-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Au2CEsHiBY9X9YeDGu8wDNmc2atLjY2CbKiFkC/ulnVIw9Q8RGpaP9rblKLHBZNM UEhD/4FcVuNB8IXGFmgcgA== 0000912057-00-019384.txt : 20000425 0000912057-00-019384.hdr.sgml : 20000425 ACCESSION NUMBER: 0000912057-00-019384 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGDEN CORP CENTRAL INDEX KEY: 0000073902 STANDARD INDUSTRIAL CLASSIFICATION: AIRPORTS, FLYING FIELDS & AIRPORT TERMINAL SERVICES [4581] IRS NUMBER: 135549268 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-03122 FILM NUMBER: 607472 BUSINESS ADDRESS: STREET 1: TWO PENNSYLVANIA PLZ - 25TH FLR CITY: NEW YORK STATE: NY ZIP: 10121 BUSINESS PHONE: 2128686100 MAIL ADDRESS: STREET 1: TWO PENNSYLVANIA PLZ - 25TH FLR CITY: NEW YORK STATE: NY ZIP: 10121 10-K/A 1 FORM 10-K/A Amendment No. 1 to FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________________ TO____________________ COMMISSION FILE NUMBER 1-3122 - ------------------------------- OGDEN CORPORATION ------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) -------------------------------------------------------- DELAWARE 13-5549268 - --------------------------------- ------------------------------------ (State or Other Jurisdiction (I.R.S. Employee Identification No.) of Incorporation or Organization) TWO PENNSYLVANIA PLAZA, NEW YORK, N.Y. 10121 - ----------------------------------------- -------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code - (212) 868-6000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of each class Which Registered ----------------------------------- Common Stock, par value $.50 per share New York Stock Exchange $1.875 Cumulative Convertible Preferred Stock (Series A) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO______ 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 amendments to this Form 10-K. [ ] The aggregate market value of registrant's voting stock, held by non-affiliates based on the New York Stock Exchange closing price as reported in the consolidated transaction reporting system as of the close of business on March 31, 2000 was as follows: Common Stock, par value $.50 per share $511,488,044 $1.875 Cumulative Convertible Preferred Stock (Series A) $2,798,775 The number of shares of the registrant's Common Stock outstanding as of March 31, 2000 was 49,495,891 shares. The following documents are hereby incorporated by reference into this Form 10-K: (1) Portions of the Registrant's Proxy Statement for its 2000 Annual Meeting of Stockholders are incorporated by reference in Part III (Items 10, 11, 12 and 13). PART I Item 1. BUSINESS Ogden Corporation was incorporated in Delaware as a public utilities holding company on August 4, 1939. In 1948 Ogden registered with the Securities and Exchange Commission as a closed-end investment company. Following several acquisitions the company no longer qualified as an investment company and since 1953 Ogden has operated as a diversified holding company operating through subsidiaries. In May 1966 Ogden was listed on the New York Stock Exchange. Ogden Corporation (hereinafter together with its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a global company which has offered a wide range of operations and services through its operating groups within each of three principal business units, Energy, Entertainment and Aviation. 1999 DEVELOPMENTS In March, 1999 Ogden announced that it was exploring ways to split its existing businesses into two separate public companies, one company would consist of its Energy business and the other would comprise its Entertainment and Aviation businesses. After a review of this approach, in September 1999 Ogden decided instead to adopt a plan to discontinue its Entertainment and Aviation operations, to pursue the sale or other disposition of these businesses, pay down corporate debt and to concentrate on its Energy business. The process of selling the Aviation and Entertainment businesses is underway. As of March 31, 2000 the following agreements and sales have been effected: (i) on March 9, 2000 Ogden announced that it had signed a definitive agreement with Alfa Alfa Holdings, SA of Greece to sell its theme and water parks-related operations, subject to certain lender and regulatory approvals, for approximately $148 million, consisting of cash and the assumption of approximately $80 million of associated debt; (ii) on March 10, 2000 Ogden sold its Fairmount Park racing operations located in Collinsville, Illinois, for $15.5 million in cash and a $7.5 million note subject to certain contingencies; (iii) on March 30, 2000 Ogden announced that it has signed a definitive agreement to sell its Food and Beverage Concessions and Venue Management businesses, subject to certain lender and regulatory approvals, for approximately $236 million, consisting of cash and the assumption of approximately $11.0 million in associated debt; (iv) on April 4, 2000 Ogden announced that it completed an agreement with one of its partners in the Aeropuertos Argentina 2000 consortium whereby Ogden received $27.5 million and will receive an additional $2.5 million at a later date; (v) have sold or have under contract to sell, various other assets for approximately $11.5 million; and (vi) the Company has received preliminary bids for its Aviation ground-handling business and has invited a select number of these bidders to perform due diligence in advance of requesting final bids. The Energy group develops, owns and operates independent power facilities and waste to energy facilities, and provides water and wastewater infrastructure services; the Entertainment group has interests in themed and location-based attractions; food and beverage concessions; venue management; large format films and theatres; concert promotions, artist management and recordings; and the Aviation group provides ground and cargo handling; passenger services; fueling; and airport infrastructure development and management. Following is a more detailed description of the continuing operations of the Energy Group's businesses. ENERGY Ogden's Energy segment seeks to develop, own or operate energy generating facilities and water and wastewater facilities in the United States and abroad. The operations of Ogden's Energy segment are conducted by Ogden Energy Group, Inc. and subsidiaries through four principal business areas: independent power; waste-to-energy; water and wastewater; and environmental consulting, engineering and construction (collectively, together with its subsidiaries, the "Energy Group"). Since the early 1980s, the Energy Group has been engaged in developing, and in some cases owning, energy-generating projects fueled by municipal solid waste, and providing long-term services from these projects to communities. The Energy Group is now the largest full service vendor (i.e., builder/operator) in the world for large-scale waste-to-energy projects. In addition, since 1989, the Energy Group has been engaged in developing, owning and/or operating independent power production projects utilizing a variety of fuels. The Energy Group's involvement in the operation of water and wastewater facilities began in 1994. The Energy Group generally seeks to participate in projects in which it can make an equity investment and become the operator; its returns are derived from equity distributions and/or operating fees. It also seeks to have a role in the development of the projects. The types of projects in which the Energy Group seeks to participate sell the electrical power services they generate, or the waste or water-related services they provide, under long-term contracts or market concessions to utilities, government agencies providing power distribution, creditworthy industrial users, or local government units. In selected cases, such services may be provided under short-term arrangements as well. For power projects utilizing a combustible fuel or geothermal sources, the Energy Group typically seeks projects which have a secure supply of fuel or geothermal brine through long-term supply arrangements or by obtaining control of the fuel source. Similarly, for water and wastewater-related services, the Energy Group seeks to operate under long-term contracts with governmental units or market concessions. The Energy Group generally looks to finance its projects using equity or capital commitments provided by it and other investors, combined with limited recourse debt for which the lender's source of payment is project revenues and collateralized by project assets. Consequently, the ability of the Energy Group to declare and pay cash dividends to the Company is subject to certain limitations in the project loan and other documents entered into by such project subsidiaries. In some project situations, the Energy Group or Ogden has provided limited support such as operating guarantees, financial guarantees of bridge loans or other interim debt arrangements. The Company will continue to do so in the future where it deems this warranted. The number of projects being pursued at any given time by the Energy Group will fluctuate. The complexities and uniqueness of international project development in particular requires that the Energy Group continually assess the likelihood of successful project financing throughout the development stage and weigh that against expected benefits. In addition, the 2 Energy Group may, depending upon circumstances and at the appropriate time, elect to dispose of a portion of an equity interest it may have in a project after financing. The Energy Group presently has interests in projects with an aggregate generating capacity of approximately 2570 MW (gross) either operating or under construction in the United States, Central and South America, Europe and Asia. It continues to seek to expand its ownership and operation of projects in these and other regions. In addition to its headquarters in Fairfield, New Jersey, the Energy Group's business is facilitated through two principal regional offices, each responsible for distinct geographic areas where its efforts are concentrated. The Energy Group's Asian businesses and development efforts are managed from its Hong Kong office, with field offices in Manila, The Philippines; Bangkok, Thailand; Beijing, China; and Calcutta, India. The Energy Group's businesses and development efforts in Europe and the Americas are managed from its Fairfax, Virginia office, with field offices in London, England, Sao Paulo, Brazil and Ankara, Turkey. INDEPENDENT POWER The Energy Group's independent power business is conducted by its wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates and/or invests in independent (i.e., non-utility) energy generation ("Independent Power Production" or "IPP") projects in the United States and abroad which sell their output to utilities, electricity distribution companies or industrial consumers. Within the commercial parameters of each project, the Energy Group attempts to sell electricity under long-term power sales contracts, and to structure the revenue provisions of such power sales contracts such that the revenue components of such contracts correspond to the projects' cost structure (including changes therein due to inflation and currency fluctuations) of building, financing, operating and maintaining the projects. On many of its projects, the Energy Group performs operation and maintenance services on behalf of the project owner. While all operation and maintenance contracts are different, the Energy Group typically seeks to perform these services on a cost-plus-fixed-fee basis, with a bonus and limited penalty payment mechanism related to specified benchmarks of plant performance. (a) FACILITIES UNDER CONSTRUCTION. - Samalpatti, India In 1999, the Energy Group acquired an equity interest in a 105 MW heavy fuel oil fired generating facility located near Samalpatti, Tamil Nadu, India. This project is under construction and commercial operation is expected in March, 2001. The project will be operated by the Energy Group. The Energy Group currently owns a 49% interest in the project company, and will own approximately 60% after the project achieves commercial operation. Shapoorji 3 Pallonji Infrastructure Capital Co. Ltd. and its affiliates will own 29% of such equity with the remainder of 11% being held by Wartsila India Power Investment, LLC. The electrical output of the project will be sold to the Tamil Nadu Electricity Board (TNEB) pursuant to a long-term agreement. Bharat Petroleum Corporation Ltd. will supply the oil requirements of the project. TNEB's obligations are guaranteed by the Government of the State of Tamil Nadu. - Linasa, Spain In 1999, the Energy Group acquired a 50% equity interest in Linasa Cogeneracion y Associados, a Spanish limited liability company created as a joint venture with Industria Jabonera LINA, S.A., a Spanish soap and detergent manufacturing company, to construct and operate a 15 MW natural gas-fired diesel engine based cogeneration project in the Province of Murcia SDG, S.A. The electrical output of the project will be sold under a long-term purchase contract with the Spanish electrical utility, Iberdrola, at governmentally established preferential rates for cogeneration projects (currently expected to extend until November 2007) and at market rates thereafter. The thermal output and some of the electrical output from the project will be sold to Industria Jabonera LINA, S.A. The project is being financed by BSCH Bank, through a limited recourse project financing. The construction contractor is Wartsila NSD Finland Oy. Operating revenue is expected upon commercial operation, projected for fourth quarter 2000. (b) OPERATING FACILITIES. The Energy Group's operating IPP projects utilize a variety of energy sources: water (hydroelectric), natural gas, coal, geothermal energy, wood waste, landfill gas, heavy fuel oil, and diesel fuel. - DOMESTIC PROJECTS - Geothermal Energy. The Energy Group has interests in two geothermal facilities in Southern California, the Heber and SIGC facilities, with a combined gross generating capacity of 100 MW. The Energy Group is the sole lessee of the SIGC project and is the sole owner of the Heber project. The Energy Group operates these facilities. The Energy Group also owns a geothermal resource, which is adjacent to and supplies fluid to both geothermal facilities. The electricity from both projects is sold under long-term contracts with Southern California Edison. The Energy Group also owns a 50% partnership interest in Mammoth-Pacific, L.P., which owns three geothermal power plants with a gross capacity of 40 MW, located on the eastern slopes of the Sierra Nevada Mountains at Casa Diablo Hot Springs, California. The projects have contractual rights to the geothermal brine resource for a term not less than the term of the power contracts. All three projects sell electricity to Southern California Edison under long-term contracts. 4 - Hydroelectric. The Energy Group owns 50% equity interests in two run-of-river hydroelectric projects which generate a total of 30 MW: Koma Kulshan Hydroelectric Project ("Koma Kulshan") and Weeks Falls Hydroelectric Project ("Weeks Falls"). Both Koma Kulshan and Weeks Falls are located in Washington State. Koma Kulshan and Weeks Falls each sell electricity to Puget Sound Power & Light Company under long-term contracts. The Catalyst New Martinsville, West Virginia project, is a 40 MW run-of-river project which is operated through a subsidiary. The Energy Group is the lessee. The output is sold to Monongahela Power Company under a long-term contract. - Waste Wood. The Energy Group owns 100% interests in three waste wood fired electric power plants in California: Burney Mountain Power Station, Mount Lassen Power Station and Pacific Oroville Power Station. A fourth, Pacific Ultrapower Chinese Station Power Station, is owned by a partnership in which the Energy Group holds a 50% interest. Generally, fuel supply is procured from local sources through a variety of short-term waste wood supply agreements. The four projects have a gross capacity of 67 MW. All four projects sell electricity to Pacific Gas & Electric Company under long-term contracts. - Landfill Gas. The Energy Group owns and operates eight landfill gas projects which produce electricity by burning methane gas produced by the anaerobic digestion of the solid waste contained in sanitary landfills. Seven of the projects are located in California, and one is located in Maryland. The eight projects have a gross capacity of 43 MW. All sell electricity generated to local utilities, under contracts having varying lengths, the longest expiring in 2011. - INTERNATIONAL PROJECTS - Coal. A consortium, of which the Energy Group is a 26% member, has a 510 MW (gross) coal-fired electric generating facility in the Republic of the Philippines (the "Quezon Project"). The project first generated electricity in October, 1999, and is now selling electricity during project commissioning. Full commercial operation is expected during the second quarter, 2000. The other members of the consortium are an affiliate of International Generating Company, (itself an affiliate of Bechtel Enterprises, Inc.), an affiliate of General Electric Capital Corporation, and PMR Limited Co., a Philippines partnership. The consortium sells electricity to Manila Electric Company ("Meralco"), the largest electric distribution company in the Philippines, which serves the area surrounding and including metropolitan Manila. Under a long-term agreement, Meralco is obligated to take or pay for stated minimum annual quantities of electricity produced 5 by the facility. The consortium has entered into contracts for the supply of coal at stated prices for a portion of the term of the power purchase agreement. The Energy Group will operate the project under a long term agreement with the consortium. The Energy Group has majority equity interests in four coal-fired cogeneration facilities in three different provinces in the Peoples Republic of China. These projects are operated, in each case, by an affiliate of the minority equity stakeholder in the projects. Parties holding minority positions in the projects include a private company, a local government enterprise and in the remaining two cases, affiliates of the local municipal government. A majority of the electrical output of the projects is sold to the relevant local Municipal Power Bureau and steam is sold to various host industrial facilities, both pursuant to long-term power and steam sales agreements. - Natural Gas. In 1998, the Energy Group acquired an equity interest in a barge-mounted 122 MW diesel/natural gas fired facility located near Haripur, Republic of Bangladesh. This project entered commercial operation in June, 1999, and is operated by the Energy Group. The Energy Group owns approximately 45% of the project company equity. An affiliate of El Paso Energy Corporation owns 50% of such equity, and the remaining interest is held by Wartsila NSD North America, Inc. The electrical output of the project is sold to the Bangladesh Power Development Board (BPDB) pursuant to a long-term agreement. That agreement also obligates the BPDB to supply all of the natural gas requirements of the project. The BPDB's obligations under agreement are guaranteed by the Government of Bangladesh. In 1999, the project received $87 million in financing and political risk insurance from the Overseas Private Investment Corporation. In 1999, the Energy Group acquired ownership interests in two 122 MW gas-fired combined cycle facilities in Thailand: the Sahacogen facility and the Rojana Power facility. Both facilities, which commenced operations in 1999, sell power under long-term contracts to adjacent industrial parks, and the excess is sold into the national power grid. The Energy Group acquired a 74% ownership interest in the Sahacogen facility, and a 25% ownership interest the Rojana Power facility. Both facilities are operated under the supervision of the Energy Group. In connection with these acquisitions, the Energy Group acquired an interest in an operating company in Thailand. The Energy Group owns an approximately 12% interest in Empresa Valle Hermoso ("EVH") which was formed by the Bolivian government as part of the capitalization of the government-owned utility ENDE. EVH owns and operates 182 MW of gas-fired generating capacity. The Energy Group also participates in a joint venture that supplies EVH with management services support. - Hydroelectic. 6 The Energy Group operates the Don Pedro project and the Rio Volcan project in Costa Rica, pursuant to long term contracts, through an operating subsidiary. The Energy Group also has a nominal equity investment in each project. The electric output from both of these facilities is sold to Instituto Costarricense de Electricidad, a Costa Rica national electric utility. Through its investment in EVH (See discussion above, under "Natural Gas") the Energy Group also has a small (less than 7%) ownership interest in a 12 MW hydroelectric project in Rio Yura, Bolivia. The Rio Yura project sells its output to mining companies, local residents and the national grid. - Diesel. The Energy Group owns interests in three diesel fuel facilities in The Philippines. The Bataan Cogeneration project is a 65 MW facility that has a long-term contract to sell its electrical output to the National Power Corporation (with which it also has entered into a fuel management agreement for fuel supply) and the Bataan Export Processing Zone Authority. The Island Power project is a 7 MW facility that has a long-term power contract with the Occidental Mindoro Electric Cooperative. Both projects are operated by the Energy Group. In 1999, the Energy Group acquired 100% of the stock of Magellan Cogeneration, Inc. a Philippine company that owns and operates a 65 MW diesel fired electric generating facility located in the province of Cavite, The Philippines. This project sells a portion of its energy and capacity to the National Power Corporation and a portion to the Cavite Export Processing Zone Authority pursuant to long-term power purchase agreements. c) PROJECT SUMMARIES. Certain information with respect to the Energy Group's IPP projects as of March 1, 2000 is summarized in the following table: 7 IPP PROJECTS
DATE OF ACQUISITION/ COMMENCEMENT IN OPERATION LOCATION SIZE NATURE OF INTEREST OF OPERATIONS - ------------- --------- ------ ------------------ --------------- A. HYDROELECTRIC ------------- 1. New Martinsville West Virginia 40MW Lessee/Operator 1991 2. Rio Volcan Costa Rica 16MW Part Owner/Operator 1997 3. Don Pedro Costa Rica 16MW Part Owner/Operator 1996 4. Koma Kulshan(1) Washington 12MW Part Owner 1997 5. Weeks Falls(1) Washington 5MW Part Owner 1997 6. Rio Yura (2) Bolivia 12MV Part Owner 1998 ---- SUBTOTAL 101MW B. GEOTHERMAL ---------- 1. Heber California 52MW Owner/ Operator 1989 2. SIGC California 48MW Lessee/Operator 1994 3. Mammoth G1(1) California 10MW Part Owner/Operator 1997 4. Mammoth G2(1) California 15MW Part Owner/Operator 1997 5. Mammoth G3(1) California 15MW Part Owner/Operator 1997 ---- SUBTOTAL 140MW C. NATURAL GAS ------------ 1. Empresa Valle Bolivia 182MW Part Owner/ 1995 Hermoso (3) Operations Mgmt. 2. Sahacogen (4) Thailand 122MW Owner/Operator 1999 3. Rojana (5) Thailand 122MW Owner/Operator 1999 4. Haripur(6) Bangladesh 120MW Part Owner/Operator 1999 ----- SUBTOTAL 546MW
8 D. COAL 1. Quezon(7) Philippines 510MW Part Owner/Operator 2000 2. Lin'an(8) China 24MW Part Owner 1997 3. Huantai(8) China 24MW Part Owner 1997 4. Taixing(8) China 24MW Part Owner 1997 5. Yanjiang(8) China 24MW Part Owner 1997 ---- SUBTOTAL 606MW E. DIESEL 1. Island Power Philippines 7MW Part Owner/ 1996 Corporation(9) Operator 2. Bataan Philippines 65MW Owner/Operator 1996 Cogeneration 3. Magellan Philippines 65MW Owner/Operator 1999 ---- SUBTOTAL 137MW F. WASTE WOOD 1. Burney Mountain California 11.4MW Owner/Operator 1997 2. Pacific Ultrapower California 25.6MW Part Owner 1997 Chinese Station(1) 3. Mount Lassen California 11.4 MW Owner/Operator 1997 4. Pacific Oroville California 18.7MW Owner/Operator 1997 ------ SUBTOTAL 67MW G. LANDFILL GAS 1. Gude Maryland 3MW Owner/Operator 1997 2. Otay California 3.7MW Owner/Operator 1997 3. Oxnard California 5.6MW Owner/Operator 1997 4. Penrose California 10MW Owner/Operator 1997 5. Salinas California 1.5MW Owner/Operator 1997 6. Santa Clara California 1.5MW Owner/Operator 1997
9 7. Stockton California 0.8MW Owner/Operator 1997 8. Toyon California 10MW Owner/Operator 1997 ---- SUBTOTAL 36MW TOTAL MW IN OPERATION: 1633MW ========= UNDER CONSTRUCTION: 1. Samalpatti (10) India 105MW Part Owner/Operator 2001(est.) 2. Linasa (1) Spain 15MW Part Owner/Operator 2000(est.) ---- TOTAL MW UNDER CONSTRUCTION 120MW ------- ------- TOTAL ALL PROJECTS 1753MW ========
NOTES (1) The Energy Group has a 50% ownership interest in the project. (2) The Energy Group has an approximately 12% interest in a company that owns 58% of this project. (3) The Energy Group owns an approximate 24% interest in a consortium that purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by Bolivian pension funds. (4) The Energy Group has a 74% ownership interest in this project. (5) The Energy Group has a 25% ownership interest in this project. (6) The Energy Group has an approximately 45% interest in this project, This project is capable of operating through combustion of diesel oil in addition to natural gas. (7) The Energy Group has an approximately 26% ownership interest in this project. (8) The Energy Group has a 60% ownership interest in this project. (9) The Energy Group has an approximately 40% ownership interest in this project. (10) The Energy Group has a 49% interest in this project, and upon commercial operation will own 60% of this project. 10 (d) OTHER DEVELOPMENT EFFORTS. The Energy Group is actively pursuing a number of projects, some of which have achieved significant development milestones such as executed power purchase agreements, site acquisition or receipt of key governmental approvals. Among the most advanced development efforts are: (i) Three Mountain Power (U.S.): a 500 MW gas-fired combined cycle merchant facility, to be located at the same site as the Energy Group's Burney facility in Shasta County, California. The project is presently in the permitting stage, which the Energy Group expects to conclude during 2000. (ii) Balaji (India): a 106 MW oil-fired project in the State of Tamil Nadu, India with similar design and technology to the Samalpatti project. The Energy Group has executed agreements pursuant to which it will have a majority ownership position and will operate the project. (iii) Maheshwar (India): a 400 MW hydroelectric project in the State of Madya Pradesh, India. The Energy Group has executed agreements giving it the right to purchase 49% of the project equity, subject to certain conditions relating to the project development progress. (iv) Thai Gulf Acquisition (Thailand): an acquisition of a 50% interest in a Thai holding company which owns interests in two projects: (1) a 100% interest in a 107 MW operating gas-fired project, selling power under long term contracts to the Electric Generating Authority of Thailand ("EGAT") and several industrial customers, and (2) a 60% interest in a 734 MW coal-fired project that is in the late stages of development. This project has a long term contract with EGAT to sell its electricity. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing, some of which are not within the Energy Group's control. As such, no assurance can be given that these projects will ultimately be developed successfully. WASTE-TO-ENERGY The Energy Group's waste-to-energy operations are managed through a wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE"). Waste-to-energy facilities combust municipal solid waste to make saleable energy in the form of electricity or steam. This group completed construction of its first waste-to-energy project in 1986. It currently operates 26 waste-to-energy projects. OWTE's subsidiaries are the owners or lessees of 17 of its waste-to-energy projects. The Energy Group has the exclusive right to market in the United States the proprietary, mass-burn technology of Martin GmbH fur Umwelt und Energietechnik ("Martin"). All of the waste-to-energy facilities the Energy Group has constructed use this Martin technology. In addition, the Energy Group owns and/or operates waste-to-energy facilities using other technologies. 11 Generally, the Energy Group provides waste-to-energy services pursuant to long-term service contracts ("Service Agreements") with local governmental units sponsoring the waste-to-energy project ("Client Communities"). Certain of its waste-to-energy facilities do not have sponsoring Client Communities. (a) TERMS AND CONDITIONS OF SERVICE AGREEMENTS. Each Service Agreement is different in order to reflect the specific needs and concerns of the Client Community, applicable regulatory requirements, and other factors. The following description sets forth terms that are generally common to these agreements: - The Energy Group designs the facility, helps to arrange for financing, and then constructs and equips the facility on a fixed price and schedule basis. - The Energy Group operates the facility and generally guarantees it will meet minimum processing capacity and efficiency standards, energy production levels, and environmental standards. The Energy Group's failure to meet these guarantees or to otherwise observe the material terms of the Service Agreement (unless caused by the Client Community or by events beyond its control ("Unforeseen Circumstances")) may result in liquidated damages being charged to the Energy Group or, if the breach is substantial, continuing and unremedied, the termination of the Service Agreement. In the case of such Service Agreement termination, the Energy Group may be obligated to discharge project indebtedness. - The Client Community is generally required to deliver minimum quantities of municipal solid waste ("MSW") to the facility and is obligated to pay a service fee for its disposal, regardless of whether that quantity of waste is delivered to the facility. The service fee escalates to reflect indices of inflation. In many cases the Client Community must also pay for other costs, such as insurance, taxes, and transportation of the residue to the disposal site. If the facility is owned by the Energy Group, the Client Community also pays as part of the Service Fee an amount equal to the debt service due to be paid on the bonds issued to finance the facility. Generally, expenses resulting from the delivery of unacceptable and hazardous waste on the site are also borne by the Client Community. In addition, the contracts generally require that the Client Community pay increased expenses and capital costs resulting from Unforeseen Circumstances, subject to limits which may be specified in the Service Agreement. - The Client Community usually retains a portion of the energy revenues (generally 90%) generated by the facility, with the balance paid to the Energy Group. 12 (b) OTHER ARRANGEMENTS FOR PROVIDING WASTE-TO-ENERGY SERVICES. The Energy Group owns one facility that is not operated pursuant to a Service Agreement with a Client Community. The Energy Group may undertake additional such projects in the future. In such projects, the Energy Group generally assumes the project debt and risks relating to waste availability and pricing, risks relating to the continued performance of the electricity purchaser, as well as risks associated with Unforeseen Circumstances. In these projects, the Energy Group generally retains all of the energy revenues from sales of power to utilities or industrial power users and disposal fees for waste accepted at these facilities. Accordingly, the Energy Group believes that such projects carry both greater risks and greater potential rewards than projects in which there is a Client Community. In addition, the Energy Group has recently undertaken, together with three Client Communities, restructuring of its waste-to-energy projects. In Union County, a municipally-owned facility has been leased to the Energy Group, and the Client Community has agreed to deliver approximately 50% of the facility's capacity on a put-or-pay basis. The balance of facility capacity will be marketed by the Energy Group, at its risk. The Company provided limited credit support in the form of an operating performance guaranty, as well as a rent guaranty supporting one series of subordinated bonds. In connection with this restructuring, the Client Community assigned to the Energy Group the long term power contract with the local utility. As part of this assignment, the power contract was amended to give the Energy Group the right to sell all or a portion of the plant's output to other purchasers. In 1999, the Energy Group elected to sell 20 MW of power to Sempra Energy Trading Corporation under a two year arrangement which the Energy Group believes will enhance project revenues. Other such arrangements may be considered in the future. In Tulsa, Oklahoma, the Client Community paid a fee to terminate its Service Agreement. At the same time the parties entered into a new arrangement pursuant to which the Energy Group is required to fund the cost of the facility's Clean Air Act retrofit; the Client Community is committed to deliver tonnages on a put or pay basis, for a fee per ton; and the parties agreed to sharing of certain excess revenues from facility operations. In addition, the Energy Group no longer has the right to require an adjustment to fees to cover the costs of unforeseen circumstances, but may terminate the contract if the Client Community declines to accept such increases. Under the new contract, the Client Community has accepted the obligation to repay bonds issued to finance the facility, including prepayment as a result of termination of the Service Agreement, regardless of the reasons for the termination. In Warren County, New Jersey the Energy Group has agreed to market the facility's capacity, at its risk, in a restructuring plan that includes State assistance with debt retirement. The Warren County restructuring is subject to several conditions precedent, some of which are beyond the control of the Energy Group, notably the securing of State funds. Currently, the project's debt service reserve funds have been depleted, and the State provided funds to ensure debt service was paid to bondholders in December, 1999. The parties are now negotiating a restructuring with the State's participation and supervision. There can be no assurance, however, that an acceptable resolution will be achieved. If such a resolution cannot be 13 achieved, the Warren County Client Community may default on its obligations, including obligations to bondholders, in which case a restructuring would need to be addressed between the Energy Group and the project's lenders and credit enhancement providers. The project is mortgaged to its lenders; it is possible that such restructuring could result in the Energy Group no longer owning and/or operating the Facility. In Lake County, Florida, the Client Community has indicated its intention to reduce or terminate its continuing payment obligations with respect to the facility, and has expressed its desire to restructure its relationship with the Energy Group subsidiary to substantially reduce its payment obligation or to institute condemnation proceedings to purchase the Facility from the Energy Group. If discussions regarding a mutually acceptable resolution of these matters are not successful, litigation and/or condemnation proceedings may result. There can be no assurance that the efforts to restructure this project will succeed, or that litigation or condemnation can be avoided. Although the company wishes to find mutually acceptable ways to resolve the County's concerns, it will vigorously contest any effort by the County to evade its contractual responsibilities. The Energy Group may agree to additional such restructurings in the future for other projects, depending upon the particular facts and circumstances applicable to each situation where a restructuring is proposed. (c) PROJECT FINANCING. Financing for the Energy Group's domestic projects is generally accomplished through the issuance of tax-exempt and taxable revenue bonds issued by or on behalf of the Client Community. If the facility is owned by the Energy Group subsidiary the Client Community loans the bond proceeds to the subsidiary to pay for facility construction, and pays to the subsidiary amounts necessary to pay debt service. For such facilities, project-related debt is included as a liability in Ogden's consolidated financial statements. Generally, such debt is secured by the revenues pledged under the respective indenture and is collateralized by the assets of the Energy Group subsidiary and otherwise provides no recourse to Ogden, subject to construction and operating performance guarantees and commitments. (d) OWTE PROJECTS. Certain information with respect to projects as of March 1, 2000 is summarized in the following table: 14 WASTE-TO-ENERGY PROJECTS
BOILER COMMENCEMENT UNITS TONS PER DAY UNITS MW OF OPERATIONS ----- -------------- ------ ------------- Tulsa, OK (I) (1) 750 2 11 1986 Marion County, OR 550 2(2) 13 1987 Hillsborough County, FL (3) 1,200 3(2) 29 1987 Tulsa, OK (II) (1)(4) 375 1 -- 1987 Bristol, CT 650 2(2) 16.3 1988 Alexandria/Arlington, VA 975 3 22 1988 Indianapolis, IN 2,362 3(2) N.A. 1988 Hennepin County, MN (1)(5) 1,200 2 38.7 1989 Stanislaus County, CA 800 2 22.5 1989 Babylon, NY 750 2(2) 16.8 1989 Haverhill, MA 1,650 2 46 1989 Warren County, NJ (5) 450 2 13 1988 Kent County, MI (3) 625 2(2) 18 1990 Wallingford, CT (5) 420 3(2) 11 1989 Fairfax County, VA 3,000 4(2) 79 1990 Huntsville, AL (3) 690 2(2) N.A. 1990 Lake County, FL 525 2(2) 14.5 1991 Lancaster County, PA (3) 1,200 3(2) 35.7 1991 Pasco County, FL (3) 1,050 3(2) 31.2 1991 Huntington, NY (6) 750 3(2) 4.25 1991 Hartford, CT (3)(7)(8) 2,000 3 68.5 1987 Detroit, MI (1)(8) 3,300 3 68 1991 Honolulu, HI (1)(8) 2,160 2 57 1990 Union County, NJ (9) 1,440 3 44 1994 Lee County, FL (3) 1,200 2(2) 39.7 1994 Onondaga County NY (6) 990 3 39.5 1995 Montgomery County, MD (3) 1,800 3(2) 55 1995 ------ ---- TOTAL 32,862 TONS/DAY 813.65 MW
- -------------------------------- (1) Facility is owned by an owner/trustee pursuant to a sale/leaseback arrangement. (2) Facility has been designed to allow for the addition of another unit. (3) Facility is owned by the Client Community. (4) Phase II of the Tulsa facility, which was financed as a separate project, expanded the capacity of the facility from two to three units. (5) Energy Group subsidiaries were purchased after completion, and use a mass-burn technology that is not the Martin Technology. (6) Owned by a limited partnership in which the limited partners are not affiliated with Ogden. (7) Under contracts with the Connecticut Resource Recovery Authority and Northeast Utilities, the Energy Group operates only the boiler and turbine for this facility. 15 (8) Operating contracts were acquired after completion. Facility uses a refuse-derived fuel technology and does not employ the Martin Technology. (9) The Union Facility is leased to an Energy Group subsidiary. (e) TECHNOLOGY. The principal feature of the Martin Technology is the reverse-reciprocating stoker grate upon which the waste is burned. The patent for the basic stoker grate technology used in the Martin Technology expired in 1989, and a related patent expired in 1999. The Energy Group believes that unexpired patents on other portions of the Martin Technology and other proprietary know how would limit the ability of other companies to effectively use the basic stoker grate technology in competition with the Energy Group. There are several unexpired patents related to the Martin Technology including: (i) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires 2000; (ii) Method and Apparatus for Regulating the Furnace Output of Incineration Plants - expires 2007; (iii) Method for Regulating the Furnace Output in Incineration Plants - expires 2008; and (iv) Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants - expires 2008. More importantly, the Energy Group believes that it is Martin's know-how and worldwide reputation in the waste-to-energy field, and the Energy Group's know-how in designing, constructing and operating waste-to-energy facilities, rather than the use of patented technology, that is important to the Energy Group's competitive position in the waste-to-energy industry in the United States. Ogden does not believe that the expiration of the patent covering the basic stoker grate technology or patents on other portions of the Martin Technology will have a material adverse effect on Ogden's financial condition or competitive position. The Energy Group believes that mass burn technology is now the predominant technology used for the combustion of solid waste. Overall, there are several other mass-burn technologies available in the market including those of Von Roll, W+E, Takuma, Volund, Steinmueller, Deutsche Babcock, Lurgi, and Detroit Stoker. Martin and other vendors seek to implement improvements and modifications to its technology in order to maintain their competitive position with non-mass burn technologies. The Energy Group believes that the Martin technology is a proven and reliable mass burn technology, and that its association with Martin has created significant name recognition and value for the Energy Group's domestic waste-to-energy business. The Energy Group's efforts internationally have not been technology-specific. (f) THE COOPERATION AGREEMENT. Under an agreement between Martin and an Ogden affiliate (the "Cooperation Agreement"), the Energy Group has the exclusive rights to market the proprietary technology (the "Martin Technology") of Martin in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central and South America, and Israel. Martin is obligated to assist the Energy Group in installing, operating, and maintaining facilities incorporating the Martin Technology. The 15-year term of the Cooperation Agreement renews automatically each year unless notice of termination is given, in which case the Cooperation Agreement would terminate 15 years after such notice. Additionally, the Cooperation Agreement may be terminated by either party if the other fails to remedy its material default within 90 days of notice. The 16 Cooperation Agreement is also terminable by Martin if there is a change of control (as defined in the Cooperation Agreement) of Ogden Martin Systems, Inc. Termination would not affect the rights of the Energy Group to design, construct, operate, maintain, or repair waste-to-energy facilities for which contracts have been entered into or proposals made prior to the date of termination. (g) OTHER DEVELOPMENT EFFORTS. OWTS is actively pursuing several development efforts, some of which are in advanced stages of development. Among the most advanced projects are: In February of 2000, the Energy Group acquired a 13% equity interest in Prima s.r.l. ("PRIMA"), a special purpose Italian limited liability company, to develop, construct and operate a 15 MW mass burn waste-to-energy project near the City of Trezzo Sull' Lombardy Region, Italy (the "Trezzo Project"). The remainder of the equity in PRIMA is currently held by TTR Tecno Trattamento Rifiuti s.r.l., a subsidiary of Falck S.p.a. ("Falck"). The Trezzo Project will be operated by Ambiente 2000 s.r.l. ("A2000"), an Italian special purpose limited liability company of which Ogden owns 40% of the equity. The municipal solid waste used to fuel the project will come from municipalities under long term contracts with PRIMA and is guaranteed by Falck. PRIMA shall pay A2000 a Service Fee based on the number of tons of waste processed under a long term Operations and Maintenance Agreement, the terms of which have been finalized and such agreement is expected to be signed in the second quarter, 2000. The electrical output from the Trezzo Project will be sold at governmentally established preferential rates under a long term purchase contract to Italy's state owned utility company Ente Nazionale de Electtricita s.p.a. PRIMA is in the later stages of financing the development and construction of the facility through a limited recourse financing through Credit Agricole Indosuez and San Paolo IMI. The Energy Group has no other commitments in its waste-to-energy backlog as of December 31, 1999. In the first quarter of 2000, OWTE was selected by the Solid Waste Management Authority of Puerto Rico to negotiate an agreement for the design, construction and operation of an 1800 tons per day facility in northwest Puerto Rico. The project is expected to generate approximately 60MW of electricity, which will be sold to the Puerto Rico Electric Power Authority. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing or closing, some of which are not within the Energy Group's control. As such, no assurance can be given that these products will ultimately be developed successfully. WATER AND WASTEWATER The Energy Group's water and wastewater business is conducted through Ogden Water Systems, Inc. ("OWS"). OWS's mission is to develop, design, construct, maintain, operate and, in some cases, own, water and wastewater treatment facilities and distribution and collection networks in the United States, the Middle East, Latin America and elsewhere. 17 In the United States, the Energy Group seeks to participate in water projects in which, under contracts with municipalities, it privatizes water and/or wastewater facilities, agrees to build new or substantially augment existing facilities and agrees to operate and maintain the facilities under long-term contracts. In addition, the Energy Group currently has contracts with five communities in New York State for the operation of facilities in which it has no ownership or long-term leasehold interest. In countries other than the United States, the Energy Group is seeking water and wastewater opportunities in which it will provide services to municipalities in which it can own an equity interest in facilities under a concession that grants it the right to provide service to, and collect revenues from, consumers. The Energy Group believes that the lack of creditworthiness of some non-U.S. municipalities, which may result from their limited ability to raise revenues or from other causes, makes the collection of tariffs from the consumer a more secure source of revenue. In circumstances where the creditworthiness of a sponsoring municipality is adequate to support a limited recourse financing, the Energy Group may provide services to and collect fees from municipal entities or other governmental agencies. Under contractual arrangements, the Energy Group may be required to warrant certain levels of performance and may be subject to financial penalties or termination if it fails to meet these warranties. The Energy Group may be required to guarantee the performance of OWS. OWS seeks to not take responsibility for conditions that are beyond its control. During 1999, OWS purchased a controlling interest in DSS Environmental, Inc., which owns the patent for the DualSand -Registered Trademark- filtration technology. OWS believes that this technology offers superior performance at a competitive cost, and that it will have wide application for both water and wastewater projects. In addition, OWS believes that, because the DualSand -Registered Trademark- system is based on a modular design, it can be implemented over a wide range of project sizes. (a) WATER AND WASTEWATER PROJECTS. The Energy Group operates and maintains wastewater treatment facilities for five small municipalities in New York State. Such facilities together process approximately 16 million gallons per day ("mgd"). (b) PROJECTS UNDER CONSTRUCTION. The Energy Group entered into a Water Facilities Services Agreement with The Governmental Utility Services Corporation (the "GUSC") of the City of Bessemer, Alabama in 1997. The Agreement provides that the Energy Group will design, construct, operate and maintain a 25 mgd potable water treatment facility and associated transmission and pumping equipment, which will supply water to residents and businesses in Bessemer, Alabama, a suburb of Birmingham. The Energy Group will be compensated on a fixed price basis for design and construction of the facility, and will be paid a fixed fee plus passthrough costs for delivering processed water to the City's water distribution system. GUSC closed on its financing in 1998, and the Energy Group commenced design and construction shortly thereafter. Construction completion is expected during the second quarter of 2000. 18 (c) OTHER DEVELOPMENT EFFORTS. OWS has a number of development projects which it pursues at any given time. Among its most advanced development projects are: A consortium of which OWS is a member has received a project award with respect to a 32-year concession serving a population in excess of 700,000 in the City of Muscat, the capital of the Sultanate of Oman. The project encompasses taking over the existing wastewater treatment and collection facilities in Muscat, as well as the construction and operation of new wastewater infrastructure. The infrastructure capital program would be phased in over several years, with the first phase projected to require approximately $200 million in new construction. The Energy Group's role would be as operator on behalf of a joint venture to be formed. The joint venture's arrangement with the government would be on a Build/Own/Operate/Transfer basis, and some equity capital, expected to be approximately $15 million, would be required of the Energy Group. The implementation of the Muscat project remains subject to several conditions precedent, many of which are beyond the control of the Energy Group, including successful completion of key project contracts. OWS has also received an award as winning bidder for a $59 million, 4 mgd wastewater collection and sewer system in Key Largo, Florida. OWS expects to sign definitive agreements for the projects during the second quarter, 2000. During 1999, OWS also entered into an agreement with a consortium that has been awarded the exclusive rights to develop a wastewater system in Ajman, United Arab Emirates. The agreement gives OWS the exclusive rights to operate the project as well as the right to purchase a controlling interest in the project consortium. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing or closing each project, many of which are not within the Energy Group's control. As such, there can be no assurance that these projects will ultimately be developed successfully. ENVIRONMENTAL CONSULTING AND ENGINEERING The Energy Group's environmental consulting services are provided through Ogden Environmental and Energy Services Co., Inc. ("OEES") which provides a comprehensive range of environmental, infrastructure and energy consulting, engineering and design services to industrial and commercial companies, electric utilities and governmental agencies. These services include analysis and characterization, remedial investigations, engineering and design, data management, project management, regulatory assistance and remedial construction as well as concrete and civil construction projects which are provided to a variety of clients in the public and private sectors in the United States and abroad. Principal clients include major Federal agencies, particularly the Department of Defense, as well as major corporations in the chemical, petroleum, transportation, public utility and health care industries and Federal and state regulatory authorities. United States Government contracts may be terminated, in whole or in part, at the 19 convenience of the government or for cause. In the event of a convenience termination, the government is obligated to pay the costs incurred under the contract plus a fee based upon work completed. In 1999, Ogden announced its intention to sell its environmental consulting services. OTHER Datacom, Inc. (formerly Atlantic Design Company, Inc.) a contract manufacturer which conducts assembly and manufacturing operations at its facility located in Reynosa, Mexico near the boarder with McAllen, Texas. Datacom sells an overwhelming majority of its output under a supply contract with the Genicom Corporation, a specialty printer supplier. Genicom filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code on March 10, 2000. If the Genicom contract is rejected by Genicom, Datacom would be limited to its remedies as an unsecured creditor. DISCONTINUED BUSINESSES (A) ENTERTAINMENT During 1999, the Company conducted business in its Entertainment segment through Ogden Entertainment, Inc. ("Entertainment"). Entertainment was engaged in business activities related to owning, servicing, and operating public assembly facilities and entertainment attractions in the United States, Canada, Europe, South America, Latin America and Australia both directly and through partnerships and joint ventures Entertainment's business operations were divided into two categories: Concessions and Venue Management; and Parks and Attractions. In addition, Entertainment owns a 50% interest in the Metropolitan Entertainment Group, which is engaged in a number of activities related to the development and exhibition of entertainment products. Since September, 1999, the Company has reported the Entertainment Group as discontinued operations in its financial statements, and is currently in the process of selling the Entertainment business. (B) AVIATION Prior to September, 1999, the Company conducted business in its Aviation segment through two major operations: (i) Aviation Services, and (ii) Airport Privatization and Infrastructure Development. Aviation's Airport Privatization and Infrastructure operations designs, finances, builds and operates major airport facilities and other aviation infrastructure projects; provides airport development and management; Aviation Services provides ground handling and passenger services; cargo facility development and operations; and fueling and fuel facility management. These diversified services are performed throughout the world through joint ventures, consortiums, contracts with individual airlines, consolidated agreements with several airlines, and contracts with various airport authorities. Ogden Aviation's customer base consists of airlines companies and aviation authorities. The first step in providing aviation services is to obtain operating licenses at key locations from the governing aviation authorities. These licenses grant Aviation the right to compete in the airline services market at a particular airport and tend to be long-term in nature. Since September, 1999, the Company has reported its Aviation segment as discontinued operations in its financial statements, and is currently in the process of selling the Aviation business. 20 OTHER INFORMATION Any statements in this communication, including but not limited to the "Year 2000 Issue" discussion, which may be considered to be "forward-looking statements", as that term is defined in the Private Securities Litigation Reform Act of 1995, are subject to certain risk and uncertainties. The factors that could cause actual results to differ materially from those suggested by any such statements include, but are not limited to, those discussed or identified from time to time in Ogden public filings with the Securities and Exchange Commission and more generally, general economic conditions, including changes in interest rates and the performance of the financial markets; changes in domestic and foreign laws, regulations, and taxes; changes in competition and pricing environments; and regional or general changes in asset valuations. MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS Ogden's Energy businesses can be adversely affected by general economic conditions, war, inflation, adverse competitive conditions, governmental restrictions and controls, natural disasters, energy shortages, weather, the adverse financial condition of customers and suppliers, various technological changes and other factors over which Ogden has no control. The Energy Group's independent power business faces a domestic market that is expected to change substantially in the years ahead from a mature, highly regulated and uncompetitive market for energy services to a less regulated and more competitive market as utilities restructure for deregulation and termination of their traditional monopolies. The international market for energy services is characterized by a large demand and much competition for projects within a relatively immature market framework. The domestic market for the Energy Group's waste-to-energy services has largely matured and is now heavily regulated. New opportunities for domestic projects are expected to be scarce for the foreseeable future. This reflects a number of factors that adversely affected communities' willingness to make long-term capital commitments to waste disposal projects, including: declining prices at which energy can be sold, and low alternative disposal costs. Another factor adversely affecting the demand for new waste-to-energy projects, as well as having an impact on existing projects, was a 1994 United States Supreme Court decision invalidating state and local laws and regulations mandating that waste generated within a given jurisdiction be taken to a designated facility. The invalidation of such laws has created pressure on Client Communities as well as the Energy Group to lower costs or restructure contractual arrangements in order to continue to attract waste supplies and ensure that revenues are sufficient to pay for all project costs. See Waste to Energy, "Other Arrangements for Providing Waste-to-Energy Services". Foreign demand for waste to energy projects in which OWTE would participate is expected to exist only in unique circumstances where other disposal options are unavailable or unusually costly. 21 The Energy Group's water and wastewater business faces an immature but developing domestic market for private water and wastewater services, and, like energy, a large foreign demand within an immature marketplace. Competition for business is intense in all the domestic and foreign markets in which Ogden conducts or intends to conduct its businesses and its businesses are subject to a variety of competitiveness and market influences. The economic climate can adversely affect Ogden's operations. Ogden's Energy group expends substantial amounts for the development of new businesses. The financial support required to undertake some of these activities comes from Ogden. Beyond staffing costs, expenditures can include the costs of contract and site acquisition, feasibility and environmental studies, technical and financial analysis, and in some cases the preparation of extensive proposals in response to public or private requests for proposals. Development of some projects involves substantial risks which are not within their control. Success of a project may depend upon obtaining in a timely manner acceptable contractual arrangements and financing, appropriate sites, acceptable licenses, environmental permits and governmental approvals. Even after the required contractual arrangements are achieved, implementation of the project often is subject to substantial conditions that may be outside the control of the Company. In some, but not all, circumstances, the Energy group will make contractual arrangements for the partial recovery of development costs if the project fails to be implemented for reasons beyond its control. INTERNATIONAL BUSINESS DEVELOPMENT The Energy Group develops projects in many countries, and in doing so seeks to implement its strategy for the development of its business in selected international markets where private development is encouraged. It seeks to do so by focusing on a limited number of opportunities which can be developed in conjunction with local and international partners. Offices have been established in Hong Kong, Manila, Sao Paulo, Calcutta, Bangkok, Beijing, Ankara and London in order to service foreign projects. Opportunities in foreign countries for the services provided by the Energy Group are highly dependent upon the elimination of historic legal and political barriers to the participation of foreign capital and foreign companies in the financing, construction, ownership and operation of infrastructure facilities. The Energy Group has ownership interest and/or operates (or will operate upon completion of construction) projects in four continents. They are: - North America: 46 energy generating projects totaling 1114 MW (gross); 6 water or wastewater projects totaling 41 mgd capacity. - Asia: 12 energy generating projects totaling 1212 MW (gross). - South and Central America: 4 energy generating projects totaling 226 MW (gross). - Europe: 1 energy generating project of 15 MW (gross). 22 The development, construction, ownership and operation of facilities in foreign countries entails significant political and financial uncertainties and other structuring issues that typically are not involved in such activities in the United States. These risks include unexpected changes in electricity tariffs, conditions in financial markets, currency exchange rate fluctuations, currency repatriation restrictions, currency inconvertibility, unexpected changes in laws and regulations, political, economic or military instability, civil unrest and expropriation. Such risks have the potential to cause substantial delays or material impairment to the value of the project being developed or business being operated. Many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries. The political, social and economic conditions in some of these countries is typically less stable than those prevalent in the United States. The financial condition and creditworthiness of the potential purchasers of power and services provided by the Energy Group (which may be a governmental or private utility or industrial consumer) or of the suppliers of fuel for projects in these countries may not be as strong as those of similar entities in developed countries. The obligations of the purchaser under the power purchase agreement, the service recipient under the related service agreement and the supplier under the fuel supply agreement generally are not guaranteed by any host country or other creditworthy governmental agency. Whenever such governmental guarantees are not available, the Energy Group undertakes a credit analysis of the proposed power purchaser or fuel supplier. It also seeks, to the extent appropriate and achievable within the commercial parameters of a project, to require such entities to provide financial instruments such as letters of credit or arrangements regarding the escrowing of the receivables of such parties in the case of power purchasers. The Energy Group's IPP and waste-to-energy projects in particular are dependent on the reliable and predictable delivery of fuel meeting the quantity and quality requirements of the project facilities. The Energy Group will typically seek to negotiate long-term contracts for the supply of fuel with creditworthy and reliable suppliers. However, the reliability of fuel deliveries may be compromised by one or more of several factors that may be more acute or may occur more frequently in developing countries than in developed countries, including a lack of sufficient infrastructure to support deliveries under all circumstances, bureaucratic delays in the import, transportation and storage of fuel in the host country, customs and tariff disputes and local or regional unrest or political instability. In most of the projects in which the Energy Group participates internationally, it seeks, to the extent practicable, to shift the consequences of interruptions in the delivery of fuel, whether due to the fault of the fuel supplier or due to reasons beyond the fuel supplier's control, to the electricity purchaser or service recipient by securing a suspension of its operating responsibilities under the applicable agreements and an extension of its operating concession under such agreements and/or, in some instances, by requiring the energy purchaser or service recipient to continue to make payments in respect of fixed costs. In order to mitigate the effect of short-term interruptions in the supply of fuel, the Energy Group endeavors to provide on-site storage of fuel in sufficient quantities to address such interruptions. 