<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GTS DURATEK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
DIANE R. BROWN, CORPORATE SECRETARY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:_____________________
(2) Aggregate number of securities to which transaction
applies:_____________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filling fee is
calculated and state how it was determined): ____________________
(4) Proposed maximum aggregate value of transaction:_______________________
(5) Total fee paid: _____________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:____________________
(2) Form, schedule or registration statement no.: ______________________
(3) Filing party: ________________________
(4) Date filed:__________________________
<PAGE>
GTS DURATEK, INC.
10100 Old Columbia Road
Columbia, Maryland 21046
---------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of GTS
Duratek, Inc. (the "Company") will be held at 10100 Old Columbia Road, Columbia,
Maryland 21046 on the 19th day of May, 1998 at 10:30 a.m., Eastern Standard
Daylight Savings Time, for the following purposes:
1. To elect seven Directors of the Company to serve until the next Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualify.
2. To approve the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, as the Company's independent auditors for the year
ending December 31, 1998.
3. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
Holders of record of Common Stock and 8% Cumulative Convertible Redeemable
Preferred Stock as of the close of business on March 19, 1998 are entitled to
receive notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
Diane R. Brown
Secretary
Columbia, Maryland
April 19, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING OF
STOCKHOLDERS, PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
GTS DURATEK, INC.
10100 Old Columbia Road
Columbia, Maryland 21046
--------
Columbia, Maryland April 19, 1998
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of GTS Duratek, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 10100
Old Columbia Road, Columbia, Maryland 21046 on the 19th day of May, 1998 at
10:30 a.m. Eastern Standard Daylight Savings Time, and at any adjournments
thereof. The approximate date on which this Proxy Statement and the
accompanying Proxy were first given or sent to security holders was April 19,
1998.
Each Proxy executed and returned by a stockholder may be revoked at any
time thereafter, by written notice to that effect to the Company, attention of
the Secretary, prior to the Annual Meeting, or in person to the Chairman of, or
the Inspectors of Election at, the Annual Meeting, or by the execution and
return of a later-dated Proxy, except as to any matter voted upon prior to such
revocation.
The Proxies in the accompanying form will be voted in accordance with the
specifications made thereon and where no specifications are given, such Proxies
will be voted FOR the nominees for election as directors named herein, and FOR
the approval of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors. In the discretion of the proxy holders, the Proxies will
also be voted FOR or AGAINST such other matters as may properly come before the
meeting. The management of the Company is not aware that any other matters are
to be presented for action at the meeting.
The terms of the Company's 8% Cumulative Convertible Redeemable Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"), provide
that the holders thereof, voting as a separate class, shall have the right to
elect a majority of the Company's Board of Directors so long as The Carlyle
Group and its affiliates ("Carlyle") own shares of capital stock having 20% or
more of the votes that may be cast at annual or special meetings of
stockholders. The remaining directors shall be elected by the vote of the
holders of the Company's common stock, par value $.01 per share (the "Common
Stock"), and the Convertible Preferred Stock, voting together as a single class.
With respect to the election of the majority of the Board of Directors by the
holders of the Convertible Preferred Stock, voting as a separate class, such
directors shall be elected by a plurality of the votes cast by the holders of
shares of Convertible Preferred Stock present in person or represented by proxy
at the Annual Meeting. In the election of the remaining directors by the
holders of the Common Stock and the Convertible Preferred Stock, voting together
as a single class, such directors shall be elected by a plurality of the votes
cast by the holders of shares of Common Stock and Convertible Preferred Stock
present in person or represented by proxy at the Annual Meeting. For purposes
of the election of directors, abstentions and broker non-votes are not
considered to be votes cast and do not affect the plurality vote required for
directors. On all other matters, including the approval of the appointment of
the Company's independent auditors, a majority of the votes cast at the meeting,
with a quorum present, is required to approve the matter. Accordingly,
abstentions and broker non-votes will not be considered to be votes cast and
will have no effect on the outcome of the matter.
<PAGE>
The solicitation of proxies generally will be by mail and by directors,
officers, and regular employees of the Company. In some instances, solicitation
may be made by telephone or other means. All costs incurred in connection with
the solicitation of proxies will be borne by the Company. Arrangements may be
made with brokers and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and the Company may reimburse them for
reasonable out-of-pocket and clerical expenses in forwarding such material.
VOTING SECURITIES
The Board of Directors has fixed the close of business on March 19, 1998 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting. The issued and outstanding stock of the
Company on March 19, 1998 consisted of 12,960,050 shares of Common Stock and
160,000 shares of Convertible Preferred Stock. For all matters, each share of
Common Stock is entitled to one vote, except that in the election of directors,
each share of Common Stock is entitled to cast one vote for each director to be
elected; cumulative voting is not permitted. For all matters in which the
holders of shares of Convertible Preferred Stock vote with the holders of the
Common Stock as a single class, each share of Convertible Preferred Stock
entitles the holder thereof to cast the number of votes equal to the number of
votes which could be cast in such vote by a holder of the number of the shares
of Common Stock into which such share of Convertible Preferred Stock is
convertible. The current number of shares of Common Stock into which each share
of Convertible Preferred Stock is convertible is 33-1/3. Accordingly, the
outstanding shares of Convertible Preferred Stock represent 5,333,333 votes in
the aggregate when voting with the shares of Common Stock as a single class. A
quorum of the stockholders is constituted by the presence, in person or by
proxy, of holders of record of voting stock, representing a majority of the
number of votes entitled to be cast.
