<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended September 30, 1995
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 0-14292
GTS DURATEK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-2476180
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8955 Guilford Road, Suite 200, Columbia, Maryland 21046
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 312-5100
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
----- -----
Number of shares outstanding of each of the issuer's classes of common stock as
of November 3, 1995:
Common Stock, par value $0.01 per share 8,962,972 shares
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION ----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
as of September 30, 1995 and December 31, 1994 . . . . . . . 1
Consolidated Condensed Statements of Operations for the Three
and Nine Months Ended September 30, 1995 and 1994 . . . . . . 2
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the Nine Months Ended September 30, 1995 . . . . . 3
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 1995 and 1994 . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 6
Qualification Relating to Financial Information . . . . . . . . 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
PART I Financial Information
Item 1. Financial Statements
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1995 1994
------------- ------------
ASSETS (unaudited) *
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 2,724,375 $
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,978,179 8,090,614
Costs and estimated earnings in excess of
billings on uncompleted contracts . . . . . . . . . . . . . . . . . . 7,709,662 3,119,443
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,487 334,998
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 263,841 141,510
------------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 17,965,544 11,686,565
------------- ------------
Costs and estimated earnings in excess of billings,
noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307,728
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . 2,016,316 2,137,247
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,682 637,553
Investments in and advances to joint venture, net . . . . . . . . . . . . . 3,902,798 2,417,771
Deferred charges and other assets . . . . . . . . . . . . . . . . . . . . . 964,564 1,013,220
------------- ------------
$ 25,410,904 $ 19,200,084
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 7,630,512
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . 635,073 707,094
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . 2,572,924 3,427,236
------------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 3,207,997 11,764,842
------------- ------------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,409 502,417
------------- ------------
Redeemable convertible preferred stock
(Liquidation value $16,320,000) . . . . . . . . . . . . . . . . . . . . . 14,554,384
------------- ------------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,784 87,598
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . 17,188,093 16,656,009
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,504,986) (9,639,005)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . (171,777) (171,777)
------------- ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 7,600,114 6,932,825
------------- ------------
$ 25,410,904 $ 19,200,084
============= ============
</TABLE>
* The Consolidated Condensed Balance Sheet as of December 31, 1994 has been
derived from the Company's audited Consolidated Balance Sheet as of that date.
1
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 9,426,299 $ 8,865,374 $ 28,947,692 $ 25,837,339
Cost of revenues . . . . . . . . . . . . . . . . . . . . 7,478,492 7,055,193 23,397,469 20,244,732
------------ ------------ ------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . 1,947,807 1,810,181 5,550,223 5,592,607
------------ ------------ ------------ ------------
Expenses:
Selling, general and administrative . . . . . . . . . 1,402,004 1,498,125 4,077,433 4,645,207
Royalties paid to related parties . . . . . . . . . . 25,000 25,000 75,000 75,000
------------ ------------ ------------ ------------
1,427,004 1,523,125 4,152,433 4,720,207
------------ ------------ ------------ ------------
Income from operations . . . . . . . . . . . . . . . . . 520,803 287,056 1,397,790 872,400
Interest (income) expense, net . . . . . . . . . . . . . (47,209) 181,622 (73,124) 385,399
------------ ------------ ------------ ------------
Income before income taxes and
proportionate share of loss of
joint venture . . . . . . . . . . . . . . . . . . . . 568,012 105,394 1,470,914 487,001
Income taxes . . . . . . . . . . . . . . . . . . . . . . 56,898 8,628 147,113 10,023
------------ ------------ ------------ ------------
Income before proportionate share of
loss of joint venture . . . . . . . . . . . . . . . . 511,114 96,766 1,323,801 476,978
Proportionate share of loss of joint
venture . . . . . . . . . . . . . . . . . . . . . . (37,915) (45,548) (170,225) (254,548)
------------ ------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 473,199 $ 51,218 $ 1,153,576 $ 222,430
============ ============ ============ ============
Net income per share . . . . . . . . . . . . . . . . . . $ .01 $ .01 $ .02 $ .03
============ ============ ============ ============
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . . . . . . 8,784,859 8,687,917 8,731,551 8,684,630
============ ============ ============ ============
</TABLE>
2
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in Total
-------------------- Excess of Treasury Stockholders'
Shares Amount Par Value Deficit Stock Equity
--------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 8,759,775 $ 87,598 $ 16,656,009 $ (9,639,005) $ (171,777) $ 6,932,825
Net Income 1,153,576 1,153,576
Preferred dividends (875,200) (875,200)
Issuance of stock options 280,000 280,000
Exercise of stock options 118,600 1,186 252,084 253,270
Accretion of redeemable
preferred stock (144,357) (144,357)
--------- -------- ------------ ------------- ----------- -------------
Balance, September 30, 1995 8,878,375 $ 88,784 $ 17,188,093 $ (9,504,986) $ (171,777) $ 7,600,114
========= ======== ============ ============= =========== =============
</TABLE>
3
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operations:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,153,576 $ 222,430
------------ ------------
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 451,636 376,683
Proportionate share of loss of joint venture . . . . . . . . . . . . . . 170,225 254,548
Changes in operating items:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,112,435 (1,434,373)
Cost in excess of billings . . . . . . . . . . . . . . . . . . . . . . (3,282,491) (2,841,749)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,511 (32,982)
Accounts payables and accrued expenses . . . . . . . . . . . . . . . . (1,174,312) 32,961
Other operating items . . . . . . . . . . . . . . . . . . . . . . . . (122,331) (247,716)
------------ ------------
Net cash used by operations . . . . . . . . . . . . . . . . . . . . (1,645,751) (3,670,198)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment, net . . . . . . . . . . . . . (188,400) (425,271)
Advances to joint venture . . . . . . . . . . . . . . . . . . . . . . . . (1,655,252) (568,444)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,778) (980)
------------ ------------
Net cash used by investing activities . . . . . . . . . . . . . . . (1,861,430) (994,695)
------------ ------------
Cash flows from financing activities:
Net proceeds from (repayment of) short-term borrowings . . . . . . . . . (7,630,512) 3,409,367
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . 970,000
Reduction of long-term debt . . . . . . . . . . . . . . . . . . . . . . . (526,029) (228,873)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . 253,270 514,399
Proceeds from issuance of redeemable preferred stock . . . . . . . . . . 14,410,027
Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . (555,200)
Proceeds from issuance of stock option . . . . . . . . . . . . . . . . . 280,000
------------ ------------
Net cash provided by financing activities . . . . . . . . . . . . . 6,231,556 4,664,893
------------ ------------
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period . . . . . . . . . . . .
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 2,724,375 $
------------ ------------
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,380 $ 385,399
============ ============
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,711 $ 10,023
============ ============
</TABLE>
4
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
On January 24, 1995, the Company consummated a financing transaction
(the "Financing Transaction") whereby it issued for $16 million 160,000
shares of 8% Cumulative Convertible Redeemable Preferred Stock, par value
$.01 per share (the "Convertible Preferred Stock") and an option (the
"Company Option") to purchase up to an additional 1.25 million shares of the
Company's newly issued common stock, par value at $.01 per share (the "Common
Stock") at any time prior to January 24, 1999 for $3.75 per share to
investment partnerships sponsored and controlled by the Carlyle Group, a
Washington, D.C. based private merchant bank ("Carlyle"). The Convertible
Preferred Stock is initially convertible into the Company's Common Stock at a
conversion price of $3 per share and, if not previously converted, the
Company is required to redeem the outstanding Convertible Preferred Stock on
December 31, 2001 for $100 per share plus accrued and unpaid dividends. The
Company is required to pay quarterly dividends on the Convertible Preferred
Stock of $320,000. In addition, as part of the Financing Transaction,
Carlyle acquired 1,666,667 shares of Common Stock of the Company owned by
National Patent for $3 per share and has the option (the "NPD Option") to
purchase up to an additional 500,000 shares of the Company's Common Stock
from National Patent at any time prior to January 24, 1996 at an exercise
price of $3.75 per share. The Company is using proceeds from the Financing
Transaction to (i) finance the Company's obligations under the DuraChem joint
venture with Chem-Nuclear Systems, Inc., estimated at $5 million, (ii)
provide $5 million of working capital required in connection with the
contract with Westinghouse Savannah River Company to construct a DuraMelterTM
vitrification melter to remediate and stabilize low-level radioactive waste
at the Department of Energy's Savannah River Site in South Carolina, and
(iii) provide working capital for the Company's Technology Group.
As of September 30,1995, assuming the conversion of all of the
Convertible Preferred Stock into Common Stock, Carlyle would own 49.9% of the
Common Stock of the Company, excluding the effects of the exercise of the
Company and the NPD Options and all other outstanding warrants and employee
stock options. Assuming the conversion of all of the Convertible Preferred
Stock into Common Stock and assuming Carlyle's exercise in full of the
Company and NPD Options (but not the exercise of outstanding warrants and
employee stock options), Carlyle would own 57.3% of the Company's Common
Stock.
2. INVENTORIES
Inventories, consisting of material, labor and overhead, are classified as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . $ 35,895 $ 55,452
Finished goods . . . . . . . . . . . . . . . . 253,592 279,546
------------- ------------
$ 289,487 $ 334,998
============= ============
</TABLE>
3. NET INCOME PER SHARE
The net income per share for 1995 and 1994 was computed by dividing the
net income applicable to common stock, which reflects the preferred stock
dividend requirement and accretion, by the weighted average number of shares
of common stock outstanding and common stock equivalents to the extent they
result in additional dilution. As the Company has issued options and warrants
which exceed 20% of the common stock outstanding, the Company determines the
dilutive effect of such common stock equivalents using the modified treasury
stock method. For the three and nine months ended September 30, 1995, the
common stock equivalents were deemed to be anti-dilutive and, accordingly,
are not included in the weighted average number of shares used in determining
net income per share.
4. SUBSEQUENT EVENT
On November 7, 1995 the Company and BNFL Inc. (BNFL) entered into a
strategic alliance pursuant to which the two companies will jointly pursue up
to five major United States Department of Energy (DOE) waste stabilization
projects. BNFL is the U.S. subsidiary of British Nuclear Fuels plc, a United
Kingdom based company with annual revenues of $2 billion worldwide. Under
the terms of the strategic alliance, BNFL will
5
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSEQUENT EVENT (CONTINUED)
pay to the Company a fee of $1 million each time the two companies agree to
pursue on an exclusive basis a waste stabilization project together. The
first project to be pursued jointly by the Company and BNFL under this
strategic alliance will be the separation and vitrification (conversion to
glass) of high level radioactive waste at the DOE's Hanford, Washington site.
Upon the execution of the definitive agreements, the Company received the $1
million fee for its agreement to pursue the Hanford project exclusively with
BNFL.
As part of the strategic alliance, BNFL invested $10 million in the
Company in the form of a convertible debenture. The debenture accrues
interest during the first five years at the one-year London Interbank Offered
Rate (LIBOR) and is convertible into 1,381,571 shares of the Company's common
stock prior to November 7, 2000, unless extended under certain circumstances,
or repaid in installments over the five year period beginning in November 8,
2000. BNFL also agreed to provide the Company research and development
funding of at least $500,000 per year over the next five years. The Company
has agreed as part of the strategic alliance to sublicense its radioactive
waste vitrification technologies to BNFL for use exclusively in the United
Kingdom.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GTS DURATEK, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
OVERVIEW
The Company had net income of $473,000 and $1,154,000 for the quarter
and nine months ended September 30, 1995 as compared to $51,000 and $222,000
for the quarter and nine months ended September 30, 1994. The increase in
net income was due to increased revenues in both the Technology and Services
Group combined with lower selling, general and administrative expenses and a
reduction in net interest expense.
The Company's results of operations are significantly affected by the
timing of the award of contracts and the timing and performance on contracts.
These factors directly affect the Company's pre-tax income and net income.
The quarter-to-quarter results continue to be affected by the Company's
electric utility customers scheduling of nuclear power plant outages causing
the demand for these services to often shift between quarters. Accordingly,
results of operations for the quarter and quarter-to-quarter comparisons may
not be as meaningful as comparisons over longer periods.
REVENUES
Revenues were $9,426,000 and $28,948,000 during the quarter and nine
months ended September 30, 1995 as compared to $8,865,000 and $25,837,000 for
the same periods in 1994. The increase in consolidated revenues of $561,000
or 6.3% for the quarter is attributable an increase in the Technology Group
revenues of $1,911,000 and a decrease in the Services Group revenues of
$1,350,000. The increase in consolidated revenues of $3,111,000 or 12.0% for
the nine month period is attributable to increases in the Technology Group
and Services Group revenues of $2,327,000 and $784,000, respectively. The
increases in Technology Group revenues for the quarter and nine month period
was primarily due to work performed on the Department of Energy's Savannah
River M-Area low-level radioactive waste vitrification project. The increase
in the Services Group revenues for the nine month period was partially offset
by a decrease in revenues for the quarter due to the Company's electric
utility customers scheduling of nuclear power plant outages resulting in
lower demand for the quarter.
GROSS PROFIT
Gross profit was $1,948,000 or 20.7% and $5,550,000 or 19.2% for the
quarter and nine months ended September 30, 1995 as compared to $1,810,000 or
20.4% and $5,593,000 or 21.6% for the same periods in 1994. The changes in
gross profit for the quarter and nine month period were due to changes in the
mix of revenues with a higher proportion of the total from the Services Group
which generates a lower gross profit than the Technology Group.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $1,427,000 and
$4,152,000 for the quarter and nine months ended September 30, 1995 as
compared to $1,523,000 and $4,720,000 for the same periods in 1994. The
decrease of $96,000 and $568,000 for the quarter and nine month period was
due to cost saving measures taken in the second half of 1994 in the Services
Group from personnel reductions, consolidation of offices and continued
efforts to control costs, partially offset by higher operating costs incurred
by the Technology Group for the advancement of the vitrification technology.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
GTS DURATEK, INC. AND SUBSIDIARIES
INTEREST EXPENSE
The decrease in interest expense, net for the quarter and nine months
ended September 30, 1995 as compared to the same periods in 1994 reflects the
repayment of short-term borrowings and investment income with the proceeds of
the Financing Transaction (see Note 1).
OTHER INCOME AND EXPENSE
The Company's proportionate share of loss of the joint venture of
$38,000 and $170,000 for the quarter and nine months ended September 30, 1995
relates to the start-up expenses and operation of a 50% joint venture formed
to pursue vitrification of non-radioactive waste materials.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with short-term
borrowings and as of September 30, 1995, the Company has available borrowings
of $7,000,000 under the line of credit arrangement.
On November 7, 1995 the Company and BNFL Inc. (BNFL) entered into a
strategic alliance pursuant to which the two companies will jointly pursue up
to five major United States Department of Energy (DOE) waste stabilization
projects. BNFL is the U.S. subsidiary of British Nuclear Fuels plc, a United
Kingdom based company with annual revenues of $2 billion worldwide. Under
the terms of the strategic alliance, BNFL will pay to the Company a fee of $1
million each time the two companies agree to pursue on an exclusive basis a
waste stabilization project together. The first project to be pursued
jointly by the Company and BNFL under this strategic alliance will be the
separation and vitrification (conversion to glass) of high level radioactive
waste at the DOE's Hanford, Washington site. Upon the execution of the
definitive agreements, the Company received the $1 million fee for its
agreement to pursue the Hanford project exclusively with BNFL.
