As filed with the Securities and Exchange Commission on April 4, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GROUNDWATER TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT, AS SPECIFIED IN ITS CHARTER)
Delaware 8748 02-0324047
(state or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
100 River Ridge Drive
Norwood, Massachusetts 02062
(617) 769-7600
(Address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
BRIAN D. GOLDSTEIN, ESQ.
100 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062
(617) 769-7600
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
COPIES TO:
ANDREW E. TAYLOR, JR., ESQ.
Testa, Hurwitz & Thibeault
125 High Street, High Street Tower
Boston, MA 02110
(617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective and certain other conditions under the applicable merger agreement are
met or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. ___
<PAGE>
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered (Shares) Offering Price (2) Aggregate Offering Registration Fee (3)
Registered (1) Price (2)
<S> <C> <C> <C> <C>
Common Stock, $.001 8,076,347 Not Applicable $71,926,021 $24,802
par value
</TABLE>
(1) Based upon an estimate of the maximum number of shares of the Common
Stock of the Registrant, $.001 par value per share, issuable in the
transactions described herein to holders of shares of capital stock of
the Registrant and to Fluor Daniel, Inc.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended
(the "Securities Act"), and calculated as the sum of (a) the number of
shares of Common Stock of the Registrant being cancelled (6,970,701)
multiplied by the average high and low prices as reported on the Nasdaq
National Market Listing on March 28, 1996 ($13.50), plus (b)
$33,350,000 to be paid to the Registrant, less (c) $60,087,443 to be
paid by the Registrant to its stockholders, plus (d) the book value of
the shares to be received by the Registrant ($4,559,000).
(3) A fee of $11,500 was previously paid by the Registrant pursuant to Rule
14a-6 promulgated under the Securities Exchange Act of 1934, as
amended, in connection with the filing of the preliminary Proxy
Statement/Prospectus on February 7, 1996, and the Company has a current
balance with the Commission of $764.64. Pursuant to Rule 457(b) under
the Securities Act, such fee and balance are being credited against the
registration fee, and, accordingly, an additional $12,538 is being paid
in connection with this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
GROUNDWATER TECHNOLOGY, INC.
Cross-Reference Sheet Showing Locations in the
Prospectus of the Responses to the Items of From S-4 (Pursuant
to Item 501(b) of Regulation S-K)
<TABLE>
<CAPTION>
Form S-4 Item Number and Caption Location in Prospectus
-------------------------------- ----------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus............ Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Proxy
Statement/Prospectus
2 Inside Front and Outside Back Cover Pages
of Prospectus..................................... Inside Front Cover Page of Proxy
Statement/Prospectus; Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information..................... Summary; Risk Factors; Selected Historical
and Pro Forma Financial Data; Comparative
Per Share Data
4. Terms of the Transaction.......................... Summary; The Transactions; The Investment
Agreement; The Marketing Agreement; Certain
Federal Income Tax Considerations
5. Pro Forma Financial Information................... Unaudited Pro Forma Financial Information
6. Material Contacts with the Company Being
Acquired.......................................... Summary; The Transactions
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters................................ Not Applicable
8. Interests of Named Experts and Counsel............ Legal Matters; Experts; Opinion of Financial
Advisor
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities....................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants....... Available Information; Incorporation by
Reference; Summary; Selected Historical
Financial Data and Summary Unaudited Pro
Forma Financial Information
11. Incorporation of Certain Information by
Reference........................................ Summary; Available Information;
Incorporation by Reference
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. Information with Respect to S-2 or S-3
Registrants...................................... Not Applicable
13. Incorporation of Certain Information by
Reference........................................ Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants................ Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies........ Not Applicable
16. Information with Respect to S-2 or S-3
Companies........................................ Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies.................. Summary; Information with Respect to
FDESI; Financial Statements; Fluor Daniel
Environmental Services, Inc. Selected
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations of FDESI; Market Price,
Dividends, Holders of Capital Stock
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited................ Outside Front Cover Page of Proxy
Statement/Prospectus; Incorporation by
Reference; Summary; The Transactions;
Share Ownership of GTI Management and
Principal Holders
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited in an
Exchange Offer.................................... Not Applicable
</TABLE>
2
<PAGE>
[LOGO]
GROUNDWATER
TECHNOLOGY(R)
April 5, 1996
DEAR STOCKHOLDER:
You are cordially invited to attend the Special Meeting of Stockholders of
Groundwater Technology, Inc. ("GTI" or the "Company") to be held on Friday, May
10, 1996 at 9:30 a.m., at the Courtyard Marriott, 300 River Ridge Drive,
Norwood, Massachusetts.