Carlyle beneficially owns 144,697 shares of Convertible Preferred Stock
outstanding and 1,961,162 shares of Common Stock outstanding, or an aggregate of
37.1% of the outstanding voting securities of the Company. National Patent
Development Corporation, a Delaware corporation ("National Patent"),
beneficially owns 1,450,522 shares of the outstanding Common Stock, representing
7.9% of the outstanding voting securities of the Company. Carlyle and National
Patent have entered into a stockholders' agreement dated as of January 24, 1995
(the "Stockholders' Agreement") whereby each agreed that they would vote the
shares of stock beneficially owned by them so that the Company's Board of
Directors would be comprised of the Carlyle designees representing a majority of
the designees to the Board of Directors, the Company's president and the
remaining members designated by National Patent. National Patent has
subsequently waived its rights under the Stockholders Agreement to designate
members to the Company's Board of Directors. See "Security Ownership of Certain
Beneficial Owners and Management."
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
On January 24, 1995, the Company issued for $16 million 160,000 shares of
Convertible Preferred Stock, and an option (the "Company Option") to purchase up
to an additional 1.25 million shares of newly issued Common Stock from the
Company at any time prior to January 24, 1999 at $3.75 per share to investment
partnerships sponsored and controlled by Carlyle. The Convertible Preferred
Stock is convertible into Common Stock at a conversion price of $3 per share.
In addition, as part of this financing transaction (the "Financing
Transaction"), Carlyle acquired 1,666,667 shares of Common Stock of the Company
owned by National Patent, the Company's largest stockholder, for $3 per share
and had 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. Carlyle exercised the
NPD Option in full on December 22, 1995.
Assuming the conversion of all of the Convertible Preferred Stock into
Common Stock, Carlyle would own 37.1% of the Common Stock of the Company,
excluding the effects of the exercise of the Company Option and all other
outstanding warrants, convertible securities 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 portion of the Company
Option that it owns (but not the exercise of outstanding warrants, convertible
securities and employee stock options), Carlyle would own 40.7% of the Company's
Common Stock.
The terms of the Convertible Preferred Stock provide that the holders of a
majority of the Convertible Preferred Stock have the right to elect a majority
of the Company's Board of Directors so long as Carlyle owns shares of capital
stock having 20% or more of the votes that may be cast at annual or special
meetings of stockholders. As part of the Financing Transaction and the sale of
the Company's Common Stock from National Patent to Carlyle, the Company, Carlyle
and National Patent entered into the Stockholders' Agreement whereby, among
other things, National Patent agreed to vote the remaining shares of Common
Stock that it owns in favor of the Carlyle designees to the Company's Board of
Directors. As a result of the Financing Transaction, Carlyle has the ability,
through its stock ownership, the terms of the Convertible Preferred Stock and
the terms of the Stockholders' Agreement, to elect a majority of the Company's
Board of Directors and effectively control the Company.
The following table sets forth, at March 19, 1998, the amount and
percentage of the Company's outstanding Common Stock and Convertible Preferred
Stock beneficially owned by each director and nominee for director, each
executive officer named in the Summary Compensation Table, all directors and
officers as a group and by all persons, to the knowledge of the Company,
beneficially owning more than five percent (5%) of the Company's Common Stock or
Convertible Preferred Stock.
3
<PAGE>
<TABLE>
<CAPTION>
Convertible
Common Stock Preferred Stock
-------------------------------- -------------------------------
Number Percent of Number Percent of
of Class of Class
Name Shares Outstanding Shares Outstanding
- -------------------------------- ----------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Daniel A. D'Aniello 3,091,613(1) 21.9% 144,697(1) 90.4%
William E. Conway, Jr. 3,091,613(1) 21.9% 144,697(1) 90.4%
Robert E. Prince 273,567(2) 2.1% - -
Robert F. Shawver 75,967(2) * - -
Earle C. Williams 8,200 * - -
Admiral James D. Watkins 900 * - -
George V. McGowan 1,200 * - -
J. A. Brothers - - - -
Directors and Executive Officers
as a Group (13 persons) 3,538,397(3) 24.4% 145,162 90.7%
<CAPTION>
Name and Address of Other 5%
Holders of Common Stock or
Convertible Preferred Stock
- ---------------------------------
<S> <C> <C> <C> <C>
The Carlyle Group 3,091,613(4) 21.9% 145,162(5) 90.7%
1001 Pennsylvania Avenue, NW
Washington, DC 20004-2505
National Patent 1,450,522(6) 11.2% - -
Development Corp.
