FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
OR --------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-7567
------
URS CORPORATION
-----------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-1381538
----------------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
100 California Street, Suite 500
San Francisco, California 94111-4529
---------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-774-2700
------------
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ..X.. No .....
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at June 7, 1996
---------------------------- ---------------------------
Common stock, $.01 par value 8,602,867
Exhibit Index on Page 13
Page 1 of 40
URS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION:
In the opinion of management, the information furnished
reflects all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair statement of the
interim financial information. Net earnings per share
computations are based upon the weighted average number of common
shares outstanding during the period plus shares issuable under
warrants and stock options that have a dilutive effect.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted.
These condensed financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995. The results of operations
for the three and six month periods ended April 30, 1996 are not
necessarily indicative of the operating results for the full
year.
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
April 30, 1996 and October 31, 1995 . . . . . . 3
Consolidated Statements of Operations
Three and six months ended April 30,
1996 and 1995 . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Six months ended April 30, 1996 and 1995 . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 10
Page 2 of 40
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
April 30, October 31,
ASSETS 1996 1995
--------- -----------
Current assets: (unaudited)
Cash $ 5,793 $ 8,836
Accounts receivable, less allowance for
doubtful accounts of $2,940 and $664 71,756 35,822
Costs and accrued earnings in excess of
billings on contracts in process, less
allowances for losses of $1,943 and $606 15,524 13,200
Prepaid expenses and other 4,894 1,849
-------- --------
Total current assets 97,967 59,707
Property and equipment at cost, net 16,458 5,835
Goodwill, net 40,926 7,765
Other assets 944 768
-------- --------
$156,295 $ 74,075
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 4,675 $ -
Accounts payable 13,433 7,724
Accrued salaries and wages 10,303 6,588
Accrued expenses 19,414 9,088
-------- --------
Total current liabilities 47,825 23,400
Long-term debt, including related parties 55,633 9,999
Deferred compensation and other 1,395 1,198
-------- --------
Total liabilities 104,853 34,597
Stockholders' equity:
Common shares, par value $.01; authorized
20,000 shares; issued 8,603 and 7,167
shares 87 73
Treasury stock (287) (287)
Additional paid-in capital 41,443 31,791
Retained earnings since February 21, 1990, date of
quasi-reorganization 10,199 7,901
-------- --------
Total stockholders' equity 51,442 39,478
-------- --------
$156,295 $ 74,075
======== ========
Page 3 of 40
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three months ended Six months ended
April 30, April 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
(unaudited) (unaudited)
Revenues $64,864 $44,810 $113,367 $85,117
------ ------ ------- ------
Expenses:
Direct operating 39,128 27,122 69,525 51,551
Indirect, general and
administrative 22,466 16,063 38,935 30,585
Interest expense, net 698 347 1,004 670
------ ------ ------- ------
62,292 43,532 109,464 82,806
------ ------ ------- ------
Income before taxes 2,572 1,278 3,903 2,311
Income tax expense 1,050 227 1,570 460
------ ------ ------- ------
Net income $ 1,522 $ 1,051 $ 2,333 $ 1,851
====== ====== ====== ======
Net income per share:
Primary and fully diluted $ .18 $ .15 $ .29 $ .26
====== ====== ====== ======
Page 4 of 40
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
April 30,
-----------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited)
Net income $2,333 $ 1,851
----- ------
Adjustment to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 1,983 1,388
Changes in current assets and liabilities, net
of effect of business acquisitions:
Increase in accounts receivable and costs and
accrued earnings in excess of billings on
contracts in process (76) 328
Increase in prepaid expenses (774) (779)
Decrease in accounts payable, accrued salaries
and wages and accrued expenses (988) (3,560)
Decrease in deferred income taxes 1,040 (296)
Other, net 433 (163)
------ ------
Total adjustments 1,618 (3,082)
------ ------
Net cash provided (used) by operating activities 3,951 (1,231)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired (54,556) (3,596)
Capital expenditures (2,601) (680)
Other - 43
------ ------
Net cash (used) by investing activities (57,157) (4,233)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 50,000 -
Repurchase of common shares - (174)
Proceeds from sale of common shares 163 99
Proceeds from exercise of stock options 6 265
Other (8) -
------ ------
Net cash provided by financing activities 50,161 190
------ ------
Net decrease in cash (3,045) (5,274)
Cash at beginning of period 8,838 9,457
------ ------
Cash at end of period $ 5,793 $ 4,183
====== ======
SUPPLEMENTAL INFORMATION:
Interest paid $ 584 $ 637
====== ======
Taxes paid $ 1,640 $ 761
====== ======
Issuance of common stock in business acquisition $ 9,463 $ -
====== ======
Page 5 of 40
URS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company reports the results of its operations on a
fiscal year which ends on October 31. This Management Discussion
and Analysis (MD&A) should be read in conjunction with the MD&A
and the footnotes to the Consolidated Financial Statements
included in the Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 which was previously filed with the
Securities and Exchange Commission.
Acquisition
-----------
On March 29, 1996, the Company acquired Greiner Engineering,
Inc., an Irving, Texas, engineering and architectural design
services firm (Greiner), for $78,524,000, comprised of cash of
$69,061,000, and 1.4 million shares of the Company's Common
Stock.
The purchase was partially financed by $50.0 million of
secured term loans payable over seven years beginning October
1996. The loans bear interest based on rate indexes selected by
the Company, with variable spreads over the selected index based
on loan maturity and the Company's financial performance. At
April 30, 1996, the interest rate was based on the London
Interbank Offered Rate (LIBOR) of 5.375%, plus spreads of 2.625%
or 3.00%.
The acquisition has been accounted for by the purchase
method of accounting and the excess of the fair value of the net
assets acquired over the purchase price has been allocated to
goodwill. The operating results of Greiner are included in the
Company's results of operations from the date of purchase.
The purchase price consisted of:
Cash paid $19,061
Term debt-current portion 4,675
Term debt-long-term portion 45,325
Common Stock 9,463
------
$78,524
======
The purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $76,916
Fair value of assets acquired (42,510)
------
Excess purchase price over net assets acquired $34,406
======
The following unaudited pro forma summary presents the
consolidated results of operations as if the Greiner acquisition
had occurred at the beginning of the periods presented and does
not purport to indicate what would have occurred had the
Page 6 of 40
acquisition been made as of those dates or of results which may
occur in the future. The substantial decrease in 1996 pro forma
operating results compared to 1995 is attributable to the
substantial losses reported by Greiner in the third and fourth
quarters of 1995.
Six Months Ended April 30, 1996:
1996 1995
-------- --------
Revenues $175,858 $160,492
======== ========
Net income $ 369 $ 3,900
======== ========
Net income per share $ .04 $ .44
======== ========
Results of Operations
---------------------
SECOND QUARTER ENDED APRIL 30, 1996 VS. APRIL 30, 1995.
