-----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, NLBVBktgWh851EhslL4IOCkq5Xg/5wRABgb6AWJUu+kq08bFK4mcTnGlWWt/nYEw UUCRgzJUv8YGRuNvsjD25A== 0000818968-99-000010.txt : 19990412 0000818968-99-000010.hdr.sgml : 19990412 ACCESSION NUMBER: 0000818968-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990409 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDING LAWSON ASSOCIATES GROUP INC CENTRAL INDEX KEY: 0000818968 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 680132062 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16169 FILM NUMBER: 99590542 BUSINESS ADDRESS: STREET 1: 7655 REDWOOD BLVD STREET 2: P O BOX 578 CITY: NOVATO STATE: CA ZIP: 94945 BUSINESS PHONE: 4158920821 MAIL ADDRESS: STREET 1: 7655 REDWOOD BLVD CITY: NOVATO STATE: CA ZIP: 94945 FORMER COMPANY: FORMER CONFORMED NAME: HARDING ASSOCIATES INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities ----- Exchange Act of 1934 For the quarterly period ended February 28, 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 0-16169 HARDING LAWSON ASSOCIATES GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 68-0132062 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7655 Redwood Boulevard Novato, California 94945 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 892-0821 Indicate by check mark whether the registrant (1) has filed all reports required 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 At April 5, 1999 the registrant had issued and outstanding an aggregate of 4,918,122 shares of its common stock. INDEX HARDING LAWSON ASSOCIATES GROUP, INC. Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - February 28, 1999 (Unaudited) and May 31, 1998.......................................................3 Condensed Consolidated Statements of Income - Three and Nine Months Ended February 28, 1999 and February 28, 1998 (Unaudited)......................................4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended February 28, 1999 and February 28, 1998 (Unaudited).....................................5 Notes to Condensed Consolidated Financial Statements February 28, 1999 (Unaudited)......................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..................................13 SIGNATURES .................................................................14 EXHIBIT INDEX ...............................................................15 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) February 28, 1999 May 31, 1998 - ---------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $12,560 $15,118 Accounts receivable 33,619 28,976 Unbilled work in progress 13,205 13,863 Less allowances for receivables and unbilled work (2,332) (1,836) Prepaid expenses 944 1,196 Deferred income taxes 2,966 2,708 - ---------------------------------------------------------------------------------------------------------------- Total current assets 60,962 60,025 - ---------------------------------------------------------------------------------------------------------------- Equipment 26,973 24,892 Less accumulated depreciation (21,289) (19,571) - ---------------------------------------------------------------------------------------------------------------- Net equipment 5,684 5,321 - ---------------------------------------------------------------------------------------------------------------- Deposits and other assets 11,476 11,272 - ---------------------------------------------------------------------------------------------------------------- Total assets $78,122 $76,618 ================================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $7,779 $6,381 Accrued expenses 6,094 5,350 Accrued compensation 7,137 7,794 Billings in excess of costs and estimated earnings on uncompleted contracts 5,164 5,352 Income taxes payable 620 468 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 26,794 25,345 Other liabilities 994 1,084 - ---------------------------------------------------------------------------------------------------------------- Total liabilities 27,788 26,429 - ---------------------------------------------------------------------------------------------------------------- Commitments and Contingencies Minority interest in subsidiaries 380 401 - ---------------------------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock--$.01 par value; authorized shares 1,000,000; issued and outstanding--none Common stock--$.01 par value authorized shares 10,000,000; issued and outstanding--4,883,122 and 5,009,018 at February 28,1999 and May 31, 1998, respectively 49 50 Additional paid-in capital 17,542 18,891 Retained earnings 32,625 31,059 Foreign currency translation adjustment (262) (212) - ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity 49,954 49,788 - ---------------------------------------------------------------------------------------------------------------- Total liabilities and shareholder's equity $78,122 $76,618 ================================================================================================================ The accompanying notes are an integral part of these financial statements.
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended February 28, February 28, 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------- Gross revenue $ 41,326 $ 28,040 $121,466 $ 93,486 Less: Cost of outside services 15,031 8,959 40,693 31,444 - ---------------------------------------------------------------------------------------------------------------- Net revenue 26,295 19,081 80,773 62,042 - ---------------------------------------------------------------------------------------------------------------- Costs and expenses: Payroll and benefits 18,148 13,250 55,771 41,759 General expenses 7,594 5,629 22,683 17,489 - ---------------------------------------------------------------------------------------------------------------- Total costs and expenses 25,742 18,879 78,454 59,248 - ---------------------------------------------------------------------------------------------------------------- Operating income 553 202 2,319 2,794 Interest in loss of unconsolidated subsidiaries -- -- -- (50) Interest income, net 130 277 349 784 - ---------------------------------------------------------------------------------------------------------------- Income before provision for income taxes and minority interest 683 479 2,668 3,528 Provision for income taxes 287 168 1,123 1,450 Minority interest (18) 57 (21) 13 - ---------------------------------------------------------------------------------------------------------------- Net income $ 414 $ 254 $ 1,566 $ 2,065 ================================================================================================================ Basic net income per share $ 0.09 $ 0.05 $ 0.32 $ 0.41 ================================================================================================================ Shares used in computing basic net income per share 4,815 4,986 4,844 5,016 ================================================================================================================ Diluted net income per share $ 0.09 $ 0.05 $ 0.32 $ 0.41 ================================================================================================================ Shares used in computing diluted net income per share 4,830 5,142 4,890 5,097 ================================================================================================================ The accompanying notes are an integral part of these financial statements.
HARDING LAWSON ASSOCIATES GROUP, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended February 28, 1999 1998 OPERATING ACTIVITIES Net income $1,566 $2,065 Adjustments to reconcile net income to net cash provided by in operating activities: Depreciation and amortization 2,426 1,899 Net (increase)/decrease in current assets (2,633) 3,738 Net increase/(decrease) in current liabilities 1,185 (3,135) Other (decrease) (150) (249) - ---------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,394 4,318 - ---------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of equipment, net (1,460) (1,738) Investment in acquisition (1,020) -- - ---------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (2,480) (1,738) - ---------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from sale of common stock 280 348 Repurchase of common stock (2,702) (405) - ---------------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (2,422) (57) - ---------------------------------------------------------------------------------------------------------------- Effect of foreign currency translation (50) (123) - ---------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,558) 2,400 Cash and cash equivalents at beginning of period 15,118 24,464 - ---------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,560 $26,864 ================================================================================================================ The accompanying notes are an integral part of these financial statements.
HARDING LAWSON ASSOCIATES GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) February 28, 1999 NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared without audit by Harding Lawson Associates Group, Inc., (the "Company") in accordance with generally accepted accounting principles for interim financial statements and pursuant to the rules of the Securities and Exchange Commission for Form 10-Q. Certain information and footnotes required by generally accepted accounting principles for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal and recurring nature. For further information, refer to the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K dated May 31, 1998. Reclassification of certain balances for the fiscal year ended May 31, 1998 have been made to conform to the February 28, 1999 presentation. NOTE 2: COMMITMENTS AND CONTINGENCIES The Company is currently subject to certain claims and lawsuits arising in the ordinary course of its business. In the opinion of management, adequate provision has been made for all known liabilities that are currently expected to result from these claims and lawsuits, and in the aggregate such claims are not expected to have a material effect on the financial position of the Company. The estimates used in establishing these provisions could differ from actual results. Should these provisions change significantly, the effect on operations for any quarterly or annual reporting period could be material. NOTE 3: NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information", was issued and is effective for the year ending May 31, 1999. This Statement establishes standards for reporting information about operating segments in annual and interim financial statements. The Company is currently assessing the impact of SFAS 131 on its financial reporting. In June 1997, the Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income", was issued and is effective for fiscal year 1999. SFAS 130 establishes rules for the reporting of comprehensive income and its components in financial statements. At present, comprehensive income for the Company includes net income and translation adjustments on foreign currency. Comprehensive income for the nine months ending February 28 is as follows: Nine months ending February 28, 1999 1998 Net income $1,566 $2,065 Foreign currency translation adjustment (50) (123) ------ ------ Comprehensive income $1,516 $1,942 ====== ====== NOTE 4: ACQUISITIONS On May 8, 1998, the Company acquired all outstanding shares of ABB Environmental Services, Inc., a consulting and engineering firm, from ABB Services, Inc. Total consideration of $12 million, excluding transaction costs, was paid entirely in cash. The acquisition was accounted for using the purchase method and accordingly, the purchase price was allocated to the assets and liabilities acquired based upon their fair market value. The excess of purchase price of the acquisition over the fair market value of the net assets acquired was recorded as goodwill. The goodwill will be amortized on a straight-line basis over 20 years. The following table presents summarized unaudited pro forma operating results assuming the Company had acquired ABB Environmental Services, Inc. ("ABB ES") on June 1, 1997 (in thousands except per share data): Three months ended Nine months ended February 28, 1998 February 28, 1998 Net revenue $ 27,554 $ 89,229 Income before income taxes 828 5,621 Net income 460 3,300 Basic net income per share $ 0.09 $ 0.66 Shares used in computing basic net income per share 4,986 5,016 Diluted net income per share $ 0.09 $ 0.65 Shares used in computing diluted net income per share 5,142 5,097 On December 18, 1998, the Company acquired Regional Engineers, Planners & Surveyors, Inc., ("REPS") located in Florida. Total consideration, excluding transaction costs, was $1.2 million in cash and shares of common stock of the Company. The acquisition was accounted for using the purchase method and accordingly, the purchase price was allocated to the assets and liabilities acquired based upon their fair market value. The excess of purchase price of the acquisition over the fair market value of the net assets acquired was recorded as goodwill. Goodwill of $697 will be amortized on a straight-line basis over 15 years. The results of REPS' operations from the date of acquisition were included in the Company's consolidated financial statements. Had the acquisition taken place on June 1, 1998, the Company's 1999 results of operations for the nine months ended February 28, 1999 would not have been materially different. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward Looking Statements The statements in this report that are forward-looking are based on current expectations, and actual results may differ materially. The forward-looking statements include those regarding the level of future purchases of fixed assets, the possible impact of current and future claims against the Company based upon negligence and other theories of liability, the possibility of the Company making acquisitions during the next 12 to 18 months and the impact of becoming Year 2000 compliant. Forward-looking statements involve numerous risks and uncertainties that could cause actual results to differ materially, including, but not limited to, the possibilities that the demand for the Company's services may decline as a result of possible changes in general and industry specific economic conditions and the effects of competitive services and pricing; one or more current or future claims made against the Company may result in substantial liabilities; and such other risks and uncertainties as are described in reports and other documents filed by the Company from time to time with the Securities and Exchange Commission. Results of Operations (In thousands, except share data) The following table sets forth, for the periods indicated, (i) the percentage that certain items in the condensed consolidated income statements of the Company bear to net revenues, and (ii) the percentage increase (decrease) in dollar amount of such items from year to year.