As part of the strategic alliance, BNFL invested $10 million in the
Company in the form of a convertible debenture. The debenture accrues
interest during the first five years at the one-year London Interbank Offered
Rate (LIBOR) and is convertible into 1,381,571 shares of the Company's common
stock prior to November 7, 2000, unless extended under certain circumstances,
or repaid in installments over the five year period beginning in November 8,
2000. BNFL also agreed to provide the Company research and development
funding of at least $500,000 per year over the next five years. The Company
has agreed as part of the strategic alliance to sublicense its radioactive
waste vitrification technologies to BNFL for use exclusively in the United
Kingdom.
The Company believes that cash flow from operations, existing cash
resources, funds invested by BNFL and borrowings availability under the line
of credit will be sufficient to meet its operating needs and preferred
dividend requirements.
OTHER ITEMS
Investments in and advances to joint venture, net, were $3,903,000 and
$2,418,000 at September 30, 1995 and December 31, 1994, respectively. The
increase of $1,485,000 for the nine month period is primarily attributable to
expenditures on the DuraChem joint venture to design and construct a
vitrification system at an existing Chem-Nuclear waste management facility.
Costs and estimated earnings in excess of billings on uncompleted
contracts were $7,710,000 and $3,119,000 at September 30, 1995 and December
31, 1994, respectively. The increase of $4,591,000 for the nine month period
is primarily attributable to the work performed on the Department of Energy's
Savannah River M-Area low level radioactive waste vitrification project
mentioned above and a contract with Fernald Environmental Restoration
Management Corporation to provide a joule-heated vitrification system. Such
amounts are expected to be billed and collected over the next twelve month
period.
8
<PAGE>
Item 2. Qualification Relating to Financial Information
GTS DURATEK, INC. AND SUBSIDIARIES
The consolidated financial information included herein is unaudited, and
does not include all disclosures required under generally accepted accounting
principles because certain note information included in the Company's Annual
Report, filed on Form 10-K, has been omitted; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. The results of the 1995 interim period are not
necessarily indicative of results to be expected for the entire year.
9
<PAGE>
PART II OTHER INFORMATION
GTS DURATEK, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
a. EXHIBITS
4.5 Convertible Debenture issued by GTS Duratek, Inc., General
Technical Services, Inc., GTS Instrument Services
Incorporated to BNFL Inc. dated November 7, 1995.
10.20 Teaming Agreement by and between GTS Duratek, Inc. and BNFL
Inc. dated November 7, 1995.
10.21 Sublicense Agreement by and between GTS Duratek, Inc. and
BNFL Inc. dated November 7, 1995.
11.1 GTS Duratek, Inc., and Subsidiaries, Computation of
Earnings Per Share for the three and nine months ended
September 30, 1995 and 1994.
27 Financial Data Schedule
99.2 Press Release of GTS Duratek, Inc. dated November 8, 1995.
b. REPORTS
There were no reports on Form 8-K filed for the period ended
September 30, 1995.
10
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1995
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.
GTS DURATEK, INC.
Dated: November 13, 1995 BY: /s/ Robert F. Shawver
------------------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: November 13, 1995 BY: /s/ Craig T. Bartlett
------------------------------------
Craig T. Bartlett
Controller and Principal
Accounting Officer
11
<PAGE>
GTS DURATEK, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1995
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.
GTS DURATEK, INC.
Dated: November 13, 1995 BY:
------------------------------------
Robert F. Shawver
Executive Vice President and
Chief Financial Officer
Dated: November 13, 1995 BY:
------------------------------------
Craig T. Bartlett
Controller and Principal
Accounting Officer
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THIS CONVERTIBLE DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES ACT OF ANY STATE. THIS
CONVERTIBLE DEBENTURE HAS BEEN ISSUED IN RELIANCE ON THE EXEMPTIONS FROM
REGISTRATION CONTAINED IN THE ACT AND IN THE SECURITIES ACTS OF APPLICABLE
STATES AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE
REGISTRATION UNDER SUCH ACTS OR IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACTS.
GTS DURATEK, INC.
CONVERTIBLE DEBENTURE
$10,000,000.00 November 7, 1995
Columbia, Maryland
FOR VALUE RECEIVED, GTS DURATEK, INC., a Delaware corporation
("Duratek"), GENERAL TECHNICAL SERVICES, INC., a Maryland corporation
("GTS"), and GTS INSTRUMENT SERVICES INCORPORATED, a Maryland corporation
("GTSIS"), (Duratek, GTS and GTSIS are hereinafter collectively referred to
as the "Borrower"), jointly and severally promise to pay to the order of BNFL
Inc., a Delaware corporation (the "Holder"), the principal sum of TEN MILLION
DOLLARS ($10,000,000) (the "Principal Amount"), pursuant to the terms and
subject to the conditions set forth herein.
The Holder agrees that the payment of principal, interest and all other
fees and charges in connection with this Debenture is hereby expressly
subordinated in right of payment to the prior payment of principal, interest
and all other fees and charges in connection with any Senior Debt. For
purposes of this Debenture, the term "Senior Debt" shall mean any
indebtedness of the Borrower for money borrowed from banks, including without
limitation First Fidelity Bank, N.A., or other institutional lenders,
existing on the date hereof or hereafter created or incurred, which by its
terms is senior to this Debenture and is secured by any of the assets of the
Borrower; provided, however, that the Holder shall have the authority to
negotiate in good faith and execute any documents required by the banks or
institutional lenders in respect of such subordination.
The following terms shall apply to this Debenture:
Section 1. MATURITY DATE. Unless sooner paid in full, the Borrower
promises to pay to the Holder the outstanding and unpaid balance of the
Principal Amount, together with all accrued and unpaid interest thereon and
any late charges, costs, expenses, fees and sums, in full on or before
November 7, 2005 (the "Maturity Date"), unless the Holder has converted this
Debenture into the Borrower's common stock pursuant to Section 11 below.
SECTION 2. INTEREST RATE. From the date hereof until November 7, 2000
(the "Initial Period Termination Date," and such period shall be referred to
as the "Initial Period"), interest shall accrue on the unpaid balance of the
Principal Amount at the floating and fluctuating interest rate per annum
equal to the one (1) year London Interbank Offered Rate ("LIBOR Rate") as
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quoted in the "Money Rates" column of the WALL STREET JOURNAL on the first
business day of each calendar quarter or, if such day is not a business day
or if the specified rate is not so quoted in the WALL STREET JOURNAL, then
the next succeeding business day when such specified rate is quoted. The
LIBOR Rate so quoted pursuant to the preceding sentence shall apply until the
LIBOR Rate is determined at the beginning of the next succeeding calendar
quarter. On the Initial Period Termination Date, all accrued and unpaid
interest on the unpaid balance of the Principal Amount during the Initial
Period shall be capitalized and thereafter treated as principal by adding
such amount (the "Capitalized Interest Amount") to the unpaid balance of the
Principal Amount, and the total of such unpaid balance of the Principal
Amount plus the Capitalized Interest Amount is referred to herein as the
"Adjusted Principal Balance," and the term "Principal Amount" shall be deemed
to refer to the Adjusted Principal Balance at all times on and after the
Initial Period Termination Date. From the Initial Period Termination Date
until all sums due and owing hereunder have been paid in full, interest shall
accrue upon the Adjusted Principal Balance at the LIBOR Rate. Interest shall
be calculated on the basis of a three hundred sixty (360) day year applied to
the actual number of days that the Principal Amount or the Adjusted Principal
Balance, or any portion thereof, as the case may be, is outstanding. For
purposes of this Debenture, the term "business day" shall mean any day,
except a Saturday, Sunday or legal holiday, on which commercial banking
institutions are open for business in the State of Maryland. Notwithstanding
anything contained herein to the contrary, all interest shall compound
annually.
Section 3. PAYMENT. The Adjusted Principal Balance, along with accrued
interest thereon, shall be paid in five (5) annual installments commencing on
November 7, 2001 and continuing on the next four (4) anniversaries of such
date, with the last such payment date being the Maturity Date (each such date
shall be referred to as a "Payment Date"). The amount of such payment for
the first four (4) Payment Dates shall be determined by the Borrower, in its
sole discretion, provided that each such payment shall not be less than One
Million Dollars ($1,000,000.00) and the amount of the fifth and final payment
on the Maturity Date shall be equal to the outstanding and unpaid balance of
the Adjusted Principal Balance together with all accrued and unpaid interest
thereon, and any late charges, costs, expenses, fees and other sums due
hereunder. If any amounts due under this Debenture are to be paid to the
Holder on a day which is not a business day, then such amounts shall be due
on the next following day which is a regular business day.
Section 4. APPLICATION OF PAYMENTS. All payments made hereunder shall
be applied first to late charges, costs, expenses, fees and other sums owing
to the Holder, pursuant to this Debenture, next to accrued and unpaid
interest, and then to the unpaid Principal Amount.
Section 5. MANNER OF PAYMENT. All payments of the unpaid balance of
the Adjusted Principal Balance and interest thereon, and all other sums due
hereunder, shall be paid by wire transfer of immediately available funds, in
lawful money of the United States of America, during regular business hours
to such account in the United States as the Holder may at any time or
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from time to time designate in writing to the Borrower effective on five (5)
days prior written notice to the Borrower.
Section 6. EVENTS OF DEFAULT; ACCELERATION. Any time after the
occurrence of an Event of Default (as hereinafter defined), the Holder may,
in the Holder's sole and absolute discretion, declare the entire unpaid
balance of the Principal Amount, plus accrued interest and other sums due
hereunder, to be immediately due and payable. The occurrence of any of the
following shall be an event of default ("Event of Default") hereunder: (i)
the failure of the Borrower to pay Holder when due any amount due hereunder,
and such failure to pay is not cured within seven (7) calendar days, or the
breach of any other material provision of this Debenture that is not cured by
the Borrower within twenty (20) calendar days of receipt of written notice of
such breach provided by the Holder to the Borrower, (ii) the occurrence of a
default under any Senior Debt instrument that is not waived by the senior
lender thereunder or cured by the Borrower within thirty (30) calendar days
after notice of the default by the holder of the Senior Debt, (iii) the
filing of any petition under the U.S. Bankruptcy Code, in effect from time to
time, or any similar Federal or state statute by or against the Borrower or
the failure of the Borrower generally to pay its debts as such debts become
due, (iv) the filing of an application for the appointment of a receiver for,
the making of a general assignment for the benefit of creditors by, or the
insolvency of, the Borrower, or (v) the Borrower's liquidation, dissolution,
termination of existence or cessation of the conduct of its business
operations, or (vi) the material breach of the provisions of Article XII of
the Teaming Agreement by and between Duratek and the Holder dated November 7,
1995 (the "Teaming Agreement").
Section 7. DEFAULT INTEREST RATE. Upon the occurrence of, and during
the continuance of, an Event of Default, the rate of interest accruing on the
unpaid balance of the Principal Amount and accrued interest thereon, shall
increase by the lesser of (i) two (2) percentage points per annum above the
rate of interest otherwise applicable and (ii) the maximum amount permitted
by law, independent of whether the Holder elects to accelerate the unpaid
balance of the Principal Amount as a result of such Event of Default.
Section 8. INTEREST RATE AFTER JUDGMENT. If judgment is entered
against the Borrower on this Debenture, the amount of the judgment entered
(which may include the Principal Amount, interest, default interest, late
charges, fees, expenses and costs) shall bear interest at the lesser of (i)
the highest rate authorized under this Debenture and (ii) the maximum amount
permitted by law, as of the date of entry of the judgment.
Section 9. EXPENSES OF COLLECTION. Should this Debenture be referred
to an attorney for collection, and whether or not a suit has been filed, the
Borrower shall pay all of the Holder's actual costs, fees (including
reasonable attorney's fees) and expenses resulting from such referral.
Section 10. WAIVER OF PROTEST. The Borrower, and all parties to this
Debenture, whether maker, endorser, or guarantor, waive presentment, notice
of dishonor and protest.
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Section 11. CONVERSION OF DEBENTURE.
11.1 RIGHT TO CONVERT. Subject to the provisions of this Section
11.1 and upon compliance with the provisions of this Debenture, the Holder of
this Debenture shall have the right (the "Conversion Right"), at the Holder's
option, at any time from the date hereof until November 7, 2000 (the
"Exercise Period") to cause the conversion of all, but not less than all, of
the unpaid Principal Amount and all accrued interest thereon into a total of
1,381,575 fully paid and nonassessable shares of Common Stock (as defined
below) of the Borrower, subject to adjustment pursuant to Section 11.5 below;
provided, however, that should there be any substantial U.S. regulatory
obstacle to the receipt by BNFL of all such shares, then BNFL shall be
entitled to convert less than all of the unpaid Principal Amount and accrued
interest thereon in order to receive the maximum number of shares in such
conversion (the "First Conversion") as may be permitted notwithstanding such
obstacle (the "Maximum Convertible Number"), and in such case, the remainder
of the Principal Amount and accrued interest thereon not so converted shall
be treated thereafter as follows: the outstanding principal due under this
Debenture shall be reset, to be an amount (the "New Principal Amount") equal
to (1) the Principal Amount plus accrued but unpaid interest immediately
prior to the First Conversion, minus (2) the product of (x) the Principal
Amount plus all accrued but unpaid interest immediately prior to the First
Conversion, multiplied by (y) the Maximum Convertible Number, divided by (z)
1,381,575 (as such number may be adjusted pursuant to Section 11.5 hereof).
In such event, interest shall accrue on the New Principal Amount and the
Exercise Period will be extended until not later than the Maturity Date for
the conversion of the New Principal Amount and all accrued and unpaid
interest thereon, provided that the Holder will use its best efforts to
eliminate such U.S. regulatory obstacle and to convert such New Principal
Amount into Common Stock (also referred to herein as a "Conversion Right") as
soon as legally practicable, and the conversion rights hereunder shall
terminate 90 days after receipt of applicable regulatory approval if not
previously exercised. If the New Principal Amount is not converted hereunder
into shares of Common Stock prior to the Maturity Date, the Borrower shall
pay in full the outstanding and unpaid balance of the New Principal Amount,
together with all accrued and unpaid interest thereon and any late charges,
costs, expenses, fees and sums in full on the Maturity Date. Following the
exercise in full of the Conversion Right, the Holder shall have no further
right to collect the Principal Amount or any accrued interest thereon.
11.2 EXERCISE OF CONVERSION RIGHTS. In order to exercise the
Conversion Right in accordance with Section 11.1, the Holder shall send
notice of the exercise of such Conversion Right to the Borrower (the
"Conversion Notice") and shall simultaneously present this Debenture, or an
affidavit of loss with appropriate provision for indemnification by the
Holder, to the Borrower at the office of the Borrower. As soon as
practicable after the receipt of the Conversion Notice and the presentation
of this Debenture (or such affidavit and indemnification), the Borrower shall
issue and shall deliver to the Holder a certificate or certificates for the
number of full shares of Common Stock issuable upon the conversion of this
Debenture. Such conversion shall be deemed to have been effected immediately
prior to the close of business on
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the date on which the Conversion Notice and this Debenture (or such
affidavit and indemnification) shall have been received by the Borrower, and
at such time the rights of the Holder under this Debenture shall cease and
the Holder shall be deemed to have become the registered owner of record of
the shares represented thereby; provided however that should the Holder be
able to convert only the Maximum Convertible Number, then the Holder shall
continue to hold this Debenture until the earlier of (i) the time the Holder
is able to convert (and does convert) the balance of this Debenture into
shares of Common Stock, or (ii) the Maturity Date.