9 West 57th Street, Suite 4170
New York, NY 10019
BNFL Inc. 1,381,575(7) 9.6% - -
9302 Lee Highway, Suite 950
Fairfax, VA 22031
The Capital Group Companies 811,100 6.3%
333 South Hope Street
Los Angeles, CA 90071
Soros Capital Offshore 198,773(8) 1.5% 9,308 5.8%
Partners LDC
c/o Coutts & Co. (Cayman) Limited
West Bay Road, George Town
Grand Cayman, Cayman Islands
British West Indies
</TABLE>
- -----------
* The number of shares owned is less than one percent of the outstanding
shares of Common Stock.
4
<PAGE>
(1) Messrs. D'Aniello and Conway are each Managing Directors of Carlyle and, as
a result, may be deemed to beneficially own the shares (1,967,464 Common
Stock and 1,134,087 options) of Common Stock and Convertible Preferred
Stock beneficially owned by Carlyle. However, Messrs. D'Aniello and Conway
disclaim beneficial ownership of such shares.
(2) Includes options to purchase 212,267 and 75,667 shares of Common Stock for
Messrs. Prince and Shawver, respectively, which are exercisable within
60 days.
(3) Includes 1,495,171 shares that may be issued upon the exercise of options
and warrants outstanding and beneficially owned by the executive officers
and directors as a group.
(4) Represents (i) 1,961,162 shares of Common Stock purchased from National
Patent in the Financing Transaction and upon the exercise of the NPD Option
and (ii) 1,130,451 shares of Common Stock which may be acquired upon the
exercise of a presently exercisable option held by Carlyle. Does not
include shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock. The shares of Convertible Preferred Stock are
convertible into 4,823,234 shares of Common Stock. Assuming the conversion
of the Convertible Preferred Stock into Common Stock, Carlyle would own
7,914,847 shares of Common Stock or 41.9% of the Common Stock. In all
instances, the shares are owned by partnerships sponsored and controlled by
Carlyle.
(5) Represents shares of Convertible Preferred Stock acquired by Carlyle in the
Financing Transaction. In all instances, the shares are owned by
partnerships sponsored and controlled by Carlyle.
(6) National Patent has granted to certain of its officers, directors and
employees, options which are presently exercisable at an average price of
$1.97 per share, to purchase 245,800 shares of the Company's Common Stock
owned by it. If all of the options were exercised, National Patent would
own 1,204,722 shares of Common Stock of the Company (9.3%).
(7) Represents shares of Common Stock issuable upon the conversion of the
convertible debenture issued by the Company to BNFL Inc. on November 7,
1995 for $10.0 million.
(8) Represents (i) 126,051 shares of Common Stock held by Soros Capital and
(ii) 72,722 shares of Common Stock which may be acquired upon the exercise
of a presently exercisable option held by Soros Capital. These securities
and the shares of Convertible Preferred Stock were acquired from Carlyle.
5
<PAGE>
ELECTION OF DIRECTORS
Seven directors will be elected at the meeting to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
duly elected and qualify. It is intended that the Proxies will be voted for the
following nominees, but the holders of the Proxies reserve discretion to cast
votes for individuals other than the nominees for director named below in the
event of the unavailability of any such nominee. The Company has no reason to
believe that any of the nominees will become unavailable for election. Set
forth below are the names of the nominees, age, position with the Company, the
year in which first elected a director of the Company, principal occupation and
certain other information concerning each of the nominees.
The terms of the Convertible Preferred Stock provide that the holders
thereof voting as a separate class, have the right to elect a majority of the
Company's Board of Directors so long as Carlyle owns shares of capital stock
having 20% or more of the votes that may be cast at annual or special meetings
of stockholders. Messrs. D'Aniello, Conway, Williams and Brothers are the
designees of the holders of the Convertible Preferred Stock to the Company's
Board of Directors. The remaining directors shall be elected by the vote of the
holders of the Common Stock and the Convertible Preferred Stock voting together
as a single class. In addition, Carlyle and National Patent have entered into
the Stockholders' Agreement whereby each agreed that they would vote the shares
of stock beneficially owned by them so that the Company's Board of Directors
would be comprised of the Carlyle designees representing a majority of the
designees to the Board of Directors, the Company's president and the remaining
members designated by National Patent. National Patent has subsequently waived
its right under the Stockholder's Agreement to designate members to the
Company's Board of Directors.
Convertible Preferred Stock Designees
- -------------------------------------
Daniel A. D'Aniello, 51, has been Chairman of the Board and a director of
the Company since January 1995. He has been a Managing Director for Carlyle, a
Washington, D.C. based private merchant bank, since 1987. Mr. D'Aniello was
Vice President, Finance and Development for Marriott Corporation, a hospitality
company, from 1981 to 1987. He currently serves on the Board of Directors for
Baker & Taylor, Inc., International Technology Corporation and Pharmaceutical
Research Associates. Mr. D'Aniello is a magna cum laude graduate of Syracuse
University, where he was a member of Beta Gamma Sigma, and a graduate of the
Harvard Business School, where he was a Teagle Foundation Fellow.