Percentage of Net Revenue Percentage Three Months Ended Nine Months Ended Increase/(Decrease) February 28, February 28, February 28, Three Months Nine Months 1999 1998 1999 1998 1999 vs 1998 1999 vs 1998 ---- ---- ---- ---- ------------ ------------ Net revenue 100.0% 100.0% 100.0% 100.0% 37.8% 30.2% Costs and expenses Payroll and benefits 69.0 69.4 69.0 67.3 37.0 33.6 General expenses 28.9 29.5 28.1 28.2 34.9 29.7 Operating income/margin 2.1 1.1 2.9 4.5 173.8 (17.0) Interest income, net and interest in loss of uncon- solidated subsidiaries 0.5 1.5 0.4 1.2 (53.1) (52.5) Income before income taxes and minority interest 2.6 2.5 3.3 5.7 42.4 (24.4) Provision for income taxes and minority interest 1.0 1.2 1.4 2.4 19.3 (24.7) Net income 1.6 1.3 1.9 3.3 63.0 (24.2)
Third Quarter Comparison for Fiscal Years 1999 and 1998 Net revenue for the fiscal quarter ended February 28, 1999 totaled $26,295, an increase of 37.8% from net revenue of $19,081 for the third quarter of the prior fiscal year. The increase in net revenue was primarily attributable to the acquisition of ABB ES. Net revenue would have been 4.6% lower than the third quarter of the prior year had the acquisition of ABB ES occurred on June 1, 1997. The decline in net revenue for ABB ES for the period was 25.2% compared with the prior year due primarily to the wind down of a large federal project. Excluding the acquisition, net revenue was 2.3% higher than the same period last year. This was primarily due to a 4.1% increase in revenue from domestic industrial contracts, offset by a 0.6% decline from public sector contracts and a 28.0% decline in net revenue from international operations. The decline in public sector net revenue was due to a 19.8% decrease in revenue from federal contracts, offset by a 24.3% increase in revenue from state and local contracts. Net revenue increased in the third quarter due to higher demand for the Company's services, partially offset by lower prices compared to the same period in the prior year. For the Company, net revenue from public sector contracts accounted for 41.8% of total net revenue compared to 37.7% in the prior year. Net revenue from domestic industrial clients accounted for 54.7% of total net revenue compared to 55.7% in the prior year. Net revenue from international operations for the fiscal quarter ended February 28, 1999 was $911 or 3.5% of total net revenue compared to $1,266 or 6.6% of total net revenue in the same quarter of the prior fiscal year. A significant portion of the services provided by the Company to its public sector clients are performed under a relatively small number of larger contracts compared to private sector clients. Similar to situations that have occurred in the past few years, some of these public sector contracts will be substantially completed during fiscal 1999 and 2000. The Company has been awarded certain contracts that potentially could offset revenue that will be lost under nearly completed contracts. However, if the Company is unsuccessful in realizing the full potential of these contracts or winning new contracts, or if funding delays are experienced on previously awarded federal contracts, a material decline in revenue could result. Operating income was $553 in the third quarter of fiscal 1999, an increase of 173.8% from $202 for the same period in fiscal 1998. Operating margin increased to 2.1% of net revenue in the current quarter compared to 1.1% in the third quarter of fiscal 1998. The increase in operating income and margin was primarily due to the higher net revenue discussed above, partially offset by higher payroll costs and general expenses. Excluding the operating results from the ABB ES acquisition, operating income would have decreased by $595 from the prior year resulting in a negative margin of 2.0%. The decrease in operating income resulted from both higher payroll costs and indirect expenses. The higher indirect expenses were primarily due to the write-down of excess premise leases and, to a lesser extent, external consulting and bad debt expenses. Net interest income for the third quarter ended February 28, 1999 was $130 compared to $277 in the third quarter of the prior year, a decrease of 53.1% due primarily to a $13.3 million decrease in the average cash balance compared to the third quarter of last year. The decrease in cash was due primarily to cash utilized in the acquisition of ABB ES and REPS and to the repurchase of more common stock by the Company than in the prior year. The effective tax rate was 42.0% for the third quarter of fiscal 1999 and was 35.1% in the third quarter of fiscal 1998. The increase in the effective tax rate was attributable to the fact that the prior year's quarter benefited from the recognition of tax losses from the international operations for which the tax benefits had not previously been recorded. Net income for the quarter was $414 compared with $254 in the third quarter of fiscal 1998, an increase of 63%. Basic and diluted earnings per share were $0.09 on 4,815 and 4,830 weighted average shares outstanding, respectively, compared to $0.05 per share on 4,986 and 5,142 weighted average shares outstanding, respectively, in the same period last year. The decrease in the weighted average diluted shares outstanding was primarily due to the decrease in the price per share of the Company's common stock, resulting in a decrease in share equivalents used in the per share calculation. Nine Month Comparison for Fiscal Years 1999 and 1998 Net revenue for the nine months ended February 28, 1999 was $80,773, an increase of 30.2% from net revenue for the nine months ended February 28, 1998 of $62,042. The increase in net revenue was due primarily to the acquisition of ABB ES. Net revenue would have been 9.5% lower than net revenue for the nine months of the prior year had the ABB ES acquisition occurred on June 1, 1997. Excluding the acquisition, net revenue was 4.2% lower than the same period in the prior year. Net revenue from the public sector and international operations declined by 14.1% and 32.0%, respectively, which was partially offset by a 3.4% increase in net revenue from domestic industrial sector clients. Net revenue increased in the first nine months of fiscal 1999 due to higher demand for the Company's services, partially offset by lower prices compared to the same period in the prior year. Operating income was $2,319, a decrease of 17.0% from operating income of $2,794 for the nine months ended February 28, 1998. The operating margin decreased to 2.9% from 4.5% a year ago. The lower operating income and margin were due primarily to higher payroll costs and indirect expenses. The higher indirect expenses resulted charges associated with a severance agreement negotiated with the Company's former Chief Executive Officer and the related search and recruitment costs for a successor, and charges related to the write-down of excess premise leases. Net interest income for the nine months ended February 28, 1999 was $349, a decrease of 55.5% from net interest income of $784 for the same period of the prior fiscal year. The decrease was primarily due to a $12.8 million decrease in the average cash balance compared to the prior year. The effective tax rate for the nine months ended February 28, 1999 was 42.1% and for the nine months ended February 28, 1998 was 41.1%. Net income for the nine months was $1,566, a decrease of 24.2% from net income of $2,065 for the nine month period in the prior year. Basic and diluted earnings per share were $0.32 on 4,844 and 4,890 weighted average shares outstanding, respectively, compared to $0.41 on 5,016 and 5,097 weighted average shares outstanding, respectively, in the first nine month period of the prior year. The decrease in weighted average diluted shares outstanding was primarily due to the decrease in the price per share of the Company's common stock, resulting in a decrease in share equivalents used in the per share calculation. Liquidity and Capital Resources For the nine months ended February 28, 1999, net cash provided by operations was $2,394 compared to $4,318 for the first nine months of the prior year. The decrease in cash provided by operations was primarily due to an increase in days sales outstanding in the Company's receivables in the current fiscal year compared to the prior fiscal year. The Company made net capital expenditures of $1,460 in the first nine months of fiscal 1999 compared to net capital expenditures of $1,738 in the first nine months of the prior year. The Company anticipates that its capital expenditures, excluding acquisitions, for the current fiscal year will be approximately the same as those incurred in the prior fiscal year. The Company, in December 1998, expended $1 million in cash in the acquisition of REPS. On March 7, 1996 the Board of Directors of the Company approved a Common Stock Repurchase Program ("1996 Program") that authorized the Company to purchase up to a maximum of 500,000 shares of stock on the open market for the purpose of funding the Company's various employee stock programs. The Company repurchased 310,000 shares during the first nine months of fiscal 1999 at an average price of $8.72 compared to 46,300 shares repurchased at an average price of $8.75 during the first nine months of fiscal 1998. There are 4,500 shares which remain available to be repurchased under the 1996 Program. On September 25, 1998, the Board authorized management to repurchase up to 500,000 shares over the next four years. The Company is a consulting engineering services firm engaged in providing environmental, infrastructure, geotechnical and construction related services and encounters potential liability, including claims for errors and omissions, resulting from construction defects, construction cost overruns, environmental or other damage in the normal course of business. The Company is party to lawsuits and is aware of potential exposure related to certain claims. In the opinion of management, adequate provision has been made for all known liabilities that are currently expected to result from these matters, and in the aggregate, such claims are not expected to have a material impact on the financial position and liquidity of the Company. Currently, the Company is provided a $10 million per occurrence, $15 million aggregate contractor's operations and professional services insurance policy through an unrelated, rated carrier. The Company also maintains a general liability insurance policy with an unrelated, rated carrier. At February 28, 1999 the Company had cash on hand and cash equivalents of $12,560. The Company has a $20 million revolving credit line agreement that expires in November 2000. At February 28, 1999 and 1998, the Company had no borrowings outstanding under its line of credit leaving $20 million available to the Company. Borrowings were available to the Company at an interest rate of 5.0% at February 28, 1999 and 5.7% at May 31, 1998. The Company is in compliance with all covenants pertaining to the credit line agreement. The Company believes that its available cash and cash equivalents, as well as cash generated from operations and its available credit line, will be sufficient to meet the Company's cash requirements for the balance of the fiscal year. The Company intends to actively continue its search for acquisitions to expand its geographical representation and enhance its technical capabilities. The Company expects to utilize a portion of its liquidity over the next 12 to 18 months for capital expenditures, including acquisitions and investments in aligned businesses. Year 2000 Compliance Overview Computer systems and software have historically been coded to accept only two digit entries for the year. Consequently, on January 1, 2000, as well as on other significant dates, errors may occur. If computers cannot properly distinguish between the years 1900 and 2000, computers may shutdown or perform incorrect calculations. Scope & Status The Company has taken seriously the potential risks of the Year 2000 issue and has devoted resources company-wide to address the issue. In late 1997, the Company established a Year 2000 Project Team ("Project Team"). The Project Team was established to address the following key components related to the Year 2000 issue: o Information applications, including the Company's project management and accounting systems o Computer hardware, software, operating systems and net- work infrastructure including telecommunications systems o Facility and administrative systems o Digital systems and devices with embedded processors installed on client projects o Major suppliers and customers' systems During the second quarter of fiscal 1999, the Company completed the upgrade of its major information technology system (a project management and accounting system). This version of the third party business application is warranted as Year 2000 compliant. The Company will perform specific Year 2000 compliance testing of this system in the first quarter of its next fiscal year which commences on June 1, 1999. The Company is conducting an inventory and assessment of its hardware and software for Year 2000 compliance. It expects to complete this inventory and assessment by May 31, 1999. Other network and infrastructure upgrades of equipment and software are scheduled as part of normal business operations. Facility and administrative systems that support the Company (such as telephone, security systems, etc.) are also being assessed for Year 2000 compliance and required upgrades to such hardware and software are being prioritized for resolution. The assessment and remediation of the Company's facility and administrative systems is scheduled to be completed prior to December 31, 1999. The Company considers risks in these areas to be minimal. Contingency plans will be developed if the Company determines that compliance is not likely to occur. The Company has undertaken an analysis of its vendors and suppliers to determine potential areas of risk with regard to their failure to achieve Year 2000 compliance. Written requests have been sent to appropriate vendors and suppliers to determine their Year 2000 readiness. Evaluation of the responses to those requests will determine future verification procedures. The Company is currently inventorying and contacting vendors of software and equipment such vendors have supplied under contracts or relationships with its clients. Contingency plans will also be developed as appropriate to address any potential problems that may be identified. Costs The costs associated with Year 2000 compliance have not been material and generally fall within normally anticipated operating and capital spending. The Company currently estimates the costs of becoming Year 2000 compliant will not be material to the financial position of the Company. Although the Company does not currently anticipate the costs of Year 2000 compliance to be material, it cannot ensure Year 2000 compliance by third parties. Risks The upgrade of the Company's project management and accounting systems to a Year 2000 compliant version mitigates the risk that the Company would be unable to maintain accurate client records and billings. Technical infrastructure at client sites could cause potential interruption in services provided by those clients. The Company's efforts to evaluate and remediate software and equipment supplied to its clients will mitigate such potential service interruptions. The Company cannot predict with accuracy the extent to which its vendors and clients will become compliant. The resulting effects on the Company's financial position could be adversely affected if major vendors or clients do not operate into and beyond the change in the millennium. The Company believes that the completion of its Year 2000 Project as scheduled will significantly reduce the possibility of significant interruptions to its normal business operations; however, no assurances can be given. HARDING LAWSON ASSOCIATES GROUP, INC. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits The following exhibits are furnished along with this Form 10-Q Quarterly Report for the period ended February 28, 1999: Exhibit No. 10.12 Employment Agreement, dated March 19, 1999, for Robert L. Costello, Jr. Exhibit No. 10.13 Executive Retention Agreement, dated February 17, 1999, for Claude Corvino Exhibit No. 10.14 Executive Retention Agreement, dated February 17, 1999, for Arthur C. Riese Exhibit No. 10.15 Executive Retention Agreement, dated February 17, 1999, for Gregory A. Thornton Exhibit No. 11 Computation of Per Share Earnings Exhibit No. 27 Financial Data Schedule b. Reports on Form 8-K Subsequent to the fiscal quarter ended February 28, 1999, the Company filed a Current Report on Form 8-K, dated March 26, 1999, describing changes in executive officers of the Company. SIGNATURES Pursuant to the requirements 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. HARDING LAWSON ASSOCIATES GROUP, INC. Date: April 8, 1999 /s/ Gregory A. Thornton ------------------------------------------- Gregory A. Thornton Vice President and Chief Financial Officer (Principal Executive and Accounting Officer) HARDING LAWSON ASSOCIATES GROUP, INC. EXHIBIT INDEX Exhibit No. 10.12 Employment Agreement dated March 19, 1999 for Robert L. Costello, Jr. 10.13 Executive Retention Agreement dated February 17, 1999 for Claude Corvino 10.14 Executive Retention Agreement dated February 17, 1999 for Arthur C. Riese 10.15 Executive Retention Agreement dated February 17, 1999 for Gregory A. Thornton 11 Computation of Per Share Earnings 27 Financial Data Schedule EX-10 2 10.12 EMPLOYMENT AGREEMENT ROBERT L. COSTELLO, JR. EMPLOYMENT CONTRACT THIS EMPLOYMENT AGREEMENT is between Robert L. Costello, Jr. (hereafter called "Employee") and HARDING LAWSON ASSOCIATES GROUP, INC., a Delaware corporation (hereafter called the "Company"). Recitals The Company desires to hire Employee as its Chief Executive Officer and appoint him to the Board of Directors as a Director. Accordingly, the Company desires assurances of the continued association and services of Employee, and is therefore willing to engage his services on the terms and conditions set forth below. Employee desires to continue in the employ of the Company and is willing to do so on those terms and conditions. NOW, THEREFORE, in consideration of the above Recitals and the mutual promises and conditions in this Agreement, IT IS AGREED AS FOLLOWS: 1. Term of Employment. Subject to earlier termination as provided in this Agreement, Employee shall be employed for a term of three (3) years, beginning March 19, 1999. The term of this Agreement may be renewed or extended in writing by mutual agreement for succeeding terms of from one (1) to three (3) years each. 2. Duties of Employee. Employee shall serve the Company in the capacities of Director and Chief Executive Officer and shall use his best efforts to perform all of the customary duties of a person employed in those positions, and such other duties as may from time to time be reasonably requested by the Board of Directors. While serving in these capacities, Employee shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company, subject always to the authority and policies set by the Board of Directors. 3. Change of Control. (a) A First Year Change of Control will be deemed to occur upon the happening of either of the following events, but only if such event takes place prior to March 19, 2000: (1) the acquisition, directly or indirectly, by any unaffiliated "person" (as such term is used in section 13(d) and 14 (d) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of thirty percent (30%) or more of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors, provided that a Change of Control for the purpose of either Section 3(a) or Section 3(b) of this Agreement shall not be deemed to have occurred by reason of the formation or combining of a group of shareholders who are otherwise unaffiliated for the purpose of making recommendations to the Board of Directors, or (2) Continuing Directors cease to constitute at least a majority of the Board of Directors. If a First Year Change of Control occurs and if within six months of the First Year Change of Control the Employee's employment is terminated by the Company or any parent or successor of the Company without cause or the Employee terminates his employment based upon a material reduction of his duties or responsibilities under this Agreement, (1) Employee shall be entitled to a lump sum bonus payment of Four Hundred Twenty-Seven Thousand Five Hundred Dollars ($427,500), an amount equal to One Hundred Fifty percent (150%) of Employee's initial Base Salary and (2) the stock options described in Section 13 shall vest immediately. "Continuing Directors" as used herein shall mean the directors of the Company in office on March 19, 1999 and any directors whose nominations or selections are approved by a majority of the Continuing Directors in office at the time of such nominations or selections. (b) In addition, if a First Year Change of Control occurs, the Employee shall receive Two Hundred Fifty Thousand Dollars ($250,000) if (1) the First Year Change of Control occurs as a result of a transaction that results in the Company's Common Stock no longer being publicly traded and if the closing sale price of the Company's Common Stock as reported in the Wall Street Journal exceeds Ten Dollars ($10) per share on the last day on which the Company's Common Stock was publicly traded prior to the closing of such transaction or (2) the First Year Change of Control does not result in the Company's Common Stock no longer being publicly traded and the average closing sale price of the Company's Common Stock as reported in the Wall Street Journal exceeds Ten Dollars ($10) per share, as adjusted, for any fifteen (15) consecutive trading days during the ninety (90) calendar day period immediately following the date on which the Change of Control occurs. Such payment shall be made within ninety (90) days of the date on which the Company's Common Stock price becomes determinable under the provisions of the preceding sentence. (c) A Future Change of Control will be deemed to occur upon the happening of either of the events defined in the first sentence of Section 3(a) above on or after March 19, 2000. If a Future Change of Control occurs and if within six months of the Future Year Change of Control the Employee's employment is terminated by the Company or any parent or successor of the Company without cause or the Employee terminates his employment based upon a material reduction of his duties or responsibilities under this Agreement, (1) Employee shall be entitled to a lump sum bonus payment of One Hundred Fifty percent (150%) of Employee's then-current Base Salary and (2) the stock options described in Section 13 shall vest immediately. (d) Notwithstanding the foregoing, a Change of Control will not be deemed to have occurred in any transaction or acquisition in which the Employee leads or will hold more than a 0.5% equity interest in the surviving company. (e) If any payments are made to Employee under this Section, Employee shall not be entitled to any payments under Sections 4 or 6 hereof. (f) Certain Additional Payments. If any payments, distributions or other benefits by or from the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payment required under this Section 3(f) (collectively, the "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive from the Company an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including, without limitation, any income and employment taxes and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. All calculations required by this Section 3(f) shall be performed by the independent auditors retained by the Company most recently prior to the Change of Control (the "Auditors"), based on information supplied by the Company and the Employee. All fees and expenses of the Auditors shall be paid by the Company. 4. Change of Duties. If the Board of Directors materially reduces Employee's duties or responsibilities under this Agreement, Employee, at his option, may terminate this Agreement prior to the conclusion of the term of employment. In that event, subject to the provisions of Section 3(e), Employee shall be entitled to receive, as severance pay, the amounts set forth in Section 6. In the event of such termination, the provisions of Sections 16 through 20 shall nevertheless remain in full force and effect unless specifically waived in writing by the Company. 5. Termination Without Cause. This Agreement is subject to termination at the option of the Company without cause, subject to the provisions of Section 6 hereof governing compensation after termination. In the event of termination without cause by the Company, the provisions of Sections 16 through 20 shall nevertheless remain in full force and effect unless specifically waived in writing by the Company. 6. Compensation After Termination Without Cause. If this Agreement is terminated without cause by the Company, Employee shall receive those employee benefits and compensation which shall have accrued prior to such termination and shall receive as severance pay the sum of Two Hundred percent (200%) of Employee's then-current Base Salary, subject to the provisions of Section 3(e) and to the Employee's executing on behalf of the Company a satisfactory release of any and all claims against the Company in the form attached hereto as Exhibit A. All amounts payable as severance pay shall be payable in the same installments as if Employee were still employed by the Company. In addition, the Company will continue to pay the cost of maintaining the health insurance coverage then being provided by the Company to the Employee for a period of one year after termination. Except as provided in this Agreement, after termination of this Agreement (whether with or without cause, by death or disability, by resignation or by mutual consent), the Company shall not have any duty or obligation to continue to provide, at the Company's expense, any of Employee's benefits, including but not limited to life and disability insurance (provided, however, that to the extent allowable under the Company's plans the Employee can continue such coverage at his expense); nor shall the Company be required to pay Employee any severance pay (except any accrued vacation balance) in addition to that set forth herein. The voluntary and temporary continuation of any benefits by the Company shall not create an obligation to continue such benefits for any length of time after termination, and any such continuance beyond termination shall be in the absolute discretion of the Board of Directors. It is not the intent of this Section 6 to reduce any fully vested benefits to which Employee is otherwise entitled under any insurance policy, salary deferral plan, deferred bonus plan or similar plan. Employee's benefits under such plans shall be governed by the provisions of those plans. Employee's benefits under any policy of insurance shall be governed by the terms of the policy. 7. Termination for Cause. (a) The Company reserves the right to terminate this Agreement at any time if Employee willfully breaches or unjustifiably neglects the duties which he is required to perform under the terms of this Agreement or commits material acts of dishonesty, discloses confidential information, is guilty of gross carelessness, professional negligence, misconduct, fraud or misrepresentation or commits other acts that would prevent the effective performance of his duties, or acts in a negligent way that has a direct, substantial, and adverse effect on the Company's reputation or profitability; or fails or refuses to perform the reasonable duties of the Chief Executive Officer, after 30 days' notice by the Company, during which thirty (30) day period Employee shall have the opportunity to cure said failure or refusal to perform reasonable duties. (b) The Company may, at its option, immediately terminate this Agreement for the reasons stated in this Section by giving written notice of termination to Employee without prejudice to any other remedy to which the Company may be entitled, either at law, in equity or under this Agreement. (c) Upon termination for cause, Employee shall be entitled to receive only those employment benefits and compensation which shall have accrued prior to such termination, and shall not be entitled to receiveseverance compensation, or any other or further compensation; however, it is not the intent of this Section to reduce any fully vested benefits to which Employee is otherwise entitled under any insurance policy, salary deferral plan, stock option plan, deferred bonus plan or similar plan. Employee's benefits under such plans shall be governed by the provisions of those plans. Employee's benefits under any policy of insurance shall be governed by the terms of the policy. (d) In the event of termination for cause, all the provisions of Sections 16 through 20 hereof shall survive such termination and continue in full force and effect. 8. Termination on Death or Disability. In the event of Employee's death, this Agreement shall terminate on the last day of the calendar month after the month in which his death occurs. In the event of Employee's disability, this Agreement shall terminate at the discretion of the Board of Directors, subject, however, to the provisions of Sections 16 through 20 hereof, which shall survive such termination and continue in full force and effect. In the event of Employee's death or permanent disability as determined by the Board of Directors, Employee shall be entitled to receive only those employment benefits and compensation which shall have accrued prior to such death or disability and shall not be entitled to receive severance compensation, or any other or further compensation. For purposes of this Agreement, disability shall mean a mental or physical disease or injury that substantially impairs or prevents the ability of Employee to perform normal services for the benefit of the Company or any affiliated Company and which can reasonably be expected to be of long, continued or indefinite duration. The disability of Employee shall be reasonably determined by the Board of Directors, upon the basis of such evidence as the Board deems necessary and desirable. In the event that the Board of Directors chooses (at least initially) not to terminate this Agreement because of disability, then to the extent that Employee receives payments from any Company-maintained disability insurance policy during the period in which the Company is obligated to make salary payments under this Agreement, the Company shall be relieved of the obligation to make such basic salary payments to Employee to the extent of the amounts so received by Employee. 9. Dedication of Services. Employee agrees that while Employee is employed by the Company, during normal business hours Employee shall devote Employee's entire productive time, ability and attention to the business of the Company. Employee further agrees that during the term of this Agreement or any extension thereof, Employee will not, without the Company's prior written consent, engage in any other business activities, except personal investments. The foregoing shall not preclude Employee from engaging in appropriate civic, charitable or religious activities. 10. Place of Employment. Unless the parties agree otherwise in writing, during the employment term Employee shall perform the services he is required to perform under this Agreement at the Company's headquarters, which are presently in Novato, California. The Company may from time to time require Employee to travel temporarily to other locations on Company business. 11. Salary. The Company shall pay a base salary to Employee at the rate of $285,000 per year, payable in equal monthly or bi-monthly installments. Employee's base salary shall be subject to review annually by the Board of Directors, but Employee's salary shall not be reduced below the base salary set forth in this Agreement. 