11.3 NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of the
Conversion Right. The number of shares so issued shall be only a whole
number obtained by rounding up or down to the nearest whole number for any
fractions resulting from the calculation of the number of shares to be
delivered.
11.4 NOTICE OF CERTAIN ACTIONS. In case at any time:
(a) the Borrower shall declare any dividend upon its common
stock, $.01 par value per share (the "Common Stock"), payable in securities
or make any special dividend or other distribution (other than a cash
dividend to the holders of its Common Stock);
(b) the Borrower shall offer for subscription pro rata to the
holders of its Common Stock any additional securities of any class or other
rights;
(c) there shall be any capital reorganization, or
reclassification of the capital stock of the Borrower (other than the
conversion of the Borrower's outstanding 8% Cumulative Redeemable Preferred
Stock), or consolidation or merger of the Borrower, or sale of all or
substantially all its assets;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Borrower; or
(e) the Borrower shall enter into an agreement or adopt a
plan for the purpose of effecting a consolidation, merger, or sale of all or
substantially all of its assets;
then, in any one or more of said cases, the Borrower shall give written
notice to the Holder of the date on which (i) the books of the Borrower shall
close or a record shall be taken for such dividend, distribution or
subscription rights, or (ii) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall
take place, as the case may be. Such notice shall also specify the dates as
of which the holders of Common Stock of record shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding up, as the case may be. Such written
notice shall be given at least 30 days prior to the action
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in question and not less than 30 days prior to the record date or the date on
which the Borrower's transfer books are closed in respect thereto.
11.5 ADJUSTMENT TO NUMBER OF SHARES ISSUED UPON EXERCISE OF
CONVERSION RIGHT. In the event that the Borrower shall (i) declare a
dividend or make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its outstanding shares
of Common Stock into a greater number of shares or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller number of
shares, the aggregate number of shares of Common Stock into which this
Debenture is convertible shall be proportionately adjusted as of the
effective date of such event by multiplying the number of shares of Common
Stock issuable upon the conversion of this Debenture by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately following such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior thereto.
11.6 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Borrower's assets to another person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein
as an "Organic Change." Prior to the consummation of any Organic Change, the
Borrower will make provisions to insure that the Holder will thereafter have
the right to acquire and receive, in lieu of or in addition to the shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of this Debenture, securities or assets as the Holder would have
received in connection with such Organic Change if the Holder had converted
this Debenture immediately prior to such Organic Change. The Borrower shall
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (of other than the Borrower)
resulting from consolidation or merger or the corporation purchasing such
assets assumes, by written instrument, the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
11.7 RESERVATION OF SHARES. The Borrower shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue upon conversion of this Debenture as herein provided, such
number of shares of Common Stock as shall then be issuable upon the exercise
of the Conversion Right. The Borrower covenants that all such Common Stock
which shall be so issuable shall, upon the conversion of this Debenture as
herein provided, be duly and validly issued and fully paid and nonassessable
by the Borrower.
11.8 REGISTRATION RIGHTS FOR ISSUED SHARES. Simultaneous with the
issuance of the Common Stock upon the exercise by the Holder of the
Conversion Right, the Borrower and the Holder shall enter into a registration
rights agreement substantially in the form of the agreement attached hereto
as EXHIBIT A.
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11.9 TAXES. The issuance of certificates for shares upon
conversion of this Debenture shall be made without charge to the holder of
this Debenture for any issuance tax in respect thereto.
Section 12. MODIFICATION; WAIVER. No modification, change, waiver or
amendment of this Debenture shall be effective unless in writing signed by
the Holder and the Borrower. No delay on the part of the Holder in
exercising any right or remedy hereunder shall operate as a waiver thereof,
and no single or partial exercise of any such right or remedy shall preclude
other or future exercise thereof, or the exercise of any other right or
remedy. Waiver by the Holder of any default by the Borrower or any other
party shall not constitute a waiver of any subsequent defaults, but shall be
restricted to the default so waived. All rights and remedies of the Holder
hereunder are irrevocable and cumulative, and not alternate or exclusive, and
shall be in addition to all rights and remedies given in any other instrument
or by any laws, whether now existing or hereafter enacted.
Section 13. PROVIDING INFORMATION TO THE HOLDER. For as long as this
Debenture is outstanding, the Borrower shall provide to the Holder annual
audited and quarterly financial statements of the Borrower on a consolidated
basis. This provision shall be deemed satisfied by the Borrower providing to
the Holder its Annual Report on Form 10-K and its quarterly reports on Form
10-Q, for as long as the Borrower is required to file such reports pursuant
to the Securities Exchange Act of 1934 (the "1934 Act"), no later than the
date such reports are made available to the public. If the Borrower is not
required to file such report pursuant to the 1934 Act, the quarterly
financial statements of the Borrower will be provided to the Holder within 45
days of the end of the quarter for which they relate and the annual audited
financial statements of the Borrower will be provided to the Holder within 90
days of the end of the fiscal year to which they relate. The Borrower shall
promptly provide to the Holder copies of any notices of default or notices
indicating noncompliance with any terms of the Senior Debt that it receives
from any holder of Senior Debt.
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Section 14. REPRESENTATIONS AND WARRANTIES OF GTS AND GTSIS.
14.1 GTS hereby represents and warrants to the Holder as of the
date hereof as follows:
(i) GTS is a corporation duly incorporated and validly existing
under the laws of the State of Maryland.
(ii) GTS has all requisite corporate power and authority to enter
into this Debenture and carry out and perform its obligations hereunder.
(iii) The execution, delivery and performance of this Debenture has
been duly authorized and approved by all necessary corporate action and this
Debenture, when duly executed and delivered by GTS, will constitute a valid
and legally binding obligation of GTS, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to the rights of creditors generally.
(iv) The execution and performance of this Debenture does not and
will not (i) violate GTS's articles of incorporation or bylaws, or the terms
of any judgment, decree or order of any court or administrative authority or
the terms of any material agreement to which it is a party or by which it is
bound or (ii) require the filing, declaration or registration with, or
permit, consent or approval of, or the giving of any notice to, any
governmental authority or third party, excluding those that have already been
obtained prior to the date hereof.
(v) There is no litigation, arbitration, mediation or other
investigation or proceeding pending or, to the best of GTS's knowledge,
threatened or in prospect, against GTS with respect to the transactions
contemplated by this Debenture.
14.2 GTSIS hereby represents and warrants to the Holder as of the
date hereof as follows:
(i) GTSIS is a corporation duly incorporated and validly existing
under the laws of the State of Maryland.
(ii) GTSIS has all requisite corporate power and authority to enter
into this Debenture and carry out and perform its obligations hereunder.
(iii) The execution, delivery and performance of this Debenture has
been duly authorized and approved by all necessary corporate action and this
Debenture, when duly executed and delivered by GTSIS, will constitute a valid
and legally binding obligation of GTSIS, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to the rights of creditors generally.
(iv) The execution and performance of this Debenture does not and
will not (i) violate GTSIS's articles of incorporation or bylaws, or the
terms of any judgment, decree or order of any court or administrative
authority or the terms of any material agreement to which it is a party or by
which it is bound or (ii) require the filing, declaration or registration
with, or permit, consent or approval of, or the giving of any notice to, any
governmental authority or third party, excluding those that have already been
obtained prior to the date hereof.
(v) There is no litigation, arbitration, mediation or other
investigation or proceeding pending or, to the best of GTSIS's knowledge,
threatened or in prospect, against GTSIS with respect to the transactions
contemplated by this Debenture.
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Section 15. RIGHT OF OFFSET. Notwithstanding anything herein to the
contrary, in the event that the Holder has defaulted on its obligation to pay
the Article XII and Non-Competition Fee (as defined in the Teaming
Agreement), to Duratek pursuant to Article III of the Teaming Agreement, then
the Borrower has the right to offset any amounts due to Holder hereunder
until such time as the payment default with respect to the Article XII and
Non-Competition Fee has been cured by the Holder or waived by the Borrower.
The offset by the Borrower of any amounts due to Holder pursuant to this
Section 15 shall not constitute an Event of Default under Section 6 of this
Debenture.
Section 16. INVALIDITY OF ANY PART. If one or more provisions of this
Debenture shall be found to be illegal, invalid or unenforceable under any
applicable law, then such contravention or invalidity shall not invalidate
the entire Agreement. Such provision shall be deemed to be modified
consistent with the intent of the parties to the extent necessary to render
it legal, valid and enforceable, and if no such modification shall render it
legal, valid and enforceable, then this Agreement shall be construed as if
not containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced accordingly.
Section 17. ASSIGNMENT. This Debenture may not be
assigned by the Holder or the Borrower at any time, in whole or
in part, without the approval of the other party.
Section 18. TIME OF THE ESSENCE. Time is of the essence to this
Debenture and to all obligations of the Borrower hereunder.
Section 19. NOTICES. Except as otherwise expressly stated, all notices
required to be given or which may be given under this Agreement shall be in
writing and shall be deemed given upon the earlier of (i) when it is
personally delivered, (ii) three (3) days after having been mailed by
certified mail, postage prepaid, return receipt requested, (iii) two (2) days
after having been sent by recognized overnight delivery service or (iv) one
day after having been sent by facsimile transmission, addressed as follows:
if to:
(a) Borrower:
GTS Duratek, Inc.
8955 Guilford Road, Suite 200
Columbia, Maryland 21046
Attn: Robert E. Prince, President and Chief Executive Officer
Telecopy No.: (301) 621-8211
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(b) Holder:
BNFL Inc.
9302 Lee Highway, Suite 950
Fairfax, Virginia 22031
Attn: K. Edward Newkirk, General Counsel
Telecopy No.: (703) 359-0442
Section 20. GOVERNING LAW. This Debenture is executed and delivered
in, and shall be governed by and construed under the laws of, the State of
Maryland. The Borrower and the Holder agree that all claims of any kind
arising from or relating to this Debenture shall be brought in a court of
competent jurisdiction in the State of Maryland and agree to the jurisdiction
of the Maryland courts (including the Unites States District Court for the
District of Maryland) in all such matters. Both the Borrower and the Holder
waive all objections to venue.
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be
executed in its name, under its seal, by its duly authorized officer on its
behalf, the day and year first above written.
ATTEST: GTS DURATEK, INC.
/s/ Diane Brown By: /s/ Robert E. Prince
- --------------------------------- ---------------------------------- (SEAL)
Diane Brown, Secretary Robert E. Prince, President
ATTEST: GENERAL TECHNICAL SERVICES, INC.
/s/ Diane Brown By: /s/ Robert E. Prince
- --------------------------------- ---------------------------------- (SEAL)
Diane Brown, Secretary Robert E. Prince, President
ATTEST: GTS INSTRUMENT SERVICES, INC.
/s/ Diane Brown By: /s/ Robert E. Prince
- --------------------------------- ---------------------------------- (SEAL)
Diane Brown, Secretary Robert E. Prince, President
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EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
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TEAMING AGREEMENT
THIS TEAMING AGREEMENT (this "Agreement") is made this 7th day of
November 1995 by and between GTS Duratek, Inc., a Delaware corporation
("GTSD") and BNFL Inc., a Delaware corporation ("BNFL").
W I T N E S S E T H:
WHEREAS, GTSD has specialized knowledge, experience and rights to
technology for the vitrification of radioactive, hazardous and other wastes;
WHEREAS, BNFL possesses experience in the processing and stabilization
of radioactive waste which could complement the specialized knowledge,
experience and technology rights of GTSD for the treatment and handling of
wastes at DOE (as defined) sites throughout the United States and all of its
territories and possessions;
WHEREAS, GTSD and BNFL believe that a cooperative pursuit of contracts
and other potential business opportunities with the DOE to treat and handle
wastes at DOE sites throughout the United States and all of its territories
and possessions would be to the mutual benefit of both companies;
WHEREAS, GTSD and BNFL desire to establish a collaborative business
relationship and to support each other in the pursuit of potential business
opportunities for the treatment and handling of wastes at DOE sites;
WHEREAS, it is in the interest of the parties to use their reasonable
best efforts to apply marketing, contractual and technical resources in the
most effective manner in pursuing potential business opportunities for the
treatment and handling of wastes for the DOE;
WHEREAS, it is the desire of the parties to develop a total program
workshare that offers a satisfactory business opportunity for each while
placing the GTSD/BNFL team in the best competitive position;
WHEREAS, pursuant to the teaming arrangement provided herein, BNFL will
invest $10.0 million in GTSD in the form of a convertible subordinated
debenture (the "Convertible Debenture"), convertible into the common stock of
GTSD, $.01 par value per share (the "Common Stock"), as provided herein;
WHEREAS, pursuant to the teaming arrangement provided herein, BNFL will
provide research and development funding to GTSD for five (5) years, as
provided herein; and
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WHEREAS, pursuant to the teaming arrangement provided herein, GTSD shall
grant to BNFL a sublicense with respect to the vitrification technology for
use in the United Kingdom, as provided herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
provided herein, and other good and sufficient consideration, the receipt of
which is acknowledged by each party hereto, the parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to those terms defined elsewhere herein, when used herein,
the following capitalized terms shall have the meanings indicated:
"AFFILIATE" of a specified person means a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified.
"CONTRACT" means any contract awarded to GTSD, BNFL or a Project
Organization by the DOE in response to a Proposal.
"DOE" means the United States Department of Energy, its successor, or
any other agency or Person administering or operating the United States
Department of Energy sites around the United States and its territories and
possessions.
"PERSON" or "PERSON" means an individual, corporation, partnership,
limited liability company, firm, association, joint venture, trust,
unincorporated organization, government, governmental body, agency, political
subdivision or other entity.
"PROJECT" means a project for the treatment and handling of radioactive,
hazardous and other wastes at a particular DOE site by means of vitrification
and the related services in connection therewith. A Project will involve
services to be provided by GTSD, BNFL and/or a Project Organization in
accordance with the scope of work to be determined by the Steering Committee,
on a project by project basis, and which may include technologies and
services other than vitrification.
"PROJECT ORGANIZATION" means a newly formed corporation, partnership,
limited liability company, firm, joint venture, trust or other form of
business organization that is jointly owned, directly or indirectly, by GTSD,
BNFL and possibly other third parties, and was formed for the specific and
limited purpose of undertaking a Project.
"PROPOSAL" means a proposal submitted by either GTSD, BNFL or a Project
Organization, as agreed, in response to an RFP.
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"RFP" means any request for proposal issued by the DOE for the treatment
and handling of radioactive, hazardous and other wastes at a DOE site and the
related services in connection therewith.
"STEERING COMMITTEE" means the Vitrification Technology Steering
Committee established pursuant to Article VI hereof.
"SUBCONTRACT" means any subcontract entered into by and between any of
GTSD, BNFL and a Project Organization relating to work to be performed under
a Contract.
ARTICLE II
SCOPE OF ACTIVITIES
2.1. GTSD and BNFL agree to collaboratively seek and pursue five (5)
Projects with the DOE for the treatment and handling of radioactive,
hazardous and other wastes at various DOE sites throughout the United States.