William E. Conway, Jr., 48, has been a director of the Company since
January 1995. He has been a Managing Director of Carlyle since 1987. Mr.
Conway was Senior Vice President and Chief Financial Officer of MCI
Communications, an international telecommunications company, from 1984 to 1987.
He currently serves on the Board of Directors for Howmet International, Inc.,
Tracor, Inc., Nextel Communications, Inc., and several privately held companies
controlled by Carlyle. Mr. Conway received his Bachelor of Arts with a
concentration in Economics at Dartmouth College and his Masters of Business
Administration in Finance at the University of Chicago.
6
<PAGE>
Earle C. Williams, 68, has been a director of the Company since January
1995. He served on the Board of Directors of BDM International, Inc. from 1972
until 1997 and was the President and Chief Executive Officer of that company
from 1972 until 1992. Mr. Williams also serves on the Board of Directors of the
following companies, Gamma-A Technologies, Inc., The Parsons Corporation, and
BTG, Inc.
J. A. "Fred" Brothers, 57, has been a director of the Company since April
1998. He has served as Executive Vice President of Ashland Inc., a diversified
petroleum and chemical products company, since 1984 and has been with Ashland
companies since 1967. Mr. Brothers also serves on the Board of Directors of the
following organizations, The Geon Company, the Defense Enterprise Fund and on
the Board of Trustees of Children's Hospital in Columbus, Ohio. Mr. Brothers
earned his doctorate in chemical engineering at Virginia Polytechnic Institute
and an advanced management degree from Harvard Business School.
Remaining Nominees
- ------------------
Admiral James D. Watkins, 71, has been a director of the Company since
April 1997. Admiral Watkins has been the President of the Joint Oceanographic
Institutions, Inc. since 1993 and President of the Consortium Oceanographic
Research and Education since 1994. Admiral Watkins was appointed Chief of Naval
Operations in 1982 by President Reagan and served as Secretary of Energy under
President Bush from 1989 to 1993. Admiral Watkins currently serves as a
director of Southern California Edison Company, International Technology
Corporation and Chariman of the Board of Eurotech, Ltd.
George V. McGowan, 70, has been a director of the Company since April 1997.
Mr. McGowan served as Chairman of the Board and Chief Executive Officer of
Baltimore Gas and Electric Company and Chairman of the Board of Constellation
Holdings, Inc., from 1988 to 1992. Mr. McGowan currently serves as a director
of Baltimore Gas and Electric Company, McCormick & Company, Inc., NationsBank,
N.A., and Scientech, Inc. Mr. McGowan currently serves as Chairman of the
Executive Committee of Baltimore Gas and Electric and is and a member of the
Committee on Nuclear Power.
Robert E. Prince, 51, has been President and Chief Executive Officer of the
Company since 1990 and a director since 1991. He founded General Technical
Services, Inc., the predecessor to the Company, in October 1984 and was
President and Chief Executive Officer from 1987 to 1990. Mr. Prince, a graduate
of the U.S. Naval Academy, served as an officer on nuclear submarines. He also
has a Masters in Business Administration from the Wharton School of Finance of
the University of Pennsylvania. Mr. Prince is a certified naval nuclear
engineer.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1997 there were six meetings of the Board of Directors of the
Company. Each director attended at least 75% of the combined total number of
meetings of the Board and the Board committees of which he was a member. The
Board of Directors of the Company has an Executive Committee, Compensation
Committee and Audit Committee.
7
<PAGE>
The Executive Committee, currently consisting of Daniel A. D'Aniello,
Chairman, William E. Conway, Jr., and Robert E. Prince, meets on call and has
authority to act on most matters during the intervals between Board meetings.
The Executive Committee met once during 1997.
The Compensation Committee, currently consisting of Admiral James Watkins,
Chairman, William E. Conway, Jr., and Daniel A. D'Aniello, establishes the
compensation for the executive officers of the Company, generally reviews
benefits and compensation for all of the Company's officers, and administers the
Company's Stock Option Plan. The Compensation Committee met twice in 1997.
The Audit Committee, currently consisting of Earle C. Williams, Chairman
and George V. McGowan reviews the internal controls of the Company and the
objectivity of its financial reporting. It meets with appropriate Company
financial personnel and the Company's independent certified public accountants
in connection with these reviews. This committee recommends to the Board of
Directors the appointment of the independent certified public accountants,
subject to the ratification by the stockholders at the Annual Meeting, to serve
as auditors for the following year in examining the corporate accounts of the
Company. The Audit Committee met once in 1997.
COMPENSATION OF DIRECTORS
For 1997, Admiral Watkins, Mr. McGowan and Mr. Williams each received a
total of $20,000 for their service on the Board of Directors and the board
committees of which they serve.
8
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information concerning the
compensation for the last three completed fiscal years of the chief executive
officer and the next most highly compensated executive officer of the Company.