12. Incentive Compensation. In addition to the base salary provided for above, Employee will be eligible to participate in an incentive compensation plan containing performance goals set by the Company. The target bonus will be 50% of base salary if specific goals which have been approved by the Board of Directors are achieved. In addition, a formula will be developed and approved by the Board which will allow the bonus to reach 100% of base salary for meeting goals that exceed the goal set for the target bonus. Such bonus shall be paid upon the completion of the fiscal year-end audit. 13. Stock Options and Stock Purchases. Employee will receive on the commencement of his employment on March 19, 1999 non-qualified stock options covering Two Hundred Thousand (200,000) shares of the Company's Common Stock. The options on One Hundred Thousand (100,000) of such shares shall be granted pursuant to a stock option agreement in the form of Exhibit B hereto and shall be exercisable at the exercise price equal to the closing sale price of the Company's Common Stock as reported in the Wall Street Journal as of the date on which Employee's employment with the Company commences (hereafter, "the Market Rate Options"); the other One Hundred Thousand (100,000) options shall be granted pursuant to a stock option agreement in the form of Exhibit C hereto and shall be exercisable at the exercise price of Ten Dollars ($10) per share (hereafter, "the $10 Options"). The options shall expire on March 18, 2009, or if earlier, 30 days after the date on which Employee's employment terminates or, in the event of Employee's death or permanent disability as determined by the Board of Directors, twelve (12) months after such death or disability is determined. Subject to the provisions of Section 3 hereof, the options shall vest and become exercisable according to the following schedule: On and after March 18, 2001, 50% of the Market Rate Options and 50% of the $10 Options shall become exercisable; on and after March 18, 2002, an additional 25% of the Market Rate Options and an additional 25% of the $10 Options shall become exercisable and on and after March 18, 2003, the balance of the Market Rate Options and the $10 Options shall become exercisable. If the exercise price of the Market Rate Options, as determined above, exceeds six dollars ($6) per share, then the number of Market Rate Options (rounded off to the next whole share) granted to the Employee on March 19, 1999 shall be determined by multiplying 100,000 by the result obtained under the following formula: 4 /(10 minus the exercise price of the option). Notwithstanding the result obtained by applying the foregoing formula, the number of Market Rate Options shall not exceed 130,000. At the commencement of Employee's employment on March 19, 1999, the Employee shall purchase Thirty-Five Thousand (35,000) shares of Common Stock under the Company's Key Executive Stock Ownership Program at a price equal to the closing sale price of the Company's common stock as reported in the Wall Street Journal on the date on which the Employee's employment with the Company commences, to be paid for by a full recourse note providing for annual interest equal to the lowest rate allowed under the Internal Revenue Service's imputed interest rules. At the end of each calendar year, if the Employee is then employed by the Company, the amount of the then-accrued interest shall be forgiven, and the interest shall become taxable to Employee as compensation. The loan shall be secured by the Thirty-Five Thousand (35,000) shares of stock, which shall be pledged to the Company. The amount borrowed and secured by the note shall be repaid to the Company by the Employee over ten (10) years, with a mandatory principal reduction of at least ten percent (10%) per annum of the original balance. Such principal payments shall commence on January 1, 2001. If Employee is terminated with cause, the entire balance of the note, principal and interest, will become due and owing immediately. If Employee voluntarily resigns or is terminated without cause, or if termination is the result of death or disability, Employee shall repay the entire amount of the loan, principal and interest, within ninety (90) days of such termination. 14. Additional Benefits. During his employment hereunder, Employee shall be entitled to receive all other benefits of employment generally available to the Company's other management executives as he becomes eligible for them, including group health and life insurance benefits, and the right to participate in the salary deferral plan. Regardless of the vacation periods available to other management employees, Employee shall be entitled to four (4) weeks' paid vacation per year. 15. Expenses. During his employment hereunder, the Company shall reimburse Employee for reasonable out-of-pocket expenses incurred in connection with the Company's business, including travel expenses, food and lodging while away from home, subject to such policies as the Company may from time to time reasonably establish for its other employees. The Company shall reimburse Employee for all reasonable costs associated with Employee's relocation to the greater Bay Area and Employee shall receive a lump sum payment of Twenty-Five Thousand Dollars ($25,000) to cover incidental expenses associated with that relocation. To the extent that the expense reimbursements under this Section are included in Employee's income for purposes of federal and state taxes, the Company shall increase such reimbursement: (1) by an amount sufficient to provide for the payment of such taxes and (2) by an amount sufficient to provide for the payment of taxes on such taxes, but not by any additional amount 16. Return of Documents. On termination of employment for any reason, Employee will promptly return to the Company all documents and other materials relating to the Company's business, together with all copies thereof, including but not limited to Company reports, job files, operating manuals, technical blueprints or plans, business forecasts, market summaries, proposals, job notes and customer lists, and any other files or documents that could reasonably be construed to be of value to the Company. 17. No Solicitation of Customers or Employees. (a) Employee agrees that all clients of the Company for which Employee provides services during Employee's employment, and all prospective Company clients as described below, are solely the clients of the Company and not of the Employee. Employee agrees that if his employment terminates, except in the case of any First Year or Future Change of Control, he will not, for a period of one (1) year after the date of such termination, either directly or indirectly, solicit business, as to products or services competitive with those of the Company, from any of the Company's clients or prospective clients as described below. For purposes of this Section, the term "prospective clients" shall mean clients from whom Employee and/or Company has actively solicited business within one (1) year prior to Employee's termination. (b) Employee agrees that the Company has invested substantial time and effort and resources in assembling, training and managing its present staff of personnel, which constitutes a significant asset of the Company. Accordingly, Employee agrees that, both while employed and for a period of one (1) year after termination of employment, Employee will not directly or indirectly induce or solicit or encourage any of the Company's employees to leave their employment with the Company. 18. Disclosure of Confidential Client Information Prohibited. In the course of his employment, Employee will have access to confidential records and data pertaining to the Company's clients and to the relationship between these clients and the Company. Employee agrees that such information is considered secret and is disclosed to Employee in confidence. In consideration of this access to this confidential information, Employee agrees that he shall not, directly or indirectly, disclose or use any such information, except as required in the course of his employment by the Company, until such information otherwise becomes public knowledge. 19. Disclosure of Confidential Company Information Prohibited. Employee agrees that he will regard and preserve as confidential and will not divulge to unauthorized persons, or use or permit persons who are under his direction or supervision to divulge or use, for any purposes other than those related to the business of the Company, either during or after the term of this Agreement, any information, matter or thing of a secret, confidential or private nature connected with the business of the Company, or any of its suppliers, customer or affiliates, without the written consent of the Board of Directors, until such time as such information otherwise becomes public knowledge. Included within the meaning of the foregoing are matters of a technical nature, such as know-how, formulae, computer programs, software and documentation, secret processes or machines, inventions and research projects; and matters of a business nature such as information about costs, profits, markets, sales, customers, suppliers and employees (including salary, evaluation and other personnel data), and plans for further development; and any other information of a similar nature to the extent not available to the public. 20. Company's Ownership of Intangibles. All processes, techniques, trade secrets, computer programs or applications, formulae, inventions, copyrights, trademarks and other intangible rights that may be conceived or developed by Employee, either alone or with others, during the term of Employee's employment (hereafter "work products"), whether or not conceived or developed during Employee's working hours, whether or not reduced to writing, and with respect to which the equipment, supplies, facilities, premises or property of the Company were used, or that relate to the business of the Company or the Company's actual or demonstrable and anticipated research and development, or that result from any work performed by Employee for or on behalf of the Company, shall be the sole property of the Company. Employee acknowledges and agrees that all such work products shall be the sole property of the Company, and Employee hereby assigns to the Company Employee's entire right and interest in all such work products. Employee shall execute all documents, including patent applications and assignments, required by the Company to establish the Company's rights under this Section; provided, however, that such assignment does not apply to any invention which qualifies fully under the provisions of Section 2870 of the California Labor Code. 21. Effect of Combination or Dissolution. This Agreement shall not be terminated by the Company's voluntary or involuntary dissolution or by any merger in which the Company is not the surviving or resulting corporation, or on any transfer of all or substantially all of the Company's assets. In the event of any such merger or transfer of assets, the provisions of this Agreement shall be binding on and inure to the benefit of Employee and the surviving business entity or the business entity to which such assets shall be transferred. 22. Employment Rights. Nothing in this Agreement shall be deemed to constitute a lifetime employment contract between Employee and the Company, and nothing contained herein shall be deemed to give Employee any right to be retained in the employment of the Company beyond the term of this Agreement, subject to provisions on earlier termination. This Agreement shall in no way serve to enlarge or extend the employment rights or obligations of Employee beyond those under California law, except as expressly stated herein. 23. Notices. Any notice to the Company required or permitted under this Agreement shall be given in writing to the Company, either by personal service or by registered or certified mail, postage prepaid, addressed to the attention of the Chairman of the Board, as its then principal place of business, which at this time is 7655 Redwood Boulevard, Novato, California 94945. Any such notice to Employee shall be given in a like manner and, if mailed, shall be addressed to Employee at his home address then shown on the Company's records. For the purpose of determining compliance with any time limit in this Agreement, a notice shall be deemed to have been duly given (a) on the date of service, if served personally on the party to whom notice is to be given, or (b) on the second business day after mailing, if mailed to the party to whom the notice is to be given in the manner provided in this Section. 24. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or breach of this Agreement, shall be settled by arbitration in accordance with the Arbitration Rules of the American Arbitration Association relating to employment disputes, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction. Each party shall pay the fees of his own attorney, and the expenses of his witnesses and all other expenses connected with presenting his case. Other costs of the arbitration, including the cost of any record or transcript of the arbitration, administrative fees and all other fees and costs, shall be borne equally by the parties. 25. Injunction. Notwithstanding the foregoing Section concerning arbitration, in addition to other remedies provided by law or this Agreement, the Company shall have the right to obtain injunctive relief against the breach of any or all the provisions of Sections 16 through and including 20 of this Agreement by Employee. In the event that injunctive relief is sought by the Company pursuant to this Section, any other claims by the Company arising from or relating to this Agreement, or the breach of this Agreement, may, at the option of the Company, be asserted in the same action. 26. Integration. This Agreement contains the entire agreement between the parties and supersedes all prior oral and written agreements, understandings, commitments and practices between the parties, including all prior employment agreements, whether or not fully performed by Employee before the date of this Agreement. No amendments to this Agreement may be made except by a writing signed by both parties. 27. Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. 28. Choice of Law. The formation, construction and performance of this Agreement shall be construed in accordance with the laws of the State of California. COMPANY: HARDING LAWSON ASSOCIATES GROUP, INC., a Delaware corporation By: /s/ D. K. Stager Date: 3-10-99 Donald K. Stager Chairman of the Compensation Committee HARDING LAWSON ASSOCIATES GROUP, INC., a Delaware corporation By: /s/ Gregory A. Thornton Date: 3-10-99 Gregory A. Thornton Chief Executive Officer and Chief Financial Officer /s/ Robert L.Costello, Jr. Date: 3-19-99 Robert L. Costello, Jr. EX-10 3 10. 13 RETENTION AGREEMENT CLAUDE CORVINO EXECUTIVE RETENTION AGREEMENT This Agreement between Claude Corvino (you) and Harding Lawson Associates Group Inc. (Company) have been entered into as of February 17, 1999. This Agreement promises you severance benefits if, following a Change of Control, a Potential Change in Control or a Change of Management, (referred to collectively hereafter as the "Change") you are terminated without Cause or resign for Good Reason during the Term of this Agreement. Capitalized terms are defined in the last section of this Agreement. 1. Purpose The Company considers a sound and vital management team to be essential. Management personnel who become concerned about the possibility that the Company may undergo a Change in Control or a Change in Management may terminate employment or become distracted. Accordingly, the Board has determined that appropriate steps should be taken to minimize the distraction executives may suffer from the possibility of a Change in Control or Management. One step is to enter into this Agreement with you. 2. Your Promise If one or more of the events set forth in section 3 below occur during the Term of this Agreement, you promise not to resign for at least 12 full calendar months except as follows: (a) you may resign if you are given Good Reason to do so; and (b) you may terminate employment on account of retirement on or after attaining age 65 or because you become unable to work due to serious illness or injury. 