proceed against other parties at the subsite who have not been named by the EPA as PRPs or who have not contributed to the company's cost in complying with the EPA's administrative orders. The company, along with other PRPs from various other subsites, has recommended that the EPA adopt area-wide institutional controls as the permanent remedy at the site. No formal response to this proposal has been received by the PRPs. The company notified its primary and excess general liability insurance carriers of the claims by the EPA at the first and third subsites. Although one primary carrier agreed to pay for a part of the company's defense, it has not done so and has refused to pay for expenses the company has already incurred. The company's other primary carrier has declined coverage altogether. On August 10, 1992 the company filed suit in the Alabama District Court against its primary liability insurance carriers 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). This complaint is limited to the EPA's claims at the third subsite. The suit has been amended to include as a defendant the excess liability carrier of the company's predecessor at the site. An investigation of the coverage provided by the primary carrier of the company's predecessor is also underway. An award of punitive damages is being sought against two of these carriers for their bad faith in failing to investigate the company's claim and/or denying the company's claim. The case is proceeding in accordance with a case management order issued by the District Court Magistrate assigned to handle pretrial matters. 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 second subsite. Estimated total cleanup costs, including capital outlays and future maintenance costs for soil and groundwater remediation of approximately $17 million, are based on independent engineering studies. The company has assumed that it will participate in 33 percent of the costs. Included in the discontinued operations provision is the company's estimate of its share of the likely cost of soil and groundwater remediation at these three subsites. The company's estimated share of the costs is based on its assessment of the total cleanup costs, its potential exposure, and the viability of other named PRPs. On May 27, 1993 the company was also notified by the EPA that the company might be liable for costs incurred by the United States in responding to a release or threatened release of hazardous substances at a non-operating research facility in Golden, Colorado. The notice, which was received without any advance indication that the EPA regarding the company as a potentially liable party, gave the company seven days to express its intent to conduct or participate in actions at the site. The company, whose engineering and construction division dealt with the research facility on specific projects from 1968 to 1980, is one of about ninety non- governmental former clients of the research facility to receive such notices. The United States has indicated it also regards a state educational institution associated with the research facility and various federal agencies as potentially liable for the cleanup. On June 8, 1993 the company responded to the EPA's notice of potential liability by stating that it does not believe it is a responsible party at the site. The company has also declined to participate in remedial actions at the site. In December, 1993 the company received a Waste-In list for this subsite and Notice of Planned De Minimis Settlement Offer for Eligible Parties Associated with the Subsite. On the basis of the alleged volumetric contribution of waste attributed to the company by the EPA, the company believes it will be offered a de minimis settlement at this subsite. There are no reliable estimates of the cost of remediation at this site. DRAVO CORPORATION 22 The company has notified its insurance carriers of its receipt of the EPA's notice of potential liability. The company's primary carriers have notified the company of their intent to investigate the company's claim, requested additional information and reserved all of their rights and defenses. In 1990, the company filed an action now pending in Luzerne County, Pennsylvania alleging breach of contract and unjust enrichment arising out of the termination of a Turnkey Construction Contract for the Hazleton Gasification Facility Expansion. The suit named as defendants Continental Energy Associates (CEA), the project owner, Continental Cogeneration Corporation(CCC), the general partner of CEA, and Swiss Bank Corporation, the project