No stock appreciation rights ("SARs") were granted during 1997 nor have any SARs
been granted at any time in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
- ---------------------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING
RESTRICTED OPTIONS ALL OTHER
STOCK GRANTED COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY $ BONUS $ AWARD(S)($) (#)(2) (3) ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Prince 1997 209,300 60,697 - 10,000 4,750
President and Chief Executive 1996 202,000 - - - 4,862
Officer 1995 200,000 16,000 - - 2,488
Robert F. Shawver 1997 150,850 32,810 - 5,000 4,750
Executive Vice President and 1996 145,600 3,200 - - 5,366
Chief Financial Officer 1995 140,000 8,400 - - 2,992
C. Paul Deltete(4) 1997 134,700 29,297 - 15,000 4,664
Senior Vice President 1996 130,000 2,850 - 65,000 1,622
1995 - - - - -
Donald R. Neely(4) 1997 95,175 27,601 - 7,500 2,646
Senior Vice President 1996 - - - - -
1995 - - - - -
Leslie M. Hill(4) 1997 92,147 30,450 - 20,000 -
Senior Vice President 1996 - - - - -
1995 - - - - -
</TABLE>
(1) No executive officer named above received any perquisites and other personal
benefits the aggregate amount of which exceeded the lesser of either $50,000
or 10% of the total annual salary and bonus reported for 1996 in the Summary
Compensation Table.
(2) Represents options to purchase Common Stock that were granted to Messrs.
Prince, Shawver, Deltete, Neely and Hill on July 29, 1997. The options
granted become exercisable in four equal annual installments commencing
July 29, 1998.
(3) Consists of Company matching contributions to the Company's 401(k) Savings
Plan.
(4) Mr. Deltete joined the Company January 16, 1996; Mr. Neely joined the
Company April 18, 1997; and Mr. Hill joined the Company May 1, 1997
9
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information relating to options
granted in 1997 to purchase shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Number of Percent of Potential Realizable
Securities Total Exercise Value at Assumed
Underlying Options or Base Annual Rates of Stock
Options Granted in Price (Per Expiration Price Appreciation for
Name Granted (#) Fiscal Year Share) (1) Date Option Term (3)
- ------------------ ----------- ----------- ---------- ---------- ----------------------
5% 10%
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Prince 10,000 6.9% $10.50 7/29/02 $29,100 $64,100
Robert F. Shawver 5,000 3.5% $10.50 7/29/02 14,550 32,050
Donald R. Neely 7,500 5.2% $10.50 7/29/02 21,825 48,075
Leslie Hill 20,000 13.8% $10.50 7/29/02 58,200 128,200
C. Paul Deltete 15,000 10.4% $10.50 7/29/02 43,650 96,150
</TABLE>
The 5% and 10% assume rates of stock appreciation used to calculate potential
gains to optionees are mandated by the rules of the Securities and Exchange
Commission.
(1) Options were granted at 100% of fair market value on the date of the
grant.
(2) Optionees will not realize value under their 1997 option grants
without a stock price appreciation which will benefit all
stockholders.
(3) These dollar amounts are the result of calculations of assumed annual
rates of stock price appreciation from July 29, 1997 (the date of the
grant of the option awards) to July 29, 2002 (the date of the
expiration of such options) of 0%, 5%, and 10%, the latter two assume
rates being required under the rules of the Securities and Exchange
Commission. Based on these assumed annual rates of stock price
appreciation of 0%, 5%, and 10%, respectively, the Company's stock
price at July 29, 2002 is projected to be $13.41, and $16.91,
respectively. These assumptions are not intended to forecast future
appreciation of the Company's stock price. Indeed, the Company's
stock price may increase or decrease in value over the time period set
forth above. The potential realizable value computation does not take
into account federal or state income tax consequences of option
exercises or sales of appreciated stock.
10
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth certain information concerning the exercise of
stock options, the number of unexercised options and the value of unexercised
options at the end of 1997 for the executive officers whose compensation is
reported in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES
DURING 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE
OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
SHARES EXERCISABLE/ EXERCISABLE/
ACQUIRED ON VALUE ---------------------- --------------------
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------- ------------ ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Robert E. Prince 45,000 $504,624 226,678/123,322 $2,266,780/$1,163,220
Robert F. Shawver 40,000 389,412 84,671/ 47,329 $ 846,710/$ 438,290
C. Paul Deltete 0 0 48,750/ 31,250 $ 36,563/$ 57,188
Donald R. Neely 0 0 0/ 7,500 $ 0/$ 22,500
Leslie M. Hill 0 0 0/ 20,000 $ 0/$ 60,000
</TABLE>
(1) Calculated based on the closing price of the Company's Common Stock ($13.50)
as reported by Nasdaq National Market on December 31,1997. An "In-the-
Money" option is an option for which the option price of the underlying
stock is less than the market price at December 31, 1997, and all of the
value shown reflects stock price appreciation since the granting of the
option.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In connection with the closing of the Financing Transaction, the Company
entered into employment agreements with Messrs. Prince and Shawver. Under the
terms of the employment agreement between the Company and Mr. Prince, he will
hold the offices of President, Chief Executive Officer and will serve as a
member of the Board of Directors. As compensation for his services, Mr. Prince
will receive an initial base salary of $200,000 per annum. The employment
agreement between the Company and Mr. Shawver provides that he will hold the
offices of Executive Vice President and Chief Financial Officer and will receive
an initial base salary of $140,000 per annum. Increases in the base salaries of
Messrs. Prince and Shawver may be upwardly adjusted by the Compensation
Committee in its discretion. In January 1996, the
11
<PAGE>
Company entered into an employment agreement with Mr. Deltete. Under the terms
of the employment agreement between the Company and Mr. Deltete, he will hold
the office of Senior Vice President of Operations and will receive an initial
base salary of $130,000 per annum. Increases in the base salary may be upwardly
adjusted by the Compensation Committee in its discretion. The agreements with
Messrs. Prince, Shawver, and Deltete provide that the Compensation Committee
shall consider in good faith the amount of bonus which each may receive and the
amount of such bonus shall be determined with reference to the performance of
each executive and the performance and results of operations of the Company.