3. Events That Trigger Severance Benefits (a) Termination After a Change in Management You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Management has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (b) Termination After a Change in Control You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Control has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (c) Termination After a Potential Change in Control You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Potential Change in Control has occurred but before a Change in Control actually occurs, your employment is terminated by the Company without Cause or you resign for Good Reason, but only if either: (i) you are terminated at the direction of a Person who has entered into an agreement with the Company that will result in a Change in Control; or (ii) the event constituting Good Reason occurs at the direction of such Person. (d) Successor Fails To Assume This Agreement You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement, a successor to the Company fails to assume this Agreement, as provided in Section 13(a). 4. Events That Do Not Trigger Severance Benefits You will not be entitled to Severance Benefits if your employment ends because you are terminated for Cause or on account of Disability or because you resign without Good Reason, retire, or die. Except as provided in Section 3(c), you will not be entitled to Severance Benefits while you remain protected by this Agreement and remain employed by the Company, its affiliates, or their successors. 5. Termination Procedures If you are terminated by the Company after the Change and during the Term of this Agreement, you will receive written notice of your termination If you are being terminated for Cause, your notice of termination will include a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (at a meeting of the Board called and held for the purpose of considering your termination (after reasonable notice to you and an opportunity for you and your counsel to be heard before the Board)) finding that, in the good faith opinion of the Board, Cause for your termination exists and specifying the basis for that opinion in detail. 6. Severance Benefits (a) In General If you become entitled to Severance Benefits under this Agreement, you may receive all of the Severance Benefits described in this Section. Severance benefits will be payable to you following your termination of employment only if you deliver to the Company (on the form and by the deadline it prescribes) your executed general release of all claims you may have against the Company and its affiliates relating to your termination of employment, other than claims under this Agreement, indemnification rights for your acts in the course and scope of your employment, or under ERISA-regulated employee benefit plans of the Company. (b) Lump-Sum Payment in Lieu of Future Compensation In lieu of any further cash compensation for periods after your employment ends, you will be paid a cash lump sum equal to 1.0 times your annual base salary in effect when your employment ends or, if higher, in effect immediately before the Change, or Good Reason event for which you terminate employment (c) Group Insurance Benefit Continuation During the period that begins when you become entitled to Severance Benefits under this Agreement and ends on the last day of the 12th calendar month beginning thereafter, the Company shall provide, at no cost to you or your spouse or dependents, the life, disability, accident, and health insurance benefits (or substantially similar benefits) it was providing to you and your spouse and dependents immediately before you became entitled to Severance Benefits under this Agreement (or immediately before a benefit reduction that constitutes Good Reason, if you terminate employment for that Good Reason). These benefits shall be treated as satisfying the Company's COBRA obligations. After benefit continuation under this subsection ends, you and your spouse and dependents will be entitled to any remaining COBRA rights. (d) Acceleration of Vesting under Stock Option Plans To the extent permitted by the terms of the plans or under applicable law, your rights to options granted under any of the Company's stock option plans shall be immediately vested. (e) Allowance for Professional Services You will receive an allowance of $10,000 for your use for outplacement, legal services, tax advice, or other professional services in connection with the termination of your employment with the Company. Upon presentation of invoices, the Company will pay the service providers directly until the allowance has been exhausted. If any balance remains in the allowance fund at the end of six months following termination, that balance will be paid to you in a lump sum; the unused balance shall be determined on the basis of invoices received by the Company on or before the end of the allowance period. The Company shall have no other responsibility for expenses incurred by you except as otherwise set forth in this Agreement. (f) Payment of Accrued Personal Time Off ("PTO") The Company will pay you all PTO that has accrued through the date your employment terminates. No additional PTO shall accrue thereafter. (g) Deferred Compensation Plans Your vested rights under the Company's 401(k) Salary Deferral Plan and the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to be governed by the terms and conditions of the Plan documents and applicable law. 7. Time for Payment You will be paid your cash Severance Benefits within 15 days after you become entitled to Severance Benefits under this Agreement (e.g., within 15 days following your termination of employment 8. Relation to Other Severance Programs Your Severance Benefits under this Agreement are in lieu of any severance or similar benefits that may be payable to you under any other employment agreement or other arrangement; to the extent any such benefits are paid to you, they shall be applied to reduce the amount due under this Agreement. This Agreement constitutes the entire agreement between you and the Company and its affiliates with respect to such benefits. Notwithstanding any other provision of this Agreement, if you are terminated for any reason not addressed by this Agreement, other than termination for Cause, you will receive separation benefits consistent with the Companys written severance policy or six months salary, whichever is greater. 9. Disability Following a Change in Control, while you are absent from work as a result of physical or mental illness, the Company will continue to pay you your full salary and provide you all other compensation and benefits payable to you under the Company's compensation or benefit plans, programs, or arrangements. These payments will stop if and when your employment is terminated by the Company for Disability or at the end of the Term of this Agreement, whichever is earlier. Severance Benefits under this Agreement are not payable if you are terminated on account of your Disability. 10. Effect of Reemployment Your Severance Benefits will not be reduced by any other compensation you earn or could have earned. 11. Successors (a) Assumption Required In addition to obligations imposed by law on a successor to the Company, during the Term of this Agreement the Company will require any successor to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company was required to perform. If the Company fails to obtain such an assumption and agreement before the effective date of a succession, you will be entitled to Severance Benefits as if you were terminated by the Company without Cause on the effective date of that succession. Notwithstanding the foregoing, you and the Company or its successor may in writing agree to replace or modify the terms of this Agreement. (b) Heirs and Assigns This Agreement will inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you die while any amount is still payable to you under this Agreement, that amount will be paid to the executor, personal representative, or administrator of your estate. 12. Amendments This Agreement may be modified only by a written agreement executed by you and the Chairman of the Board of Directors of the Company. 13. Governing Law This Agreement creates a "top hat" employee benefit plan subject to the Employee Retirement Income Security Act of 1974, and it shall be interpreted, administered, and enforced in accordance with that law; the Company is the "plan administrator." To the extent that state law is applicable, the statutes and common law of the State of California (excluding its choice of law statutes or common law) shall apply. 14. Dispute Resolution (a) Sole Remedy Both you and the Company agree that the sole and exclusive remedy for any alleged breach of this Agreement by the other, or for any other dispute arising out of any act or omission of you or the Company affecting, involving or relating to this Agreement, shall be final and binding arbitration conducted by and pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association in the County of San Francisco, California. The Parties expressly waive venue in any other county or state in which they live or might live. (b) Time Before demanding arbitration, the Party making the demand shall serve written notice upon the other Party of the alleged breach or claim. Such written notice must be served by hand delivery or by being placed in the U.S. Mail, postage pre-paid, return receipt requested, or with an overnight mail delivery service, not more than ninety (90) days after the breach or after the claim arises. Failure timely to serve such notice shall constitute a waiver of the claim. The party upon whom the notice is served shall have thirty (30) days from the date of receipt of the notice to respond. If the party upon whom the notice is served fails to respond within that time, of if the claim is not resolved within that time, the party seeking arbitration must serve a demand for arbitration upon the American Arbitration Association within fourteen (14) days. Failure timely to serve the demand shall constitute a waiver of the claim. (c) Expenses and Attorneys' Fees The prevailing party in any such proceeding, as determined by the arbitrator, shall be entitled to an award of its reasonable attorneys' fees and costs, including the full cost of the arbitration. 15. Limitation on Employee Rights This Agreement does not give you the right to be retained in the service of the Company. 16. Validity The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 17. Counterparts This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument. 18. Giving Notice (a) To the Company All communications from you to the Company relating to this Agreement must be sent to the Company in writing, addressed as follows (or in any other manner the Company notifies you to use): If Mailed Harding Lawson Associates Attention: Greg Klein 7655 Redwood Boulevard P. O. Box 578 Novato, California 94948 If Faxed Harding Lawson Associates Attention: Greg Klein Fax: (415) 892 - 0685 Tel.: (415) 892 - 0821 (b) To You All communications from the Company to you relating to this Agreement must be sent to you in writing, addressed as indicated at the end of this Agreement. 19. Definitions (a) Agreement "Agreement" means this contract, as amended. (b) Beneficial Owner "Beneficial Owner" has the meaning set forth in Rule 13d-3 under the Exchange Act. (c) Board "Board" means the Board of Directors of the Company. (d) Cause "Cause" means any of the following: (1) Willful Failure to Perform Duties. You continue willfully to fail to perform your duties for the Company after a written demand for performance has been delivered to you by the Board that specifically identifies how you have failed to perform. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company or if your failure to perform was caused by your physical or mental illness. You may not be terminated for Cause under this paragraph after you have properly notified the Company that you are resigning for Good Reason. (2) Willful Adverse Conduct. You willfully engage in conduct that is demonstrably and materially injurious to the Company or its affiliates, monetarily or otherwise. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company. (e) Change in Control "Change in Control," means the first of the following to occur after the date of this Agreement: (1) Acquisition of Controlling Interest. Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. In applying the preceding sentence, securities acquired directly from the Company or its affiliates by or for the Person shall not be taken into account. (2) Merger Approved. The shareholders of the Company approve a merger or consolidation of the Company with any other corporation unless: (a) the voting securities of the Company outstanding immediately before the merger or consolidation would continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; and (b) no Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. (3) Sale of Assets. The shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets or a plan of complete liquidation of the Company. (f) Change in Management "Change in Management," means the Company has hired a new Chief Executive Officer ("CEO"). (g) Code "Code" means the Internal Revenue Code of 1986, as amended. (h) Company "Company" means Harding Lawson Associates Group Inc. and any successor to its business or assets that (by operation of law, or otherwise) assumes and agrees to perform this Agreement. However, for purposes of determining whether a Change in Control has occurred in connection with such a succession, the successor shall not be considered to be the Company. (i) Disability "Disability" means that, due to physical or mental illness: (i) you have been absent from the full-time performance of your duties with the Company for substantially all of a period of 6 consecutive months; (ii) the Company has notified you that it intends to terminate you on account of Disability; and (iii) you do not resume the full-time performance of your duties within 30 days after receiving notice of your intended termination on account of Disability. (j) Exchange Act "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) Good Reason "Good Reason" means the occurrence of any of the following without your express written consent after the Change: (1) Demotion. Your duties and responsibilities are substantially and adversely altered from those in effect immediately before the Change, other than merely as a result of the Company ceasing to be a public company, a change in your title, or your transfer to an affiliate. (2) Pay Cut. Your annual base salary is reduced other than as part of across-the-board salary reductions affecting all employees of similar status employed by the Company and any Person in control of the Company. (3) Relocation. Your principal office is transferred to another location, which increases your one-way commute to work by more than 50 miles, based on your residence when the transfer was announced or, if you consent to the transfer, the Company fails to pay (or reimburse you) for all reasonable moving expenses you incur in changing your principal residence in connection with the relocation and to indemnify you against any loss you may realize when you sell your principal residence in connection with the relocation in an arm's-length sale for adequate consideration. For purposes of the preceding sentence, your "loss" will be the difference between the actual sales price of your residence and the higher of: (a) your aggregate investment in the residence; or (b) the fair market value of the residence, as determined by a real estate appraiser designated by