lender. CEA and CCC filed a separate suit against the company which, as amended, seeks damages for breach of contract, negligent design and construction, negligent misrepresentation, fraud and tortious interference with the contract of surety. The two suits, along with a third separate action commenced by CEA and CCC against the company's surety, the Insurance Company of North America, have been consolidated. Documents produced by CEA and CCC during the course of discovery allege claims at an amount from approximately $10 million to approximately $35 million. However, the construction contract contains a provision limiting damages to the value of the contract (a net of approximately $10 million) which the company would seek to have specifically enforced. The company continues to vigorously assert its claims and to deny any liability. The company filed an action in 1981 to collect on a promissory note issued by Meladuras Portuguesa, C.A. (Melaport) and its principal, Alberto Caldera (Caldera). In 1985, Melaport and Caldera filed a counterclaim for damages alleging the company breached a contract between Melaport and the company relating to engineering and procurement services rendered between 1973 and 1978 for a sugar cane processing facility. A local Venezuelan court ruled partially in favor of Melaport's counterclaim. The ruling was upheld by a Venezuelan appeals court on September 25, 1992 and by the Venezuelan Supreme Court on July 8, 1993. The court ruling does not specify damages to be paid but does identify certain categories of damages to which Caldera and Melaport are entitled: (1) the losses suffered by Melaport from the time it commenced operations in 1974 to 1978; (2) the value of certain equipment and other assets which had been pledged by Melaport to secure borrowing in connection with the project; (3) the value of approximately 540 acres of land which a corporation controlled by Caldera had mortgaged to secure the borrowings. The amount of damages in these three categories will be established by an appraisal process conducted by the trial court. Damages will be adjusted for inflation since the counterclaim was filed in 1985 and for interest at 12 percent per year. While the opposing counsel has asserted that the damages are in excess of $35 million, the company at this time cannot predict the result of the appraisal proceedings. The company has no assets in Venezuela and will challenge the enforcement in the United States if a judgment is finally issued by the Venezuelan courts. On November 2, 1993, the company filed suit against Melaport and Caldera in the United States District Court for the Western District of Pennsylvania, seeking an injunction and a declaratory judgment with respect to the proceedings in Venezuela. The company is requesting a determination that any judgment in the Venezuelan proceedings is not enforceable against the company and is also seeking indemnification for all costs, expenses, losses and damages incurred and which may be incurred by the company in the Venezuelan proceedings and the costs and expenses of the United States District Court action. On February 25, 1994, Melaport and Caldera filed a motion asking the Court to dismiss the suit based on the lack of personal jurisdiction over the defendants and based on the doctrines of forum non conveniens, res judicata and judicial estoppel. It also asked the Court to dismiss, as premature, the company's demand for injunctive and declaratory relief. If the ruling of the Venezuelan Courts is successfully enforced against the company in the United States, the liability would be material to the company. If these lawsuits, claims and assertions, discussed above, are sustained against the company, material charges would be recorded in the company's financial statements. However, in some instances, it is not possible to determine the outcome of these matters or to estimate with any degree of certainty the range of potential costs which may be involved. In other instances, based upon the knowledge the company has of these lawsuits, claims and assertions, management believes the ultimate disposition of these matters will not result in material charges to earnings in excess of amounts recorded in the financial statements. 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, both in lawsuits and in administrative proceedings for contract adjustments under various contracts, which 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. 23 ANNUAL REPORT 1993 The status of combined employee pension benefit plans as of December 31, 1993 and 1992 is shown below:
1993 1992 ---------------------------------------------- ----------------------------------------------- PLANS WHICH HAVE PLANS WHICH HAVE PLANS WHICH HAVE PLANS WHICH HAVE FUNDED ASSETS IN EXCESS ACCUMULATED BENEFIT FUNDED ASSETS IN EXCESS ACCUMULATED BENEFIT OF ACCUMULATED OBLIGATIONS IN EXCESS OF ACCUMULATED OBLIGATIONS IN EXCESS BENEFIT OBLIGATIONS OF FUNDED ASSETS BENEFIT OBLIGATIONS OF FUNDED ASSETS ----------------------- --------------------- ----------------------- --------------------- Actuarial present value of projected benefit obligation: Vested employees $161,662 $22,109 $143,692 $19,623 Nonvested employees 397 2,859 28 2,886 -------- ------- -------- ------- Accumulated benefit obligation 162,059 24,968 143,720 22,509 Effect of projected future salary increases 4,241 1,051 4,071 1,398 -------- ------- -------- ------- Total projected benefit obligation 166,300 26,019 147,791 23,907 Plan assets 168,699 20,360 153,400 19,226 -------- ------- -------- ------- Assets in excess of (less than) projected benefit obligation $ 2,399 $(5,659) $ 5,609 $(4,681) ======== ======= ======== ======= Prepaid (accrued) pension expense $ 9,860 $(4,801) $ 9,037 $(3,487) Unamortized net asset (liability) existing at date of adoption of SFAS No. 87 1,375 (897) 2,062 (972) Unrecognized net gain (loss) from actuarial experience (8,836) (4,186) (5,490) (1,956) Adjustment to recognize minimum liability -- 4,225 -- 1,734 -------- ------- -------- ------- $ 2,399 $(5,659) $ 5,609 $(4,681) ======== ======= ======== =======
The components of 1993, 1992 and 1991 net periodic pension (income) expense are as follows:
(IN THOUSANDS) YEARS ENDED DECEMBER 31, 1993 1992 1991 -------- -------- -------- Service cost of benefits earned during the year $ 901 $ 900 $ 784 Interest cost on projected benefit obligation 14,431 14,101 14,352 Actual return on plan assets (30,951) (12,540) (30,301) Net amortization (deferral) 15,566 (3,028) 16,390 -------- -------- -------- Net pension (income)/ expense for year $ (53) $ (567) $ 1,225 ======== ======== ========
The following assumptions were used for the valuation of the pension obligations as of December 31:
1993 1992 1991 ---- ---- ---- Discount rate 7.5% 8.5% 8.5% Expected long-term rate of return on assets 8.0% 9.0% 9.0% Rate of increase in compensation levels 5.0% 6.0% 6.0%
NOTE 10: POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The company and certain subsidiaries provide 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. Currently, the company pays all costs increases for employees who retired prior to 1985 and who have not elected to participate in a new plan in which they pay cost increases, in exchange for expanded benefits, in excess of a specified amount. For employees retiring after 1984, the company's liability is limited to a fixed contribution amount for each participant or dependent. This amount is reduced significantly when the participant becomes eligible for Medicare coverage. The company has made no commitment to adjust the amount of its contributions. The company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106) effective January 1, 1993. The statement requires that an accrual be made for the expected cost of providing postretirement benefits to the employee and the employee's beneficiaries and covered dependents during the years that an employee renders employment services. The restructuring and downsizing that occurred over the past several years have left the company with a large population of retired employees compared to active employees. Because of this, DRAVO CORPORATION 24 the expense the company recognized as a result of implementing SFAS 106 was not materially different from the previous practice of expensing postretirement benefits on a pay-as-you-go basis. The cost of postretirement benefits other than pensions was $4.9 million in 1993, $4.5 million in 1992 and $4.7 million in 1991. 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 7.5 percent and a health care cost trend rate of 11.5 percent in 1993, gradually declining to 6.5 percent in 1999. An increase in the health care cost trend rate of one percent would increase the APBO at December 31, 1993 by $1.4 million and the total service and interest rate components of the 1993 postretirement benefit cost by $116,000. Postretirement benefit cost for 1993 includes the following components:
(IN THOUSANDS) Service cost--benefits earned during the period $ 177 Interest cost on accumulated postretirement benefit obligation 2,887 Amortization of accumulated postretirement benefit obligation 1,789 ------- Postretirement benefit cost $ 4,853 =======