2.2. The decision to pursue a Project will be determined by the Steering
Committee. To the extent that the Steering Committee identifies and decides
that GTSD and BNFL shall jointly pursue a Project, the Steering Committee
shall acknowledge in writing the pursuit of such Project in accordance with
the terms of this Agreement and a copy of such written acknowledgment shall
be provided to both GTSD and BNFL. The written acknowledgment shall also
contain the date, or the basis for determining the date, by which the Article
XII and Non-Competition Fee (as hereinafter defined) is required to be paid
pursuant to Section 3.2.
2.3 Once the DOE has issued an RFP for a Project that the Steering
Committee has determined that the parties should jointly pursue, the parties
shall collaborate in preparing and submitting a Proposal in response to the
RFP. At such time that such an RFP is issued, the Steering Committee shall
determine which party is to serve as the prime contractor (the "Prime
Contractor") with the DOE and which party shall serve as the subcontractor
(the "Subcontractor"). The parties shall regulate their relationship on a
particular Project through the issuance of subcontracts and agree to work
together in an exclusive prime contractor/subcontractor relationship as per
Article III herein. The scope of work shall be decided upon by the parties in
accordance with Article V below. Alternatively, the Steering Committee may
elect in its sole discretion to form a Project Organization to pursue the
Project and shall determine the structure and ownership of such entity and
the contribution of each party to such entity.
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ARTICLE III
EXCLUSIVITY; PAYMENT OF CERTAIN FEES
3.1. For Projects which the Steering Committee has determined that the
parties shall jointly pursue, upon such determination and the receipt by each
party of the written acknowledgment of such determination, each party hereto
shall: (i) not participate in any manner in the preparation or submission of
proposals to the DOE by itself or with a third party to the exclusion of the
other party; and (ii) not participate in any manner in furtherance of the
preparation of proposals to the DOE by or with any third party for
opportunities related to the Project, without the written consent of the
other party, which consent may be withheld in such other party's sole
discretion. Nothing herein shall be deemed to confer any right or impose any
obligation or restriction on either party with respect to any other project
other than a Project which the Steering Committee has determined to pursue.
Each party hereto shall not be precluded from its normal marketing and
business efforts in connection with the sale of standard products or services
not covered by this Agreement. Each party hereto shall not be precluded from
participating in a DOE project, as a subcontractor or otherwise, once the DOE
has awarded the project to a party other than BNFL, GTSD or a Project
Organization, provided that such party uses its best efforts to participate
in such DOE project with the other party hereto, unless the types of goods or
services required to be provided for such project or the economics of the
party's participation in such project do not make it commercially reasonable,
as determined in the reasonable discretion of the Steering Committee, to
jointly participate in such project.
3.2 Unless otherwise agreed upon by the Steering Committee, upon the
earlier of (i) three (3) business days after the issuance of an RFP by the
DOE for a Project that the Steering Committee has determined that the parties
should jointly pursue or (ii) the determination by the Steering Committee to
jointly pursue a Project and the determination by the Steering Committee to
commence work in earnest to prepare a Proposal for such Project (but in any
event not later than the submission of a Proposal pursuant to this provision
(ii)), BNFL shall pay to GTSD, subject to Section 3.6, the sum of $1.0
million (the "Article XII and Non-Competition Fee") in consideration of
GTSD's agreement to, (i) exclusively pursue the Project with BNFL, (ii)
provide the technology required under Article XII, and (iii) not compete with
BNFL and to exclusively team with BNFL and mutually acceptable third parties
with respect to preparing a proposal for the stabilization of radioactive
waste contained in the underground tanks of the DOE's Hanford Washington site.
3.3 GTSD shall be deemed to have earned the Article XII and
Non-Competition Fee simply by its agreement to the items specified in Section
3.2 and no further conditions or obligations shall be required to be
satisfied after the payment of the Article XII and Non-Competition Fee.
3.4 In the event that GTSD has not received the Article XII and
Non-Competition Fee within thirty (30) calendar days of when the obligation
of BNFL to pay such Article XII and Non-Competition Fee arose pursuant to
Section 3.2 above, then, in addition to its right to
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receive the Article XII and Non-Competition Fee, GTSD shall be free to pursue
the Project with another party and shall not be subject to the exclusivity
provisions of Section 3.1 herein with respect to that Project.
3.5 For purposes of this Agreement, the Steering Committee has
determined to pursue the Project for the stabilization of the radioactive
waste contained in the underground tanks at the DOE's Hanford, Washington
site and all of the conditions of Section 3.2 herein shall be deemed to have
been satisfied as of the date hereof. Accordingly, BNFL shall pay to GTSD
$1.0 million upon the execution and delivery of this Agreement.
3.6 The maximum aggregate amount of Article XII and Non-Competition
Fees to be paid by BNFL to GTSD pursuant to this Agreement shall be $5.0
million. In the event that BNFL, GTSD or a Project Organization is not
awarded any one or more of the Projects that the Steering Committee has
determined to pursue, GTSD agrees to exclusively team with BNFL on one (1)
additional Project for no additional Article XII and Non-Competition Fee,
provided that GTSD has received an aggregate of $5.0 million in Article XII
and Non-Competition Fees from BNFL.
3.7 Notwithstanding anything contained herein to the contrary, in the
event that BNFL is (i) debarred or suspended from doing business with the DOE
or the United States Government or (ii) legally prohibited in any way from
being involved in a Project, then the exclusivity provisions contained in
this Article III shall be suspended until such time as BNFL is legally
permitted do business with the DOE and to be involved in a Project.
3.8 Notwithstanding anything herein to the contrary, in the event that
GTSD has defaulted on any of its payment obligations under the Convertible
Debenture, BNFL shall be entitled to offset the amounts owed to GTSD as
Article XII and Non-Competition Fees until such time as the payment default
has been cured or the payment default has been waived by BNFL. All amounts
so offset shall be applied in whole toward the cure of the payment default
under the Convertible Debenture.
ARTICLE IV
PREPARATION AND SUBMISSION OF PROPOSALS
4.1. The parties agree that the Prime Contractor shall serve as the
primary interface with the DOE in the pursuit of a Contract for a Project.
4.2. The Subcontractor shall submit in a timely manner an offer to the
Prime Contractor for the Subcontractor's respective scope of work to be
integrated into the Proposal to be submitted to the DOE by the Prime
Contractor. The offer to be submitted by the Subcontractor to the Prime
Contractor shall include the necessary technical and price information for
the goods and/or services to be provided by the Subcontractor, and support
and backup
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therefor, so that the Prime Contractor can complete the Proposal in an
appropriate manner. The Subcontractor shall bear all of the costs and
expenses associated with preparing the offer that is submitted to the Prime
Contractor. The Prime Contractor shall incorporate the relevant offer by the
Subcontractor in the Proposal and shall submit the Proposal to the DOE.
4.3 The Prime Contractor shall have the overall responsibility for the
preparation and submission of a Proposal, including the document preparation
cost for the Proposal. The parties agree to submit the Proposal for review
by the Steering Committee before submission to the DOE and the Steering
Committee shall have approved the Proposal prior to its submission. In no
event shall the Prime Contractor be entitled to modify or amend the offer
from the Subcontractor to be incorporated in the Proposal without the prior
written consent of the Subcontractor. Each party shall bear its own risks,
costs, fees and other expenses incurred in connection with the preparation
and submission of a Proposal. After submission of a Proposal to the DOE, the
parties shall provide such services and information as are reasonably
required for evaluation of the Proposal and negotiation of the resulting
Contract.
4.4. The Prime Contractor shall be responsible for carrying out all
negotiations with the DOE. If requested by the Prime Contractor, the
Subcontractor, at its own expense, shall participate in presenting and
negotiating with the DOE with a view to obtaining an award to the Prime
Contractor of the Contract. The Prime Contractor shall keep the
Subcontractor informed of the progress and content of the negotiations with
the DOE. The Prime Contractor shall not agree to any amendment to the
Proposal which affects the rights and obligations of the Subcontractor
without the prior written consent of the Subcontractor, which consent shall
not be unreasonably withheld or delayed.
4.5. The parties hereby undertake to provide each other with prompt
notification in the event either party determines that it may not be in its
best interest, or the best interest of both parties, to pursue the Project
and enter into a Contract with the DOE.
ARTICLE V
SUBCONTRACTS
5.1 In the event that a Contract is awarded to the Prime Contractor
based on a Proposal, the Prime Contractor shall, as soon as practicable,
place a subcontract (the "Subcontract") with the Subcontractor for its
respective scope of work consistent with the terms of the offer submitted by
the Subcontractor to the Prime Contractor and included in the Proposal.
5.2 It is understood by the parties that the Prime Contractor may enter
into an agreement with other potential subcontractors in support of
opportunities in which the parties hereto are jointly pursuing provided that
such potential subcontractor shall not provide goods or services which the
Subcontractor is capable of providing and willing to provide on commercially
reasonable terms. Subcontractor shall be permitted (as a subcontractor) to
enter into a
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subcontract with a third party provided that the Steering Committee has
approved such third party subcontractor and the terms and conditions of the
subcontract with such third party.
5.3 The parties agree that the proportion and content of work to be
undertaken by each party in respect of each Project shall be generally
consistent with the scope of work as determined by the Steering Committee.
The parties recognize that as the RFP and as a Project are more clearly
defined, changes to the scope of work to be performed by each party may be
necessary to meet the requirements of the DOE. In such cases the parties
shall agree upon reasonable variations to the scope of work for each party
for that particular Project in such a way so that the final scope of work for
each party for that particular Project shall be as close as possible to the
proportion and content of its scope of work initially determined by the
Steering Committee.
ARTICLE VI
STEERING COMMITTEE
6.1 A Steering Committee shall be established by the parties. The
Steering Committee shall consist of one representative of GTSD and one
representative of BNFL (each a "Representative" and collectively the
"Representatives"). The initial Representative designated by GTSD shall be
Robert E. Prince and the initial Representative designated by BNFL shall be
Richard H. Peebles. Replacement of the designated Representative, either
permanently or at any time, by a particular party shall require the written
consent of the other party, which consent shall not be unreasonably withheld
or delayed.
6.2 Meetings of the Steering Committee shall be held at least once
every three (3) months upon five (5) business days notice to the
Representatives and such notice shall be accompanied by an agenda determined
by the Representatives. Should circumstances so require, a meeting shall be
held at any time at the request of either of the parties. The meeting shall
only be held with the presence of both of the Representatives. Decisions of
the Steering Committee shall be made by mutual agreement with each
Representative acting and negotiating in good faith. The Steering Committee
cannot act or make any determination without the approval of both
Representatives.
6.3 The Representatives shall, prior to the commencement of each
meeting, elect a secretary to take minutes of the meeting. The secretary of a
Steering Committee meeting need not be one of the Representatives. The
secretary shall distribute copies of the minutes of the meeting to both of
the parties within ten (10) calendar days after the meeting. Such minutes
shall be deemed to have been accepted by the parties unless comments are made
in writing within ten (10) calendar days of their receipt by said parties.
6.4 The Steering Committee shall have the following responsibilities
and shall be empowered to take the following actions:
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(i) Overall governance of the collaborative relationship of the
parties as contemplated by this Agreement;
(ii) Determine the Projects to be pursued jointly by the parties
and provide written acknowledgment of such determination to each of the
parties;
(iii) Determine which party shall serve as the Prime Contractor and
which shall serve as the Subcontractor on a particular Project or,
alternatively, determine to form a Project Organization to undertake a
particular Project and the structure, ownership and contribution of each of
the parties to such Project Organization;
(iv) Determine when to commence work on a particular Project;
(v) Determine the scope of work to be provided by each of the
parties and any appropriate modifications or amendments thereto;
(vi) Review the final Proposal to be submitted to the DOE in
response to an RFP and have final approval over such Proposal;
(vii) Approve the appointment of any agents engaged or retained by
any of the parties in connection with the pursuit of a Project;
(viii) Act in an advisory capacity concerning the negotiation of
Contracts and the performance of such Contracts and resulting Subcontracts;
(ix) Interpret the meanings of "most favored nation" and "preferred
partner," as such terms are used in Article VIII, and set forth such meanings
in a memorandum submitted to each of the parties;
(x) Determine the total capital cost of a Project and the capital
cost of the Project related to the verification portion and provide written
notice to each of the parties of such determination;
(xi) Determine the budget for the expenditure of research and
development funds and provide authorization to expend such funds pursuant to
Article XIV;
(xii) Attempt to solve expeditiously any conflict between the
parties related to this Agreement; and
(xiii) Delegate any of the authority of the Steering Committee to
appropriate individuals or groups as may be determined unanimously by the
Steering Committee, provided that such delegation can be revoked by either
Representative upon written notice.
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6.5 Each Representative has an obligation to inform the other
Representative of any possible projects or business opportunities which may
be contemplated by this Agreement, and the Representatives will make a
decision whether to jointly pursue such projects or business opportunities in
a timely fashion in light of all relevant and appropriate business
considerations.
6.6 Each Representative shall designate a deputy (each a "Deputy
Representative" and collectively the "Deputy Representatives") who shall act
on his behalf only in the event that the Representative is unavailable and
action of the Steering Committee is to be taken. Each Deputy Representative
may attend all meetings of the Steering Committee and may participate in such
meetings but shall not vote at such meetings unless the Deputy Representative
is acting on behalf of his Representative pursuant to the preceding sentence.
The initial Deputy Representative designated by Robert E. Prince shall be
Robert F. Shawver and the initial Deputy Representative designated by Richard
H. Peebles shall be determined at a later time provided that such initial
Deputy Representative is subject to the approval of Robert E. Prince.
Replacement of the designated Deputy Representative, either permanently or at
any time, by a particular Representative shall require the written consent of
the other Representative, which consent shall not be unreasonably withheld or
delayed.
6.7 In the event that the Representatives cannot agree on a matter
under the authority of the Steering Committee and such inability to reach an
agreement continues for sixty (60) calendar days or such other period of time
that causes the interests of one or both of the parties to be adversely
affected, then the Representatives shall consider in good faith either (i)
delegating the authority of the Steering Committee to such other members of
their respective organizations who may be appropriate to assume such
authority or (ii) adopting such other appropriate means for resolving the
disagreement.
ARTICLE VII
CLASSIFIED INFORMATION
Access to classified information may be required in the performance
of the services hereunder and both parties shall use their best efforts to
meet the applicable security clearance requirements of the DOE and the United
States Government at all times relevant to this Agreement.
ARTICLE VIII
OTHER COVENANTS AND AGREEMENTS BETWEEN THE PARTIES
8.1 Unless otherwise agreed, until the later of (i) the termination of
this Agreement or (ii) BNFL no longer owns an interest in GTSD, BNFL hereby
agrees to perform, directly or through a subcontractor or other party,
vitrification of any substance only with GTSD, provided that BNFL and GTSD
can agree on mutually acceptable terms and conditions.
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8.2 BNFL and GTSD agree to extend to each other a "most favored nation"
approach for working jointly on any projects.
8.3 (a) BNFL and GTSD intend to jointly pursue vitrification projects
on a "preferred partner" basis.
(b) The parties will meet at least once every six (6) months to
discuss potential opportunities and strategies for pursuing projects outside
of the United States.