The Company's revenues were $64,864,000 for the second
quarter ended April 30, 1996, an increase of $20,054,000 or 44.7%
over the amount reported for the same period last year. The
growth in revenue is attributable to the acquisition of Greiner,
the results of which are included commencing April 1, 1996, and
to an equal extent an increase in demand for the Company's on-
going services on both infrastructure and environmental projects.
The revenues generated from the Company's three largest
indefinite delivery contracts, the Navy CLEAN, EPA ARCS 9 & 10,
and EPA ARCS 6,7 & 8 contracts, were $6,710,705 for the quarter
ended April 30, 1996, compared to $9,503,000 for the same period
last year.
Direct operating expenses for the quarter ended April 30,
1996, which consist of direct labor and other direct expenses,
including subcontractor costs, increased $12,006,000 a 44.2%
increase over the amount reported for the same period last year.
This increase is due to the addition of the direct operating
expenses of Greiner and to increases in subcontractor costs and
direct labor costs as well.
Indirect, general and administrative expenses for the
quarter ended April 30, 1996 increased $6,403,000, or 39.9% over
the amount reported for the same period last year as a result of
the addition of the Greiner overhead as well as an increase in
business activity.
The Company earned $2,572,000 before income taxes for the
second quarter ended April 30, 1996 compared to $1,278,000 for
the same period last year. The Company's effective income tax
rate for the quarter ended April 30, 1996 was approximately 40%
compared to 18% in 1995 when the Company had available net
operating loss carry forwards.
Page 7 of 40
The Company reported net income of $1,522,000, or $.18 per
share for the second quarter ended April 30, 1996, compared with
$1,051,000, or $.15 per share for the same period last year.
SIX MONTHS ENDED APRIL 30, 1996 VS. APRIL 30, 1995.
The Company's revenues were $113,367,000 for the six months
ended April 30, 1996, an increase of $28,250,000, or 33.2% over
the amount reported for the same period last year. The growth in
revenues is attributable to all areas of the Company's business
including infrastructure projects involving transportation
systems, institutional and commercial facilities and
environmental projects as well as the Greiner acquisition. The
revenues generated from the Company's three largest indefinite
delivery contracts (Navy CLEAN, EPA ARCS 9 & 10 and EPA ARCS 6, 7
& 8) were $14,154,697 for the six months ended April 30, 1996,
compared to $20,293,000 for the same period last year.
Direct operating expenses for the six months ended April 30,
1996, which consist of direct labor and other direct expenses
including subcontractor costs, increased $17,974,000, or 34.9%
over the amount reported in the same period last year. This
increase is attributable to the overall increase in the Company's
business as compared to the same period last year as well as the
Greiner acquisition. Indirect, general and administrative
expenses were $38,935,000 for the six months ended April 30,
1996, an increase of $8,350,000, or 27.3% over the amount
reported for the same period last year. The increase in
indirect, general and administrative expenses is due to an
increase in business activity in addition to the addition of the
Greiner overhead.
The Company earned $3,903,000 before income taxes for the
six months ended April 30, 1996 compared to $2,311,000 for the
same period last year. The Company's effective income tax rate
for the six months ended April 30, 1996 was approximately 40%
compared to 20% in 1995 when the Company had available net
operating loss carry forwards.
The Company reported net income of $2,333,000 or $.29 per
share, for the six months ended April 30, 1996, compared with
$1,851,000, or $.26 per share for the same period last year.
The Company's backlog at April 30, 1996 was $379,843,000, as
compared to $196,400,000 at October 31, 1995. This increase is
due primarily to the addition of the Greiner backlog as a result
of the Greiner acquisition, as well as to an overall increase in
contracts signed by the Company.
Liquidity and Capital Resources
-------------------------------
At April 30, 1996, the Company had working capital of
$50,142,000 an increase of $13,835,000 from October 31, 1995,
due primarily to the Greiner acquisition.
Page 8 of 40
The Company's current revolving line of credit is
$20,000,000 of which $19,500,000 was available at April 30, 1996.
The Company's credit agreement requires compliance with
certain financial and other covenants. The Company was in
compliance with such covenants at April 30, 1996.
The Company believes that its existing financial resources,
together with its planned cash flow from operations and its
unused bank line of credit, will provide sufficient capital to
fund its combined operations and capital expenditure needs for
the foreseeable future.
Page 9 of 40
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's regularly scheduled annual
stockholders meeting, held on March 26, 1996, the stockholders
approved the (i) retention of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the 1996 fiscal year, with
stockholders holding 6,033,289 shares voting in favor,
stockholders holding 10,895 shares voting against, and
stockholders holding 14,227 shares abstaining from voting, and
(ii) election of each of the following nominees as directors of
the Company by the following vote:
For Withheld
--------- --------
Richard C. Blum 6,020,025 14,723
Emmet J. Cashin Jr. 6,019,834 14,914
Armen Der Marderosian 6,031,148 3,600
Adm. S. Robert Foley, Jr., USN (Ret.) 6,018,813 15,935
Martin M. Koffel 6,034,640 108
Richard B. Madden 6,021,778 12,970
Richard Q. Praeger 6,019,841 14,907
Irwin L. Rosenstein 6,033,971 777
William D. Walsh 6,020,078 14,670
No stockholders abstained from voting in this election of
directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are furnished in accordance with
the provisions of Item 601 of Regulation S-K:
Exhibit Number Exhibit
10.1 Employment Agreement, dated March 29, 1996,
between Greiner, Inc. and Robert L. Costello.
FILED HEREWITH.
10.2 Indemnification Agreement, dated as of
March 29, 1996, between the Company and
Robert L. Costello. FILED HEREWITH.
27 Financial Data Schedule. FILED HEREWITH.
(b) The Company filed a report on Form 8-K dated
March 29, 1996, reporting under Item 2 the acquisition of Greiner
and the financing thereof, and incorporating into Item 7, by
reference from the Proxy Statement/Prospectus relating to the
Greiner acquisition filed as part of the Company's registration
Page 10 of 40
statement on Form S-4 (Registration No. 33-31091) filed on
February 20, 1996, the following financial statements, together
with accompanying explanatory information and notes:
(1) Consolidated Balance Sheets of Greiner at
December 31, 1995 and 1994;
(2) Consolidated Statements of Operations of
Greiner for the years ended December 31, 1995, 1994 and
1993;
(3) Consolidated Statements of Stockholders'
Equity of Greiner for the years ended December 31, 1995,
1994 and 1993;
(4) Consolidated Statements of Cash Flows of
Greiner for the years ended December 31, 1995, 1994 and
1993;
(5) Unaudited Pro Forma Combined Condensed
Balance Sheet of Greiner and the Company at October 31,
1995; and
(6) Statements of Operations of Greiner and the
Company for the year ended October 31, 1995.