The company's postretirement benefit plans funded status reconciled with the amount included in the company's consolidated balance sheet at December 31, 1993 is as follows:
(IN THOUSANDS) Accumulated postretirement benefit obligation: Retirees and related beneficiaries $34,190 Other fully eligible participants 888 Other active participants not fully eligible 4,887 ------- Accumulated postretirement benefit obligation 39,965 Unrecognized transition obligation (33,994) Unrecognized loss (5,136) ------- Accrued postretirement benefit liability $ 835 =======
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" (SFAS No. 112) in November, 1992. The company must adopt SFAS No. 112 effective January 1, 1994. The Statement 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 reliable estimate of SFAS No. 112's impact on the company's financial condition has not been determined, but management believes the effect, based on the company's current postemployment benefit programs, will not be material. NOTE 11: STOCK OPTIONS, STOCK APPRECIATION RIGHTS AND PERFORMANCE SHARES The following summary shows the changes in outstanding common stock options and stock appreciation rights (collectively, rights):
1978 1983 1988 PLAN PLAN PLAN TOTAL ------ ------- ------- --------- Outstanding at December 31, 1992 55,100 198,650 912,000 1,165,750 Granted -- 70,000 88,000 158,000 Exercised -- -- (12,700) (12,700) Forfeited (1,900) (10,200) -- (12,100) ------ ------- ------- --------- Outstanding at December 31, 1993 53,200 258,450 987,300 1,298,950 ====== ======= ======= =========
Prices per share of outstanding rights at December 31, 1992 were $5.94 to $19.31; a grant was awarded during 1993 at a price of $11.13. Rights were exercised during the year at $7.94. Rights were forfeited during 1993 at prices between $11.25 and $19.31. Rights outstanding at December 31, 1993 are exercisable at prices ranging from $5.94 to $19.31 per share. Of the stock appreciation rights and options outstanding from the 1978, 1983 and 1988 plans, 53,200, 188,450 and 836,800 shares, respectively, were exercisable at December 31, 1993. The exercise of options does not necessitate a charge or credit to income. Under the 1978 Plan and 1988 Plan for executives and key employees, 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 provides 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. 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. 25 ANNUAL REPORT 1993 No additional grants can be made from the 1978 or 1983 plans, both of which have expired. At December 31, 1993 and 1992, there were 0 and 88,000 shares, respectively, available for granting common stock options and/or stock appreciation rights under the 1988 plan. There were no performance shares outstanding at December 31, 1993 and 1992. NOTE 12: SHAREHOLDERS' EQUITY Shareholders' equity at December 31 is presented below:
PREFERENCE COMMON OTHER TREASURY (IN THOUSANDS) STOCK STOCK CAPITAL SHARES ---------- ------- ------- -------- Balance, January 1, 1991 $42 $14,923 $65,910 $(1,969) Common shares issued through: Retirement of Series B preference stock (9,648) (3) 10 (7) Common stock options exercised (4,000) 3 65 Recognition of minimum liability on pension plan 24 --- ------- ------- ------- Balance, December 31, 1991 $39 $14,933 $65,930 $(1,904) Common shares issued through: Retirement of Series B preference stock (12,864) (4) 12 (9) Common stock options exercised (4,000) 64 Recognition of minimum liability on pension plan 39 --- ------- ------- ------- Balance, December 31, 1992 $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) === ======= ======= =======
NOTE 13: INCOME TAXES Income before taxes and provisions for income tax expense (benefit) from continuing operations at December 31 are:
(IN THOUSANDS) 1993 1992 1991 -------- ------- ------- Income before taxes $ 10,471 $12,719 $16,118 -------- ------- ------- Current federal income taxes $ -- $ 5,237 $ 2,885 Deferred federal income taxes (24,853) (3,664) 983 Current state income taxes 198 828 -- -------- ------- ------- Total $(24,655) $ 2,401 $ 3,868 ======== ======= =======
The provisions for income tax benefit from discontinued operations at December 31 are:
(IN THOUSANDS) 1993 1992 1991 -------- ------- ------- Current federal income taxes $ -- $ -- $(1,781) Deferred federal income taxes -- -- (1,787) -------- ------- ------- Total $ -- $ -- $(3,568) ======== ======= =======