you and satisfactory to the Company. (4) Discontinuance of Compensation Plan Participation. Other than as part of an across-the-board reduction affecting all employees of similar status employed by the Company and any Person in control of the Company, the Company fails to continue, or continue your participation in, any compensation plan in which you participated immediately before the Change that is material to your total compensation, unless an equitable substitute arrangement has been adopted or made available on a basis not materially less favorable to you than the plan in effect immediately before the Change, both as to the benefits you receive and your level of participation relative to other participants. The plans referred to in the preceding sentence include such programs as Incentive Compensation Plan and Incentive Stock Option Plan (if still in effect immediately before the Change), similar programs, and any substitute plans adopted before the Change. (5) Discontinuance of Benefits. Other than as part of an across-the-board change affecting all employees of similar status employed by the Company, the Company stops providing you with benefits that, in the aggregate, are substantially as valuable to you as those you enjoyed immediately before the Change under the Company's pension, savings, deferred compensation, life insurance, medical, health, disability, accident, vacation, and any other fringe benefit plans, programs, and arrangements. (6) Notice of Prospective Action. During the Term of this Agreement, you are officially notified or it is officially announced that the Company will take any of the actions listed above. However, an event that is or would constitute Good Reason shall cease to be Good Reason if: (a) you do not terminate employment within 90 days after the event occurs; (b) the Company reverses the action or cures the default that constitutes Good Reason before you terminate employment; or (c) you were a primary instigator of the Good Reason event and the circumstances make it inappropriate for you to receive benefits under this Agreement (e.g., you agree temporarily to relinquish your position on the occurrence of a merger transaction you negotiate). If you have Good Reason to terminate employment, you may do so even if you are on a leave of absence due to physical or mental illness or any other reason. (l) Person "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Section 13(d) of that Act, and shall include a "group," as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not include: (i) the Company or any of its subsidiaries; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) 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. (m) Potential Change in Control "Potential Change in Control" means that any of the following has occurred during the term of this Agreement: (1) Agreement Signed. The Company enters into an agreement that will result in a Change in Control. (2) Notice of Intent to Seek Change in Control. The Company or any Person publicly announces an intention to take or to consider taking actions that will result in a Change in Control. (3) Board Declaration. With respect to this Agreement, the Board adopts a resolution declaring that a Potential Change in Control has occurred. (n) Severance Benefits "Severance Benefits" means your benefits under Section 6 of this Agreement. (o) Term of this Agreement "Term of this Agreement" means the period that commences on the date of this Agreement and ends on the later of: (1) The last day of the 24th month from the date of this Agreement. or (2) The last day of the 12th month from the Change. Date 02/22/99 /s/ Greg P. Klein Gregory P. Klein Vice President - Human Resources Date 02/17/99 /s/ D. K. Stager Donald K. Stager Chairman - Compensation Committee Date 02/17/99 /s/ Claude Corvino Claude Corvino Company notices to you shall be addressed as follows (or in any other manner you notify the Company to use): If Mailed Claude Corvino 1172 Wikiup Drive. Santa Rosa, Ca. 95403 If Faxed Claude Corvino Fax: N/A Tel.: (707) 545-4664 EX-10 4 10.14 RETENTION AGREEMENT ARTHUR C. RIESE RETENTION AGREEMENT This Agreement between Arthur C. Riese (you) and Harding Lawson Associates Group Inc. (Company) have been entered into as of February 17, 1999. This Agreement promises you severance benefits if, following a Change of Control, a Potential Change in Control or a Change of Management, (referred to collectively hereafter as the "Change") you are terminated without Cause or resign for Good Reason during the Term of this Agreement. Capitalized terms are defined in the last section of this Agreement. 1. Purpose The Company considers a sound and vital management team to be essential. Management personnel who become concerned about the possibility that the Company may undergo a Change in Control or a Change in Management may terminate employment or become distracted. Accordingly, the Board has determined that appropriate steps should be taken to minimize the distraction executives may suffer from the possibility of a Change in Control or Management. One step is to enter into this Agreement with you. 2. Your Promise If one or more of the events set forth in section 3 below occur during the Term of this Agreement, you promise not to resign for at least 12 full calendar months except as follows: (a) you may resign if you are given Good Reason to do so; and (b) you may terminate employment on account of retirement on or after attaining age 65 or because you become unable to work due to serious illness or injury. 3. Events That Trigger Severance Benefits (a) Termination After a Change in Management You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Management has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (b) Termination After a Change in Control You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Control has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (c) Termination After a Potential Change in Control You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Potential Change in Control has occurred but before a Change in Control actually occurs, your employment is terminated by the Company without Cause or you resign for Good Reason, but only if either: (i) you are terminated at the direction of a Person who has entered into an agreement with the Company that will result in a Change in Control; or (ii) the event constituting Good Reason occurs at the direction of such Person. (d) Successor Fails To Assume This Agreement You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement, a successor to the Company fails to assume this Agreement, as provided in Section 13(a). 4. Events That Do Not Trigger Severance Benefits You will not be entitled to Severance Benefits if your employment ends because you are terminated for Cause or on account of Disability or because you resign without Good Reason, retire, or die. Except as provided in Section 3(c), you will not be entitled to Severance Benefits while you remain protected by this Agreement and remain employed by the Company, its affiliates, or their successors. 5. Termination Procedures If you are terminated by the Company after the Change and during the Term of this Agreement, you will receive written notice of your termination If you are being terminated for Cause, your notice of termination will include a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (at a meeting of the Board called and held for the purpose of considering your termination (after reasonable notice to you and an opportunity for you and your counsel to be heard before the Board)) finding that, in the good faith opinion of the Board, Cause for your termination exists and specifying the basis for that opinion in detail. 6. Severance Benefits (a) In General If you become entitled to Severance Benefits under this Agreement, you may receive all of the Severance Benefits described in this Section. Severance benefits will be payable to you following your termination of employment only if you deliver to the Company (on the form and by the deadline it prescribes) your executed general release of all claims you may have against the Company and its affiliates relating to your termination of employment, other than claims under this Agreement, indemnification rights for your acts in the course and scope of your employment, or under ERISA-regulated employee benefit plans of the Company. (b) Lump-Sum Payment in Lieu of Future Compensation In lieu of any further cash compensation for periods after your employment ends, you will be paid a cash lump sum equal to 1.0 times your annual base salary in effect when your employment ends or, if higher, in effect immediately before the Change, or Good Reason event for which you terminate employment (c) Group Insurance Benefit Continuation During the period that begins when you become entitled to Severance Benefits under this Agreement and ends on the last day of the 12th calendar month beginning thereafter, the Company shall provide, at no cost to you or your spouse or dependents, the life, disability, accident, and health insurance benefits (or substantially similar benefits) it was providing to you and your spouse and dependents immediately before you became entitled to Severance Benefits under this Agreement (or immediately before a benefit reduction that constitutes Good Reason, if you terminate employment for that Good Reason). These benefits shall be treated as satisfying the Company's COBRA obligations. After benefit continuation under this subsection ends, you and your spouse and dependents will be entitled to any remaining COBRA rights. (d) Acceleration of Vesting under Stock Option Plans To the extent permitted by the terms of the plans or under applicable law, your rights to options granted under any of the Company's stock option plans shall be immediately vested. (e) Allowance for Professional Services You will receive an allowance of $10,000 for your use for outplacement, legal services, tax advice, or other professional services in connection with the termination of your employment with the Company. Upon presentation of invoices, the Company will pay the service providers directly until the allowance has been exhausted. If any balance remains in the allowance fund at the end of six months following termination, that balance will be paid to you in a lump sum; the unused balance shall be determined on the basis of invoices received by the Company on or before the end of the allowance period. The Company shall have no other responsibility for expenses incurred by you except as otherwise set forth in this Agreement. (f) Payment of Accrued Personal Time Off ("PTO") The Company will pay you all PTO that has accrued through the date your employment terminates. No additional PTO shall accrue thereafter. (g) Deferred Compensation Plans Your vested rights under the Company's 401(k) Salary Deferral Plan and the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to be governed by the terms and conditions of the Plan documents and applicable law. 7. Time for Payment You will be paid your cash Severance Benefits within 15 days after you become entitled to Severance Benefits under this Agreement (e.g., within 15 days following your termination of employment 8. Relation to Other Severance Programs Your Severance Benefits under this Agreement are in lieu of any severance or similar benefits that may be payable to you under any other employment agreement or other arrangement; to the extent any such benefits are paid to you, they shall be applied to reduce the amount due under this Agreement. This Agreement constitutes the entire agreement between you and the Company and its affiliates with respect to such benefits. Notwithstanding any other provision of this Agreement, if you are terminated for any reason not addressed by this Agreement, other than termination for Cause, you will receive separation benefits consistent with the Companys written severance policy or six months salary, whichever is greater. 9. Disability Following a Change in Control, while you are absent from work as a result of physical or mental illness, the Company will continue to pay you your full salary and provide you all other compensation and benefits payable to you under the Company's compensation or benefit plans, programs, or arrangements. These payments will stop if and when your employment is terminated by the Company for Disability or at the end of the Term of this Agreement, whichever is earlier. Severance Benefits under this Agreement are not payable if you are terminated on account of your Disability. 10. Effect of Reemployment Your Severance Benefits will not be reduced by any other compensation you earn or could have earned. 11. Successors (a) Assumption Required In addition to obligations imposed by law on a successor to the Company, during the Term of this Agreement the Company will require any successor to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company was required to perform. If the Company fails to obtain such an assumption and agreement before the effective date of a succession, you will be entitled to Severance Benefits as if you were terminated by the Company without Cause on the effective date of that succession. Notwithstanding the foregoing, you and the Company or its successor may in writing agree to replace or modify the terms of this Agreement. (b) Heirs and Assigns This Agreement will inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you die while any amount is still payable to you under this Agreement, that amount will be paid to the executor, personal representative, or administrator of your estate. 12. Amendments This Agreement may be modified only by a written agreement executed by you and the Chairman of the Board of Directors of the Company. 13. Governing Law This Agreement creates a "top hat" employee benefit plan subject to the Employee Retirement Income Security Act of 1974, and it shall be interpreted, administered, and enforced in accordance with that law; the Company is the "plan administrator." To the extent that state law is applicable, the statutes and common law of the State of California (excluding its choice of law statutes or common law) shall apply. 14. Dispute Resolution (a) Sole Remedy Both you and the Company agree that the sole and exclusive remedy for any alleged breach of this Agreement by the other, or for any other dispute arising out of any act or omission of you or the Company affecting, involving or relating to this Agreement, shall be final and binding arbitration conducted by and pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association in the County of San Francisco, California. The Parties expressly waive venue in any other county or state in which they live or might live. (b) Time Before demanding arbitration, the Party making the demand shall serve written notice upon the other Party of the alleged breach or claim. Such written notice must be served by hand delivery or by being placed in the U.S. Mail, postage pre-paid, return receipt requested, or with an overnight mail delivery service, not more than ninety (90) days after the breach or after the claim arises. Failure timely to serve such notice shall constitute a waiver of the claim. The party upon whom the notice is served shall have thirty (30) days from the date of receipt of the notice to respond. If the party upon whom the notice is served fails to respond within that time, of if the claim is not resolved within that time, the party seeking arbitration must serve a demand for arbitration upon the American Arbitration Association within fourteen (14) days. Failure timely to serve the demand shall constitute a waiver of the claim. (c) Expenses and Attorneys' Fees The prevailing party in any such proceeding, as determined by the arbitrator, shall be entitled to an award of its reasonable attorneys' fees and costs, including the full cost of the arbitration. 15. Limitation on Employee Rights This Agreement does not give you the right to be retained in the service of the Company. 