The agreements may be terminated by the Company (i) upon the long-term
disability of the employee, (ii) upon the employee's death, (iii) for cause or
for good reason (each as defined in the agreements), or (iv) upon six months
notice to the employee. Messrs. Prince or Shawver may terminate their
employment agreements under certain circumstances upon six months notice. If
the agreements are not terminated, they shall terminate upon the third
anniversary from the date of the agreements, provided that if neither party has
given a notice to the other not to extend the agreement, such employment
agreements will be automatically extended, on a day-by-day basis, to a date
which is six months after the date on which a notice not to extend is first
given. Neither the Company nor Messrs Prince or Shawver have provided a notice
not to continue the respective employment agreements. Accordingly, the
employment agreements for Messrs Prince and Shawver are continuing on a day-to-
day basis until six months after either party to each such agreement provides an
notice not to extend the agreement.
Under the terms of these agreements, if the employee is terminated for good
reason or without cause upon the discretion of the Company or the employee
resigns with justification and such termination occurs within one year of a
"change of control" of the Company, the Company shall pay to the employee all
compensation, at the rate then in effect, through the date of such termination,
the base salary of the employee, then in effect, for a period of one year from
the date of termination and will maintain certain employee benefits for a period
of one year from the date of termination. As defined in the employment
agreements of Messrs. Prince, Shawver and Deltete, a "change of control" occurs
when Carlyle ceases to be owner of twenty percent (20%) of the Company's voting
securities and the designees of Carlyle to the Company's Board of Directors
shall cease to represent a majority of the Board of Directors.
The employment agreements also contain certain non-competition provisions
prohibiting the employees, for certain periods of time, from engaging in, or
being employed by, businesses that derive revenues from vitrification or
remediation of any form of waste or derive revenues from the remediation of any
form of wastes that then accounts for at least ten percent (10%) of the revenues
of the Company's technology group irrespective of the remediation technology
being used.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing the compensation
for the executive officers of the Company, reviewing benefits and compensation
for all of the Company's officers and administering the Company's Stock Option
Plan. The Compensation Committee's executive compensation policies are designed
to enhance the financial performance of the Company, and thus stockholder value,
by significantly aligning the financial interest of the key executives with
those of stockholders. The Compensation Committee reviews the financial
performance and increases to stockholder value annually and adjusts the
compensation of key executives based on the improvements achieved.
12
<PAGE>
During 1997, the Company adopted an Executive Compensation Plan in order to
formalize the determination of the annual compensation of the Company's
executive officers. The purpose of the plan is to attract, retain and motivate
key management and to align the financial interests of the Company's executive
officers with those of the Company's stockholders. Under the plan, the
executive officers' compensation is structured in such a way so that a
meaningful portion is "at risk," with annual and long-term incentives intended
to provide between 20% and 40% of total compensation. All Senior Vice
Presidents and above are eligible to participate in the Executive Compensation
Plan and for 1997 the eligible participants consisted only of the executive
officers named in the Summary Compensation Table. The Executive Compensation
Plan is administered and all salary and bonuses are at the sole discretion of
the Compensation Committee.
The Executive Compensation Plan consists of three components of
compensation: base salary, annual cash performance bonus and long-term incentive
stock option grants. The base salary and any raises for the Company's Chief
Executive Officer are determined by the Compensation Committee. The base salary
and raises for the other executive officers are determined by the Chief
Executive Officer. The annual cash performance bonus is designed to reward
executive officers for their contributions to corporate and business unit
objectives, and for individual performance. The bonus is expressed as a
percentage of the executive officer's base for such fiscal year. The amount of
the bonus earned by each executive officer, as a percentage of the executive
officer's base salary, is dependent upon the performance of the Company during
the fiscal year as compared to budgeted amounts. The specific factors examined
include the Company's operating profit, free cash flow, earnings per share and a
specific personal objective for each executive officer. The first three factors
are each weighted 30% with the personal objective criteria weighted 10% in
determining the amount of the annual cash performance bonus. In addition to
salary and cash bonus, the Compensation Committee can award options to purchase
shares of the Company's Common Stock. Although the Compensation Committee has a
guideline to award an aggregate of 30,000 to 40,000 options to the participants
in the Executive Compensation Plan, all option awards are at the sole discretion
of the Compensation Committee.