DRAVO CORPORATION 26 The actual income tax expense attributable to earnings from continuing operations for the years ended December 31, 1993, 1992 and 1991 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) 1993 1992 1991 -------- ------- ------- Computed "expected" tax expense $ 3,560 $ 4,325 $ 5,480 Alternative minimum tax -- -- 300 Percentage depletion (3,374) (2,641) (2,015) State income taxes, net of federal income tax benefit 131 546 -- Other items (119) 171 103 Benefit of operating loss carryforwards (24,853) -- -- -------- ------- ------- Provision (benefit) for income tax $(24,655) $2,401 $ 3,868 ======== ======= =======
The significant components of the deferred income tax benefit attributable to income from continuing operations for the year ended December 31, 1993 are as follows:
(IN THOUSANDS) 1993 -------- Deferred tax expense (exclusive of the effects of other components listed below) $ (2,431) Decrease in beginning-of-the-year balance of the valuation allowance for deferred tax assets (22,422) -------- Total $(24,853) ========
For the years ended December 31, 1992 and 1991, deferred income tax (benefit) expense of ($3.7 million) and $983,000, respectively, results from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those timing differences are presented below:
(IN THOUSANDS) 1992 1991 ------- ----- Book depreciation in excess of tax depreciation $(4,783) $(437) Differences in book and tax basis for inventories 695 (10) Pension contribution in excess of book expense 755 922 State income taxes 177 521 Expenses allowable for taxes when paid (589) (62) Other 81 49 ------- ----- Total $(3,664) $ 983 ======= =====
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 are as follows:
(IN THOUSANDS) 1993 -------- Deferred tax assets: Provision for discontinued operations $ 9,039 Accounts receivable, principally due to allowance for doubtful accounts 439 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 214 Compensated absences, principally due to accrual for financial reporting purposes 758 Net operating loss carryforwards 59,313 Investment tax credit carryforwards 2,992 Other 2,025 -------- Total gross deferred tax assets 74,780 Less valuation allowance (31,663) -------- Net deferred tax assets 43,117 -------- Deferred tax liabilities: Properties and equipment, principally due to depreciation 15,603 Pension accrual 2,647 Other 14 -------- Total gross deferred tax liabilities 18,264 -------- Net deferred tax asset $ 24,853 ========
The net change in the total valuation allowance for the year ended December 31, 1993 was a decrease of $22.4 million. 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. 27 ANNUAL REPORT 1993 The company had NOLs of approximately $174.4 million at December 31, 1993 because of losses associated with discontinued businesses. These carryforwards, which management expects will be fully utilized, expire as follows:
(IN THOUSANDS) 2002 $18,039 2003 76,662 2004 39,012 2005 17,428 2006 7,336 2007 2,744 2008 13,228 -------
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 has pending the renewal of several existing contracts. When they are finalized, utility lime sales backlog will exceed $800 million. At that point, long-term contracts will account for more than 50 percent of the company's annual lime revenue. As a result, the company believes that revenues and income from its lime subsidiary can be reasonably projected over the life of its long-term contracts for purposes of determining whether the realization of the asset resulting from the utilization of NOLs in future years is more likely than not. Income projections for the contract lime business were based on historical information adjusted for contract terms. Projections for the non-contract lime business were based on the last three year's results. The company projected future income for its aggregates business based on the last three year's results, a period of low profitability for Dravo Basic Materials. In assessing the valuation allowance, estimates were made as to the potential financial impact on the company should adverse judgments be rendered in the remaining substantive uncertainties associated with discontinued operations. The significant uncertainties involve litigation related to contract claims and environmental matters and are discussed more fully in Note 8, Contingent Liabilities. Management's position in these cases is to vigorously pursue its claims and to contest the asserted claims and liability for environmental cleanup. In determining the appropriate valuation allowance, however, management has used the upper limit of the potential financial impact estimated for these matters. Claims against the company in these matters, which