23 Payment for services that the Energy Group provides will often be made in whole or part in the domestic currencies of the host countries. Conversion of such currencies into U.S. dollars generally is not assured by a governmental or other creditworthy country agency, and may be subject to limitations in the currency markets, as well as restrictions of the host country. In addition, fluctuations in value of such currencies against the value of the U.S. dollar may cause the Energy Group's participation in such projects to yield less return than expected. Transfer of earnings and profits in any form beyond the borders of the host country may be subject to special taxes or limitations imposed by host country laws. The Energy Group seeks to participate in projects in jurisdictions where limitations on the convertibility and expatriation of currency have been lifted by the host country and where such local currency is freely exchangeable on the international markets. In most cases, components of project costs incurred or funded in the currency of the United States are recovered without risk of currency fluctuation through negotiated contractual adjustments to the price charged for electricity or service provided. This contractual structure may cause the cost in local currency to the project's power purchaser or service recipient to rise from time to time in excess of local inflation, and consequently there is risk in such situations that such power purchaser or service recipient will, at least in the near term, be less able or willing to pay for the project's power or service. Due to the fact that many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries, the successful development of a project or projects may be adversely impacted by economic changes in such countries or by changes in government support for such projects. Adverse economic changes may, and have, resulted in initiatives (by local governments alone or at the request of world financial institutions) to reduce local commitments to pay long-term obligations in US dollars or US dollar equivalents. There is therefore risk that the Energy Group's development efforts in such countries may from time to time be adversely affected by such changes on a temporary or long-term basis. In addition, the Energy Group will generally participate in projects which provide services that are treated as a matter of national or key economic importance by the laws and politics of many host countries. There is therefore risk that the assets constituting the facilities of these projects could be temporarily or permanently expropriated or nationalized by a host country, or made subject to local or national control. The Energy Group will seek to manage and mitigate these risks through all available means that it deems appropriate. They will include: political and financial analysis of the host countries and the key participants in each project; guarantees of relevant agreements with creditworthy entities; political risk and other forms of insurance; participation by international finance institutions, such as affiliates of the World Bank, in financing of projects in which it participates; and joint ventures with other companies to pursue the development, financing and construction of these projects. 24 EQUAL EMPLOYMENT OPPORTUNITY In recent years, governmental agencies (including the Equal Employment Opportunity Commission) and representatives of minority groups and women have asserted claims against many companies, including some Ogden subsidiaries, alleging that certain persons have been discriminated against in employment, promotions, training, or other matters. Frequently, private actions are brought as class actions, thereby increasing the practical exposure. In some instances, these actions are brought by many plaintiffs against groups of defendants in the same industry, thereby increasing the risk that any defendant may incur liability as a result of activities which are the primary responsibility of other defendants. Although Ogden and its subsidiaries have attempted to provide equal opportunity for all of its employees, the combination of the foregoing factors and others increases the risk of financial exposure. YEAR 2000 ISSUES See discussion on Ogden's Year 2000 issues set forth in Part II, Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of this Form 10-K Report. EMPLOYEE AND LABOR RELATIONS Ogden and its subsidiaries currently employ approximately 2,600 U.S. and foreign employees in its continuing businesses. This figure does not include employees currently employed in discontinued businesses. Certain employees of Ogden are employed pursuant to collective bargaining agreements with various unions. During 1999 Ogden successfully renegotiated collective bargaining agreements in certain of its business sectors with no strike-related loss of service. Ogden considers relations with its employees to be good and does not anticipate any significant labor disputes in 2000. ENVIRONMENTAL REGULATORY LAWS (a) DOMESTIC. Ogden's business activities in the United States are pervasively regulated pursuant to Federal, state and local environmental laws. Federal laws, such as the Clean Air Act and Clean Water Act, and their state counterparts, govern discharges of pollutants to air and water. Other federal, state, and local laws, comprehensively govern the generation, transportation, storage, treatment, and disposal of solid waste, and also regulate the storage and handling of petroleum products, including hazardous waste (such laws and the regulations thereunder, "Environmental Regulatory Laws"). The Environmental Regulatory Laws and other federal, state, and local laws, such as the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"), make Ogden potentially liable on a joint and several basis for any environmental contamination which may be associated with the Company's 25 activities and the activities at sites, including landfills, which the Energy Group's subsidiaries have owned, operated, or leased or at which there has been disposal of residue or other waste handled or processed by such subsidiaries or at which there has been disposal of waste generated by the Energy Group's activities. Through its subsidiaries, the Energy Group leases and operates a landfill in Haverhill, Massachusetts, and leases a landfill in Bristol, Connecticut, in connection with its projects at those locations. Some state and local laws also impose liabilities for injury to persons or property caused by site contamination. Some Service Agreements provide for indemnification of the operating subsidiaries from some such liabilities. In addition, other subsidiaries involved in landfill gas projects have access rights to landfills pursuant to certain leases at landfill sites which permit the installation, operation and maintenance of landfill gas collection systems. A portion of these landfill sites is and has been a federally designated "superfund" site. Each of these leases provide for indemnification of the Energy Group subsidiary from some liabilities associated with these sites. The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of waste-to-energy, independent power and water and wastewater projects. There can be no assurance that all required permits will be issued, and the process of obtaining such permits can often cause lengthy delays, including delays caused by third-party appeals challenging permit issuance. Failure to meet conditions of these permits or of the Environmental Regulatory Laws and the corresponding regulations can subject an operating subsidiary to regulatory enforcement actions by the appropriate governmental unit, which could include monetary penalties, and orders requiring certain remedial actions or limiting or prohibiting operation. In addition, certain of Ogden's discontinued businesses also are required to comply with various regulatory and permitting requirements and can be subject to regulatory enforcement actions. To date, Ogden has not incurred material penalties, been required to incur material capital costs or additional expenses, nor been subjected to material restrictions on its operations as a result of violations of environmental laws, regulations, or permits. The Environmental Regulatory Laws and Federal and state governmental regulations and policies governing their enforcement are subject to revision. New technology may be required or stricter standards may be established for the control of discharges of air or water pollutants for storage and handling of petroleum products or for solid or hazardous waste or ash handling and disposal. Thus, as new technology is developed and proven, it may be required to be incorporated into new facilities or major modifications to existing facilities. This new technology may often be more expensive than that used previously. The Clean Air Act Amendments of 1990 required EPA to promulgate New Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable to new and existing municipal waste combustion units for particulate matter (total and fine), opacity, sulfur dioxide, hydrogen chloride, oxides of nitrogen, carbon monoxide, dioxins and dibenzofurans. The NSPS and EG, which were issued in final form in 1995, require capital improvements or operating changes to most of the waste-to-energy facilities operated by OWTE to control emissions of nitrogen oxides, organics, mercury and acid gases. EPA has since issued a 26 final rule which slightly revised the emission limits for NOX, CO, SO2, HCl, dioxin, cadmium, and lead, tightening all but the NOX limit. The general compliance deadline for the NSPS and EG is December 19, 2000, the deadline for these seven revised limits is August 26, 2002. As a practical matter the capital and operating changes necessary to meet them is very nearly identical to that needed to achieve the prior NSPS and EG limits. OWTE anticipates that projects to install all new equipment needed to achieve the applicable new limits under the NSPS and EG will be undertaken in a single effort, to be completed by December 19, 2000. The costs to meet new rules for existing facilities owned by Client Communities generally will be borne by the Client Communities. For projects owned or leased by Ogden and operated under a Service Agreement, the Client Community has the obligation to fund such capital improvements, to which Ogden may be required to make an equity contribution. In certain cases, Ogden is required to fund the full cost of these capital improvements at those facilities that are either not operated pursuant to a Service Agreement or whose Service Agreement does not require the costs to be borne by the Client Community. The Company estimates that its commitments for these capital improvements will total approximately $30 million during 2000. Only moderate additional costs are likely to be incurred during 2001 and 2002. OWTE believes that most costs incurred to meet EG and operating permit requirements at facilities it operates may be recovered from Client Communities and other users of its facilities through increased service fees permitted under applicable contracts. Such increased service fees will be paid for either out of their general revenues or by increasing fees charged to facility users by the Client Community. Because of the reluctance or inability of some municipalities to increase taxes, or tipping fees if the market may not bear the increase without some loss of waste deliveries, Client Communities may seek to have OWTE subsidize the cost, or modify its contractual relationship. The Environmental Remediation Laws prohibit disposal of hazardous waste other than in small, household-generated quantities at OWTE's municipal solid waste facilities. The Service Agreements recognize the potential for improper deliveries of hazardous wastes and specify procedures for dealing with hazardous waste that is delivered to a facility. Although certain Service Agreements require the Operating Subsidiary to be responsible for some costs related to hazardous waste deliveries, to date, no Operating Subsidiary has incurred material hazardous waste disposal costs. Domestic drinking water facilities developed in the future by OWS will be subject to regulation of water quality by the EPA under the Federal Safe Drinking Water Act and by similar state laws. Domestic wastewater facilities are subject to regulation under the Federal Clean Water Act and by similar state laws. These laws provide for the establishment of uniform minimum national water quality standards, as well as governmental authority to specify the type of treatment processes to be used for public drinking water. Under the Federal Clean Water Act, OWS may be required to obtain and comply with National Pollutant Discharge Elimination System permits for discharges from its treatment stations. Generally, under its current contracts, the client community is responsible for fines and penalties resulting from the delivery to OWS's treatment facilities of water not meeting standards set forth in those contracts. 27 (b) INTERNATIONAL. Among the Energy Group's objectives is providing energy generating and other infrastructure through environmentally protective project designs, regardless of the location of a particular project. This approach is consistent with the increasingly stringent environmental requirements of multilateral financing institutions, such as the World Bank, and also with the Energy Group's experience in domestic waste-to-energy projects, where environmentally protective facility design and performance has been required. The laws of other countries also may require regulation of emissions into the environment, and provide governmental entities with the authority to impose sanctions for violations, although these requirements are generally not as rigorous as those applicable in the United States. Compliance with environmental standards comparable to those of the United States may be conditions to the provision of credit by multilateral banking agencies as well as other lenders or credit providers. As with domestic project development, there can be no assurance that all required permits will be issued, and the process can often cause lengthy delays. ENERGY AND WATER REGULATIONS The Energy Group's domestic businesses are subject to the provisions of federal, state and local energy laws applicable to their development, ownership and operation of their domestic facilities, and to similar laws applicable to their foreign operations. Federal laws and regulations govern transactions with utilities, the types of fuel used and the power plant ownership. State regulatory regimes govern rate approval and other terms under which utilities purchase electricity from independent power producers, except to the extent such regulation is pre-empted by federal law. Pursuant to Federal Public Utility Regulatory Policies Act ("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated regulations that exempt qualifying facilities (facilities meeting certain size, fuel and ownership requirements, or "QFs") from compliance with certain provisions of the Federal Power Act ("FPA"), the Public Utility Holding Company Act of 1935 ("PUHCA"), and certain state laws regulating the rates charged by, or the financial and organizational activities of, electric utilities. PURPA was enacted in 1978 to encourage the development of cogeneration facilities and other facilities making use of non-fossil fuel power sources, including waste-to-energy facilities. The exemptions afforded by PURPA to qualifying facilities from regulation under the FPA and PUHCA and most aspects of state electric utility regulation are of great importance to the Energy Group and its competitors in the waste-to-energy and independent power industries. Except with respect to waste to energy facilities with a net power production capacity in excess of thirty megawatts (where rates are set by FERC), state public utility commissions must approve the rates, and in some instances other contract terms, by which public utilities purchase electric power from QFs. PURPA requires that electric utilities purchase electric energy produced by QFs at negotiated rates or at a price equal to the incremental or "avoided" cost that would have been incurred by the utility if it were to generate the power itself or purchase it from another source. PURPA does not expressly require public utilities to enter into long-term contracts to purchase the output supplied by QFs. 28 Under PUHCA, any entity owning or controlling ten percent or more of the voting securities of a "public utility company" or company which is a "holding company" of a public utility company is subject to registration with the Securities and Exchange Commission (the "SEC") and regulation by the SEC unless exempt from registration. Under PURPA, most projects that satisfy the definition of a "qualifying facility" are exempt from regulation under PUHCA. Under the Energy Policy Act of 1992, projects that are not QFs under PURPA but satisfy the definition of an "exempt wholesale generator" ("EWG") are not deemed to be public utility companies under PUHCA. Finally, projects that satisfy the definition of "foreign utility companies" are exempt from regulation under PUHCA. The Energy Group believes that all of its operating projects involved in the generation, transmission and/or distribution of electricity, both domestically and internationally, qualify for an exemption from PUHCA and that it is not and will not be required to register with the SEC. In the past there has been consideration in the U.S. Congress of legislation to repeal PURPA entirely, or at least to repeal the obligation of utilities to purchase power from QFs. There is continuing support for grandfathering existing QF contracts if such legislation is passed. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire electric assets throughout the United States that are geographically widespread, eliminating the current requirement that the utility's electric assets be capable of physical integration. Also, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. With the repeal of PURPA or PUHCA, competition for independent power generators from utilities would likely increase. This is likely to have little or no impact on existing Energy Group projects, but may mean additional competition from highly-capitalized companies seeking to develop projects in the U.S. In addition, the FERC, many state public utility commissions and Congress have implemented or are considering a series of proposals to restructure the electric utility industry in the United States to permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC has issued a series of orders requiring utilities to offer wholesale customers and suppliers open access on their transmission lines on a comparable basis to the utilities' own use of the line. All public utilities have already filed "open access" tariffs to implement this requirement. As the trend toward increased competition continues, the utilities contend that they are entitled to recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. These include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices, or rescind or buy out these contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Regulatory agencies to date have recognized the continuing validity of approved power purchase agreements, and have rejected attempts by some utilities to abrogate these contracts. At the same time, regulatory agencies have encouraged renegotiations of power contracts where rate payer savings can be achieved as a result. The 29 Energy Group anticipates that the regulatory impetus to restructure "above market" power purchase agreements will continue in many of the jurisdictions where it owns or operates generating facilities. Future U.S. electric rates may be deregulated in a restructured U.S. electric utility industry and increased competition may result in lower rates and less profit for U.S. electricity sellers developing new projects. Falling electricity prices and uncertainty as to the future structure of the industry can be expected to inhibit United States utilities from entering into long-term power purchase contracts. On the other hand, deregulation could open up markets for the sale of electricity, including retail markets, previously available only to regulated utilities. The Energy Group presently has, and intends to continue to acquire, ownership and operating interests in electric generating projects outside the United States. Most countries have expansive systems for the regulation of the power business. These generally include provisions relating to ownership, licensing, rate setting and financing of generating and transmission facilities. OWS's business may be subject to the provisions of state, local and, in the case of foreign operations, national utility laws applicable to the development, ownership and operation of water supply and wastewater facilities. Whether such laws apply depends upon the local regulatory scheme as well as the manner in which OWS provides its services. Where such regulations apply, they may relate to rates charged, services provided, accounting procedures, acquisitions and other matters. In the United States, rate regulations have typically been structured to provide a predetermined return on the regulated entities investments. In other jurisdictions, the trend is towards periodic price reviews comparing rates to anticipated capital and operating revenues. The regulated entity benefits from efficiencies achieved during the period for which the rate is set. 30 Item 2. PROPERTIES Ogden's executive offices are located at Two Pennsylvania Plaza, New York, New York 10121, pursuant to a lease that expires on April 30, 2008, subject to an option by Ogden to renew the lease for an additional five years. Ogden Services Corporation also owns a 12,000 square-foot warehouse and office facility located in Long Island City, New York. The principal executive offices of Ogden Energy Group, Inc. are located in Fairfield, New Jersey, in an office building located on a 5.4 acre site owned by Ogden Projects, Inc. It also leases approximately 47,000 square feet of office space in Fairfax, Virginia, and approximately 910 square meters of office space in Hong Kong. The following table summarizes certain information relating to the locations of the properties owned or leased by Ogden Energy Group, Inc. or its subsidiaries:
APPROXIMATE SITE SIZE LOCATION IN ACRES SITE USE NATURE OF INTEREST(1) - -------- --------- --------- ----------------------- 1. Fairfield, New Jersey 5.4 Office space Own 2. Marion County, Oregon 15.2 Waste-to-energy facility Own 3. Alexandria/Arlington, Virginia 3.3 Waste-to-energy facility Lease 4. Bristol, Connecticut 18.2 Waste-to-energy facility Own 5. Bristol, Connecticut 35.0 Landfill Lease 6. Indianapolis, Indiana 23.5 Waste-to-energy facility Lease 7. Stanislaus County, California 16.5 Waste-to-energy facility Lease 8. Babylon, New York 9.5 Waste-to-energy facility Lease 9. Haverhill, Massachusetts 12.7 Waste-to-energy facility Lease 10. Haverhill, Massachusetts 16.8 RDF processing facility Lease 11. Haverhill, Massachusetts 20.2 Landfill Lease 12. Lawrence, Massachusetts 11.8 RDF power plant (closed) Own 13. Lake County, Florida 15.0 Waste-to-energy facility Own 14. Wallingford, Connecticut 10.3 Waste-to-energy facility Lease 15. Fairfax County, Virginia 22.9 Waste-to-energy facility Lease 16. Union County, New Jersey 20.00 Waste-to-energy facility Lease
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17. Huntington, New York 13.0 Waste-to-energy facility Lease 18. Warren County, New Jersey 19.8 Waste-to-energy facility Lease 19. Hennepin County, Minnesota 14.6 Waste-to-energy facility Lease 20. Tulsa, Oklahoma 22.0 Waste-to-energy facility Lease 21. Onondaga County, New York 12.0 Waste-to-energy facility Lease 22. New Martinsville, W. VA N/A Hydroelectric Power Generating Lease 23. Heber, California N/A Geothermal Power Plant Lease 24. Heber, California N/A Geothermal Power Plant Lease 25. Bataan, Philippines 3,049 sq. meters Diesel Power Plant Lease 26. Zhejiang Province, N/A Coal-fired Land Use Right People's Republic of Cogeneration Facility reverts to China China Joint Venture Partner Upon termination of Joint Venture Agreement. 27. Shandong Province, N/A Coal-fired Land Use Right People's Republic of Cogeneration Facility reverts to China Joint China Venture Partner upon termination of Joint Venture Agreement. 28. Jiangsu Province, N/A Coal-fired Land Use Right People's Republic of Cogeneration Facility reverts to China Joint China Venture Partner upon termination of Joint Venture Agreement 29. Jiangsu Province, N/A Coal-fired Land Use Right People's Republic of China Cogeneration Facility reverts to China Joint Venture Partner upon termination of Joint Venture Agreement 30. Casa Diablo Hot Springs, 1,510 Geothermal Projects Land Use Rights from California Geothermal Resource Lease 31. Rockville, Maryland N/A Landfill Gas Project Lease 32. San Diego, California N/A Landfill Gas Project Lease 33. Oxnard, California N/A Landfill Gas Project Lease
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34. Sun Valley, California N/A Landfill Gas Project Lease 35. Salinas, California N/A Landfill Gas Project Lease 36. Santa Clara, California N/A Landfill Gas Project Lease 37. Stockton, California N/A Landfill Gas Project Lease 38. Los Angeles, California N/A Landfill Gas Project Lease 39. Burney, California 40 Wood Waste Project Lease 40. Jamestown, California 26 Wood Waste Project Own (50%) 41. Westwood, California 60 Wood Waste Project Own 42. Oroville, California 43 Wood Waste Project Lease 43. Whatcom County, Washington N/A Hydroelectric Project Own (50%) 44. Weeks Falls, Washington N/A Hydroelectric Project Lease 45. Haripur, Bangladesh 4.6 Gas/Diesel Project Lease 46. Cavite, Philippines 13,122 Diesel Project Lease sq. meters 47. Chonburi, Thailand 5.92 Gas Project Own
- ----------------------- (1) All ownership or leasehold interests relating to projects are subject to material liens in connection with the financing of the related project, except those listed above under items 12, 26-29, and 31-42. In addition, all leasehold interests extend at least as long as the term of applicable project contracts, and several of the leasehold interests are subject to renewal and/or purchase options. 33 ITEM 3. LEGAL PROCEEDINGS The Company has various legal proceedings involving matters arising in the ordinary course of business. The Company does not believe that there are any pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company is a party or to which any of its property is subject, the outcome of which would have a material adverse effect on the Company's consolidated position or results of operation. The Company's operations are subject to various Federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the Company's operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, the Company believes that it is in substantial compliance with existing environmental laws and regulations. In connection with certain previously divested operations, the Company may be identified, along with other entities, as being among potentially responsible parties responsible for contribution for costs associated with the correction and remediation of environmental conditions at various hazardous waste disposal sites subject to CERCLA. In certain instances the Company may be exposed to joint and several liability for remedial action or damages. The Company's ultimate liability in connection with such environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation, the financial viability of other companies that also sent waste to a given site and its contractual arrangement with the purchaser of such operations. The potential costs related to all of the foregoing matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the Company's responsibility. Although the ultimate outcome and expense of any litigation, including environmental remediation, is uncertain, the Company believes that the following proceedings will not have a material adverse effect on the Company's consolidated financial position or results of operations. (a) Environmental Matters (i) Ogden Aviation Fueling Company of Virginia, Inc. ("Ogden Virginia") has tentatively agreed with the U.S. Department of Justice to accept one misdemeanor plea for negligent violation of the Clean Water Act as a result of a fuel spill from a holding tank in October 1996 at a tank farm formerly operated by Ogden Virginia at Dulles International Airport in Washington, D.C. The plea includes payment of a $200,000 penalty. 34 (ii) Ogden was recently served with a lawsuit entitled "AIRFRANCE, ET. AL. V. OGDEN AVIATION FUELING COMPANY OF VIRGINIA, INC. AND OGDEN AVIATION SERVICES, INC." (Circuit Ct., Fairfax Co., Index No. 183590) in which certain of the airlines seek recovery of cleanup costs for which they reimbursed Ogden, arising from a spill of aviation fuel from a holding tank in October 1996 at the former tank farm operated by Ogden at Dulles International Airport. The plaintiffs include United, the largest carrier that operated out of Dulles in 1996, as well as nine other airlines - Air France, America West, Austrian Airlines, British Airways, Continental, Lufthansa, Northwest, UPS and Virgin. The suit claims damages in the amount of at least $731,149.76, plus interest. This dollar amount reflects the portion of the spill cleanup paid by the named plaintiffs. Total cleanup costs were in the range of $1,000,000, but apparently not all the airlines have joined in the suit at this time. The suit alleges damages on two theories: (1) breach of contract in that Ogden was not authorized under the contract to charge the airlines spill related costs; and (2) equitable relief in that Ogden has been unjustly enriched at the expense of the airlines. Ogden has filed a motion to dismiss the complaint on the grounds that it was never a party to the fuel service agreements, a motion to dismiss the unjust enrichment claim and has answered the claim arising under the contract. Ogden has taken the position that fuel spill clean up costs were properly charged back to the plaintiff airlines. (iii) Ogden has been in negotiations with the Port Authority of New York and New Jersey to resolve all liabilities associated with Ogden's operations at the Bulk and Satellite Tank Farms located at the John F. Kennedy International Airport in New York, New York. Ogden has reached an agreement in principle with the Port Authority under which Ogden will make an upfront payment of $1,000,000 with additional payments tied to the extension of the lease totaling $1,200,000 from 1999 through 2008 ($200,000 for first 4 years and $100,000 for remaining 4 years). The active groundwater remediation currently being conducted at the Satellite tank farm has been ongoing since 1991 and is paid for by the airlines. The active groundwater remediation at the Bulk tank farm is being performed and paid for by the Port Authority pursuant to an Administrative Order with New York State Department of Environmental Conservation. (iv) Ogden has been requested by United Airlines ("United") and American Airlines ("American") to participate in the remediation of underground environmental contamination at Buildings 56 & 57 at the John F. Kennedy International Airport in New York, New York. United held the lease to Building 56 from the mid-1950's to 1991, and subleased to American for the period 1989 to 1991. Since 1991, American has been the lessee of Building 56. American entered into a lease agreement for Building 57 in August 1976. By letter dated March 6, 1996, United notified Ogden of its potential liability under New York's Navigation Law (the "Spill Law") for petroleum discharges at Building 56. United advised that it spent approximately $500,000 in investigatory costs and that it estimated an additional $3,000,000 to $4,000,000 in remediation costs. Ogden received a letter dated April 6, 1998, from United and American (the "Airlines") notifying Ogden of potential liability under the Spill Law and under agreements between Ogden and the Airlines for petroleum discharges at Building 56. The Airlines further notified Ogden that they spent $1,050,000 on a remediation program to date, estimated an additional $3,300,000 in expenditures and that they expected Ogden (without citing any facts with respect to the cause of the problem or Ogden's role) to cooperate in the remediation and be responsible for 75% of the costs. Ogden received a letter dated September 30, 1999 from American further notifying Ogden of its potential liability under the Spill 35 Law and the Fuel Service Agreement between Ogden and American. American demanded that Ogden participate in financing of investigation and remediation activities at Buildings 56 & 57. American estimated that it would incur future costs of $70,000,000 to remediate its leasehold in accordance with New York State Department of Environmental Conservation requirements. American has since advised Ogden that its cost estimate has been reduced to approximate $30,000,000 - - $35,000,000. United Airlines filed suit against Ogden in the Supreme Court of the State of New York, County of New York on January 4, 2000 seeking $1,972,000 in technical contractor and legal costs incurred in connection with Building 56 and declaratory judgement for future costs and damages that United may incur. Ogden believes that under their respective leases with the Port Authority of New York and New Jersey, United and American are responsible for the underground piping and the hydrant pits on the leased premises. Ogden is only responsible for the hydrants heads. United and American have failed to demonstrate how Ogden is responsible for any environmental contamination on the Buildings 56 & 57 leaseholds. Ogden also believes it has meritorious defenses to the allegations made in the United suit and to the allegations brought by American. (b) Shareholder Litigation On September 22, October 1, and October 12, 1999, complaints (the "Complaints") denominated as class actions (the "Actions") were filed in the United States District Court for the Southern District of New York against the Company, the Company's former Chairman and Chief Executive, R. Richard Ablon, and Robert M. DiGia (incorrectly identified in the Complaints as the Chief Financial Officer and Senior Vice President of the Company). The Complaints, which are largely identical to one another, are brought by alleged shareholders of the Company and purport to assert claims under the federal securities laws. In general, the Complaints allege that the Company and the individual defendants disseminated false and misleading information during the period of March 11, 1999 through September 17, 1999 (the "Class Period") with respect to the Company's intended reorganization plans and its financial condition. The Complaints seek the certification of a class of all purchasers of Ogden Corporation common stock during the Class Period. By order dated December 22, 1999, the Actions have been consolidated for all purposes and lead plaintiffs and lead counsel have been appointed. On February 28, 2000 plaintiffs filed a consolidated amended compliant (the "Amended Compliant"). The Amended Complaint repeats the allegations made in the original complaints and adds new allegations with respect to the timing of the reporting of certain losses experienced by Ogden. In the Amended Complaint, Plaintiffs have added Raymond E. Dombrowski, Jr., Ogden's Senior Vice President and Chief Financial Officer as a defendant. There has been no discovery in the Actions. While the Actions are at a 36 very early stage, the Company believes it has meritorious defenses to the allegations made in the Complaints and intends to defend the Actions vigorously. (c) Other Litigation On November 5, 1999, the Company received a summons and complaint filed in the Supreme Court of the State of New York, brought by R. Richard Ablon, the Company's former Chairman, President and Chief Executive Officer. In general, this complaint alleges that the Company has breached the employment agreement between the Company and Mr. Ablon (the terms of which are described in the company's most recent proxy statement), and seeks damages in the amount of $12.5 million, plus continuation of pension and certain other benefits valued in such complaint at approximately $10 million. In December 1999 a settlement was reached between Ogden and Mr. Ablon whereby Ogden agreed (i) to pay Mr. Ablon an aggregate of $15.0 million between January 3, 2000 and July 3, 2000; (ii) not to assert any offsets to the foregoing payments; (iii) to pay a portion of Mr. Ablon's legal fees in the amount of $50,000; (iv) that the Demand Notes of Mr. Ablon in the amount of $1,816,757 would be forgiven and no interest would be charged or forgiven; (v) to maintain Mr. Ablon's medical insurance program as currently provided until December 31, 2004 at which time his participation would continue at Mr. Ablon's own cost; (vi) to provide him with $2.0 million of term life insurance until he reaches age 65; and (vii) that Mr. Ablon's obligations under his Employment Agreement would be deemed fulfilled. Mr. Ablon agreed to immediately withdraw his lawsuit by stipulation and without prejudice pending the payment of the $15.0 million on or before July 3, 2000, whereupon the withdrawal will automatically become a withdrawal with prejudice. 37 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders of Ogden during the fourth quarter of 1999. EXECUTIVE OFFICERS OF OGDEN Set forth below are the names, ages, positions and offices held and years appointed, of Ogden's current "executive officers" (as defined by Rule 3b-7 of the Securities Exchange Act of 1934).
CONTINUALLY AN OGDEN POSITION AND EXECUTIVE OFFICE HELD AGE AS OF 3/1/2000 OFFICER SINCE NAME Scott G. Mackin(1) President and Chief 43 1992 Executive Officer Jesus Sainz Executive Vice President 56 1998 Raymond E. Dombrowski, Jr. Senior Vice President and 45 1998 Chief Financial Officer Lynde H. Coit Senior Vice President and 45 1991 General Counsel Rodrigo Arboleda Executive Vice President, 59 1995 Business Development, Latin America David L. Hahn Senior Vice President, 48 1995 Aviation
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CONTINUALLY AN OGDEN POSITION AND EXECUTIVE NAME OFFICE HELD AGE AS OF 3/1/2000 OFFICER SINCE - ------ ------------ ----------------- -------------- Gary D. Perusse Senior Vice President, Risk 51 1996 Management Peter Allen Senior Vice President 63 1998 Bruce W. Stone Executive Vice President 52 1997 for Waste-to-Energy Operations and Managing Director-Ogden Energy Group, Inc. B. Kent Burton Senior Vice President, 48 1997 Policy and Communications Peter Cain Vice President, Finance and 42 1997 Treasurer William J. Metzger Vice President, and Chief 41 1999 Accounting Officer
(1) ON SEPTEMBER 16, 1999 R. RICHARD ABLON RESIGNED AS A DIRECTOR OF OGDEN AND AS OGDEN'S CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER AND OGDEN'S BOARD OF DIRECTORS APPOINTED MR. MACKIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER AND DIRECTOR. There is no family relationship by blood, marriage or adoption (not more remote than first cousins) between any of the above individuals and any Ogden director. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualified. There are no arrangements or understandings between any of the above officers and any other person pursuant to which any of the above was selected as an officer. 39 The following briefly describes the business experience, the principal occupation and employment of the foregoing Executive Officers during the past five years: Scott G. Mackin, has served as President and Chief Executive Officer of Ogden since September 1999, prior thereto he served as Executive Vice President of Ogden from January 1997 to September 1999 and as President and Chief Operating Officer of Ogden Energy Group, Inc., an Ogden subsidiary, since January 1991. Jesus Sainz served as an Ogden director from 1994 until January 1, 1998. On January 15, 1998 he was appointed Executive Vice President of Ogden. For more than five years prior to 1997, Mr. Sainz served as Executive Vice Chairman of a private Spanish company which he created in 1984 and which holds interests in companies operating in such fields as foreign trade, fast food and real estate. Raymond E. Dombrowski, Jr. was appointed Senior Vice President and Chief Financial Officer of Ogden on September 17, 1998. From 1997 until he joined Ogden he served as General Attorney, Finance, Bell Atlantic Headquarters, responsible for all domestic and international finance transactions. Between 1994 and 1997 Mr. Dombrowski served as Counsel, Treasury and Finance, Bell Atlantic Headquarters, with responsibilities in the area of structuring, negotiating and documenting sensitive financing structures. Lynde H. Coit has been Senior Vice President and General Counsel of Ogden for more than the last five years. Rodrigo Arboleda was appointed Senior Vice President of Ogden in January 1995 and Executive Vice President in March 1999. For more than the last five years he served as Ogden's Senior Vice President-Business Development-Latin America operations. David L. Hahn was appointed Senior Vice President, Business Development, Asia in January 1995 and since 1997 he has served as Ogden's Senior Vice President, Aviation and Chief Operating Officer of Ogden's Aviation operations. Prior to 1995 he served as Vice President-Marketing of Ogden Services Corporation. Gary D. Perusse was appointed Senior Vice President - Risk Management in September, 1996. Prior thereto he had served as Director - Risk Management of Ogden for more than five years. Peter Allen has served as a Senior Vice President of Ogden since January 1998 and as Senior Vice President and General Counsel of Ogden Services Corporation, an Ogden subsidiary, for more than the last five years. Bruce W. Stone was designated an Executive Officer of Ogden in 1997. He currently 40 serves as Executive Vice President and Managing Director of Ogden Energy Group, Inc., an Ogden subsidiary, a position he has held since January 29, 1991. B. Kent Burton has served as Senior Vice President - Policy and Communications of Ogden since May 1999, from May 1997 to May 1999 he served as Vice President-Policy and Communications of Ogden and prior thereto he served as Senior Vice President of the Ogden Energy Group, Inc., an Ogden subsidiary, in political affairs and lobbying activities. Peter Cain has served in various financial capacities as a senior officer of many of Ogden's major subsidiaries for more than the last five years. He has served as Ogden's Vice President of Finance since 1997 and was appointed Ogden's Treasurer in 1998. William J. Metzger has served as Vice President and Chief Accounting Officer of Ogden since May, 1999, from April, 1996 to April, 1999 he served as the Chief Accounting Officer of Ogden Energy Group, Inc., an Ogden subsidiary, and from September 1990 to April 1996 he served as a Senior Manager at Deloitte & Touche LLP. 41 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Ogden Corporation and Subsidiaries PRICE RANGE OF STOCK AND DIVIDEND DATA
1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- High Low High Low Common: First Quarter.......................................... 28 22-5/8 29-3/4 24-1/2 Second Quarter......................................... 25-15/16 23-3/16 32-1/2 26-15/16 Third Quarter.......................................... 27-1/2 9-1/2 28-7/8 23 Fourth Quarter......................................... 14-3/8 8-7/16 28-7/16 23-5/8 -------------------------------------------------------------------- Preferred: First Quarter.......................................... 160 160 170 170 Second Quarter......................................... 160 155 180 177 Third Quarter.......................................... 155 154 158 150 Fourth Quarter......................................... 154 68 165 145 --------------------------------------------------------------------
Ogden's common and $1.875 preferred stocks are listed on the New York Stock Exchange. As of March 31, 2000 there were approximately 5,665 common stockholders. Quarterly common stock dividends of $.3125 per share were paid to shareholders of record for the first two quarters of 1999 and the four quarters of 1998, the dividend for the last quarter of 1998 being paid in January of 1999. The Company suspended its common stock dividend in the third quarter of 1999. Quarterly dividends of $.8376 were paid for the four quarters of 1999 and 1998 on the $1.875 preferred stock. On March 3, 1999, pursuant to an Agreement and Plan of Merger, a subsidiary of Ogden acquired 100% of the issued and outstanding stock of Flight Services Group, Inc. ("FSG") from the two individual shareholders (the "Shareholders") of FSG. Pursuant to this transaction Ogden issued an aggregate of 207,190 shares of restricted common stock, par value $.50 per share (the "Common Stock") to the Shareholders. The Common Stock issued to the Shareholders was exempt from registration pursuant to Rule 501 and 505 of Regulation D of the Securities Act of 1933, as amended (the "1933 Act") and Rule 144 of the Securities Exchange Act of 1934, as amended. The Shareholders executed an Investment Letter agreeing to abide by all of the requirements of the foregoing Rules and Regulations and each share of Common Stock issued to the Shareholders contains a legend to the effect that the shares were acquired for investment and not with a view to the public distribution thereof and will not be transferred in violation of the 1933 Act. 42 Ogden Corporation and Subsidiaries ITEM 6. SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- (In thousands of dollars, except per-share amounts) TOTAL REVENUES FROM CONTINUING OPERATIONS............... $ 1,000,350 $ 896,496 $ 958,371 $ 1,209,045 $ 1,433,632 ------------- ------------- ------------- ------------ -------------- Income (loss) from continuing operations before cumulative effect of change in accounting principle.... (36,290) 37,248 36,787 39,081 17,442 Income (loss) from discontinued operations............. (41,851) 49,722 38,886 25,453 (9,998) Cumulative effect of change in accounting principle.... (3,820) ------------- ------------- ------------- ------------ -------------- Net income (loss)...................................... (81,961) 86,970 75,673 64,534 7,444 ------------- ------------- ------------- ------------ -------------- BASIC EARNINGS (LOSS) PER SHARE: Income (loss) from continuing operations before cumulative effect of change in accounting principle.... (0.74) 0.74 0.73 0.78 0.35 Income (loss) from discontinued operations............. (0.85) 1.00 0.78 0.51 (0.20) Cumulative effect of change in accounting principle.... (0.08) ------------- ------------- ------------- ------------ -------------- Total.................................................. (1.67) 1.74 1.51 1.29 0.15 ------------- ------------- ------------- ------------ -------------- DILUTED EARNINGS (LOSS) PER SHARE: Income (loss) from continuing operations before cumulative effect of change in accounting principle.... (0.74) 0.73 0.72 0.77 0.35 Income (loss) from discontinued operations............. (0.85) 0.98 0.76 0.50 (0.20) Cumulative effect of change in accounting principle.... (0.08) ------------- ------------- ------------- ------------ -------------- Total.................................................. (1.67) 1.71 1.48 1.27 0.15 ------------- ------------- ------------- ------------ -------------- TOTAL ASSETS........................................... 3,727,148 3,647,554 3,443,981 3,401,382 3,451,407 ------------- ------------- ------------- ------------ -------------- LONG-TERM OBLIGATIONS.................................. 1,884,427 1,864,772 1,911,707 1,935,306 2,022,734 ------------- ------------- ------------- ------------ -------------- SHAREHOLDERS' EQUITY................................... 443,050 549,100 566,091 550,925 546,978 ------------- ------------- ------------- ------------ -------------- SHAREHOLDERS' EQUITY PER COMMON SHARE.................. 8.94 11.20 11.24 11.06 11.04 ------------- ------------- ------------- ------------ -------------- CASH DIVIDENDS DECLARED PER COMMON SHARE............... .625 1.25 1.25 1.25 1.25 ------------- ------------- ------------- ------------ -------------
Net income in 1995 reflects a net after-tax charge of $48.9 million, or $.98 per diluted share, reflecting the impairment of assets and other charges. Net income in 1999 reflects net after-tax charges of $97.8 million, or $1.99 per share, reflecting costs associated with existing non-core businesses and impairment of certain assets, comprised of $62.5 million, or $1.27 per diluted share, for continuing operations, and $35.3 million, or $.72 per diluted share, for discontinued operations. 43 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: The following discussion and analysis should be read in conjunction with the Company's Financial Statements and Notes thereto. DISCONTINUED OPERATIONS On September 29, 1999, the Board of Directors of the Company decided to sell all of the operations of the Entertainment and Aviation segments and to report the results of operations from those segments prospectively as "Discontinued Operations." Information for two segments previously reflected under the segment headings "Energy" and "Other" are now reported as Continuing Operations and will continue to be reported under those headings. At December 31, 1999, the Company had approximately $568,000,000 in net assets associated with its discontinued operations. In addition, the Company had associated debt with respect to the discontinued operations of approximately $160,000,000. Since September 29, 1999 the Company has retained financial advisors to assist it in determining how best to group the assets to maximize sales proceeds. As part of that process, the Company is actively pursuing sales of its Themed Parks and Attractions; Food and Beverage/Venue Management; and Aviation Services and Airport Privatization Businesses. The Company has reached definitive agreements to sell its Themed Parks and Attractions and a substantial majority of its Food/Beverage Venue Management businesses; it has received preliminary indications of interest with respect to its Aviation businesses; and is in various stages with respect to a number of other assets included within discontinued operations. Finally, certain aspects of the businesses will require the Company to pay monies to terminate leases or cancel other contractual commitments. Based upon the results of the sales processes, results from discontinued operations will be recognized currently, and gains and losses on disposal of portions of the discontinued operations will be deferred until substantially all assets of the discontinued operations have been sold. The Company believes that it will receive net proceeds in excess of its carrying value of net assets of its discontinued operations. 44 1999 VS. 1998 CONTINUING OPERATIONS: Revenues from continuing operations for 1999 were $103,900,000 higher than 1998, reflecting an increase in Energy segment revenues of $118,100,000. The increase in Energy segment revenues is primarily due to increased construction revenues of $74,600,000 comprised of increased activity in civil construction ($42,000,000), increased retrofit activity at several locations ($23,000,000), and the construction of a potable water treatment plant ($9,000,000). The Company anticipates that retrofit construction activity will decline during 2000, as facilities attain compliance with the Clean Air Act Amendments of 1990, mandated by the end of 2000 and that civil construction activity will decline during 2000 as projects are completed. In addition, Energy segment revenue increased by $53,000,000 associated with new plants in Thailand ($23,000,000) and the Philippines ($13,000,000) that began operations in 1999, the acquisition of an additional 50% interest in a power plant in California in 1999 ($11,300,000), and the gain on the sale of the Company's interest in a joint venture in Maine ($5,700,000). In addition, Energy segment revenues increased by $3,100,000 at several facilities, primarily Union County, New Jersey ($12,300,000), reflecting a new service agreement negotiated in the third quarter of 1998, an increase in revenues at the Tulsa, Oklahoma facility ($4,700,000) primarily due to a renegotiated service agreement, and an insurance settlement ($7,800,000) attributable to the Lawrence, Massachusetts facility, partially offset by the gain on the buyout of a power sales agreement in 1998 ($9,000,000), lower revenues in 1999 due to the closing of the Lawrence facility in the prior year ($9,600,000) and the effect of amortization of the prepayment of a power sales agreement ($6,000,000). These increases were partially offset by reduced activity in environmental consulting of $12,600,000. The Other Segment's revenues decreased $14,200,000 primarily due to lower activity at Datacom, Inc. (Datacom, previously known as Atlantic Design Company), a contract manufacturing business ($12,100,000), and Support Services ($5,400,000), which is now discontinued, as well as gains in 1998 from disposition of businesses ($1,500,000), partially offset by increased activity at Applied Data Technology, Inc. (ADTI) ($5,000,000). Consolidated operating income for 1999 was $84,700,000 lower than the comparable period of 1998 primarily reflecting a decrease of $45,900,000 in the Energy segment's income from operations chiefly 45 associated with the adoption of a plan to sell its environmental consulting and engineering business and discontinue its civil construction business once the remaining construction projects are completed. Management anticipates that the remaining construction projects will be completed during 2000, with the exception of one project that is estimated to continue into 2001. In connection with the planned sale and discontinuation of these businesses, the carrying value of their assets was reduced to estimated net realizable value. As a result, write-offs of $28,400,000 were recorded, of which approximately $23,000,000 related to goodwill, and $5,400,000 related to property and other assets. The decrease in income from operations is also attributed to a decrease of approximately $11,000,000 due to a gain on the buyout of a power sales agreement and related closure of the Lawrence facility in mid-1998, the effect of amortization of the prepayment of a power sales agreement of $6,000,000 and an $8,000,000 gain recognized in 1998 in connection with a payment received for the termination and restructuring of a facility operating contract. In connection with the Clean Air Act Amendments, the Company has shortened the estimated useful lives of certain air pollution control equipment resulting in additional depreciation expense of $5,000,000 in 1999. In addition, decreases in income from operations of approximately $7,800,000 were experienced at various facilities due to reduced activity and increased costs, and a charge of approximately $3,000,000 was recorded to provide for a negotiated settlement with a contractor. Income from operations was also negatively impacted by approximately $9,000,000 by increased development and overhead expenses and increased losses in construction activity of $6,300,000 chiefly associated with losses in civil construction ($10,200,000), partially offset by income in plant construction ($3,900,000). These decreases were partially offset by the receipt of $9,300,000 in 1999 for the termination and restructuring of the Tulsa facility's operating contract, an adjustment of approximately $9,000,000 associated with the favorable resolution of matters related to the Heber facility in California, and a $5,700,000 gain on the sale of a joint venture interest in Maine. In addition, the Company recorded a net gain of $7,800,000 associated with an insurance settlement at the Lawrence facility and had increased income of $6,500,000 from new facilities that became operational in 1999. 46 The Other segment's loss from operations increased $17,700,000 in 1999 chiefly associated with lower income of $7,400,000 at ADTI. In the fourth quarter of 1999, the Company adopted a plan to dispose of ADTI. As a result, the carrying value of its assets was reduced to estimated net realizable value. This resulted in a write-off of $7,800,000 related to goodwill. In March 2000, the Company sold ADTI at approximately its remaining carrying value. Also in the Other segment, Datacom had a higher loss from operations of $11,800,000 primarily reflecting the write-down of obsolete inventory, receivables, and other assets totaling $15,200,000, offset by reduced operating losses of $3,400,000. This decrease was partially offset by an increase of $1,300,000 in income at Support Services. Datacom is a contract manufacturer which sells an overwhelming majority of its output under a supply contract with Genicom Corporation (Genicom), a specialty printer supplier. On March 10, 2000, Genicom filed for protection from its creditors under the provisions of Chapter 11 of the U.S. Bankruptcy Code. At December 31, 1999, Datacom had approximately $8,000,000 in net inventory associated with Genicom, approximately $8,000,000 in commitments to purchase parts for use in the assembly of inventory for sale to Genicom, and approximately $7,500,000 in receivables owed to it by Genicom. Based on discussions with the new management of Genicom, the Company understands that Genicom intends to sell its business within the second quarter of 2000. Genicom has stated that it does not intend to reject the Datacom contract and consequently the Company believes it will be able to substantially realize the carrying value of its inventory and receivables and the value of its commitments. However, were the contract rejected, the Company would be limited to its remedies as an unsecured creditor. Selling, administrative and general expenses were $30,500,000 higher in 1999 than in 1998, chiefly associated with an increase in severance charges and an employment contract termination settlement together totaling $33,900,000, as well as increased professional fees, international office expansion, the accelerated amortization of a new data processing system and Y2K costs, partially offset by the settlement of certain litigation and proxy-related charges in 1998. Debt service charges decreased by approximately $5,400,000 compared with 1998 due mainly to lower project debt outstanding on various 47 facilities caused by redemption and maturity of bonds and certain refinancings. The Energy segment had three interest rate swap agreements (two of which were terminated in 1998) entered into as hedges against interest rate exposure on adjustable-rate project debt that resulted in additional debt service expense of $1,700,000 and $800,000 for 1999 and 1998, respectively. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. Interest income for 1999 was $8,000,000 lower than 1998 primarily reflecting lower cash balances available for investment, interest on a customer note repaid in 1998 and interest received on a legal settlement in 1998. Interest expense was $2,900,000 higher chiefly associated with increased borrowings on the Company's revolving line of credit and interest accrued on an Internal Revenue Service tax assessment. In addition to the Energy segment's swaps, Ogden Corporation had two interest rate swap agreements (one of which expired in December 1998) covering notional amounts of $100,000,000 and $1,600,000, respectively. The first swap was entered into to convert Ogden's fixed rate $100,000,000 9.25% debentures into variable-rate debt. The second swap agreement expires November 30, 2000 and was entered into to convert Entertainment's $1,600,000 variable-rate debt to a fixed rate. These agreements resulted in additional interest expense in 1999 and 1998 of zero and $100,000, respectively. The effect of these swap agreements on the weighted-average interest rate was not significant. Equity in net income of investees and joint ventures decreased by approximately $6,300,000, of which $6,800,000 related to the buyout of an energy sales agreement with respect to a 50% owned joint venture. The effective income tax rate for 1999 was 18.7% compared with 34.2% for 1998. This decrease of 15.5% was primarily due to the write-off of goodwill for which the Company did not have any tax basis, higher foreign taxes and non-deductible foreign losses. Note 21 to the Consolidated Financial 48 Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. DISCONTINUED OPERATIONS: Losses from discontinued operations for 1999 were $41,900,000, a decrease in earnings of $91,600,000 from the comparable period of 1998. Operating income (loss) of discontinued operations was ($35,200,000) in 1999 compared to $87,200,000 in 1998. This $122,400,000 decrease was primarily associated with a decrease of $67,400,000 in Entertainment operations reflecting, in part, severance charges of $13,300,000, and a charge of $10,500,000 relating to a non-refundable deposit and related expenditures for the proposed purchase of Volume Services America (VSA). In addition, in the third quarter of 1999, the Company reached agreements to sell its interest in the Grizzly Nature Center and its interest in a casino operation in Aruba, resulting in losses of $4,000,000 and $2,500,000, respectively. It also wrote off unrecoverable contract acquisition costs at two sport facilities, $5,000,000 related to the Great Western Forum and $1,500,000 related to the U.S. Air Arena, both of which had ceased to be utilized by professional sports teams. The Company continues to perform concession services at the new venues (the Staples Center and the MCI Arena) utilized by those teams. Ongoing income is not expected to be materially altered as a result of these events. The Company also abandoned its casino development activities in South Africa resulting in charges of $7,300,000. In 1999, the Company changed its accounting for its investment in the LaRural project in Argentina to the equity method due to a change in control of the project. As a result, its operating income in 1999 for LaRural was $10,800,000 lower than in 1998 which included a $3,400,000 charge due to the venture's inability to obtain necessary building permits to complete a new facility. The Entertainment segment also had lower income in its gaming operations of $10,400,000, themed attractions of $5,300,000, and restaurants in malls of $10,200,000, as well as increased overhead of $3,800,000 and other charges of $3,700,000. These decreases were partially offset by increased income of $10,100,000 from water parks acquired in 1999, the increase in gains on the sale of certain amphitheater contracts of $2,300,000 and a gain of $6,000,000 on the negotiation of a revised management contract at Arrowhead Pond in Anaheim, California. 49 Aviation's operating income in 1999 was $55,000,000 lower than 1998 chiefly due to the $39,900,000 gain on the sale of its in-flight catering business in 1998 and an additional gain of $10,500,000 from related transactions; 1999 severance charges of $11,800,000; lower income of $4,000,000 on reduced sales of ownership interests in the Hong Kong airport ground services company; and increased overhead costs of $3,300,000. These decreases were partially offset by the additional gain in 1999 on the sales of the Spanish in-flight kitchens, domestic catering operations and certain ground operations of $6,800,000; settlement of litigation in 1998 of $1,500,000; insurance proceeds of $1,500,000; management fee income from South American ventures of $3,200,000; increased operating income in domestic fueling and ground services operations of $2,000,000; and a $700,000 increase from operations of companies acquired in 1999 in the Fixed Base Operations Group. 1998 VS. 1997 CONTINUING OPERATIONS: Revenues from continuing operations for 1998 were $61,900,000 lower than the comparable period of 1997. This decrease was primarily due to a decline of $153,700,000 in the Other segment's revenues chiefly associated with the sale of Facility Services New York operations in July 1997 and certain operations of Datacom in late 1997 and early 1998. These decreases in revenues were partially offset by an increase of $91,800,000 in the Energy segment's revenues chiefly associated with the acquisition in late 1997 of Pacific Energy, Inc. of $20,100,000; a 60% interest in four cogeneration plants in China of $30,700,000; increased income at the Edison Bataan facility of $5,500,000 due to increased production; the buyout of a waste-to-energy power sales contract of $9,100,000; increased construction revenues of $44,900,000 associated with retrofit activity at several facilities ($17,100,000); increased activity in civil construction ($19,800,000); and the construction of a potable water treatment plant ($7,800,000), partially offset by lower revenues of $3,900,000 at several facilities, primarily at the Haverhill facility due to the amortization of a prepayment of a power sales agreement; the receipt of a settlement of litigation for $6,000,000 in 1997; and the closing of the Lawrence facility of $8,600,000. 