Page 11 of 40
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.
Dated June 14, 1996
URS CORPORATION
/s/ Kent P. Ainsworth
------------------------------
Kent P. Ainsworth
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
Page 12 of 40
INDEX TO EXHIBITS
-----------------
Exhibit Sequentially
Number Exhibit Numbered Page
---------------------------------------------------------------
10.1 Employment Agreement, dated as of
March 29, 1996, between Greiner, Inc.
and Robert L. Costello. FILED HEREWITH. 14
10.2 Indemnification Agreement, dated as of
March 29, 1996, between the Company and
Robert L. Costello. FILED HEREWITH. 30
27 Financial Data Schedule. FILED HEREWITH. 40
Page 13 of 40
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered
into as of March 29, 1996, by and between ROBERT L. COSTELLO
(the "Employee") and GREINER, INC., a Delaware corporation (the
"Company").
1. Term of Employment.
------------------
(a) BASIC RULE. The Company agrees to employ the
Employee, and the Employee agrees to remain in employment with
the Company, from the date hereof until the earlier of:
(i) The third anniversary of the date first above
written; or
(ii) The date when the Employee's employment
terminates pursuant to Subsection (b), (c), (d) or (e)
below.
(b) TERMINATION BY COMPANY NOT FOR CAUSE. The
Company may terminate the Employee's employment at any time,
with or without Cause (as defined below) and for any reason or
no reason whatsoever, by giving the Employee notice in writing.
(c) TERMINATION BY COMPANY FOR CAUSE. The Company
may terminate the Employee's employment for Cause by giving the
Employee notice in writing. For all purposes under this
Agreement, "Cause" shall mean:
(i) A substantial failure or omission of the
Employee to perform his duties hereunder, other than as a
result of death of Employee or Disability of Employee (as
defined below).
(ii) An act by the Employee involving material injury
to the Company or to URS Corporation (or any parent,
subsidiary or affiliated corporation or related entity of
either of them), willful or gross misconduct, fraud or
dishonesty;
(iii) The Employee's conviction of, or plea of
"guilty" or "no contest" to, a felony; or
(iv) The Employee's disobedience of orders and
directives of the Chief Executive Officer of URS
Corporation or his designee (as determined under
Section 2(a)).
-1-
Page 14 of 40
(d) RESIGNATION BY EMPLOYEE. The Employee may
terminate his employment by giving the Company notice in
writing.
(e) DEATH OF EMPLOYEE. The Employee's employment
shall terminate automatically in the event of his death.
(f) DISABILITY. The Company may terminate the
Employee's employment due to Disability. For all purposes
under this Agreement, "Disability" shall mean either:
(i) Employee has qualified for long-term disability
benefits under a plan, program or arrangement maintained
by the Company or a parent, subsidiary or affiliated
corporation or related entity of the Company; or
(ii) The inability of the Employee to perform the
normal duties of his position under this Agreement for a
continuous period of 60 calendar days or any incapacity,
however caused, that, in the good faith opinion of the
Chief Executive Officer of URS Corporation or his
designee, is likely to prevent Employee from performing
his normal duties under this Agreement for more than 90
calendar days in any twelve consecutive month period
(taking into account, in the case of such an inability or
incapacity which is a physical or mental impairment that
substantially limits one or more of the major life
activities of Employee, reasonable accommodations that
would not impose an undue hardship on the Company, as the
terms "reasonable accommodation" and "undue hardship" are
defined in the Americans With Disabilities Act of 1990, as
amended).
(g) RIGHTS UPON TERMINATION. Except as expressly
provided in Sections 6 and 7, upon the termination of the
Employee's employment pursuant to this Section 1, the Employee
shall only be entitled to the compensation, benefits and
reimbursements described in Sections 3, 4 and 5 for the period
preceding the effective date of the termination; provided,
however, except with respect to Base Compensation payable in
accordance with Section 3, expenses reimbursable in accordance
with Section 5, and Sections 6 and 7, neither this sentence nor
the provisions of this Agreement shall be construed to give
rise to any right, entitlement or vesting as to any
compensation or benefit under any employee benefit plan or
program referred to in Section 4 that has not been paid as of
the time of employment termination. By way of example and not
by way of limitation, except as may be specifically required by
the written terms and conditions thereof without regard to this
Agreement, Employee shall not have any right, shall not be
vested, and shall not be entitled to any full or partial
-2-
Page 15 of 40
incentive or bonus compensation or any other amount whatsoever
under any nonqualified management incentive or bonus
compensation plan or arrangement if Employee's employment shall
have terminated before amounts are actually paid thereunder,
whether for the period under such plan or arrangement during
which Employee's employment ceases or any other period. The
payments under this Agreement shall fully discharge all
responsibilities of the Company to the Employee.
(h) EMPLOYMENT BY AFFILIATE. The employment of
Employee shall not be considered to have terminated for
purposes of this Agreement if Employee is employed by a parent,
subsidiary or affiliated corporation or related entity of the
Company.
(i) TERMINATION OF AGREEMENT. This Agreement shall
terminate when all obligations of the parties hereunder have
been satisfied.
2. Duties and Scope of Employment.
------------------------------
(a) POSITION. The Company agrees to employ the
Employee in an executive position for the term of his
employment under this Agreement. The Employee shall report as
directed by the Chief Executive Officer of URS Corporation or
such officers and agents of the Company or its parent,
subsidiary and affiliated corporations and related entities as
such Chief Executive Officer may direct and shall serve in such
positions on behalf of the Company and such corporations and
entities and perform such duties consistent with an executive
position at such locations as may be required by such Chief
Executive Officer or designee. It is anticipated that the
Employee's duties will require him to travel frequently and
extensively. The Employee's principal office may be changed
from time to time, provided the Company reimburses reasonable
relocation expenses of Employee in accordance with generally
applicable policies of the Company.
(b) OBLIGATIONS. During the term of his employment
under this Agreement, the Employee shall devote his full
business efforts and time to the Company and its parent,
subsidiaries and affiliated corporations and related entities
and shall not render services to any other person or entity
without the prior written consent of the Chief Executive
Officer of URS Corporation. The foregoing, however, shall not
preclude the Employee from engaging in appropriate civic,
charitable or religious activities.
(c) OTHER AGREEMENTS. Employee shall from time to
time execute and deliver to Company and its parent, subsidiary
and affiliated corporations and related entities such
-3-
Page 16 of 40
agreements, documents and instruments as the Company may
reasonably require, including without limitation
confidentiality, trade secret, invention assignment and other
agreements.