management believes are grossly overstated, exceed $45 million. In addition to projecting future income, the company considered an appropriate tax planning strategy as permitted by SFAS 109. A tax planning strategy is an action that a company ordinarily might not implement but would implement, if necessary, to realize a tax benefit for an NOL before it expires. The tax planning strategy must be prudent and feasible. In early 1992, the company explored the option of retiring long-term debt by exercising a sale and leaseback of the above-ground assets at its Maysville mine and lime production facility. The terms received from a commercial bank at that time and an independent appraisal indicated the sale leaseback would create taxable income in excess of $70 million. The consideration of this tax planning strategy, supported by the company's forecast that it will generate sufficient future taxable income to realize the entire deferred tax asset prior to expiration of any NOLs without implementing the strategy, results in the assessment that the realization of a $24.9 million net deferred tax asset is more likely than not. 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 Basic Materials and Dravo Lime's combined cumulative taxable earnings for the past five years total $64.7 million. There can be no assurance, however, that the company will generate any earnings or any specific level of continuing earnings. Tax benefits of $8.8 million for investment tax credits expiring in 1994 and later are also being carried forward. The company recorded an extraordinary credit of $1.6 million for the year ended December 31, 1992, representing the recognition of income tax benefits resulting from the utilization of net operating loss carryforwards for financial reporting purposes. In 1991, a $3.6 million tax benefit from utilization of net operating loss carryforwards was netted against the provision for loss on discontinued operations. DRAVO CORPORATION 28 NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS The company has estimated the fair value of certain on- and off-balance sheet financial instruments. The estimated fair value of financial instruments with extended maturities are presented below:
1993 1992 ----------------- ----------------- CARRYING FAIR CARRYING FAIR (IN THOUSANDS) VALUE VALUE VALUE VALUE -------- ------- -------- ------- Notes payable $93,008 $95,659 $92,769 $93,890 Series D Preference Stock 20,000 23,544 20,000 22,504 Off-balance sheet financial instrument: Interest rate swap -- 123 -- -- -------- ------- -------- -------
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. The fair value of the interest rate swap is the estimated amount the company would have received if it had terminated the agreement on December 31, 1993. 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 15: RESEARCH AND DEVELOPMENT Research and development activity for the years ended December 31 is as follows:
(IN THOUSANDS) 1993 1992 1991 ------ ------ ------ Total research and development expense $4,166 $3,833 $3,852 Billings to third parties 1,915 1,804 2,854 ------ ------ ------ Net research and development expense $2,251 $2,029 $ 998 ====== ====== ======
NOTE 16: INTERIM FINANCIAL INFORMATION
(UNAUDITED, IN MILLIONS, FIRST SECOND THIRD FOURTH EXCEPT EARNINGS PER SHARE) QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- 1993 Revenue $ 61.8 $70.2 $76.1 $ 69.5 Gross profit 10.3 13.9 13.9 11.2 Earnings before taxes from continuing operations 0.4 4.0 4.5 1.6 Provision (benefit) for income taxes -- 0.3 0.2 (25.1) Earnings from continuing operations 0.4 3.7 4.3 26.7 Discontinued operations -- -- -- (35.3) Net earnings (loss) 0.4 3.7 4.3 (8.6) Earnings (loss) per share: Continuing operations (0.02) 0.21 0.24 1.77 Discontinued operations -- -- -- (2.38) Net earnings (loss) (0.02) 0.21 0.24 (0.61) ----- ----- ------ ------ 1992 Revenue $ 61.5 $70.6 $73.4 $ 67.5 Gross profit 10.3 14.9 15.0 11.5 Earnings before taxes and extraordinary item 1.0 4.8 5.1 1.8 Provision for income taxes 0.3 1.3 0.6 0.2 Earnings before extraordinary item 0.7 3.5 4.5 1.6 Extraordinary item 0.2 0.9 0.1 0.4 Net earnings 0.9 4.4 4.6 2.0 Earnings per share: Continuing operations 0.01 0.19 0.26 0.06 Extraordinary item 0.01 0.06 0.01 0.03 Net earnings 0.02 0.25 0.27 0.09 ----- ----- ----- -----