50 Consolidated operating income for 1998 was $17,300,000 lower than 1997 primarily reflecting a decrease of $5,600,000 in the Other segment chiefly associated with the sale of certain non-core businesses and an investment in the Universal Ogden joint venture in 1997. The Energy segment's income from operations was $400,000 higher primarily due to income from Pacific Energy, Inc. (acquired in late 1997) of $2,000,000, income from a 60% interest in four cogeneration plants in China of $10,000,000, increased activity at the Edison Bataan facility of $2,500,000, the gain on the buyout of a power sales agreement of $9,100,000 and receipt of a contract termination payment of $8,000,000, as well as an increase in construction income of $5,000,000 primarily related to retrofit activity. These increases were partially offset by increased development costs of $7,000,000; reduced income at several waste-to-energy facilities of $8,300,000 primarily due to increased maintenance costs; the effect of amortization of the prepayment of a power sales agreement of $5,100,000; a favorable legal settlement in 1997 of $6,000,000; the write-off of uncollectible notes receivable of $3,000,000; a reduction in environmental consulting operations of $4,800,000 and a legal settlement of $1,500,000. Selling, administrative and general expenses for 1998 were $2,900,000 higher than 1997 primarily due to a $10,700,000 increase in corporate overhead costs which includes the installation of a new data processing system, severance payments, the settlement of certain litigation and proxy-related charges, partially offset by the effects of the sale of non-core businesses in 1997 and 1998. Debt service charges for 1998 were $1,300,000 lower than the comparable period of 1997, primarily due to lower average debt outstanding, partially offset by increased project debt associated with the Pacific Energy companies. The Energy segment had three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service costs of $800,000 and $300,000 in 1998 and 1997, respectively. The 1998 amount includes $200,000 representing the net cost to terminate two of the three interest rate swap agreements that related to refinanced debt. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. Interest income for 1998 was $4,200,000 higher primarily reflecting higher income on overnight investments and interest earned on a legal settlement. 51 Interest expense was $2,900,000 higher chiefly associated with increased recourse debt issued in connection with the acquisition in 1997 of Pacific Energy. In addition to the Energy segment's swaps, Ogden Corporation had two interest rate swap agreements covering notional amounts of $100,000,000 and $3,200,000, respectively. The first swap agreement expired on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000 9.25% debentures into variable-rate debt. The second swap agreement expires November 30, 2000 and was entered into to convert Entertainment's $3,200,000 variable-rate debt to a fixed rate. These agreements resulted in additional interest expense in 1998 and 1997 of $100,000 and $400,000, respectively. The effect of these swap agreements on the weighted average interest rate was not significant. Equity income of investees and joint ventures for 1998 was $17,600,000 higher than the comparable period of 1997, chiefly associated with the results of Pacific Energy joint ventures of which $6,800,000 related to the buyout of an energy sales agreement with respect to a 50% owned joint venture. The effective income tax rate for 1998 was 34.2% compared with 35.9% for 1997. This decrease of 1.7% was primarily due to a net reduction in permanent differences between book and taxable income. Note 21 to the Consolidated Financial Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. DISCONTINUED OPERATIONS: Income from discontinued operations for 1998 was $49,700,000 or $10,800,000 higher than the comparable period of 1997. Operating income of discontinued operations for 1998 was $87,200,000, an increase of $23,100,000. This increase was primarily due to an increase of $25,100,000 in the Aviation segment, chiefly associated with a gain of $39,900,000 on the sale of the domestic in-flight catering business and an increase due to gains on the sale of an interest in the Hong Kong ground services company of $4,000,000. These increases were partially offset by the gain of $13,000,000 on the sales of the Miami and Spanish in-flight kitchens and certain ground services operations in 1997; reduced activity in European operations of $3,500,000, which included the relocation of its headquarters; severance payments and certain legal claims in 1998; and lower operating income of 52 $2,600,000 associated with the sale of the domestic catering operation. Entertainment's income from operations was $2,000,000 lower primarily reflecting the effects of the NBA lockout of $1,600,000; start-up costs at the Tinseltown operations of $1,700,000; lower results on gaming operations of $1,500,000; lower results on theme park operations of $2,800,000; lower results of $1,100,000 at other locations; and increased overhead of $2,800,000. These decreases were partially offset by the gain in 1998 of $4,900,000 on the sale of certain amphitheater contracts and increased activity at various venues and convention centers of $4,900,000. CAPITAL INVESTMENT AND COMMITMENTS: For the year ended December 31, 1999, capital investments for continuing operations amounted to $65,700,000, of which $64,600,000 was for Energy and $1,100,000 was for Other and Corporate operations. At December 31, 1999, capital commitments for continuing operations amounted to $29,000,000 for normal replacement and growth in Energy. Other capital commitments for Energy as of December 31, 1999 amounted to approximately $96,600,000. This amount includes a commitment to pay, in 2008, $10,600,000 for a service contract extension at an energy facility. In addition, this amount includes $28,000,000 for a 50% interest in a project in Thailand; $18,500,000 and $15,300,000, respectively, for two oil-fired projects in India; $5,000,000 for additional equity commitments related to a coal-fired power project in the Philippines;$3,500,000 for a mass-burn waste-to-energy facility in Italy; $1,900,000 for a natural gas-fired diesel engine based cogeneration project in Spain; and $13,800,000 for standby letters of credit in support of debt service reserve requirements. Funding for the additional mandatory equity contributions to the coal-fired power project in the Philippines is being provided through bank credit facilities, which must be repaid in 2000. In addition, compliance with the standards and guidelines under the Clean Air Act Amendments of 1990 will require further Energy capital expenditures of approximately $30,000,000 through December 2000, subject to the final time schedules determined by the individual states in which the Company's waste-to-energy facilities are located. 53 Commitments for Discontinued Operations amounted to $37,000,000 for normal replacement and growth in Aviation ($100,000) and Entertainment ($36,900,000), the latter relating primarily to Entertainment's Jazzland theme park in New Orleans,Louisiana. As part of its agreement to sell its themed attractions, the Company has agreed to complete the construction of the Jazzland theme park. The Company also had a $2,500,000 contingent equity contribution for Entertainment's investment at Isla Magica at December 31, 1999. The Company has no further obligations with respect to its previous agreement to acquire VSA. The Company acquired a 50% interest in an Aviation ground handling business in Rome, Italy and in March 2000, made a contractually required investment of $6,600,000 in connection therewith. Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. (SEE LIQUIDITY SECTION BELOW.) The Company did not include its interests in either the Arrowhead Pond or the Corel Centre near Ottawa, Canada as part of the sale of its Venue Management business announced in March 2000. The Company manages the Arrowhead Pond under a long-term contract. As part of this contract, the Company is a party, along with the City of Anaheim, to a reimbursement agreement in connection with a letter of credit in the amount of approximately $120,000,000. Under the reimbursement agreement, the Company is responsible for draws, if any, under the letter of credit caused by the Company's failure to perform its duties under its management contract at that venue. The Company is exploring alternatives for disposing of these operations along with the related obligations. During 1994, a subsidiary of Ogden entered into a 30-year facility management contract at the Corel Centre pursuant to which it agreed to advance funds to a customer, and if necessary, to assist the 54 customer's refinancing of senior secured debt incurred in connection with the construction of the facility. Ogden is obligated to purchase such senior debt in the amount of $97,100,000 on December 23, 2002, if the debt is not refinanced prior to that time. Ogden is also required to repurchase the outstanding amount of certain subordinated secured debt of such customer on December 23, 2002. At December 31, 1999, the amount outstanding was $51,600,000. In addition, as of December 31, 1999, the Company had guaranteed $3,500,000 of senior secured term debt of an affiliate and principal tenant (the NHL Ottawa Senators) of this customer and had guaranteed up to $3,500,000 of the tenant's secured revolving debt. Further, Ogden is obligated to purchase $20,800,000 of the tenant's secured subordinated indebtedness on January 29, 2004, if such indebtedness has not been repaid or refinanced prior to that time. In October 1999, Ogden also agreed to advance a secured loan to that tenant of up to approximately $8,400,000 if certain events occur. Separately, Ogden has guaranteed approximately $3,800,000 of borrowings of Metropolitan Entertainment Group, an Entertainment joint venture in which Ogden has an equity interest. The Company expects this guarantee to be assumed by the ultimate purchaser of this interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. The Company is exposed to various market risks including changes in interest rates and foreign currency exchange rates. Since approximately 81% of the Company's debt is at fixed interest rates, the Company's exposure to interest-rate fluctuations is not material to the Consolidated Financial Statements. The Company has entered into financial instruments on several occasions to reduce the impact of changes in interest rates. At December 31, 1999, Ogden had two interest rate swap agreements, which are described above and in the Long-Term Debt and Project Debt notes to the Consolidated Financial Statements. Ogden is also exposed to foreign currency risks due to changes in exchange rates. Foreign countries in which the Company operates are primarily Canada and countries in Latin America, Europe and Asia. Since the Company does not plan to repatriate foreign assets and considers foreign earnings to be permanentlyinvested overseas, the exposure to changes in foreign currency exchange rates is primarily limited to cumulative translation adjustments, which have been charged to 55 Other Comprehensive Income. Ogden does not enter into derivatives or other financial instruments for trading or speculative purposes. LIQUIDITY/CASH FLOW: Net cash provided by operating activities of continuing operations was $217,336,000 lower than in 1998, primarily reflecting a decrease in net income from continuing operations of $77,400,000, and a decrease of $35,800,000 in deferred income taxes. These decreases were partially offset by non-cash items, primarily the write-down of companies to be sold totaling $36,150,000; severance and other employment charges of $32,600,000 and an increase in depreciation and amortization of $14,900,000. In addition, there was a decrease of $195,800,000 in deferred income associated with the prepayment of a power sales agreement in 1998, and an increase of $23,800,000 in accounts receivable, partially offset by an increase of $35,300,000 in accounts payable and accrued expenses. Net cash used in investing activities was $28,300,000 lower primarily relating to a decrease in purchases of marketable securities of $57,100,000, and an increase from the sales of: marketable securities ($52,100,000); a 50% interest in a joint venture ($10,300,000); a security investment ($5,100,000); and equipment ($1,000,000). In addition, there was a decrease in capital expenditures of $2,600,000 and an increase of $4,000,000 in distributions from joint ventures. These decreases were partially offset by increases in companies purchased of $58,500,000, increases in investments in Energy facilities of $31,900,000; and increased investments in and advances to joint ventures of $11,500,000. In addition, there was a reduction of $2,000,000 in the collection of other receivables. Net cash used in financing activities was $140,500,000 lower primarily due to lower net debt payments of $96,700,000, reduced purchases of treasury shares of $53,900,000 and lower dividends paid of $16,300,000. These decreases were partially offset by a decrease of $19,400,000 in the use of funds held in trust and lower proceeds from the exercise of stock options of $8,500,000. In addition, cash used by discontinued operations increased $68,000,000 primarily reflecting increased capital expenditures and acquisitions, including water and theme parks, and aviation fixed base operations. 56 At December 31, 1999, the Company had approximately $154,000,000 in cash and cash equivalents, of which $101,000,000 related to continuing operations. In addition, the Company had a $200,000,000 revolving credit facility, of which the Company had drawn $50,000,000 at year-end. At December 31, 1999, the Company agreed with its credit providers (including its revolving credit lenders and certain other banks that have similar covenants in their respective facilities, collectively the "Credit Providers"), to amend certain of the Company's financial covenants relating to leverage and fixed charge coverages through the end of March 2000. As part of this agreement, the Company agreed to forego borrowing additional sums under the revolver pending further discussions. In March 2000, the Company and its revolving credit lenders agreed to reduce the amount of the revolving credit facility to $100,000,000 and provide the Company with access to a $50,000,000 liquidity facility, which is secured by certain assets of the Company and matures on July 31, 2000, in addition to the outstanding $50,000,000 which is unsecured. At the same time, the Company and all of its Credit Providers agreed to amend certain covenants relating to limits on indebtedness as a percentage of its capitalization, interest coverage as a function of income from continuing operations and its minimum Shareholders' Equity, all through the end of July 2000, and to permit the sales of the Aviation and Entertainment segments provided certain minimum prices are obtained. Management believes such minimum prices can be obtained. In addition, the lenders agreed to permit the Company to retain the first $100,000,000 in cash proceeds received from the asset sales to fund operations. The Company expects to use the remaining proceeds from such sales principally to repay existing corporate debt where economically feasible. With certain exceptions, the Company has further agreed not to incur any additional indebtedness other than that incurred under the revolving credit facility. The Company expects that it will close a series of sales transactions with respect to the Themed Attractions, Parks, Venue Management/Food and Beverage Operations in its Entertainment segment during the second quarter of 2000. These businesses are currently under two separate agreements of sale. The Company further expects that it will close a transaction with respect to the sale of its Aviation business either late in the second quarter or in the third quarter of 2000. The Company also determined in the fourth quarter 1999 to sell all of the operations currently reflected in the "Other Segment". It also decided to sell its domestic Environmental Consulting business and its Spanish subsidiary and to wind down the operations of its civil construction business all of which have been reported in its Energy segment. Additional charges have been taken in connection with these decisions, for which the Company has sought, and received, changes in its debt covenants. Accordingly, the Company expects to repay the revolving credit facility and the secured facility, have sufficient proceeds to fund normal operations (including additional energy investments), and repay certain other indebtedness, on or before the specified maturity date. The Company expects to obtain a new facility on or before July 31, 2000, more tailored to its Energy business. The Company continues to have discussions concerning possible new credit facilities and/or obtaining equity for such purpose. 57 Company continues to have discussions concerning possible new credit facilities and/or obtaining equity for such purpose. Under certain agreements previously entered into by the Company, if the Company's outstanding debt securities are no longer rated investment grade, it may be required to post additional collateral or letters of credit. The failure to take such actions could result in a forfeiture of certain contracts or could result in a default under the agreements requiring the posting of such letters. Such a default would also be a default under certain of the Company's credit facilities. The Company would need the consent of its Credit Providers to obtain the funds necessary to post the letters of credit if they become due, obtain equity, or potentially utilize sales proceeds for such purpose. The Company's Credit Providers have agreed to work with the Company to explore solutions to this issue should it arise. The Company believes its recent agreement with its Credit Providers is consistent with its prior stated intention of using the proceeds from the sales of the Entertainment and Aviation businesses to pay down existing debt. In 1998, Ogden's Board of Directors increased the authorization to purchase shares of the Corporation's common stock up to a total of $200,000,000. Through January 2000, 2,223,000 shares of common stock were purchased for a total cost of $58,890,000. In addition, the Company suspended its common stock dividend in the third quarter of 1999. The Company adopted Statement of Position 98-5 (SOP) "Reporting on the Costs of Start-Up Activities" on January 1, 1999. This SOP established accounting standards for these costs and requires that they 58 generally be expensed as incurred. The effect of adopting the SOP is shown as a cumulative effect of a change in accounting principle and is reflected as a net charge to income of $3,820,000 in 1999. In addition, in June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." Ogden will adopt SFAS No. 133 in January, 2001. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities and requires recognition of all derivative instruments as assets or liabilities and requires measurement of those instruments at fair value. The Corporation is in the process of determining the impact adoption of this standard will have on Ogden's financial position and results of operations. YEAR 2000 ISSUES: The Company had established, and successfully completed, a Year 2000 Project that actively addressed its Year 2000 issues. The total cost associated with resolving the Company's Year 2000 issues was $8,972,000 and was not material to the Company's financial condition. The Company's successful transition through the New Year and the Leap Day without any material adverse effect leads the Company to conclude that its Year 2000 Project has successfully addressed any potential risks associated with Year 2000 issues. 59 Any statements in this communication, including but not limited to the "Year 2000 Issue" discussion, which may be considered to be "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, are subject to certain risk and uncertainties. The factors that could cause actual results to differ materially from those suggested by any such statements include, but are not limited to, those discussed or identified from time to time in the Company's public filings with the Securities and Exchange Commission and more generally, general economic conditions, including changes in interest rates and the performance of the financial markets; changes in domestic and foreign laws, regulations, and taxes; changes in competition and pricing environments; and regional or general changes in asset valuations. 60 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See the Capital Investments and Commitments portion of Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of this Form 10-K Report. 61 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX
Page -------- Statements of Consolidated Income and Comprehensive Income for the Years ended December 31, 1999, 1998 and 1997 63 Consolidated Balance Sheets - December 31, 1999 and 1998 64 Statements of Shareholders' Equity - for the Years ended December 31, 1999, 1998 and 1997 65 Statements of Consolidated Cash Flows for the Years ended December 31, 1999, 1998 and 1997 66 Notes to Consolidated Financial Statements 67-126 Independent Auditors' Report 127 Report of Management 128 Quarterly Results of Operations 129 Financial Statement Schedules 130-132 Schedule II - Valuation and Qualifying Accounts for the Years ended December 31, 1999, 1998 and 1997 All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
62 Ogden Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
- ----------------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------- ---------------- Service revenues.............................................. $820,233,000 $ 783,051,000 $ 807,786,000 Net sales..................................................... 54,997,000 67,113,000 133,374,000 Construction revenues......................................... 119,455,000 44,861,000 Net gain on sale of businesses................................ 5,665,000 1,471,000 17,211,000 --------------- ---------------- ---------------- Total revenues................................................ 1,000,350,000 896,496,000 958,371,000 --------------- ---------------- ---------------- Operating costs and expenses.................................. 618,370,000 543,868,000 599,708,000 Costs of goods sold........................................... 65,676,000 57,685,000 87,954,000 Construction costs............................................ 120,774,000 39,855,000 Selling, administrative, and general expenses................. 123,164,000 92,712,000 89,768,000 Debt service charges.......................................... 95,003,000 100,363,000 101,658,000 --------------- ---------------- ---------------- Total costs and expenses...................................... 1,022,987,000 834,483,000 879,088,000 --------------- ---------------- ---------------- Consolidated operating income (loss).......................... (22,637,000) 62,013,000 79,283,000 Equity in income of investees and joint ventures.............. 13,005,000 19,340,000 1,784,000 Interest income............................................... 4,790,000 12,785,000 8,616,000 Interest expense.............................................. (35,487,000) (32,597,000) (29,661,000) Other income (deductions)-net................................. 3,298,000 1,317,000 303,000 --------------- ---------------- ---------------- Income (loss) from continuing operations before income taxes, minority interests and the cumulative effect of change in accounting principle........................................ (37,031,000) 62,858,000 60,325,000 Income taxes.................................................. 6,917,000 (21,557,000) (21,715,000) Minority interests ........................................... (6,176,000) (4,053,000) (1,823,000) --------------- ---------------- ---------------- Income (loss)from continuing operations....................... (36,290,000) 37,248,000 36,787,000 Income (loss) from discontinued operations (net of income taxes of: 1999, $6,000; 1998, $40,240,000; and 1997, $31,385,000).......................................... (41,851,000) 49,722,000 38,886,000 Cumulative effect of change in accounting principle (net of income taxes of $1,313,000)......................... (3,820,000) --------------- ---------------- ---------------- NET INCOME (LOSS)............................................. (81,961,000) 86,970,000 75,673,000 --------------- ---------------- ---------------- Other Comprehensive Income, Net of Tax: Foreign currency translation adjustments...................... (4,631,000) (2,170,000) (8,094,000) Unrealized Gains (Losses) on Securities: Unrealized holding gains (losses) arising during period....... (60,000) 470,000 1,637,000 Less: reclassification adjustment for losses (gains) included in net income...................................... 275,000 (2,046,000) Minimum pension liability adjustment.......................... 409,000 (392,000) 241,000 --------------- ---------------- ---------------- Other comprehensive income.................................... (4,007,000) (2,092,000) (8,262,000) --------------- ---------------- ---------------- Comprehensive income (loss)................................... $ (85,968,000) $ 84,878,000 $ 67,411,000 --------------- ---------------- ---------------- --------------- ---------------- ---------------- Basic Earnings Per Share: Income (loss) from continuing operations...................... $ (0.74) $ 0.74 $ 0.73 Income (loss) from discontinued operations.................... (0.85) 1.00 0.78 Cumulative effect of change in accounting principle........... (0.08) --------------- ---------------- ---------------- Net Income (Loss)............................................. $ (1.67) $ 1.74 $ 1.51 --------------- ---------------- ---------------- --------------- ---------------- ---------------- Diluted Earnings Per Share: Income (loss) from continuing operations...................... $ (0.74) $ 0.73 $ 0.72 Income (loss) from discontinued operations.................... (0.85) 0.98 0.76 Cumulative effect of change in accounting principle........... (0.08) --------------- ---------------- ---------------- Net Income (Loss)............................................. $ (1.67) $ 1.71 $ 1.48 --------------- ---------------- ---------------- --------------- ---------------- ----------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 63 Ogden Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------- ASSETS December 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents................................................. $ 101,020,000 $ 181,169,000 Marketable securities available for sale.................................. 44,685,000 Restricted funds held in trust............................................ 103,662,000 110,553,000 Receivables(less allowances:1999,$17,942,000 and 1998,$18,130,000)........ 294,051,000 274,307,000 Inventories............................................................... 10,767,000 20,162,000 Deferred income taxes..................................................... 36,189,000 47,921,000 Other..................................................................... 65,713,000 49,448,000 Net assets of discontinued operations..................................... 568,146,000 455,726,000 ------------------ ------------------ Total current assets................................................... 1,179,548,000 1,183,971,000 Property, plant, and equipment-net........................................ 1,841,811,000 1,736,241,000 Restricted funds held in trust............................................ 166,784,000 180,922,000 Unbilled service and other receivables.................................... 159,457,000 159,409,000 Unamortized contract acquisition costs.................................... 102,137,000 69,260,000 Goodwill and other intangible assets...................................... 12,520,000 41,935,000 Investments in and advances to investees and joint ventures............... 180,523,000 149,663,000 Other assets.............................................................. 84,368,000 126,153,000 ------------------ ------------------ Total Assets.............................................................. $ 3,727,148,000 $ 3,647,554,000 ------------------ ------------------ ------------------ ------------------ - ------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity - ------------------------------------------------------------------------------------------------------------------------- Liabilities: Current Liabilities: Current portion of long-term debt......................................... $ 113,815,000 $ 21,888,000 Current portion of project debt........................................... 80,383,000 63,201,000 Dividends payable......................................................... 15,403,000 Accounts payable.......................................................... 75,169,000 50,556,000 Federal and foreign income taxes payable.................................. 21,776,000 Accrued expenses, etc..................................................... 360,155,000 236,774,000 Deferred income........................................................... 45,806,000 45,090,000 ------------------ ------------------ Total current liabilities.............................................. 675,328,000 454,688,000 Long-term debt............................................................ 344,945,000 348,594,000 Project debt.............................................................. 1,390,832,000 1,367,528,000 Deferred income taxes..................................................... 380,812,000 392,850,000 Deferred income........................................................... 182,663,000 201,563,000 Other liabilities......................................................... 127,559,000 158,875,000 Minority interests........................................................ 33,309,000 25,706,000 Convertible subordinated debentures....................................... 148,650,000 148,650,000 ------------------ ------------------ Total liabilities...................................................... 3,284,098,000 3,098,454,000 ------------------ ------------------ Shareholders' Equity: Serial cumulative convertible preferred stock, par value $1.00 per share, authorized, 4,000,000 shares; shares outstanding: 39,246 in 1999 and 42,218 in 1998, net of treasury shares of 29,820 in 1999 and 1998......... 39,000 43,000 Common stock, par value $.50 per share; authorized, 80,000,000 shares; outstanding: 49,468,195 in 1999 and 48,945,989 in 1998, net of treasury shares of 4,405,103 and 4,561,963, respectively........................... 24,734,000 24,473,000 Capital surplus........................................................... 183,915,000 173,413,000 Earned surplus............................................................ 255,182,000 367,984,000 Accumulated other comprehensive income.................................... (20,820,000) (16,813,000) ------------------ ------------------ Total Shareholders' Equity................................................ 443,050,000 549,100,000 ------------------ ------------------ Total Liabilities and Shareholders' Equity................................ $ 3,727,148,000 $ 3,647,554,000 ------------------ ------------------ ------------------ ------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 64 Ogden Corporation and Subsidiaries
STATEMENTS OF SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS - ----------------------------------------------------------------------------------------------------------------------------------- SERIAL CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE; AUTHORIZED, 4,000,000 SHARES Balance at beginning of year .......... 72,038 $ 73,000 74,166 $ 75,000 77,509 $ 78,000 Shares converted into common stock .... (2,972) (4,000) (2,128) (2,000) (3,343) (3,000) ----------- ------------ ----------- ------------ ----------- ----------- Total ................................. 69,066 69,000 72,038 73,000 74,166 75,000 Treasury shares ....................... (29,820) (30,000) (29,820) (30,000) (29,820) (30,000) ----------- ------------ ----------- ------------ ----------- ----------- Balance at end of year (aggregate involuntary liquidation value-- 1999, $791,000) ....................... 39,246 39,000 42,218 43,000 44,346 45,000 ----------- ------------ ----------- ------------ ----------- ----------- COMMON STOCK, PAR VALUE $.50 PER SHARE; AUTHORIZED, 80,000,000 SHARES: Balance at beginning of year .......... 53,507,952 26,754,000 53,430,246 26,715,000 53,350,650 26,675,000 Exercise of stock options ............. 155,801 78,000 65,000 33,000 59,640 30,000 Shares issued for acquisition ......... 191,800 96,000 Conversion of preferred shares ........ 17,745 9,000 12,706 6,000 19,956 10,000 ----------- ------------ ----------- ------------ ----------- ----------- Total ................................. 53,873,298 26,937,000 53,507,952 26,754,000 53,430,246 26,715,000 ----------- ------------ ----------- ------------ ----------- ----------- Treasury shares at beginning of year .. 4,561,963 2,281,000 3,135,123 1,568,000 3,606,123 1,803,000 Purchase of treasury shares ........... 102,000 51,000 2,121,100 1,060,000 Exercise of stock options ............. (258,860) (129,000) (694,260) (347,000) (471,000) (235,000) ----------- ------------ ----------- ------------ ----------- ----------- Treasury shares at end of year ........ 4,405,103 2,203,000 4,561,963 2,281,000 3,135,123 1,568,000 ----------- ------------ ----------- ------------ ----------- ----------- Balance at end of year ................ 49,468,195 24,734,000 48,945,989 24,473,000 50,295,123 25,147,000 ----------- ------------ ----------- ------------ ----------- ----------- CAPITAL SURPLUS: Balance at beginning of year........... 173,413,000 212,383,000 202,162,000 Exercise of stock options.............. 8,061,000 16,355,000 10,228,000 Shares issued for acquisition.......... 4,904,000 Purchase of treasury shares............ (2,458,000) (55,321,000) Conversion of preferred shares......... (5,000) (4,000) (7,000) -------------- -------------- ------------ Balance at end of year................. 183,915,000 173,413,000 212,383,000 -------------- -------------- ------------ EARNED SURPLUS: Balance at beginning of year........... 367,984,000 343,237,000 330,302,000 Net income (loss)...................... (81,961,000) 86,970,000 75,673,000 -------------- -------------- ------------ Total.................................. 286,023,000 430,207,000 405,975,000 -------------- -------------- ------------ Preferred dividends-per share 1999, 1998, and 1997, $3.35.................. 137,000 144,000 152,000 Common Dividends-per share 1999, $.625; 1998 and 1997, $1.25.......... 30,704,000 62,079,000 62,586,000 ------------- -------------- ------------ Total dividends........................ 30,841,000 62,223,000 62,738,000 ------------- ------------- ------------ Balance at end of year................. 255,182,000 367,984,000 343,237,000 ------------- -------------- ------------ CUMULATIVE TRANSLATION ADJUSTMENT-NET. (20,663,000) (16,032,000) (13,862,000) -------------- -------------- ------------ MINIMUM PENSION LIABILITY ADJUSTMENT... (307,000) (716,000) (324,000) -------------- -------------- ------------ NET UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE....... 150,000 (65,000) (535,000) -------------- -------------- ------------ TOTAL SHAREHOLDERS' EQUITY............. $443,050,000 $549,100,000 $566,091,000 -------------- -------------- ------------ -------------- -------------- ------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 65 Ogden Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------ For the years ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ................................................ $ (81,961,000) $ 86,970,000 $ 75,673,000 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities of Continuing Operations: (Income) loss from discontinued operations ....................... 41,851,000 (49,722,000) (38,886,000) Depreciation and amortization .................................... 94,905,000 79,981,000 76,446,000 Deferred income taxes ............................................ (16,944,000) 18,820,000 21,384,000 Cumulative effect of change in accounting principle .............. 3,820,000 Write-down of assets for sale .................................... 36,150,000 Severance and other employment charges ........................... 32,602,000 Other ............................................................ 3,170,000 (8,601,000) (11,744,000) Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Accounts receivable .............................................. (25,365,000) (1,522,000) 78,366,000 Inventories ...................................................... 2,208,000 1,132,000 20,125,000 Other assets ..................................................... 18,834,000 (25,110,000) 4,785,000 Increase (Decrease) in Liabilities: Accounts payable ................................................. 19,572,000 (7,584,000) 2,719,000 Accrued expenses ................................................. 35,921,000 27,799,000 (65,983,000) Deferred income .................................................. (3,698,000) 192,137,000 (3,393,000) Other liabilities ................................................ (51,214,000) 12,887,000 (1,501,000) ------------- ------------- ------------- Net cash provided by operating activities of continuing operations 109,851,000 327,187,000 157,991,000 ------------- ------------- ------------- Cash Flows From Investing Activities: Entities purchased, net of cash acquired ......................... (59,436,000) (900,000) (58,190,000) Proceeds from sale of marketable securities available for sale ... 66,355,000 14,232,000 13,970,000 Proceeds from sale of businesses and other ....................... 10,560,000 225,000 35,155,000 Proceeds from sale of property, plant, and equipment .............. 1,175,000 181,000 1,318,000 Proceeds from sale of investment ................................. 5,138,000 Investments in facilities ........................................ (50,749,000) (18,847,000) (28,459,000) Other capital expenditures ....................................... (15,048,000) (17,675,000) (14,030,000) Decrease in other receivables .................................... 820,000 2,865,000 11,252,000 Investments in marketable securities available for sale .......... (1,815,000) (58,917,000) (13,970,000) Distributions from investees and joint ventures .................. 12,459,000 8,479,000 45,749,000 Increase in investments in and advances to investees and joint ventures ............................................... (43,997,000) (32,458,000) (55,506,000) ------------- ------------- ------------- Net cash used in investing activities of continuing operations ... (74,538,000) (102,815,000) (62,711,000) ------------- ------------- ------------- Cash Flows From Financing Activities: Borrowings for Energy Facilities ................................. 150,894,000 506,518,000 57,358,000 Other new debt ................................................... 90,508,000 34,525,000 102,266,000 Payment of debt .................................................. (205,089,000) (601,396,000) (213,809,000) Dividends paid ................................................... (46,241,000) (62,541,000) (62,564,000) Purchase of treasury shares ...................................... (2,509,000) (56,381,000) Decrease in funds held in trust .................................. 21,019,000 40,415,000 928,000 Proceeds from exercise of stock options .......................... 8,268,000 16,735,000 10,493,000 Other ............................................................ (4,412,000) (5,922,000) (5,447,000) ------------- ------------- ------------- Net cash provided by (used in) financing activities of continuing operations ......................................... 12,438,000 (128,047,000) (110,775,000) ------------- ------------- ------------- Net cash provided by (used in) discontinued operations ........... (127,900,000) (59,880,000) 70,714,000 ------------- ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............. (80,149,000) 36,445,000 55,219,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................... 181,169,000 144,724,000 89,505,000 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR ......................... $ 101,020,000 $ 181,169,000 $ 144,724,000 ============= ============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 66 Ogden Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION, COMBINATIONS, ETC.: The Consolidated Financial Statements include the accounts of Ogden Corporation and its subsidiaries (Ogden or the Company or the Corporation). Companies in which Ogden has equity investments of 50% or less are accounted for using the "Equity Method," if appropriate. All intercompany transactions and balances have been eliminated. On September 17, 1999, the Company announced that it intended to sell its Aviation and Entertainment businesses and on September 29, 1999 the Board of Directors of the Company formally adopted a plan to sell the operations of its Aviation and Entertainment units which were previously reported as separate business segments. As a result of the adoption of this plan, the presentation of the financial results has been reclassified in the accompanying financial statements to show these operations as discontinued and the prior periods have been restated. (See Note 2.) In 1999, in transactions accounted for as purchases, Ogden acquired the shares of a Philippine diesel-fired power plant, a 74% interest in a Thailand gas-fired facility, a 90% interest in a Thailand company that operates and maintains several power plant facilities, the unowned 50% partnership interests in the Heber Geothermal Company, which owns a geothermal power plant in California, and Heber Field Company in California for a total cost of $58,500,000. The operations of these companies have been included in the accompanying financial statements from the dates of acquisition. If Ogden had acquired these companies at January 1, 1998, consolidated revenues, net income (loss) and diluted earnings (loss) per share would have been $1,004,900,000, ($85,568,000) and ($1.74) for 1999 and $919,259,000, $81,633,000 and $1.60 for 1998. 67 In 1998, in transactions accounted for as purchases, Ogden acquired the shares of a civil construction company for a total cost of $900,000. The operations of this company have been included in the accompanying financial statements from date of acquisition. If Ogden had acquired this company at January 1, 1997, consolidated revenues, net income and diluted earnings per share would have been $897,524,000, $87,406,000 and $1.72 for 1998 and $959,931,000, $75,752,000 and $1.49 for 1997. In 1997, in transactions accounted for as purchases, Ogden acquired the shares of Pacific Energy, Inc., as well as a 60% interest in four cogeneration plants in China for a total cost of $118,967,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1997, consolidated revenues, net income, and diluted earnings per share would have been $1,000,762,000, $84,077,000, and $1.65 for 1997. In connection with an earlier restructuring plan, the Binghamton, New York and Cork, Ireland operations of Datacom, Inc. (Datacom, previously known as Atlantic Design Company), a contract manufacturing company, were sold in January 1998; the Facility Services group's operations in New York City were sold in July 1997; and the Charlotte, North Carolina, operations of Datacom, were sold in September 1997. USE OF ESTIMATES: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances and highly liquid investments having original maturities of three months or less. 68 MARKETABLE SECURITIES: Marketable securities are classified as available for sale and recorded at current market value. Net unrealized gains and losses on marketable securities available for sale are credited or charged to Other Comprehensive Income (see Note 3). CONTRACTS AND REVENUE RECOGNITION: Service revenues primarily include only the fees for cost-plus contracts and other types of contracts. Both service revenues and operating expenses exclude reimbursed expenditures of zero, $1,800,000 and $30,794,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Subsidiaries engaged in governmental contracting recognize revenues from cost-plus-fixed-fee contracts on the basis of direct costs incurred plus indirect expenses and the allocable portion of the fixed fee. Revenues under time and material contracts are recorded at the contracted rates as the labor hours and other direct costs are incurred. Revenues under fixed-price contracts are recognized on the basis of the estimated percentage of completion of services rendered. Service revenues also include the fees earned under contracts to operate and maintain the waste-to-energy facilities and to service the facilities' debt, with additional fees earned based on excess tonnage processed and energy generation. Long-term unbilled service receivables related to waste-to-energy operations are discounted in recognizing the present value for services performed currently. Such unbilled receivables amounted to $151,257,000 and $149,341,000 at December 31, 1999 and 1998, respectively. Subsidiaries engaged in long-term construction contracting record income on the percentage-of-completion method of accounting and recognize income as the work progresses. Anticipated losses on contracts are recognized as soon as they become known. INVENTORIES: Inventories, consisting primarily of raw materials, work in progress and finished goods, are recorded principally at the lower of first-in, first-out cost or market. PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment is stated at cost. For financial reporting purposes, depreciation is provided by the straight-line method over the estimated useful lives of the assets, which range generally from three years for computer equipment to 50 years for waste-to-energy facilities. Accelerated depreciation is generally used for Federal income tax purposes. 69 Leasehold improvements are amortized by the straight-line method over the terms of the leases or the estimated useful lives of the improvements as appropriate. Landfills are amortized based on the quantities deposited into each landfill compared to the total estimated capacity of such landfill. Property, plant, and equipment is periodically reviewed to determine recoverability by comparing the carrying value to expected future cash flows. CONTRACT ACQUISITION COSTS: Costs associated with the acquisition of specific contracts are amortized over their respective contract terms. BOND ISSUANCE COSTS: Costs incurred in connection with the issuance of revenue bonds are amortized over the terms of the respective debt issues. RESTRICTED FUNDS: Restricted funds represent proceeds from the financing and operations of energy facilities. Funds are held in trust and released as expenditures are made or upon satisfaction of conditions provided under the respective trust agreements. INTEREST RATE SWAP AGREEMENTS: Amounts received or paid relating to swap agreements during the year are credited or charged to interest expense or debt service charges, as appropriate. GOODWILL: Goodwill is amortized by the straight-line method over periods ranging from 15 to 25 years. RETIREMENT PLANS: Ogden and certain subsidiaries have several retirement plans covering substantially all of their employees. Certain subsidiaries also contribute to multiemployer plans for unionized hourly employees that cover, among other benefits, pensions and postemployment health care. INCOME TAXES: Ogden files a consolidated Federal income tax return, which includes all eligible United States subsidiary companies. Foreign subsidiaries are taxed according to regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on 70 distributions, which may be received from foreign subsidiaries, which are considered to be permanently invested overseas. LONG-LIVED ASSETS: Ogden accounts for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of by evaluating the carrying value of its long-lived assets in relation to the operating performance and future undiscounted cash flows of the underlying businesses when indications of impairment are present. Long-lived assets to be disposed of are evaluated in relation to the estimated net realizable value. EARNINGS PER SHARE: Basic Earnings (Loss) per Share is represented by net income (loss) available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or stock options were exercised or converted into common stock during the period, if dilutive (see Note 23). REPORTING ON COSTS OF START-UP ACTIVITIES: The American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up Activities" in April 1998. This SOP established accounting standards for these costs and requires that they generally be expensed as incurred. Ogden adopted SOP 98-5 on January 1, 1999. The effect of adopting the SOP is shown as a cumulative effect of a change in accounting principle and is reflected as a net charge to income of $3,820,000 in 1999. ACCOUNTING FOR DERIVATIVE INSTRUMENTS: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments andHedging Activities." This SFAS establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities and requires recognition of all derivative instruments as assets or liabilities and requires measurement of those instruments at fair value. Ogden will adopt SFAS No. 133 in January, 2001. The Corporation is in the process of determining the impact adoption of this standard will have on Ogden's financial position and results of operations. 71 RECLASSIFICATION: The accompanying financial statements have been reclassified to conform with the 1999 presentation, principally for discontinued operations. 72 2.DISCONTINUED OPERATIONS As a result of the adoption of the plan to discontinue the operations of the Entertainment and Aviation businesses, the Company's financial statement presentation has changed. Information for two units previously reported under the segment headings "Energy" and "Other" is now reported as Continuing Operations and will continue to be reported under those headings. Results previously reported for "Entertainment" and "Aviation" are now reported as Discontinued Operations. Management expects the process of selling the discontinued operations to be substantially completed in the third quarter of 2000 and will involve the sale of various individual and groups of entities or operations. Based upon a number of assumptions and judgments, management believes that these dispositions will, in the aggregate after costs of disposition, be at book value or greater. Therefore, results from discontinued operations will be recognized currently and gains or losses on disposal of portions of the discontinued operations will be deferred until substantially all assets of the discontinued operations have been sold. Revenues and income (loss) from discontinued operations (expressed in thousands of dollars) were as follows:
YEARS ENDED DECEMBER 31 ------------------------------------------------------ 1999 1998 1997 Revenues $ 807,430 $ 795,879 $ 791,354 ========== ========= ========== Operating income (loss) $ (35,183) $ 87,203 $ 64,079 ----------- --------- --------- Income (Loss) Before Income Taxes and Minority Interests $ (40,169) $ 90,172 $ 70,453 Income Taxes 6 40,240 31,385 Minority Interests 1,676 210 182 ------------ ------------- ------------- Income (Loss) from Discontinued Operations $ (41,851) $ 49,722 $ 38,886 =========== ========= =========
73 Net assets of discontinued operations (expressed in thousands of dollars) were as follows:
December 31 ---------------------------------------- 1999 1998 Current Assets $ 221,200 $ 226,953 Property, Plant and Equipment - Net 375,211 251,402 Other Assets 336,700 253,409 Notes Payable and Current Portion of Long-Term Debt (51,081) (53,347) Other Current Liabilities (142,327) (121,152) Long-Term Debt (108,681) (42,693) Other Liabilities (62,876) (58,846) --------- --------- Net Assets of Discontinued Operations $ 568,146 $ 455,726 ========= =========
74 3. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE At December 31, 1999 and 1998, marketable equity and debt securities held for current and noncurrent uses, such as non-qualified pension liabilities and deferred compensation plan, are classified as current assets and long-term assets (see Note 7), respectively. Net unrealized gains and losses on marketable equity and debt securities held for current and noncurrent uses are charged to Other Comprehensive Income. Marketable securities at December 31, 1999 and 1998 (expressed in thousands of dollars), include the following:
1999 1998 - -------------------------------------------------------------------------------------------- Market Market Value Cost Value Cost - -------------------------------------------------------------------------------------------- Classified as Current Assets: Mutual and bond funds $44,685 $44,714 ------- ------- Total Classified as Current Assets $44,685 $44,714 ======= ======= Classified as Noncurrent Assets: Mutual and bond funds $ 6,777 $ 6,627 $27,451 $27,673 ------- ------- ------- ------- Total Classified as Noncurrent Assets $ 6,777 $ 6,627 $27,451 $27,673 ======= ======= ======= =======
At December 31, 1999 and 1998, unrealized gains (losses) were $150,000 and ($251,000), respectively. The deferred tax benefits on these gains (losses) at December 31, 1999 and 1998 were zero and $186,000, respectively, resulting in net (credits) charges of ($150,000) and $65,000, respectively, to Accumulated Other Comprehensive Income. Proceeds, realized gains, and realized losses from the sales of securities classified as available for sale for the years ended December 31, 1999, 1998, and 1997, were $66,355,000, $743,000, and $1,963,000; $14,232,000, zero, and zero; and $13,970,000, $3,444,000, and zero; respectively. For the purpose of determining realized gains and losses, the cost of securities sold was based on specific identification. 75 4. UNBILLED SERVICE AND OTHER RECEIVABLES Unbilled service and other receivables (expressed in thousands of dollars) consisted of the following:
1999 1998 - ---------------------------- -------- -------- Unbilled service receivables $151,257 $150,389 Notes receivable 8,200 9,020 -------- -------- Total $159,457 $159,409 ======== ========
Long-term unbilled service receivables are for services, which have been performed for municipalities, that are due by contract at a later date and are discounted in recognizing the present value of such services. Current unbilled service receivables, which are included in Receivables, amounted to $49,305,000 and $41,822,000 at December 31, 1999 and 1998, respectively. Long-term notes receivable primarily represent notes received relating to the sale of noncore businesses. 76 5. RESTRICTED FUNDS HELD IN TRUST Funds held by trustees include proceeds received from financing the construction of waste-to-energy facilities; debt service reserves for payment of principal and interest on project debt; lease reserves for lease payments under operating leases; and deposits of revenues received. Such funds are invested principally in United States Treasury bills and notes and United States government agencies securities. Fund balances (expressed in thousands of dollars) were as follows:
1999 1998 - -------------------------------------- -------- -------- -------- -------- Current Noncurrent Current Noncurrent - -------------------------------------- -------- -------- -------- ---------- Construction funds $ 1,074 $ 14,604 Debt service funds 56,624 $121,929 24,871 $131,873 Revenue funds 23,932 13,626 Lease reserve funds 4,112 22,774 10,075 14,488 Other funds 17,920 22,081 47,377 34,561 -------- -------- ------- -------------- Total $103,662 $166,784 $110,553 $180,922 ======== ======== ======= ==============
77 6. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment (expressed in thousands of dollars) consisted of the following:
1999 1998 - ---------------------------------------------- ---------- ---------- Land $ 8,111 $ 6,137 Energy facilities 2,112,057 1,948,329 Buildings and improvements 111,490 102,963 Machinery and equipment 121,587 109,577 Landfills 12,955 17,959 Construction in progress 49,836 26,614 ---------- ---------- Total 2,416,036 2,211,579 Less accumulated depreciation and amortization 574,225 475,338 ---------- ---------- Property, plant, and equipment-net $1,841,811 $1,736,241 ========== ==========
78 7. OTHER ASSETS Other assets (expressed in thousands of dollars) consisted of the following:
1999 1998 - ---------------------------------------- -------- -------- Unamortized bond issuance costs $ 41,352 $ 43,420 Noncurrent securities available for sale 6,777 27,451 Deposits on potential acquisition 13,478 Deferred financing costs 11,858 12,248 Other 24,381 29,556 -------- -------- Total $ 84,368 $126,153 ======== ========
79 8. ACCRUED EXPENSES, ETC. Accrued expenses, etc. (expressed in thousands of dollars), consisted of the following:
1999 1998 - ---------------------------------------------- -------- -------- Operating expenses $ 83,646 $ 51,787 Severance and employment litigation settlement 50,532 Insurance 24,476 21,398 Debt service charges and interest 31,008 24,580 Municipalities' share of energy revenues 28,160 36,300 Payroll 14,763 17,138 Payroll and other taxes 17,200 21,080 Lease payments 15,193 16,038 Construction costs 11,636 3,377 Pension and profit sharing 8,391 9,958 Other 75,150 35,118 -------- -------- Total $360,155 $236,774 ======== ========
80 9. DEFERRED INCOME Deferred income (expressed in thousands of dollars) consisted of the following:
1999 1998 - ------------------------------------------------ -------------------- -------------------- Current Noncurrent Current Noncurrent - ------------------------------------------------ -------- ---------- ------- ---------- Power sales agreement prepayment $ 9,001 $165,311 $ 9,001 $174,328 Sale and leaseback arrangements 1,523 17,352 1,523 18,876 Advance billings to municipalities 6,733 11,523 Other 28,549 23,043 8,359 -------- --------- ------- -------- Total $ 45,806 $182,663 $ 45,090 $201,563 ======== ======== ======= =========
The gains from sale and leaseback transactions consummated in 1986 and 1987 were deferred and are being amortized as a reduction of rental expense over the respective lease terms. Advance billings to various customers are billed one or two months prior to performance of service and are recognized as income in the period the service is provided. In 1998, Ogden received a payment for future energy deliveries required under a power sales agreement. This prepayment is being amortized over the life of the agreement. 81 10. LONG-TERM DEBT Long-term debt (expressed in thousands of dollars) consisted of the following:
1999 1998 - -------------------------------------------------- -------- -------- ----- Adjustable-rate revenue bonds due 2014-2024 $124,755 $124,755 9.25% debentures due 2022 100,000 100,000 Revolving credit facility 50,000 Other long-term debt 70,190 123,839 -------- -------- Total $344,945 $348,594 ======== ========
The adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rates for this debt were 3.21% and 3.38% in 1999 and 1998, respectively. These bonds were issued under agreements that contain various restrictions, the most significant being the requirements to comply with certain financial ratios and to maintain Shareholders' Equity of at least $440,000,000. At December 31, 1999, Ogden was in compliance with all requirements and had $3,050,000 in excess of the required amount of Shareholders' Equity. This covenant has been amended to require a minimum Shareholders' Equity of $400,000,000 through July 31, 2000 (see Note 12). At December 31, 1999, the Company had drawn $50,000,000 on its $200,000,000 principal revolving credit facility due in 2002. The interest rate on this facility at December 31, 1999 was 6.225% and was based on the six-month LIBOR plus 0.225% (see Note 12). Other long-term debt includes an obligation for approximately $28,450,000, representing the equity component of a sale and leaseback arrangement relating to a waste-to-energy facility. This arrangement is accounted for as a financing, has an effective interest rate of 5%, and extends through 2017. Other long-term debt also includes $22,450,000 resulting from the sale of limited partnership interests in and 82 related tax benefits of a waste-to-energy facility, which has been accounted for as a financing for accounting purposes. This obligation has an effective interest rate of 10% and extends through 2015. The remaining other long-term debt of $19,290,000 consists primarily of notes payable, loans and capital leases associated with the acquisition of Energy assets. These instruments bear interest at rates ranging from 6% to 8.6% with various maturity dates. At December 31, 1999 Ogden had one long-term interest rate swap agreement covering a notional amount of $1,600,000, which expires November 30, 2000. This swap was entered into to convert Ogden's $1,600,000 variable-rate debt to a fixed rate. Ogden pays a fixed rate of 5.83% paid on a quarterly basis and receives a floating rate of three months LIBOR on a quarterly basis. At December 31, 1999, the three-month LIBOR rate was 5.81%. The counterparty to this interest rate swap is a major financial institution. Management believes its credit risk associated with nonperformance by the counterparty is not significant. Ogden also had a swap agreement to convert its fixed-rate $100,000,000 9.25% debentures into variable-rate debt which expired December 16, 1998. Amounts paid on swap agreements amounted to zero, $100,000, and $400,000, for 1999, 1998, and 1997, respectively, and were charged to interest expense. The effect on Ogden's weighted-average borrowing rate for 1999, 1998, and 1997 was an increase of zero, .04%, and .09%, respectively. 83 The maturities of long-term debt (expressed in thousands of dollars) at December 31, 1999, were as follows:
2000 $113,815 2001 14,672 2002 51,633 2003 1,279 2004 1,253 Later years 276,108 -------- Total 458,760 Less current portion 113,815 -------- Total long-term debt $344,945 ========
84 11. PROJECT DEBT Project debt (expressed in thousands of dollars) consisted of the following:
1999 1998 - ---------------------------------------------------------------------------- ---------- ---------- Revenue Bonds Issued by and Prime Responsibility of Municipalities: 3.4 - 6.75% serial revenue bonds due 2001 through 2011 $ 442,205 $ 341,284 4.65 - 7.625% term revenue bonds due 2001 through 2015 412,838 557,595 Adjustable-rate revenue bonds due 2006 through 2013 80,220 80,220 ------- ---------- Total 935,263 979,099 ------- ---------- Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties - 5.0 - 8.9% serial revenue bonds due 2001 through 2008 90,666 98,091 ------- ---------- Other Revenue Bonds: 4.5 - 5.5% serial revenue bonds due 2001 through 2015 98,720 104,414 5.5 - 6.7% term revenue bonds due 2014 through 2019 68,020 58,020 ------- ---------- Total 166,740 162,434 ------- ---------- Other project debt 198,163 127,904 ------- ---------- Total long-term project debt $1,390,832 $1,367,528 ======= ==========