8.4 The parties will use their reasonable efforts to cause their
respective Affiliates to comply with the provisions of Sections 8.1, 8.2 and
8.3(a).
8.5 If GTSD is intending to borrow funds from a lender whereby it is
contemplated that such lender would have a security interest in the GTSD
Technology (as hereinafter defined), then GTSD covenants and agrees that it
shall use its best efforts to cause such lender (the "Lender") to execute as
part of the loan documents (the "Loan") a non-disturbance agreement, or
similar provision having like effect, granting to GTSD, BNFL or their
Affiliates, as appropriate, the limited, non-exclusive right to continue
using the GTSD Technology on any projects jointly undertaken by GTSD and BNFL
or by a Project Organization with terms substantially similar to those given
by First Fidelity Bank, N.A. to GTSD and BNFL in its non-disturbance
agreement of even date herewith (as determined in the reasonable discretion
of the Steering Committee) (any such agreement or provision referred to
herein as a "Non-Disturbance Agreement"). If, after GTSD uses such best
efforts for a reasonable time and the Lender will not agree to give a
Non-Disturbance Agreement, BNFL shall join the negotiations with GTSD and the
Lender solely on the issue of the Non-Disturbance Agreement and BNFL shall
use its best efforts to persuade the Lender to give a Non-Disturbance
Agreement. If, after BNFL uses such best efforts for a reasonable time, the
Lender will not agree to give a Non-Disturbance Agreement, GTSD shall be
permitted to enter into the Loan arrangement only if BNFL first consents in
writing to the Loan (the "Consent"); provided, however, that the Consent
shall be required only for the portions of the Loan which are required in
order to protect continuing access to the GTSD Technology as such GTSD
Technology relates to any Project. The Consent shall not be unreasonably
withheld by BNFL; and, in determining whether to grant such Consent, the sole
consideration of BNFL shall be whether the withholding of such Consent is
necessary in order to protect access to the GTSD Technology covered by the
Sublicense Agreement or BNFL's continuing access to the GTSD Technology as
such access is contemplated under this Agreement.
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ARTICLE IX
PROPRIETARY AND CONFIDENTIAL INFORMATION
9.1 Proprietary or confidential information (relating to technical and
non-technical matters) may be transferred between the parties during the term
of this Agreement, subject to the confidentiality and use restrictions
provided herein. Notwithstanding any other provisions herein, the parties
agree that during the term of this Agreement and for a period of five (5)
years thereafter, any proprietary or confidential information exchanged
during the performance of this Agreement shall be used by the receiving party
for the exclusive purpose of performing this Agreement, of preparing a
Proposal hereunder or performing a Contract pursuant hereto.
9.2 Each of the parties hereto agrees that during the term of this
Agreement and for a period of five (5) years thereafter, it shall not, and it
shall use reasonable efforts to cause its Affiliates, directors, officers,
employees, agents and advisors not to, reveal, divulge or make known to any
person (other than the other party hereto or the Project Organization) or use
for its own account or for the account of any person any proprietary or
confidential information. For purposes of this Agreement, "proprietary or
confidential information" includes, without limitation, any method, record,
data, report, trade secret, pricing policy, bid amount, bid strategy, rate
structure, personnel policy, method or practice of soliciting or obtaining or
doing business by a party or any other information regarding a party, other
than information that can be demonstrated to have (i) been publicly known
prior to the date of this Agreement, (ii) become well known by publication or
otherwise not due to the unauthorized act or omission on the part of a party
hereto or (iii) been obtained by a party hereto from a source other than the
other party hereto, provided that such source was not bound by an obligation
of confidentiality.
9.3 Notwithstanding anything herein to the contrary, a party may
disclose proprietary or confidential information regarding the other party to
one of its Affiliates provided that such Affiliate executes and delivers a
confidentiality agreement reasonably satisfactory to the other party.
9.4 In addition to the confidentiality provisions provided in the
preceding paragraph, BNFL shall ensure that in any project undertaken by it
or an Affiliate of BNFL within a period of five (5) years beyond the later of
(i) the termination of this Agreement, or (ii) the termination of BNFL's
right to designate a member or observer to GTSD's Board of Directors pursuant
to Article XVI hereto, which involves the performance of vitrification of any
substance other than high level radioactive waste, and which does not involve
GTSD, all intellectual property, including know-how, technical data, designs
and the like relating to the GTSD vitrification technology and any other
proprietary or confidential information of GTSD, is protected and not made
available to that project, without the written consent of GTSD.
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ARTICLE X
INTELLECTUAL PROPERTY RIGHTS
10.1 Each party shall remain the sole owner of its intellectual property
rights, technical data, know-how, designs, specifications and the like
generated or acquired prior to the execution of this Agreement, and any
transfer of such information from one party to another (or to a Project
Organization) under this Agreement is to be used only for the express purpose
for which it was transferred. Any additional use of that information would
be the subject of a separate license or other agreement to be entered into
between the parties.
10.2 No license to the other party (or to a Project Organization) under
any intellectual property rights is granted or implied by conveying
proprietary or confidential information to that party (or to a Project
Organization) for any purpose whatsoever other than the limited purposes of
the parties permitted under this Agreement. None of such information which
may be transmitted or exchanged by the respective parties (or by a Project
Organization) shall constitute any representation, warranty, assurance,
guaranty or inducement by either party to the other (or to a Project
Organization) with respect to the infringement of patents or other rights of
others.
10.3 Subject to the right, if any, of the DOE and to any express
provisions contained in any Subcontract between the parties hereto (which
said provisions shall prevail in the event of any conflict with this clause)
and subject to the provisions herein contained, all intellectual property
produced pursuant to this Agreement shall vest in and at all times remain
vested in the party originating that intellectual property; provided that if
the parties jointly produce material pursuant to this Agreement then unless
the parties previously agree in writing to the contrary, all intellectual
property rights in such jointly produced material shall vest jointly in each
of the parties without accounting to the other. The parties undertake to
enter into good faith negotiations to agree upon such measures of protection
as patents and like instruments and the establishment thereof, as the parties
agree to be appropriate.
10.4 In this regard, it is recognized that the parties may be required
under provisions contained in the Contract to grant licenses or other rights
to the DOE and, in that event they shall by reasonable agreement do so. Any
such granting of licenses or other rights shall be mutually agreed by the
parties.
ARTICLE XI
LOAN FROM BNFL TO GTSD
In connection with the teaming arrangement contemplated by this
Agreement and contemporaneous with the execution of this Agreement, BNFL
shall loan to GTSD $10.0 million. Such loan shall be evidenced by a
Convertible Debenture, a form of which Convertible Debenture is attached
hereto as APPENDIX I. All of the terms and conditions with respect to the
loan by BNFL to GTSD are included in the Convertible Debenture.
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ARTICLE XII
PROVIDING TECHNOLOGY TO JOINT PROJECTS
12.1 With respect to any Projects jointly undertaken by GTSD and BNFL or
by a Project Organization pursuant to the terms of this Agreement, GTSD shall
provide to such Projects through its involvement in such Projects all of the
rights and know-how in the technology currently owned by GTSD, or owned by
GTSD in the future, or in which GTSD has rights of use now or in the future,
including without limitation all of the Intellectual Property as defined in
Section 19.1 and all improvements and enhancements thereto for the
vitrification of worldwide radioactive and mixed waste (excluding Germany)
(all such technologies are collectively referred to herein as the "GTSD
Technology"). The contribution of the GTSD Technology to a Project shall be
undertaken through GTSD and shall not be deemed in any way to constitute an
assignment or sublicense of such technology to any other party.
12.2 In the event that GTSD is (i) debarred or suspended from doing
business with the DOE or the United States Government, (ii) legally
prohibited in any way from being involved in a Project and providing the GTSD
Technology to the Project pursuant to Section 12.1 or (iii) unwilling or
unable to provide the GTSD Technology to any Project pursuant to Section 12.1
for any reason, then GTSD shall license or sublicense, as applicable, such
technology to the Project Organization or take such other action as is
determined by the Steering Committee to enable either BNFL or the Project
Organization that continues to be engaged in the Project to continue to use
the GTSD Technology until completion of such Project. In the event that GTSD
shall be required to provide a license or sublicense pursuant to this Section
12.2, such license or sublicense shall be provided on terms which enable GTSD
to receive the same economic benefit it would have received had it been able
to participate in the Project and GTSD will not be entitled to receive any
additional consideration above such amount for the granting of the license or
sublicense hereunder.
12.3 GTSD hereby covenants and agrees that it will not take any action,
or fail to take a required action, either of which results in the termination
of the license agreement by and between GTSD and Drs. Pedro B. Macedo and
Theodore A. Litovitz (collectively the "Inventors") dated August 17, 1992
(the "License Agreement") prior to the expiration of its natural term. GTSD
hereby covenants and agrees that it will use its best efforts to maintain the
License Agreement and the underlying Intellectual Property (as hereinafter
defined) in full force and effect so long as GTSD and BNFL are jointly
pursuing a Project or participating jointly in a Project, however, GTSD shall
have the right to amend the License Agreement or enter into a new license
agreement with the Inventors provided that the terms of such new license
agreement would not adversely affect GTSD's performance of its obligations
hereunder.
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ARTICLE XIII
SHARING OF PROJECT FEES
13.1 Notwithstanding any other arrangement for the sharing of fees with
respect to a Project or the compensation for goods or services provided to a
Project by each of the parties, which shall be determined by Steering
Committee for each particular Project, the parties hereby covenant and agree
that they will share a portion of the fees from each Project in the following
manner:
(a) A fee (the "Project Fee") equal to three percent (3%) of the
total revenues related to the vitrification portion of a Project will be
shared equally by GTSD and BNFL until such time as BNFL has received an
amount (including amounts previously distributed to BNFL pursuant to this
paragraph) equal to a twelve percent (12%) cumulative annual yield on the
amount of the Article XII and Non-Competition Fee paid by BNFL to GTSD
pursuant to Article III for the particular Project. Thereafter, such Project
Fee will be distributed eighty percent (80%) to GTSD and twenty percent (20%)
to BNFL.
(b) In order to determine the total revenues related to the
vitrification portion of a given Project, the total revenues from such
Project shall be multiplied by a fraction, the numerator of which is the
capital cost of the Project related to the vitrification portion and the
denominator of which is the total capital cost of the Project. For purposes
of this Section 13.1, the term "total revenues from a Project" shall mean all
amounts or proceeds received by GTSD, BNFL or a Project Organization on a
Project, less the following deductions: (i) discounts allowed and taken for
prompt payment, (ii) allowances for returns or other trade credits, (iii) all
sales, use and other taxes imposed, (iv) packaging and transportation costs
and (v) the cost of services contracted to other subcontractors providing
technologies and services complimentary to the Technology. The total capital
cost of the Project and the capital cost of the Project related to the
vitrification portion will be determined by the Steering Committee prior to
commencement of the Project.
(c) In the event that GTSD, in order to provide the GTSD
Technology, must obtain from a third party a license or other authorization
under such third party's valid patent or other proprietary rights and must
pay a license or other fees thereunder to such third party in order to use
any portion of the GTSD Technology, then in such event, GTSD shall be
entitled to recover such license or other fees payable to such third party
out of the Project Fee prior to the distribution arrangement contemplated by
paragraph (a) of this Section 13.1 and such license or other fees payable to
such third party shall reduce on a dollar for dollar basis the amount of the
Project Fee distributable to each of GTSD and BNFL pursuant to paragraph (a)
of this Section 13.1.
(d) The Project Fee provided for in this Article XIII shall be
based on Project revenues received by GTSD, BNFL or a Project Organization
during each calendar year and shall be paid by March 31st of the following
year. All payments required to be made under this
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Agreement shall be made in United States funds. At the time of payment of the
Project Fee, the Steering Committee shall render to the parties hereto a
statement in writing showing computation of such Project Fee payable for such
year.
(e) Notwithstanding anything herein to the contrary, in the event
that GTSD has defaulted on any of its payment obligations under the
Convertible Debenture, BNFL shall be entitled to receive the entire Project
Fee, less amounts owed to GTSD pursuant to paragraph (c) of this Section
13.1, until such time as the payment default has been cured or the payment
default has been waived by BNFL. All of GTSD's portion of the Project Fee
directed to BNFL pursuant to this paragraph shall be applied in whole toward
the cure of the payment default under the Convertible Debenture.
13.2 All other fees and compensation for goods and services provided by
the parties to a Project shall be determined by the Steering Committee prior
to the commencement of the Project and shall be reflected in an appropriate
Subcontract.
ARTICLE XIV
RESEARCH AND DEVELOPMENT COST SHARING ARRANGEMENT
14.1 In connection with the teaming arrangement contemplated by this
Agreement, BNFL hereby covenants and agrees to provide research and
development funding to GTSD of at least $500,000 per year commencing on the
date hereof and continuing until the fifth anniversary of the date of this
Agreement in order to develop, enhance and improve the GTSD Technology and to
develop related technologies.
14.2 The budget for the expenditure of the research and development
funds and the authorization to expend such funds shall be determined by the
Steering Committee. Within thirty (30) calendar days of when the budget for
the expenditure of the research and development funds and the authorization
to expend such funds has been established by the Steering Committee, BNFL
shall provide such funds to GTSD for the research and development efforts.
The budget for the expenditure of the research and development funds and the
authorization to expend such funds for the one year period commencing on the
date hereof shall be determined within thirty (30) calendar days of the date
hereof. For each successive year, the budget for the expenditure of the
research and development funds and the authorization to expend such funds
shall be determined by the Steering Committee at least thirty (30) calendar
days prior to the commencement of such one year period.
14.3 GTSD will administer and manage the research and development
efforts performed in the United States and an Affiliate of BNFL will
administer and manage the research and development efforts performed in the
United Kingdom, but GTSD shall participate in such research and development
activities in the United Kingdom and shall provide any necessary technology
rights that it owns to such activities. The Steering Committee shall
determine who is to administer and manage the research and development
efforts performed outside of the
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United States and the United Kingdom. Any party other than GTSD that is to
administer and manage the research and development efforts relating to the
GTSD Technology will be required to execute an appropriate confidentiality
agreement, prior to its commencement of research and development efforts,
containing restrictions on the disclosure and use by such party of such
technology.
14.4 All goods and services provided by each of the parties in
furtherance of the research and development efforts contemplated by this
Article XIV shall be at such party's cost, including an allocation of
reasonable overhead costs and expenses (including without limitation general
and administrative expenses), without any markup or built-in profit to such
party.
14.5 As to the research and development efforts which are the subject of
this Article XIV, each party shall remain the sole owner of its technologies
(including any enhancements or improvements thereto) resulting from the
research and development efforts contemplated by this Article XIV, and the
ownership and access rights of the parties with respect to any such
intellectual property regarding any such technologies, other than each
party's respective technologies, shall be determined on a case by case basis
by the Steering Committee in its reasonable discretion either (i) at the time
the budget for the expenditure of the research and development funds and the
authorization to expend such funds is determined or (ii) at the time such
intellectual property is developed.
14.6 In consideration of its agreement to provide the research and
development funding commitment specified herein, BNFL shall receive the
benefit of such enhancements or improvements to the GTSD Technology through
its sublicense arrangement pursuant to Article XV below and shall also
receive all information, data and know-how that are the product of the
research and development activities under the arrangement specified by this
Article XIV.