29 ANNUAL REPORT 1993 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 written policies and procedures that communicate the details of the control system, by careful selection and training of qualified personnel, and by 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, 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. INDEPENDENT AUDITORS' REPORT [LOGO OF KPMG PEAT MARWICK] 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, 1993 and 1992, 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, 1993. 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 at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes 10 and 13 to the consolidated financial statements, effective January 1, 1993, the company adopted the methods of accounting for postretirement benefits other than pensions and for income taxes prescribed by Statements of Financial Accounting Standards Nos. 106 and 109, respectively. As discussed in Note 8 to the consolidated financial statements, certain lawsuits, claims and assertions have been brought against the company for environmental costs and contract and claim disputes, the outcome of which presently cannot be determined. /S/ KPMG PEAT MARWICK KPMG Peat Marwick New Orleans, Louisiana February 16, 1994 DRAVO CORPORATION 30 FIVE-YEAR SUMMARY
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE YEARS ENDED DECEMBER 31, DATA AND AVERAGE MINERAL RESOURCE PRICES) 1993 1992 1991 1990 1989 -------- -------- -------- -------- ------ Summary of operations: Revenue $ 277.6 $ 273.0 $ 295.7 $ 295.9 $279.5 Gross profit 49.3 51.7 57.7 59.3 54.1 Interest expense 9.2 10.5 11.2 9.8 9.7 Depreciation expense 18.0 18.6 17.7 16.2 15.6 Earnings from continuing operations before provision for income taxes and extraordinary item 10.5 12.7 16.1 19.7 17.8 Provision (benefit) for income taxes (24.6) 2.4 3.9 3.9 3.1 Earnings from continuing operations before extraordinary item 35.1 10.3 12.2 15.8 14.7 Loss from discontinued operations, net of income taxes (35.3) -- (38.5) -- -- Extraordinary item, net of income taxes -- 1.6 -- 3.9 3.1 Net earnings (loss) (0.2) 11.9 (26.3) 19.7 17.8 -------- -------- -------- -------- ------ Dividends declared 2.6 2.6 2.6 2.6 2.6 Capital expenditures, continuing operations 13.6 8.5 19.7 34.1 12.4 -------- -------- -------- -------- ------ Employees at year-end 1,416 1,421 1,556 1,713 1,733 -------- -------- -------- -------- ------ Summary of financial position: Total assets $ 272.1 $ 268.5 $ 271.8 $ 299.8 $285.4 Working capital 59.5 60.1 45.6 10.0 15.1 Long-term obligations and redeemable preference stock 108.5 108.1 109.7 74.7 81.7 Total debt and redeemable preference stock 113.0 112.8 114.4 128.7 111.6 Property, plant and equipment, net 110.0 114.9 128.5 127.9 117.4 Shareholders' equity 89.5 95.0 85.5 114.3 97.1 -------- -------- -------- ------- ------ Per common share data: Earnings from continuing operations $ 2.20 $ 0.52 $ 0.65 $ 0.90 $ 0.82 Loss from discontinued operations (2.38) -- (2.60) -- -- Extraordinary item -- 0.11 -- 0.26 0.20 -------- -------- -------- -------- ------ Net earnings (loss) (0.18) 0.63 (1.95) 1.16 1.02 Book value 6.15 6.27 5.63 7.57 6.41 -------- -------- -------- -------- ------ Shareholders at year end 3,442 3,736 3,893 4,079 4,307 -------- -------- -------- -------- ------ Mineral resources (in millions of tons): Proven and probable reserves Total reserves 1,121.2 1,142.1 1,074.7 1,102.7 957.2 Tons mined 22.8 25.4 24.7 26.6 23.6 Average market price $ 6.01 $ 5.85 $ 6.31 $ 6.01 $ 6.19 -------- -------- -------- -------- ------
31 ANNUAL REPORT 1993 BOARD OF DIRECTORS William G. Roth Chairman, Dravo Corporation Carl A. Torbert, Jr. President and Chief Executive Officer, Dravo Corporation E. Eugene Bishop Chairman of the Board, Morrison's Restaurants, Inc. Arthur E. Byrnes Chairman, Deltec Asset Management Corporation John E. Dolan Retired Vice Chairman, Engineering and Construction, American Electric Power Service Corporation Jack Edwards Senior Partner, Hand, Arendall, Bedsole, Greaves & Johnston James C. Huntington, Jr. Retired Senior Vice President, American Standard, Inc. Willard L. Hurley Retired Chairman and Chief Executive Officer, First Alabama Bancshares, Inc. William E. Kassling Chairman, Chief Executive Officer and President, Westinghouse Air Brake Company Konrad M. Weis Retired President and Chief Executive Officer, Bayer USA, Inc. Robert C. Wilburn President and Chief Executive Officer, The Colonial Williamsburg Foundation PRINCIPAL EXECUTIVES William G. Roth Chairman Carl A. Torbert, Jr. President and Chief Executive Officer Ernest F. Ladd III Executive Vice President, Finance and Administration Carl A. Gilbert Senior Vice President H. Donovan Ross Senior Vice President John R. Major Vice President, Administration James J. Puhala Vice President, General Counsel and Secretary Albert H. Tenhundfeld, Jr. Vice