Project debt associated with the financing of waste-to-energy facilities is generally arranged by municipalities through the issuance of tax-exempt and taxable revenue bonds. The category, "Revenue Bonds Issued by and Prime Responsibility of Municipalities," includes bonds issued with respect to which debt service is an explicit component of the client community's obligation under the related service agreement. In the event that a municipality is unable to satisfy its payment obligations, the bondholders' recourse with respect to the Corporation is limited to the waste-to-energy facilities and restricted funds pledged to secure such obligations. The category, "Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties," includes bonds issued to finance two facilities for which contractual obligations of third parties to deliver waste ensure sufficient revenues to pay debt 85 service, although such debt service is not an explicit component of the third parties' service fee obligations. The category "Other Revenue Bonds" includes bonds issued to finance one facility for which current contractual obligations of third parties to deliver waste provide sufficient revenues to pay debt service related to that facility through 2011, although such debt service is not an explicit component of the third parties' service fee obligations. The Company anticipates renewing such contracts prior to 2011. Payment obligations for the project debt associated with waste-to-energy facilities are limited recourse to the operating subsidiary and nonrecourse to the Corporation, subject to construction and operating performance guarantees and commitments. These obligations are secured by the revenues pledged under various indentures and are collateralized principally by a mortgage lien and a security interest in each of the respective waste-to-energy facilities and related assets. At December 31, 1999, such revenue bonds were collateralized by property, plant, and equipment with a net carrying value of $1,427,550,000, a credit enhancement of approximately $5,200,000 for which Ogden has certain reimbursement obligations, and restricted funds held in trust of approximately $231,200,000 (see Note 5). The interest rates on adjustable-rate revenue bonds are adjusted periodically to reflect current market rates. The average adjustable rate for such revenue bonds was 5.5% and 5.4% in 1999 and 1998, respectively. Other project debt includes an obligation of a special-purpose limited partnership acquired by special-purpose subsidiaries of Ogden and represents the lease of a geothermal power plant, which has been accounted for as a financing. This obligation, which amounted to $55,921,000 at December 31, 1999, has an effective interest rate of 5.3% and extends through 2008 with options to renew for additional periods and has a fair market value purchase option at the conclusion of the initial term. Payment obligations under this lease arrangement are limited to assets of the limited partnership and revenues derived from a power sales agreement with a third party, which are expected to provide sufficient 86 revenues to make rental payments. Such payment obligations are secured by all the assets, revenues, and other benefits derived from the geothermal power plant, which had a net carrying value of approximately $80,579,000 at December 31, 1999. Other project debt also includes $12,940,000 due to a financial institution as part of the refinancing of project debt in the category "Revenue Bonds Issued by and Prime Responsibility of Municipalities." The debt service associated with this loan is included as an explicit component of the client community's obligation under the related service agreement. A portion of the funds was retained in the Corporation's restricted funds and is loaned to the community each month to cover the community's monthly service fees. The Corporation's repayment for the other part of the loan is limited to the extent repayment is received from the client community. This obligation has an effective interest rate of 7.05% and extends through 2005. In addition, other project debt includes $3,600,000, which is due to financial institutions and bears interest at an adjustable rate equal to the three-month LIBOR rate plus 3.5% (9.5% at December 31, 1999). The debt extends through 2001 and is secured by substantially all the assets of a diesel-fired power plant in the Philippines, which had a net carrying value of approximately $47,410,000 at December 31, 1999. Other project debt includes $34,386,000 due to financial institutions which bears interest at an adjustable rate that was the two-month LIBOR rate plus 1.2% (7.10% at December 31, 1999). The debt extends through 2005 and is secured by substantially all the assets of a subsidiary that owns various power plants in the United States, which had a carrying value of approximately $90,358,000 at December 31, 1999, and a credit enhancement of $10,000,000. Other project debt includes $57,878,000 due to banks of which $45,343,000 is denominated in US dollars and $12,535,000 is denominated in Thai Baht. This debt relates to a Thailand gas-fired energy facility acquired in 1999. The US dollar debt bears interest at the three-month LIBOR plus 3.5% (9.5% at December 31, 1999) and the Thai Baht debt bears an interest rate of Thai bank MLR plus 1.75% (10.25% at December 31, 1999). The MLR, which is the melded Maximum Lending Rate of the consortium of Thai banks that have lent to the project, was approximately 8.5% at December 31, 1999. The debt extends 87 through 2012, is non recourse to Ogden and is secured by all project assets, which had a net carrying value of approximately $97,800,000 at December 31, 1999. Other project debt includes $33,438,000 related to the purchase of the MCI power plant in the Philippines. This debt bears interest at rates equal to the six-month LIBOR plus spreads that increase from plus 3.5% until February 10, 2000, to plus 4.5% thereafter until the final maturity on August 10, 2002. The rate was 9.26% at December 31, 1999. This debt is nonrecourse to Ogden and is secured by all assets of the project, which had a net carrying value of $48,055,000 at December 31, 1999, and all revenues and contracts of the project and by pledge of the Company's ownership in the project. At December 31, 1999, the Company had one interest rate swap agreement as a hedge against interest rate exposure on certain adjustable-rate revenue bonds. The swap agreement expires in January 2019. This swap agreement relates to adjustable rate revenue bonds in the category "Revenue Bonds Issued by and Prime Responsibility of Municipalities" and any payments made or received under the swap agreement are therefore included as an explicit component of the client community's obligation under the related service agreement. Under the swap agreement, the Company pays a fixed rate of 5.18% per annum on a semi-annual basis and receives a floating rate based on a defined LIBOR-based rate. At December 31, 1999, the floating rate on the swap was 5.05%. The notional amount of the swap at December 31, 1999 was $80,220,000 and is reduced in accordance with the scheduled repayments of the applicable revenue bonds. In addition, the Company terminated two other interest rate swap agreements during 1998. The swap agreements resulted in increased debt service expense of $1,659,000, $824,000 and $300,000 for 1999, 1998 and 1997, respectively, including $211,000 paid to terminate two swap agreements during the year ended December 31, 1998. The effect on Ogden's weighted average borrowing rate on project debt was an increase of .11%, .06% and .02% for 1999, 1998 and 1997, respectively. The counterparty to the swap is a major financial institution. The Company believes the credit risk associated with nonperformance by the counterparty is not significant. 88 The maturities on long-term project debt (expressed in thousands of dollars) at December 31, 1999 were as follows:
2000 $ 80,383 2001 100,062 2002 98,870 2003 100,634 2004 101,877 Later years 989,389 -------------- Total 1,471,215 Less current portion 80,383 -------------- Total long-term project debt $ 1,390,832 ==============
89 12. CREDIT AGREEMENTS At December 31, 1999, the Company had an unused revolving credit line of $150 million under its principal revolving credit facility at various borrowing rates including prime, the Eurodollar rate plus .225% and certificate of deposit rates plus .35%. Ogden is not required to maintain compensating balances; however, Ogden pays a facility fee of 1/8 of 1% on its principal revolving credit line, which expires July 1, 2002. The Company agreed with its revolving credit lenders at year-end to not make further draws under its principal revolving credit facility in consideration of obtaining certain waivers of financial covenants contained in that document. In addition, the Company and all of its credit providers (including its revolving credit lenders and certain other banks that have similar covenants in their respective facilities) agreed to amend certain covenants relating to limits on indebtedness as a percentage of its capitalization, interest coverage as a function of income from continuing operations and its minimum Shareholders' Equity, all through the end of July 2000, and to permit the sales of the Aviation and Entertainment segments provided certain minimum prices are obtained. Consequently, all the Company's credit providers have agreed to permit the Company to sell its Aviation and Entertainment businesses and retain the first $100 million in cash proceeds to fund operations and to extend the waivers of the financial covenants through the end of July 2000. Moreover, the revolving credit lenders have agreed to provide the Company with access to $50,000,000 of credit on a secured basis, in addition to the outstanding $50,000,000 which is unsecured. The rate on the $50,000,000 secured facility has been set at either the Eurodollar Rate plus 3% or the prime rate plus 1%. In addition, the Company will pay a 2% fee for the secured facility, which matures on July 31, 2000. The Company expects to obtain a new facility on or before July 31, 2000, more tailored to its Energy business. The Company continues to have discussions concerning possible new credit facilities and/or obtaining equity for such purpose. 90 13. CONVERTIBLE SUBORDINATED DEBENTURES Convertible subordinated debentures (expressed in thousands of dollars) consisted of the following:
1999 1998 - -------------------------------------- -------- -------- 6% debentures due June 1, 2002 $ 85,000 $ 85,000 5 3/4% debentures due October 20, 2002 63,650 63,650 -------- -------- Total $148,650 $148,650 -------- -------- -------- --------
The 6% convertible subordinated debentures are convertible into Ogden common stock at the rate of one share for each $39.077 principal amount of debentures. These debentures are redeemable at Ogden's option at 100% of face value. The 5 3/4% convertible subordinated debentures are convertible into Ogden common stock at the rate of one share for each $41.772 principal amount of debentures. These debentures are redeemable at Ogden's option at 100% of face value. 91 14. PREFERRED STOCK The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is convertible at any time at the rate of 5.97626 common shares for each preferred share. Ogden may redeem the outstanding shares of preferred stock at $50 per share, plus all accrued dividends. These preferred shares are entitled to receive cumulative annual dividends at the rate of $1.875 per share, plus an amount equal to 150% of the amount, if any, by which the dividend paid or any cash distribution made on the common stock in the preceding calendar quarter exceeded $.0667 per share. 92 15. COMMON STOCK AND STOCK OPTIONS In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan"). Under this plan, options and/or stock appreciation rights were granted to key management employees to purchase Ogden common stock at prices not less than the fair market value at the time of grant, which became exercisable during a five-year period from the date of grant. Options were exercisable for a period of ten years after the date of grant. As adopted and as adjusted for stock splits, the 1986 Plan called for up to an aggregate of 2,700,000 shares of Ogden common stock to be available for issuance upon the exercise of options and stock appreciation rights, which were granted over a ten-year period ending March 10, 1996. At December 31, 1998, all of the authorized shares of this plan had been granted. In October 1990, Ogden adopted a nonqualified stock option plan (the "1990 Plan"). Under this plan, nonqualified options, incentive stock options, and/or stock appreciation rights and stock bonuses may be granted to key management employees and outside directors to purchase Ogden common stock at an exercise price to be determined by the Ogden Compensation Committee, which become exercisable during a five-year period from the date of grant. These options are exercisable for a period of ten years after the date of grant. Pursuant to the 1990 Plan, which was amended in 1994 to increase the number of shares available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common stock became available for issuance upon the exercise of such options, rights, and bonuses, which may be granted over a ten-year period ending October 11, 2000; 183,000 shares were available for grant at December 31, 1999. In 1999, Ogden adopted a nonqualified stock option plan (the "1999 Plan"). Under this plan, nonqualified options, incentive stock options, limited stock appreciation rights (LSARs) and performance-based cash awards may be granted to employees and outside directors to purchase Ogden common stock at an exercise price not less than 100% of the fair market value of the common stock on the date of grant which become exercisable over a three-year period from the date of grant. These options are exercisable for a period of ten years after the date of grant. In addition, performance based cash awards may also be granted to employees and outside directors. As adopted, the 1999 plan calls for up to an aggregate of 4,000,000 93 shares of Ogden common stock to be available for issuance upon the exercise of such options and LSAR's, which may be granted over a ten-year period ending May 19, 2009. At December 31, 1999, 2,563,000 shares were available for grant. Effective January 1, 2000 the 1999 Plan was amended and restated, subject to shareholder approval, to change the name of the plan to the "1999 Stock Incentive Plan" and to include the award of restricted stock to key employees based on the attainment of pre-established performance goals. The maximum number of shares of common stock that is available for awards of restricted stock is 1,000,000. No awards of restricted stock have been made under the plan. Under the foregoing plans, Ogden issued 6,282,400 LSARs in conjunction with the stock options granted. These LSARs are exercisable only during the period commencing on the first day following the occurrence of any of the following events and terminate 90 days after such date: the acquisition by any person of 20% or more of the voting power of Ogden's outstanding securities; the approval by Ogden shareholders of an agreement to merge or to sell substantially all of its assets; or the occurrence of certain changes in the membership of the Ogden Board of Directors. The exercise of these limited rights entitles participants to receive an amount in cash with respect to each share subject thereto, equal to the excess of the market value of a share of Ogden common stock on the exercise date or the date these limited rights became exercisable, over the related option price. In February, 2000 Ogden adopted the Restricted Stock Plan for Non-Employee Directors (the "Directors Plan") and the Restricted Stock Plan for key employees (the "Key Employees Plan"). Awards of restricted stock will be made from treasury shares of Ogden common stock, par value $.50 per share. Restricted shares awarded under the Directors Plan vest 100% at the end of three months from the date of the award. Shares of restricted stock awarded under the Key Employees Plan are subject to a two-year vesting schedule, 50% one year following the date of award and 50% two years following the date of award. As of December 31, 1999, no shares of restricted stock had been awarded under these plans. Between January 1, 2000 and February 29, 2000, an aggregate of 80,700 restricted shares were awarded under the Key Employees Plan and an aggregate of 27,218 restricted shares were awarded under the Directors Plan. In connection with the acquisition of the minority interest of Ogden Energy Group, Inc. (OEGI), Ogden assumed the pre-existing OEGI stock option plan then outstanding and converted these options into options to acquire shares of Ogden common stock. All of these options were exercised or cancelled at August 31, 1999. The Corporation has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for these stock option plans. Had compensation cost for the options granted in 1999, 1998, and 1997 under these plans been determined consistent with the provisions of SFAS No. 123, using the binomial option-pricing model with the following weighted-average assumptions -- dividend yield of 0.0%, 4.8% and 6.2%; volatility of 33.52%, 27.22% and 25.84%; risk-free interest rate of 5.89%, 5.42% and 6.43%; and a weighted-average expected life of 7.5 years -- the effect on net income and diluted earnings per share would have been $1,334,000 and $0.03 for 1999, $626,000 and $.01 for 1998, and $334,000 and $.01 for 1997. The 94 weighted-average fair value of options granted during 1999, 1998, and 1997 was $4.53, $3.84 and $2.56, respectively. 95 Information regarding the Corporation's stock option plans is summarized as follows:
Weighted- Option Average Price Exercise Per Share Outstanding Exercisable Price - ---------------------------------------- ----------------- --------------------- --------------------- -------------- 1986 Plan: December 31, 1996, balance $18.31-$28.54 875,500 806,200 $19.93 Became exercisable $22.50 23,100 Cancelled $28.54 (10,000) (10,000) $28.54 -------------- -------- -------- ------ December 31, 1997, balance $18.31-$28.54 865,500 819,300 $19.74 Became exercisable $22.50 19,100 Exercised $18.32-$26.40 (217,000) (217,000) $18.92 Cancelled $22.50-$28.54 (28,000) (20,000) $27.32 ------------- ------- ------- ------ December 31, 1998, balance $18.31-$28.54 620,500 601,400 $19.69 Became exercisable $22.50 19,100 Cancelled $28.54 (50,000) (50,000) $28.54 ------------- ------- -------- ------ December 31, 1999, balance $18.31-$22.50 570,500 570,500 $19.01 ------------- ------- ------- ------ 1990 Plan: December 31, 1996, balance $18.31-$31.50 3,657,000 2,470,200 $20.21 Granted $20.19 570,000 $20.19 Became exercisable $18.31-$31.50 385,400 Exercised $18.31-$21.93 (471,000) (471,000) $18.62 Cancelled $18.31-$23.56 (72,000) (11,000) $21.90 ------------- -------- -------- ------ December 31, 1997, balance $18.31-$31.50 3,684,000 2,373,600 $20.39 Granted $25.97-$29.38 923,000 $26.29 Became exercisable $20.06-$31.50 460,900 Exercised $18.31-$23.56 (538,900) (538,900) $19.05 Cancelled $20.06-$20.31 (7,500) ( 2,000) $20.17 ------------- ------- -------- ------ December 31, 1998, balance $18.31-$31.50 4,060,600 2,293,600 $20.56 Granted $26.78 655,000 $26.78 Became exercisable $20.06-$29.38 589,800 Exercised $18.31-$23.56 (242,600) (242,600) $19.47 Cancelled $20.06-$31.50 (198,500) $23.21 ------------- --------- -------- ------ December 31, 1999, balance $18.31-$29.38 4,274,500 2,640,800 $21.14 ------------- --------- --------- ------ 1999 Plan: Granted $8.66-$26.59 1,437,400 $13.13 ------------ --------- ---------- ------ December 31, 1999, balance $8.66-$26.59 1,437,400 $13.13 ------------ --------- ---------- ------
Conversion of OEGI Plan: December 31, 1996, balance $14.17-$29.46 243,461 243,461 $14.70 Exercised $14.17 (59,640) (59,640) $14.17 Cancelled $29.46 (8,400) (8,400) $29.46 ------------- --------- ----------- -------- December 31, 1997, balance $14.17 175,421 175,421 $14.17 Exercised $14.17 (3,360) (3,360) $14.17 ------------- --------- ---------- --------- December 31, 1998, balance $14.17 172,061 172,061 $14.17 Exercised $14.17 (172,061) (172,061) $14.17 ------------- --------- ---------- --------- December 31, 1999, balance 0 0 0 0 ------------ -------- -------- -------- Total December 31, 1999 $8.66 - $29.38 6,282,400 3,211,300 $20.76 ============== ========= ========= ======
96 The following table summarizes information about stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable ------------------------------------------------- ------------------------------ Number of Weighted-Average Number of Range of Exercise Shares Remaining Weighted-Average Shares Weighted-Average Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price - ----------------- ----------- ---------------- ---------------- ----------- ---------------- $ 8.66-$15.56 1,412,400 9.9 years $12.89 0 $0 $18.31-$29.38 4,870,000 4.9 years $22.27 3,211,300 $20.76 - ------------- --------- --------- ------ --------- ------ $ 8.66-$29.38 6,282,400 6.0 years $20.16 3,211,300 $20.76 - ------------- --------- --------- ------ --------- ------ - ------------- --------- --------- ------ --------- ------
The weighted-average exercise prices for all exercisable options at December 31, 1999, 1998, and 1997, were $20.76, $20.04, and $19.56, respectively. At December 31, 1999, there were 12,961,485 shares of common stock reserved for the exercise of stock options and the conversion of preferred shares and debentures. In 1998, Ogden's Board of Directors authorized the purchase of shares of the Corporation's common stock in an amount up to $200,000,000. Through January 2000, 2,223,000 shares of common stock were purchased at total cost of $58,890,000. 97 16. PREFERRED STOCK PURCHASE RIGHTS In 1990, the Board of Directors declared a dividend of one preferred stock purchase right (Right) on each outstanding share of common stock. Among other provisions, each Right may be exercised to purchase a one one-hundredth share of a new series of cumulative participating preferred stock at an exercise price of $80, subject to adjustment. The Rights may only be exercised after a party has acquired 15% or more of the Corporation's common stock or commenced a tender offer to acquire 15% or more of the Corporation's common stock. The Rights do not have voting rights, expire October 2, 2000, and may be redeemed by the Corporation at a price of $.01 per Right at any time prior to the acquisition of 15% of the Corporation's common stock. In the event a party acquires 15% or more of the Corporation's outstanding common stock in accordance with certain defined terms, each Right will then entitle its holders (other than such party) to purchase, at the Right's then-current exercise price, a number of the Corporation's common shares having a market value of twice the Right's exercise price. At December 31, 1999, 49,468,195 Rights were outstanding. 98 17. FOREIGN EXCHANGE Foreign exchange translation adjustments for 1999, 1998, and 1997, amounting to $4,631,000, $2,170,000, and $8,094,000, respectively, have been charged directly to Other Comprehensive Income. Foreign exchange transaction adjustments, amounting to ($7,000), zero, and $30,000, have been charged (credited) directly to income for 1999, 1998, and 1997, respectively. 99 18. DEBT SERVICE CHARGES Debt service charges for Ogden's project debt (expressed in thousands of dollars) consisted of the following:
1999 1998 1997 - ------------------------------------------------------- ----------- ------------ ----------- Interest incurred on taxable and tax-exempt borrowings $ 90,430 $ 96,939 $ 99,284 Interest earned on temporary investment of certain restricted funds 1,991 4,192 3,992 ----------- ------------ ----------- Net interest incurred 88,439 92,747 95,292 Interest capitalized during construction in property, plant, and equipment 631 ----------- ------------ ----------- Interest expense-net 88,439 92,747 94,661 Amortization of bond issuance costs 6,564 7,616 6,997 ----------- ------------ ----------- Debt service charges $ 95,003 $ 100,363 $ 101,658 =========== ============ ===========
100 19. PENSIONS AND OTHER POSTRETIREMENT BENEFITS Ogden has retirement plans that cover substantially all of its employees. A substantial portion of hourly employees of Ogden Services Corporation participate in defined contribution plans. Other employees participate in defined benefit or defined contribution plans. The defined benefit plans provide benefits based on years of service and either employee compensation or a flat benefit amount. Ogden's funding policy for those plans is to contribute annually an amount no less than the minimum funding required by ERISA. Contributions are intended to provide not only benefits attributed to service to date but also for those expected to be earned in the future. In 1992, the Corporation discontinued its policy of providing postretirement health care and life insurance benefits for all salaried employees, except those employees who were retired or eligible for retirement at December 31, 1992. In 1999, the Corporation discontinued a defined benefit retirement plan for certain Ogden Corporation salaried employees and paid benefits due to employees at December 31, 1999. The following table sets forth the details of Ogden's defined benefit plans' and other postretirement benefit plans' funded status and related amounts recognized in Ogden's Consolidated Balance Sheets (expressed in thousands of dollars): 101
PENSION BENEFITS OTHER BENEFITS ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 26,869 $ 22,850 $ 8,580 $ 10,771 Service cost 2,866 2,434 39 35 Interest cost 1,871 1,620 593 547 Plan amendments 382 Effect of curtailment (3,081) Effect of settlement (7,047) Actuarial (gain) loss (1,618) 154 (374) (2,474) Benefits paid (786) (571) (414) (299) -------- -------- -------- -------- Benefit obligation at end of year 19,074 26,869 8,424 8,580 -------- -------- -------- -------- CHANGE IN PLAN ASSETS: Plan assets at fair value at beginning of year 16,827 14,790 Actual return on plan assets 1,749 1,647 Company contributions 7,653 962 414 299 Effect of settlement (7,047) Benefits paid (786) (571) (414) (299) -------- -------- -------- -------- Plan assets at fair value at end of year 18,396 16,828 -------- -------- -------- -------- RECONCILIATION OF PREPAID (ACCRUED) AND TOTAL RECOGNIZED: Funded status of the plan (678) (10,041) (8,424) (8,580) UNRECOGNIZED: Net transition (asset) obligation (107) Prior service cost 76 818 Net (gain) loss (4,346) (2,503) (1,206) (956) -------- -------- -------- -------- Net amount recognized $ (5,055) ($11,726) $ (9,630) $ (9,536) ======== ======== ======== ======== AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET CONSIST OF: Accrued benefit liability $ (5,055) ($11,726) $ (9,630) ($ 9,536) -------- -------- -------- -------- Net amount recognized $ (5,055) ($11,726) $ (9,630) ($ 9,536) ======== ======== ======== ======== WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31: Discount rate 7.75% 6.75% 7.75% 6.75% Expected return on plan assets 8.00% 8.00% Rate of compensation increase 4.50% 4.00% 4.50% 4.00%
102 For management purposes, annual rates of increase of 8.5% and 7.5% in the per capita cost of health care benefits were assumed for 1999 for covered employees under age 65 and over age 65, respectively. The rates were assumed to decrease gradually to 5.5% and 5% for employees under age 65 and over age 65, respectively, in 2005 and remain at that level. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $2,502,000, $2,676,000 and zero, respectively, as of December 31, 1999 and $6,431,000, $10,481,000 and zero, respectively, as of December 31, 1998. Contributions and costs for defined contribution plans are determined by benefit formulas based on percentage of compensation as well as discretionary contributions and totaled $9,002,000, $8,257,000, and $8,652,000 in 1999, 1998, and 1997, respectively. Plan assets at December 31, 1999, 1998, and 1997, primarily consisted of common stocks, United States government securities, and guaranteed insurance contracts. Pension costs for Ogden's defined benefit plans and other postretirement benefit plans included the following components (expressed in thousands of dollars):
PENSION BENEFITS OTHER BENEFITS ------------------------------- ------------------------------- 1999 1998 1997 1999 1998 1997 ------- ------- ------- ------- ------- ------- COMPONENTS ON NET PERIODIC BENEFIT COST: Service cost $ 2,866 $ 2,434 $ 1,923 $ 39 $ 35 $ 54 Interest cost 1,871 1,620 1,340 593 547 713 Expected return on plan assets (1,441) (1,191) (899) Amortization of unrecognized: Net transition (asset) obligation 27 27 27 Prior service cost 233 416 378 Net (gain) loss (33) (22) (62) (124) (170) 9 ------- ------- ------- ------- ------- ------- Net periodic benefit cost $ 3,523 $ 3,284 $ 2,707 $ 508 $ 412 $ 776 ======= ======= ======= ======= ======= ======= Curtailment gain $(2,493) Settlement gain (51)
103 Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in the assumed health care trend rate would have the following effects (expressed in thousands of dollars):
One Percentage One Percentage Point Increase Point Decrease -------------- -------------- Effect on total service and interest cost components $ 15 $ (14) Effect on postretirement benefit obligation $ 206 $(194)
104 20. SPECIAL CHARGES In September 1999, the Company's Board of Directors approved a plan to dispose of its Aviation and Entertainment businesses and close its New York City headquarters, and in December 1999 approved a plan to exit other non-core businesses so that Ogden can focus its resources on its Energy business. As a result of these decisions, the Company has incurred various expenses which have been recognized in its continuing and discontinued operations. These expenses include severance costs mainly for its New York City employees of $41,500,000; contract termination costs of its former Chairman and Chief Executive Officer of $17,500,000; the write-down to estimated net realizable value of other non-core businesses of $36,200,000 based upon the estimated proceeds from the sale of such businesses; and the accelerated amortization of a new data processing system of $2,300,000 based upon a revised useful life of 15 months starting October 1, 1999. Such expenses also include the costs to abandon expansion plans of its Entertainment business totaling $17,800,000, which includes the forfeiture of the non-refundable deposit and related costs totaling $10,500,000 in connection with the termination of the proposed acquisition of Volume Services America (VSA). In addition, charges totaling $13,200,000 were recorded to recognize losses prior to the decision to discontinue the Entertainment business relating to the sale of assets and to the write-down of unamortized contract acquisition costs at two venues. In addition, Datacom, Inc. (Datacom), a subsidiary of Ogden which primarily manufactures products for its major customer Genicom Corporation (Genicom), recorded write-downs of its inventories and accounts receivable from Genicom of $10,500,000, primarily as a result of Genicom's poor financial position in 1999 evidenced by Genicom's announcement of its violation of its credit facilities in the third quarter and its subsequent filing for protection from creditors under the provisions of Chapter 11 of the Bankruptcy Code on March 10, 2000. As of December 31, 1999, Datacom had net inventory in connection with the Genicom contract of approximately $8,000,000, commitments to purchase parts for use in the assembly of inventory for sale to Genicom of approximately $8,000,000, and accounts receivable net of allowances of approximately $7,500,000. Since Datacom is a principal supplier of 105 goods to Genicom, the Company is in conversation with the credit institutions and others about continuing to ship products to Genicom and the related payment terms. The Company believes that it will be successful in resuming its business relationship with Genicom and will realize the net carrying value of its accounts receivable and inventory on hand at December 31, 1999. The following is a summary of the principal special charges recognized in 1999 and the remaining accruals at December 31, 1999 (expressed in thousands of dollars):
Total Amounts Balance at Continuing Discontinued Special Paid in December Operations Operations Charges 1999 31, 1999 ---------- ------------ ---------- ------- ---------- Cash charges: Severance for approximately 220 employees $16,400 $25,100 $41,500 $ 1,100 $40,400 Contract termination settlement 17,500 17,500 1,800 15,700 Termination of VSA acquisition 10,500 10,500 10,500 0 ------- ------- ------- -------- ------- Cash charges 33,900 35,600 69,500 $ 13,400 $56,100 ------- ------- ------- ======== ======= Noncash charges: Write-downs of non-core businesses: OEES goodwill ($23,000) and property and other assets ($5,400); ADTI goodwill ($7,800) 36,200 36,200 Datacom inventory ($7,200), and receivables ($3,300) 10,500 10,500 Entertainment asset sales and abandonment: Sale of the Grizzly Nature Center ($4,200) and a casino in Aruba ($2,500); and unrecoverable contract acquisition costs ($6,500) 13,200 13,200 Abandonment of Entertainment expansion: Casino facilities in South Africa 7,300 7,300 Accelerated amortization of new data processing system 500 1,800 2,300 ---------- --------- ---------- Noncash charges 47,200 22,300 69,500 ---------- --------- ---------- Total charges $ 81,100 $ 57,900 $ 139,000 ========== ========= ==========
For continuing operations, severance accruals, the provision for contract termination settlement, the write-down of non-core businesses, the accelerated depreciation of a new data processing system and the provisions relating to Datacom receivables are included in selling, administrative, and general 106 expenses, and a provision relating to Datacom's inventory is included in cost of sales in the accompanying 1999 Statement of Consolidated Income and Comprehensive Income. The amount accrued for severance is based upon the Company's written severance policy and the positions eliminated. The accrued severance does not include any portion of the employees' salaries through their severance dates. Based upon current severance dates and the severance accrual remaining at December 31, 1999, the Company expects to pay these amounts largely in 2000. The amount accrued for the contract termination costs of the Company's former Chairman and Chief Executive Officer is based upon a settlement agreement reached in December 1999. Pursuant to the settlement agreement, the Company forgave demand notes dated August 1999 in the face amount of approximately $1,800,000, and with the exception of certain insurance benefits, expects to pay these amounts largely in 2000. 107 21. INCOME TAXES The components of the provision (benefit) for income taxes (expressed in thousands of dollars) were as follows:
1999 1998 1997 -------- -------- -------- Current: Federal $ 4,552 $ (1,354) $ (8,703) State 4,108 3,191 7,358 Foreign 1,367 900 1,676 -------- -------- -------- Total current 10,027 2,737 331 -------- -------- -------- Deferred: Federal (13,809) 17,459 24,127 State (3,543) 1,436 (2,743) Foreign 408 (75) -------- -------- -------- Total deferred (16,944) 18,820 21,384 -------- -------- -------- Total provision (benefit) for income taxes $ (6,917) $ 21,557 $ 21,715 ======== ======== ========
The provision for income taxes (expressed in thousands of dollars) varied from the Federal statutory income tax rate due to the following: 108
1999 1998 1997 --------------------- --------------------- ---------------------- Percent of Percent of Percent of Income Income Income Amount of Before Amount of Before Amount of Before Tax Taxes Tax Taxes Tax Taxes --------- ---------- --------- ---------- --------- ---------- Taxes at statutory rate $(12,961) 35.0% $ 22,074 35.0% $ 21,177 35.0% State income taxes, net of Federal tax benefit 367 (1.0) 3,007 4.8 2,999 4.9 Taxes on foreign earnings (3,469) 9.3 (2,384) (3.8) (1,550) (2.5) Amortization of goodwill 651 (1.7) 691 1.1 665 1.1 Write-down of goodwill 10,795 (29.1) 1,750 2.9 Benefit relating to sale of stock of former subsidiary (3,581) (5.9) Energy credits (2,338) 6.3 (2,511) (3.9) Other--net 38 (.1) 680 1.0 255 .4 -------- ------ -------- ------ -------- ------- Provision (benefit) for income taxes $ (6,917) 18.7% $ 21,557 34.2% $ 21,715 35.9% ======== ====== ======== ====== ======== ======
109 The components of the net deferred income tax liability (expressed in thousands of dollars) as of December 31, 1999 and 1998, were as follows:
1999 1998 -------- -------- Deferred Tax Assets: Deferred Income $ 7,234 $ 6,828 Accrued expenses 89,140 84,469 Other liabilities 32,834 34,271 Investment tax credits 7,042 Alternative minimum tax credits 32,298 45,032 -------- -------- Total deferred tax assets 168,548 170,600 -------- -------- Deferred Tax Liabilities: Unbilled accounts receivable 51,088 52,003 Property, plant, and equipment 430,867 433,693 Other 31,216 29,833 -------- -------- Total deferred tax liabilities 513,171 515,529 -------- -------- Net deferred tax liability $344,623 $344,929 ======== ========
110 Deferred tax assets and liabilities (expressed in thousands of dollars) are presented as follows in the accompanying balance sheets:
1999 1998 --------- --------- Net deferred tax liability--noncurrent $ 380,812 $ 392,850 Less net deferred tax asset--current (36,189) (47,921) --------- --------- Net deferred tax liability $ 344,623 $ 344,929 ========= =========
At December 31, 1999, for Federal income tax purposes, the Corporation had investment and energy tax credit carryforwards of approximately $7,042,000, which will expire in 2006 through 2009, and alternative minimum tax credit carryforwards of approximately $32,298,000 which have no expiration date. Deferred Federal income taxes have been reduced by these amounts. 111 22. LEASES Total rental expense amounted to $54,301,000, $42,331,000, and $39,015,000 (net of sublease income of $5,242,000, $3,398,000, and $1,815,000) for 1999, 1998, and 1997, respectively. Principal leases are for leaseholds, sale and leaseback arrangements on waste-to-energy facilities, trucks and automobiles, and machinery and equipment. Some of these operating leases have renewal options. The following is a schedule (expressed in thousands of dollars), by year, of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1999: 2000 $ 49,352 2001 49,556 2002 47,020 2003 45,423 2004 36,480 Later years 432,516 -------- Total $660,347 ========
These future minimum rental payment obligations include $430,636,000 of future nonrecourse rental payments that relate to energy facilities of which $277,828,000 are supported by third-party commitments to provide sufficient service revenues to meet such obligations. The remaining $152,808,000 relates to a waste-to-energy facility at which the Company serves as operator and directly markets one-half of the facility's disposal capacity. This facility currently generates sufficient revenues from short- and medium-term contracts to meet rental payments. The Company anticipates renewing the short- and medium-term contracts or entering into new contracts to generate sufficient revenues to meet those remaining future rental payments. Also included are $42,896,000 of nonrecourse rental payments relating to an energy facility operated by a special-purpose subsidiary, which are supported by contractual power purchase obligations of a third party and which are expected to provide sufficient 112 revenues to make the rent payments. These nonrecourse rental payments (in thousands of dollars) are due as follows: 2000 $ 34,554 2001 36,006 2002 36,488 2003 36,664 2004 25,940 Later years 303,880 -------- Total $473,532 ========
113 23. EARNINGS PER SHARE Basic earnings per share was computed by dividing net income, reduced by preferred stock dividend requirements, by the weighted average of the number of shares of common stock outstanding during each year. Diluted earnings per share was computed on the assumption that all convertible debentures, convertible preferred stock, and stock options converted or exercised during each year or outstanding at the end of each year were converted at the beginning of each year or at the date of issuance or grant, if dilutive. This computation provided for the elimination of related convertible debenture interest and preferred dividends. The reconciliation of the income and common shares included in the computation of basic earnings per common share and diluted earnings per common share for years ended December 31, 1999, 1998, and 1997, is as follows: 114
1999 1998 1997 ------------------------------------ -------------------------------- ---------------------------------- Per- Per- Per Income Shares Share Income Shares Share Income Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ------------ ------------- ------ ----------- ------------- ------ ----------- ------------- ------ Income (loss) from continuing operations $ (36,290,000) $37,248,000 $36,787,000 Less: preferred stock dividend 137,000 144,000 152,000 ------------- ----------- ----------- BASIC EARNINGS (LOSS)PER SHARE (36,427,000) 49,235,000 $(0.74) 37,104,000 49,836,000 $ 0.74 36,635,000 50,030,000 $ 0.73 ====== ====== ====== Effect of Dilutive Securities: Stock options (A) 807,000 538,000 Convertible preferred stock (A) 144,000 257,000 152,000 275,000 6% convertible debentures (A) (A) (A) 5 3/4% convertible debentures (A) (A) (A) ------------- ---------- ------ ----------- ---------- ------ ----------- ---------- ----- DILUTED EARNINGS (LOSS) PER SHARE $ (36,427,000) 49,235,000 $(0.74) $37,248,000 50,900,000 $ 0.73 $36,787,000 50,843,000 $0.72 ============= ========== ====== =========== ========== ====== =========== ========== =====
(A) Antidilutive Outstanding stock options to purchase common stock with an exercise price greater than the average market price of common stock were not included in the computation of diluted earnings per share. The balance of such options was 2,954,000 in 1999, 75,000 in 1998, and 80,000 in 1997. Shares of common stock to be issued, assuming conversion of convertible preferred shares, the 6% convertible debentures, and the 5 3/4% convertible debentures, were not included in computations of diluted earnings per share if to do so would have been antidilutive. The common shares excluded from the calculation were 2,175,000 in 1999, 1998 and 1997 for the 6% convertible debentures; 1,524,000 in 1999, 1998 and 1997 for the 5 3/4% convertible debentures; 308,000 in 1999 for stock options; and 245,000 in 1999 for convertible preferred stock. 115 24. COMMITMENTS AND CONTINGENT LIABILITIES Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. The Company did not include certain of its operations at either the Arrowhead Pond in Anaheim, California or the Corel Centre near Ottawa, Canada as part of its agreement to sell its Food and Beverage/Venue Management business which was announced in March 2000. The Company manages the Arrowhead Pond under a long-term contract. As part of that contract, the Company is a party, along with the City of Anaheim, to a reimbursement agreement under a letter of credit in the amount of approximately $120,000,000. Under the reimbursement agreement, the Company is responsible for draws, if any, under the letter of credit caused by the Company's failure to perform its duties under its management contract at that venue. The Company is exploring alternatives for disposing of these operations along with the reimbursement agreement and related obligations. During 1994, a subsidiary of Ogden entered into a 30-year facility management contract at the Corel Centre, pursuant to which it agreed to advance funds to a customer, and if necessary, to assist the customer's refinancing of senior secured debt incurred in connection with the construction of the facility. Ogden is obligated to purchase such senior debt in the amount of $97,100,000 on December 23, 2002, if the debt is not refinanced prior to that time. Ogden is also required to repurchase the outstanding amount of certain subordinated secured debt of such customer on December 23, 2002. At December 31, 1999, the amount outstanding was $51,600,000. In addition, as of December 31, 1999, the Corporation had guaranteed $3,500,000 of senior secured term debt of an affiliate and principal tenant (the NHL Ottawa Senators) of this customer and had guaranteed up to $3,500,000 of the tenant's secured 116 revolving debt. Further, Ogden is obligated to purchase $20,800,000 of the tenant's secured subordinated indebtedness on January 29, 2004, if such indebtedness has not been repaid or refinanced prior to that time. In October 1999, Ogden also agreed to advance a secured loan to that tenant of up to approximately $8,400,000 if certain events occur. Separately, Ogden has guaranteed approximately $3,800,000 of borrowings of Metropolitan Entertainment Group, an Entertainment joint venture in which Ogden has an equity interest. Management expects this guarantee to be assumed by the ultimate purchaser of this interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. Under certain agreements previously entered into by the Company, if the Company's outstanding debt securities are no longer rated investment grade, it may be required to post additional collateral or letters of credit. The failure to take such actions could result in a forfeiture of certain contracts or could result in a default under the agreements requiring the posting of such letters. Such a default would also be a default under certain of the Company's credit facilities. The Company would need the consent of its Credit Providers to obtain the funds necessary to post the letters of credit if they become due, obtain equity, or potentially utilize sales proceeds for such purpose. The Company's Credit Providers have agreed to work with the Company to explore solutions to this issue should it arise. At December 31, 1999, capital commitments for continuing operations amounted to $29,000,000 for normal replacement and growth in Energy. Other capital commitments for Energy as of December 31, 1999 amounted to approximately $96,600,000. This amount includes a commitment to pay, in 2008, $10,600,000 for a service contract extension at an energy facility. In addition, this amount includes $28,000,000 for a 50% interest in a project in Thailand; $18,500,000 and $15,300,000, respectively, for two oil-fired projects in India; $5,000,000 for additional equity commitments related to Energy's interest in a coal-fired power project in the Philippines; $3,500,000 for a mass-burn waste-to-energy facility in Italy; $1,900,000 for a natural gas-fired diesel engine cogeneration project in Spain; and $13,800,000 for standby letters of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contributions to the coal-fired power project in the Philippines is being provided through bank credit facilities, which must be repaid in 2000. In addition, compliance with the standards and guidelines under the Clear Air Act Amendments of 1990 will require further Energy capital expenditures of approximately $30,000,000 through December 2000, subject to the final time schedules determined by the individual states in which the Corporation's waste-to-energy facilities are located. 117 Commitments for discontinued operations amounted to $37,000,000 for normal replacement and growth in Aviation ($100,000) and Entertainment ($36,900,000), the latter relating primarily to Entertainment's Jazzland theme park in New Orleans. As part of its agreement to sell the themed attractions, the Company has agreed to complete the construction of its Jazzland theme park. The Corporation also has a $2,500,000 contingent equity contribution for Entertainment's investment at Isla Magica. The Corporation has no further obligations with respect to its previous agreement to acquire VSA. The Company acquired a 50% interest in an Aviation ground handling business in Rome Italy and in March 2000, made a contractually required investment of $6,600,000 in connection therewith. 118 25. INFORMATION CONCERNING BUSINESS SEGMENTS As of September 29, 1999, the Corporation adopted a plan to discontinue the operations of its Aviation and Entertainment segments. As a result of this decision, these segments are now reflected as discontinued operations. The Corporation now has two reportable segments, Energy and Other. Ogden's Energy segment seeks to develop, own or operate energy generating facilities in the United States and abroad that utilize a variety of fuels, as well as water and wastewater facilities that will similarly serve communities on a long-term basis. The Energy segment also includes environmental consulting and engineering, and construction activities which are being sold and discontinued, respectively. The Other segment is primarily comprised of non-core businesses of the Corporation. Ogden substantially completed the disposition of its non-core businesses during 1997 and early 1998, principally through the sale of the remaining Facility Services operations (New York Region) which provided facility management, maintenance, janitorial and manufacturing support services; and the sale of the Charlotte, North Carolina, Binghamton, New York and Cork, Ireland operations of Datacom. Datacom continues to provide contract manufacturing at its remaining facility located in Reynosa, Mexico near the boarder with McAllen, Texas. Applied Data Technology, Inc. ("ADTI"), located in San Diego, California, is a leading supplier of air combat maneuvering instrumentation systems and after-action reporting and display systems. The Company sold this business in March 2000. 119 Revenues and income from continuing operations (expressed in thousands of dollars) for the years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997 ----------- ----------- ----------- Revenues: Energy $ 922,099 $ 804,043 $ 712,272 Other 78,251 92,453 246,099 ----------- ----------- ----------- Total revenues $ 1,000,350 $ 896,496 $ 958,371 =========== =========== =========== Income (Loss) from Operations: Energy $ 54,602 $ 100,513 $ 100,081 Other (22,731) (4,982) 1,010 ----------- ----------- ----------- Total income from operations 31,871 95,531 101,091 Equity in Income of Investees and Joint Ventures: Energy 13,005 19,251 1,605 Other 89 179 ----------- ----------- ----------- Total 44,876 114,871 102,875 Corporate unallocated income and expenses--net 51,210 32,201 21,505 Interest--net 30,697 19,812 21,045 ----------- ----------- ----------- Income (Loss) from Continuing Operations Before Income Taxes, Minority Interests and the Cumulative Effect of Change in Accounting Principle $ (37,031) $ 62,858 $ 60,325 =========== =========== ===========
Ogden's revenues include $59,887,000, $62,148,000, and $53,600,000 from the United States government contracts for the years ended December 31, 1999, 1998, and 1997, respectively. Total revenues by segment reflect sales to unaffiliated customers. In computing income from operations, none of the following have been added or deducted: unallocated corporate expenses, nonoperating interest expense, interest income, and income taxes. 120 A summary (expressed in thousands of dollars) of identifiable assets, depreciation and amortization, and capital additions of continuing operations for the years ended December 31, 1999, 1998, and 1997, is as follows:
Identifiable Depreciation and Capital Assets Amortization Additions ------------ ---------------- --------- 1999 Energy $3,010,723 $ 86,735 $ 64,655 Other 51,440 2,007 735 Corporate 96,839 6,163 407 ---------- ---------- ---------- Consolidated $3,159,002 $ 94,905 $ 65,797 ========== ========== ========== 1998 Energy $2,858,816 $ 75,809 $ 32,237 Other 72,680 1,909 2,051 Corporate 260,332 2,263 2,234 ---------- ---------- ---------- Consolidated $3,191,828 $ 79,981 $ 36,522 ========== ========== ========== 1997 Energy $2,808,571 $ 72,835 $ 39,967 Other 109,587 2,736 2,295 Corporate 179,518 875 227 ---------- ---------- ---------- Consolidated $3,097,676 $ 76,446 $ 42,489 ========== ========== ==========
121 Ogden's areas of operations are principally in the United States. Operations outside of the United States are primarily in Asia, Latin America and Europe. No single foreign country or geographic area is significant to the consolidated operations. A summary of revenues and identifiable assets by geographic area for the years ended December 31, 1999, 1998 and 1997 (expressed in thousands of dollars) is as follows:
1999 1998 1997 ---------- ---------- ----------- Revenues: United States $ 900,642 $ 827,344 $ 911,327 Asia 80,811 47,344 11,331 Latin America 11,375 11,025 11,362 Europe 7,522 10,783 22,003 Other 2,348 ---------- ---------- ---------- $1,000,350 $ 896,496 $ 958,371 ========== ========== ==========
Identifiable Assets: United States $2,749,888 $2,979,825 $2,930,539 Asia 399,136 200,913 141,547 Latin America 2,784 890 11,221 Europe 7,194 10,200 13,582 Other 787 ---------- ---------- ---------- Total $3,159,002 $3,191,828 $3,097,676 ========== ========== ==========
122 26. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Expressed in thousands of dollars) 1999 1998 1997 - ------------------------------------------------------------------- ----------------- ----------------- Cash Paid for Interest and Income Taxes: Interest (net of amounts capitalized).................. $147,597 $131,178 $136,114 Income taxes........................................... 22,278 14,419 24,193 Noncash Investing and Financing Activities: Conversion of preferred shares for common shares....... 4 2 3 Acquisition of property, plant, and equipment for debt. 21,660 Detail of Entities Acquired: Fair value of assets acquired.......................... 165,829 900 147,428 Liabilities assumed.................................... (106,393) (89,238) Net cash paid for acquisitions......................... 59,436 900 58,190
123 27. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair-value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that Ogden would realize in a current market exchange. The estimated fair value (expressed in thousands of dollars) of financial instruments at December 31, 1999 and 1998, is summarized as follows: 124
1999 1998 - ----------------------------------------------------------------- -------------- ---------------- ------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - ----------------------------------------------------------------- -------------- ---------------- ------------- Assets: Cash and cash equivalents $101,020 $101,020 $181,169 $181,169 Marketable Securities 6,777 6,777 72,136 72,136 Receivables 453,508 445,627 433,716 430,282 Restricted funds 270,446 233,319 291,475 290,141 Other assets 310 310 Liabilities: Debt 458,760 485,634 370,482 418,056 Convertible subordinated debentures 148,650 123,275 148,650 142,581 Project debt 1,471,215 1,487,025 1,430,729 1,539,765 Other liabilities 1,838 1,838 2,648 2,648 Off Balance-Sheet Financial Instruments: Unrealized losses on interest rate swap agreements 8,913 14,542 Unrealized gains on interest rate swap agreements 4 Guarantees 7,449 9,190
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: For cash and cash equivalents, and marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of long-term unbilled receivables is estimated by using a discount rate that approximates the current rate for comparable notes. The fair value of noncurrent receivables is estimated by discounting the future cash flows using the current rates at which 125 similar loans would be made to such borrowers based on the remaining maturities, consideration of credit risks, and other business issues pertaining to such receivables. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee. Other assets, consisting primarily of insurance and escrow deposits, and other miscellaneous financial instruments used in the ordinary course of business, are valued based on quoted market prices or other appropriate valuation techniques. Fair values for debt were determined based on interest rates that are currently available to the Corporation for issuance of debt with similar terms and remaining maturities for debt issues that are not traded on quoted market prices. With respect to convertible subordinated debentures, fair values are based on quoted market prices. The fair value of project debt is estimated based on quoted market prices for the same or similar issues. Other liabilities are valued by discounting the future stream of payments using the incremental borrowing rate of the Corporation. The fair value of the Corporation's interest rate swap agreements is the estimated amount that the Corporation would receive or pay to terminate the swap agreements at the reporting date based on third-party quotations. The fair value of Ogden financial guarantees provided on behalf of customers (see Note 24) are valued by discounting the future stream of payments using the incremental borrowing rate of the Corporation. The fair-value estimates presented herein are based on pertinent information available to management as of December 31, 1999 and 1998. Although management is not aware of any factors that would significantly affect the estimated fair-value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 126 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Ogden Corporation: We have audited the accompanying consolidated balance sheets of Ogden Corporation and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of shareholders' equity, consolidated income and comprehensive income, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1999 and 1998, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. As more fully described in Notes 2, 12 and 20 to the financial statements, the Company has adopted plans to discontinue its Entertainment and Aviation business segments and dispose of certain other non-core assets, utilize the proceeds to pay down debt, and focus solely on its Energy business. As discussed in Note 1 to the financial statements, the Company changed its method of accounting for the costs of start-up activities in 1999. Deloitte & Touche LLP New York, New York March 30, 2000 127 Ogden Corporation and Subsidiaries REPORT OF MANAGEMENT Ogden's management is responsible for the information and representations contained in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances to reflect in all material respects the substance of events and transactions that should be included and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions currently being accounted for. In meeting its responsibility for the reliability of the financial statements, management depends on the Corporation's internal control structure. This structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. In designing control procedures, management recognizes that errors or irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of such controls. Management believes that the Corporation's internal control structure provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented and would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for these financial statements through the Audit Committee, which is composed solely of nonaffiliated directors. The Audit Committee, in this oversight role, meets periodically with management to monitor their responsibilities. The Audit Committee also meets periodically with the independent auditors and their internal auditors, both of whom have free access to the Audit Committee without management present. The independent auditors elected by the shareholders express an opinion on our financial statements. Their opinion is based on procedures they consider to be sufficient to enable them to reach a conclusion as to the fairness of the presentation of the financial statements. Scott G. Mackin Raymond E. Dombrowski, Jr. President and Chief Executive Officer Senior Vice President and Chief Financial Officer 128 Ogden Corporation and Subsidiaries QUARTERLY RESULTS OF OPERATIONS
1999 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 - ------------------------------------------------------------------------------------------------------------------------------ (In thousands of dollars, except per-share amounts) Total revenues from continuing operations....................... $234,824 $252,070 $255,623 $ 257,833 ----------- ----------- ----------- ----------- Gross profit.................................................... $ 53,684 $ 72,437 $ 58,636 $ 10,773 ----------- ----------- ----------- ----------- Income (loss) from continuing operations before cumulative effect of change in accounting principle........................ $ 4,059 $ 16,268 $ 8,353 $ (64,970) Income (loss) from discontinued operations...................... 6,462 8,724 (16,069) (40,968) Cumulative effect of change in accounting principle............. (3,820) ----------- ----------- ----------- ----------- Net income (loss)............................................... $ 6,701 $ 24,992 $ (7,716) $ (105,938) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Basic earnings (loss) per common share: Income (loss) from continuing operations before cumulative effect of change in accounting principle........................ $ 0.08 $ 0.33 $ 0.17 $ (1.31) Income (loss) from discontinued operations...................... 0.13 0.18 (0.33) (0.83) Cumulative effect of change in accounting principle............. (0.08) ----------- ----------- ----------- ----------- Total........................................................... $ 0.13 $ 0.51 $ (0.16) $ (2.14) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted earnings (loss) per common share: Income (loss) from continuing operations before cumulative effect of change in accounting principle........................ $ 0.08 $ 0.33 $ 0.17 $ (1.31) Income (loss) from discontinued operations...................... 0.13 0.17 (0.33) (0.83) Cumulative effect of change in accounting principle............. (0.08) ----------- ----------- ----------- ----------- Total........................................................... $ 0.13 $ 0.50 $ (0.16) $ (2.14) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1998 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 - ------------------------------------------------------------------------------------------------------------------------------ (In thousands of dollars, except per-share amounts) Total revenues from continuing operations....................... $211,263 $229,545 $217,632 $238,056 ----------- ----------- ----------- ----------- Gross profit.................................................... $ 55,766 $ 62,361 $ 71,196 $ 65,765 ----------- ----------- ----------- ----------- Income from continuing operations .............................. $ 2,705 $ 6,051 $ 14,059 $ 14,433 Income from discontinued operations............................. 8,995 21,009 14,096 5,622 ----------- ----------- ----------- ----------- Net income...................................................... $ 11,700 $ 27,060 $ 28,155 $ 20,055 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Basic earnings per common share: Income from continuing operations .............................. $ 0.05 $ 0.12 $ 0.28 $ 0.29 Income from discontinued operations............................. 0.18 0.42 0.29 0.12 ----------- ----------- ----------- ----------- Total........................................................... $ 0.23 $ 0.54 $ 0.57 $ 0.41 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted earnings per common share: Income from continuing operations .............................. $ 0.05 $ 0.12 $ 0.28 $ 0.29 Income from discontinued operations............................. 0.17 0.41 0.28 0.11 ----------- ----------- ----------- ----------- Total........................................................... $ 0.22 $ 0.53 $ 0.56 $ 0.40 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
129 ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS ------------------------------------ BALANCE AT CHARGED TO BEGINNING CHARGED TO COSTS OTHER BALANCE AT DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- ALLOWANCES DEDUCTED IN THE BALANCE SHEET FROM THE ASSETS TO WHICH THEY APPLY: DOUBTFUL RECEIVABLES-CURRENT $18,135,000 $ 5,130,000 $ 3,468,000 (E) $ 2,094,000 (A) $17,942,000 6,697,000 (C) DEFERRED CHARGES ON PROJECTS 13,070,000 13,070,000 (D) ---------------------------------------------------------------------------------------- TOTAL $31,205,000 $ 5,130,000 $ 3,468,000 $21,861,000 $17,942,000 ======================================================================================== ALLOWANCES NOT DEDUCTED: PROVISION FOR RESTRUCTURING $ 274,000 $ 274,000 (C) RESERVES RELATING TO TAX INDEMNIFICATION AND OTHER CONTINGENCIES IN CONNECTION WITH THE SALE OF LIMITED PARTNERSHIP INTERESTS IN AND RELATED TAX BENEFITS OF A WASTE-TO-ENERGY FACILITY 300,000 $ 300,000 OTHER 1,850,000 1,850,000 (B) ---------------------------------------------------------------------------------------- TOTAL $ 2,424,000 $ 2,124,000 $ 300,000 ======================================================================================
NOTES: (A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE. (B) PAYMENTS CHARGED TO ALLOWANCES. (C) REVERSAL OF PROVISIONS NO LONGER REQUIRED. (D) WRITE-OFF OF DEFERRED CHARGES. (E) TRANSFER FROM OTHER ACCOUNTS. 130 ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------- COLUMN C COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E -------------------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER BALANCE AT DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- ALLOWANCES DEDUCTED IN THE BALANCE SHEET FROM THE ASSETS TO WHICH THEY APPLY: DOUBTFUL RECEIVABLES-CURRENT $14,643,000 $ 7,336,000 $ 3,318,000 (A) $18,135,000 526,000 (E) DOUBTFUL RECEIVABLES-NONCURRENT 3,000,000 3,000,000 (A) DEFERRED CHARGES ON PROJECTS 10,741,000 2,609,000 280,000 (D) 13,070,000 ------------------------------------------------------------------------------------ TOTAL $28,384,000 $ 9,945,000 $ 7,124,000 $31,205,000 ==================================================================================== ALLOWANCES NOT DEDUCTED: ESTIMATED COST OF DISPOSAL OF ASSETS $ 296,000 $ 296,000 (B) PROVISION FOR RESTRUCTURING 1,141,000 867,000 (B) $ 274,000 RESERVES RELATING TO TAX INDEMNIFICATION AND OTHER CONTINGENCIES IN CONNECTION WITH THE SALE OF LIMITED PARTNERSHIP INTERESTS IN AND RELATED TAX BENEFITS OF A WASTE-TO-ENERGY FACILITY 3,000,000 2,700,000 (C) 300,000 OTHER 3,979,000 $ 100,000 1,223,000 (B) 1,850,000 1,006,000 (C) ------------------------------------------------------------------------------------ TOTAL $ 8,416,000 $ 100,000 $ 6,092,000 $ 2,424,000 ====================================================================================