(d) RESIGNATION FROM OTHER POSITIONS. Immediately
upon request by the Company, before or after the termination of
the employment of Employee, he shall resign from any position
he holds as director, officer, trustee, nominee, agent for
service of process, attorney-in-fact or similar position with
respect to the Company or a parent, subsidiary or affiliated
corporation or related entity of the Company, and shall
execute, verify, acknowledge, swear to and deliver any
documents and instruments reasonably requested by the Company
or required to reflect such resignation.
3. Base Compensation.
-----------------
During the term of his employment under this
Agreement, the Company agrees to pay the Employee as
compensation for his services a base salary at an annual rate
of no less than $250,000. Such salary shall be payable in
accordance with the Company's standard payroll procedures.
(The annual compensation specified in this Section 3, together
with any increases in such compensation that the Company may
grant from time to time, is referred to in this Agreement as
"Base Compensation.")
4. Employment Benefits, Stock Options, and
Incentive Compensation, and Other Compensation
Plans and Programs.
-----------------------------------------------
(a) ELIGIBILITY TO PARTICIPATE. During the term of
his employment under this Agreement, the Employee shall be
eligible to participate in the employee benefit plans, stock
option and other equity-based incentive and compensation plans,
and other executive incentive and compensation programs
maintained with respect to employees of the Company, subject in
each case to (i) the generally applicable terms and conditions
of the plan or program in question and to the determinations of
the Board of Directors or any committee or other person
administering such plan or program, (ii) determinations by the
Company, any such corporation or entity, or any such board,
committee or person as to whether and to what extent Employee
shall so participate or cease to participate, and
(iii) amendment, modification or termination of any such plan
or program in the sole and absolute discretion of the Company
or its parent, subsidiary or affiliated corporation or related
entity maintaining such plan.
-4-
Page 17 of 40
(b) FISCAL YEAR 1996 INCENTIVE COMPENSATION.
Subject to the provisions of Section 4(a), in substitution for
any rights of Employee under the Greiner Management Incentive
Plan or any similar plan, Employee shall have a 40% Target
Award Percentage under the 1996 Incentive Compensation Plan to
be established by the Company with respect to the period
January 1, 1996 through October 31, 1996 on terms and
conditions substantially similar to those of the URS
Consultants, Inc. 1995 Incentive Compensation Plan, modified as
the Company deems appropriate to reflect application to the
Company rather than URS Consultants, Inc., and that the period
covered is less than full twelve (12) months. Base Salary of
Employee for purposes of such plan means his base salary
actually paid to him by the Company during such period at the
rates applicable from time to time during such period.
5. Business Expenses.
-----------------
In accordance with the Company's generally applicable
policies, (i) during the term of his employment under this
Agreement, the Employee shall be authorized to incur necessary
and reasonable travel, entertainment and other business
expenses in connection with his duties hereunder, and (ii) the
Company shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting
documentation.
6. Change in Control.
-----------------
(a) DEFINITION. For all purposes under this
Agreement, "Change in Control" shall mean that, after the date
of this Agreement, any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended), other than a person that immediately before
the acquisition or aggregation of securities referred to
immediately hereinafter, directly or indirectly controls, is
controlled by, or is under common control with URS Corporation,
through the acquisition or aggregation of securities becomes
the beneficial owner, directly or indirectly, of securities of
URS Corporation or the Company representing 51 percent or more
of the combined voting power of the then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of
directors (the "Base Capital Stock"); except that any change in
the relative beneficial ownership of URS Corporation's
securities by any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital
Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases
in any manner, directly or indirectly, such person's beneficial
ownership of any securities of URS Corporation.
-5-
Page 18 of 40
(b) GOOD REASON. For all purposes under this
Agreement, "Good Reason" shall mean that either (i) the
Employee has incurred a reduction in his Base Compensation or
(ii) the Company has breached its obligations under Section
2(a) and, at the time of such breach, Employee is in compliance
with his obligations thereunder and under the other provisions
of this Agreement.
(c) CHANGE OF CONTROL PAYMENT. If, during the term
of this Agreement and within one year after the occurrence of a
Change in Control with respect to URS Corporation, the Employee
voluntarily resigns his employment for Good Reason or the
Company terminates the Employee's employment for any reason
other than Cause or Disability, then the Employee shall be
entitled to receive a severance payment from the Company (the
"Change of Control Payment") and in addition shall be entitled
to Severance Benefits in accordance with Subdivision (ii) of
Section 7(a). No Change of Control Payment shall be made in
case of termination of employment of Employee by reason of
resignation of Employee other than for Good Reason, death of
Employee, or any other circumstance not specifically and
expressly described in the immediately preceding sentence. The
Change of Control Payment shall be made in a lump sum not more
than five business days following the date of the employment
termination and shall be in an amount determined under
Subsection (d) below; PROVIDED, HOWEVER, in no event shall the
Company be required to make the Change of Control Payment
unless and until Employee executes and delivers to the Company
a release in the form of Exhibit A and seven (7) days have
elapsed following such execution and delivery without
revocation of such release by Employee. The Change of Control
Payment shall be in lieu of (i) any further payments to the
Employee under Section 3, (ii) any further accrual of benefits
under Section 4 and 6 with respect to periods subsequent to the
date of the employment termination and (iii) any entitlement to
a Severance Payment (as defined in Subdivision (i) of Section
7(a) below).
(d) AMOUNT. Subject to the provisions of Sections
6(e) and 8(a), the amount of the Change of Control Payment
shall be equal to two hundred (200) percent of the Employee's
annual rate of Base Compensation, as in effect on the date of
the employment termination.
7. Involuntary Termination Without Cause.
-------------------------------------
(a) SEVERANCE. In the event that, during the term
of this Agreement, the Company terminates the Employee's
employment for any reason other than Cause or Disability or the
Employee voluntarily resigns his employment for Good Reason
-6-
Page 19 of 40
within one month of the effective date of the reduction of his
Base Compensation, and Section 6 does not apply, then:
(i) The Company shall pay an amount ("Severance
Payment") in installments (or a lump sum if the Company so
elects), as provided below, equal in the aggregate to one
hundred percent (100%) of Employee's annual rate of Base
Compensation as in effect on the date of employment
termination LESS Base Compensation paid to Employee for
any period up to one (1) month between the date of
termination and the date that notice thereof was given
PLUS any accrued and unpaid vacation at the time of such
termination. The Severance Payment shall be made in
installments at the same rate and in accordance with the
same schedule as Base Compensation would have been paid
had employment continued until the Severance Payment has
been made in full; provided, however, at its election the
Company may at any time pay any remainder of the Severance
Payment in a lump sum.