The Company has certain broad-based employee benefit plans in which all
employees, including the named executive officers, are permitted to participate
on the same terms and conditions relating to eligibility and subject to the same
limitations on amounts that may be contributed. In 1997, the Company also made
a matching contribution for those participants to the Company's 401(k) Savings
Plan.
Mr. Prince's 1997 Compensation. Mr. Prince's 1997 compensation was
determined pursuant to the terms of the Executive Compensation Plan and
consistent with the terms of his employment agreement with the Company. Mr.
Prince's base salary for 1997 was $209,300. Mr. Prince received an annual cash
performance bonus of approximately $61,000 for 1997, based upon the Company
exceeding its budget for operating income, free cash flow and earnings per share
and for satisfying his personal objective. In considering whether Mr. Prince
satisfied his personal objective, the Compensation Committee considered the
closing of the Company's acquisition of The Scientific Ecology Group, Inc.
(SEG), the resumption of radioactive waste processing at the Company's facility
at the U.S. Department of Energy's Savannah River Site and the achievement of
all milestones with respect to the Company's Hanford Tank Waste Remediation
System and Idaho Advanced Mixed Waste Treatment Projects during 1997, the
Compensation Committee awarded Mr. Prince options to purchase 10,00 shares of
the Company's Common Stock.
13
<PAGE>
Compensation of other Executive Officers and Employees. The compensation
of the other executive officers of the Company named in the Summary Compensation
Table was determined consistent with the terms of the Executive Compensation
Plan, including the fact that the Company exceeded its budget for operation
income, free cash flow and earnings per share and taking into account the
individual performance. In addition, the Compensation Committee awarded to
Messrs. Shawver, Deltete, Neely and Hill options to purchase 5,000, 15,000,
7,500 and 20,000 shares of the Company's Common Stock, respectively. Messrs.
Neely and Hill joined the Company during 1997 following the Company's
acquisition of SEG.
The Compensation Committee continuously reviews the compensation policies
of the Company to attract, retain and provide appropriate incentives for the
highest quality professional personnel in order to maintain the Company's
competitive position in the environmental technology and services industries,
and thereby seek to provide for long-term success of the Company and the
interests of its stockholders.
The Securities and Exchange Commission requires Compensation Committees of
public companies, or other committees performing similar functions, to state
their compensation policies with respect to the federal income tax laws that
limit to $1 million the deductibility of compensation paid to executive officers
named in the proxy statement of such companies. In light of the current level
of compensation for the Company's named executive officers, the Compensation
Committee has not adopted a policy with respect to the deductibility limit, but
will adopt such a policy should it become relevant.
William E. Conway, Jr. (Chairman)
Admiral James D. Watkins
Daniel A. D'Aniello
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Conway and D'Aniello served as members of the
Compensation Committee. No director or executive officer of the Company is a
director or executive officer of any other corporation that has a director or
executive officer who is also a director or a board committee member of the
Company.
PERFORMANCE GRAPH
As part of the proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a five-
year comparison of the cumulative total stockholder return on its Common Stock
with that of a broad equity market index and either a published industry index
or a company-constructed peer group index. The following graph compares the
performance of the Company's Common Stock for the periods indicated with the
performance of the CRSP Index for the Nasdaq Stock Market (non-financial) and
the Pollution Control Industry Group compiled by Research Data Group (which
includes all companies with primary SIC codes 4950, 4953 and 4955 whose stock
has been publicly-traded for all of 1997). The comparison assumes $100 was
invested on December 31, 1992 in the Company's Common Stock and in each of the
foregoing indices and the reinvestment of dividends.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
AMONG GTS DURATEK, INC.,
THE NASDAQ NON-FINANCIAL INDEX AND A PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ PEER
Measurement Period GTS NON-FINANCIAL GROUP
(Fiscal Year Covered) DURATEK, INC. INDEX INDEX
- --------------------- ------------- ------------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1992 $100.00 $100.00 $100.00
FYE 12/31/1993 $132.00 $115.00 $ 75.00
FYE 12/31/1994 $114.00 $111.00 $ 70.00
FYE 12/31/1995 $407.00 $155.00 $ 81.00
FYE 12/31/1996 $371.00 $188.00 $ 93.00
FYE 12/31/1997 $386.00 $221.00 $ 95.00
</TABLE>
* $100 INVESTED ON 12/31/92 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
15
<PAGE>
CERTAIN TRANSACTIONS
On November 7, 1995, the Company and BNFL Inc. ("BNFL") entered into a
strategic alliance to jointly pursue up to five major United States Department
of Energy ("DOE") waste treatment projects. The terms of the strategic alliance
provide that BNFL pays to the Company a fee of $1.0 million each time the two
companies agree to exclusively pursue a waste treatment project together. Upon
execution of the strategic alliance agreement, the Company received the $1.0
million fee for its agreement to pursue the DOE's Hanford, Washington project
exclusively with BNFL. During 1996, the Company received $2.0 million for its
agreement to exclusively team on two DOE waste treatment projects. As part of
the strategic alliance, BNFL invested $10.0 million in the Company in the form
of a convertible debenture. The debenture accrues non-cash interest during the
first five years at the one-year London Interbank Offered Rate (LIBOR) and is
convertible at the option of BNFL into 1,381,575 shares of the Company's Common
Stock prior to November 7, 2000. If the debenture is not converted or extended,
the Company must repay principal and installments over the five-year period
beginning on November 8, 2000. BNFL also agreed to provide the Company with
research and development funding of at least $500,000 per year over the five
years. The two parties will mutually agree on how the Company will retain the
rights to the vitrification processes that it develops through this funding.