14.7 The research and development funding provided by BNFL pursuant to
this Article XIV is to be used solely for research and development of the
GTSD Technology and is not in any way to be construed as part of the
consideration for the sublicense granted by GTSD to BNFL pursuant to Article
XV.
14.8 The obligations of each of the parties pursuant to this Article XIV
hall be a material obligation of this Agreement.
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ARTICLE XV
GRANT OF SUBLICENSE TO BNFL
In connection with the teaming arrangement contemplated by this
Agreement and contemporaneous with the execution of this Agreement, GTSD and
BNFL shall enter into a sublicense agreement (the "Sublicense Agreement"), a
form of which is attached hereto as APPENDIX II, pursuant to which GTSD shall
grant to BNFL a sublicense to the GTSD Technology for the United Kingdom,
subject to such other terms, conditions, limitations and conditions as are
contained in the Sublicense Agreement.
ARTICLE XVI
BNFL REPRESENTATION ON GTSD BOARD OF DIRECTORS
16.1 As long as the Convertible Debenture is outstanding, BNFL shall
have the right to designate an observer to GTSD's Board of Directors who
shall have visitation rights on GTSD's Board of Directors, but no right to
vote on any matter that comes before GTSD's Board of Directors. The observer
designated by BNFL pursuant to this Section 16.1 shall not be considered a
member of GTSD's Board of Directors for any purpose. As long as the observer
rights provided herein are in effect, the observer designated by BNFL shall
be notified in writing of any action taken by written consent of the Board of
Directors without a meeting having been held. The visitation rights provided
in this Section 16.1 shall be subject to the sole discretion of GTSD's Board
of Directors who may suspend such rights for a portion of a meeting, for an
entire meeting, for any action taken by written consent of the Board of
Directors of GTSD or terminate such rights altogether. BNFL shall be
promptly notified of any action taken by written consent of the Board of
Directors.
16.2 GTSD covenants and agrees that it shall take all action that may be
required of it in order to effect the terms of the agreement by and between
BNFL and The Carlyle Group of even date herewith relating to the rights of
BNFL to designate a member or an observer to GTSD's Board of Directors under
certain circumstances.
ARTICLE XVII
TERM OF THE AGREEMENT
This Agreement shall commence on the date hereof and remain in effect
for a period of five (5) years thereafter, unless terminated prior thereto in
accordance with Article XVIII.
ARTICLE XVIII
TERMINATION EVENTS
18.1 This Agreement may be terminated prior to the end of its natural
term as provided in Article XVII at any time by mutual agreement of both
parties.
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18.2 A party hereto shall have the right to terminate this Agreement by
giving prior written notice upon the occurrence of any of the following
events involving the other party hereto:
(i) A material breach of this Agreement by the other party,
including without limitation the representations and warranties contained in
Article XIX, which if capable of remedy, has not been remedied by such
breaching party within thirty (30) calendar days of written notice by the
non-breaching party;
(ii) The filing of any petition under the United States Bankruptcy
Code, in effect from time to time, or any similar Federal or state statute by
or against the other party if such petition is not dismissed within 120 days
after service upon the other party, or the failure of the other party
generally to pay its debts as such debts become due;
(iii) The filing of an application for the appointment of a
receiver for, the making of a general assignment for the benefit of creditors
by, or the insolvency of, the other party; or
(iv) The other party's liquidation, dissolution, termination of
existence or cessation of the conduct of its business operations.
18.3 The following provisions shall survive termination of this
Agreement:
SECTION 8.1
ARTICLE IX - PROPRIETARY AND CONFIDENTIAL INFORMATION
ARTICLE X - INTELLECTUAL PROPERTY RIGHTS
ARTICLE XII - PROVIDING TECHNOLOGY TO JOINT PROJECTS
ARTICLE XVI - BNFL REPRESENTATION ON GTSD BOARD OF DIRECTORS
ARTICLE XX - PUBLIC DISCLOSURE
ARTICLE XXIII - RESPONSIBILITY FOR COSTS INCURRED
ARTICLE XXIV - COMPLIANCE WITH LAWS
ARTICLE XXX - ARBITRATION
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ARTICLE XIX
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
19.1 GTSD hereby represents and warrants to BNFL as of the date hereof
as follows:
(i) GTSD is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
(ii) GTSD has all requisite corporate power and authority to enter
into this Agreement, the Convertible Debenture and the Sublicense Agreement
and carry out and perform its obligations under the terms of such agreements.
(iii) The execution, delivery and performance of this Agreement,
the Convertible Debenture and the Sublicense Agreement have been duly
authorized and approved by all necessary corporate action and this Agreement,
the Convertible Debenture and the Sublicense Agreement, when duly executed
and delivered by GTSD, will constitute valid and legally binding obligation
of GTSD, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to the
rights of creditors generally.
(iv) The execution and performance of this Agreement, the
Convertible Debenture and the Sublicense Agreement do not and will not (i)
violate GTSD's certificate of incorporation or bylaws, or the terms of any
judgment, decree or order of any court or administrative authority or the
terms of any material agreement to which it is a party or by which it is
bound or (ii) require the filing, declaration or registration with, or
permit, consent or approval of, or the giving of any notice to, any
governmental authority or third party, excluding those that have already been
obtained prior to the date hereof.
(v) There is no litigation, arbitration, mediation or other
investigation or proceeding pending or, to the best of GTSD's knowledge,
threatened or in prospect, against GTSD with respect to the transactions
contemplated by this Agreement.
(vi) Schedule 19.1 attached hereto sets forth, as of the date
hereof, a true, complete and accurate list of all (i) United States and
foreign patents and patent applications, (ii) unpatented technology,
including trade secrets, know-how, proprietary rights and information, and
expertise, (iii) United States, state and foreign trademark applications and
registrations, trade names and material common-law marks, (iv) United States
and foreign registered and material unregistered copyrighted works, including
any computer programs and (v) any license, joint venture or other material
agreements relied on, related to, used or enjoyed by GTSD in connection with
its business of vitrifying radioactive and mixed wastes (collectively, the
"Intellectual Property").
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(vii) Except as set forth in SCHEDULE 19.1, GTSD either (a) owns or
(b) holds adequate, enforceable, valid and binding licenses to use, transfer,
sublicense and otherwise grant rights to third parties in, all of the
Intellectual Property.
(viii) Except as set forth in SCHEDULE 19.1, GTSD has no knowledge
nor any basis to believe that (a) any of the Intellectual Property or (b) any
past operations or currently planned operations, activities or products of
GTSD, infringe on any intellectual property, proprietary, contract or other
rights of any third party.
(ix) Except as set forth in SCHEDULE 19.1, to the best of GTSD's
knowledge, no entity or person is infringing the rights of GTSD with respect
to the Intellectual Property and GTSD has no reasonable basis to claim such
infringement.
(x) Except as set forth in SCHEDULE 19.1 and other than the rights
of the Inventors, (a) the Intellectual Property is free and clear of any
liens, pledges, assignments, obligations or any other encumbrances of any
nature, and (b) no consents or approvals of any person or entity are
necessary to sell, convey, transfer, assign, deliver or sublicense any of the
Intellectual Property to any third party.
(xi) The patents, registered trademarks and registered copyrights
listed on SCHEDULE 19.1 are subsisting, valid and enforceable, and have been
maintained by the Company.
(xii) Except as set forth in SCHEDULE 19.1, none of (a) the
Catholic University, (b) the Vitreous State Laboratory of the Catholic
University, (c) the United States Government or any United States government
agency, (d) any foreign government or foreign government agency or (e) any
other person or entity (other than GTSD, the Inventors and First Fidelity
Bank, N.A.) have any rights whatsoever in any of the Intellectual Property.
19.2 BNFL hereby represents and warrants to GTSD as of the date hereof
as follows:
(i) BNFL is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
(ii) BNFL has all requisite corporate power and authority to enter
into this Agreement and the Sublicense Agreement and carry out and perform
its obligations under the terms of such agreements.
(iii) The execution, delivery and performance of this Agreement and
the Sublicense Agreement have been duly authorized and approved by all
necessary corporate action and this Agreement and the Sublicense Agreement,
when duly executed and delivered by BNFL, will constitute valid and legally
binding obligation of BNFL, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to the rights of creditors generally.
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(iv) The execution and performance of this Agreement and the
Sublicense Agreement do not and will not (i) violate BNFL's certificate of
incorporation or bylaws, or the terms of any judgment, decree or order of any
court or administrative authority or the terms of any material agreement to
which it is a party or by which it is bound or (ii) require the filing,
declaration or registration with, or permit, consent or approval of, or the
giving of any notice to, any governmental authority or third party, excluding
those that have already been obtained prior to the date hereof.
(v) There is no litigation, arbitration, mediation or other
investigation or proceeding pending or, to the best of BNFL's knowledge,
threatened or in prospect, against BNFL with respect to the transactions
contemplated by this Agreement.
19.3 Each of the parties hereto covenants and agrees to indemnify the
other party and its Affiliates, directors, officers, employees, agents,
successors and assigns and hold such other person harmless against any and
all liabilities, losses, damages, claims, deficiencies, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable legal costs and expenses) actually suffered or incurred by such
other person (hereinafter a "Loss"), arising out of or resulting from the
breach of any representation or warranty by such party contained herein.
19.4 Promptly after the assertion by any third party of any claim
against any party entitled to be indemnified under this Article XIX (the
"Indemnitee") that, in the judgment of such Indemnitee, may result in the
incurrence by such Indemnitee of Losses for which such Indemnitee would be
entitled to indemnification pursuant to this Agreement, such Indemnitee shall
deliver to the other party who has indemnified such Losses hereunder
("Indemnitor") a written notice describing such claim. Such Indemnitor may
participate in and, at its option upon acknowledgment of Indemnitee's right
to indemnification for such matter, assume the defense of the Indemnitee
against such claim, including the employment of counsel, who shall be
reasonably satisfactory to such Indemnitee. In such case, any Indemnitee
shall have the right to employ separate counsel in any such action or claim
and to participate in the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the Indemnitor unless (i) the
Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such claim as provided in the
preceding sentence, to assume the defense of the such claim, (ii) the
employment of such counsel has been specifically authorized in writing by the
Indemnitor or (iii) the named parties to any such action (including impleaded
parties) include both such Indemnitee and the Indemnitor and such Indemnitee
shall have been advised in writing by Indemnitor's counsel that there may be
conflicting interests between Indemnitee and the Indemnitor in the legal
defense thereof. No Indemnitor shall be liable to indemnify any Indemnitee
for any compromise or settlement of any such action or claim effected without
the consent of the Indemnitor.
19.5 In the event that GTSD is required under Section 19.3 to make any
indemnification to BNFL, and GTSD cannot or does not make such required
payment when
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required, for whatever reason, BNFL or the Project Organization, as
applicable, shall be entitled to offset any such unpaid amounts against any
payment otherwise due to GTSD under this Agreement. In the event that BNFL
is required under Section 19.3 to make any indemnification to GTSD, and BNFL
cannot or does not make such required payment when required, for whatever
reason, GTSD or the Project Organization, as applicable, shall be entitled to
offset any such unpaid amounts against any payment otherwise due to BNFL
under this Agreement or under the Convertible Debenture. In the event the
Project Organization withholds amounts otherwise due a party pursuant to this
Section 19.5, the Project Organization will promptly forward such amounts to
the other party.
19.6 All representations and warranties made pursuant to or in
connection with this Agreement shall survive the date hereof, but shall
terminate three (3) years after the date hereof; provided, that there shall
be no such termination with respect to any representation or warranty as to
which a bona fide claim has been asserted prior to such date.
19.7 Notwithstanding anything herein to the contrary, each party hereto
shall not be liable as Indemnitor for any Losses of the other party under
this Article XIX unless and until the aggregate amount of all Losses
hereunder by such other party equals or exceeds $50,000, in which case the
indemnifying party shall be liable for all such losses of the other party
equal to or greater than $50,000, up to a maximum aggregate amount of
$10,000,000.
ARTICLE XX
PUBLIC DISCLOSURE
Any news release, public announcement, advertising, publicity or
discussion with any other contractor or vendor whatsoever pertaining to the
performance or the nature of the work related to this Agreement shall be
subject to the express prior written approval of all of the parties hereto.
ARTICLE XXI
WAIVER AND SEVERABILITY
21.1 The waiver by any of the parties of any breach of any provision
hereof by another shall not be construed to be a waiver of any succeeding
breach of such provision or a waiver of the provision itself.
21.2 If one or more of the provisions of the Agreement shall be found to
be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified consistent with the intent of the
parties to the extent necessary to render it legal, valid and enforceable,
and if no such modification shall render it legal, valid and enforceable,
then this Agreement shall be construed as if not containing the provision
held to be invalid, and the rights and obligations of the parties shall be
construed and enforced accordingly.
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ARTICLE XXII
RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall be construed to create
any joint venture, pooling arrangement or partnership, whether statutory or
otherwise, and the rights and obligations of the parties hereto shall be
limited to those expressly recited herein. Nothing in this Agreement shall
be construed to grant to either of the parties hereto any right to make
commitments of any kind for or on behalf of the other party hereto without
the prior written consent of said other party.
ARTICLE XXIII
RESPONSIBILITY FOR COSTS INCURRED
Each party shall bear all of the costs and expenses entailed in its
own performance of its activities contemplated by this Agreement, excluding
any work to be performed pursuant to any Subcontract resulting from this
Agreement.
ARTICLE XXIV
COMPLIANCE WITH LAWS
Each party agrees to comply with applicable provisions of all laws,
ordinances, orders, rules and regulations of the United States as they relate
to the parties' performance of this Agreement and each of the parties agrees
to require any and all consultants, vendors and agents retained in
conjunction with the activities described in this Agreement to do likewise;
and such compliance shall be a material obligation of this Agreement.
ARTICLE XXV
NOTICES
Except as otherwise expressly stated, all notices required to be given
or which may be given under this Agreement shall be in writing and shall be
deemed given upon the earlier of (i) when it is personally delivered, (ii)
three (3) days after having been mailed by certified mail, postage prepaid,
return receipt requested, (iii) two (2) days after having been sent by
recognized overnight delivery service or (iv) one (1) day after having been
sent by facsimile transmission, addressed as follows:
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If to:
(a) GTSD:
GTS DURATEK, INC.
8955 Guilford Road, Suite 200
Columbia, MD 21046
Attn: Robert E. Prince, President and Chief Executive Officer
Telecopy No.: (301) 621-8211
(b) BNFL:
BNFL INC.
9302 Lee Highway, Suite 950
Fairfax, Virginia 22031
Attn: K. Edward Newkirk, General Counsel
Telecopy No.: (703) 359-0442
ARTICLE XXVI
COMPLETE AGREEMENT
This Agreement together with the other agreements referenced herein
to be entered into between the parties contains the complete agreement and
understanding between the parties concerning the subject matter hereof and
shall supersede all other agreements, understandings or commitments between
the parties as to such subject matter.
ARTICLE XXVII
ASSIGNMENT
The obligations and rights of each party hereunder shall not be
assignable without the prior written consent of the other party; provided,
however, that a party hereto may without the consent of the other party
assign this Agreement to any successor owner of such party or its business
resulting from merger, consolidation, sale of the business or otherwise so
long as such successor agrees in writing to assume the party's obligations
under this Agreement in a form and manner reasonably acceptable to the other
party. Notwithstanding anything herein to the contrary, BNFL may assign its
obligations and rights hereunder to an Affiliate upon the written consent of
GTSD, which consent will not be unreasonably withheld or delayed. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties' respective heirs, legal representatives, successors and
assigns.