(ii) For the period of one (1) year following such
termination (reduced by any period up to one (1) month
between the date of termination and the date that notice
thereof was given), the Company shall (i) reimburse
Employee for dental and health insurance premiums required
to be paid by Employee for such one (1) year (or reduced)
period to obtain COBRA continuation coverage within the
meaning of Section 4980B(f)(2) of the Internal Revenue
Code of 1986, as amended (the "Code"), provided Employee
elects such continuation coverage, and (ii) cause group
long-term disability insurance coverage and basic term
life insurance coverage with a death benefit of up to
$100,000 then provided to Employee by the Company, if any,
to be continued for such one (1) year (or reduced) period
(or, if such coverage cannot be continued or can only be
continued at a cost to the Company greater than the
Company would have incurred absent such termination, then,
at the Company's election, the Company may either provide
such long-term disability or term life insurance as may be
available at no greater cost than one hundred fifty
percent (150%) of what the Company would have incurred
absent such termination or pay to Employee one hundred
fifty percent (150%) of the amount of premiums the Company
would have incurred to continue such coverage absent such
termination) (payments and benefits under this Subdivision
(ii), collectively "Severance Benefits").
There shall be credited toward payment and provision
of the Severance Payment and Severance Benefits any other
payments or benefits paid or provided to Employee by or on
behalf of the Company or its parent or subsidiaries as a result
-7-
Page 20 of 40
of any such termination of employment (other than payment of
vacation accrued as of such termination, and provided that mere
acceleration of exercisability of stock options or of the time
of payment or provision of other payments or benefits that are
payable or required to be provided to Employee without regard
to termination of employment shall not be considered to result
from such termination). The first installment of the Severance
Payment shall be made not later than thirty (30) days after
such termination and Severance Benefits shall be provided
monthly commencing after the expiration of one (1) month
following such termination; PROVIDED, HOWEVER, in no event
shall the Company be required to make or provide any Severance
Payment or Severance Benefit unless and until Employee executes
and delivers to the Company a release in the form of Exhibit A
and seven (7) days have elapsed following such execution and
delivery without revocation of such release by Employee (EXCEPT
THAT, pending either such execution and delivery of such a
release by Employee or failure of Employee to do so within such
thirty (30) period, the Company will advance for the account of
Employee premiums required to be paid during such thirty (30)
day period if necessary to avoid lapse with respect to Employee
within such period of a group dental, health or disability
policy to which Severance Benefits relate, which advance shall
be repaid by Employee on expiration of such thirty (30) day
period in case Employee fails to so execute and deliver such a
release).
(b) TERMINATION OF SEVERANCE BENEFITS. All
Severance Benefits shall be discontinued completely as of the
date when the Employee returns to employment or self-
employment, whether full- or part-time, with an entity that
offers any group insurance coverage to its employees or
independent contractors, regardless of whether such coverage is
equivalent to the insurance coverage contemplated by the
Severance Benefits.
8. Limitation on Payments.
----------------------
(a) BASIC RULE. Any other provision of this
Agreement notwithstanding, the Company shall not be required to
make any payment to, or for the benefit of, the Employee (under
this Agreement or otherwise) that would be nondeductible by the
Company by reason of section 280G of the Code or that would
subject the Employee to the excise tax described in
section 4999 of the Code, and any payment or benefit that would
be nondeductible by reason of section 162(m) of the Code shall
to the extent be deferred and paid or provided in the next
taxable year when it can be paid or provided without limitation
by section 162(m) of the Code. All calculations required by
this Section 8 shall be performed by the independent auditors
retained by URS Corporation most recently prior to the Change
-8-
Page 21 of 40
in Control (the "Auditors"), based on information supplied by
the Company and the Employee, and shall be binding on the
Company and the Employee. All fees and expenses of the
Auditors shall be paid by the Company.
(b) REDUCTIONS. If the amount of the aggregate
payments to the Employee must be reduced under this Section 8,
then the Employee shall direct in which order the payments are
to be reduced, but no change in the timing of any payment shall
be made without the Company's consent except as provided above
with respect to the limitation of section 162(m) of the Code.
As a result of uncertainty in the application of
sections 162(m), 280G and 4999 of the Code at the time of an
initial determination by the Auditors hereunder, it is possible
that a payment will have been made by the Company that should
not have been made (an "Overpayment") or that an additional
payment that will not have been made by the Company could have
been made (an "Underpayment"). In the event that the Auditors,
based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Employee that the
Auditors believe has a high probability of success, determine
that an Overpayment has been made, such Overpayment shall be
treated for all purposes as a loan to the Employee that he
shall repay to the Company, together with interest at the
applicable federal rate specified in section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the
Employee to the Company if and to the extent that such payment
would not reduce the amount that is nondeductible under section
162(m) or 280G of the Code or is subject to an excise tax under
section 4999 of the Code. In the event that the Auditors
determine that an Underpayment has occurred, such Underpayment
shall promptly be paid or transferred by the Company to, or for
the benefit of, the Employee, together with interest at the
applicable federal rate specified in section 7872(f)(2) of the
Code.
9. Nondisclosure.
-------------
During the term of this Agreement and thereafter, the
Employee shall not, without the prior written consent of the
Board, disclose or use for any purpose (except in the course of
his employment under this Agreement and in furtherance of the
business of the Company) confidential information or
proprietary data of the Company or URS Corporation, or any
parent, subsidiary or affiliated corporation or related entity
of either of them, except as required by applicable law or
legal process, in which case promptly and before disclosure the
Employee shall give notice to the Company of any such
requirement or process; provided, however, that confidential
information shall not include any information available from
another source on a nonconfidential basis, known generally to
-9-
Page 22 of 40
the public, or ascertainable from public or published
information (other than as a result of unauthorized disclosure
by the Employee). The Employee agrees to deliver to the
Company at the termination of his employment, or at any other
time the Company may request, all memoranda, notes, plans,
records, reports and other documents (and copies thereof)
relating to the business of the Company and URS Corporation or
any parent, subsidiary or affiliated corporation or related
entity of either of them, which he may then possess or have
under his control.
10. Miscellaneous Provisions.
------------------------
(a) SUCCESSORS. Subject to Subsection (i) below and
provided that Employee may not delegate his duties hereunder
without the consent of the Board of Directors of the Company,
this Agreement and all rights hereunder shall inure to the
benefit of, and be enforceable by, the parties' successors,
assigns, personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees.
(b) NOTICE. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or
when mailed by U.S. registered mail, return receipt requested
and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing for income
tax withholding purposes or by notice given pursuant to this
Subsection (a). In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all
notices shall be directed to the attention of its Secretary,
with a copy to URS Corporation addressed to its corporate
headquarters as reflected in its most recent Report on Form
10-Q or Form 10-K filed with the U.S. Securities and Exchange
Commission, directed to the attention of its Secretary.
(c) WAIVER. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver
or discharge is agreed to in writing and signed by the Employee
and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at
another time.
(d) WHOLE AGREEMENT. No agreements, representations
or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement
have been made or entered into by either party with respect to
-10-
Page 23 of 40
the subject matter hereof. Effective as of the date hereof,
this Agreement supersedes all prior employment agreements
between the parties.