The Company has agreed as part of the strategic alliance to sublicense its
radioactive waste vitrification technologies to BNFL for use only in the United
Kingdom. See "Security Ownership of Certain Beneficial Owners and Management."
During 1996, the Company advanced loans of $394,198 and $287,341 to Mr.
Prince and Mr. Shawver, respectively. The loans bear interest at market rates
and were due by December 31, 1997. During the 1997 compensation committee
meeting of the board of directors, the loan expiration dates were extended to
December 31, 1998. At December 31, 1997, Mr. Shawver paid off his loan in full
and Mr. Prince's new balance is $314,426.
APPROVAL OF SELECTION OF KPMG PEAT MARWICK LLP AS AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP to audit the
accounts of the Company for the year ending December 31, 1998. KPMG Peat
Marwick LLP has no financial interest in the Company and neither it nor any
member or employee of the firm has had any connection with the Company in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee. KPMG Peat Marwick LLP has audited the accounts of the Company since
1987. The Delaware General Corporation Law does not require the approval of the
selection of auditors by the Company's stockholders, but in view of the
importance of the financial statements to the stockholders, the Board of
16
<PAGE>
Directors deems it desirable that they pass upon its selection of auditors. In
the event the stockholders disapprove the selection, the Board of Directors will
consider the selection of other auditors. The Board of Directors recommends
that you vote in favor of the above proposal in view of the familiarity of KPMG
Peat Marwick LLP with the Company's financial and other affairs acquired during
its previous service as auditors for the Company.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 annual meeting
of stockholders must be received by the Company for inclusion in the Company's
proxy statement and proxy relating to that meeting no later than December 18,
1998 and must otherwise be in compliance with applicable Securities and Exchange
Commission regulations.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented for action at the meeting other than that mentioned above. However,
if any matters properly come before the meeting, it is intended that the persons
named in the accompanying proxy will vote on such other matters in accordance
with their judgment of the best interests of the Company.
17
<PAGE>
PROXY GTS DURATEK, INC. PROXY
10100 OLD COLUMBIA ROAD
COLUMBIA, MARYLAND 21046
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR COMMON STOCKHOLDERS
Revoking any such prior appointment, the undersigned hereby appoints
Robert E. Prince and Daniel A. D'Aniello and each of them, attorneys and agents,
with power of substitution, to vote as Proxy for the undersigned, as herein
stated, at the Annual Meeting of Stockholders of GTS Duratek, Inc., to be held
at 10100 Old Columbia Road, Columbia, Maryland 21046 on Tuesday, May 19, 1998 at
10:30 a.m., and at any adjournments thereof, with respect to the number of
shares the undersigned would be entitled to vote if personally present.
The undersigned hereby acknowledges receipt of a copy of the Company's
1997 Annual Report and Notice of Annual Meeting and Proxy Statement relating to
such Annual Meeting.
The shares represented by this proxy will be voted in accordance with
the specifications made herein. If no instructions to the contrary are indicated
on the reverse side hereof, this proxy when properly executed will be voted FOR
the election of Directors, FOR the selection of KPMG Peat Marwick LLP as
auditors, and on any other matters in accordance with the discretion of the
named attorneys and agents.
(Continued and to be signed on reverse side.)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN ITEM 1 AND "FOR"
ITEM 2.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR WITHHOLD FOR ALL
1. ELECTION OF DIRECTORS-- ALL ALL (EXCEPT NOMINEE(S) WRITTEN BELOW)
Nominees: Admiral James D. Watkins,
George V. McGowan, and Robert E. Prince. [ ] [ ] [ ]
---------------------------------------------------
2. Appointment of KPMG Peat Marwick LLP as FOR AGAINST ABSTAIN
auditors of the Company for the year
ending December 31, 1998. [ ] [ ] [ ]
3. Upon any other matters which may properly
come before the meeting or any adjournment
thereof.
</TABLE>
Dated: , 1998
-----------------------------------------------------------
Signature(s)
-----------------------------------------------------------
- -----------------------------------------------------------------------
Title or Authority
----------------------------------------------------
Please mark, date and sign as your name appears above and return in the enclosed
envelope. If acting as executor, administrator, trustee, guardian, etc., you
should so indicate when signing. If the signer is a corporation, please sign the
full corporate name, by a duly authorized officer. If shares are held jointly
each shareholder named should sign.
/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