President, Finance and Treasurer Larry J. Walker Controller DRAVO CORPORATION 32 HEADQUARTERS 3600 One Oliver Plaza Pittsburgh, PA 15222-2682 Telephone: 412 566-3000 FAX: 412 566-3116 61 St. Joseph Street Mobile, Alabama 36602 Telephone: 205 438-3531 FAX: 205 432-2162 Listing of Common Stock New York Stock Exchange (DRV) Transfer Agent and Registrar Continental Stock Transfer & Trust Company 2 Broadway New York, NY 10004 800-509-5586 ANNUAL MEETING The annual Shareholders' Meeting of Dravo Corporation will be held on Thursday, April 28, 1994 at the Westin William Penn Hotel, Pittsburgh, Pennsylvania. Formal notice of the meeting and proxy material is being mailed to shareholders. ADDITIONAL REPORTS More detailed information on the company's business is available in its Form 10-K filed annually with the Securities and Exchange Commission. Shareholders desiring a copy of this report for the most recent fiscal year may obtain it, without charge, by contacting the Investor Relations Department at 412 566-5530. Design Mizrahi Design Associates Photography John C. Evans Printing Hoechstetter Printing Company Inc., Pittsburgh, PA EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 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 Leasing Company, Inc. Delaware 100 Dravo Lime Company Delaware 100 Potomac Sand and Gravel Company District of Columbia 80 Princeton Ridge, Inc. New Jersey 100 Subsidiaries of Dravo Basic Materials Company, Inc.: Tideland Industries, Inc. Louisiana 100 Atchafalaya Mining Company, Inc. Louisiana 100 Dravo Bahama Rock, Ltd. Commonwealth of the Bahamas 100 Dravo Natural Resources Company Delaware 50 Subsidiary of Dravo Lime Company: Dravo Natural Resources Company Delaware 50
-1- EX-23 7 CONSENT OF EXPERTS AND COUNSEL EXHIBIT 23 Exhibit 23. Consents of Experts and Counsel - -------------------------------------------- CONSENT OF INDEPENDENT AUDITORS The Board of Directors Dravo Corporation: We consent to incorporation by reference in the registration statements No. 33- 23632 on Form S-8, No. 33-17356 on Form S-3, No. 2-84462 on Form S-8, Amendment No. 1 to No. 2-87555 on Form S-8/S-3, No. 2-64137 on Form S-8, and No. 2-71993 on Form S-16 amended by Form S-3 of Dravo Corporation, of our report dated February 16, 1994 relating to the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1993 and 1992 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, 1993 which report appears in, or is incorporated by reference in, the December 31, 1993 annual report on Form 10-K of Dravo Corporation. Our reports refers to the adoption of the methods of accounting for postretirement benefits other than pensions and for income taxes prescribed by Statements of Financial Accounting Standards Nos. 106 and 109, respectively. Our report dated February 16, 1994 contains an explanatory paragraph that states that certain lawsuits, claims and assertions have been brought against the company for environmental costs and contract and claim disputes, the outcome of which presently cannot be determined. KPMG PEAT MARWICK New Orleans, Louisiana March 29, 1994 -1- EX-24 8 POWERS OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. E. EUGENE BISHOP -------------------------- -1- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. ARTHUR E. BYRNES -------------------------- -2- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. JOHN E. DOLAN -------------------------- -3- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. JACK EDWARDS --------------------------- -4- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. JAMES C. HUNTINGTON, JR. ----------------------------- -5- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. WILLARD L. HURLEY ----------------------------- -6- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. WILLIAM E. KASSLING ---------------------------- -7- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. WILLIAM G. ROTH ------------------------- -8- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. CARL A. TORBERT, JR. ------------------------- -9- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. KONRAD M. WEIS ------------------------ -10- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. ROBERT C. WILBURN -------------------------- -11- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Torbert, Jr., 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, 1993 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 said 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 27th day of January, 1994. ERNEST F. LADD III --------------------------- -12- -----END PRIVACY-ENHANCED MESSAGE-----