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ARTICLE XXVIII
WAIVER, MODIFICATION OR AMENDMENT
No waiver, modification or amendment of any provision of this
Agreement shall be effective, binding or enforceable unless in writing and
signed by all of the parties hereto.
ARTICLE XXIX
GOVERNING LAW
The validity of this Agreement and of any of the terms or
provisions as well as the rights and duties of the parties hereunder shall be
governed by the laws of the State of Maryland, without reference to any
conflict of law or choice of law principles in the State of Maryland that
might apply the law of another jurisdiction.
ARTICLE XXX
ARBITRATION
Any disputes between the parties relating to the terms of this
Agreement, or the breach thereof, shall be submitted to binding arbitration
in Baltimore, Maryland, in accordance with the rules of the American
Arbitration Association. In the event that either party desires to arbitrate
any such dispute, such party shall so notify the other party and the parties
shall endeavor, for a period of thirty (30) days, to resolve such dispute
without arbitration. In the event that the parties cannot resolve the
dispute within such thirty (30) day period, then within ten (10) days
thereafter, the parties shall jointly designate an arbitrator to hear the
dispute, or, if the parties are unable to jointly select an arbitrator, an
arbitrator shall be chosen by the President of the American Arbitration
Association from lists of candidates provided by each of the parties. The
decision of the arbitrator shall be final and binding upon the parties, their
successor and assigns, and they shall comply with such decision in good
faith, and each party hereby submits itself to the jurisdiction of the courts
of the place where the arbitration is held, but only for the entry of
judgment with respect to and to enforce the decision of the arbitrator
hereunder. The arbitrator may order specific performance or other equitable
relief or remedies to the extent it deems it appropriate, in any situation in
which a court could so order. Each party shall pay all of its own expenses
in connection with such arbitration and one-half of the arbitrator's fees and
expenses.
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ARTICLE XXXI
CONSTRUCTION
Headings or captions of this Agreement are for reference only and
are not to be construed in any way as part of this Agreement, nor in the
interpretation of this Agreement. The masculine pronoun shall include the
feminine and neuter, and vice versa, where the context so requires.
ARTICLE XXXII
COUNTERPARTS
This Agreement may be executed in multiple original counterparts, each
of which shall be deemed an original and all of which together shall
constitute but one and the same document.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESS/ATTEST: GTS DURATEK, INC.
/s/ Diane R. Brown By: /s/ Robert E. Prince
- ---------------------------------- ------------------------------------
Diane R. Brown, Secretary Name: Robert E. Prince
Title: President and Chief Executive
Officer
BNFL INC.
/s/ Richard H. Peebles By: /s/ Rolland A. Langley
- ---------------------------------- ------------------------------------
Richard H. Peebles, Vice President Name: Rolland A. Langley
Title: President
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APPENDIX I
FORM OF CONVERTIBLE DEBENTURE
<PAGE>
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (the "Agreement") is made this 7th day of
November, 1995, by and between GTS Duratek, Inc., a Delaware corporation
("GTSD") and BNFL Inc., a Delaware corporation ("BNFL").
W I T N E S S E T H :
WHEREAS, Dr. Pedro B. Macedo and Dr. Theodore A. Litovitz (collectively
the "Inventors") are the owners of certain patents and patent applications,
and possess certain technology and know-how relating to in-furnace
vitrification of radioactive and hazardous waste, to the use of glass
matrices suitable for the encapsulation of these materials and to the use of
ion exchange as a method of removing radioactive and hazardous materials from
liquids;
WHEREAS, GTSD has obtained an exclusive license, with the right to grant
sublicenses, under said patents and patent applications and the exclusive
right to use such technology pursuant to that certain License Agreement
between GTSD and the Inventors dated August 17, 1992 (the "License
Agreement"), a copy of which is attached hereto as ANNEX A;
WHEREAS, GTSD and BNFL have entered into a Teaming Agreement dated as of
the date hereof (the "Teaming Agreement") pursuant to which GTSD and BNFL
have agreed to jointly pursue contracts and other potential business
opportunities providing services to the United States Department of Energy;
WHEREAS, as contemplated by the Teaming Agreement, BNFL will invest
$10.0 million in GTSD in the form of a convertible debenture (the
"Convertible Debenture"), convertible into the common stock of GTSD;
WHEREAS, BNFL desires a sublicense under said patents and patent
applications and the right to utilize such technology for processing
radioactive or mixed waste in the United Kingdom, and GTSD is willing to
grant such sublicense and rights;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
a. "Patent Rights" shall mean United States patents and foreign
patents, and United States and foreign patent applications listed on SCHEDULE
A, and all other future United States and foreign patent applications
relating thereto in the Sublicensed Field, including any
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continuations, continuations-in-part, divisions, reissues, renewals,
additions and extensions thereof; and all United States and foreign patents
that may be granted thereon.
b. "Affiliate" of a specified person shall mean a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified.
c. "Technology" shall mean all ideas, inventions (patentable and
unpatentable), know-how and technical information either conceived, invented,
discovered or possessed by GTSD, including but not limited to processes,
articles, devices, equipment, techniques, compositions, formulations, data,
etc., and any use thereof, all in the Sublicensed Field and either acquired
by GTSD through the License Agreement or otherwise.
d. "Sublicensed Subject Matter" shall mean (i) any process, composition
of matter, article of manufacture or apparatus covered by any valid product
or process claim, in any patent included in the Patent Rights or arising out
of or resulting from the use of the Technology.
e. "Sublicensed Field" shall mean stabilizing, fixating or immobilizing
by melting, vitrification, sintering or any other thermal or chemical method
any radioactive material and/or any other non-radioactive material when
intermingled with the radioactive material ("mixed waste"), and to all uses
thereof.
f. "License Year" shall mean any calendar year.
g. "Sublicensed Territory" shall mean only the United Kingdom and no
other territory.
Unless a particular context clearly indicates to the contrary, all terms
not herein defined shall have the same meanings given to them in the License
Agreement.
II. GRANT OF SUBLICENSE
GTSD hereby grants to BNFL a non-exclusive sublicense, without the right
to sublicense, to market, sell and practice the inventions covered by the
Patent Rights and the Technology in the Sublicensed Field in the Sublicensed
Territory to the full end of the term of this Sublicense. BNFL shall not be
permitted by this Agreement to market, sell and practice the inventions
covered by the Patent Rights and the Technology outside of the Sublicensed
Territory. Nothing in this Agreement shall be construed to prohibit GTSD
from the granting of other similar sublicenses to any person or entity within
the Sublicensed Territory or to prohibit GTSD from marketing, selling and
practicing the inventions covered by the Patent Rights and the Technology in
the Sublicensed Territory.
-2-
<PAGE>
III. DISCLOSURE AND SUBLICENSE OF FUTURE TECHNOLOGY
All Technology in the Sublicensed Field which GTSD creates, develops or
acquires through the License Agreement, the research and development cost
sharing arrangement contemplated by Article XIV of the Teaming Agreement or
as GTSD otherwise acquires and comes into being during the term of this
Agreement ("Future Technology") shall be included within the definition of
Technology and sublicensed to BNFL pursuant to the terms of this Agreement,
and such Future Technology shall be fully disclosed to BNFL in a timely
manner.
IV. ROYALTY PAYMENTS
a. In consideration of the sublicense and rights herein granted, BNFL
shall pay to GTSD in the manner herein provided unless terminated as
hereinafter provided the following:
1. An annual royalty (the "Annual Royalty") of three percent (3%) of
the Net Sales Value (as defined below) of the Sublicensed Subject Matter in
the Sublicensed Territory so long as (i) the Teaming Agreement is in effect,
(ii) GTSD and BNFL are actively pursuing or participating in joint projects,
to the extent able, pursuant to the terms of the Teaming Agreement, as
determined in the reasonable discretion of the Steering Committee (as such
term is defined in the Teaming Agreement) and (iii) BNFL retains in whole the
Convertible Debenture (other than for U.S. regulatory restrictions as
contemplated by Section 11.1 of the Convertible Debenture) or has not sold,
transferred, disposed of, pledged or hypothecated any of the shares of GTSD
common stock received upon conversion of the Convertible Debenture. Upon the
earlier of the following: (i) the termination of the Teaming Agreement, (ii)
GTSD and BNFL are no longer actively pursuing or participating in joint
projects, to the extent able, pursuant to the terms of the Teaming Agreement,
as determined in the reasonable discretion of the Steering Committee (as such
term is defined in the Teaming Agreement) or (iii) BNFL no longer retains in
whole the Convertible Debenture (other than for U.S. regulatory restrictions
as contemplated by Section 11.1 of the Convertible Debenture) or has sold,
transferred, disposed of, pledged or hypothecated any of the shares of GTSD
common stock received upon conversion of the Convertible Debenture, the
Annual Royalty shall be seven and one-half percent (7.50%) of the Net Sales
Value.
2. As used in this Agreement, "Net Sales Value" of Sublicensed Subject
Matter shall mean all amounts or proceeds received by BNFL or its Affiliates
from the sale, lease or use of the Sublicensed Subject Matter, except with
respect to the vitrification of high level radioactive waste, and less the
following deductions where applicable: (i) discounts allowed and taken for
prompt payment, (ii) allowances for prompt returns, (iii) all sales and use
tax imposed upon and with specific reference to particular sales, (iv)
packaging and transportation costs separately billed or prepaid, (v) services
contracted to other subcontractors providing technologies and services
complimentary to and outside of the Sublicensed Field and packaged for sale
with the Sublicensed Subject Matter, and (vi) the revenues associated with
ancillary processes. (Services that directly support sale of Technology in
the Sublicensed Field such as outside laboratory services or brick
installation services, etc. are not deducted from gross sales.)
-3-
<PAGE>
No allowance or deduction shall be made for collections or commissions by
whatever name known.
3. The Net Sales Value of Sublicensed Subject Matter sold by BNFL to
any Affiliate of, or person, firm or corporation enjoying a specially favored
course of dealing with, BNFL, shall be the amount which BNFL would receive
for such Sublicensed Subject Matter on an arm's length sale to a bona fide
third party less the deductions under Article IV(a)(2).
b. In the event the United States Government has royalty-free rights
under the Patent Rights or Technology, then in such event any amounts or
proceeds received by BNFL in respect of any Sublicensed Subject Matter caused
to be manufactured by or through BNFL and sold or leased to the United States
Government or services performed for the United States Government shall not
be included within the definition of "Net Sales Value" and no Annual Royalty
shall be required to be paid thereon.
c. Notwithstanding anything herein to the contrary, in the event that
GTSD has defaulted on any of its payment obligations under the Convertible
Debenture, then the Annual Royalty percentage provided in Section IV(a)(i)
shall remain at three percent (3%) until such time as the payment default has
been cured or the payment default has been waived by BNFL, and BNFL shall be
entitled to offset the amounts owed to GTSD as the Annual Royalty under this
Article IV until such time as the payment default has been cured or the
payment default has been waived by BNFL. All amounts so offset shall be
applied in whole toward the cure of the payment default under the Convertible
Debenture.
V. AVOIDANCE OF DUPLICATION OF ROYALTY PAYMENTS
In no event shall more than one royalty payment be due under this
Agreement on the same Sublicensed Subject Matter or component part thereof.
VI. BNFL FEES PAYABLE TO THIRD PARTIES
In the event BNFL, in order to continue to practice in the Sublicensed
Field, must obtain from a third party (other than an Affiliate) a license
under such third party's valid patent and must pay license fees thereunder to
such third party in order to use any portion of the Technology or to operate
under any significant patent included in the Patent Rights, then in such
event, BNFL may credit the license or other fees payable to such third party
against the Annual Royalty payable to GTSD pursuant to Article IV hereof.
-4-
<PAGE>
VII. PAYMENT OF ROYALTIES AND ACCOUNTING
The Annual Royalty provided for in Section IV shall be based on the Net
Sales Value generated by BNFL or its Affiliates during each License Year and
shall be paid within 60 days of the end of each License Year less any
deductions allowable hereunder. All payments required to be made under this
Agreement shall be made in U.S. funds. At the time of payment of the Annual
Royalty, BNFL shall render to GTSD a statement in writing showing the
computation of the Annual Royalty payable for such License Year. Any
statement hereunder shall be conclusively presumed to be accurate and deemed
acceptable by GTSD unless it notifies BNFL in writing as to any objections
within one (1) year of GTSD's receipt of such statement. For purposes of
determining the royalty payments owed to GTSD pursuant to Section IV, the
first License Year shall be the calendar year beginning January 1, 1996. The
accounting shall be in accordance with generally accepted accounting
principles in the United Kingdom. In the event that BNFL shall be in default
in the payment of the Annual Royalty, then GTSD may terminate this Agreement
upon 30 days written notice unless during said period the default is cured.
VIII. AUDIT RIGHTS
BNFL and its Affiliates shall maintain normal business records
accurately showing all transactions necessary to compute the Net Sales Value
hereunder. GTSD shall have the right, at its option and sole expense and
within one (1) year after receipt of any payments made to it pursuant to
Article IV hereof, to have BNFL's or its Affiliates' books and records
relating to the Patent Rights and the Technology audited by an independent
certified public accountant ("CPA") selected by GTSD and approved by BNFL,
such approval not to be unreasonably withheld or delayed. BNFL and its
Affiliates will make such books and records available to such CPA during
reasonable business hours upon fourteen (14) calendar days written notice.
The CPA shall agree to advise GTSD only of the accuracy or inaccuracy of
BNFL's royalty payments to GTSD, and if not accurate, the actual amounts as
computed by such CPA. Notwithstanding anything herein to the contrary, in
the event that the CPA reports that the books and records have not been
maintained or are not accurate or that BNFL has failed to make payment of any
of the Annual Royalty required by the Agreement as shown by such books and
records, BNFL shall reimburse GTSD for the cost of reviewing the books and
records, including without limitation, reimbursement of the reasonable fees
and expenses of the CPA if such recalculation results in an increased royalty
payment to GTSD; provided, however, that BNFL shall in no event have any such
reimbursement obligation in excess of the amount of such increase.