NOTES: (A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE. (B) PAYMENTS CHARGED TO ALLOWANCES. (C) REVERSAL OF PROVISIONS NO LONGER REQUIRED. (D) WRITE-OFF OF DEFERRED CHARGES. (E) TRANSFER TO OTHER ACCOUNTS. 131 ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS -------------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING AND COSTS OTHER BALANCE AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- ALLOWANCES DEDUCTED IN THE BALANCE SHEET FROM THE ASSETS TO WHICH THEY APPLY: DOUBTFUL RECEIVABLES-CURRENT $30,321,000 $ 1,974,000 $11,652,000 (A) $14,643,000 6,000,000 (C) DOUBTFUL RECEIVABLES-NONCURRENT 6,000,000 3,000,000 (C) 3,000,000 DEFERRED CHARGES ON PROJECTS 8,638,000 6,707,000 4,604,000 (D) 10,741,000 ----------------------------------------------------------------------------------- TOTAL $44,959,000 $ 8,681,000 $25,256,000 $28,384,000 =================================================================================== ALLOWANCES NOT DEDUCTED: ESTIMATED COST OF DISPOSAL OF ASSETS $ 863,000 $ 567,000 (B) $ 296,000 PROVISION FOR RESTRUCTURING 2,507,000 1,213,000 (B) 1,141,000 153,000 (C) RESERVES RELATING TO TAX INDEMNIFICATION AND OTHER CONTINGENCIES IN CONNECTION WITH THE SALE OF LIMITED PARTNERSHIP INTERESTS IN AND RELATED TAX BENEFITS OF A WASTE-TO-ENERGY FACILITY 3,000,000 3,000,000 OTHER 5,500,000 $ 2,832,000 1,953,000 (B) 3,979,000 1,900,000 (C) 500,000 (E) ---------------------------------------------------------------------------------- TOTAL $11,870,000 $ 2,832,000 $ 6,286,000 $ 8,416,000 ==================================================================================
NOTES: (A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE. (B) PAYMENTS CHARGED TO ALLOWANCES. (C) REVERSAL OF PROVISIONS NO LONGER REQUIRED. (D) WRITE-OFF OF DEFERRED CHARGES. (E) WRITE-OFF TO OTHER ACCOUNTS. 132 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS
TERM PRINCIPAL OCCUPATION AND NAME, AGE, AND TO EMPLOYMENT DURING THE PAST FIRST BECAME OTHER INFORMATION EXPIRE FIVE YEARS A DIRECTOR - ----------------- ------ ---------- ---------- David Abshire: Age 73 2000 President and Chief Executive 1987 Member of Ogden's Management Committee. Officer, Center for the Study of the Presidency. Norman G. Einspruch: Age 67 2000 Professor and Senior Fellow, College 1981 Chairman of Ogden's Management of Engineering, University of Miami. Committee; Member of Ogden's Audit, Technology & Compensation Committees. Attallah Kappas: Age 73 2000 Sherman Fairchild Professor; 1988 Physician-in-Chief Emeritus and Past Vice President, The Rockefeller University. Homer A. Neal: Age 57 2000 Professor of Physics, Director of 1988 Chairman of Ogden's Governance Committee and Project ATLAS, Interim President Member of Ogden's Audit and Technology Emeritus, Vice President for Committees; Director of Ford Motor Company. Research Emeritus, University of Michigan. Anthony J. Bolland: Age 46 2001 Managing Director, Boston Ventures 1998 Director of Globenet Communications Group Management, Inc. Limited and Northern Light Technology Corporation. Scott G. Mackin: Age 43 2001 President and Chief Executive 1999(1) Officer of Ogden and Ogden Energy Group, Inc., an Ogden Subsidiary
133
TERM PRINCIPAL OCCUPATION AND NAME, AGE, AND TO EMPLOYMENT DURING THE PAST FIRST BECAME OTHER INFORMATION EXPIRE FIVE YEARS A DIRECTOR - ----------------- ------ ---------- ---------- Judith D. Moyers: Age 64 2001 President, Public Affairs Television, 1978 Chairman of Ogden's Compensation Inc.; Television Producer. Committee and a member of Ogden's Management and Governance Committees. Robert E. Smith: Age 64 2001 Counsel, Rosenman & Colin LLP, a law 1990 Member of Ogden's Audit, firm. Governance and Management Committees. George L. Farr: Age 59 2002 Retired, former Vice Chairman of 1999 Chairman of Ogden's Board of American Express Company. Directors and Member of Ogden's Management Committee; Director of Swiss Reinsurance Co., Zurich, Switzerland; and MISYS PLC, London, England; Principal Muirhead Holdings LLC. Jeffrey F. Friedman: Age 53 2002 Investment Manager, Dreyfus 1998 Chairman of Ogden's Audit Corporation. Committee and Member of Ogden's Compensation Committee. Helmut Volcker: Age 65 2002 Professor of Energy Technology, 1994 Chairman of Ogden's Technology University of Essen, Germany; retired Committee; Chairman, Technical member of the Management Board of Advisory Board, Alstom Energy STEAG AG, Essen; and consultant for Systems GmbH, Stuttgart, Germany; international energy projects and Vice Chairman of the Board of Directors, power plant industries. Schmeink & Cofreth AG, Bocholt, Germany
(1) Mr. Mackin was appointed a director and President and Chief Executive Officer of Ogden by the Board of Directors on September 16, 1999. 134 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires Ogden's directors, officers and persons who beneficially own more than 10% of any class of Ogden's equity securities to file certain reports concerning their beneficial ownership and changes in their beneficial ownership of Ogden's equity securities. Ogden believes that during fiscal 1999 all persons who are required to file reports concerning their beneficial ownership as described above complied with their Section 16(a) filing requirements except the following officers who were late in filing their Form 5 reports concerning the grant of stock options on December 22, 1999: B. Kent Burton, Vice President, William J. Metzger, Vice President and Chief Accounting Officer, Gary D. Perusse, Vice President and Bruce W. Stone, Executive Vice President, Ogden Energy Group, Inc. LEGAL PROCEEDINGS (a) Shareholder Litigation On September 22, October 1, and October 12, 1999 complaints (the "Complaints") denominated as class actions (the "Actions") were filed in the United States District Court for the Southern District of New York against the Company, the Company's former Chairman and Chief Executive, R. Richard Ablon, and Robert M. DiGia (incorrectly identified in the Complaints as the Chief Financial Officer and Senior Vice President of the Company). The Complaints, which are largely identical to one another, are brought by alleged shareholders of the Company and purport to assert claims under the federal securities laws. In general, the Complaints allege that the Company and the individual defendants disseminated false and misleading information during the period of March 11, 1999 through September 17, 1999 (the "Class Period") with respect to the Company's intended reorganization plans and its financial condition. The Complaints seek the certification of a class of all purchasers of Ogden Corporation common stock during the Class Period. By order dated December 22, 1999, the Actions have been consolidated for all purposes and lead plaintiffs and lead counsel have been appointed. On February 28, 2000 plaintiffs filed a consolidated amended complaint (the "Amended Complaint"). The Amended Complaint repeats the allegations made in the original complaints and adds new allegations with respect to the timing of the reporting of certain losses experienced by Ogden. In the Amended Complaint Plaintiffs have added Raymond E. Dombrowski, Jr., Ogden's Senior Vice President and Chief Financial Officer as a defendant. There has been no discovery in the Actions. While the Actions are at a very early stage, the Company believes it has meritorious defenses to the allegations made in the Complaints and intends to defend the Actions vigorously. (b) Other Litigation On November 5, 1999, the Company received a summons and complaint filed in the Supreme Court of the State of New York, brought by R. Richard Ablon, the Company's former Chairman, President and Chief Executive Officer. In general, this complaint alleges that the Company has breached the employment agreement between the Company and Mr. Ablon (the terms of which are described in the company's most recent proxy statement), and seeks damages in the amount of $12.5 million, plus continuation of pension and certain other benefits valued in such complaint at approximately $10 million. 135 In December 1999 a settlement was reached between Ogden and Mr. Ablon whereby Ogden agreed (i) to pay Mr. Ablon an aggregate of $15.0 million between January 3, 2000 and July 3, 2000; (ii) not to assert any offsets to the foregoing payments; (iii) to pay a portion of Mr. Ablon's legal fees in the amount of $50,000; (iv) that the Demand Notes of Mr. Ablon in the amount of $1,816,757 would be forgiven and no interest would be charged or forgiven; (v) to maintain Mr. Ablon's medical insurance program as currently provided until December 31, 2004 at which time his participation would continue at Mr. Ablon's own cost; (vi) to provide him with $2.0 million of term life insurance until he reaches age 65; and (vii) that Mr. Ablon's obligations under his Employment Agreement would be deemed fulfilled. Mr. Ablon agreed to immediately withdraw his lawsuit by stipulation and without prejudice pending the payment of the $15.0 million on or before July 3, 2000, whereupon the withdrawal will automatically become a withdrawal with prejudice. EXECUTIVE OFFICERS See Pages 38 through 41 of this Form 10-K Annual Report 136 ITEM 11. EXECUTIVE COMPENSATION The following Summary Compensation Table sets forth the aggregate cash and non-cash compensation for each of the last three fiscal years awarded to, earned by or paid to each CEO of Ogden and each of Ogden's four other most highly compensated executive officers whose salary and bonus exceeded $100,000: SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------- Annual Compensation (1) Long Term Compensation Awards - -------------------------------------------------------------------------------------------------------------------------- Other Annual Securities Name and Principal Position Year Salary Bonus (5) Compensation Underlying Options/ All Other (2) Limited SARs (3) Compensation (4) - -------------------------------------------------------------------------------------------------------------------------- Scott G. Mackin, President and 1999 $ 542,275 $ 600,000 $ 0 490,000 $ 0 Chief Executive Officer, Ogden, 1998 517,275 575,000 0 0 97,019 and President and Chief 1997 495,000 450,000 0 50,000 88,156 Executive Officer, Ogden Energy Group, Inc., a 100% owned subsidiary of Ogden.(6) R. Richard Ablon , former 1999 $ 730,769(6) $ 0 $ 159,776(6) 0 $ 6,400(6) Chairman of the Board, 1998 1,000,000 1,500,000 147,854 0 200,609 President and Chief Executive 1997 800,000 1,000,000 131,639 0 160,840 Officer, Ogden.(6) Raymond E. Dombrowski, Jr., 1999 $ 300,000 $ 300,000 $ 0 0 $ 2,667 Senior Vice President and Chief 1998 132,869 110,000 0 50,000 0 Financial Officer, Ogden.(7) Bruce W. Stone, Executive 1999 $ 291,059 $ 230,000 $ 0 55,000 $ 0 Vice President and Managing 1998 281,216 225,000 0 0 49,562 Director, Ogden Energy Group, 1997 270,400 209,280 129,095 0 45,988 Inc., a 100% owned subsidiary of Ogden David L. Hahn, Senior Vice 1999 $ 310,500 $ 50,000 $ 37,900 0 $ 6,400 President, Ogden, and Executive 1998 300,000 250,000 0 100,000 49,763 Vice President and Chief 1997 230,000 200,000 0 30,000 35,224 Operating Officer of Ogden Aviation Services, Inc., a 100% owned subsidiary of Ogden Lynde H. Coit, Senior Vice 1999 $ 290,000 $ 250,000 $ 11,500 0 $ 6,400 President and General Counsel, 1998 270,000 210,000 0 0 46,720 Ogden 1997 260,000 190,000 50,715 0 37,565 - --------------------------------------------------------------------------------------------------------------------------
(1) Includes annual compensation awarded to, earned by or paid to the individual during the last three fiscal years, or any portion thereof, that the named individual served as an executive officer of Ogden. (2) Amounts in this column represent: (i) interest earned on funds distributed to Messrs. Hahn and Coit which were held in the Ogden Select Savings Plan, a deferred compensation plan, which was terminated during 1999; and (ii) cost of life insurance, car allowance, medical reimbursement, personal use of aircraft and other personal benefits which in the aggregate exceeded the lesser of either $50,000 or 10% of the executive's combined salary and bonus. The only personal benefits exceeding 25% of the total personal benefits reported in 137 1999 for the listed executive officers was a charge of $125,893 for personal use of the Ogden aircraft by Mr. Ablon. (3) See "Stock Option Tables - Option/Limited Stock Appreciation Rights Granted in Last Fiscal Year" of this Item 11. of this Form 10-K Annual Report. (4) Includes, for the fiscal year ending December 31, 1999, matching contributions in the amount of $6,400 credited to the account balances of each of Messrs. Ablon, Hahn and Coit and to Mr. Dombrowski in the amount of $2,667 under the Ogden 401(k) Plan. (5) The bonuses of Messrs. Mackin and Stone will be paid 75% in cash and 25% in Ogden restricted stock which will vest at the rate of 50% each year over a period of two years from the date of grant. (6) Mr. Ablon resigned as Ogden's Chairman, President and Chief Executive Officer on September 16, 1999 (See "Legal Proceedings - Subsection (b) Other Litigation" of Item 10. of this Form 10-K Annual Report). Mr. Mackin was appointed President and Chief Executive Officer and a director on September 16, 1999. (7) Mr. Dombrowski was appointed Senior Vice President and Chief Financial Officer of Ogden in September 1998. STOCK OPTION TABLES The following table sets forth information with respect to the named executive officers of Ogden concerning the grant of Ogden stock options and limited stock appreciation rights during the fiscal year 1999: OPTION/LIMITED STOCK APPRECIATION RIGHTS GRANTED IN LAST FISCAL YEAR
- ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS/ OPTION/ LIMITED STOCK LIMITED APPRECIATION STOCK RIGHTS APPRECIATION GRANTED TO EXERCISE GRANT DATE RIGHTS EMPLOYEES IN PRICE PER EXPIRATION PRESENT NAME GRANTED (1) FISCAL YEAR (2) SHARE (3) DATE VALUE(4) - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- Scott G. Mackin 40,000 $26.7813 1/21/2009 $462,758 - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- 150,000 10.375 9/29/2009 672,300 - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- 150,000 12.9688 9/29/2009 627,972 - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- 150,000 15.5625 9/29/2009 590,426 - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- Bruce W. Stone 27,500 11.7813 12/22/2009 139,962 - ------------------------- -------------------- --------------------- -------------- ---------------- ------------------- 27,500 14.7266 12/22/2009 130,695 - ------------------------- -------------------- --------------------- -------------- ---------------- -------------------
138 (1) All options vest at the rate of 33.33% per year over a three year period and expire 10 years from date of grant except the 40,000 shares granted to Mr. Mackin which vest at the rate of 20% per year over a five year period. Each option is accompanied by a limited stock appreciation right which provides that the option becomes immediately exercisable upon a change in control of Ogden, as defined in the Ogden 1990 and 1999 Stock Option Plans. (2) The 490,000 shares granted to Mr. Mackin and the 55,000 shares granted to Mr. Stone, represented 25.4% and 2.8%, respectively of the total options granted to key employees during 1999. (3) Mr. Mackin's 40,000 share option was granted at $26.7813 per share, the average of the high and low price of Ogden common stock on the date of grant (the "Fair Market Value"), the 150,000 share option at $10.375 per share was granted at Fair Market Value, the 150,000 share option at $12.9688 per share was granted at 125% of Fair Market Value and the 150,000 share option at $15.5625 per share was granted at 150% of Fair Market Value. The 27,500 share option of Mr. Stone at $11.7813 per share and the 27,500 share option at $14.7266 per share were granted at Fair Market Value and 125% of Fair Market Value, respectively. (4) The estimated grant date present value was determined by using the Black-Scholes model with the following assumptions: (i) an exercise price of $26.7813, $10.375 and $11.7813 per share, equal to 100% of the Fair Market Value of Ogden common stock on the date of grant, for the 40,000 shares and 150,000 shares granted to Mr. Mackin and the 27,500 shares granted to Mr. Stone, respectively; an exercise price of $12.9688 and $14.7266 per share, equal to 125% of the Fair Market Value of Ogden common stock on the date of grant, for the 150,000 shares granted to Mr. Mackin and the 27,500 shares granted to Mr. Stone, respectively; and, an exercise price of $15.562 per share, equal to 150% of the Fair Market Value of Ogden common stock on the date of grant, for the 150,000 shares granted to Mr. Mackin; (ii) stock price volatility of 0.5414; (iii) dividend yield of 4.0%; (iv) a 6.46% risk-free rate of return; and (v) an option term of 10 years. No adjustments have been made for forfeitures or nontransferability. The ultimate value of the options will depend on the future market price of Ogden common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of Ogden's common stock over the exercise price on the date the option is exercised. The following table sets forth information with respect to the named executive officers of Ogden concerning the exercise of stock options and limited stock appreciation rights during 1999 and the value of unexercised stock options held as of December 31, 1999. 139 AGGREGATED OPTION/LIMITED STOCK APPRECIATION RIGHTS EXERCISED IN 1999 AND FISCAL YEAR-END OPTION/ LIMITED STOCK APPRECIATION RIGHTS VALUES
- ----------------------------------------------------------------------------------------------------------------------- SHARES ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED IN- ON VALUE UNDERLYING UNEXERCISED THE-MONEY OPTIONS/LSAR NAME EXERCISE REALIZED OPTIONS/LSAR AT FY-END AT FY-END (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE SCOTT G. MACKIN 29,400 285,424 345,000 520,000 $0 $196,875 - ----------------------------------------------------------------------------------------------------------------------- R. RICHARD ABLON 105,000 $1,019,372 975,000 0 0 0 - ----------------------------------------------------------------------------------------------------------------------- RAYMOND E. 0 0 10,000 40,000 0 0 DOMBROWSKI, JR. - ----------------------------------------------------------------------------------------------------------------------- BRUCE W. STONE 25,200 244,649 125,000 55,000 0 0 - ----------------------------------------------------------------------------------------------------------------------- DAVID HAHN 0 0 72,000 98,000 0 0 - ----------------------------------------------------------------------------------------------------------------------- LYNDE H. COIT 6,300 61,162 150,000 0 0 0 - -----------------------------------------------------------------------------------------------------------------------
(1) Computed based upon the difference between the exercise price of each option grant and the average of the high and low sale prices of Ogden common stock on the New York Stock Exchange Composite Tape on December 31, 1999 ($11.6875 per share). OGDEN EXECUTIVE PENSION PLAN The Ogden Executive Pension Plan is a non-tax qualified defined benefit plan under which Ogden made annual contributions to the plans trust, as determined by Ogden's actuary, which were deposited with the trustee pursuant to a grantor trust agreement between Ogden and the trustee. Ogden did not have access to or use of the trust assets; however, the assets were subject to the claims of Ogden's general creditors in the event of its insolvency or bankruptcy. All of the executive officers listed in the Summary Compensation Table (except Messrs. Mackin and Stone), participated in the Ogden Executive Pension Plan and are entitled to a retirement benefit, subject to certain offsets as described below, equal to 1.5% of the executive's final average compensation for the five consecutive highest paid years out of the executive's last ten years preceding retirement multiplied by the executive's years of service. The Ogden Executive Pension Plan was terminated in September 1999 and all assets distributed, pursuant to which Messrs. Ablon, Dombrowski, Hahn and Coit received $1,607,297, $13,549, $186,634 and $151,513, respectively. OGDEN ENERGY GROUP PENSION PLAN Scott G. Mackin and Bruce W. Stone participate in the Ogden Energy Group Pension Plan, a tax-qualified defined benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Under the Energy Group Pension Plan each participant who meets the plan's vesting requirements will be provided with an annual benefit at or after age 65 140 equal to 1.5% of the participant's average compensation during the five consecutive calendar years of employment out of the ten consecutive calendar years immediately preceding his retirement date or termination date during which such average is the highest, multiplied by his total years of service. Compensation includes salary and other compensation received during the year and deferred income earned, but does not include imputed income, severance pay, special discretionary cash payments or other non-cash compensation. The relationship of the covered compensation to the annual compensation shown in the Summary Compensation Table would be the Salary and Bonus columns and any car allowance. A plan participant who is at least age 55 and who retires after completion of at least five years of employment receives a benefit equal to the amount he would have received if he had retired at age 65, reduced by an amount equal to 0.5% of the benefit multiplied by the number of months between the date the participant commences receiving benefits and the date he would have commenced to receive benefits if he had not retired prior to age 65. Messrs. Mackin and Stone also participate in the Ogden Energy Group Supplemental Deferred Benefit Plan, a deferred compensation plan which is not qualified for federal income tax purposes. The Energy Group Supplemental Benefit Plan provides that, in the event that the annual retirement benefit of any participant in the Energy Group Pension Plan, determined pursuant to such plan's benefit formula, cannot be paid because of certain limits on annual benefits and contributions imposed by the Code, the amount by which such benefit must be reduced will be paid to the participant from the general assets of the company. The following table shows the estimated annual retirement benefits payable in the form of a life annuity at age 65 under the Energy Group Pension Plan and the Energy Group Supplemental Benefit Plan. Mr. Mackin has 13.5 years, and Mr. Stone has 23.8 years of credited service under the Energy Group Pension Plan as of December 31, 1999 and had annual average earnings for the last five years of $924,636 and $470,039, respectively. 141
AVERAGE ANNUAL EARNINGS IN 5 CONSECUTIVE HIGHEST PAID YEARS OUT OF LAST 10 YEARS PRECEDING RETIREMENT ESTIMATED ANNUAL RETIREMENT BENEFITS BASED ON YEARS OF SERVICE - ----------------- -------------- --------------- -------------- -------------- --------------- -------------- 5 10 15 20 25 30 - ----------------- -------------- --------------- -------------- -------------- --------------- -------------- $360,000 $27,000 $54,000 $81,000 $108,000 $135,000 $162,000 375,000 28,125 56,250 84,375 112,500 140,625 168,750 400,000 30,000 60,000 90,000 120,000 150,000 180,000 425,000 31,875 63,750 95,625 127,500 159,375 191,250 450,000 33,750 67,500 101,250 135,000 168,750 202,500 500,000 37,500 75,000 112,500 150,000 187,500 225,000 550,000 41,250 82,500 123,750 165,000 205,250 247,500 600,000 45,000 90,000 135,000 180,000 225,000 270,000 625,000 46,875 93,750 140,625 187,500 234,375 281,250 900,000 67,500 135,000 202,500 270,000 337,500 405,000 950,000 71,250 142,500 213,750 285,000 356,250 427,500 - ----------------- -------------- --------------- -------------- -------------- --------------- --------------
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS EMPLOYMENT CONTRACTS (A) Mr. Mackin is employed by Ogden as its Executive Vice President and President and Chief Operating Officer of Ogden Energy Group, Inc., a wholly-owned subsidiary of Ogden, pursuant to an employment agreement dated as of October 1, 1998 for a five-year term commencing October 1, 1998 and continuing through September 30, 2003 and year to year thereafter, subject to the right of either party to terminate the agreement on any September 30 upon at least sixty (60) days prior written notice. The agreement provides for a minimum annual salary in the amount of $517,275, and an annual incentive bonus in such amount as may be determined by the Board of Directors. The agreement also provides that if Mr. Mackin terminates his employment for good reason, including a change-in-control (as defined in the agreement), or if his employment is terminated by Ogden for any reason other than for cause (as defined in the agreement) then he is entitled to a lump sum cash payment equal to the product of five times his base salary at the highest annual rate in effect at any time prior to the termination date, and the highest amount of annual bonus payable at any time prior to the termination date and, if applicable, an additional payment equal to the amount of any excise tax imposed on any payments under the agreement (including the additional payment) under the excess parachute payments of the Code. 142 (B) Mr. Dombrowski is employed by Ogden as its Senior Vice President and Chief Financial Officer pursuant to an employment agreement dated as of September 21, 1998 which continues in effect until terminated by Mr. Dombrowski, by Ogden or by Mr. Dombrowski's death or total disability. His annual salary under the agreement is fixed at a minimum of $300,000 with an annual incentive bonus in such amount as determined by the Board of Directors. Ogden also provides Mr. Dombrowski with access to a company-provided apartment located near Ogden's offices in New York City. The agreement also provides that if Mr. Dombrowski's employment is terminated by Ogden for any reason other than for Cause (as defined in the agreement) or if Mr. Dombrowski terminates employment for good reason, including a change-in-control (as defined in the agreement), then Mr. Dombrowski is entitled to a lump sum cash payment equal to the product of five times his base salary at the highest annual rate in effect at any time prior to the termination date and the highest amount of annual bonus payable at any time prior to the termination date, and if applicable, an additional payment equal to the amount of any excise tax imposed on any payments under the agreement (including the additional payment) under the excess parachute payments of the Code. (C) Mr. Stone is employed by Ogden Energy Group, Inc., an Ogden subsidiary as Executive Vice President for Waste-to-Energy operations and Managing Director pursuant to an employment agreement which became effective as of May 1, 1999 and continues through May 1, 2004, and from year to year thereafter. The annual salary under the agreement is fixed at a minimum of $291,059 with an annual incentive bonus in such amount as determined by the Board of Directors. The agreement also provides that if Mr. Stone's employment is terminated by Ogden Energy for any reason other than for cause (as defined in the agreement) or if Mr. Stone terminates employment for good reason, including a change-in-control (as defined in the agreement), then Mr. Stone is entitled to a lump sum cash payment equal to the product of five time his annualized based salary at the highest annual rate in effect at any time prior to the termination date and the highest amount of annual bonus payable at any time prior to the termination date. (D) Mr. Hahn is employed by Ogden as its Senior Vice President, Aviation and as Executive Vice President and Chief Operating Officer of Ogden Aviation Services, Inc., a wholly-owned subsidiary of Ogden, pursuant to an amended employment agreement which became effective as of October 1, 1998 and continues through September 30, 1999, and from year to year thereafter, subject to the right of either party to terminate such employment on September 30, 1999 or any subsequent September 30, upon at least sixty days prior written notice. The annual salary under the agreement is fixed at a minimum of $300,000 with an annual incentive bonus in such amount as determined by the Board of Directors. The agreement also provides that if Mr. Hahn's employment is terminated by Ogden for any reason other than for cause (as defined in the agreement) or if Mr. Hahn terminates employment for good reason, including a change-in-control (as defined in the agreement), then Mr. Hahn is entitled to a lump sum cash payment equal to the product of five times his base salary at the highest annual rate in effect at any time prior to the termination date and the highest amount of annual bonus payable at any time prior 143 to the termination date. At Mr. Hahn's option the foregoing amount may be paid to him over a period of five years. (E) Mr. Coit is employed by Ogden as its Senior Vice President and General Counsel pursuant to an employment agreement dated as of March 1, 1999 which continues in effect until terminated by Mr. Coit, by Ogden or by Mr. Coit's death or total disability. The annual salary under the agreement is fixed at a minimum of $290,000 with an annual incentive bonus in such amount as determined by the Board of Directors. The agreement also provides that if Mr. Coit's employment is terminated by Ogden for any reason other than for cause (as defined in the agreement) or if Mr. Coit terminates employment for good reason, including a change-in-control (as defined in the Agreement), then Mr. Coit is entitled to a lump-sum cash payment equal to the product of five times his base salary at the highest annual rate in effect at any time prior to the termination date and the highest amount of annual bonus payable at any time prior to the termination date. (F) See Legal Proceedings - Subsection (b) Other Litigation of Item 10. of this Form 10-K Annual Report for a description of the suit brought by Mr. Ablon against Ogden alleging that Ogden had breached his Employment Agreement and a description of the terms and conditions of the settlement of the suit between Ogden and Mr. Ablon. DIRECTORS COMPENSATION (a) Directors Fees During 2000 each non-employee director of Ogden or an Ogden subsidiary will receive an annual director's retainer fee of $35,000 plus a meeting fee of $1,500 for each Board of Directors meeting attended. Each non-employee director will also receive a meeting fee of $1,500 for each committee meeting attended. All directors are reimbursed for expenses incurred in attending Board of Directors and committee meetings. Directors who are employees of Ogden or an Ogden subsidiary receive no additional compensation for serving on the Board of Directors or any committee. (b) Stock Options Each non-employee director of Ogden has been granted a Director's Stock Option and limited stock appreciation rights under the Ogden 1990 Stock Option Plan with respect to 25,000 shares of Ogden Common Stock at varying exercise prices equal to the average of the high and low sales prices of Ogden Common Stock on the date of grant (the "Fair Market Value"). Pursuant to the Ogden 1999 Stock Option Plan (the "1999 Plan"), approved by shareholders at the 1999 Annual Shareholders Meeting the Board of Directors may award annual grants of Directors Stock Options and limited stock appreciation rights with respect of up to 2,500 shares of Ogden common stock to each non-employee director, at an exercise price equal to the Fair Market Value on the date of grant. On July 14, 1999, each non-employee director was granted an option for 2,500 shares at an exercise price of $26.5938 per share, the Fair Market Value of a share of Ogden common stock on the date of grant. Each option is a ten year option vesting at the rate of 33.3% each year over a period of three years. On October 28, 1999 Mr. Farr was granted options by the Board of Directors under the 1999 Plan aggregating 111,000 shares, 37,000 shares granted at $8.6563 per share (the Fair Market Value on the date of grant), 37,000 shares granted at $10.8204 per share (125% above the Fair Market Value on the date of grant), and 37,000 shares granted at $12.9845 (150% above the Fair Market Value on the date of grant). Each option is a ten year option vesting at the rate of 33.3% 144 each year over a period of three years. These options were granted to Mr. Farr in recognition of his performing certain assignments given to him by the Board of Directors which required him, in his capacity as Chairman of the Board, to perform services that are traditionally and primarily performed by the executive officers of the Company. (c) Restricted Stock On February 17, 2000 the Board of Directors adopted the Ogden Restricted Stock Plan for Non-Employee Directors (the "Director's Restricted Stock Plan") which is administered by the Board of Directors and provides that only non-employee directors are eligible to receive awards. Each award of restricted stock will vest upon the earliest of the third month following the date of grant, the non-employee director's attainment of age 72, the non-employee director's disability or the non-employee director's death. Shares are freely transferable after they become vested subject to meeting certain SEC requirements. All unvested shares of restricted stock are forfeited upon the director's termination of directorship for any reason, other than death or disability. Shares become fully vested upon a change-in-control of the Company. Shares of common stock to be issued under the Director's Restricted Stock Plan will be made from shares held in treasury, the maximum aggregate number of shares authorized to be issued is 100,000 shares and the purchase price for each share issued is zero. Under the Director's Restricted Stock Plan each non-employee director will automatically be paid in the form of restricted stock, (i) 50% of the director's annual retainer fees as of the first Board Meeting of each fiscal year based on the closing price of a share of common stock on the date of such meeting and (ii) 50% of the director's meeting fees as of the last day of each calendar quarter in which such meeting occurs based on the average closing price of a share of common stock for the calendar quarter. In the event of a Change-in-Control of the Company, shares of restricted stock which would otherwise be made on the last day of the calendar quarter in which the Change-in-Control occurs, will be made on the date of the Change-in-Control. In September 1999 the Board of Directors waived their meeting fees for the remainder of the year. On February 17, 2000 the Board authorized the payment of 50% of these fees in cash and granted awards of restricted stock in payment of the other 50%. The Board also authorized a special award of 2,000 shares of restricted stock to Messrs. Bolland, Einspruch, Farr and Friedman for serving on a special committee appointed by the Board of Directors to oversee the sale of the Company's Aviation and Entertainment businesses. The foregoing awards were based on the average of the high and low sale prices of Ogden common stock on December 22, 1999 ($11.781 per share). In recognition of the special role that Mr. Farr is performing as Ogden's Chairman of the Board, the Board of Directors has authorized a special compensation package for Mr. Farr (in addition to the options granted to him on October 28, 1999) that will apply only during the period 145 of time in which he is serving in his special role. The compensation package provides for a monthly retainer of $35,000, payable 50% in cash and 50% in preferred stock at the end of each quarter, commencing during the first quarter of 2000 and is subject to review by the Compensation Committee on a quarterly basis. During this period of time Mr. Farr will not be paid any director or committee retainer or meeting fees. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of Ogden's Compensation Committee are Judith D. Moyers, Chairman; Norman G. Einspruch; and Jeffrey F. Friedman. All of the foregoing members are "non-employee directors" (within the meaning of revised Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended) and "outside directors" (within the meaning of Section 162(m) of the Code) of Ogden who are not employees or members of management of Ogden or any of its subsidiaries. The Compensation Committee Report on Executive Compensation and the graph which follows shall not be deemed to be incorporated by reference into any filing made by Ogden under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent Ogden incorporates such report and graph by specific reference. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION THE EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY The Company's Compensation Committee (the "Committee") of the Board of Directors is responsible for developing the Company's executive compensation philosophy. In addition, the Committee administers the compensation program with respect to the Company's Chief Executive Officer ("CEO") and other senior executive officers. The primary goal of the Company's compensation philosophy is to establish incentives which encourage and reward the creation of shareholder value. This "pay-for-performance" principle permeates all elements of the Company's compensation program, which is designed to align executives' financial interests with those of our shareholders. The Company seeks to reward exceptional performers - those individuals whose job performance clearly exceeds expectations and is consistent with the Company's financial goals and corporate values - with a total compensation package targeted at the 75th percentile of total compensation offered by our competitors. As part of our competitive review process and to facilitate the Committee's effort to shift the Company's direct compensation mix towards greater emphasis on long-term compensation, in 1999, the Committee retained the services of outside compensation consultants. These consultants have reviewed our annual and long-term programs and will assist the Committee in developing and implementing an ongoing compensation program consistent with the needs of the Company and its shareholders. The primary elements of the Company's current compensation arrangements are 146 discussed below. BASE SALARY The Company targets base salary levels to attract, motivate and retain talented executives who demonstrate the personal and professional qualities required to succeed in the Company's entrepreneurial culture and who meet or exceed our goals and standards for exceptional performance. As the Company implements a shift in direct compensation mix towards greater utilization of long-term compensation, it is expected that while base salary will remain competitive, it will comprise a smaller proportion of the total compensation received by executive officers. ANNUAL INCENTIVE The Company's annual incentive bonus payments are designed to be highly variable based on the achievement of relevant quantitative and qualitative criteria established by the Committee, which may vary from year to year. Historically, annual incentive awards have been based upon any or all of the following elements: earnings-per-share, business unit operating income and attainment of team and individual goals. The Committee believes that annual incentive bonuses reinforce the Company's pay-for- performance philosophy and it intends to continue rewarding individuals whose performance contributes to achieving the Company's strategic and financial objectives. Payment of annual incentive awards attributable to1999 performance is payable 75% in cash and 25% in restricted stock. LONG-TERM INCENTIVES The Committee believes that creation of shareholder value is best facilitated through clear and uncomplicated long-term incentives. Accordingly, the Company grants stock options to encourage equity ownership and to align executives' and shareholders' interests. Historically, stock options have been granted periodically to executives to reflect the Company's recognition of expanded individual roles and job responsibilities or to readjust the total direct compensation mix received by an executive. As part of its effort to better align executives' and shareholders' incentives, the Company will grant options annually. These grants will vest over a three-year period which is typical of the vesting schedule used by our competitors. Option awards will be concentrated among those executives who the Company believes have the greatest potential to substantially increase shareholder value. Annual grant size will reflect a variety of factors, including corporate performance during the most recent operating period, overall compensation levels for comparable positions in the competitive market, consideration of a given individual's importance in implementing our long-term strategic plan, an evaluation of individual performance and previous option grants. With the assistance of its outside compensation consultants, the Company regularly compares its executives' compensation levels with other similarly-sized companies in the markets in which the Company operates. To attract and retain high caliber executives, the Company targets its executives' total compensation opportunity at approximately the 75th percentile of these markets. Actual compensation levels depend upon individual performance, achievement of business unit goals, the Company's results of operations, and actual shareholder returns realized. CHIEF EXECUTIVE OFFICER (CEO) COMPENSATION In assessing competitors' compensation levels and practices, the Committee reviews data covering each of the industries within which the Company competes as well as general industry data. The Committee set Mr. Ablon's base salary for 1999 at $1,000,000, unchanged from 1998. For 1999, Mr. Ablon's target annual incentive opportunity was 100% of his base salary. Mr. Ablon resigned from his position as Chief Executive Officer on September 16, 1999. Accordingly, 147 Mr. Ablon received no annual incentive payment for the 1999 operating period. However, in December 1999, the Company agreed to make certain payments to Mr. Ablon in settlement of employment-related claims brought by Mr. Ablon against the Company. (For a discussion of these payments to be made to Mr. Ablon by the Company, see the "Legal Proceedings-Subsection (b) Other Litigation" of Item 10 of this Form 10-K Annual Report.) On September 16, 1999, Mr. Mackin, previously an Executive Vice President of the Company and President and Chief Operating Officer of Ogden Energy Group, Inc., was named as the Company's President and Chief Executive Officer. Consistent with the Company's pay-for-performance compensation philosophy and the desire to align Mr. Mackin's incentives with those of the Company's shareholders, Mr. Mackin's base salary was set at $600,000 per annum, his target annual incentive bonus was set at 100% of his base salary and he was made a front-loaded grant of 450,000 stock options with the following exercise prices: 150,000 equal to the fair market value of the Company's stock on the grant date ("FMV"), 150,000 at 125% of FMV, and 150,000 at 150% of FMV. CEO BONUS PLAN--1999 PERFORMANCE--The CEO Bonus Plan adopted by the Committee and approved by shareholders in 1994 sets forth a Target Bonus which can be earned by Mr. Ablon based upon the Pre-Tax Return on Equity (ROE) Performance Level achieved for each calendar year. The bonus actually earned can vary based upon the degree to which performance goals are achieved. For 1999, Mr. Ablon's target bonus was $1,000,000. However, due to Mr. Ablon's resignation, no bonus was due him pursuant to this plan. For 1999, Mr. Mackin received a bonus equal to his target of $600,000, which was determined based upon the Committee's review of the Company's performance as well as Mr. Mackin's performance both as President and Chief Operating Officer of Ogden Energy Group, Inc. and as the Company's Chief Executive Officer during the latter part of 1999. POLICY REGARDING DEDUCTIBILITY OF EXECUTIVE COMPENSATION The Company's policy regarding deductibility of executive pay in excess of $1 million is to preserve the tax deductibility of such amounts by having annual incentive bonuses for executives and stock options qualified as performance-based compensation under the IRS rules. The 1994 Bonus Plan, as amended, and the Company's 1999 Stock Option Plan, both of which were adopted by the Committee and the Board, and approved by shareholders, constitute the largest elements of the Company's senior executives' compensation packages. The Committee acknowledges that there may be certain non-cash "imputed income" items and certain non-incentive designed plans such as the Ogden Restricted Stock Plan, which may cause pay to exceed $1 million in any year. This policy does not contemplate restricting the Committee from using discretionary business judgment as it determines appropriate. COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS Judith Davidson Moyers, Chairman Norman G. Einspruch Jeffrey F. Friedman 148 The graph below compares the cumulative total shareholder return on Ogden's common shares for the last five fiscal years with the cumulative total shareholder return on the S&P 500 Index and the S&P Midcap 400 Index over the same period, assuming the investment of $100 in Ogden common shares and the reinvestment of all dividends. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG OGDEN, THE S&P 500 INDEX AND THE S&P MIDCAP 400 INDEX COMPARATIVE ANALYSIS
1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- OGDEN CORP. 100 120.670 114.320 177.110 165.330 82.870 S&P 500 100 137.580 169.170 225.600 290.080 351.120 S&P MIDCAP 400 100 130.690 155.600 205.400 244.230 279.730
Notes: Assumes that the value of the investment in the Company's Common Stock, and each index, was $100 on December 30, 1994, and that all dividends were reinvested. The following graph compares the cumulative total shareholder return for the last five years for the Company's Common Stock to the annual cumulative total returns of (i) S&P 500 and (ii) S&P Midcap 400. 149 ITEM 12. SECURITY OWNERSHIP BY MANAGEMENT Information about the common stock beneficially owned as of March 31, 2000 by each nominee, each director, each executive officer named in the summary compensation table and all directors and executive officers of Ogden as a group is set forth as follows:
AMOUNT AND NATURE OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) (2) ------------------------ ---------------------------- David Abshire 27,218(3) (7) Anthony J. Bolland 28,994(3) (7) Lynde H. Coit 156,665(5) Raymond E. Dombrowski, Jr. 22,500(5) Norman G. Einspruch 40,880(3) (7) George L. Farr 14,000(3) (7) Jeffrey F. Friedman 26,846(3) (7) David L. Hahn 108,350(4) Attallah Kappas 39,930(3) (7) Scott G. Mackin 409,400(5) Judith D. Moyers 33,967(3) (7) Homer A. Neal 27,725(3) (7) Robert E. Smith 28,121(3) (7) Bruce W. Stone 155,317(5) Helmut Volcker 29,130(3) (7) All executive officers and directors as a group (22 persons) including those named 1,149,043(6) above.
- ---------- (1) Except as otherwise noted each individual owns all shares directly and has sole investment and voting power with respect to all shares. No officer or director owns shares of Ogden Series A Preferred Stock. (2) The beneficial ownership of each individual is less than 1.0% of the class. (3) Includes, 20,000 shares for Dr. Volcker; 20,000 shares for Dr. Kappas 10,000 shares for Mr. Friedman; 5,000 shares for Mr. Farr; 5,000 shares for Mr. Bolland and 25,000 shares for each of Messrs. Abshire, Einspruch, Neal, Smith and Ms. Moyers subject to stock options which are exercisable within 60 days of March 31, 2000. Also includes: 2,735 shares held by Dr. Einspruch in a Keogh Plan; 100 shares held by Dr. Neal jointly with his wife over which Dr. Neal has shared voting and investment authority with his wife; and 12,000 shares held by Mr. Friedman in an IRA. (4) Includes 98,000 shares subject to stock options which are exercisable within 60 days of March 31, 2000. Does not include 700 shares held by his wife. Mr. Hahn has neither 150 investment nor voting power with respect to the shares held by his wife and disclaims any beneficial interest of such shares. (5) Includes 150,000 shares for Mr. Coit; 10,000 shares for Mr. Dombrowski; 363,000 shares for Mr. Mackin; and 125,000 shares for Mr. Stone subject to stock options which are exercisable within 60 days of March 1, 2000. (6) Includes 1,254,218 shares subject to stock options which are exercisable and restricted stock which becomes vested within 60 days of March 31, 2000. (7) Includes: 1,930 shares, 3,994 shares, 4,440 shares, 4,440 shares, 1,930 shares, 2,000 shares, 2,121 shares, 2,121 shares, 1,930 shares, and 2,312 shares of restricted stock awarded to Messrs. Abshire, Bolland, Einspruch, Friedman, Kappas, Farr, Neal, Smith, Volcker and Ms. Moyers, respectively, which become fully vested within 60 days of March 31, 2000. Ogden has been advised by FMR Corp., Greenway Partners, L.P. and Fir Tree Partners that they, along with certain members of their group or respective investment managers, are each the beneficial owner of more than 5% of Ogden's common stock, which were acquired for investment purposes for certain of their advisory clients. The following table sets forth certain information concerning the foregoing:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS - -------------- ------------------- ----------------------- -------- Common..................... FMR Corp. 6,430,510 shares (1) 13.0 82 Devonshire Street Boston, Massachusetts 02109 Common..................... Greenway Partners, L.P. 4,820,500 shares (2) 9.8 277 Park Avenue, 27th Floor New York, New York 10017 Common..................... Fir Tree Partners 2,777,100 shares (3) 5.6 535 Fifth Avenue, 31st Floor New York, New York 10017
(1) A Schedule 13G Report dated January 14, 2000 shows that 2,351,500 shares are held with sole power to vote or to direct the vote and 5,112,600 shares are held with sole power to dispose or direct the disposition thereof. (2) A Schedule 13D Report dated October 15, 1999 shows that 4,820,500 shares are held with sole voting power, 4,580,500 shares are held with shared voting power, 4,820,500 shares are held with sole dispositive power and 4,580,500 shares are held with shared dispositive power. 151 (3) A Schedule 13D Report Filed on November 5, 1999 shows that 2,777,100 shares are held with sole power to vote or to direct the vote and with sole power to dispose or direct the disposition thereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS A loan was made by Ogden on December 16, 1998 to David L. Hahn, Senior Vice President, Aviation to assist Mr. Hahn in making improvements and additions to his existing home. The loan is evidenced by a promissory note bearing interest at the rate of 7% per annum. The maximum amount outstanding during 1999 under the promissory note was $300,000. As of March 1, 2000, there was an outstanding balance of $300,000, plus accrued interest, under the promissory note. The maximum amount outstanding during 1999 pursuant to a loan made by Ogden Energy in 1990 to Bruce W. Stone, an Executive Officer of Ogden, for the purpose of assisting him in the purchase of his home was $96,058. The loan is evidenced by a demand note bearing interest at the rate 8% per annum. As of February 1, 2000, there was an outstanding balance of $76,207. On August 6, 1999 Ogden made loans to Messrs. Mackin, Stone and Coit for the purpose of paying the exercise price and withholding taxes in connection with their exercise of Ogden stock options which were expiring on August 9, 1999. All loans are evidenced by demand notes with interest accruing thereon at the short-term applicable federal rate compounded annually. As of March 1, 2000 the outstanding balances for Messrs. Mackin, Stone and Coit was $505,838.04, $436,021.94 and $106,864.80, respectively. Robert E. Smith, an Ogden director, is counsel to the law firm of Rosenman & Colin LLP which during 1999 rendered legal services to Ogden principally in the area of litigation management. 152 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Listed below are the documents filed as a part of this report: 1). All financial statements: see Index to financial statements, Page 62. 2). Financial statement schedules: see Index to financial statements, Page 62. (b) During the fourth quarter of 1999 a Form 8-K Report was filed on November 9, 1999 under Item 5. Other Events, and is incorporated herein by reference. (c) Those exhibits required to be filed by Item 601 of Regulation S-K: 153 EXHIBITS -------- 2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as of October 31, 1989, among Ogden, ERCI Acquisition Corporation and ERC International, Inc.* 2.2 Agreement and Plan of Merger among Ogden Corporation, ERC International, Inc., ERC Acquisition Corporation and ERC Environmental and Energy Services Co., Inc., dated as of January 17, 1991.* 2.3 Amended and Restated Agreement and Plan of Merger among Ogden Corporation, OPI Acquisition Corp. and Ogden Projects, Inc., dated as of September 27, 1994.* 3.0 Articles of Incorporation and By-laws. 3.1 Ogden's Restated Certificate of Incorporation as amended.* 3.2 Ogden's By-Laws, as amended through April 8, 1998.* 4.0 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of June 1, 1987, and Offering Memorandum dated June 12, 1987, relating to U.S. $85 million Ogden 6% Convertible Subordinated Debentures, Due 2002.* 4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million Ogden 5-3/4% Convertible Subordinated Debentures, Due 2002.* 4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to The Bank of New York, Trustee, relating to Ogden's $100 million debt offering.* 10.0 Material Contracts 10.1(a) U.S. $95 million Term Loan and Letter of Credit and Reimbursement Agreement among Ogden, the Deutsche Bank AG, New York Branch and the signatory Banks thereto, dated March 26, 1997.* 154 10.1(b) $200 million Credit Agreement among Ogden, The Bank of New York as Agent and the signatory Lenders thereto, dated as of June 30, 1997.* 10.2 Rights Agreement between Ogden Corporation and Manufacturers Hanover Trust Company, dated as of September 20, 1990 and amended August 15, 1995 to provide The Bank of New York as successor agent.* 10.3 Executive Compensation Plans and Agreements. (a) Ogden Corporation 1990 Stock Option Plan as Amended and Restated as of January 19, 1994.* (i) Amendment adopted and effective as of September 18, 1997.* (b) Ogden Corporation 1999 Stock Option Plan, as amended.* (i) Ogden Corporation 1999 Stock Incentive Plan Amended and Restated as of January 1, 2000. Transmitted herewith as Exhibit 10.3(b)(i). (c) Ogden Services Corporation Select Savings Plan Amendment and Restatement as of January 1, 1995.* (i) Amendment Number One to the Ogden Services Corporation Select Savings Plan as Amended and Restated January 1, 1995, effective January 1, 1998.* (d) Ogden Services Corporation Select Savings Plan Trust Amendment and Restatement dated as of January 1, 1995.* (e) (i) Ogden Corporation Restricted Stock Plan and Restricted Stock Agreement. Transmitted herewith as Exhibit 10.3(e)(i). (ii) Ogden Corporation Restricted Stock Plan for Non-Employee Directors and Restricted Stock Agreement. Transmitted herewith as Exhibit 10.3(e)(ii). (f) Ogden Corporation Profit Sharing Plan as Amended and Restated effective as of January 1, 1995.* (g) Ogden Corporation Core Executive Benefit Program.* (h) Ogden Projects Pension Plan.* 155 (i) Ogden Projects Profit Sharing Plan.* (j) Ogden Projects Supplemental Pension and Profit Sharing Plans.* (k) Ogden Projects Core Executive Benefit Program.* (l) (i) Form of Amended Ogden Projects, Inc. Profit Sharing Plan, effective as of January 1, 1994.* (ii) Form of Amended Ogden Projects, Inc. Pension Plan, effective as of January 1, 1994.* (m) Ogden Executive Performance Incentive Plan. Transmitted herewith as Exhibit 10.3(m). (n) Ogden Key Management Incentive Plan.* 10.4 Employment Agreements (a) Employment Agreement between Ogden and Lynde H. Coit dated March 1, 1999.* (b) Employment Agreement between Ogden and R.Richard Ablon dated as of January 1, 1998.* (c) Termination Agreement between Ogden and Philip G. Husby, Senior Vice President and CFO, dated as of September 17, 1998.* (d) Employment Agreement between Scott G. Mackin, Executive Vice President and Ogden Corporation dated as of October 1, 1998.* (e) Employment Agreement between David L. Hahn and Ogden Corporation, dated December 1, 1995.* i. Letter Amendment to Employment Agreement between Ogden Corporation and David L. Hahn, Senior Vice President, Aviation, effective as of October 1, 1998.* (f) Employment Agreement between Ogden Services Corporation and Rodrigo Arboleda dated January 1, 1997.* i. Letter Amendment to Employment Agreement between Ogden and Rodrigo Arboleda, Senior Vice President, effective as of 156 October 1, 1998.* (g) Employment Agreement between Ogden Energy Group, Inc. and Bruce W. Stone dated May 1, 1999. Transmitted herewith as Exhibit 10.4(g). (h) Employment Agreement between Ogden Corporation and Quintin G. Marshall, dated October 30, 1996.* i. Letter Amendment to Employment Agreement between Ogden and Quintin G. Marshall, Senior Vice President-Corporate Development, effective as of October 1, 1998.* (i) Employment Agreement between Ogden Corporation and Jesus Sainz, effective as of January 1, 1998.* i. Letter Amendment to Employment Agreement between Ogden and Jesus Sainz, Executive Vice President, effective October 1, 1998.* (j) Employment Agreement between Alane Baranello, Vice President-Human Resources and Ogden dated October 28, 1996.* i. Letter Amendment to Employment Agreement between Ogden and Alane Baranello, Vice President-Human Resources dated October 13, 1998.* (k) Employment Agreement between Peter Allen, Senior Vice President and Ogden, dated July 1, 1998.* (l) Employment Agreement between Ogden and Raymond E. Dombrowski, Jr., Senior Vice President and Chief Financial Officer, dated as of September 21, 1998.* 10.5 First Amended and Restated Ogden Corporation Guaranty Agreement made as of January 30, 1992 by Ogden Corporation for the benefit of Mission Funding Zeta and Pitney Bowes Credit Corporation.* 10.6 Ogden Corporation Guaranty Agreement as of January 30, 1992 by Ogden Corporation for the benefit of Allstate Insurance Company and Ogden Martin Systems of Huntington Resource Recovery Nine Corporation.* 11 Not Applicable. 157 12 Not Applicable. 13 Not Applicable. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Independent Auditors Consent. Transmitted herewith as Exhibit 23. 27 Financial Data Schedule (EDGAR Filing Only). * INCORPORATED BY REFERENCE AS SET FORTH IN THE EXHIBIT INDEX OF THIS ANNUAL REPORT ON FORM 10-K. 158 SIGNATURES ---------- Pursuant to the requirements of Section 13 and 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. OGDEN CORPORATION DATE: MARCH 13, 2000 By SCOTT G. MACKIN* --------------------------------- Scott G. Mackin President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Scott G. Mackin and William J. Metzger, or either of them as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Report on Form 10-K, and to file the same, with all exhibits thereto, and 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 connection therewith, as fully to all intents and purposes as he 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. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated. 159 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 indicated.
SIGNATURE TITLE DATE - --------- ----- ----- SCOTT G. MACKIN* President, Chief Executive Officer and April 24, 2000 - -------------------------------- Director SCOTT G. MACKIN RAYMOND E. DOMBROWSKI, JR.* Senior Vice President and Chief Financial Officer April 24, 2000 - -------------------------------- RAYMOND E. DOMBROWSKI, JR. /S/ WILLIAM J. METZGER Vice President and Chief Accounting Officer April 24, 2000 - -------------------------------- WILLIAM J. METZGER DAVID M. ABSHIRE* Director April 24, 2000 - -------------------------------- DAVID M. ABSHIRE ANTHONY J. BOLLAND* Director April 24, 2000 - -------------------------------- ANTHONY J. BOLLAND NORMAN G. EINSPRUCH* Director April 24, 2000 - -------------------------------- NORMAN G. EINSPRUCH GEORGE L. FARR* Director April 24, 2000 - -------------------------------- GEORGE L. FARR JEFFREY F. FRIEDMAN* Director April 24, 2000 - -------------------------------- JEFFREY F. FRIEDMAN ATTALLAH KAPPAS* Director April 24, 2000 - -------------------------------- ATTALLAH KAPPAS JUDITH D. MOYERS* Director April 24, 2000 - -------------------------------- JUDITH D. MOYERS
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HOMER A. NEAL* Director April 24, 2000 - -------------------------------- HOMER A. NEAL ROBERT E. SMITH* Director April 24, 2000 - -------------------------------- ROBERT E. SMITH HELMUT F.O. VOLCKER* Director April 24, 2000 - -------------------------------- HELMUT F.O. VOLCKER By: /s/ William J. Metzger ---------------------------- Attorney-in-fact
161 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION 2 Plans of Acquisition, Reorganization Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as of Filed as Exhibit 2 to Ogden's Form S-4 October 31, 1989, among Ogden, ERCI Acquisition Registration Statement File No. 33-32155, Corporation and ERC International Inc. and incorporated herein by reference. 2.2 Agreement and Plan of Merger among Ogden Filed as Exhibit (10)(x) to Ogden's Form Corporation, ERC International Inc., ERC 10-K for the fiscal year ended December 31, Acquisition Corporation and ERC Environmental 1990 and incorporated herein by reference. and Energy Services Co., Inc. dated as of January 17, 1991. 2.3 Amended and Restated Agreement and Plan of Filed as Exhibit 2 to Ogden's Form S-4 Merger among Ogden Corporation, OPI Acquisition Registration Statement File No. 33-56181 and Corporation sub. and Ogden Projects, Inc. dated incorporated herein by reference. as of September 27, 1994. 3 Articles of Incorporation and By-Laws. 3.1 Ogden Restated Certificate of Incorporation as Filed as Exhibit (3)(a) to Ogden's Form 10-K amended. for the fiscal year ended December 31, 1988 and incorporated herein by reference. 3.2 Ogden By-Laws, as amended. Filed as Exhibit 3.2 to Ogden's Form 10-Q for the quarterly period ended March 31, 1998 and incorporated herein by reference.
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4 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden and Filed as Exhibits (C)(3) and (C)(4) to Bankers Trust Company, dated as of June 1, 1987 Ogden's Form 8-K filed with the Securities and Offering Memorandum dated June 12, 1987, and Exchange Commission on July 7, 1987 and relating to U.S. $85 million Ogden 6% incorporated herein by reference. Convertible Subordinated Debentures, Due 2002. 4.2 Fiscal Agency Agreement between Ogden and Filed as Exhibit (4) to Ogden's Form S-3 Bankers Trust Company, dated as of October 15, Registration Statement filed with the 1987, and Offering Memorandum, dated October Securities and Exchange Commission on 15, 1987, relating to U.S.$75 million Ogden December 4, 1987, Registration No. 33-18875, 5-3/4% Convertible Subordinated Debentures, Due and incorporated herein by reference. 2002. 4.3 Indenture dated as of March 1, 1992 from Ogden Filed as Exhibit (4)(C) to Ogden's Form 10-K Corporation to The Bank of New York, Trustee, for fiscal year ended December 31, 1991, and relating to Ogden's $100 million debt offering. incorporated herein by reference. 10 Material Contracts 10.1(a) U.S. $95 million Term Loan and Letter of Credit Filed as Exhibit 10.6 to Ogden's Form 10-Q and Reimbursement Agreement among Ogden, the for the quarterly period ended March 31, Deutsche Bank AG, New York Branch and the 1997 and incorporated herein by reference. signatory Banks thereto, dated March 26, 1997. 10.1(b) $200 million Credit Agreement among Ogden, The Filed as Exhibit 10.1(i) to Ogden's Form Bank of New York as Agent and the signatory 10-Q for the quarterly period ended June 30, Lenders thereto, dated as of June 30, 1997. 1997 and incorporated herein by reference. 10.2 Rights Agreement between Ogden Corporation and Filed as Exhibit (10)(h) to Ogden's Form Manufacturers Hanover Trust Company, dated as 10-K for the fiscal year ended December 31, of September 20, 1990 and amended August 15, 1990 and incorporated herein by reference. 1995 to provide The Bank of New York as successor agent.