16. Validity The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 17. Counterparts This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument. 18. Giving Notice (a) To the Company All communications from you to the Company relating to this Agreement must be sent to the Company in writing, addressed as follows (or in any other manner the Company notifies you to use): If Mailed Harding Lawson Associates Attention: Greg Klein 7655 Redwood Boulevard P. O. Box 578 Novato, California 94948 If Faxed Harding Lawson Associates Attention: Greg Klein Fax: (415) 892 - 0685 Tel.: (415) 892 - 0821 (b) To You All communications from the Company to you relating to this Agreement must be sent to you in writing, addressed as indicated at the end of this Agreement. 19. Definitions (a) Agreement "Agreement" means this contract, as amended. (b) Beneficial Owner "Beneficial Owner" has the meaning set forth in Rule 13d-3 under the Exchange Act. (c) Board "Board" means the Board of Directors of the Company. (d) Cause "Cause" means any of the following: (1) Willful Failure to Perform Duties. You continue willfully to fail to perform your duties for the Company after a written demand for performance has been delivered to you by the Board that specifically identifies how you have failed to perform. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company or if your failure to perform was caused by your physical or mental illness. You may not be terminated for Cause under this paragraph after you have properly notified the Company that you are resigning for Good Reason. (2) Willful Adverse Conduct. You willfully engage in conduct that is demonstrably and materially injurious to the Company or its affiliates, monetarily or otherwise. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company. (e) Change in Control "Change in Control," means the first of the following to occur after the date of this Agreement: (1) Acquisition of Controlling Interest. Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. In applying the preceding sentence, securities acquired directly from the Company or its affiliates by or for the Person shall not be taken into account. (2) Merger Approved. The shareholders of the Company approve a merger or consolidation of the Company with any other corporation unless: (a) the voting securities of the Company outstanding immediately before the merger or consolidation would continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; and (b) no Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. (3) Sale of Assets. The shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets or a plan of complete liquidation of the Company. (f) Change in Management "Change in Management," means the Company has hired a new Chief Executive Officer ("CEO"). (g) Code "Code" means the Internal Revenue Code of 1986, as amended. (h) Company "Company" means Harding Lawson Associates Group Inc. and any successor to its business or assets that (by operation of law, or otherwise) assumes and agrees to perform this Agreement. However, for purposes of determining whether a Change in Control has occurred in connection with such a succession, the successor shall not be considered to be the Company. (i) Disability "Disability" means that, due to physical or mental illness: (i) you have been absent from the full-time performance of your duties with the Company for substantially all of a period of 6 consecutive months; (ii) the Company has notified you that it intends to terminate you on account of Disability; and (iii) you do not resume the full-time performance of your duties within 30 days after receiving notice of your intended termination on account of Disability. (j) Exchange Act "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) Good Reason "Good Reason" means the occurrence of any of the following without your express written consent after the Change: (1) Demotion. Your duties and responsibilities are substantially and adversely altered from those in effect immediately before the Change, other than merely as a result of the Company ceasing to be a public company, a change in your title, or your transfer to an affiliate. (2) Pay Cut. Your annual base salary is reduced other than as part of across-the-board salary reductions affecting all employees of similar status employed by the Company and any Person in control of the Company. (3) Relocation. Your principal office is transferred to another location, which increases your one-way commute to work by more than 50 miles, based on your residence when the transfer was announced or, if you consent to the transfer, the Company fails to pay (or reimburse you) for all reasonable moving expenses you incur in changing your principal residence in connection with the relocation and to indemnify you against any loss you may realize when you sell your principal residence in connection with the relocation in an arm's-length sale for adequate consideration. For purposes of the preceding sentence, your "loss" will be the difference between the actual sales price of your residence and the higher of: (a) your aggregate investment in the residence; or (b) the fair market value of the residence, as determined by a real estate appraiser designated by you and satisfactory to the Company. (4) Discontinuance of Compensation Plan Participation. Other than as part of an across-the-board reduction affecting all employees of similar status employed by the Company and any Person in control of the Company, the Company fails to continue, or continue your participation in, any compensation plan in which you participated immediately before the Change that is material to your total compensation, unless an equitable substitute arrangement has been adopted or made available on a basis not materially less favorable to you than the plan in effect immediately before the Change, both as to the benefits you receive and your level of participation relative to other participants. The plans referred to in the preceding sentence include such programs as Incentive Compensation Plan and Incentive Stock Option Plan (if still in effect immediately before the Change), similar programs, and any substitute plans adopted before the Change. (5) Discontinuance of Benefits. Other than as part of an across-the-board change affecting all employees of similar status employed by the Company, the Company stops providing you with benefits that, in the aggregate, are substantially as valuable to you as those you enjoyed immediately before the Change under the Company's pension, savings, deferred compensation, life insurance, medical, health, disability, accident, vacation, and any other fringe benefit plans, programs, and arrangements. (6) Notice of Prospective Action. During the Term of this Agreement, you are officially notified or it is officially announced that the Company will take any of the actions listed above. However, an event that is or would constitute Good Reason shall cease to be Good Reason if: (a) you do not terminate employment within 90 days after the event occurs; (b) the Company reverses the action or cures the default that constitutes Good Reason before you terminate employment; or (c) you were a primary instigator of the Good Reason event and the circumstances make it inappropriate for you to receive benefits under this Agreement (e.g., you agree temporarily to relinquish your position on the occurrence of a merger transaction you negotiate). If you have Good Reason to terminate employment, you may do so even if you are on a leave of absence due to physical or mental illness or any other reason. (l) Person "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Section 13(d) of that Act, and shall include a "group," as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not include: (i) the Company or any of its subsidiaries; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) 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. (m) Potential Change in Control "Potential Change in Control" means that any of the following has occurred during the term of this Agreement: (1) Agreement Signed. The Company enters into an agreement that will result in a Change in Control. (2) Notice of Intent to Seek Change in Control. The Company or any Person publicly announces an intention to take or to consider taking actions that will result in a Change in Control. (3) Board Declaration. With respect to this Agreement, the Board adopts a resolution declaring that a Potential Change in Control has occurred. (n) Severance Benefits "Severance Benefits" means your benefits under Section 6 of this Agreement. (o) Term of this Agreement "Term of this Agreement" means the period that commences on the date of this Agreement and ends on the later of: (1) The last day of the 24th month from the date of this Agreement. or (2) The last day of the 12th month from the Change. Date 02/22/99 /s/Greg P. Klein Gregory P. Klein Vice President - Human Resources Date 02/17/99 /s/D.K. Stager Donald K. Stager Chairman - Compensation Committee Date 02/17/99 /s/Arthur C. Riese Arthur C. Riese Company notices to you shall be addressed as follows (or in any other manner you notify the Company to use): If Mailed Arthur C. Riese 1025 S. Josephine. Denver, CO 80209 If Faxed Arthur C. Riese Fax: N/A Tel.: (303) 733-2379 EX-10 5 10.15 RETENTION AGREEMENT GREGORY A. THORNTON EXECUTIVE RETENTION AGREEMENT This Agreement between Gregory A. Thornton (you) and Harding Lawson Associates Group Inc. (Company) have been entered into as of February 17, 1999. This Agreement promises you severance benefits if, following a Change of Control, a Potential Change in Control or a Change of Management, (referred to collectively hereafter as the "Change") you are terminated without Cause or resign for Good Reason during the Term of this Agreement. Capitalized terms are defined in the last section of this Agreement. 1. Purpose The Company considers a sound and vital management team to be essential. Management personnel who become concerned about the possibility that the Company may undergo a Change in Control or a Change in Management may terminate employment or become distracted. Accordingly, the Board has determined that appropriate steps should be taken to minimize the distraction executives may suffer from the possibility of a Change in Control or Management. One step is to enter into this Agreement with you. 2. Your Promise If one or more of the events set forth in section 3 below occur during the Term of this Agreement, you promise not to resign for at least 12 full calendar months except as follows: (a) you may resign if you are given Good Reason to do so; and (b) you may terminate employment on account of retirement on or after attaining age 65 or because you become unable to work due to serious illness or injury. 3. Events That Trigger Severance Benefits (a) Termination After a Change in Management You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Management has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (b) Termination After a Change in Control You will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Change in Control has occurred, your employment is terminated by the Company without Cause (other than on account of your Disability) or you resign for Good Reason. (c) Termination After a Potential Change in Control You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement and within twelve months after a Potential Change in Control has occurred but before a Change in Control actually occurs, your employment is terminated by the Company without Cause or you resign for Good Reason, but only if either: (i) you are terminated at the direction of a Person who has entered into an agreement with the Company that will result in a Change in Control; or (ii) the event constituting Good Reason occurs at the direction of such Person. (d) Successor Fails To Assume This Agreement You also will receive Severance Benefits under this Agreement if, during the Term of this Agreement, a successor to the Company fails to assume this Agreement, as provided in Section 13(a). 4. Events That Do Not Trigger Severance Benefits You will not be entitled to Severance Benefits if your employment ends because you are terminated for Cause or on account of Disability or because you resign without Good Reason, retire, or die. Except as provided in Section 3(c), you will not be entitled to Severance Benefits while you remain protected by this Agreement and remain employed by the Company, its affiliates, or their successors. 5. Termination Procedures If you are terminated by the Company after the Change and during the Term of this Agreement, you will receive written notice of your termination If you are being terminated for Cause, your notice of termination will include a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (at a meeting of the Board called and held for the purpose of considering your termination (after reasonable notice to you and an opportunity for you and your counsel to be heard before the Board)) finding that, in the good faith opinion of the Board, Cause for your termination exists and specifying the basis for that opinion in detail. 6. Severance Benefits (a) In General If you become entitled to Severance Benefits under this Agreement, you may receive all of the Severance Benefits described in this Section. Severance benefits will be payable to you following your termination of employment only if you deliver to the Company (on the form and by the deadline it prescribes) your executed general release of all claims you may have against the Company and its affiliates relating to your termination of employment, other than claims under this Agreement, indemnification rights for your acts in the course and scope of your employment, or under ERISA-regulated employee benefit plans of the Company. (b) Lump-Sum Payment in Lieu of Future Compensation In lieu of any further cash compensation for periods after your employment ends, you will be paid a cash lump sum equal to 1.0 times your annual base salary in effect when your employment ends or, if higher, in effect immediately before the Change, or Good Reason event for which you terminate employment (c) Group Insurance Benefit Continuation During the period that begins when you become entitled to Severance Benefits under this Agreement and ends on the last day of the 12th calendar month beginning thereafter, the Company shall provide, at no cost to you or your spouse or dependents, the life, disability, accident, and health insurance benefits (or substantially similar benefits) it was providing to you and your spouse and dependents immediately before you became entitled to Severance Benefits under this Agreement (or immediately before a benefit reduction that constitutes Good Reason, if you terminate employment for that Good Reason). These benefits shall be treated as satisfying the Company's COBRA obligations. After benefit continuation under this subsection ends, you and your spouse and dependents will be entitled to any remaining COBRA rights. (d) Acceleration of Vesting under Stock Option Plans To the extent permitted by the terms of the plans or under applicable law, your rights to options granted under any of the Company's stock option plans shall be immediately vested. (e) Allowance for Professional Services You will receive an allowance of $10,000 for your use for outplacement, legal services, tax advice, or other professional services in connection with the termination of your employment with the Company. Upon presentation of invoices, the Company will pay the service providers directly until the allowance has been exhausted. If any balance remains in the allowance fund at the end of six months following termination, that balance will be paid to you in a lump sum; the unused balance shall be determined on the basis of invoices received by the Company on or before the end of the allowance period. The Company shall have no other responsibility for expenses incurred by you except as otherwise set forth in this Agreement. (f) Payment of Accrued Personal Time Off ("PTO") The Company will pay you all PTO that has accrued through the date your employment terminates. No additional PTO shall accrue thereafter. (g) Deferred Compensation Plans Your vested rights under the Company's 401(k) Salary Deferral Plan and the Company's Rabbi Trust Non-Qualified Salary Deferral Plan shall continue to be governed by the terms and conditions of the Plan documents and applicable law. 7. Time for Payment You will be paid your cash Severance Benefits within 15 days after you become entitled to Severance Benefits under this Agreement (e.g., within 15 days following your termination of employment 8. Relation to Other Severance Programs Your Severance Benefits under this Agreement are in lieu of any severance or similar benefits that may be payable to you under any other employment agreement or other arrangement; to the extent any such benefits are paid to you, they shall be applied to reduce the amount due under this Agreement. This Agreement constitutes the entire agreement between you and the Company and its affiliates with respect to such benefits. Notwithstanding any other provision of this Agreement, if you are terminated for any reason not addressed by this Agreement, other than termination for Cause, you will receive separation benefits consistent with the Companys written severance policy or six months salary, whichever is greater. 