-5-
<PAGE>
IX. EXPENSES: PREPARATION, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
a. Upon request for the duration of this Agreement, GTSD and BNFL shall
jointly review the question of patentability or other protection of any idea,
work, invention or discovery which is conceived, invented or discovered by
the Inventors or GTSD in the Sublicensed Field, or any idea, work, invention
or discovery which results from or arises out of any research work conducted
by the Inventors, GTSD, BNFL or any of their Affiliates pursuant to a grant
provided by BNFL pursuant to the research and development cost sharing
arrangement contemplated by Article XIV of the Teaming Agreement,
irrespective of whether or not any such idea, work, invention or discovery is
included or required to be included in the Technology. Conduct of this joint
review does not, in itself, constitute an obligation to grant to BNFL a
license or sublicense, as applicable, for discoveries, works or inventions
outside of the Sublicensed Field.
b. BNFL shall have the power and authority to file and prosecute
applications for patents on any idea, invention or discovery in the
Sublicensed Field in the Sublicensed Territory and to procure and maintain
patents thereon on behalf of the Inventors or GTSD, as appropriate. The
parties shall use their best efforts to ensure that the inventor of any such
idea, invention or discovery shall, at BNFL's request, execute such documents
and perform such acts as BNFL's counsel may deem necessary and advisable to
perfect the filing of such applications for patent in the Sublicensed
Territory and to assist BNFL in procuring, maintaining, enforcing and
defending patents, and other applicable statutory protection granted or
issued thereon, on behalf of the Inventors or GTSD, as appropriate, all at
the expense of BNFL.
c. Any application for patent thus filed and any patent granted or
issued thereon shall be included in the Patent Rights and subject to the
terms and conditions of this Agreement.
d. BNFL shall bear all costs and expenses associated with maintaining
and defending the Patent Rights in the Sublicensed Territory in their
discretion.
e. Anything in this Agreement to the contrary notwithstanding, BNFL may
elect to relinquish its sublicense under any application for patent or patent
included in the Patent Rights by giving GTSD at least sixty (60) days prior
written notice of such election. Any such application for patent or patent
thereafter shall be excluded from the Patent Rights and the Technology and
BNFL thereafter shall not be liable for any costs incurred in the
prosecution, procurement, maintenance, enforcement and defense thereof.
X. INFRINGEMENT
a. BNFL shall have the right, but shall not be obligated, to bring and
prosecute any suit or action in the Sublicensed Territory against an
infringer of any patent included in the Patent Rights in the name of GTSD
and/or the Inventors, as appropriate, at BNFL's sole cost and expense and for
BNFL's own account, and in any such case BNFL shall have control of the
-6-
<PAGE>
conduct or settlement of any such suit or action. Any and all recoveries of
any kind from any such suit or action shall be the property of BNFL, except
in the event any recoveries are reasonably considered to be royalties for
past infringement and/or considered to be future royalties and/or for a
paid-up license under any patent included in the Patent Rights, then any such
recoveries less pro rata costs incurred by BNFL for attorney's fees,
witnesses' fees, and court costs shall be considered in the Annual Royalty
calculation according to Section IV hereof.
b. Should BNFL exercise its rights under Section X(a), BNFL agrees to
indemnify the Inventors and GTSD from countersuit by an infringer of any
patent with respect to their roles as inventors or licensees of the patents,
as applicable. Such indemnification is limited to issues related to or
arising out of patent validity or patent infringement only.
c. GTSD shall give promptly upon request and without compensation
(other than reasonable out-of-pocket expenses and as provided in this Article
X) all reasonable information and assistance necessary to enable BNFL to
bring and prosecute any such suit or action.
d. In the event that BNFL shall fail to cause any infringement of
Patent Rights in the Sublicensed Territory to terminate or shall fail to
bring suit or action against any such infringer within six (6) months after
request in writing from GTSD to do so, then in such event GTSD shall have the
right, but shall not be obligated, to bring and prosecute any such suit or
action in its own name and/or the Inventors, at GTSD's sole cost and expense
and for its own account, and in any such case, GTSD shall have sole control
of the conduct or settlement of any such suit or action. Any and all
recoveries for damages, royalties, costs and awards form any such suit or
action shall be the sole property of GTSD, less any reasonable out-of-pocket
costs which may be incurred by BNFL in support of such action or suit.
e. Should GTSD exercise its rights under Section X(d), GTSD agrees to
indemnify BNFL from countersuit by an infringer of any patent with respect to
BNFL's role as sublicensee. Such indemnification is limited to issues
related to patent validity or patent infringement only.
f. The party not bringing such suit or action shall have the right, at
its sole expense, to be represented by counsel during all proceedings of such
suit or action.
XI. WARRANTIES AND COVENANT
a. Each of GTSD and BNFL represents to the other that the respective
representations and warranties contained in Article XIX of the Teaming
Agreement by GTSD and BNFL, respectively, are true and accurate and such
representations and warranties are repeated herein by each of the respective
parties.
b. GTSD hereby covenants and agrees that it will not take any action, or
fail to take a required action, either of which results in the termination of
the License Agreement prior to the expiration of its natural term. GTSD
hereby covenants and agrees that it will use its best
-7-
<PAGE>
efforts to maintain the License Agreement and the underlying Patent Rights
and Technology in full force and effect during the term of this Agreement,
however, GTSD shall have the right to amend the License Agreement or enter
into a new license agreement with the Inventors provided that the terms of
such new license agreement would not adversely affect GTSD's performance of
its obligations hereunder.
XII. TERMINATION
a. In the event any party to this Agreement shall fail to perform or
fulfill, at the time and in the manner herein provided, any material
obligation or condition required to be performed or fulfilled by such party
under this Agreement, and in the event such party shall fail to remedy such
default within thirty (30) days after written notice thereof from a party not
at fault, such party not at fault shall have the right to terminate this
Agreement by giving written notice of termination to the party at fault.
b. This Agreement shall terminate immediately upon the termination of
the License Agreement.
c. BNFL shall have the right to terminate this Agreement at any time by
giving at least sixty (60) days written notice of termination to GTSD.
d. In the event of termination pursuant to this Section XII, the
sublicenses, rights and privileges granted to BNFL hereunder shall terminate
forthwith.
e. Any such termination of this Agreement by GTSD or BNFL pursuant to
this Article XII shall be in addition to and shall not be exclusive of or
prejudicial to any other rights or remedies GTSD may have on account of such
termination.
f. The termination of this Agreement shall not affect any accrued
monetary obligation owed to GTSD by BNFL.
XIII. TERMINATION: PRORATED ROYALTIES
In the event of any termination under Section XII hereof, the Annual
Royalty payable hereunder for the License Year in which this Agreement is
terminated shall be reduced by an amount which bears the same relationship to
such royalties that the number of days of such License Year after such
termination bears to three hundred sixty-five (365).
-8-
<PAGE>
XIV. RECORDS AND CONFIDENTIAL DATA
a. All memoranda, notices, files, records and other information related
to the Technology shall be retained in confidence by the parties hereto and
their agents, and shall not be disclosed to any third party, except to the
extent reasonably necessary to pursue the business objectives of the parties
hereto or to comply with the contractual commitments of this Agreement.
b. Each of the parties agrees that the other party will be entitled
(without posting bond or other security) to injunctive or other equitable
relief, as deemed appropriate by any such court or tribunal, to prevent a
breach of the other party's obligations set forth in this Article XIV.
XV. TERM OF THE AGREEMENT
This Agreement shall commence on the date hereof, and unless sooner
terminated as herein provided shall continue in full force and effect until
the expiration of the last expiring patent or patent application included in
the Patent Rights.
XVI. PRIOR RIGHTS
The rights of each party regarding the sublicensing of the Technology
shall be as stipulated in this Agreement. Notwithstanding any other
provision herein to the contrary, this Agreement shall be subject to the
Prior Rights of certain parties included in Article XXI of the License
Agreement.
XVII. WAIVER AND SEVERABILITY
a. The waiver by any of the parties of any breach of any provision
hereof by the other shall not be construed to be a waiver of any succeeding
breach of such provision or a waiver of the provision itself.
b. If one or more of the provisions of this Agreement shall be found to
be illegal or invalid, it shall not affect the legality or validity of any of
the remaining provisions hereof.
XVIII. NOTICES
Except as otherwise expressly stated, all notices required to be given or
which may be given under this Agreement shall be in writing and shall be
deemed given upon the earlier of (i) when personally delivered, (ii) three
(3) days after having been mailed by certified mail,
-9-
<PAGE>
postage prepaid, return receipt requested, (iii) two (2) days after having
been sent by recognized overnight delivery service or (iv) one (1) day after
having been sent by facsimile transmission, addressed as follows:
If to:
(a) GTSD:
GTS DURATEK, INC.
8955 Guilford Road, Suite 200
Columbia, MD 21046
Attn: Robert E. Prince, President and Chief Executive Officer
Telecopy No.: (301) 621-8211
(b) BNFL:
BNFL INC.
9302 Lee Highway, Suite 950
Fairfax, Virginia 22031
Attn: K. Edward Newkirk
Telecopy No.: (703) 359-0442
XIX. COMPLETE AGREEMENT
This Agreement and the Teaming Agreement and all documents referenced
therein to be entered into between the parties hereto contains the complete
agreement and understanding between the parties concerning the subject matter
hereof and shall supersede all other agreements, understandings or
commitments between the parties as to such subject matter, and the
representations and warranties contained in Article XIX of the Teaming
Agreement are incorporated herein pursuant to Article XI of this Agreement.
XX. ASSIGNMENT
The obligations and rights of each party hereunder shall not be
assignable without the prior written consent of the other party, which
consent may be withheld in such party's sole discretion; provided, however,
that if BNFL assigns this Agreement to an Affiliate, then GTSD will not
unreasonably withhold or delay consent to such assignment. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties' respective heirs, legal representatives, successors and assigns.
-10-
<PAGE>
XXI. WAIVER, MODIFICATION OR AMENDMENT
No waiver, modification or amendment of any provision of this Agreement
shall be effective, binding or enforceable unless in writing and signed by
all of the parties hereto.
XXII. GOVERNING LAW
The validity of this Agreement and of any of the terms or provisions as
well as the rights and duties of the parties hereunder shall be governed by
the laws of the State of Maryland, without reference to any conflict of law
or choice of law principles in the State of Maryland that might apply the law
of another jurisdiction.
XXIII. ARBITRATION
Any disputes between the parties relating to the terms of this
Agreement, or the breach thereof, shall be submitted to binding arbitration
in Baltimore, Maryland, in accordance with the rules of the American
Arbitration Association. In the event that either party desires to arbitrate
any such dispute, such party shall so notify the other party and the parties
shall endeavor, for a period of thirty (30) days, to resolve such dispute
without arbitration. In the event that the parties cannot resolve the
dispute within such thirty (30) day period, then within ten (10) days
thereafter, the parties shall jointly designate an arbitrator to hear the
dispute, or, if the parties are unable to jointly select an arbitrator, an
arbitrator shall be chosen by the President of the American Arbitration
Association from lists of candidates provided by each of the parties. The
decision of the arbitrator shall be binding upon the parties. The arbitrator
may order specific performance or other equitable relief or remedies to the
extent it deems it appropriate, in any situation in which a court could so
order. Each party shall pay all of its own expenses in connection with such
arbitration and one-half of the arbitrator's fees and expenses.
XXIV. CONSTRUCTION
Headings or captions of this Agreement are for reference only and are
not to be construed in any way as part of this Agreement, nor in the
interpretation of this Agreement. The masculine pronoun shall include the
feminine and neuter, and vice versa, where the context so requires.
XXV. COUNTERPARTS
This Agreement may be executed in multiple original counterparts, each of
which shall be deemed an original and all of which together shall constitute
but one and the same document.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WITNESS/ATTEST: GTS DURATEK, INC.
/s/ Diane R. Brown By: /s/ Robert E. Prince
- ----------------------------------- ------------------------------------
Diane R. Brown, Secretary Name: Robert E. Prince
Title: President and Chief Executive
Officer
BNFL INC.
/s/ Richard H. Peebles By: /s/ Rolland A. Langley
- ----------------------------------- ------------------------------------
Richard H. Peebles, Vice President Name: Rolland A. Langley
Title: President
-12-
<PAGE>
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
See Attched
<PAGE>
Exhibit 11.1
GTS DURATEK, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------------------- ------------------------------
1995 1994 1995 1994
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Primary:
Net earnings $ 473,199 $ 51,218 $1,153,576 $ 222,430
Accrued dividend on preferred stock (320,000) 0 (875,200) 0
Accretion of redeemable preferred stock (54,303) 0 (144,358) 0
---------- ---------- ---------- ----------
Net earnings applicable to common stock $ 98,896 $ 51,218 $ 134,018 $ 222,430
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares outstanding 8,784,859 8,687,917 8,731,551 8,684,630
Earnings per common share $ 0.01 $ 0.01 $ 0.02 $ 0.03
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1995 (UNAUDITED) AND
THE CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 (UNAUDITED) OF GTS, DURATEK, INC. AND SUBSIDIARIES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,724,375
<SECURITIES> 0
<RECEIVABLES> 14,805,573
<ALLOWANCES> (117,732)
<INVENTORY> 289,487
<CURRENT-ASSETS> 17,965,544
<PP&E> 6,063,115
<DEPRECIATION> (4,046,799)
<TOTAL-ASSETS> 25,410,904
<CURRENT-LIABILITIES> 3,207,997
<BONDS> 48,409
<COMMON> 88,784
14,554,384
0
<OTHER-SE> 7,511,330
<TOTAL-LIABILITY-AND-EQUITY> 25,410,904
<SALES> 0
<TOTAL-REVENUES> 28,947,692
<CGS> 0
<TOTAL-COSTS> 23,397,469
<OTHER-EXPENSES> 4,091,433
<LOSS-PROVISION> 61,000
<INTEREST-EXPENSE> (73,124)
<INCOME-PRETAX> 1,470,914
<INCOME-TAX> 147,113
<INCOME-CONTINUING> 1,153,576
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,153,576
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
<PAGE>
**** FOR IMMEDIATE RELEASE ****
Date: November 8, 1995 Contact: Robert Prince, Pres. & CEO
Diane Brown, Investor Relations
(410) 312-5100
Richard Peebles, Vice President, BNFL Inc.
(703) 385-7100
GTS Duratek and BNFL Strategic Alliance
GTS DURATEK AND BNFL INC. COMPLETE STRATEGIC ALLIANCE
COLUMBIA, Md. GTS Duratek (Nasdaq: DRTK) and BNFL Inc. today announced
that they have executed the definitive agreements formalizing their
previously announced strategic alliance, under which the two companies will
jointly pursue major Department of Energy (DOE) waste stabilization projects.
GTS Duratek president and CEO, Robert E. Prince, said, "This agreement
really gives our company a turbo charge. With a world-class partner like
BNFL, we are eager to put our combined knowhow and technical capabilities to
work."
As a part of the alliance, BNFL is investing $10 million in GTS Duratek
in the form of a convertible debenture. In addition, BNFL will contribute up
to $7.5 million in fees and technology development funding over the next five
years.
(more)
<PAGE>
GTS Duratek and BNFL Strategic Alliance/2
The first DOE project to be jointly pursued by GTS Duratek and BNFL will
be the separation and vitrification (conversion to glass) of high-level
radioactive waste at the DOE's Hanford Washington site. This site contains
61 million gallons of highly toxic and radioactive waste currently stored in
177 underground tanks. The DOE, which has previously stated that this
cleanup could last 20 years and cost $41 billion, announced that the Draft
Request for Proposal for the first phase of the privatized cleanup of the
tanks will be issued on November 13, 1995. In other recent public
presentations, the DOE has stated its intent to award contracts by August
1996.
BNFL Inc. is the U.S. subsidiary of British Nuclear Fuels plc, a
U.K.-based company with annual sales of $2 billion worldwide. It is one of
only two companies in the world with commercial experience in processing and
stabilizing high-level radioactive wastes similar to those at Hanford. BNFL
has been working with the DOE for the last four years to determine the best
solution for these wastes.
GTS Duratek is an environmental technology and services firm that uses
its proprietary vitrification processes to convert radioactive and hazardous
waste into glass for storage and recycling. The DOE has already determined
that GTS Duratek's joule-heated vitrification technology is appropriate for
the conversion of radioactive waste into glass.
###