163
10.3 Executive Compensation Plans. (a) Ogden Corporation 1990 Stock Option Filed as Exhibit 10.6(b)(i) to Ogden's Form Plan as Amended and Restated as of 10-Q for the quarterly period ended January 19, 1994. September 30, 1994 and incorporated herein by reference. Amendment adopted and effective as of Filed as Exhibit 10.7(a)(ii) to Ogden's Form September 18, 1997. 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference. (b) Ogden Corporation 1999 Stock Option Filed as Exhibit 10.3(a)(a) to Ogden's Form 10-Q for the Plan, as amended. quarterly period ended June 30, 1999 and incorporated herein by reference. (i) Ogden Corporation 1999 Stock Transmitted herewith as Exhibit 10.3 (b) (i). Incentive Plan Amended and Restated as of January 1, 2000. (c) Ogden Services Corporation Select Filed as Exhibit 10.7(c)(ii) to Ogden's Form Savings Plan Amendment and Restatement 10-K for the fiscal year ended December 31, as of January 1, 1995. 1994 and incorporated herein by reference. (i) Amendment Number One to the Ogden Filed as Exhibit 10.7(c)(ii) to Ogden's Form Services Corporation Select and 10-K for the fiscal year ended December 31, Savings Plan as Amended and Restated 1997 incorporated herein by reference. January 1, 1995,
164
effective January 1, 1998. (d) Ogden Services Corporation Select Filed as Exhibit 10.7(e)(i) to Ogden's Form Savings Plan Trust Amendment and 10-K for the fiscal year ended December 31, Restatement as of January 1, 1995. 1994 and incorporated herein by reference. (e) (i) Ogden Corporation Restricted Transmitted herewith as Exhibit 10.3(e)(i). Stock Plan and Restricted Stock Agreement. (ii) Ogden Corporation Restricted Stock Transmitted herewith as Exhibit 10.3(e)(ii). Plan for Non-Employee Directors and Restricted Stock Agreement. (f) Ogden Profit Sharing Plan as Amended Filed as Exhibit 10.7(p)(ii) to Ogden's Form and Restated effective as of January 1, 10-K for fiscal year ended December 31, 1994 1995. and incorporated herein by reference. (g) Ogden Corporation Core Executive Filed as Exhibit 10.8(q) to Ogden's Form 10-K Benefit Program. for fiscal year ended December 31, 1992 and incorporated herein by reference. (h) Ogden Projects Pension Plan. Filed as Exhibit 10.8(r) to Ogden's Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (i) Ogden Projects Profit Sharing Plan. Filed as Exhibit 10.8(s) to Ogden's Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (j) Ogden Projects Supplemental Pension Filed as Exhibit 10.8(t) to Ogden's Form 10-K for fiscal
165
and Profit Sharing Plans. year ended December 31, 1992 and incorporated herein by reference. (k) Ogden Projects Core Executive Benefit Filed as Exhibit 10.8(v) to Ogden's Form 10-K for fiscal Program. year ended December 31, 1992 and incorporated herein by reference. (l) (i) Form of amended Ogden Projects Profit Filed as Exhibit 10.7(w)(i) to Ogden's Form 10-K for fiscal Sharing Plan effective as of January year ended December 31, 1994 and incorporated herein by 1, 1994. reference. (ii) Form of amended Ogden Projects Filed as Exhibit 10.7(w)(ii) to Ogden's Form 10-K for fiscal Pension Plan, effective as of year ended December 31, 1994 and incorporated herein by January 1, 1994. reference. (m) Executive Performance Incentive Plan Transmitted herewith as Exhibit 10.3(m). (n) Ogden Key Management Incentive Plan. Filed as Exhibit 10.7(p) to Ogden's Form 10-K for fiscal year ended December 31, 1997 and incorporated herein by reference. 10.4 Employment Agreements (a) Employment Agreement between Ogden Filed as Exhibit 10.4(a) to Ogden's Form and Lynde H. Coit dated March 1, 1999. 10-K for fiscal year ended December 31, 1998 and incorporated herein by reference. (b) Employment Agreement between R. Filed as Exhibit10.3(h) to Ogden's Form Richard Ablon and Ogdend. 10-Q for the quarterly period ended June 30, 1998 dated as of January 1, 1998. and incorporated herein by reference.
166
(c) Termination Agreement between Ogden Filed as Exhibit 10.8(c) to Ogden's Form and Philip G. Husby, Senior Vice 10-Q for the quarterly period ended President and CFO dated as of September 30, 1998 and incorporated herein September 17, 1998. by reference. (d) Employment Agreement between Scott G. Filed asExhibit 10.8(e) to Ogden's Form Mackin, Executive Vice President and 10-Q for quarterly period ended September Ogden Corporation, dated as of October 30, 1998 and incorporated herein by 1, 1998. reference. (e) Employment Agreement between Ogden Filed as Exhibit 10.8(i) to Ogden's Form Corporation and David L. Hahn, dated 10-K for fiscal year ended December 31, 1995 December 1, 1995. and incorporated herein by reference. i. Letter Amendment to Employment Filed as Exhibit 10.8(f)i. to Ogden's Form Agreement between Ogden 10-Q for quarterly period ended September Corporation and David L. 30, 1998 and incorporated herein by Hahn, Senior Vice President, reference. dated as of October 1, 1998. (f) Employment Agreement between Ogden Filed as Exhibit 10.8(j) to Ogden's Form 10-K for fiscal Corporation and Rodrigo Arboleda, year ended December 31, 1996 and incorporated herein by dated January 1, 1997. reference. i. Letter Amendment to Filed as Exhibit 10.8(g)(i) to Ogden's Form Employment Agreement between 10-Q for quarterly period ended September Ogden and Rodrigo Arboleda, 30, 1998 and incorporated herein by Senior Vice President, reference. effective as of October 1, 1998. (g) Employment Agreement Transmitted herewith as Exhibit
167
between Ogden Energy Group, 10.4(g) Inc. and Bruce W. Stone, dated May 1, 1999. (h) Employment Agreement Filed as Exhibit 10.8(l) to Ogden's Form between Ogden Corporation and 10-K for fiscal year ended December 31, 1996 Quintin G. Marshall, dated and incorporated herein by reference. October 30, 1996. 10.4(g). i. Letter Amendment to Filed as Exhibit 10.8(i)i. to Ogden's Form Employment Agreement between 10-Q for the quarter ended September 30, Ogden and Quintin G. 1998 and incorporated herein by reference. Marshall, Senior Vice President, Corporate Development, effective as of October 1, 1998. (i) Employment Agreements between Ogden Filed as Exhibit 10.8(m) to Ogden's Form and Jesus Sainz, effective as of 10-K for the fiscal year ended December 31, January 1, 1998. 1997 and incorporated herein by reference. i. Letter Amendment to Filed as Exhibit 10.8(j)i. to Ogden's Form Employment Agreement between 10-Q for the quarter ended September 30, Ogden and Jesus Sainz, 1998 and incorporated herein by reference. Executive Vice President, effective as of October 1, 1998. (j) Employment Agreement between Filed as Exhibit 10.3(m) to Ogden's Form Alane Baranello, Vice President - 10-Q for the quarterly period ended June 30, Human Resources and Ogden dated 1998 and incorporated herein by reference. October 28, 1996. i. Letter Amendment to Filed as Exhibit 10.8(k)i. to Ogden's Form Employment Agreement between 10-Q for the quarterly period ended September 30, Ogden and Alane Baranello, 1998 and incorporated herein by reference. Vice
168
President-Human Resources, dated October 13,1998. (k) Employment Agreement between Ogden Filed as Exhibit 10.3(l) to Ogden's and Peter Allen, Senior Vice President, Form 10-Q for the quarterly period ended dated July 1, 1998. June 30, 1998 and incorporated herein by reference. (l) Employment Agreement between Ogden and Filed as Exhibit 10.4(m) to Ogden's Form 10-K Raymond E. Dombrowski, Jr., Senior for fiscal year ended December 31, 1998 Vice President and CFO, dated as of and incorporated herein byreference. September 21, 1998. 10.5 First Amended and Restated Ogden Corporation Filed as Exhibit 10.3(b)(i) to Ogden's Form Guaranty Agreement made as of January 30, 1992 10-K for fiscal year ended December 31, 1991 by Ogden Corporation for the benefit of Mission and incorporated herein by reference. Funding Zeta and Pitney Bowes Credit. 10.6 Ogden Corporation Guaranty Agreement made as of Filed as Exhibit 10.3(b)(iii) to Ogden's January 30,1992 by Ogden Corporation for the Form 10-K for fiscal year ended December 31, benefit of Allstate Insurance Company and Ogden 1991 and incorporated herein by reference. Martin Systems of Huntington Resource Recovery Nine Corp. 11 Not Applicable. 12 Not Applicable. 13 Not Applicable. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Independent Auditors Consent Transmitted herewith as Exhibit 23. 27 Financial Data Schedule. Transmitted herewith as Exhibit 27.
169 EX-10.3(B)(I) 2 EXHIBIT 10.3(B)(I) EXHIBIT 10.3(b)(i) OGDEN CORPORATION 1999 STOCK INCENTIVE PLAN AMENDED AND RESTATED AS OF JANUARY 1, 2000 1. PURPOSE. The purposes of this Ogden Corporation 1999 Stock Incentive Plan, amended and restated as of January 1, 2000 (the "Plan") are to induce certain individuals to remain in the employ of, or to continue to serve as directors of, Ogden Corporation (the "Company"), its present and future subsidiary corporations (each a "Subsidiary"), as defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code") and its future parent corporations, if any (each, a "Parent"), as defined in section 424(e) of the Code, to attract new individuals to enter into such employment and service and to encourage such individuals to secure or increase on reasonable terms their stock ownership in the Company. The Plan has been amended and restated, effective as of January 1, 2000, to authorize grants of restricted stock to employees of the Company, a Subsidiary or Parent (if any). The Board of Directors of the Company (the "Board") believes that the granting of stock options, restricted stock and other awards (the "Awards") under the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company and aid in securing its continued growth and financial success. 2. SHARES SUBJECT TO PLAN. The maximum number of shares of the common stock, par value $.50 per share (the "Common Stock"), of the Company with respect to which Awards may be granted under the Plan or that may be delivered to participants ("Participants") and their beneficiaries under the Plan shall be 4,000,000 (subject to adjustment as provided in Section 10 of the Plan). For purposes of this Section 2 other than with regard to incentive stock options described in Section 4(A) of the Plan, the number of shares that may be delivered under the Plan shall be determined after giving effect to the use by a Participant of the right, if granted, to cause the Company to withhold from the shares of Common Stock otherwise deliverable to him or her upon the exercise of an Award, shares of Common Stock in payment of all or a portion of his or her withholding obligation arising from such exercise (i.e., only the number of shares issued net of the shares tendered shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan). If any Awards expire or terminate for any reason without having been exercised in full, new Awards may thereafter be granted with respect to the unpurchased shares subject to such expired or terminated Awards. If a limited stock appreciation right ("LSAR") is granted in tandem with a stock option, such grant shall only apply once against the maximum number of shares of Common Stock which may be delivered to Participants or granted under the Plan. If any shares of restricted stock awarded under this Plan are forfeited or repurchased by the Company for any reason, the number of forfeited or repurchased shares of restricted stock shall again be available for the purposes of Awards under this Plan. The shares of Common Stock 1 available under the Plan may be either authorized and unissued shares of Common Stock or shares of Common Stock held in or acquired for the treasury of the Company. 3. ADMINISTRATION. (A) The Plan shall be administered by a committee or subcommittee of the Board (the "Committee") which shall consist of two or more members of the Board, each of whom is intended to be, to the extent required by Rule 16b-3 promulgated under section 16(b) of the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), a "non-employee director" as defined in Rule 16b-3 and, to the extent required by section 162(m) of the Code, an "outside director" as defined under section 162(m) of the Code; provided, however, that with respect to the application of the Plan to non-employee directors, the Board shall be deemed the Committee. If for any reason the Committee does not meet the requirements of Rule 16b-3 or section 162(m) of the Code, such non-compliance with the requirements of Rule 16b-3 or section 162(m) of the Code shall not affect the validity of Awards, interpretations or other actions of the Committee. The Committee shall be appointed annually by the Board, which may at any time and from time to time remove any members of the Committee, with or without cause, appoint additional members to the Committee and fill vacancies, however caused, in the Committee. In the event that no Committee shall have been appointed, the Plan shall be administered by the Board. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members present at a meeting duly called and held except that the Committee may delegate to any one of its members the authority of the Committee with respect to the grant of Awards to an employee who: (i) is not an officer and/or director of the Company; (ii) is not, and may not reasonably be expected to become, a "covered employee" within the meaning of section 162(m) (3) of the Code; and (iii) who is not subject to the reporting requirements under section 16(a) of the Securities Exchange Act of 1934, as amended. Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee (or by a member of the Committee to whom authority has been delegated) shall be fully as effective as if it had been made at a meeting duly called and held. (B) The Committee's powers and authority shall include, but not be limited to (i) selecting individuals for participation who are employees of the Company, any Subsidiary or any Parent and who are members of the Board; (ii) determining the types and terms and conditions of all Awards granted, including exercise price or purchase price (if any), performance goals and other earnout and/or vesting contingencies and acceleration provisions; (iii) permitting transferability of Awards to third parties; (iv) interpreting the Plan's provisions; and (v) administering the Plan in a manner that is consistent with its purpose. The Committee's determination on the matters referred to in this Section 3(B) shall be conclusive. Any dispute or disagreement which may arise under or as a result of or with respect to any Award shall be determined by the Committee, in its sole discretion, and any interpretations by the Committee of the terms of any Award shall be final, binding and conclusive. (C) Subject to Section 13 of the Plan, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, 2 deem advisable; to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. The Committee may adopt special guidelines and provisions for persons who are residing in, or subject to, the taxes of, non-U.S. jurisdictions to comply with applicable tax, securities and other laws and may impose any limitations and restrictions that it deems necessary to comply with the applicable tax, securities and other laws of such non-U.S. jurisdictions. To the extent applicable, the Plan is intended to comply with section 162(m) of the Code (with regard to "covered employees" as defined in section 162(m) of the Code) and the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith. 4. TYPES OF AWARDS. An Award may be granted singularly, in combination with another Award(s) or in tandem whereby exercise or vesting of one Award held by a Participant cancels another award held by the Participant. Subject to Section 6 hereof, an Award may be granted as an alternative to or replacement of an existing Award under the Plan or under any other compensation plans or arrangements of the Company, including the plan of any entity acquired by the Company. The types of Awards that may be granted under the Plan include: (A) A stock option, which represents a right to purchase a specified number of shares of Common Stock during a specified period at a price per share which is no less than that required by Section 6 hereof. Options will be either (a) "incentive stock options" (which term, when used herein, shall have the meaning ascribed thereto by the provisions of section 422 (b) of the Code, or (b) options which are not incentive stock options ("non-qualified stock options"), as determined at the time of the grant thereof by the Committee. (B) An LSAR, which is a right granted in tandem with a related stock option, to receive a payment in cash equal to the excess of the aggregate price (as described herein) at the time specified below of a specified number of shares of Common Stock over the aggregate exercise price of the related stock option being exercised; provided, however, that such right shall be exercisable only upon the occurrence of a Change in Control and only in the alternative to exercise of its related stock option. The Committee may grant in connection with any stock option granted hereunder one or more LSARs relating to a number of shares of Common Stock less than or equal to the number of shares of Common Stock subject to the related stock option. An LSAR may be granted at the same time as, or subsequent to the time that, its related stock option is granted. The exercise of an LSAR relating to a non-qualified stock option with respect to any number of shares of Common Stock shall entitle the Participant to a cash payment, for each share, equal to the excess of (i) the greatest of (A) the highest price per share of Common Stock paid in the Change in Control in connection with which such LSAR became exercisable, (B) the fair market value of a share of Common Stock on the date of such Change of Control and (C) the fair 3 market value of a share of Common Stock on the effective date of such exercise over (iii) the exercise price of the related stock option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days; after the effective date of such exercise. The exercise of an LSAR relating to an incentive stock option with respect to any number of shares of Common Stock shall entitle the Participant to a cash payment, for each such share, equal to the excess of (i) the fair market value of a share of Common Stock on the effective date of such exercise over (ii) the exercise price of the related stock option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days, after the effective date of such exercise. An LSAR shall be exercisable only during the period commencing on the first day following the occurrence of a Change in Control and terminating on the expiration of ninety days after such date. Notwithstanding anything else herein, an LSAR relating to an incentive stock option may be exercised with respect to a share of Common Stock only if the fair market value of such share on the effective date of such exercise exceeds the exercise price relating to such share. Notwithstanding anything else herein, an LSAR may be exercised only if and to the extent that the stock option to which it relates is exercisable. The exercise of an LSAR with respect to a number of shares of Common Stock shall cause the immediate and automatic cancellation of the stock option to which it relates with respect to an equal number of shares. The exercise of a related stock option, or the cancellation, termination or expiration of a related stock option (other than pursuant to this paragraph) , with respect to a number of shares of Common Stock, shall cause the cancellation of the LSAR related to it with respect to an equal number of shares. Each LSAR shall be exercisable in whole or in part; provided, that no partial exercise of an LSAR shall be for an aggregate exercise price of less than $1,000. The partial exercise of an LSAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. (C) A cash award, which is a right denominated in cash or cash units to receive a cash payment, based on the attainment of pre-established performance goals and such other conditions, restrictions and contingencies as the Committee shall determine; provided, however, that if the cash award is made to a "covered employee," under section 162(m)(3) of the Code, the Award is intended to satisfy section 162(m) of the Code. For each Participant for each calendar year, the Committee may specify a targeted performance award. The individual target award may be expressed, at the Committee's discretion, as a fixed dollar amount, a percentage of base pay or total pay (excluding payments made under the Plan), or an amount determined pursuant to an objective formula or standard. Establishment of an individual target award for an employee for a calendar year shall not imply or require that the same level individual target award (if any such award is established by the Committee for the relevant employee) be set for any subsequent calendar year. At the time the performance goals are established, the Committee shall prescribe a formula to determine the percentages (which may be greater than one-hundred percent (100%)) of the individual target award which may be payable based upon the degree of attainment of the performance goals during the calendar year. Notwithstanding anything else herein, the Committee may, in its sole discretion, elect to pay a Participant an amount that is less than the Participant's individual target award (or attained percentage thereof) regardless of the degree of attainment of the performance goals; provided that 4 no such discretion to reduce an Award earned based on achievement of the applicable performance goals shall be permitted for the calendar year in which a Change in Control of the Company occurs, or during such calendar year with regard to the prior calendar year if the Awards for the prior calendar year have not been made by the time of the Change in Control of the Company, with regard to individuals who were Participants at the time of the Change in Control of the Company. For "covered employees" under section 162(m) of the Code, the Committee shall establish the objective performance goals, formulae or standards and the individual target award (if any) applicable to each Participant or class of Participants for a calendar year in writing prior to the beginning of such calendar year or at such later date as permitted under section 162(m) of the Code and while the outcome of the performance goals are substantially uncertain. Such performance goals may incorporate, if and only to the extent permitted under section 162(m) of the Code, provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. The performance goals that may be used by the Committee for such Awards shall be based on one or more of the performance criteria described in Exhibit A, attached hereto. The Committee may designate a single goal criterion or multiple goal criteria for performance measure purposes with the measurement based on absolute Company, Subsidiaries, Parent, division or business unit performance and/or on performance as compared with that of other publicly traded companies. With respect to "covered employees" under section 162(m) of the Code, the Committee shall satisfy the certification requirements in the manner set forth under section 162(m) of the Code. (D) Restricted stock, which is an award of shares of Common Stock under the Plan that is subject to certain conditions and restrictions as provided under Section 8 hereof. A Participant who receives an Award of restricted stock shall not have any rights with respect to such award of restricted stock, unless and until such Participant has delivered a fully executed copy of a restricted stock award agreement and has otherwise complied with the applicable terms and conditions of such Award. An Award of restricted stock may be conditioned on the attainment of pre-established performance goals and such other conditions, restrictions and contingencies as the Committee shall determine; PROVIDED, HOWEVER, that if an Award of restricted stock is made to a "covered employee," under section 162(m)(3) of the Code, the Award is intended to satisfy section 162(m) of the Code. Notwithstanding anything herein to the contrary, Awards of restricted stock may be granted solely to Participants who are employees of the Company, a Subsidiary or Parent (if any). (E) The Committee may provide a loan to any Participant in an amount determined by the Committee to enable the Participant to pay (i) any federal, state or local income taxes arising out of the exercise of an Award or (ii) the exercise price with respect to any Award or (iii) to purchase shares of Common Stock on the open market. Any such loan (i) shall be for such term and at such rate of interest as the Committee may determine, (ii) shall be evidenced by a promissory note in a form determined by the Committee and executed by the Participant and (iii) shall be subject to such other terms and conditions as the Committee may determine. 5 5. ELIGIBILITY. An Award may be granted only to (i) employees of the Company, a Subsidiary or a Parent, (ii) directors of the Company who are not employees of the Company, a Subsidiary or a Parent and (iii) employees of a corporation which has been acquired by the Company, a Subsidiary or a Parent, whether by way of exchange or purchase of stock, purchase of assets, merger or reverse merger, or otherwise, who hold options with respect to the stock of such corporation which the Company has agreed to assume. Eligibility for the grant of an Award and actual participation in the Plan shall be determined by the Committee in its sole direction. 6. STOCK OPTION PRICES AND FAIR MARKET VALUE. (A) Except as otherwise provided in Section 14 hereof, the initial per share option price of any stock option shall not be less than the fair market value of a share of Common Stock on the date of grant; provided, however, that, in the case of a Participant who owns (within the meaning of section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, each Subsidiary and Parent at the time a stock option which is an incentive stock option is granted to him or her, the initial per share option price shall not be less than 110% of the fair market value of a share of Common Stock on the date of grant. (B) For all purposes of this Plan, the fair market value of a share of Common Stock on any date shall be (i) the average of the high and low sales prices on such day of a share of Common Stock as reported on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading or (ii) if not so reported, the average of the closing bid and ask prices on such date as reported on the Nasdaq Stock Market, Inc. or (iii) if not so reported, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Committee. In the event that the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by a qualified appraiser selected by the Committee. Notwithstanding anything herein to the contrary, the fair market value of a share of Common Stock on any date means the price for Common Stock set by the Committee in good faith based on reasonable methods set forth under section 422 of the Code and the regulations thereunder including, without limitation, a method utilizing the average of prices of the Common Stock reported on the principal national securities exchange on which it is then traded or the Nasdaq Stock Market, Inc. during a reasonable period designated by the Committee. 7. OPTION TERM. Options shall be granted for such term as the Committee shall determine, not in excess of ten years from the date of the granting thereof; provided, however, that, except as otherwise provided in Section 14 hereof, in the case of a Participant who owns (within the meaning of section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, each Subsidiary and Parent that the time an option which is an incentive stock option is granted to him or her, the term with respect to such option shall not be in excess of five years from the date of the granting thereof. 6 8. RESTRICTED STOCK AWARDS. Awards of restricted stock shall be subject to the following conditions and restrictions: (A) The purchase price (if any) of restricted stock shall be fixed by the Committee. The purchase price for shares of restricted stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value. (B) Awards of restricted stock shall be evidenced by an agreement entered into between the Company and the Participant. In the event that the Participant is required to pay the purchase price for restricted stock, such agreement must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the Award date by executing a restricted stock award agreement and by paying the purchase price, if any. (C) Each Participant receiving an Award of restricted stock shall be issued a stock certificate in respect of such shares of restricted stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of an award of restricted stock. Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award of restricted stock, substantially in the following form: "The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Ogden Corporation (the "Company") 1999 Stock Option Plan, amended and restated as of January 1, 2000, and an Agreement entered into between the registered owner and the Company dated___________. Copies of such Plan and Agreement are on file at the principal office of the Company." (D) If stock certificates are issued in respect of shares of restricted stock, the Committee shall require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of restricted stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award of restricted stock. (E) The Participant shall not be permitted to transfer shares of restricted stock awarded under this Plan during the period or periods set by the Committee (the "Restriction Period") commencing on the date of such award of restricted stock, as set forth in the restricted stock award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of restricted stock. Within these limits, based on service, attainment of performance goals (as described in Section 8(F) below) and/or such other factors or criteria as the Committee may 7 provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Award of restricted stock and/or waive the deferral limitations for all or any part of any such Award. (F) If the grant of shares of restricted stock or the lapse of restrictions is based on or conditioned upon the attainment of performance goals, the Committee shall establish the performance goals and the applicable vesting percentage of the Award of restricted stock applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee and while the outcome of the performance goals are substantially uncertain. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar events or circumstances. With regard to an Award of restricted stock that is intended to comply with section 162(m) of the Code, to the extent any such provision would create impermissible discretion under section 162(m) of the Code or otherwise violate section 162(m) of the Code, such provision shall be of no force or effect. The performance goals that may be used by the Committee for such Awards shall be based on one or more of the performance criteria described in Exhibit A, attached hereto. The Committee may designate a single goal criterion or multiple goal criteria for performance measure purposes with the measurement based on absolute Company, Subsidiaries, Parent, division or business unit performance and/or on performance as compared with that of other publicly traded companies. With respect to "covered employees" under section 162(m) of the Code, the Committee shall satisfy the certification requirements in the manner set forth under section 162(m) of the Code. (G) Except as provided herein and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of restricted stock, all of the rights of a holder of shares of Common Stock including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the vesting of shares of restricted stock, the right to tender such shares. The Committee may, in its sole discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period. (H) If and when the Restriction Period expires without a prior forfeiture of the restricted stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant, except as otherwise required by applicable law. (I) Unless otherwise determined by the Committee at grant or thereafter, upon a Participant's termination of employment for any reason during the relevant Restriction Period, all restricted stock subject to restriction shall be forfeited. 9. LIMITATION ON AMOUNT OF AWARDS GRANTED. (A) Except as otherwise provided in Section 15 hereof, the aggregate fair market value of the shares of Common Stock for which any Participant may be granted incentive stock options 8 which are exercisable for the first time in any calendar year (whether under the terms of the Plan or any other stock option plan of the Company) shall not exceed $100,000. (B) No Participant (other than a nonemployee director) shall be granted stock options and/or LSARs during any calendar year to purchase more than an aggregate of 500,000 shares of Common Stock (subject to adjustment as provided in Section 10 of the Plan) and no nonemployee director shall be granted stock options and/or LSARs during any calendar year to purchase more than an aggregate of 2,500 shares of Common Stock (subject to adjustment as provided in Section 10 of the Plan). LSARs granted in tandem with a stock option shall only apply once against a Participant's maximum individual number of shares of Common Stock subject to an award of options and/or LSARs hereunder. No Participant eligible to receive restricted stocks shall be awarded, during any calendar year, more than 500,000 shares of restricted stock (subject to adjustment as provided in Section 10 of the Plan) for which the grant of such Award or the lapse of the relevant Restriction Period is subject to the attainment of performance goals as provided under Section 8(F) hereof. No nonemployee director shall be awarded shares of restricted stock hereunder. (C) There are no annual individual share limitations on restricted stock for which the grant of such Award or the lapse of the relevant Restriction Period is not based on or conditioned upon the attainment of performance goals in accordance with Section 8(F) hereof. (D) Subject to Section 9(E), the following additional maximums are imposed under the Plan. The maximum number of shares of Common Stock that may be covered by stock options intended to be incentive stock options shall be 4,000,000 (subject to adjustment as provided in Section 10 of the Plan). The maximum number of shares of Common Stock for Awards of restricted stock shall be 1,000,000 (subject to adjustment as provided in Section 10 of the Plan). The maximum payment that may be made for Awards granted to any one individual pursuant to Section 4(C) hereof shall be $3,000,000 for any single or combined performance goals established for a specified performance period. A specified performance period for purposes of this performance goal payment limit shall not exceed a sixty (60) consecutive month period. (E) Subject to the overall limitation on the number of shares of Common Stock that may be delivered under the Plan, the Committee may use available shares of Common Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company, including the plan of any entity acquired by the Company. 10. ADJUSTMENT OF NUMBER OF SHARES. (A) In the event that a dividend shall be declared upon the Common Stock payable in shares of Common Stock, the number of shares of Common Stock then subject to any Award and the number of shares of Common Stock available for purchase or delivery under the Plan but not yet covered by an Award shall be adjusted by adding to each share the number of shares which would be distributable thereon if such shares had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend. In the event that the outstanding shares of Common Stock are exchanged for a different number or kind of shares of 9 stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, reverse stock split, reclassification, combination of shares, sale of assets or merger or consolidation in which the Company is the surviving corporation, then, if the Committee shall determine, in its sole discretion, to be appropriate, there shall be substituted for each share of Common Stock then subject to any outstanding Award and for each share of Common Stock which may be issued under the Plan but not yet covered by an outstanding Award, the number and kind of shares of stock or other securities for which each outstanding share of Common Stock shall be so exchanged and, if determined by the Committee in its sole discretion to be appropriate, the exercise or option price applicable under any then outstanding Award shall be adjusted proportionately to reflect such corporate transaction. (B) In the event that there shall be any change in the capitalization of the Company or other corporate change affecting the outstanding Common Stock, including by way of an extraordinary or stock dividend, spin-off or other corporate change, other than any change specified in Section 10(A) hereof, then, if the Committee shall, in its sole discretion, determine it to be appropriate, the number or kind of shares then subject to any outstanding Award, the number or kind of shares then available for issuance in accordance with the provisions of the Plan but not yet covered by an outstanding Award, and/or the exercise or option price applicable under any then outstanding Award shall be adjusted proportionately to reflect such corporate event and, if and to the extent the Committee shall, in its sole discretion, determine it to be appropriate, all or any portion of the Plan may be assumed by any corporate successor to all or a portion of the Company's business and shares of such corporate successor (or the Parent or a Subsidiary thereof) shall be substituted for the shares of Common Stock covered by the portion of the Plan so assumed. (C) Notwithstanding the foregoing provisions of this Section 10, in the case of any then outstanding incentive stock options, the Committee shall make commercially reasonable efforts to effect any substitution or adjustment authorized by the Committee pursuant to this Section 10 in a manner consistent with the applicable requirements of Treasury Regulation section 1.425-1. (D) Any substitution or adjustment determined under this Section 10 by the Committee in good faith shall be final, binding and conclusive on the Company and all Participants, directors and employees and their respective heirs, executors, administrators, successors and assigns. (E) No adjustment or substitution provided for in this Section 10 shall require the Company to issue a fractional share under any Award or to sell a fractional share under any stock option. Fractional shares of Common Stock resulting from any adjustment in Awards pursuant to this Section 10 shall be aggregated until, and eliminated at, the time of exercise by rounding-down for fractions less than one-half and rounding-up for fractions equal to or greater than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding. (F) (i) Notwithstanding the foregoing provisions of this Section 10, in the event of a Change in Control, each Award of stock options and LSARs shall become fully vested and exercisable. Except as otherwise provided by the Committee in the Award agreement upon the Award of restricted stock, the restrictions to which any shares of restricted stock are subject shall lapse as if the applicable Restriction Period had ended upon a Change in Control. 10 (ii) As used herein, "Change in Control" shall mean: (I) any Person (as such term is defined in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, other than beneficial ownership by a Participant, the Company, any subsidiary of the Company, any employee benefit plan of the Company or a subsidiary thereof or any person or entity organized, appointed or established, pursuant to the terms of any such benefit plan; (II) the Company's stockholders approve an agreement to merge or consolidate the Company with another corporation, or an agreement providing for the sale of substantially all of the assets of the Company to one or more corporations, in any case other than with or to a corporation 50% or more of which is controlled by, or is under common control with, the Company; or (III) during any two-year period, individuals who at the date on which the period commences constitute a majority of the Board cease to constitute a majority of thereof for any reason; PROVIDED, HOWEVER, that a director who was not a director at the beginning of such period shall be deemed to have satisfied the two-year requirement if such director was elected by, or on the recommendation of, at least two-thirds of the directors who were directors at the beginning of such period (either actually or by prior operation of this provision), other than any director who is so approved in connection with any actual or threatened contest for election to positions on the Board. (G) In the event of the occurrence of any corporate transaction or event described in Section 10(A) or 10(B) hereof or the occurrence of a Change in Control, the Committee may reasonably determine in good faith that all or a portion of the Awards hereunder shall be honored, assumed or converted or new rights substituted therefor (each such honored, assumed, converted or substituted Award shall hereinafter be called an "Alternative Award") by a Participant's employer (or the parent or a subsidiary of such employer) immediately following such corporate transaction or event or Change in Control, provided that any such Alternative Award must meet the following criteria: (i) the Alternative Award must be based on stock which is traded on an established securities market, or which will be so traded within 30 days of the transaction, event or Change in Control; (ii) the Alternative Award must provide such Participant with rights and entitlements substantially equivalent to the rights and entitlements applicable under such Award immediately prior to such transaction, event or Change in Control, including, but not limited to, an identical or better exercise schedule; and 11 (iii) the Alternative Award must have economic value substantially equivalent to the value of such Award (as determined by the Committee at the time of the transaction, event or Change in Control). For purposes of incentive stock options, any assumed or substituted stock option shall comply with the requirements of Treasury Regulation Section 1.425-1 (and any amendments thereto). The Committee may, in its sole discretion, apply the same methodology to non-qualified stock options. 11. PURCHASE FOR INVESTMENT, WAIVERS AND WITHHOLDING. (A) Unless the delivery of shares under any Award shall be registered under the Securities Act of 1933, such Participant shall, as a condition of the Company's obligation to deliver such shares, be required to represent to the Company in writing that he or she is acquiring such shares for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (B) In the event of the death of a Participant, an additional condition of exercising any Award shall be the delivery to the Company of such tax waivers and other documents as the Committee shall determine. (C) An additional condition of exercising any non-qualified stock option, LSAR, or Award of restricted stock, shall be the entry by the Participant into arrangements with the Company with respect to withholding as the Committee shall determine. The Company shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any federal, state or local taxes required by law to be withheld. Upon the vesting of restricted stock, or upon making an election under section 83(b) of the Code, a Participant shall pay all required withholding to the Company. Any such withholding obligation with regard to any Participant may be satisfied, subject to the consent of the Committee, by reducing the number of shares of Common Stock otherwise deliverable. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. 12. NO STOCKHOLDER STATUS; NO RESTRICTIONS ON CORPORATE ACTS; NO EMPLOYMENT RIGHT. 12 (A) Neither any Participant nor his or her legal representatives, legatees or distributees shall be or be deemed to be the holder of any share of Common Stock covered by an Award unless and until a certificate for such share has been issued. Upon payment of the purchase price therefor, a share issued pursuant to the exercise of a stock option shall be fully paid and non-assessable. (B) Neither the existence of the Plan nor any Award shall in any way affect the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding whether of a similar character or otherwise. (C) Neither the existence of the Plan nor the grant of any Award shall require the Company, any Subsidiary or Parent to continue any Participant in the employ or service of the Company, such Subsidiary or such Parent. 13. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable; PROVIDED, HOWEVER, that the Board may not, without further approval of the holders of the shares of Common Stock in accordance with the laws of the State of Delaware, solely to the extent required by the applicable provisions of Rule 16b-3, section 162(m) or 422 of the Code or the rules of any applicable exchange: (i) increase the aggregate number of shares of Common Stock as to which Awards may be granted under the Plan (as adjusted in accordance with the provisions of Section 10 hereof); (ii) increase the minimum individual Participant share limitations under Section 9(B) of the Plan; (iii) increase the maximum payment under Section 9(D) of the Plan; (iv) materially alter the performance criteria described in Sections 4(C), 4(D) and 8(F), and Exhibit A of the Plan; (v) extend the maximum option period under Section 7 of the Plan; (vi) change the class of persons eligible to participate in the Plan; or (vii) change the manner of determining stock option prices under Section 6 of the Plan. Except as otherwise provided in Section 15 hereof, no termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted, adversely affect the rights of such Participant under such Award. 14. EXPIRATION AND TERMINATION OF THE PLAN. The Plan shall terminate on May 19, 2009 or at such earlier time as the Board may determine. The amendments made to the Plan, effective January 1, 2000, shall not be effective in the event that the amendments to the Plan are not approved by the stockholders of the Company at its 2000 Annual Meeting of Stockholders and the Plan as in effect immediately prior to January 1, 2000 shall continue in full force and effect. Awards may be granted under the Plan at any time and from time to time prior to its termination. Any Award outstanding under the Plan at the time of 13 the termination of the Plan shall remain in effect until such Award shall have been exercised or shall have expired in accordance with its terms. 15. STOCK OPTIONS GRANTED IN CONNECTION WITH ACQUISITIONS. In the event that the Committee determines that, in connection with the acquisition by the Company or a Subsidiary of another corporation which will become a Subsidiary or division of the Company (such corporation being hereafter referred to as an "Acquired Subsidiary"), stock options may be granted hereunder to employees and other personnel of an Acquired Subsidiary in exchange for then outstanding stock options to purchase securities of the Acquired Subsidiary. Such stock options may be granted at such option prices, may be exercisable immediately or at any time or times either in whole or in part, and may contain such other provisions not inconsistent with the Plan, or the requirements set forth in Section 13 hereof that certain amendments to the Plan be approved by the stockholders of the Company, as the Committee, in its discretion, shall deem appropriate at the time of the granting of such stock options. 14 EXHIBIT A PERFORMANCE GOALS These performance goals shall be based on one or more of the following criteria with regard to the Company (or a Subsidiary, Parent, division, or other operational unit of the Company): (i) the attainment of certain target levels of, or a specified percentage increase in, profits, market share, revenues, income before income taxes and extraordinary items, net income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, funds from operations or a combination of any or all of the foregoing; (ii) the attainment of certain target levels of (including, without limitation, a break-even), or a percentage increase in, after-tax or pre-tax profits including, without limitation, that attributable to continuing and/or other operations; (iii) the attainment of certain target levels of, or a specified increase in, operational cash flow or cash generation targets; (iv) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, all or a portion of, the Company's bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of such cash balances and/or other offsets and adjustments as may be established by the Committee; (v) the attainment of a specified percentage increase in earnings per share or earnings per share from continuing operations; (vi) the attainment of certain target levels of, or a specified increase in return on capital employed or return on invested capital; (vii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax return on stockholders' equity or profitability targets as measured by return ratio and stockholder returns; (viii) the attainment of certain target levels of, or a specified increase in, economic value added targets based on a cash flow return on investment formula; (ix) the attainment of certain target levels in the fair market value of the shares of the Company's common stock; and (x) the growth in the value of an investment in the Company's common stock assuming the reinvestment of dividends. For purposes of item (i) above, "extraordinary items" shall mean all items of gain, loss or expense for the calendar year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction (including, without limitation, a disposition or acquisition) or related to a change in accounting principle, all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board. To the extent permitted under section 162 (m) of the Code, but only to the extent permitted under section 162(m) of the Code with respect to "covered employees" under section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval), the Committee may: (i) designate additional business criteria on which the performance goals may be based or (ii) adjust, modify or amend the aforementioned business criteria. 15 EX-10.3(E)(I) 3 EXHIBIT 10.3(E)(I) EXHIBIT 10.3(e)(i) OGDEN CORPORATION RESTRICTED STOCK PLAN INTRODUCTION The purpose of this Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Restricted Stock to key employees of the Company and any of its Affiliates, thereby creating a means to raise the level of stock ownership by key employees in order to attract, retain and reward such employees and strengthen the mutuality of interests between such employees and the Company's stockholders. ARTICLE I DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: I.1 "AFFILIATE" shall mean each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; and (d) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee. I.2 "BOARD" shall mean the Board of Directors of the Company. I.3 "CAUSE" shall mean (with regard to a Participant's Termination of Employment with the Company or an Affiliate) a Participant's: (a) willful and continued failure to devote the time, attention and effort necessary to substantially perform his or her duties as an officer of the Employer (other than any such failure resulting from Participant's incapacity due to physical or mental illness); (b) unless corrected in all material respects by the Participant within fifteen (15) days following written notification by the Employer to the Participant that the Employer intends to terminate his or her employment for the reasons set forth under this Section 1.3(b), materially unsatisfactory performance of his or her duties for the Employer, provided, however, that on or after a Change in Control, any event described under this Section 1.3(b) shall not be considered a basis for Termination of Employment of the Participant by the Employer for Cause; (c) a material breach of any confidentiality, non-competition or non-solicitation provision of any other agreement, arrangement or plan between the Employer and a Participant; (d) acts of dishonesty; (e) gross negligence or gross misconduct with regard to the Employer or their respective assets; (f) misappropriation or fraud with regard to the Employer or their assets; (g) conviction of, or the pleading of guilty or NOLO CONTENDERE to, a felony; (h) conviction of a crime involving, in the sole discretion of the Committee, moral turpitude; or (i) a Participant's Disability. A Termination of Employment for Cause shall mean a termination by the Employer effected by written notice given within ninety (90) days of the Employer's discovery of the Cause event. I.4 "CHANGE IN CONTROL" shall have the meaning set forth in Article VII. I.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended. I.6 "COMMITTEE" shall mean a committee of the Board appointed from time to time by the Board, which committee shall be intended to consist of two or more non-employee directors, each of whom shall be, to the extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act as then in effect or any successor provisions, a "non-employee director" as defined in Rule 16b-3, except that, if and to the extent that no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3, such noncompliance with the requirements of Rule 16b-3 shall not affect the validity of the awards, grants, interpretations or other actions of the Committee. I.7 "COMMON STOCK" shall mean the common stock, $.50 par value per share, of the Company. I.8 "COMPANY" shall mean Ogden Corporation and any successor by merger, consolidation or otherwise. I.9 "DISABILITY" shall mean a permanent and total disability resulting from a physical or mental condition of such severity and probable prolonged duration whereby the Participant is entitled to and receives disability benefits under the Federal Social Security Act or under the Employer's long-term disability plan. I.10 "EFFECTIVE DATE" shall mean February 10, 2000. I.11 "ELIGIBLE EMPLOYEE" shall mean each key employee of the Employer. I.12 "EMPLOYER" shall mean, with respect to a Participant, the Company or any Affiliate which employs such Participant. I.13 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. I.14 "PARENT" shall mean any parent corporation of the Company within the meaning of Section 424(e) of the Code. I.15 "PARTICIPANT" shall mean an Eligible Employee to whom an award of Restricted Stock has been made pursuant to this Plan. -2- I.16 "PLAN" shall mean the Ogden Corporation Restricted Stock Plan. I.17 "RESTRICTED STOCK" shall mean an award of shares of Common Stock under the Plan that is subject to restrictions under Article V. I.18 "RESTRICTION PERIOD" shall have the meaning set forth in Subsection 5.3(a). I.19 "RULE 16B-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provisions. I.20 "SUBSIDIARY" shall mean any subsidiary of the Company as defined in Section 424(f) of the Code. I.21 "TERMINATION OF EMPLOYMENT" shall mean: (a) a termination of employment (for reasons other than a military or personal leave of absence granted by the Company or an Affiliate) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate. I.22 "TRANSFER" or "TRANSFERRED" shall mean anticipate, alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer. ARTICLE II ADMINISTRATION II.1 THE COMMITTEE. The Plan shall be administered and interpreted by the Committee. II.2 AWARDS OF RESTRICTED STOCK. The Committee shall have full authority to grant, pursuant to the terms of this Plan, awards of Restricted Stock to Eligible Employees. In particular, the Committee shall have the authority: (a) to select the Eligible Employees to whom awards of Restricted Stock may from time to time be granted hereunder; (b) to determine whether and to what extent awards of Restricted Stock are to be granted hereunder to one or more Eligible Employees; (c) to determine the number of shares of Restricted Stock to be covered by each award of Restricted Stock to an Eligible Employees; and (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any award of Restricted Stock granted hereunder to an Eligible Employee (including, but not limited to any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, based on such factors, if any, as the Committee shall determine, in its sole discretion). -3- II.3 GUIDELINES. Subject to Article VIII hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of this Plan and any award of Restricted Stock issued under this Plan (and any agreements relating thereto); and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect but only to the extent any such action would be permitted under the applicable provisions of Rule 16b-3. The Committee may adopt special guidelines and provisions for persons who are residing in, or subject to, the taxes of, countries other than the United States to comply with applicable tax and securities laws. To the extent applicable, this Plan is intended to comply with the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith. II.4 DECISIONS FINAL. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns. II.5 PROCEDURES. If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company, shall be fully as effective as if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. II.6 DESIGNATION OF CONSULTANTS/LIABILITY. (a) The Committee may designate employees of the Company and professional advisors to assist the Committee in the administration of the Plan and may grant authority to employees to execute agreements or other documents on behalf of the Committee. (b) The Company, the Board or the Committee may consult with and employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan (who may be, legal counsel, a consultant or agent of the Company) and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee or Board in the engagement of any such counsel, consultant or agent shall be paid by the Company and, if applicable, an Affiliate. The Committee, its members and any person -4- designated pursuant to paragraph (a) above shall not be liable for any action or determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable law, no officer of the Company or an Affiliate or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any award of Restricted Stock granted under it. To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company or, if applicable, an Affiliate, and to the extent not covered by insurance, each officer and member or former member of the Committee or of the Board shall be indemnified and held harmless by the Company or, if applicable, an Affiliate, against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Company or, if applicable, an Affiliate) or liability (including any sum paid in settlement of a claim with the approval of the Company or, if applicable, an Affiliate), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out of such officer's, member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company or any Affiliate. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to awards of Restricted Stock granted to him or her under this Plan. ARTICLE III SHARE AND OTHER LIMITATIONS III.1 SHARES TO BE DELIVERED. Shares to be issued under the Plan shall be made available only from issued shares of Common Stock reacquired by the Company and held in treasury. The aggregate number of shares of Common Stock which may be issued under this Plan with respect to any award of Restricted Stock shall not exceed 500,000 shares (subject to any increase or decrease pursuant to Section 3.2). Notwithstanding the foregoing, if any shares of Restricted Stock awarded under this Plan to a Participant are forfeited for any reason, the number of forfeited shares of Restricted Stock shall again be available for purposes of granting awards of Restricted Stock under the Plan. III.2 ADJUSTMENTS UPON CERTAIN EVENTS. (a) ADJUSTMENTS. The existence of the Plan and any award of Restricted Stock granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting Common Stock, the dissolution or liquidation of the Company or any Affiliate, any sale or transfer of all or part of the assets or business of the Company and any Affiliate, or any other corporate act or proceeding. -5- (b) CAPITAL STRUCTURE. In the event of (i) any such change in the capital structure or business of the Company by reason of any stock dividend or distribution, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, spin-off, split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other than Common Stock, sale or transfer of all or part of its assets or business, reclassification of its capital stock, or any similar change affecting the Company's capital structure or business and (ii) the Committee determines an adjustment is appropriate under the Plan, then the aggregate number and kind of shares which thereafter may be issued under this Plan shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under this Plan or as otherwise necessary to reflect the change, and any such adjustment determined by the Committee shall be binding and conclusive on the Company and all Participants and employees and their respective heirs, executors, administrators, successors and assigns. (c) FRACTIONAL SHARES. Fractional shares resulting from adjustment pursuant to Sections 3.2(a) or (b) shall be eliminated by rounding down for fractions less than one-half (1/2) and rounding up for fractions equal to or greater than one-half (1/2). No cash settlements shall be made with respect to fractional shares eliminated by rounding. ARTICLE IV ELIGIBILITY An award of Restricted Stock under this Plan may be granted only to key employees of the Company or an Affiliate. Eligibility for the grant of an award of Restricted Stock under this Plan and actual participation in this Plan shall be determined by the Committee in its sole discretion. ARTICLE V AWARDS OF RESTRICTED STOCK V.1 AWARDS OF RESTRICTED STOCK. Subject to Section 3.1 and this Article V, shares of Restricted Stock may be issued to Eligible Employees under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient (subject to Section 5.2), the time or times within which such award of Restricted Stock may be subject to forfeiture and the rights to acceleration thereof (subject to Section 5.3), and all other terms and conditions of the award of Restricted Stock. V.2 AWARDS OF RESTRICTED STOCK AND CERTIFICATES. The Eligible Employee selected to become a Participant and to receive an award of Restricted Stock shall not have any rights with respect to such award of Restricted Stock, unless and until such Eligible Employee has delivered a fully executed copy of the Restricted Stock award agreement evidencing the award of Restricted Stock to the Company and has otherwise complied with the applicable terms and -6- conditions of such award of Restricted Stock. At such time, the Eligible Employee shall become a Participant hereunder. Restricted Stock granted under this Article V shall also be subject to the following conditions: (a) PURCHASE PRICE. The purchase price (if any) of Restricted Stock shall be fixed by the Committee. The purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value. (b) AGREEMENT. Awards of Restricted Stock shall be evidenced by an agreement entered into between the Company and the Eligible Employee. In the event that the Eligible Employee is required to pay the purchase price for Restricted Stock in accordance with Section 5.2(a), such agreement must be accepted within a period of sixty (60) days (or such shorter period as the Committee may specify at grant) after the award date by executing a Restricted Stock award agreement and by paying the purchase price, if any. (c) LEGEND. Each Participant receiving an award of Restricted Stock under this Article V shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of an award of Restricted Stock. Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award of Restricted Stock, substantially in the following form: "The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Ogden Corporation (the "Company") Restricted Stock Plan and an Agreement entered into between the registered owner and the Company dated ___________. Copies of such Plan and Agreement are on file at the principal office of the Company." (d) CUSTODY. If stock certificates are issued in respect of shares of Restricted Stock, the Committee shall require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such award of Restricted Stock. V.3 RESTRICTIONS AND CONDITIONS ON AWARDS OF RESTRICTED STOCK. The shares of Restricted Stock awarded pursuant to this Plan shall be subject to Article VI and the following restrictions and conditions: -7- (a) RESTRICTION PERIOD; VESTING AND ACCELERATION OF VESTING. The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under this Plan during the period or periods set by the Committee (the "Restriction Period") commencing on the date of such award of Restricted Stock, as set forth in the Restricted Stock award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of Restricted Stock. (b) RIGHTS AS STOCKHOLDER. Except as provided in this subsection (b) and subsection (a) above and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the vesting of shares of Restricted Stock, the right to tender such shares. The Committee may, in its sole discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period. (c) LAPSE OF RESTRICTIONS. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant, except as otherwise required by applicable law. V.4 TERMINATION OF EMPLOYMENT FOR RESTRICTED STOCK. Unless otherwise determined by the Committee at grant or thereafter, upon a Participant's Termination of Employment for any reason during the relevant Restriction Period, all Restricted Stock subject to restriction shall be forfeited. Upon a Participant's Termination of Employment by the Employer for Cause, all Restricted Stock subject to restriction shall be forfeited. ARTICLE VI NON-TRANSFERABILITY Shares of Restricted Stock may not be Transferred prior to the date on which such shares are issued, or, if later, the date on which the Restriction Period lapses. No award of Restricted Stock shall, except as otherwise specifically provided by law or herein, be Transferable in any manner prior to the date on which the applicable Restriction Period lapses, and any attempt to transfer any share prior to the date on which the applicable Restriction Period lapses shall be void, and no award of Restricted Stock shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such award, nor shall it be subject to attachment or legal process for or against such person. -8- ARTICLE VII CHANGE IN CONTROL PROVISIONS VII.1 BENEFITS. Upon the occurrence of a Change in Control of the Company, except as otherwise provided by the Committee upon the grant of an award of Restricted Stock, the restrictions to which any shares of Restricted Stock granted to a Participant prior to the Change in Control are subject shall lapse as if the applicable Restriction Period had ended upon such Change in Control. VII.2 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred upon: (a) the acquisition by any person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of twenty-five percent (25%) or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, provided that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company (excluding any acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if following such reorganization, merger or consolidation the conditions described in clause (iii) of paragraph (c) below are met. (b) individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) the stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the -9- Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. ARTICLE VIII TERMINATION OR AMENDMENT OF THE PLAN Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to an award of Restricted Stock granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant. The Committee may amend the terms of any award of Restricted Stock theretofore granted, prospectively or retroactively, but, subject to Article III above or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder's consent. ARTICLE IX UNFUNDED PLAN This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. ARTICLE X GENERAL PROVISIONS X.1 REPRESENTATION AND LEGEND. The Committee may require each person receiving shares pursuant to an award of Restricted Stock under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may -10- cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. X.2 OTHER PLANS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required and such arrangements may be either generally applicable or applicable only in specific cases. X.3 NO RIGHT TO EMPLOYMENT. Neither this Plan nor the grant of any award of Restricted Stock hereunder shall give any Participant or other employee any right with respect to continuance of employment by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed to terminate his or her employment at any time. X.4 WITHHOLDING OF TAXES. The Employer shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock, or upon making an election under Code Section 83(b), a Participant shall pay all required withholding to the Employer. The Committee may permit any such statutory withholding obligation with regard to any Participant to be satisfied by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. X.5 LISTING AND OTHER CONDITIONS. (a) As long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issue of any shares of Common Stock pursuant to an award of Restricted Stock shall be conditioned upon such shares being listed on such exchange or system. The Company shall have no obligation to issue such shares unless and until such shares are so listed. (b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an award of Restricted Stock is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to shares of Common Stock or awards of Restricted Stock. (c) Upon termination of any period of suspension under this Section 10.5, any award of Restricted Stock affected by such suspension which shall not then have expired -11- or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension. X.6 GOVERNING LAW. This Plan shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). X.7 CONSTRUCTION. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. X.8 OTHER BENEFITS. No award of Restricted Stock payment under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Affiliate nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation. X.9 COSTS. The Company shall bear all expenses included in administering this Plan, including expenses of issuing Common Stock pursuant to any award of Restricted Stock hereunder. X.10 NO RIGHT TO SAME BENEFITS. The provisions of an award of Restricted Stock need not be the same with respect to each Participant, and such awards of Restricted Stock to individual Participants need not be the same in subsequent years. X.11 SECTION 16(b) OF THE EXCHANGE ACT. All transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock, including, without limitation, the grant of Restricted Stock and any withholding of shares of Common Stock by the Employer in order to satisfy required withholding, are intended to comply with all exemptive conditions under Rule 16b-3. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder. X.12 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. X.13 HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. -12- ARTICLE XI TERM OF PLAN No award of Restricted Stock shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date Plan, but awards of Restricted Stock granted prior to such tenth anniversary may extend beyond that date. -13- EXHIBIT 10.3(e)(i) RESTRICTED STOCK AGREEMENT THIS AGREEMENT, made as of the ____ day of ________, 2000, by and between Ogden Corporation, a Delaware corporation with its principal office at Two Pennsylvania Plaza, New York, NY 10121 (the "Company"), and ___________, residing at _______________________ (the "Participant"). WHEREAS, the Compensation Committee of the Board of Directors of the Company (the "Committee") adopted the Ogden Corporation Restricted Stock Plan as of February 10, 2000 (the "Plan"); and WHEREAS, the Committee has determined that the Participant receive an award of Restricted Stock under the Plan on __________, 2000 (the "Grant Date"). NOW, THEREFORE, the Company and the Participant agree as follows: 1. GRANT OF SHARES. Subject to the restrictions, terms and conditions of the Plan and this Agreement, the Company hereby awards to the Participant _______________ (______) shares of the validly issued common stock of the Company, $.50 par value per share (the "Shares"). To the extent required by law, the Participant shall pay the Company the par value ($.50) for each Share awarded to the Participant simultaneously with the execution of this Agreement. Pursuant to Section 3 hereof, the Shares are subject to certain restrictions, which restrictions shall expire in accordance with the provisions of Section 2 hereof. While such restrictions are in effect, the Shares subject to such restrictions shall be referred to herein as "Restricted Stock." Shares of common stock to be issued pursuant to this Agreement shall be made available only from issued shares of Common Stock reacquired by the Company and held in treasury. 2. VESTING. The Restricted Stock shall become vested and cease to be Restricted Stock (but shall remain subject to the other terms of this Agreement) as follows if the Participant has been continuously employed by the Company or an Affiliate until such date: Vesting Date Percentage of Shares Vested 1st Anniversary of Grant Date 50% 2nd Anniversary of Grant Date 50% There shall be no proportionate or partial vesting in the periods prior to the applicable vesting dates and all vesting shall occur only on the appropriate vesting date. In addition, all shares shall become immediately vested and cease to be Restricted Stock upon the earlier of the following to occur: (i) the occurrence of a Change in Control; or (ii) the Participant's attainment of (a) age 55 and completion of 15 years of service with the Company or any Affiliate or (b) age 65. -1- 3. RESTRICTIONS ON TRANSFER. The Participant shall not sell, negotiate, transfer, pledge, hypothecate, assign or otherwise dispose of the Shares, except as set forth in the Plan or this Agreement. Any attempted sale, negotiation, transfer, pledge, hypothecation, assignment or other disposition of the Shares in violation of the Plan or this Agreement shall be void and of no effect and the Company shall have the right to disregard the same on its books and records and to issue "stop transfer" instructions to its transfer agent. 4. FORFEITURE. If the Participant's employment with the Company or any Affiliate is terminated for any reason (other than a Termination of Employment without Cause), including, without limitation, for disability or for Cause during the relevant Restriction Period, the Participant shall forfeit to the Company, without compensation other than repayment of any par value paid for such shares of Restricted Stock, any and all unvested Restricted Stock. 5. RIGHTS AS A HOLDER OF RESTRICTED STOCK. From and after the Grant Date, the Participant shall have the right to vote the Restricted Stock, to receive and retain all regular cash dividends payable to holders of Shares of record on and after the Grant Date (although such dividends will be treated, to the extent required by applicable law, as additional compensation for tax purposes), and to exercise all other rights, powers and privileges of a holder of Shares with respect to the Restricted Stock, with the exceptions that (i) the Participant shall not be entitled to delivery of the stock certificate or certificates representing the Restricted Stock until the Restriction Period has expired; (ii) the Company (or its designated agent) will retain custody of the stock certificate or certificates representing the Restricted Stock and any other property ("RS Property") issued in respect of the Restricted Stock, including stock dividends during the Restriction Period; (iii) no RS Property will bear interest or be segregated in separate accounts during the Restriction Period; and (iv) the Participant shall not transfer the Restricted Stock during the Restriction Period. 6. ADJUSTMENTS. In the event of (i) any stock dividend or distribution, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, spin-off, split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other than Common Stock, sale or transfer of all or part of its assets or business, reclassification of its capital stock, or any similar change affecting the Company's capital structure or business and (ii) the Committee determines an adjustment is appropriate under the Plan, then the aggregate number and kind of shares of Restricted Stock under this Agreement shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participant under the Plan. Any such adjustment determined by the Committee shall be binding and conclusive on the Company and all Participants and employees and their respective heirs, executors, administrators, successors and assigns. 7. TAXES; SECTION 83(b) ELECTION. The Participant acknowledges, subject to the last sentence of this paragraph, that: (i) no later than the date on which any Restricted Stock shall have become vested, the Participant shall pay to the Employer, or make arrangements satisfactory to the Employer regarding payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to any Restricted Stock which shall have become so vested; (ii) the Employer shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any Federal, state or local taxes of any kind required by law to be withheld with respect to any Restricted Stock which shall have become so vested, including that the Employer may, but shall not be required to, sell a number of Shares sufficient to cover applicable withholding taxes; and (iii) in the event that the Participant does not satisfy (i) above on a timely basis, the Employer may, but shall not be required to, pay such required withholding and treat such amount as a demand loan to you at the maximum rate permitted by law, with such loan, at the Employer's sole discretion and provided the Employer so notifies the -2- Participant within 30 days of the making of the loan, secured by the Shares and any failure by you to pay the loan upon demand shall entitle the Employer to all of the rights at law of a creditor secured by the Shares. The Employer may hold as security any certificates representing any Shares and, upon demand of the Employer, the Participant shall deliver to the Employer any certificates in his or her possession representing Shares together with a stock power duly endorsed in blank. The Participant also acknowledges that it is his or her sole responsibility, and not the Employer's to file timely and properly any election under Section 83(b) of the Internal Revenue Code and any corresponding provisions of state or local tax laws, if you wish to utilize such election. 8. LEGEND. In the event that a certificate evidencing Restricted Stock is issued, the certificate representing the Shares shall have endorsed thereon the following legends: (a) "THE ANTICIPATION, ALIENATION, ATTACHMENT, SALE, TRANSFER, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR CHARGE OF THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE OGDEN CORPORATION (THE "COMPANY") RESTRICTED STOCK PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY DATED AS OF THE ___ DAY OF ________, ____. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY." (b) Any legend required to be placed thereon by applicable blue sky laws or other law of any state or securities law. Notwithstanding the foregoing, in no event shall the Company be obligated to issue a certificate representing the Restricted Stock prior to vesting as set forth in Section 2 hereof. 9. SECURITIES REPRESENTATIONS. The Shares are being issued to the Participant and this Agreement is being made by the Company in reliance upon the following express representations and warranties of the Participant. The Participant acknowledges, represents and warrants that: (a) the Shares are being acquired for your own account and not with a view to, or for sale with, the distribution thereof, nor with any present intention of distributing or selling any such Shares; (b) the Participant has been advised that he or she may be an "affiliate" within the meaning of Rule 144 under the Securities Act of 1933 (the "Act") and in this connection the Company is relying in part on the Participant's representations set forth in this Section 9; (c) if the Participant is deemed an affiliate within the meaning of Rule 144 of the Act, the Shares must be held indefinitely by the Participant unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a "re-offer prospectus") with regard to such Shares and the Company is under no obligation to continue in effect a Form S-8 Registration Statement or to otherwise register the Shares (or to file a "re-offer prospectus"); (d) if the Participant is deemed an affiliate within the meaning of Rule 144 of the Act, the Participant understands that the exemption from registration under Rule 144 will not be available under current law unless (i) a public trading market then exists for the Shares of the Company, (ii) adequate information concerning the Company is then available to the public, and (iii) other terms and -3- conditions of Rule 144 or any exemption therefrom are complied with and that any sale of the Shares may be made only in limited amounts in accordance with such terms and conditions. 10. NOT AN EMPLOYMENT AGREEMENT. Neither the execution of this Agreement nor the issuance of the Shares hereunder constitute an agreement by the Employer to employ or to continue to employ the Participant during the entire, or any portion of, the term of this Agreement, including but not limited to any period during which any Restricted Stock is outstanding. 11. POWER OF ATTORNEY. The Company, its successors and assigns, is hereby appointed the attorney-in-fact, with full power of substitution, of the Participant for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments which such attorney-in-fact may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. The Company, as attorney-in-fact for the Participant, may in the name and stead of the Participant, make and execute all conveyances, assignments and transfers of the Restricted Stock, other RS Property, Shares and property provided for herein, and the Participant hereby ratifies and confirms all that the Company, as said attorney-in-fact, shall do by virtue hereof. Nevertheless, the Participant shall, if so requested by the Company, execute and deliver to the Company all such instruments as may, in the judgment of the Company, be advisable for this purpose. 12. UNCERTIFICATED SHARES. Notwithstanding anything else herein, the Committee may, in its sole and absolute discretion and in accordance with Section 158 of the Delaware General Corporation Law, subject to the terms of the Plan, issue the Shares in the form of uncertificated shares. Such uncertificated shares of Restricted Stock shall be credited to a book entry account maintained by the Company (or its designee) on behalf of the Participant. If thereafter certificates are issued with respect to such uncertificated shares of Restricted Stock, such issuance and delivery of certificates shall be in accordance with the applicable terms of this Agreement. 13. MISCELLANEOUS. 13.1 This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal legal representatives, successors, trustees, administrators, distributees, devisees and legatees. The Company may assign to, and require, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any Affiliate by which you the Participant is employed to expressly assume and agree in writing to perform this Agreement. Notwithstanding the foregoing, the Participant may not assign this Agreement. 13.2 This award of Restricted Stock shall not affect in any way the right or power of the Board of Directors or stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock, the dissolution or liquidation of the Company or any Affiliate, any sale or transfer of all or part of its assets or business of the Company and any Affiliate and any other corporate act or proceeding. 13.3 The Participant agrees that the award of the Restricted Stock hereunder is special incentive compensation and that it, any dividends paid thereon (even if treated as compensation for tax purposes) and any other RS Property will not be taken into account as "salary" or "compensation" or "bonus" in determining the amount of any payment under any pension, retirement or profit-sharing plan of the Company or any life insurance, disability or other benefit plan of the Company. -4- 13.4 No modification or waiver of any of the provisions of this Agreement shall be effective unless in writing and signed by the party against whom it is sought to be enforced. 13.5 This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one contract. 13.6 The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement. 13.7 The headings of the sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or modify any of the terms or provisions hereof. 13.8 The Company shall pay all fees and expenses necessarily incurred by the Company in connection with the Plan and this Agreement and will from time to time use its reasonable efforts to comply with all laws and regulations which, in the opinion of counsel to the Company, are applicable thereto. 13.9 All notices, consents, requests, approvals, instructions and other communications provided for herein shall be in writing and validly given or made when delivered, or on the second succeeding business day after being mailed by registered or certified mail, whichever is earlier, to the persons entitled or required to receive the same, at the addresses set forth at the heading of this Agreement or to such other address as either party may designate by like notice. Notices to the Company shall be addressed to the Corporate Secretary. 13.10 This Agreement and the award hereunder is subject to all the restrictions, terms and provisions of the Plan which are incorporated herein by reference. In the event of an inconsistency between any provision of the Plan and this Agreement, unless otherwise indicated, the terms of the Plan shall control. The capitalized terms in this Agreement that are not otherwise defined shall have the same meaning as set forth in the Plan. 13.11 By executing this Agreement and by paying the price (if any) required hereunder within 60 days after the day and year first above written, the award of Restricted Stock shall be accepted by the Participant. 13.12 This Agreement shall be construed, interpreted and governed and the legal relationships of the parties determined in accordance with the internal laws of the State of Delaware without reference to rules relating to conflicts of law. -5- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. OGDEN CORPORATION By_________________________________ (Title) ----------------------------------- (Participant) -6- ACKNOWLEDGMENT STATE OF DELAWARE ) ss.: COUNTY OF ___________ ) On this ____ day of ____, 2000 before me personally appeared _____________ to me known to be the person described in and who executed the foregoing agreement, and acknowledged that he or she executed the same as his or her free act and deed. ----------------------------------- Notary Public EX-10.3(E)(II) 4 EXHIBIT 10..3(E)(II) EXHIBIT 10.3(e)(ii) ------------------- OGDEN CORPORATION RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS INTRODUCTION The purpose of this Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to automatically grant Restricted Stock to Non-Employee Directors with respect to fifty percent (50%) of their Retainer Fees and fifty percent (50%) of their Meeting Fees, thereby creating a means to raise the level of stock ownership by Non-Employee Directors in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company's stockholders. ARTICLE I DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: I.1 "BOARD" shall mean the Board of Directors of the Company. I.2 "CAUSE" shall mean (with regard to a Non-Employee Director's Termination of Directorship) an act or failure to act that constitutes cause for removal of a director under applicable Delaware law. I.3 "CHANGE IN CONTROL" shall have the meaning set forth in Article VII. I.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended. I.5 "COMMON STOCK" shall mean the common stock, $.50 par value per share, of the Company. I.6 "COMPANY" shall mean Ogden Corporation and any successor by merger, consolidation or otherwise. I.7 "DISABILITY" shall mean the inability of the Non-Employee Director to perform his material duties as a director of the Company due to a physical or mental injury, infirmity or incapacity for one hundred eighty (180) consecutive days. The existence or nonexistence of a Disability shall be determined by a physician agreed in good faith to by the Non-Employee Director and the Board. I.8 "EFFECTIVE DATE" shall mean February 17, 2000. I.9 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. I.10 "FAIR MARKET VALUE" shall mean, on any date, (i) the closing price of a share of Common Stock as reported on the principal securities exchange on which shares of Common Stock are then listed or admitted to trading or (ii) if not so reported, the average of the closing bid and ask prices on such date as reported on the Nasdaq Stock Market, Inc. or (iii) if not so reported, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Board. In the event that the price of a share of Common Stock shall not be so reported, the Fair Market Value of a share of Common Stock shall be determined by a qualified appraiser selected by the Board. Notwithstanding anything herein to the contrary, the fair market value of a share of Common Stock on any date means the price for Common Stock set by the Board in good faith based on reasonable methods set forth under Section 422 of the Code and the regulations thereunder including, without limitation, a method utilizing the average prices of the Common Stock reported on the principal national securities exchange on which it is then traded on the Nasdaq Stock Market, Inc. during a reasonable period designated by the Board. I.11 "MEETING FEE(S)" shall mean any fees to which a Non-Employee Director is entitled for attending Board meetings (including by telephonic means) or for attending the meetings of any Board committee (including by telephonic means) of which the Non-Employee Director is a member. Meeting Fees shall not include expense reimbursements, amounts realized upon the exercise of a stock option, Restricted Stock or any other amounts paid to the Non-Employee Director. I.12 "NON-EMPLOYEE DIRECTOR" shall mean any non-employee director of the Company who is not an employee of the Company. I.13 "PLAN" shall mean the Ogden Corporation Restricted Stock Plan for Non-Employee Directors. I.14 "RESTRICTED STOCK" shall mean an award of shares of Common Stock under the Plan that is subject to restrictions under Article V. I.15 "RESTRICTION PERIOD" shall have the meaning set forth in Subsection 5.3(a). I.16 "RETAINER FEE(S)" shall mean the fee to which a Non-Employee Director is entitled for service on the Board as a director during a fiscal year of the Company. Retainer Fees shall not include expense reimbursements, amounts realized upon the exercise of a stock option, Restricted Stock or any other amounts paid to the Non-Employee Director. I.17 "RULE 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provisions. I.18 "TERMINATION OF DIRECTORSHIP" shall mean that the Non-Employee Director is has ceased to be a director (whether as a non-employee director or an employee director) of the Company. 2- I.19 "TRANSFER" or "TRANSFERRED" shall mean anticipate, alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer. ARTICLE II ADMINISTRATION II.1 THE BOARD. The Plan shall be administered and interpreted by the Board. II.2 AWARDS OF RESTRICTED STOCK. The Board shall have full authority to interpret the Plan and to decide any questions and settle all controversies and disputes that may arise in connection with the Plan; to establish, amend and rescind rules for carrying out the Plan; to administer the Plan, subject to its provisions; to prescribe the form or forms of instruments evidencing awards of Restricted Stock and any other instruments required under the Plan and to change such forms from time to time; and to make all other determinations and to take all such steps in connection with the Plan and the awards of Restricted Stock as the Board, in its sole discretion, deems necessary or desirable, including the delegation of its administrative responsibilities. II.3 GUIDELINES. The Board may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect but only to the extent any such action would be permitted under the applicable provisions of Rule 16b-3. The Board may adopt special guidelines and provisions for persons who are residing in, or subject to, the taxes of, countries other than the United States to comply with applicable tax and securities laws. To the extent applicable, this Plan is intended to comply with the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith. II.4 DECISIONS FINAL. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company or the Board (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and Non-Employee Directors and their respective heirs, executors, administrators, successors and assigns. II.5 DESIGNATION OF CONSULTANTS/LIABILITY. (a) The Board may designate employees of the Company and professional advisors to assist the Board in the administration of the Plan and may grant authority to employees to execute agreements or other documents on behalf of the Board. (b) The Company or the Board may consult with and employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan (who may be, legal counsel, a consultant or agent of the Company) and may rely upon any opinion received from any such counsel or consultant and any computation received from any 3- such consultant or agent. Expenses incurred by the Board in the engagement of any such counsel, consultant or agent shall be paid by the Company. The Board, its members and any person designated pursuant to paragraph (a) above shall not be liable for any action or determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any award of Restricted Stock granted under it. To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company, and to the extent not covered by insurance, each officer and member or former member of the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out of such officer's, member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to awards of Restricted Stock granted to him or her under this Plan. ARTICLE III SHARE AND OTHER LIMITATIONS III.1 SHARES TO BE DELIVERED. Shares to be issued under the Plan shall be made available only from issued shares of Common Stock reacquired by the Company and held in treasury. The aggregate number of shares of Common Stock which may be issued under this Plan with respect to any award of Restricted Stock shall not exceed 100,000 shares (subject to any increase or decrease pursuant to Section 3.2). Notwithstanding the foregoing, if any shares of Restricted Stock awarded under this Plan to a Non-Employee Director are forfeited for any reason, the number of forfeited shares of Restricted Stock shall again be available for purposes of granting awards of Restricted Stock under the Plan. III.2 ADJUSTMENTS UPON CERTAIN EVENTS. (a) ADJUSTMENTS. The existence of the Plan and any award of Restricted Stock granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting Common Stock, the dissolution or liquidation of the Company, any sale or transfer of all or part of the assets or business of the Company, or any other corporate act or proceeding. 4- (b) CAPITAL STRUCTURE. In the event of (i) any such change in the capital structure or business of the Company by reason of any stock dividend or distribution, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, spin-off, split-up, combination or exchange of shares, distribution with respect to its outstanding Common Stock or capital stock other than Common Stock, sale or transfer of all or part of its assets or business, reclassification of its capital stock, or any similar change affecting the Company's capital structure or business and (ii) the Board determines an adjustment is appropriate under the Plan, then the aggregate number and kind of shares which thereafter may be issued under this Plan shall be appropriately adjusted consistent with such change in such manner as the Board may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Non-Employee Director under this Plan or as otherwise necessary to reflect the change, and any such adjustment determined by the Board shall be binding and conclusive on the Company and all Non-Employee Directors and their respective heirs, executors, administrators, successors and assigns. (c) FRACTIONAL SHARES. Fractional shares resulting from adjustment pursuant to Sections 3.2(a) or (b) shall be eliminated by rounding down for fractions less than one-half (1/2) and rounding up for fractions equal to or greater than one-half (1/2). No cash settlements shall be made with respect to fractional shares eliminated by rounding. ARTICLE IV ELIGIBILITY An award of Restricted Stock under this Plan may be automatically granted to Non-Employee Directors of the Company. ARTICLE V AWARDS OF RESTRICTED STOCK V.1 AWARDS OF RESTRICTED STOCK. (a) AMOUNT OF AWARDS. The Company shall pay fifty percent (50%) of a Non-Employee Director's Retainer Fees and fifty percent (50%) of a Non-Employee Director's Meeting Fees in the form of Restricted Stock. (b) DATE OF GRANT. Awards that are attributable to Retainer Fees shall be made as of the first Board meeting of the Company's fiscal year, which shall be treated as the date of grant for such award of Restricted Stock. Awards of Restricted Stock that are attributable to Meeting Fees shall be made as of the last day of the calendar quarter in which the Board meetings and/or committee meetings occur, which shall be treated as the dates of grant for such awards; provided, however, that in the event a Change in Control, awards of Restricted Stock which would otherwise be made on the last day of the calendar quarter in which the Change in Control occurs, shall be made as of the date of the Change in Control. Unless the Board decides to take specific action at grant with respect to an award of Restricted Stock (provided that it is consistent with the Plan's terms), any grant to a Non-Employee 5- Director of an award of Restricted Stock hereunder shall be automatic without further action by the Board or the stockholders of the Company. (c) DETERMINATION OF RESTRICTED STOCK AWARD. As of each date of grant, as determined in accordance with Section 5.1(b) above, each Non-Employee Director shall receive that number of shares of Restricted Stock determined by dividing (i) the amount of Retainer Fees or Meeting Fees that the Non-Employee Director will receive in Restricted Stock, by (ii) (a) with respect to Retainer Fees, the Fair Market Value of the Common Stock on the date of grant of the Restricted Stock and (b) with respect to Meeting Fees, the average Fair Market Value for the calendar quarter in which any such meeting occurs. Any fractional shares of Restricted Stock resulting from the division of (i) by (ii) shall be eliminated by rounding-down for fractions less than one-half (1/2) and rounding-up for fractions equal to or greater than one-half (1/2). No cash settlements shall be made with respect to fractional shares eliminated by rounding. (d) SPECIAL 1999 AWARDS. (i) As of the Effective Date, the Company shall pay, in the form of Restricted Stock, fifty percent (50%) of the Meeting Fees attributable to meetings held between September 17, 1999 and December 31, 1999. Awards that are granted pursuant to this Section 5.1(d) shall be determined by dividing (A) the amount of the Meeting Fees waived between September 17, 1999 and December 31, 1999 and (B) the average of the high and low sales prices of a share of Common Stock on December 22, 1999. Any fractional shares of Restricted Stock shall be eliminated by rounding-down for fractions less than one-half (1/2) and rounding-up for fractions equal to or greater than one-half (1/2). No cash settlements shall be made with respect to fractional shares eliminated by rounding. (ii) In addition, as of the Effective Date, the Company shall pay 2000 shares of Restricted Stock to each Non-Employee Director who served on the Company's "Special Committee" of the Board. V.2 AWARDS OF RESTRICTED STOCK AND CERTIFICATES. Restricted Stock granted under this Article V shall also be subject to the following conditions: (a) PURCHASE PRICE. The purchase price for shares of Restricted Stock shall be their par value or, to the extent permitted by applicable law, zero. (b) AGREEMENT. Awards of Restricted Stock shall be evidenced by an agreement entered into between the Company and the Non-Employee Director. In the event that the Non-Employee Director is required to pay the purchase price for Restricted Stock in accordance with Section 5.2(a), such agreement must be accepted within a period of sixty (60) days (or such shorter period as the Board may specify at grant) after the award date by executing a Restricted Stock award agreement and by paying the purchase price, if any. (c) VESTING. Except as otherwise provided in Article VII, shares of Restricted Stock granted to a Non-Employee Director shall vest on the earliest to occur: (i) the three (3) month anniversary of the date of grant of the award of Restricted Stock; (ii) a Non- 6- Employee Director's attainment of age seventy-two (72); (iii) a Non-Employee Director's Disability; or (iv) a Non-Employee Director's death. (d) LEGEND. Each Non-Employee Director receiving an award of Restricted Stock under this Article V shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Board elects to use another system, such as book entries by the transfer agent, as evidencing ownership of an award of Restricted Stock. Such certificate shall be registered in the name of such Non-Employee Director, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award of Restricted Stock, substantially in the following form: "The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Ogden Corporation (the "Company") Restricted Stock Plan for Non-Employee Directors and an Agreement entered into between the registered owner and the Company dated ___________. Copies of such Plan and Agreement are on file at the principal office of the Company." (e) CUSTODY. If stock certificates are issued in respect of shares of Restricted Stock, the Board may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Non-Employee Director shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such award of Restricted Stock. V.3 RESTRICTIONS AND CONDITIONS ON AWARDS OF RESTRICTED STOCK. The shares of Restricted Stock awarded pursuant to this Plan shall be subject to Article VI and the following restrictions and conditions: (a) RESTRICTION PERIOD; VESTING AND ACCELERATION OF VESTING. The Non-Employee Director shall not be permitted to Transfer shares of Restricted Stock awarded under this Plan during the period or periods set by the Board (the "Restriction Period") commencing on the date of such award of Restricted Stock, as set forth in the Restricted Stock award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of Restricted Stock. (b) RIGHTS AS STOCKHOLDER. Except as provided in this subsection (b) and subsection (a) above and as otherwise determined by the Board, the Non-Employee Director shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the vesting of shares of Restricted Stock, the right to tender such shares. The Board may, in its sole 7- discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period. (c) LAPSE OF RESTRICTIONS. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Non-Employee Director. All legends shall be removed from said certificates at the time of delivery to the Non-Employee Director, except as otherwise required by applicable law. V.4 TERMINATION OF DIRECTORSHIP FOR RESTRICTED STOCK. Unless otherwise determined by the Board at grant or thereafter, upon a Non-Employee Director's Termination of Directorship for any reason (other than death or Disability) during the relevant Restriction Period, all Restricted Stock subject to restriction shall be forfeited. Upon a Non-Employee Director's Termination of Directorship by the Company for Cause, all Restricted Stock subject to restriction shall be forfeited. ARTICLE VI NON-TRANSFERABILITY Shares of Restricted Stock may not be Transferred prior to the date on which such shares are issued, or, if later, the date on which the Restriction Period lapses. No award of Restricted Stock shall, except as otherwise specifically provided by law or herein, be Transferable in any manner prior to the date on which the applicable Restriction Period lapses, and any attempt to transfer any share prior to the date on which the applicable Restriction Period lapses shall be void, and no award of Restricted Stock shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such award, nor shall it be subject to attachment or legal process for or against such person. ARTICLE VII CHANGE IN CONTROL PROVISIONS VII.1 BENEFITS. Upon the occurrence of a Change in Control of the Company, the restrictions to which any shares of Restricted Stock granted to a Non-Employee Director prior to the Change in Control are subject shall lapse as if the applicable Restriction Period had ended upon such Change in Control. VII.2 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred upon: (a) the acquisition by any person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of twenty-five percent (25%) or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the 8- then outstanding voting securities of the Company entitled to vote generally in the election of directors, provided that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company (excluding any acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if following such reorganization, merger or consolidation the conditions described in clause (iii) of paragraph (c) below are met. (b) individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) the stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. Notwithstanding the provisions of Section 7.2(b), in the event that there is any change prior to May 11, 2000 of more than one-third of the individuals who, as of the Effective Date, constitute the Board, such change shall be deemed to be a "Change in Control." ARTICLE VIII TERMINATION OR AMENDMENT OF THE PLAN Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Non-Employee Director with 9- respect to an award of Restricted Stock granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Non-Employee Director. The Board may amend the terms of any award of Restricted Stock theretofore granted, prospectively or retroactively, but, subject to Article III above or as otherwise specifically provided herein, no such amendment or other action by the Board shall impair the rights of any holder without the holder's consent. ARTICLE IX UNFUNDED PLAN This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments as to which a Non-Employee Director has a fixed and vested interest but which are not yet made to a Non-Employee Director by the Company, nothing contained herein shall give any such Non-Employee Director any rights that are greater than those of a general creditor of the Company. ARTICLE X GENERAL PROVISIONS X.1 REPRESENTATION AND LEGEND. The Board may require each person receiving shares pursuant to an award of Restricted Stock under the Plan to represent to and agree with the Company in writing that the Non-Employee Director is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Board deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. X.2 OTHER PLANS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required and such arrangements may be either generally applicable or applicable only in specific cases. X.3 NO RIGHT TO EMPLOYMENT. Neither this Plan nor the grant of any award of Restricted Stock hereunder shall impose any obligation on the Company to retain any Non- 10- Employee Director as a director nor shall it impose on the part of any Non-Employee Director any obligation to remain as a director of the Company. X.4 WITHHOLDING OF TAXES. The Company shall have the right to deduct from any payment to be made to a Non-Employee Director, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Non-Employee Director of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock, or upon making an election under Code Section 83(b), a Non-Employee Director shall pay all required withholding to the Company. The Board may permit any such statutory withholding obligation with regard to any Non-Employee Director to be satisfied by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in case by the Non-Employee Director. X.5 LISTING AND OTHER CONDITIONS. (a) As long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issue of any shares of Common Stock pursuant to an award of Restricted Stock shall be conditioned upon such shares being listed on such exchange or system. The Company shall have no obligation to issue such shares unless and until such shares are so listed. (b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an award of Restricted Stock is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to shares of Common Stock or awards of Restricted Stock. (c) Upon termination of any period of suspension under this Section 10.5, any award of Restricted Stock affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension. X.6 GOVERNING LAW. This Plan shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). X.7 CONSTRUCTION. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. 11- X.8 OTHER BENEFITS. No award of Restricted Stock payment under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation. X.9 COSTS. The Company shall bear all expenses included in administering this Plan, including expenses of issuing Common Stock pursuant to any award of Restricted Stock hereunder. X.10 NO RIGHT TO SAME BENEFITS. The provisions of an award of Restricted Stock need not be the same with respect to each Non-Employee Director, and such awards of Restricted Stock to individual Non-Employee Directors need not be the same in subsequent years. X.11 SECTION 16(b) OF THE EXCHANGE ACT. All transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock, including, without limitation, the grant of Restricted Stock and any withholding of shares of Common Stock by the Company to satisfy required withholding are intended to comply with all exemptive conditions under Rule 16b-3. The Board may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder. X.12 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. X.13 HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. ARTICLE XI TERM OF PLAN No award of Restricted Stock shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date Plan, but awards of Restricted Stock granted prior to such tenth anniversary may extend beyond that date. 12- EXHIBIT 10.3(E)(ii) RESTRICTED STOCK AGREEMENT PURSUANT TO OGDEN CORPORATION RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS February __, 2000 Dear [Director]: I am pleased to advise you that you were automatically granted as of the _____ day of ________, 2000 (the "Grant Date")__________shares of the validly issued common stock of the Company, $.50 par value per share (the "Shares") subject and pursuant to the terms and conditions of the Ogden Corporation (the "Company") Restricted Stock Plan for Non-Employee Directors (the "Plan") and this letter. The purchase price for the Shares is zero. The Shares are subject to certain restrictions relating to the passage of time as a director. While such restrictions are in effect, the Shares subject to such restrictions are referred to herein as "Restricted Stock". 1. VESTING. The Restricted Stock will become vested and cease to be Restricted Stock (but will remain subject to paragraph 5 of this letter) on the three month anniversary of the Grant Date (the "Restriction Period"). Notwithstanding the foregoing, the Restricted Stock will become vested and cease to be Restricted Stock (but will remain subject to paragraph 5 of this letter) upon the earliest of the following to occur; (i) your attainment of age seventy-two (72); (ii) your Disability; (iii) your death; or (iv) the occurrence of a Change in Control. 2. FORFEITURE. If you incur a Termination of Directorship for any reason (other than your Disability or death) including, without limitation, retirement, resignation or failure to stand for reelection or for Cause during the relevent Restricted Period, you will forfeit to the Company, without compensation, any and all unvested Restricted Stock. 3. RIGHTS AS A HOLDER OF RESTRICTED STOCK. From and after the Grant Date, you will have the right to vote the Restricted Stock, to receive and retain all regular cash dividends payable to holders of Shares of record on and after the transfer of the Restricted Stock (although such dividends will be treated, to the extend required by applicable law, as taxable income for tax purposes), and to exercise all other rights, powers and privileges of a holder of Shares with respect to the Restricted Stock, with the exceptions that (i) you will not be entitled to delivery of the stock certificate or certificates representing the Restricted Stock until the Restriction Period has expired; (ii) the Company (or its designated agent) will retain custody of the stock certificate or certificates representing the Restricted Stock and any other property ("RS Property") issued in respect of the Restricted Stock (other than regular cash dividends which will be paid to you) during the Restriction Period; (iii) no RS Property will bear interest or be segregated in separate accounts during the Restriction Period; and (iv) you may not Transfer the Restricted Stock during the Restriction Period. 4. TAXES; SECTION 83(B) ELECTION. You acknowledge that it is your sole responsibility to pay any taxes arising in connection with the Restricted Stock and that it is your sole responsibility, and not the Company's, to file timely and properly any election under Section 83(b) of the Internal Revenue Code and any corresponding provisions of state tax laws, if you wish to utilize such election. 5. SECURITIES REPRESENTATIONS. The Shares are being issued to you in reliance upon the following express representations and warranties: (i) you have been advised that you are an "affiliate" within the meaning of Rule 144 under the Securities Act of 1933 (the "Act") and in this connection the Company is relying in part your representations set forth in this section; (ii) since you are an affiliate within the meaning of Rule 144 of the Act, the Shares must be held and sold only pursuant to any available exemption from any applicable resale restrictions or until the Company files a registration statement (or a "re-offer prospectus") with regard to such Shares and the Company is under no obligation to register the Shares (or to file a "re-offer prospectus"); and (iii) since you are an affiliate within the meaning of Rule 144 of the Act, you understand that the exemption from registration under Rule 144 will not be available unless (x) a public trading market then exists for the Shares of the Company; (y) adequate information concerning the Company is then available to the public; and (z) other terms and conditions of Rule 144 or any exemption therefrom are complied with and that any sale of the Shares may be made only in limited amounts in accordance with such terms and conditions. 6. ATTORNEY-IN-FACT STATUS. The Company, its successors and assigns, is hereby appointed your attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this letter and taking any action and executing any instruments which such attorney-in-fact may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Upon the Board of Director's request, you will deliver to the Company a duly signed stock power, endorsed in blank, relating to the Restricted Stock. 7. PLAN PROVISIONS CONTROL. This letter and the grant hereunder are subject to all the restrictions, terms and provisions of the Plan which are incorporated herein by reference. In the event of an inconsistency between any provisions of the Plan and this letter, unless otherwise indicated, the terms of the Plan will control. The capitalized terms in this letter that are not otherwise defined have the same meaning as set forth in Article I of the Plan. * * * A copy of the Plan is attached to this letter. Please sign a copy of this letter acknowledging and accepting the terms and conditions of the grant and return it to___________at Ogden Corporation, Two Pennsylvania Plaza, New York, New York______________ within 60 days after the day and year first above written. If you have any questions in connection with the grant, feel free to call ________________ at ______________. Very truly yours, George L. Farr Accepted: ___________________ ________________ Name Date EX-10.3(M) 5 EXHIBIT 10.3(M) EXHIBIT 10.3(m) --------------- OGDEN CORPORATION EXECUTIVE PERFORMANCE INCENTIVE PLAN 1. PURPOSE The purpose of this Plan is to attract, retain and motivate key employees by providing cash performance awards to designated key employees of the Company, its Parent and its Subsidiaries. This Plan is effective for the fiscal year of the Company commencing on January 1, 2000 and for fiscal years thereafter, subject to approval by the stockholders of the Company in accordance with the laws of the State of Delaware. 2. DEFINITIONS Unless the context otherwise requires, the words which follow shall have the following meaning: (a) "Award" - shall mean the total annual Performance Award as determined under the Plan. (b) "Board" - shall mean the Board of Directors of the Company. (c) "Change in Control of the Company" - shall have the meaning set forth in Exhibit A hereto. (d) "Code" - shall mean the Internal Revenue Code of 1986, as amended and any successor thereto. (e) "Code Section 162(m)" - shall mean the exception for performance-based compensation under Section 162(m) of the Code or any successor section and the Treasury regulations promulgated thereunder. (f) "Company" - shall mean Ogden Corporation and any successor by merger, consolidation or otherwise. (g) "Committee" - shall mean the Compensation Committee of the Board or such other Committee of the Board that is appointed by the Board all of whose members shall satisfy the requirements to be "outside directors," as defined under Code Section 162(m). (h) "Individual Target Award" - shall mean the targeted performance award for a Plan Year specified by the Committee as provided in Section 5 hereof. (i) "Parent" - shall mean, other than the Company, (i) any corporation in an unbroken chain of corporations ending with the Company which owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain or (ii) any corporation or trade or business (including, without limitation, a partnership or limited liability company) which controls fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest) of the Company. (j) "Participant" - shall mean an employee of the Company, the Parent or a Subsidiary selected, in accordance with Section 4 hereof, to be eligible to receive an Award in accordance with this Plan. (k) "Performance Award" - shall mean the amount paid or payable under Section 6 hereof. (l) "Plan" - shall mean this Ogden Corporation Executive Performance Incentive Plan. (m) "Plan Year" - shall mean the fiscal year of the Company, or, if applicable and determined by the Committee, in its sole discretion, the fiscal year of the applicable Subsidiary. (n) "Subsidiary" - shall mean, other than the Company, (i) any corporation in an unbroken chain of corporations beginning with the Company which owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; (ii) any corporation or trade or business (including, without limitation, a partnership or limited liability company) which is controlled fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Subsidiaries; or (iii) any other entity in which the Company or any of its Subsidiaries has a material equity interest and which is designated as a "Subsidiary" by resolution of the Committee. 3. ADMINISTRATION AND INTERPRETATION OF THE PLAN The Plan shall be administered by the Committee. The Committee shall have the exclusive authority and responsibility to: (i) interpret the Plan; (ii) approve the designation of eligible Participants; (iii) set the performance criteria for Awards within the Plan guidelines; (iv) certify attainment of performance goals and other material terms; (v) reduce Awards as provided herein; (vi) authorize the payment of all benefits and expenses of the Plan as they become payable under the Plan; (vii) adopt, amend and rescind rules and regulations relating to the Plan; and (viii) make all other determinations and take all other actions necessary or desirable for the Plan's administration including, without limitation, correcting any defect, supplying any omission or reconciling any inconsistency in this Plan in the manner and to the extent it shall deem necessary to carry this Plan into effect, but only to the extent any such action would be permitted under Code Section 162(m). Decisions of the Committee shall be made by a majority of its members. All decisions of the Committee on any question concerning the selection of Participants and the interpretation and administration of the Plan shall be final, conclusive and binding upon all parties. The Committee may rely on information, and consider recommenda tions, provided by the Board or the executive officers of the Company. The Plan is intended to comply with Code Section 162(m), and all provisions contained herein shall be limited, construed and interpreted in a manner to so comply. 4. ELIGIBILITY AND PARTICIPATION (a) For each Plan Year, the Committee shall select the employees of the Company, its Parent and Subsidiaries who are to participate in the Plan from among the executive key employees of the Company, its Parent and Subsidiaries. (b) No person shall be entitled to any Award under this Plan for any Plan Year unless he or she is so designated as a Participant for that Plan Year. The Committee may add to or delete individuals from the list of designated Participants at any time and from time to time, in its sole discretion, subject to any limitations required to comply with Code Section 162(m). 5. INDIVIDUAL TARGET AWARD For each Participant for each Plan Year, the Committee may specify a targeted performance award. The Individual Target Award may be expressed, at the Committee's discretion, as a fixed dollar amount, a percentage of base pay or total pay (excluding payments made under this Plan), or an amount determined pursuant to an objective formula or standard. Establishment of an Individual Target Award for an employee for a Plan Year shall not imply or require that the same level Individual Target Award (if any such award is established by the Committee for the relevant employee) be set for any subsequent Plan Year. At the time the Performance Goals are established (as provided in subsection 6.2 below), the Committee shall prescribe a formula to determine the percentages (which may be greater than one-hundred percent (100%)) of the Individual Target Award which may be payable based upon the degree of attainment of the Performance Goals during the Plan Year. Notwithstanding anything else herein, the Committee may, in its sole discretion, elect to pay a Participant an amount that is less than the Participant's Individual Target Award (or attained percentage thereof) regardless of the degree of attainment of the Performance Goals; provided that no such discretion to reduce an Award earned based on achievement of the applicable Performance Goals shall be permitted for the Plan Year in which a Change in Control of the Company occurs, or during such Plan Year with regard to the prior Plan Year if the Awards for the prior Plan Year have not been made by the time of the Change in Control of the Company, with regard to individuals who were Participants at the time of the Change in Control of the Company. 6. PERFORMANCE AWARD PROGRAM 6.1 Performance Awards. Subject to Section 7 herein, each Participant is eligible to receive up to the achieved percentage of their Individual Target Award for such Plan Year (or, subject to the last sentence of Section 5, such lesser amount as determined by the Committee in its sole discretion) based upon the attainment of the objective Performance Goals established pursuant to subsection 6.2 and the formula established pursuant to Section 5. Except as specifically provided in Section 7, no Performance Award shall be made to a Participant for a Plan Year unless the minimum Performance Goals for such Plan Year are attained. 6.2 Objective Performance Goals, Formulae or Standards (the "Performance Goals"). The Committee shall establish the objective performance goals, formulae or standards and the Individual Target Award (if any) applicable to each Participant or class of Participants for a Plan Year in writing prior to the beginning of such Plan Year or at such later date as permitted under Code Section 162(m) and while the outcome of the Performance Goals are substantially uncertain. Such Performance Goals may incorporate, if and only to the extent permitted under Code Section 162(m), provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. To the extent any such provision would create impermissible discretion under Code Section 162(m) or otherwise violate Code Section 162(m), such provision shall be of no force or effect. These Performance Goals shall be based on one or more of the following criteria with regard to the Company (or a subsidiary, division, or other operational unit of the Company): (i) the attainment of certain target levels of, or a specified percentage increase in, profits, market share, revenues, income before income taxes and extraordinary items, net income, earnings before income tax, earnings before interest, taxes, depreciation and amortization or a combination of any or all of the foregoing; (ii) the attainment of certain target levels of (including, without limitation, a break-even), or a percentage increase in, after-tax or pre-tax profits including, without limitation, that are attributable to continuing and/or other operations; (iii) the attainment of certain target levels of, or a specified increase in, operational cash flow or cash generation targets; (iv) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, all or a portion of, the Company's bank debt or other long-term or short- term public or private debt or other similar financial obligations of the Company, which may be calculated net of such cash balances and/or other offsets and adjustments as may be established by the Committee; (v) the attainment of a specified percentage increase in earnings per share or earnings per share from continuing operations; (vi) the attainment of certain target levels of, or a specified increase in return on capital employed or return on invested capital; (vii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax return on stockholders' equity or profitability targets as measured by return ratio and shareholder return; (viii) the attainment of certain target levels of, or a specified increase in, economic value added targets based on a cash flow return on investment formula; (ix) the attainment of certain target levels in the fair market value of the shares of the Company's common stock; and (x) the growth in the value of an investment in the Company's common stock assuming the reinvestment of dividends. For purposes of item (i) above, "extraordinary items" shall mean all items of gain, loss or expense for the Plan Year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction (including, without limitation, a disposition or acquisition) or related to a change in accounting principle, all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board. In addition, such Performance Goals may be based upon the attainment of specified levels of Company (or subsidiary, division or other operational unit of the Company) performance under one or more of the measures described above relative to the performance of other corporations. To the extent permitted under Code Section 162(m), but only to the extent permitted under Code Section 162(m) (including, without limitation, compliance with any requirements for stockholder approval), the Committee may: (i) designate additional business criteria on which the Performance Goals may be based or (ii) adjust, modify or amend the aforementioned business criteria. 6.3 Maximum Nondiscretionary Award. The maximum Performance Award, including any interest thereon due to deferral (as provided under Section 6.4 hereof), payable to a Participant for any Plan Year is $4,000,000. 6.4 Payment Date; Committee Certification. The Performance Awards will be paid as soon as administratively feasible after the Plan Year in which they are earned, but not before the Committee certifies in writing that the Performance Goals specified (except to the extent permitted under Code Section 162(m) and provided in Section 7 with regard to death, disability or Change in Control of the Company or certain other termination situations) pursuant to subsection 6.2 were, in fact, satisfied, except as may otherwise be agreed by a Participant and the Company in a written agreement executed prior to the beginning of the Plan Year to which the Performance Award relates in accordance with any deferred compensation program in effect applicable to such Participant. Performance Awards hereunder shall be payable in cash or, in the sole discretion of the Committee, in restricted stock pursuant to the Ogden Corporation 1999 Stock Incentive Plan, amended and restated as of January 1, 2000. The Committee shall use its best efforts to make a determination with regard to satisfaction of the Performance Goals within two and one-half (2 1/2) months after the end of each Plan Year. Any Performance Award deferred by a Participant shall increase or decrease (between the date on which the Performance Award is credited to any deferred compensation program applicable to such Participant and the payment date) based on an earnings factor elected by the Participant from such options offered by the Committee and set forth in writing prior to such deferral which shall be based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable at the end of the deferral period shall be based on the actual rate of return of a specific investment. The Participant shall have no right to receive payment of any deferred amount until he or she has a right to receive such amount under the terms of the applicable deferred compensation program. 7. EMPLOYMENT AT YEAR END GENERALLY REQUIRED FOR AWARD No Award shall be made to any Participant who is not an active employee of the Company, its Parent or one of its Subsidiaries or affiliates at the end of the Plan Year; provided, however, that the Committee, in its sole and absolute discretion, may make Awards to Participants for a Plan Year in circumstances that the Committee deems appropriate including, but not limited to, a Participant's death, disability, retirement or other termination of employment during such Plan Year and the Committee shall be required to make at least a pro-rata Award through the date of a Change in Control of the Company to each Participant who is a Participant at the time of such Change in Control of the Company. All such Awards shall be based on achievement of the Performance Goals for the Plan Year, except that, to the extent permitted under Code Section 162(m), in the case of death, disability or Change in Control of the Company during the Plan Year (or such other termination situations as permitted under Code Section 162(m)) an amount equal to or less than the Individual Target Awards may be made by the Committee either during or after the Plan Year without regard to actual achievement of the Performance Goals. Furthermore, upon a Change in Control of the Company the Committee may, in its sole discretion but only to the extent permitted under Code Section 162(m), make an award (payable immediately) equal to a pro-rata portion (through the date of the Change in Control of the Company) of the Individual Target Award payable upon achieving, but not surpassing, the Performance Goals for the relevant Plan Year. Any such immediate pro-rata payment shall reduce any other Award made for such Plan Year under this Plan by the amount of the pro-rata payment. 8. NON-ASSIGNABILITY No Award under this Plan nor any right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, garnishment, execution or levy of any kind or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber and to the extent permitted by applicable law, charge, garnish, execute upon or levy upon the same shall be void and shall not be recognized or given effect by the Company. 9. NO RIGHT TO EMPLOYMENT Nothing in the Plan or in any notice of award pursuant to the Plan shall confer upon any person the right to continue in the employment of the Company, its Parent, or one of its Subsidiaries or affiliates nor affect the right of the Company, its Parent or any of its Subsidiaries or affiliates to terminate the employment of any Participant. 10. AMENDMENT OR TERMINATION The Board (or a duly authorized committee thereof) may, in its sole and absolute discretion, amend, suspend or terminate the Plan or to adopt a new plan in place of this Plan at any time; provided, that no such amendment shall, without the prior approval of the stockholders of the Company in accordance with the laws of the State of Delaware to the extent required under Code Section 162(m): (i) materially alter the Performance Goals as set forth in subsection 6.2; (ii) increase the maximum amount set forth in subsection 6.3; (iii) change the class of eligible employees set forth in Section 4(a); or (iv) implement any change to a provision of the Plan requiring stockholder approval in order for the Plan to continue to comply with the requirements of Code Section 162(m). Furthermore, no amendment, suspension or termination shall, without the consent of the Participant, alter or impair a Participant's right to receive payment of an Award for a Plan Year otherwise payable hereunder. 11. SEVERABILITY In the event that any one or more of the provisions contained in the Plan shall, for any reason, be held to be invalid, illegal or unenforceable, in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of the Plan and the Plan shall be construed as if such invalid, illegal or unenforceable provisions had never been contained therein. 12. WITHHOLDING The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to the Plan. 13. GOVERNING LAW This Plan and any amendments thereto shall be construed, administered, and governed in all respects in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable principles of conflict of laws). EXHIBIT A A "Change in Control of the Company" shall be deemed to have occurred upon: (a) the acquisition by any person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of twenty-five percent (25%) or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, provided that the following acquisitions shall not constitute a Change in Control of the Company: (i) any acquisition directly from the Company (excluding any acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if following such reorganization, merger or consolidation the conditions described in clause (iii) of paragraph (c) below are met. (b) individuals who, as of the effective date of the Plan, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the effective date of the Plan, whose election, or nomination for election by the Company stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) the stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. EX-10.4(G) 6 EXHIBIT 10.4(G) EXHIBIT 10.4(g) --------------- EMPLOYMENT AGREEMENT OGDEN ENERGY GROUP, INC. (the "Company") and BRUCE W. STONE ("Executive") agree to enter into this EMPLOYMENT AGREEMENT dated as of April 1, 1999, as follows: 1. EMPLOYMENT. The Executive is currently employed pursuant to an employment agreement dated June 1, 1990 which the Company and Executive hereby terminate and enter into this new agreement on such terms and as set forth herein. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement. 2. EMPLOYMENT TERM. The period of Executive's employment under this Agreement shall be for a period of three years commencing as of April 1, 1999 (the "Effective Date") and continuing until April 1, 2004 and until terminated in accordance with Section 5 below (the "Employment Term"). 