9. Disability Following a Change in Control, while you are absent from work as a result of physical or mental illness, the Company will continue to pay you your full salary and provide you all other compensation and benefits payable to you under the Company's compensation or benefit plans, programs, or arrangements. These payments will stop if and when your employment is terminated by the Company for Disability or at the end of the Term of this Agreement, whichever is earlier. Severance Benefits under this Agreement are not payable if you are terminated on account of your Disability. 10. Effect of Reemployment Your Severance Benefits will not be reduced by any other compensation you earn or could have earned. 11. Successors (a) Assumption Required In addition to obligations imposed by law on a successor to the Company, during the Term of this Agreement the Company will require any successor to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company was required to perform. If the Company fails to obtain such an assumption and agreement before the effective date of a succession, you will be entitled to Severance Benefits as if you were terminated by the Company without Cause on the effective date of that succession. Notwithstanding the foregoing, you and the Company or its successor may in writing agree to replace or modify the terms of this Agreement. (b) Heirs and Assigns This Agreement will inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you die while any amount is still payable to you under this Agreement, that amount will be paid to the executor, personal representative, or administrator of your estate. 12. Amendments This Agreement may be modified only by a written agreement executed by you and the Chairman of the Board of Directors of the Company. 13. Governing Law This Agreement creates a "top hat" employee benefit plan subject to the Employee Retirement Income Security Act of 1974, and it shall be interpreted, administered, and enforced in accordance with that law; the Company is the "plan administrator." To the extent that state law is applicable, the statutes and common law of the State of California (excluding its choice of law statutes or common law) shall apply. 14. Dispute Resolution (a) Sole Remedy Both you and the Company agree that the sole and exclusive remedy for any alleged breach of this Agreement by the other, or for any other dispute arising out of any act or omission of you or the Company affecting, involving or relating to this Agreement, shall be final and binding arbitration conducted by and pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association in the County of San Francisco, California. The Parties expressly waive venue in any other county or state in which they live or might live. (b) Time Before demanding arbitration, the Party making the demand shall serve written notice upon the other Party of the alleged breach or claim. Such written notice must be served by hand delivery or by being placed in the U.S. Mail, postage pre-paid, return receipt requested, or with an overnight mail delivery service, not more than ninety (90) days after the breach or after the claim arises. Failure timely to serve such notice shall constitute a waiver of the claim. The party upon whom the notice is served shall have thirty (30) days from the date of receipt of the notice to respond. If the party upon whom the notice is served fails to respond within that time, of if the claim is not resolved within that time, the party seeking arbitration must serve a demand for arbitration upon the American Arbitration Association within fourteen (14) days. Failure timely to serve the demand shall constitute a waiver of the claim. (c) Expenses and Attorneys' Fees The prevailing party in any such proceeding, as determined by the arbitrator, shall be entitled to an award of its reasonable attorneys' fees and costs, including the full cost of the arbitration. 15. Limitation on Employee Rights This Agreement does not give you the right to be retained in the service of the Company. 16. Validity The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 17. Counterparts This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument. 18. Giving Notice (a) To the Company All communications from you to the Company relating to this Agreement must be sent to the Company in writing, addressed as follows (or in any other manner the Company notifies you to use): If Mailed Harding Lawson Associates Attention: Greg Klein 7655 Redwood Boulevard P. O. Box 578 Novato, California 94948 If Faxed Harding Lawson Associates Attention: Greg Klein Fax: (415) 892 - 0685 Tel.: (415) 892 - 0821 (b) To You All communications from the Company to you relating to this Agreement must be sent to you in writing, addressed as indicated at the end of this Agreement. 19. Definitions (a) Agreement "Agreement" means this contract, as amended. (b) Beneficial Owner "Beneficial Owner" has the meaning set forth in Rule 13d-3 under the Exchange Act. (c) Board "Board" means the Board of Directors of the Company. (d) Cause "Cause" means any of the following: (1) Willful Failure to Perform Duties. You continue willfully to fail to perform your duties for the Company after a written demand for performance has been delivered to you by the Board that specifically identifies how you have failed to perform. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company or if your failure to perform was caused by your physical or mental illness. You may not be terminated for Cause under this paragraph after you have properly notified the Company that you are resigning for Good Reason. (2) Willful Adverse Conduct. You willfully engage in conduct that is demonstrably and materially injurious to the Company or its affiliates, monetarily or otherwise. Your conduct will not be considered "willful" if you reasonably believed that you were acting in the best interests of the Company. (e) Change in Control "Change in Control," means the first of the following to occur after the date of this Agreement: (1) Acquisition of Controlling Interest. Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. In applying the preceding sentence, securities acquired directly from the Company or its affiliates by or for the Person shall not be taken into account. (2) Merger Approved. The shareholders of the Company approve a merger or consolidation of the Company with any other corporation unless: (a) the voting securities of the Company outstanding immediately before the merger or consolidation would continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; and (b) no Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities. (3) Sale of Assets. The shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets or a plan of complete liquidation of the Company. (f) Change in Management "Change in Management," means the Company has hired a new Chief Executive Officer ("CEO"). (g) Code "Code" means the Internal Revenue Code of 1986, as amended. (h) Company "Company" means Harding Lawson Associates Group Inc. and any successor to its business or assets that (by operation of law, or otherwise) assumes and agrees to perform this Agreement. However, for purposes of determining whether a Change in Control has occurred in connection with such a succession, the successor shall not be considered to be the Company. (i) Disability "Disability" means that, due to physical or mental illness: (i) you have been absent from the full-time performance of your duties with the Company for substantially all of a period of 6 consecutive months; (ii) the Company has notified you that it intends to terminate you on account of Disability; and (iii) you do not resume the full-time performance of your duties within 30 days after receiving notice of your intended termination on account of Disability. (j) Exchange Act "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) Good Reason "Good Reason" means the occurrence of any of the following without your express written consent after the Change: (1) Demotion. Your duties and responsibilities are substantially and adversely altered from those in effect immediately before the Change, other than merely as a result of the Company ceasing to be a public company, a change in your title, or your transfer to an affiliate. (2) Pay Cut. Your annual base salary is reduced other than as part of across-the-board salary reductions affecting all employees of similar status employed by the Company and any Person in control of the Company. (3) Relocation. Your principal office is transferred to another location, which increases your one-way commute to work by more than 50 miles, based on your residence when the transfer was announced or, if you consent to the transfer, the Company fails to pay (or reimburse you) for all reasonable moving expenses you incur in changing your principal residence in connection with the relocation and to indemnify you against any loss you may realize when you sell your principal residence in connection with the relocation in an arm's-length sale for adequate consideration. For purposes of the preceding sentence, your "loss" will be the difference between the actual sales price of your residence and the higher of: (a) your aggregate investment in the residence; or (b) the fair market value of the residence, as determined by a real estate appraiser designated by you and satisfactory to the Company. (4) Discontinuance of Compensation Plan Participation. Other than as part of an across-the-board reduction affecting all employees of similar status employed by the Company and any Person in control of the Company, the Company fails to continue, or continue your participation in, any compensation plan in which you participated immediately before the Change that is material to your total compensation, unless an equitable substitute arrangement has been adopted or made available on a basis not materially less favorable to you than the plan in effect immediately before the Change, both as to the benefits you receive and your level of participation relative to other participants. The plans referred to in the preceding sentence include such programs as Incentive Compensation Plan and Incentive Stock Option Plan (if still in effect immediately before the Change), similar programs, and any substitute plans adopted before the Change. (5) Discontinuance of Benefits. Other than as part of an across-the-board change affecting all employees of similar status employed by the Company, the Company stops providing you with benefits that, in the aggregate, are substantially as valuable to you as those you enjoyed immediately before the Change under the Company's pension, savings, deferred compensation, life insurance, medical, health, disability, accident, vacation, and any other fringe benefit plans, programs, and arrangements. (6) Notice of Prospective Action. During the Term of this Agreement, you are officially notified or it is officially announced that the Company will take any of the actions listed above. However, an event that is or would constitute Good Reason shall cease to be Good Reason if: (a) you do not terminate employment within 90 days after the event occurs; (b) the Company reverses the action or cures the default that constitutes Good Reason before you terminate employment; or (c) you were a primary instigator of the Good Reason event and the circumstances make it inappropriate for you to receive benefits under this Agreement (e.g., you agree temporarily to relinquish your position on the occurrence of a merger transaction you negotiate). If you have Good Reason to terminate employment, you may do so even if you are on a leave of absence due to physical or mental illness or any other reason. (l) Person "Person" has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Section 13(d) of that Act, and shall include a "group," as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not include: (i) the Company or any of its subsidiaries; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) 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. (m) Potential Change in Control "Potential Change in Control" means that any of the following has occurred during the term of this Agreement: (1) Agreement Signed. The Company enters into an agreement that will result in a Change in Control. (2) Notice of Intent to Seek Change in Control. The Company or any Person publicly announces an intention to take or to consider taking actions that will result in a Change in Control. (3) Board Declaration. With respect to this Agreement, the Board adopts a resolution declaring that a Potential Change in Control has occurred. (n) Severance Benefits "Severance Benefits" means your benefits under Section 6 of this Agreement. (o) Term of this Agreement "Term of this Agreement" means the period that commences on the date of this Agreement and ends on the later of: (1) The last day of the 24th month from the date of this Agreement. or (2) The last day of the 12th month from the Change. Date 02/22/99 /s/Greg P. Klein Gregory P. Klein Vice President - Human Resources Date 02/17/99 /s/D. K. Stager Donald K. Stager Chairman - Compensation Committee Date 02/17/99 /s/Gregory A. Thornton Gregory A. Thornton Company notices to you shall be addressed as follows (or in any other manner you notify the Company to use): If Mailed Gregory A. Thornton 45 Molino Ave. Mill Valley, Ca. 94941 If Faxed Gregory A. Thornton Fax: N/A Tel.: (415) 381 - 9059 EX-11 6 COMPUTATION OF PER SHARE EARNINGS
Exhibit No. 11 HARDING LAWSON ASSOCIATES GROUP, INC. Computation of Per Share Earnings (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended February 28, February 28, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Average basic shares outstanding 4,815 4,986 4,844 5,016 Net effect of dilutive stock options based on the treasury stock method. 15 156 46 81 - ------------------------------------------------------------------------------------------------------------------- Average diluted shares outstanding 4,830 5,142 4,890 5,097 =================================================================================================================== Net income $ 414 $ 254 $1,566 $2,065 =================================================================================================================== Basic and diluted earnings per common share $ 0.09 $ 0.05 $ 0.32 $ 0.41 ===================================================================================================================
EX-27 7 FDS --
5 1000 9-MOS MAY-31-1999 JUN-01-1998 FEB-28-1999 12560 0 46824 2332 0 60962 26973 21289 78122 26794 0 0 0 49 49950 78122 0 121466 0 40693 78454 0 22 2668 1,123 1566 0 0 0 1566 0.32 0.32
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