(e) WITHHOLDING. All payments made under this
Agreement shall be subject to reduction to reflect taxes
required to be withheld by law. Employee hereby declares under
penalty of perjury that his Social Security Number is
______________. The Company shall also be entitled to withhold
from or offset against any payments under this Agreement any
amounts owed by Employee (whether or not liquidated) to the
Company or URS Corporation or any parent, subsidiary or
affiliated corporation or related entity or either of them.
(f) CHOICE OF LAW. The validity, interpretation,
construction and performance of this Agreement shall be
governed by the internal laws of the State of Texas, without
regard to where Employee has his residence or principal office
or where he performs his duties hereunder.
(g) SEVERABILITY. The invalidity or
unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force
and effect.
(h) ARBITRATION. Except as otherwise provided in
Section 6, and except for any action by the Company seeking
injunctive relief against Employee, any controversy or claim
arising out of or relating to this Agreement, or the breach
thereof, or Employee's employment with the Company or the terms
and conditions or termination thereof, or any action or
omission of any kind whatsoever in the course of or connected
in any way with any relations between Employer and Employee,
shall be finally settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be administered by the
San Francisco, California regional office of such Association
and shall be conducted at the San Francisco, California offices
of such Association or at such other location in San Francisco,
California as such Association may designate. All fees and
expenses of the arbitrator and such Association shall be borne
as designated by the Arbitrator.
(i) NO ASSIGNMENT. The rights of any person to
payments or benefits under this Agreement shall not be made
subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or
-11-
Page 24 of 40
other creditor's process, and any action in violation of this
Subsection (i) shall be void.
IN WITNESS WHEREOF, each of the parties has executed
this Agreement, in the case of the Company by its duly
authorized officer, as of the day and year first above written.
/s/ Robert L. Costello
-----------------------------------
ROBERT L. COSTELLO
GREINER, INC.
By /s/ Martin M. Koffel
--------------------------------
Martin M. Koffel
Title: Chairman
-12-
Page 25 of 40
GENERAL RELEASE
This General Release ("Release") is executed and
delivered by Robert L. Costello ("Employee") to and for the
benefit of Greiner, Inc., a Delaware corporation ("Employer").
In consideration of the past services of Employee and
for the other agreements by Employee herein, Employer has
agreed to pay or provide certain amounts as set forth in
Sections 6 and 7 of that certain Employment Agreement dated
___________, 1996, by and between Employee and Employer (the
"Employment Agreement"). In addition, within ten (10) days of
receipt by Employer from Employee of proper business expense
reimbursement claims incurred and substantiated by Employee in
accordance with applicable law and policies of Employer,
Employer will process and pay to Employee reasonable and
customary business expenses so claimed and substantiated.
In consideration of the above, the sufficiency of
which Employee hereby acknowledges, Employee hereby agrees not
to sue and fully, finally, completely and generally releases,
absolves and discharges Employer, its predecessors, successors,
subsidiaries, parents, related companies and business concerns,
affiliates, partners, trustees, directors, officers, agents,
attorneys, servants, representatives and employees, past and
present, and each of them (hereinafter collectively referred to
as "Releasees") from any and all claims, demands, liens,
agreements, contracts, covenants, actions, suits, causes of
action, grievances, arbitrations, unfair labor practice
charges, wages, vacation payments, severance payments,
obligations, commissions, overtime payments, Workers
Compensation claims, debts, profit sharing or bonus claims,
expenses, damages, judgments, orders and/or liabilities of
whatever kind or nature in law, equity or otherwise, whether
known or unknown to Employee which Employee now owns or holds
or has at any time owned or held as against Releasees, or any
of them ("Claims"), including specifically but not exclusively
and without limiting the generality of the foregoing, any and
all Claims arising out of or in any way connected to Employee's
employment with or separation of employment from Employer
including any Claims based on contract, tort, wrongful
discharge, fraud, breach of fiduciary duty, attorneys' fees and
costs, discrimination in employment, any and all acts or
omissions in contravention of any federal or state laws or
statutes (including but not limited to federal or state
securities laws, the Texas Deceptive Trades Practices Act or
any similar act in any other state and the Racketeer Influenced
and Corrupt Organizations Act), and any right to recovery based
on state or federal age, sex, pregnancy, race, color, national
origin, marital status, religion, veteran status, disability,
sexual orientation, medical condition, union affiliation or
-1- EXHIBIT A
Page 26 of 40
other anti-discrimination laws, including, without limitation,
Title VII, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the National Labor Relations
Act, the California Fair Employment and Housing Act, and Texas
Commission on Human Rights Act, all as amended, whether such
claim be based upon an action filed by employee or by a
governmental agency.
During the time Employee is entitled to any Severance
Payment or Severance Benefits as defined and provided in
Section 7 of the Employment Agreement, and during the one-year
period following any "Change of Control" (as defined in the
Employment Agreement), Employee agrees (i) to assist, as
reasonably requested by Employer, in the transition of
Employee's responsibilities, (ii) not to solicit any employee
of Employer to terminate or cease employment with Employer and
(iii) to comply with the provisions of Section 9 of the
Employment Agreement. Without superseding any other agreements
and obligations Employer has with respect thereto, (i) Employee
agrees not to divulge any information that might be of a
confidential or proprietary nature relative to Employer, and
(ii) Employee agrees to keep confidential all information
contained in this Release (except to the extent (A) Employer
consents in writing to disclosure, (B) Employee is required by
process of law to make such disclosure and Employee promptly
notifies Employer of receipt by Employee of such process, or
(C) such information previously shall have become publicly
available other than by breach hereof on the part of Employee).
Employee acknowledges and agrees that neither
anything in this Release nor the offer, execution, delivery, or
acceptance thereof shall be construed as an admission by
Employer of any kind, and this Release shall not be admissible
as evidence in any proceeding except to enforce this Release.
It is the intention of Employee in executing this
instrument that it shall be effective as a bar to each and
every claim, demand, grievance and cause of action hereinabove
specified. In furtherance of this intention, Employee hereby
expressly consents that this Release shall be given full force
and effect according to each and all of its express terms and
provisions, including those relating to unknown and unsuspected
claims, demands and causes of action, if any, as well as those
relating to any other claims, demands and causes of action
hereinabove specified, and elects to assume all risks for
claims that now exist in Employee's favor, known or unknown,
that are released under this Release. Employee acknowledges
Employee may hereafter discover facts different from, or in
addition to, those Employee now knows or believes to be true
with respect to the claims, demands, liens, agreements,
contracts, covenants, actions, suits, causes of action, wages,
-2- EXHIBIT A
Page 27 of 40
obligations, debts, expenses, damages, judgments, orders and
liabilities herein released, and agrees the release herein
shall be and remain in effect in all respects as a complete and
general release as to all matters released herein,
notwithstanding any such different or additional facts.