3. DUTIES AND RESPONSIBILITIES. (a) The Company will employ Executive as its Executive Vice President and Managing Director. In such capacity, Executive shall perform the customary duties and have the customary responsibilities of such position and such other duties as may be assigned to Executive from time to time by the Company or by the Company's Board of Directors (the "Board"). (b) Executive agrees to faithfully serve the Company, devote his full working time, attention and energies to the business of the Company its subsidiaries and affiliated entities, and perform the duties under this Agreement to the best of his abilities. Executive may perform services without direct compensation therefor in connection with the management of personal investments, or in connection with charitable or civic organizations. The Executive shall be excused from rendering his service during reasonable vacation periods and during other reasonable temporary absences as may be authorized by the Board. (c) Executive agrees (i) to comply with all applicable laws, rules and regulations, and all requirements of all applicable regulatory, self-regulatory, and administrative bodies; (ii) to comply with the Company's Policy of Business Conduct; and (iii) not to engage in any other business or employment without the written consent of the Company except as otherwise specifically provided herein. 4. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $291,059 per year or such higher rate as may be determined from time to time by the Board ("Base Salary"). Such Base Salary shall be paid in accordance with the Company's standard payroll practice for senior executives. (b) ANNUAL INCENTIVE BONUS. During the Employment Term, the Executive will be eligible for an annual incentive bonus in such amount as may be determined by the Board. (c) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by Executive in the performance of the duties under this Agreement in accordance with the Company's customary practices applicable to senior executives, PROVIDED that such expenses are incurred and accounted for in accordance with the Company's policy. (d) OTHER BENEFIT PLANS, FRINGE BENEFITS AND VACATIONS. Executive shall be eligible to participate in or receive benefits under any pension plan, profit sharing plan, 401(k) plan, non-qualified deferred compensation plan, medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, incentive compensation plans, vacations, or any other fringe benefit plan, generally made available by the Company to senior executives. Except as otherwise provided in this Agreement, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to, or shall be deemed to, affect adversely any of Executive's rights as a participant under any such plans. Nothing herein shall prevent the Board from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. TERMINATION OF EMPLOYMENT. Executive's employment under this Agreement may be terminated under the following circumstances: (a) DEATH. Executive's employment shall terminate upon Executive's death. (b) TOTAL DISABILITY. The Company may terminate Executive's employment upon his becoming "Totally Disabled". For purposes of this Agreement, Executive shall be "Totally Disabled" if he is physically or mentally incapacitated so as to render him incapable of performing his usual and customary duties under this Agreement. Executive's receipt of disability benefits under the Company's long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement. (c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate Executive's employment for "Cause". Such termination shall be effective as of the date specified in the written Notice of Termination provided to Executive. Termination of employment by the Company for Cause shall be deemed to have occurred only if such termination directly results from: (A) an act or acts of dishonesty on Executive's part constituting a felony; (B) Executive's willful and continued failure to devote the time, attention, and effort necessary to substantially perform his duties as an executive officer of the Company in a manner consistent with Executive's past performance (other than any such failure resulting from Executive's incapacity due to physical or mental illness or total disability), after a demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially 2 performed his duties and Executive is given a reasonable time after such demand substantially to perform his duties; (C) gross misconduct or gross negligence in connection with the business of the Company or an affiliate which has a material adverse effect on the Company and its subsidiaries, taken as a whole; or (D) a material breach of any of the covenants set forth in Section 7 hereof. (d) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment under this Agreement without Cause thirty (30) days after providing Notice of Termination to Executive. (e) TERMINATION BY EXECUTIVE. Executive may terminate his employment under this Agreement at any time after providing Notice of Termination to the Company. Such Notice shall state whether the Executive's termination is for "Good Reason". Termination of employment by Executive for Good Reason shall be deemed to have occurred, if Executive provides the Notice of Termination within 60 days after the occurrence of any of the following: (i) A change in Executive's responsibilities, status, title, or position, which, in Executive's reasonable judgment, represents a diminution of Executive's responsibilities, status, title, or position, or any removal of Executive from, or any failure to re-elect Executive to, any of such titles, offices, or positions, PROVIDED that this clause shall not apply if Executive's -------- employment is terminated as a result of: (A) Executive's death, (B) Executive's Total Disability in accordance with Section 5(b), (C) Cause in accordance with Section 5(c), or (D) Executive's voluntary termination in accordance with this Section 5(e) other than for Good Reason. (ii) A reduction by the Company in Executive's Base Salary. (iii) The failure by the Company to pay any material amount of current compensation owing to Executive, or any material amount of compensation deferred under any plan, agreement or arrangement of or with the Company owing to Executive, within 20 days after the Executive makes written demand for such amount. (iv) The failure by the Company to obtain an assumption (in form and substance reasonably satisfactory to the Executive, except in the case of a merger or consolidation which does not constitute a Change in Control for which no separate assumption is necessary) of the obligations of the Company under this Agreement by any successor to the Company. (v) Any "Change in Control" of the Company as defined in Appendix A to this Agreement. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company or by Executive (other than by reason of Executive's death) shall be communicated by written Notice of Termination to the other party in accordance with Section 15 below. For purposes of this Agreement, a "Notice of Termination" shall mean a notice in writing which shall indicate the specific termination provision in this Agreement relied upon to terminate Executive's employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. 3 (g) TERMINATION DATE. Termination Date means (i) if Executive's employment is terminated because of his death, the date of death, or (ii) if employment is terminated for any other reason, the date specified in the Notice of Termination. 6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT. (a) TERMINATION BY REASON OF DEATH. In the event that Executive's employment is terminated by reason of Executive's death, the Company shall pay the following amounts to Executive's beneficiary or estate: (i) EARNED BUT UNPAID COMPENSATION. Any accrued but unpaid Base Salary for services rendered to the date of death, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to the date of death. (ii) LUMP SUM PAYMENT. An amount equal to the Base Salary (at the rate in effect as of the date of Executive's death) which would have been payable to Executive if Executive had continued in employment until the last day of the month in which Executive's death occurs. Such amount shall be paid in a single lump sum cash payment within 30 days after Executive's death. (iii) OTHER BENEFITS. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof as determined and paid in accordance with the terms of such plans, policies and arrangements. (b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that Executive's employment is terminated by reason of Executive's Total Disability prior to the last day of the Employment Term as determined in accordance with Section 5(b), the Company shall pay the following amounts to Executive: (i) EARNED BUT UNPAID COMPENSATION. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the Termination Date. (ii) CONTINUATION OF BASE SALARY. An amount equal to (A) the Base Salary (at the rate in effect as of the date of Executive's Total Disability) which would have been payable to Executive if Executive had continued in active employment until the end of the 12-month period following Executive's Termination Date, or such longer period as may be determined by the Board, (B) reduced by amount of disability insurance benefits payable to Executive during such period under any employer-paid disability insurance plan. Payment shall be made at the same time and in the same manner as such compensation would have been paid if Executive had remained in active employment until the end of such period. (iii) OTHER BENEFITS. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. 4 (c) TERMINATION FOR CAUSE OR TERMINATION BY EXECUTIVE FOR OTHER THAN GOOD REASON. In the event that Executive's employment is terminated by the Company for Cause pursuant to Section 5(c), or by Executive pursuant to Section 5(e) for other than Good Reason, the Company shall pay the following amounts to Executive: (i) EARNED BUT UNPAID COMPENSATION. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) OTHER BENEFITS. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive shall be entitled to the benefits described in this Section 6(d) in the event that Executive's employment is terminated (i) by the Company pursuant to Section 5(d) for reasons other than death, Total Disability, or Cause, or (ii) by Executive for Good Reason pursuant to Section 5(e). (i) EARNED BUT UNPAID COMPENSATION. The Company shall pay Executive any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) LUMP SUM PAYMENT. The Company shall pay Executive an amount equal to the product of five times the sum of (A) and (B) below: (A) Executive's annualized Base Salary at the highest annual rate in effect at any time prior to the Termination Date; and (B) the highest amount of annual bonus payable to Executive at any time prior to the Executive's Termination Date. This amount will be paid to Executive in a single lump sum within 30 business days after the Termination Date. (iii) OTHER BENEFITS. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (iv) NO MITIGATION REQUIRED. Executive shall not be required to mitigate the amount of any compensation provided for under this Section 6(d) by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Employee as the result of 5 employment with another employer after the Termination Date or by any other compensation. (v) NON-COMPETITION COVENANT DOES NOT APPLY. The restrictive covenant prohibiting competitive activity set forth in Section 7(b) below shall not be applicable to Executive and shall be null and void. (e) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement, under the terms of any incentive compensation, employee benefit, or fringe benefit plan, applicable to Executive at the time of Executive's termination or resignation of employment, Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation. 7. RESTRICTIVE COVENANTS. (a) PROTECTED INFORMATION. Executive recognizes and acknowledges that he will have access to various confidential or proprietary information concerning the Company and entities affiliated with the Company of a special and unique value which may include, without limitation, (i) books and records relating to operations, finance, accounting, sales, personnel and management, (ii) policies and matters relating particularly to operations such as customer service requirements, costs of providing service and equipment, operating costs and pricing matters, and (iii) various trade or business secrets, including business opportunities, marketing or business diversification plans, business development and bidding techniques, methods and processes, financial data and the like (collectively, the "Protected Information"). Executive therefore covenants and agrees that he will not at any time, either while employed by the Company or afterwards, knowingly make any independent use of, or knowingly disclose to any other person or organization (except as authorized by the Company) any of the Protected Information. (b) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during his period of employment with the Company, and for a period of two (2) years after the date of termination of his employment by reason of (i) termination by the Company for Cause in accordance with Section 5(c) above, or (ii) termination by the Executive in accordance with Section 5(e) above for other than Good Reason, he will not, directly or indirectly, engage in, assist, or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever, in any person, firm, or business entity which is engaged in the same business as that conducted and principally carried on by the Company on the date of Termination and continued thereafter, without the Company's specific written consent to do so. (c) RETURN OF DOCUMENTS AND OTHER MATERIALS. Executive shall promptly deliver to the Company, upon termination of his employment, or at any other time as the Company may so request, all customer lists, leads and refunds, data processing programs and documentation, employee information, memoranda, notes, records, reports, tapes, manuals, drawings, blueprints, programs, and any other documents and other materials (and all copies thereof) relating to the Company's business or that of its customers, and all property associated therewith, which Executive may then possess or have under his control. 6 8. ENFORCEMENT OF COVENANTS. (a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the covenants set forth in Section 7 hereof will cause irreparable damage to the Company with respect to which the Company's remedy at law for damages will be inadequate. Therefore, in the event of breach or anticipatory breach of the covenants set forth in this section by Executive, Executive and the Company agree that the Company shall be entitled to the following particular forms of relief, in addition to remedies otherwise available to it at law or equity, injunctions, both preliminary and permanent, enjoining or retraining such breach or anticipatory breach and Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction. (b) SEPARABILITY OF COVENANTS. The covenants contained in Section 7 hereof constitute a series of separate covenants, one for each applicable State in the United States and the District of Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall hold that any of the covenants set forth in Section 7 exceed the time, geographic, or occupational limitations permitted by applicable laws, Executive and the Company agree that such provisions shall and are hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Executive and the Company further agree that the covenants in Section 7 shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Executive against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants of Section 7. 9. CERTAIN PROPRIETARY RIGHTS. Executive agrees to and hereby does assign to the Company all his right, title and interest in and to all inventions, whether or not patentable, which are made or conceived solely or jointly by him: (a) at any time during the term of his employment by the Company in an executive, managerial, or planning capacity (including development and sales); or (b) during the course of or in connection with his duties during the Employment Term; or (c) with the use of time or materials of the Company. Executive agrees to communicate to the Company or its representatives all facts known to him concerning such inventions, to sign all rightful papers, make all rightful oaths and generally to do everything possible to aid the Company in obtaining and enforcing proper patent protection for all such inventions in all countries and in vesting title to such inventions in all countries and in vesting title to such inventions and patents in the Company. For the purpose of this Agreement, the subject matter of any application for patent naming Employee as a sole or joint inventor filed during the course of employment or within one year subsequent to the termination thereof shall be deemed to be an invention made or conceived by him during the course of his employment by the Company and 7 assignable to the Company hereunder, unless Executive establishes by a preponderance of the evidence that such invention was made or conceived by him subsequent to termination of his employment hereunder. At the Company's request (during or after the term of this Agreement) and expense, Executive will promptly execute a specific assignment of title to the Company, and perform any other acts reasonably necessary to implement the foregoing assignment. 10. WITHHOLDING OF TAXES. The Company shall withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local, or other taxes. 11. SOURCE OF PAYMENTS. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment. Executive shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations under this Agreement. To the extent that any person acquires a right to receive payments from the Company under this Agreement, such right shall be no greater than the right of an unsecured creditor of the Company and its affiliates. 12. SUCCESSOR AND BINDING AGREEMENT. (a) COMPANY SUCCESSOR. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled to under this Agreement if Executive had given Notice of Termination for Good Reason as of the day immediately before such succession became effective and had specified that day in the notice of termination. As used in this Agreement, "Company" shall mean the Company as defined in the first sentence of this Agreement and any successor to all or substantially all its business or assets or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise. (b) EXECUTIVE'S SUCCESSOR. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives and successors in interest under this Agreement. (c) FACILITY OF PAYMENT. In the event of Executive's legal incapacity, the Company may make any payments due under this Agreement to his legal representative. In the event of Executive's death, the Company may make any payment due under this Agreement to his surviving spouse or, if none, to Executive's estate. Any payment made in accordance with this provision fully discharges the obligation of the Company therefor. 8 13. ASSIGNMENT BY EXECUTIVE. The rights and benefits of Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; PROVIDED, however, that nothing in this Section 13 shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefit payable on his death. In the event of a dispute arising under this Agreement, the Company agrees to pay any and all reasonable legal fees incurred by Executive in connection therewith. 14. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State, without regard to its conflict of laws provisions. 15. NOTICES. Any notice, consent, request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice to the others: To the Company: Ogden Energy Group, Inc. 40 Lane Road P.O. Box 2615 Fairfield, New Jersey 07007-2615 Attention: President To Executive: Bruce W. Stone 53 Northway Bronxville, NY 10708 16. MISCELLANEOUS. (a) WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (b) SEPARABILITY. If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. 9 (c) HEADINGS. Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement. (d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year set forth below. OGDEN CORPORATION EXECUTIVE By By ----------------------------- -------------------------------- Scott G. Mackin, Bruce W. Stone President and Chief Operating Officer Date: ,1999 Date: ,1999 ----------------------------- -------------------------------- 10 APPENDIX A DEFINITION OF CHANGE IN CONTROL The following definition of "Change in Control" shall apply for purposes of Paragraph 5(e)(v) of the Employment Agreement between Ogden Energy Group, Inc. and Bruce W. Stone. CHANGE IN CONTROL. A "Change in Control" of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the beneficial owner, directly or indirectly, of securities of the Company, representing more than twenty-five percent (25%) of the combined voting power of the Company's then outstanding securities; (b) Individuals who, as of May 20, 1998, constitute the Board of Directors of the Company (the " Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 20, 1998, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. 11 EX-21 7 EXHIBIT 21 EXHIBIT 21 OGDEN CORPORATION - U S SUBSIDIARIES LIST (See Attachment A for foreign subsidiaries list)
Company % Domestic Co. Code/ - ------- Ownership State E.I.N. --------- ----- ------ Ogden Corporation ............................................................................ DE ....... 13-5549268 Ogden Energy Group, Inc. (f/k/a Ogden Projects, Inc.) .................... 100 ............ DE ........ 13-3213657 (SEE ATACHMENT B FOR OGDEN ENERGY GROUP, INC - U.S. AND FOREIGN SUBSIDIARIES LIST) Garden Merger Corp. ........................................................ 100 ............ NY ....... 13-4065414 Ogden Financial Services, Inc. ............................................. 100 ............ DE ....... 13-3057250 B D C Liquidating Corp. ............................................. 100 ............ DE ....... 13-2757633 Bouldin Development Corp. .................................... 100 ............ CA ....... 94-1695641 Greenway Insurance Company of Vermont ............................... 100 ............ VT ....... 13-3167991 OFS Equity of Delaware, Inc. ........................................ 100 ............ DE ....... 13-3495890 Denver Fuel Facilities Corporation ........................... 100 ............ CO ....... 105*/13-2694896 OFS Equity of Alexandria/Arlington, Inc. ..................... 100 ............ VA ....... 13-3495889 OFS Equity of Indianapolis, Inc. ............................. 100 ............ IN ....... 13-3495887 OFS Equity of Stanislaus, Inc. ............................... 100 ............ CA ....... 13-3495880 Ogden Management Services, Inc. ..................................... 100 ............ DE ....... 13-2918484 OFS Equity of Babylon, Inc. ......................................... 100 ............ NY ........ 13-3543094 OFS Equity of Huntington, Inc. ...................................... 100 ............ NY ........ 13-3543092 Astoria Studios, LP ........................................................ 3.80769 ...... NY ........ Ogden Services Corporation ................................................. 100 ............ DE ........ 141*/13-3058273 Doggie Diner, Inc. .................................................. 100 ............ DE ........ 003/92-1228666 Offshore Food Service, Inc. ......................................... 100 ............ LA ........ 027/72-0535141 Gulf Coast Catering Company, Inc. ............................ 100 ............ LA ........ 028/13-3537164 Ogden Attractions, Inc. ............................................. 100 ............ DE ........ /13-3934857 Ogden-Burtco Services, Inc. ......................................... 100 ............ WA ........ 042/92-0022939 Alpine Food Products, Inc. ................................... 100 ............ WA ........ 041/91-0760148 Ogden HCI Services ........................................... 60 ............ Ogden Facility Management Corporation of West Virginia .................... 100 ............ WV ........ 55-0459949 Ogden Film and Theater, Inc. .............................................. 100 ............ DE ........ /13-3934858 Ogden Food Service Corporation of Milwaukee ............................... 100 ............ WI ........ 063/13-2783130 Ogden Leisure, Inc. ....................................................... 100 ............ DE ........ 54-0848368 Ogden Allied Abatement & Decontamination Service, Inc. .................... 100 ............ NY ........ 144*/13-3429112 Ogden Allied Maintenance Corporation ...................................... 100 ............ NY ........ 010*/13-65939 *ARA Sunset Airport Systems, Inc. ................................... 100 ............ CA ........ 152*/95-2959114 Datacom Custom Manufacturing, Inc. ................................. 100 ............ NY ........ 086*/13-2629642 (F/K/A ATLANTIC DESIGN COMPANY, INC.) Lenzar Electro-Optics, Inc. ........................................ 100 ............ DE ........ 175/59-3063752 Ogden Allied Payroll Services, Inc. ................................ 100 ............ NY ........ 063*/13-6160158 Ogden Aviation Distributing Corp. .................................. 100 ............ NY ........ 046*/13-1835320 *Ogden Aviation Fueling Company of Atlanta, Inc...................... 100 ............ GA ........ 129*/13-3054674 Ogden Aviation Service Company of Colorado, Inc. ................... 100 ............ CO ........ 104*/13-2694899 *Ogden Aviation Service Company of Hawaii, Inc. ..................... 100 ............ HI ........ 107*/13-2706452 *Ogden Aviation Fueling Company of Virginia, Inc. ................... 100 ............ DE ........ 038*/13-1954027 *Ogden Aviation Security Services, Inc. ............................. 100 ............ DE ........ 013/13-3876173 *Ogden Aviation Security Services of Indiana, Inc. .................. 100 ............ IN ........ 163*/13-3606125 Ogden Aviation, Inc. ............................................... 100 ............ DE Oden Allied Maintenance Securities, Inc. ......................... 100 ............ DE ........ 004*/51-0102045 Kansas City International Fueling Facilities Corporation ....... 100 ............ MO ........ 080*/13-2604290 LaGuardia Fuel Facilities Corporation .......................... 100 ............ NY ........ 100*/13-2660143 Lambert Field Fueling Facilities Corporation ................... 100 ............ DE ........ 057*/13-6116279 Love Field Fueling Facilities Corporation ...................... 100 ............ TX ........ 058*/13-6116341 Newark Automotive Fuel Facilities Corporation .................. 100 ............ NJ ........ 114*/13-2806865 Philadelphia Fuel Facilities Corporation ....................... 100 ............ PA ........ 097*/13-2671427 Ogden Asia Pacific Services, Inc. ................................ 100 ............ DE ........ 134/13-3793247 (SEE ATTACHMENT A FOR FOREIGN SUBSIDIARIES) Ogden Central and South America, Inc. ............................ 100 ............ DE ........ 135/13-3793248
(SEE ATTACHMENT A FOR FOREIGN SUBSIDIARIES) Ogden Aviation Services, Inc. .................................... 100 DE 015/13-3846270 Ogden Aviation Fueling Company, Inc. ............................. 100 DE 012*/13-5564521 Ogden Aviation Fueling Company of Houston, Inc. .................. 100 TX 068*/13-2557861 Ogden Aviation Fueling Company of St Louis, Inc. ................ 100 DE 025*/13-5665586 Ogden Aviation Fueling Company of Texas, Inc. .................... 100 TX 024*/13-5661328
*The following companies are in the process of being merged into Ogden Allied Maintenance Corporation
Company % Domestic Co. Code/ - ------- Ownership State E.I.N. --------- ----- ------ Ogden Aviation Service Company of Kansas City, Inc. .............. 100 ............ MO ........ 118*/13-2942892 Ogden Aviation Service Company of New Jersey, Inc. ............... 100 ............ NJ ........ 003*/13-5565924 Ogden Aviation Service Company of New York, Inc. ................. 100 ............ NY ........ 007*/13-5565925 Ogden Aviation Service Company of Pennsylvania, Inc. ............. 100 ............ PA ........ 018*/13-2749962 Ogden Aviation Service Company of Texas, Inc. .................... 100 ............ DE ........ 019*/13-5649342 Ogden Aviation Service Company of Washington, Inc. ............... 100 ............ DE ........ 011*/13-5581082 Ogden Aviation Service International Corporation. ................ 100 ............ NY ........ 006*/13-5565926 Ogden Aviation Services of Puerto Rico, Inc. .............. 100 ............ DE ........ 177/13-3634105 Ogden International Europe Inc. ..................................... 100 ............ DE/U S.A. .. 164/13-88536 (SEE ATTACHMENT A FOR FOREIGN SUBSIDIARIES) Ogden Aviation Terminal Services, Inc. .............................. 100 ............ MA ........ 005*/13-5565923 Ogden Flight Services Group, Inc. ................................... 100 ............ DE ........ 51-0387567 Flight Services Properties, Inc. .............................. 100 ............ DE ........ Ogden Texas Ground Services, Inc. ................................... 100 ............ DE ........ 13-3889795 Ogden New York Services, Inc. ....................................... 100 ............ NY ........ 020/13-5623889 Ogden Pipeline Services Corporation ................................. 100 ............ DE ........ 125*/13-2949046 Ogden Cisco, Inc. ..................................................... 100 ............ DE ........ 157*/13-3670141 Ogden Communications, Inc. ............................................ 100 ............ DE ........ 130/13-3793364 Ogden Facility Holdings, Inc. ......................................... 100 ............ DE ........ 13-3852102 Ogden Facility Services, Inc. ....................................... 100 ............ DE ........ 13-3773192 1OCSA Financing Services, Inc. ............................................ 100 ............ DE ........ PENDING (SEE ATTACHMENT A FOR FOREIGN SUBSIDIARIES) Ogden Logistics Services .................................................. Ogden Entertainment, Inc. ................................................. 100 ............ DE ........ 001/11-2145117 The Metropolitan Entertainment Co , Inc. .............................. 50 ............ NJ ........ 22-1968974 Woodstock '99, L.L.C. ......................................... 45 ............ NY ........ 13-4041861 Ogden-MEI, L L C ...................................................... 50 ............ DE ........ 13-4022873 Ogden Park Management, Inc. ........................................... 100 ............ DE ........ 52-2096960 Ogden Entertainment of Florida, Inc. ............................... 100 ............ DE ........ /13-3877904 Ogden Parks - Carolina, Inc. ....................................... 100 ............ DE ........ 52-2153227 Ogden Parks - Poway, Inc. .......................................... 100 ............ DE ........ 52-2153532 Ogden Parks - Riverside, Inc. ...................................... 100 ............ DE ........ 52-2153530 Castle Amusement Park ......................................................... CA ........ Ogden Parks - San Jose, Inc. ....................................... 100 ............ DE ........ 52-2153222 Ogden Parks - San Dimas, Inc. ...................................... 100 ............ DE ........ 95-4128198 Raging Waters Group, Inc. (San Dimas) ....................... 100 ............ CA ........ Wet `n Wild International, Inc. .................................... 100 ............ NV Wet `n Wild, Inc. .................................................. 100 ............ TX Wet `n Wild Nevada, Inc. ........................................... 100 ............ NV I & S Consultants, Inc. ............................................ 100 ............ IL ........ 36-3241812
Company % Domestic Co. Code/ - ------- Ownership State E.I.N. --------- ----- ----- Jazzland, Inc. ......................................................... 100 ............ DE ........ 52-2096960 Ogden Facility Management Corporation .................................. 100 ............ NY ........ 098/13-3282969 Ogden Facility Management of Huntington ............................ 100 ............ WV ........ 13-3852104 Ogden Facility Management Corporation of Iowa ...................... 100 ............ IA ........ 007/13-3444248 Ogden Facility Management Corporation of Pensacola ................. 100 ............ FL ........ 006/13-3245048 Ogden Event Security Services, Inc. ................................ 100 ............ NY ........ 011/13-3428320
- -------- (1) Name to be changed to Ogden Transition Corporation Ogden Facility Management of Alaska, Inc. ....................... 100 ............ AK ....... 058/92-0097503 Ogden Facility Management Corporation of Anaheim ........................ 100 ............ CA ....... 060/13-3526194 Ogden Food Service Corporation .......................................... 100 ............ DE ....... 023/23-0404985 Ogden Confection Corporation .................................... 100 ............ DE ....... 039/36-2392940 Ogden Food Service Corporation of Kansas ........................ 100 ............ KS ....... 0032/13-3703705 Ogden Food Service Corporation of Texas ......................... 100 ............ TX ....... 092/74-1310443 Ogden Food Service Corporation of Wisconsin ..................... 100 ............ WI ....... 056/39-0912345 Ogden American Food Services, Inc. .............................. 100 ............ OH ....... 008/34-4197320 Shoreline Operating Company, Inc. 100 ............ CA ....... 77-0484063 Veterans Stadium Assoc , LP 82 ............ ........... Ogden Allied Lakewood Assoc. 65 ............ GA ....... Top of the World @ the World Trade Center, LP 90 ............ NY ....... The Victor/Victoria Company, LP .... NY ....... Ogden Firehole Entertainment Corp. ......................................... 100 ............ DE ....... 13-3516164 Ogden Technology Services Corporation ...................................... 100 ............ DE ....... 13-3977971 Applied Data Technology, Inc. ........................................... 100 ............ CA ....... 33-0297326 ADT Global Services, Inc. (formerly Ogden Range Services, Inc.) ......... 100 ............ DE ....... 169/13-3712961 Logistics Operations, Inc. ...................................... 100 ............ VA ....... 164/13-3977972 Ogden Support Services, Inc. ............................................ 100 ............ DE ....... 165*/13-3688521 Spectra Enterprises Association, LP ......................................... 4.316241
* For payroll/personnel, add 200 to codes of Maintenance companies ONLY ATTACHMENT A OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST
Company % Domestic Co. Code/ - ------- Ownership State/Country E.I.N. --------- ------------- ------ Ogden Corporation ............................................................................ DE/U.S.A Aeropuertos Argentina 2000 S.A ............................................ 28 ............ Argentina Compania de Desarrollo Aeropuerto Eldorado, S.A. (CODAD, S.A.) ............ 21 ............ Colombia Ogden Services Corporation ............................................... 100 ............ DE/U.S.A ................. 141 Ogden Allied Maintenance Corporation .................................. 100 ............ NY/U.S.A Datacom Custom Manufacturing, Inc. ............................ 100 ............ NY/U.S.A Datacom de Mexico, S.A. de C.V ...................... 100 ............ Mexico Ogden Aviation, Inc ...................................................... 100 ............ DE Allied Aviation Services Company of Newfoundland, Ltd. ................. 100 ............ Canada ................... 022 Ogden Asia Pacific Services, Inc. ...................................... 100 ............ DE/U.S.A Ogden Asia Pacific Hong Kong Branch .................................. N/A ............ Hong Kong HO/Ogden Investimentos e Transportes, Limitada ....................... 51 ............ Macau MasCargo (Macau) Company Limited .............................. 7.65 ......... Macau IEA of Japan Company Ltd. ............................................ 50 ............ Japan MASC/Ogden Aviation Services (Macau) Limited ......................... 29 ............ Macau Ogden Asia Pacific Holding Limited ................................... 100 ............ British Virgin Islands Ogden Aviation (Asia Pacific) Limited ......................... 80.1 .......... British Virgin Islands Ogden Aviation (Hong Kong) Limited ....................... 100 ............ Hong Kong Ogden Aviation Services (NZ) Limited ................................. 100 ............ New Zealand .............. 156 Ogden International Facilities Corporation (Asia Pacific) Pty Ltd. ... 100 ............ Australia ................ 172 Ogden International Facilities Corporation (Australia) Pty Ltd. ... 100 ............ Australia International Facilities Corporation (Cairns) Pty Ltd. ......... 100 ............ Australia International Facilities Corporation (NZ) Pty Ltd. ............. 100 ............ New Zealand .............. 156 International Facility Corporation (Newcastle) Ltd. ............ 100 Australia International Facility Corporation (Hong Kong) Pty Ltd. ........ 100 ............ Hong Kong International Facility Corporation (Brisbane) Pty Ltd. ......... 100 ............ Australia International Facility Corporation (Sydney) Pty Ltd. ........... 100 ............ Australia International Facility Corporation (Sydney Arena) .............. 100 ............ Australia International Facility Corporation (Melbourne) ................. 100 ............ Australia Ogden Aviation Services, Inc. .......................................... 100 ............ DE/U.S.A Ogden Aviation Service Company of New York, Inc. ..................... 100 ............ NY/U.S.A ................. 007 Ogden Ground Services, Inc. ................................... 100 ............ DE/U.S.A ................. 146 Air Aruba/Ogden Ground Services N.V ...................... 49 ............ Aruba Ogden Cargo Limited .................................................... 100 ............ U.K. Air Cargo Enterprises Limited ........................................ 50 ............ U.K. SkyCare Limited ...................................................... 100 ............ U.K. UTE No. 1 ............................................................ 30 ............ Spain UTE No. 2 ............................................................ 30 ............ Spain Ogden Central and South America, Inc. .................................. 100 ............ DE/U.S.A Americana Entertainment N.V .......................................... 100 ............ Aruba Ogden Argentina, S.A ................................................. 100 ............ Argentina Ogden Rural S.A ............................................... 50 ............ Argentina Ogden Aviation Services (Chile) Ltda ................................. 99 ............ Chile .................... 158 (1% held by Ogden Asia Pacific Services Inc.) ............ Aviation Services Leader S.A .................................. 100 ............ Chile .................... 185 Aeropuertos Dominicanos SigloXXI, S.A ................................ 100 ............ Dominican Rep. Ogden Aviation Services Dominicana, S.A .............................. 99 ............ Dominican Rep. TRUST ................................................................ 100 ............ Panama Ogden Aviation Services (Panama) Corp. ........................ 85 ............ Panama ................... 171 Ogden Services (Albrook) Corp. (MAG) ......................... 85 ............ Panama Ogden Aviation Services (Venezuela), S.A ............................. 100 ............ Venezuela ................ 168 Ogden Ground Services Caracas, C A ............................ 100 ............ Venezuela ................ 182 Ogden do Brazil Participacoes S/C Ltda. .............................. 100 ............ Brazil ................... 174 Ogden - Servicos de Atendimento Aeroterrestre Ltda. ("SERVAIR") 100 ............ Brazil Ogden Alimentos Comercio e Servicoes Ltda. .................... 100 ............ Brazil Ogden Ground Services, Inc. (St. Thomas) ............................ 100 ............ Virgin Islands ........... 155 Ogden Ground Services de Mexico, S.A. de C.V (formerly "SEITSA") .... 100 ............ Mexico ................... 150
Ogden Peru, S.R.L ................................................. 100 ............ Peru Ogden & Talma Aviation Services of Peru, S.A ............... 50 ............ Peru Ogden Saint Maarten Ground Services N.V ........................... 100 ............ Netherlands Antilles SEITSA Leasing, S.A. de C.V ...................................... 94.9 .......... Mexico ................... 183 Compania Legir S.A ................................................ 100 ............ Uruguay Irodel ........................................................ 100 ............ Uruguay Ogden Holdings S.A ....................................... 100* ........... Argentina *(11,999 shares owned by Irodel & 1 share by Legir) Casino Iguazu, S.A .................................. 100 ............ Argentina Menezul, S.A .................................................. 100 ............ Uruguay Ogden Aeropuertos R D , S.A ................................... 100 ............ Uruguay Modigold, S.A ................................................. 100 ............ Uruguay Ogden PSM Ltda ................................................ 50 ............ Brazil Ogden International Europe Inc. ......................................... 100 ............ DE/U S.A. ................ 164 Ogden Holdings B.V ............................................... 100 ............ Netherlands .............. 166 Financiere Transair, S.A ...................................... 94.72 ......... France Aeroporti Di Roma Handling S.p.A (ADR Handling) .............. 49 ............ Italy Ogden Bulgarian Aviation Services LTD (OBAS) .................. 84 ............ Bulgaria Ogden Aviation (Philippines) B.V .............................. 100 ............ Netherlands MacroAsia Aviation Services Corporation .................. 30 ............ Philippines Compania General de Sondeos CGS, S.A .......................... 100 ............ Spain .................... 191 Ogden Hellenic Aviation S.A ................................... 51 ............ Greece Czech-Ogden Airhandling s r o ................................. 75 ............ Czech .................... 162 Ogden Aviation (Schiphol) B.V ................................. 100 ............ Netherlands .............. 161 Ogden Cargo B.V .......................................... 100 ............ Netherlands Ogden Spain S.A ............................................... 100 ............ Spain1 .............. 59/A07568876 Ogden Entertainment Services Portugal, S.A .................... 100 ............ Portugal ................ 160 Ogden Entertainment Services Spain, S.A ....................... 100 ............ Spain Estadio Olimpico de Sevilla, S.A ......................... 15.9 ............ Spain Graecor Beteiligungsverwaltungs GmbH .......................... 100 ............ Austria Ogden Rhino Management Company Ltd. ...................... 50 ............ Isle of Man Ogden Holdings (Deutschland) GmbH ............................. 100 ............ Germany ................. 192 Ogden Allied Services GmbH ............................... 100 ............ Germany ................. 138 Ogden Aviation Services GmbH ............................. 100 ............ Germany ................. 193 Ogden Entertainment (Oberhausen) GmbH .................... 100 ............ Germany ................. 194 Ogden Tegel Verwaltungs GmbH (formerly DAN AIR Services GmbH) ....................................... 100 ............ Germany ................. 195 Tegel Aircraft Handling GmbH ........................ 100 ............ Germany ................. 196 Ogden Power Agua y Energia Torre Pacheco, S.A ................. 83.3 .......... Spain Ogden Romanian Aviation Services, S.A ......................... 85 ............ Romania Parque Isla Magica, S.A ........................................ 26.12 ......... Spain Ogden Services of Canada Inc. ........................................... 100 ............ Canada .................. 054 Cafas Inc. ........................................................ 100 ............ Canada .................. 028 Airconsol Aviation Services Ltd. - Les Services D'Aviation Airconsol Limitee ..................... 100 ............ Canada .................. 115 Ogden Ground Services (Canada) Ltd. .................... 100 ............ Canada Aircraft Services Limited ....................... 100 ............ Canada .................. 189 Consolidated Aviation Fueling of Toronto Limited .............. 100 ............ Ontario ................. 052 Ogden Facility Holdings, Inc. ............................................. 100 ............ DE/U S.A. Ogden Facility Services, Inc. .................................... 100 ............ DE/U.S.A. Ogden Servicios de Seguridad, S.A .......................... 100 ............ Costa Rica Ogden Aviation Services Limited ............................................ 100 ............ U.K. ........... 186/2176414259610 ** Ogden Aviation Engineering Limited ..................................... 100 ............ U.K. .................... 188 Ogden Entertainment Services (UK) Ltd. ................................. 100 ............ U.K. .................... 015 Ogden Ice Hockey Limited ........................................ 100 ............ U.K. Ice Hockey Super League Ltd. .............................. 12.5 .......... U.K. Manchester Storm, Ltd. .................................... 100 ............ U.K. Hallogen, Ltd. .................................................. 50 ............ U.K.
Company % Domestic Co. Code/ - ------- Ownership State/Country E.I.N. --------- ------------- ------ Ogden Entertainment, Inc. ........................................... 100 .......... DE/U.S.A. Culemburg Metropole Casino (Proprietary) Limited ................... 100 .......... South Africa Alls Fair Investments (Proprietary) Limited ........................ 100 .......... South Africa Ogden Entertainment Services (Canada) Inc. - Services de Divertissements Ogden (Canada) Inc. .................. 100 .......... Canada ......... 012 Ogden Gaming of Ontario, Inc. ................................... 100 .......... Canada Diamond Gaming of Ontario, Inc. ........................... 45 ........... Canada Ogden Palladium Services (Canada) Inc. .......................... 100 .......... Canada Ogden Entertainment Services de Mexico, S.A. de C.V ............... 100 .......... Mexico Servicios de Alimentos Bebidas Especializados, S.A. de CV ......... 100 .......... Mexico Ogden Park Management, Inc. ........................................ 100 .......... DE Wet `n Wild International, Inc. ................................. 100 .......... NV Wet `n Wild Do Brasil, Ltda .................................. 100 .......... Brasil Wet `n Wild Metodo Operadora se Parques ...................... 50 ........... Brasil Wet `n Wild Ribeirao Preto, Ltda ............................. 100 .......... Brasil
** COMPANY HAS BEEN SOLD DURING THE MONTH OF NOVEMBER ATTACHMENT B OGDEN ENERGY GROUP, INC - U S AND FOREIGN SUBSIDIARIES LIST
PERCENT COMPANY OWNERSHIP INCORP E.I.N. - ------- --------- ------ ------ Ogden Energy Group, Inc. ................................................... 100 ............ Delaware ....... 13-3939460 OGDEN ENERGY GROUP DO BRASIL LTDA ....................................... 100(f) ......... BRAZIL ......... 02.310.557/0001-54 Ogden Projects, Inc. .................................................... 100 ............ Delaware ....... 13-3213657 Ogden Energy, Inc. ...................................................... 100 ............ Delaware ....... 22-3405522 OGDEN MADHYA PRADESH OPERATING PRIVATE LIMITED ....................... 100 ............ INDIA .......... NA OGDEN PHILIPPINES OPERATING, INC ..................................... 100 ............ CAYMAN ISLANDS . NA Ogden Energy West, Inc. ............................................... 100 ............ Delaware ....... NA Ogden Energy Sao Jeronimo, Inc. ..................................... 100 ............ Delaware ....... NA MECARIL S.A .................................................. 100 ............ URUGUAY ........ NA Ogden Power Corporation ............................................. 100 ............ Delaware ....... 54-1732981 Geothermal, Inc. ................................................. 100 ............ Virginia ....... 54-1504703 Imperial Power Services, Inc. .................................... 100 ............ California ..... 95-3677245 New Martinsville Hydro-Operations Corporation .................... 100 ............ West Virginia .. 31-1275468 Ogden Brandywine Operations, Inc. ................................ 100 ............ Delaware ....... 54-1740297 Ogden Geothermal Operations, Inc. ................................ 100 ............ Delaware ....... 54-1607228 Ogden Hydro Operations, Inc. ..................................... 100 ............ Tennessee ...... 52-1661862 Ogden Oil & Gas, Inc. ............................................ 100 ............ Delaware ....... 54-1734589 Ogden Power Equity Corporation ................................... 100 ............ Delaware ....... 54-1504746 Catalyst New Martinsville Hydroelectric Corporation .......... 100 ............ Delaware ....... 13-3372123 ERC Energy, Inc. ............................................. 100 ............ Delaware ....... 54-1523295 Heber Loan Partners ......................................... Heber Geothermal Co ...................................... Ogden Heber Field Energy, Inc. ............................... 100 ............ Delaware ....... 54-1611569 Ogden Heber Field Co ......................................................................... Ogden Hydro Energy, Inc. ..................................... 100 ............ Delaware ....... 54-1606911 Ogden Power International Holdings, Inc. .............................. 100 ............ Delaware ....... 54-1742808 EDISON BATAAN COGENERATION CORPORATION ............................ 100 ............ PHILIPPINE ..... NA HIDRO OPERACIONES DON PEDRO S.A ................................... 100 ............ COSTA RICA ..... NA ISLAND POWER CORPORATION .......................................... 40(d) ......... PHILIPPINE ..... NA HUNGARIAN-AMERICAN GEOTHERMAL LIMITED LIABILITY COMPANY ........... 37.5(g) ........ HUNGARY ........ NA LINASA COGENERACION Y ASOCIADOS, S L .............................. 50(e) ......... SPAIN .......... B30556484 OGDEN ENERGY INDIA INVESTMENTS LTD .............................. 100 ............ MAURITIUS ...... NA OGDEN CHINESE INVESTMENTS LTD ................................ 100 ............ MAURITIUS ...... 98-0183946 OGDEN ENERGY CHINA (ALPHA) LTD ............................. 100 ............ MAURITIUS ...... 98-0183947 OGDEN ENERGY CHINA (BETA) LTD .............................. 100 ............ MAURITIUS ...... 98-0183949 OGDEN ENERGY CHINA (DELTA) LTD ............................. 100 ............ MAURITIUS ...... 98-0183951 OGDEN ENERGY CHINA (GAMMA) LTD ............................. 100 ............ MAURITIUS ...... 98-0183952 OGDEN ENERGY OF BONGAIGAON PRIVATE LIMITED ................... 100 ............ INDIA .......... N/A OGDEN ENERGY INDIA (CBM) LIMITED ............................. 100 ............ MAURITIUS ...... NA OGDEN TAIWAN INVESTMENTS LIMITED ............................. 100 ............ MAURITIUS ...... NA OGDEN ENERGY PHILIPPINE HOLDINGS, INC ............................. 100 ............ PHILIPPINES .... NA OPI Quezon, Inc. .................................................. 100 ............ Delaware ....... 13-3670144 OGDEN POWER DEVELOPMENT - CAYMAN, INC ...................... 100 ............ CAYMAN ISLANDS NA QUEZON POWER, INC (NEW DVLPMNT. CO.) ................. 27.5(b) ....... CAYMAN ISLANDS NA (f/k/a OGDEN QUEZON POWER, INC - OLD DVLPMNT. CO.) Ogden Power Development, Inc. ................................. 100 ............ Delaware ....... 13-3662254 Ogden Power Development of Bolivia, Inc. ............... 100 ............ Delaware ....... 13-3852464 OPDB, LTD ........................................ 100 ............ CAYMAN ISLANDS NA OGDEN ENERGY ASIA PACIFIC LIMITED ............................. 100(a) ......... HONG KONG ...... NA (f/k/a OGDEN PROJECTS ASIA PACIFIC LIMITED) Ogden Power Pacific, Inc. (f/k/a Pacific Energy) ................... 100 ............ California ..... 95-3845189 Burney Mountain Power ...................................... 100 ............ California ..... 94-3149256 Mammoth Geothermal Company ................................. 100 ............ California ..... 95-4311279 Mammoth Power Company ...................................... 100 ............ California ..... 95-4484066 Mt. Lassen Power ........................................... 100 ............ California ..... 94-3149255 Ogden Power Plant Operations ............................... 100 ............ California ..... 95-4497795 (f/k/a Pacific Power Plant Operations) Pacific Energy Resources Incorporated ...................... 100 ............ California ..... 95-3499702 Pacific Geothermal Company ................................. 100 ............ California ..... 95-3950189 Pacific Hydropower Company ................................. 100 ............ California ..... 95-3734859 Pacific Oroville Power, Inc. ............................... 100 ............ California ..... 95-3987027 Pacific Penobscot Power Company ............................ 100 ............ Maine ........... 85-4055394
PERCENT COMPANY OWNERSHIP INCORP E.I.N. - ------- --------- ------ ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Pacific Recovery Corporation ........................... 100 ........... California .... 95-4080088 Pacific Wood Fuels Company ............................. 100 ........... California .... 95-4046356 Pacific Wood Services Company .......................... 100 ........... California .... 95-4497794 Penstock Power Company ................................. 100 ........... California .... 95-4250440 8309 Tujunga Avenue Corp ............................... 100 ........... California .... 95-4130759 Ogden Rosemary Operations, Inc. ................................. 100 ........... Delaware ...... 22-3433655 Ogden SIGC Energy, Inc. ......................................... 100 ........... Delaware ...... 54-1742810 AMOR 14 Corporation .................................... 100 ........... Delaware ...... 88-0243401 Ogden SIGC Energy II, Inc. ...................................... 100 ........... California .... 54-1742553 Ogden SIGC Geothermal Operations, Inc. .......................... 100 ........... California .... 54-1645557 Three Mountain Power, LLC ....................................... 100 ........... Delawaare ..... 22-3604711 Ogden Environmental and Energy Services Co , Inc. .......................... 100 ........... Delaware ...... 52-1594168 Analytical Technologies, Inc. ............................................ 100 ........... Delaware ...... 95-3705905 G A Technical Services, Inc. ...................................... 100 ........... Tennessee ..... 62-1238177 Multiple Dynamics Corporation ............................................ 100 ........... Michigan ...... 38-2278155 Ogden Environmental and Energy Services Co , Inc. of Ohio ............... 100 ........... Ohio .......... 31-1357919 Ogden Environmental and Engineering Services Co , Inc. ................... 100 ........... North Carolina 56-0840101 Ogden Environmental Federal Services Co , Inc. ........................... 100 ........... Delaware ...... 54-1694984 (f/k/a Ogden Environmental Services Alaska Co , Inc.) Ogden Engineering and Construction, Inc. ................................. 100 ........... Florida ....... 59-2661991 (f/k/a Ogden Remediation Services Co , Inc.) OGDEN UMWELT UND ENERGIE SYSTEME GMBH .................................... 100 ........... GERMANY ....... NA IEAL ENERGIE & UMWELT CONSULT, GMBH ............................... 100 ........... GERMANY ....... NA OLMEC INSURANCE, LTD ...................................................... 100 ........... BERMUDA ....... NA Ogden Martin Operations of Union, LLC ...................................... 100(i) ........ New Jersey .... 22-3596572 Ogden Waste to Energy, Inc. ................................................ 100 ........... Delaware ...... 13-3871973 Ogden Energy Resource Corp .............................................. 100 ........... Delaware ...... 63-0837475 Ogden Martin Systems, Inc. .............................................. 100 ........... Delaware ...... 13-3162629 Ogden Engineering Services, Inc. ................................. 100 ........... New Jersey .... 13-3284896 Ogden Marion Land Corp ........................................... 100 ........... Oregon ........ 13-3369730 Ogden Martin Systems of Alexandria/Arlington, Inc. ............... 100 ........... Virginia ...... 58-1594213 OMS Equity of Alexandria/Arlington, Inc. ......................... 100 ........... Virginia ...... 13-3389573 Ogden Martin Systems of Babylon, Inc. ............................ 100 ........... New York ...... 13-3246689 Ogden Martin Systems of Bristol, Inc. ............................ 100 ........... Connecticut ... 13-3246723 Ogden Martin Systems of Clark, Inc. .............................. 100 ........... Ohio .......... 11-3140377 OMSC One, Inc. ................................................... 100 ........... Delaware ...... 13-3690804 OMSC Two, Inc. ................................................... 100 ........... Delaware ...... 13-3690801 OMSC Three, Inc. ................................................. 100 ........... Delaware ...... 13-3690806 OMSC Four, Inc. .................................................. 100 ........... Delaware ...... 13-3690807 Ogden Martin Systems of Fairfax, Inc. ............................ 100 ........... Virginia ...... 13-3410434 Ogden Martin Systems of Haverhill, Inc. .......................... 100 ........... Massachusetts . 13-3375647 Haverhill Power, Inc. ................................... 100 ........... Massachusetts . 04-2908628 LMI, Inc. 100 .............................................. Massachusetts 04-2943947 Ogden Omega Lease, Inc. ................................. 100 ........... Delaware ...... 13-3028120 Ogden Haverhill Properties, Inc. ................................. 100 ........... Massachusetts . 13-3382130 Ogden Martin Systems of Hillsborough, Inc. ....................... 100 ........... Florida ....... 13-3228206 Ogden Martin Systems of Huntington, Inc. ......................... 100 ........... New York ...... 13-3394817 Ogden Martin Systems of Huntington Resource Recovery One Corp .... 100 ........... Delaware ...... 06-1260495 Ogden Martin Systems of Huntington Resource Recovery Two Corp .... 100 ........... Delaware ...... 06-1260497 Ogden Martin Systems of Huntington Resource Recovery Three Corp .. 100 ........... Delaware ...... 06-1260498 Ogden Martin Systems of Huntington Resource Recovery Four Corp ... 100 ........... Delaware ...... 06-1260489 Ogden Martin Systems of Huntington Resource Recovery Five Corp ... 100 ........... Delaware ...... 06-1260492 Ogden Martin Systems of Huntington Resource Recovery Six Corp .... 100 ........... Delaware ...... 13-3629151 Ogden Martin Systems of Huntington Resource Recovery Seven Corp .. 100 ........... Delaware ...... 13-3631168 Ogden Martin Systems of Huntsville, Inc. ......................... 100 ........... Alabama ....... 13-3456026 Ogden Martin Systems of Indianapolis, Inc. ....................... 100 ........... Indiana ....... 13-3977970 Ogden Martin Systems of Kent, Inc. ............................... 100 ........... Michigan ...... 13-3369158 NRG/Recovery Group, Inc. (f/k/a Ogden Martin Systems of Lake, Inc.) ............................................................ 100 ........... Florida ....... 13-3482491 Ogden Martin Systems of Lancaster, Inc. .......................... 100 ........... Pennsylvania .. 13-3408215
PERCENT COMPANY OWNERSHIP INCORP E.I.N. - ------- --------- ------ ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Ogden Martin Systems of Lawrence, Inc. ................................... 100 ......... Massachusetts ..... 13-3714674 Ogden Martin Systems of Lee, Inc. ........................................ 100 ......... Florida ........... 13-3557826 Ogden Martin Systems of Long Island, Inc. ................................ 100 ......... Delaware .......... 11-3081090 Ogden Martin Systems of Marion, Inc. ..................................... 100 ......... Oregon ............ 91-1246805 Ogden Martin Systems of Mercer, Inc. ..................................... 100 ......... New Jersey ........ 13-3431734 Ogden Martin Systems of Montgomery, Inc. ................................. 100 ......... Maryland .......... 13-3547268 Ogden Martin Systems of Onondaga, Inc. ................................... 100 ......... New York .......... 13-3528458 Ogden Martin Systems of Onondaga Two Corp ................................ 100 ......... Delaware .......... 13-3690841 Ogden Martin Systems of Onondaga Three Corp .............................. 100 ......... Delaware .......... 13-3690843 Ogden Martin Systems of Onondaga Four Corp ............................... 100 ......... Delaware .......... 13-3690838 Ogden Martin Systems of Onondaga Five Corp ............................... 100 ......... Delaware .......... 13-3684127 OMS Onondaga Operations, Inc. ............................................ 100 ......... Delaware .......... 13-3714674 Ogden Martin Systems of Pasco, Inc. ...................................... 100 ......... Florida ........... 13-3447536 Ogden Martin Systems of San Bernardino, Inc. ............................. 100 ......... California ........ 13-3397879 Ogden Martin Systems of Stanislaus, Inc. ................................. 100 ......... California ........ 13-3315310 OMS Equity of Stanislaus, Inc. ........................................... 100 ......... California ........ 13-3436232 Ogden Martin Systems of Tampa, Inc. ...................................... 100 ......... Florida ........... 22-3603324 Ogden Martin Systems of Tulsa, Inc. ...................................... 100 ......... Oklahoma .......... 13-3203172 Ogden Martin Systems of Union, Inc. ...................................... 100 ......... New Jersey ........ 13-3323867 OGDEN WASTE TO ENERGY, Ltd. (Formerly Ogden Martin Systems, Ltd.) ....... 100 ......... ONTARIO ........... NA OGDEN MARTIN SYSTEMS OF NOVA SCOTIA, LTD ........................ 100 ......... NOVA SCOTIA ....... NA Ogden Projects of Haverhill, Inc. ........................................... 100 ......... Massachusetts ..... 13-3522006 Ogden Wallingford Associates, Inc. .......................................... 100 ......... Connecticut ....... 13-3494166 OGDEN WASTE TO ENERGY ASIA INVESTMENTS ...................................... 100 ......... MAURITIUS ......... NA Ogden Waste to Energy of Italy, Inc. 100 ......... Delaware .......... 22-3564096 AMBIENTE 2000 S.r.l .................................................. 40(h) ....... ITALY ............. NA Ogden Waste Treatment Services, Inc. ........................................ 100 ......... Delaware .......... 13-3362679 Ogden Waste Solutions, Inc. .......................................... 100 ......... Delaware .......... 22-3557169 Ogden Waste Treatment Services USA, Inc. .................................... 100 ......... Delaware .......... 13-3940678 OPW Associates, Inc. ........................................................ 100 ......... Connecticut ....... 13-3487064 OPWH, Inc. .................................................................. 100 ......... Delaware .......... 13-3592054 RRS Holdings Inc. ........................................................... 100 ......... Delaware .......... 13-3697005 Michigan Waste Energy, Inc. .............................................. 100 ......... Delaware .......... 06-1331600 Oahu Waste Energy Recovery, Inc. ......................................... 100 ......... California ........ 95-2638052 Ogden Projects of Hawaii, Inc. ........................................... 100 ......... Hawaii ............ 99-0230284 Resource Recovery Systems of Connecticut, Inc. ........................... 100 ......... Connecticut ....... 13-3696927 OPI CARMONA LIMITED ......................................................... 100 ......... CAYMAN ISLANDS .... NA OPI CARMONA ONE LIMITED ..................................................... 100 ......... CAYMAN ISLANDS .... NA Ogden Energy Engineering, Inc. (f/k/a Ogden Projects Americas, Inc.) ......... 100 ......... Delaware .......... 13-3795624 Ogden Projects Holdings, Inc. ................................................. 100 ......... Delaware .......... 13-3640508 Ogden Water Holdings, Inc. .................................................... 100 ......... Delaware .......... 13-3779130 Ogden Water Systems, Inc. .................................................. 100 ......... Delaware .......... 13-3756577 Ogden Yorkshire Acquisition, Inc. ..................................... 100 ......... Delaware .......... 13-3806665 Cunningham Environmental Support, Inc. ....................... 100 ......... New York .......... 16-1386872 Ogden Yorkshire Water of Bessemer, Inc. ............................... 100 ......... Delaware .......... 22-3405521 OGDEN YORKSHIRE WATER OF CANADA, Ltd. ................................. 100 ......... ONTARIO ........... NA Ogden Yorkshire Water of Taunton, Inc. ................................ 100 ......... Massachusetts ..... 22-3481731 OGDEN WATER SYSTEMS OF CANADA, LTD (f/k/a OGDEN PROJECTS OF HAMILTON, Ltd. ) . 100 ......... ONTARIO ........... NA Yorkshire USA, Inc. ........................................................... 100(c) ...... Delaware .......... 51-0354748
(a) OGDEN ENERGY ASIA PACIFIC LIMITED'S STOCK IS OWNED 50% BY OGDEN PROJECTS, INC. AND 50% BY OGDEN POWER DEVELOPMENT, INC. (b) QUEZON POWER, INC. (NEW DEVELOPMENT COMPANY) IS OWNED 27.5% BY OGDEN POWER DEVELOPMENT - CAYMAN, INC. , AND 72.5% BY QUEZON GENERATING COMPANY, Ltd. (c) YORKSHIRE USA, INC. WAS ACQUIRED BY OGDEN PROJECTS, INC. WHEN YORKSHIRE WATER TERMINATED ITS INVOLVEMENT AS A DIRECT PARTICIPANT IN THE VENTURE (d) 40% OF THE STOCK OF ISLAND POWER CORPORATION IS OWNED BY OGDEN POWER INTERNATIONAL HOLDINGS, INC AND 60% IS OWNED BY VARIOUS STOCKHOLDERS (e) 50% OF THE STOCK OF LINASA COGENERACION Y ASOCIADOS, S.L. IS OWNED BY OGDEN POWER INTERNATIONAL HOLDINGS, INC, AND 50% IS OWNED BY INDUSTRIA JABONERA LINA, S.A. (f) 50% OF THE STOCK OF OGDEN ENERGY GROUP DO BRASIL LTDA IS OWNED BY OGDEN ENERGY GROUP, INC. AND 50% BY OGDEN PROJECTS, INC OGDEN ENERGY GROUP, INC. IS THE MANAGEMENT COMPANY (g) 37.5% OF THE STOCK OF HUNGARIAN-AMERICAN GEOTHERMAL LIMITED LIABILITY COMPANY IS OWNED BY OGDEN POWER INTERNATIONAL HOLDINGS, INC., 37.5 % IS OWNED BY DAVENPORT POWER, L.L.C. AND 25% IS OWNED BY MOL MAGYAR OLAU-ES G_ZIPARI RT (h) 40% OF THE STOCK OF AMBIENTE 2000 S.R.L. IS OWNED BY OGDEN WASTE TO ENERGY OF ITALY, INC. AND 60% IS OWNED BY ECOSESTO S.p.a.. (i) 99% OF THE STOCK OF OGDEN MARTIN OPERATIONS OF UNION LLC IS OWNED BY OGDEN PROJECTS, INC. AND 1% IS OWNED BY OGDEN WASTE TO ENERGY, INC. EX-23 8 EXHIBIT 23 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-36658, 33-36657, 33-54143, 333-19641, and 333-82801 of Ogden Corporation on Form S-8 of our report dated March 30, 2000 appearing in the Annual Report on Form 10-K/A of Ogden Corporation for the year ended December 31, 1999. Deloitte & Touche LLP New York, New York April 20, 2000 EX-27 9 EXHIBIT 27
5 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 101,020 0 311,993 17,942 36,189 1,179,548 2,416,036 574,225 3,727,148 675,328 1,884,427 0 39 24,734 418,277 3,727,148 54,997 1,000,350 65,676 830,281 0 3,866 35,487 (37,031) (6,917) (36,290) (41,851) 0 (3,820) (81,961) ($1.67) ($1.67)
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