If any provision of this Release or application
thereof is held invalid, the invalidity shall not affect other
provisions or applications of the Release which can be given
effect without the invalid provision or application. To this
end, the provisions of this Release are severable.
Employee represents and warrants Employee has not
heretofore assigned or transferred or purported to assign or
transfer to any person, firm or corporation any claim, demand,
right, damage, liability, debt, account, action, cause of
action, or any other matter herein released.
NOTICE TO EMPLOYEE
The law requires that Employee be advised and
Employer hereby advises Employee in writing to consult with an
attorney and discuss this Release before executing it.
Employee acknowledges Employer has provided to Employee at
least 21 days within which to review and consider this Release
before signing it. Should Employee decide not to use the full
21 days, then Employee knowingly and voluntarily waives any
claims that Employee was not in fact given that period of time
or did not use the entire 21 days to consult an attorney and/or
consider this Release. Employee acknowledges that Employee may
revoke this Release for up to seven calendar days following
Employee's execution of this Release and that it shall not
become effective or enforceable until the revocation period has
expired. Employee further acknowledge and agree that such
revocation must be in writing addressed to Employer as follows:
_______________________, and received by Employer as so
addressed not later than midnight on the seventh day following
execution of this Release by Employee. If Employee so revokes
this Release, the Release shall not be effective or enforceable
and Employee will not receive the monies and benefits described
above. If Employee does not revoke this Release in the time
frame specified above, the Release shall become effective at
12:00:01 on the eighth day after it is signed by Employee.
I have read and understood the foregoing General
Release, have been advised to and have had the opportunity to
discuss it with anyone I desire, including an attorney of my
own choice, and I accept and agree to its terms, acknowledge
-3- EXHIBIT A
Page 28 of 40
receipt of a copy of the same and the sufficiency of the monies
and benefits described above, and hereby execute this Release
voluntarily and with full understanding of its consequences.
PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A
GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Dated ____________, 199__ ___________________________________
Robert L. Costello
-4- EXHIBIT A
Page 29 of 40
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement") is
made and entered into as of March 29, 1996, between URS
Corporation, a Delaware corporation (the "Company"), and
Robert L. Costello (the "Indemnitee").
WHEREAS, it is essential that the Company retain and
attract as directors and executive officers the most capable
persons available;
WHEREAS, Indemnitee is a director and executive
officer of the Company;
WHEREAS, both the Company and Indemnitee recognize
the significant risk of litigation and other claims being
asserted against directors and executive officers of public
companies in today's environment;
WHEREAS, basic protection against undue risk of
personal liability of directors and executive officers
heretofore has been provided through insurance coverage
providing reasonable protection at reasonable costs, and
Indemnitee has relied on the availability of such coverage; but
there are no assurances that the Company will be able to
continue to obtain such insurance on terms providing reasonable
protection at reasonable cost;
WHEREAS, the By-Laws of the Company (the "By-Laws")
require the Company to indemnify directors, officers and
certain other persons to the full extent permitted by law and
the Indemnitee has been serving and continues to serve as a
director and executive officer of the Company in part in
reliance on the By-Laws; and
WHEREAS, in recognition of Indemnitee's need for
substantial protection against personal liability in order to
enhance Indemnitee's continued service to the Company in an
effective manner, the uncertainty of maintaining satisfactory
director and officer liability insurance coverage, and
Indemnitee's reliance on the By-Laws, and in part to provide
Indemnitee with specific contractual assurance that the
protection promised by the By-Laws will be available to
Indemnitee (regardless of, among other things, any amendment to
or revocation of the By-Laws or any change in the composition
of the Company's Board of Directors or acquisition transaction
relating to the Company), the Company wishes to provide in this
Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the fullest extent (whether partial
or complete) permitted by law and as set forth in this
-1-
Page 30 of 40
Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors'
and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and
of Indemnitee continuing to serve the Company directly or, at
its request, another enterprise, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Certain Definitions.
-------------------
(a) Change in Control: shall be deemed to have
occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Act")), other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented
by the Company's then outstanding Voting Securities; or (ii)
during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors
of the Company and any new director whose election by the Board
of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (iii) the
stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger
or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at
least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of (in one transaction or a series
of transactions) all or substantially all of the Company's
assets.
(b) Claim: any threatened, pending or
completed action, suit or proceeding, or any inquiry or
investigation, whether instituted by the Company or any other
party, that Indemnitee in good faith believes might lead to the
-2-
Page 31 of 40
institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all
other costs, expenses and obligations paid or incurred in
connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or
occurrence related to the fact that Indemnitee is or was a
director, officer, employee, agent or fiduciary of the Company,
or is or was serving at the request of the Company as a
director, officer, employee, trustee, agent, partnership
committee member or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or
firm of attorneys, selected in accordance with the provisions
of Section 3 hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last five
years (other than with respect to matters concerning the rights
of Indemnitee under this Agreement, or of other indemnitees
under similar indemnity agreements).
(f) Potential Change in Control: shall be
deemed to have occurred if (i) the Company enters into an
agreement, the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (including
the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a
Change in Control; (iii) any person, other than a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the
Company, who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 9.5% or
more of the combined voting power of the Company's then
outstanding Voting Securities, increases his beneficial
ownership of such securities by five percentage points (5%) or
more over the percentage so owned by such person; or (iv) the
Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(g) Reviewing Party: any appropriate person or
body consisting of a member or members of the Company's Board
of Directors or any other person or body appointed by the Board
-3-
Page 32 of 40
who is not a party to the particular Claim for which Indemnitee
is seeking indemnification, or Independent Legal Counsel.
(h) Voting Securities: any securities of the
Company which vote generally in the election of directors.
2. Basic Indemnification Arrangement.
---------------------------------
(a) In the event Indemnitee was, is or becomes
a party to or witness or other participant in, or is threatened
to be made a party to or witness or other participant in, a
Claim by reason of (or arising in part out of) an Indemnifiable
Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event
no later than thirty (30) days after written demand is
presented to the Company, against any and all Expenses,
judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses,
judgments, fines, penalties or amounts paid in settlement) of
such Claim. If so requested by Indemnitee, the Company shall
advance (within ten (10) business days of such request) any and
all Expenses to Indemnitee (an "Expense Advance").
Notwithstanding anything in this Agreement to the contrary,
Indemnitee shall not be entitled to indemnification pursuant to
this Agreement in connection with (i) liability under
Section 16(b) of the Act or under federal or state securities
laws for "insider trading", (ii) conduct finally adjudged as
constituting active or deliberate dishonesty or willful fraud
or illegality, or (iii) conduct finally adjudged as producing
an unlawful personal benefit. Notwithstanding anything in this
Agreement to the contrary, prior to a Change in Control,
Indemnitee shall not be entitled to indemnification pursuant to
this Agreement in connection with any Claim initiated by
Indemnitee unless the Board of Directors has authorized or
consented to the initiation of such Claim.
(b) Notwithstanding the foregoing, (i) the
obligations of the Company under Section 2(a) hereof shall be
subject to the condition that the Reviewing Party shall not
have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 3 hereof is
involved) that Indemnitee would not be permitted to be
indemnified under applicable law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 2(a)
hereof shall be subject to the condition that, if, when and to
the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be so indemnified under applicable
law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; PROVIDED, HOWEVER, that if
Indemnitee has commenced or thereafter commences legal
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proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under
applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any Expense Advance until
a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or
lapsed). If there has not been a Change in Control, the
Reviewing Party shall be selected by the Board of Directors,
and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately
prior to such Change in Control), the Reviewing Party shall be
the Independent Legal Counsel referred to in Section 3 hereof.
If there has been no determination by the Reviewing Party
within thirty days (30) after written demand for
indemnification has been made under Section 2(a) hereof or if
the Reviewing Party determines that Indemnitee substantively
would not be permitted to be indemnified in whole or in part
under applicable law, Indemnitee shall have the right to
commence litigation in any court in the State of California or
the State of Delaware having subject matter jurisdiction
thereof and in which venue is proper seeking an initial
determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor, and the Company
hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise
shall be conclusive and binding on the Company and Indemnitee.
3. Change in Control.
-----------------
If there is a Change in Control of the Company (other
than a Change in Control which has been approved by a majority
of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect
to all matters thereafter arising concerning the rights of
Indemnitee to indemnity payments and Expense Advances under the
By-Laws, this Agreement or any other agreement or Company By-
Law now or hereafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only
from Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things,
shall render its written opinion to the Company and Indemnitee
as to whether and to what extent the Indemnitee would be
permitted to be indemnified under applicable law. The Company
shall pay the reasonable fees of the Independent Legal Counsel
referred to above and fully indemnify such counsel against any
and all expenses (including attorneys' fees), claims,
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liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
4. Establishment of Trust.
----------------------
In the event of a Potential Change in Control, the
Company shall, upon written request by Indemnitee, create a
trust for the benefit of Indemnitee and from time to time upon
written request of Indemnitee shall fund such trust in an
amount sufficient to satisfy any and all Expenses reasonably
anticipated at the time of each such request to be incurred in
connection with investigating, preparing for and defending any
Claim relating to an Indemnifiable Event, and any and all
judgments, fines, penalties and settlement amounts of any and
all Claims relating to an Indemnifiable Event from time to time
actually paid or claimed, reasonably anticipated or proposed to
be paid; PROVIDED that in no event shall more than $100,000 be
required to be deposited in any trust created hereunder in
excess of amounts deposited in respect of reasonably
anticipated Expenses. The amount or amounts to be deposited in
the trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party. The terms of the trust
shall provide that (i) the trust shall be irrevocable, (ii) the
trustee shall advance, within two (2) business days of a
request by the Indemnitee, any and all Expenses to the
Indemnitee (and the Indemnitee hereby agrees to reimburse the
trust under the circumstances under which the Indemnitee would
be required to reimburse the Company under Section 2(b) hereof,
(iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above,
(iv) the trustee shall promptly pay to Indemnitee all amounts
for which Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (v) upon a final
determination by the Reviewing Party or a court of competent
jurisdiction, as the case may be, that Indemnitee has been
fully indemnified under the terms of this Agreement, all
unexpended funds in such trust shall be returned to the
Company. The trustee shall be chosen by Indemnitee.
Notwithstanding anything in this Agreement to the contrary,
other than to the extent of the amount of funds in the trust
corpus, the Company shall have no obligation to indemnify
Indemnitee under this Agreement.
5. Indemnification for Additional Expenses.
---------------------------------------
The Company shall indemnify Indemnitee against any
and all expenses (including attorneys' fees) and, if requested
by Indemnitee, shall (within five (5) business days of such
request) advance such expenses to Indemnitee which are incurred
by Indemnitee in connection with any action brought by
Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement, the By-Laws or
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any other agreement or Company By-Law now or hereafter in
effect relating to Claims for Indemnifiable Events and/or
(ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to
such indemnification, advance expense payment or insurance
recovery, as the case may be.
6. Partial Indemnity, Etc.
-----------------------
If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties and
amounts paid in settlement of a Claim but not, however, for all
of the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has
been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified
against all Expenses incurred in connection therewith.
7. Burden of Proof.
---------------
In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
8. No Presumptions.
---------------
For purposes of this Agreement, the termination of
any claim, action, suit or proceeding by judgment, order,
settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did
not meet any particular standard of conduct or have any
particular belief or that a court has determined that
indemnification is not permitted by applicable law. In
addition, neither the failure of the Reviewing Party to have
made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief,
nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have
such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law shall be a defense
to Indemnitee's claim or create a presumption that Indemnitee
has not met any particular standard of conduct or did not have
any particular belief.
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9. Nonexclusivity, Etc.
--------------------
The rights of the Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the
By-Laws or the Delaware General Corporation Law (the "Law") or
otherwise. To the extent that a change in the Law (whether by
statute or judicial decision) permits greater indemnification
by agreement than would be afforded currently under the By-
Laws and this Agreement, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
10. Liability Insurance.
-------------------
To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any Company director or
officer.
11. Period of Limitations.
---------------------
No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company
against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two
(2) years from the date of accrual of such cause of action, and
any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely
filing of a legal action within such two-year period; PROVIDED,
HOWEVER, that if any shorter period of limitations is otherwise
applicable to any such cause of action such shorter period
shall govern.
12. Amendments, Etc.
---------------
No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
13. Subrogation.
-----------
In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute
all papers required and shall do everything that may be
necessary to secure such rights including the execution of such
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documents necessary to enable the Company effectively to bring
suit to enforce such rights.
14. No Duplication of Payments.
--------------------------
The Company shall not be liable under this Agreement
to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually
received payment (under any insurance policy, the Company
By-Laws or otherwise) of the amounts otherwise indemnifiable
hereunder.
15. Binding Effect, Etc.
-------------------
This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or
assets of the Company, spouses, heirs, executors and personal
and legal representatives. This Agreement shall continue in
effect regardless of whether Indemnitee continues to serve as
an executive officer or director of the Company or of any other
enterprise at the Company's request.
16. Severability.
------------
The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is
held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable in any respect, and the validity and
enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the fullest extent
permitted by law.
17. Governing Law.
-------------
This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state
without giving effect to the principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
URS CORPORATION
By: /s/ Kent P. Ainsworth
-----------------------------------
Kent P. Ainsworth
Chief Financial Officer
INDEMNITEE
/s/ Robert L. Costello
----------------------------------------
Robert L. Costello
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