At the Special Meeting, you will be asked to consider and vote upon
transactions which will create an alliance between GTI and Fluor Daniel, Inc.
("Fluor") as set forth in an Investment Agreement signed on December 11, 1995
(the "Transactions"). Specifically, pursuant to the Investment Agreement, a
newly created wholly-owned subsidiary of GTI will be merged with and into Fluor
Daniel Environmental Services, Inc. ("FDESI"), a wholly-owned subsidiary of
Fluor (the "Merger"). Immediately prior to the Merger, GTI will effect a
recapitalization (the "Recapitalization") whereby each outstanding share of GTI
Common Stock, $.01 par value ("Common Stock"), will be converted into $8.62 in
cash and .5274 of a share of new common stock, $.001 par value ("New Common
Stock"). The shares of New Common Stock will be listed on the Nasdaq National
Market under the symbol "FDGT" and will be substantially identical to your
current shares of Common Stock, except for the change in par value to $.001 per
share. Following the Merger, FDESI will be a wholly-owned subsidiary of GTI, and
GTI will be renamed "Fluor Daniel GTI, Inc." to emphasize the relationship
between GTI and Fluor.
In the Merger, GTI will receive all outstanding FDESI shares and $33.35
million in cash. In exchange for its FDESI shares and its cash payment, Fluor
will receive 4,400,000 shares of New Common Stock. In the Recapitalization, GTI
stockholders will receive in the aggregate approximately $60 million in cash and
3,676,347 shares of New Common Stock.
Immediately after the Merger and Recapitalization, Fluor will own
approximately 55% and current GTI stockholders will own approximately 45% of the
Company, and the Company will be governed by a Board comprised of the current
President and Chief Executive Officer of GTI, three members of Fluor management
and three independent directors. Two of the independent directors are currently
directors of GTI, and one has been designated by Fluor. In addition, GTI and
Fluor will enter into a Marketing Agreement encompassing their arrangements to
coordinate certain marketing, business opportunities and support services after
the Transactions.
The Investment Agreement is the result of careful consideration of the
Company's strategic alternatives by management and its Board of Directors. Your
Board unanimously believes that the affiliation with Fluor is in the best
interests of the Company and its stockholders. The cash payment of $8.62 per
share provides stockholders with an immediate return on their investment in GTI
at a fair price. The Board views the Transactions as, in effect, a means for
stockholders to sell approximately 47% of their shares of Common Stock for cash
at an effective per share price of approximately $18.25 and to retain (after
taking into account the issuance of New Common Stock to Fluor) ownership of
approximately 45% of the Company and thus be able to participate in its future
growth. The prospects for that growth should be enhanced by the acquisition of
FDESI and the affiliation with Fluor as a majority stockholder and business
partner.
In considering and voting on the Transactions at the Special Meeting, you
are being asked to approve the Amended and Restated Certificate of Incorporation
effecting, among other things, the Recapitalization and the change of corporate
name, to approve certain amendments to GTI's By-Laws required pursuant to the
Investment Agreement, to approve the issuance of New Common Stock to Fluor in
the Merger, to elect the directors to serve upon consummation of the
Transactions, to approve the treatment and disposition of stock options and
rights outstanding under, and certain amendments to, GTI's existing stock plans
in connection with the Transactions, and to approve and to transact such other
business, if any, as may properly come before the Special Meeting.
<PAGE>
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE TRANSACTIONS, WHICH SHALL CONSTITUTE YOUR APPROVAL OF THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, THE AMENDED BY-LAWS, THE ISSUANCE OF NEW
COMMON STOCK TO FLUOR, THE ELECTION OF DIRECTORS AND THE TREATMENT AND
DISPOSITION OF OUTSTANDING STOCK OPTIONS AND RIGHTS UNDER, AND CERTAIN
AMENDMENTS TO, GTI'S EXISTING STOCK PLANS IN CONNECTION WITH THE TRANSACTIONS.
The accompanying Proxy Statement/Prospectus, which you are urged to read
carefully, provides important detailed information concerning the Transactions
and the Special Meeting. Whether or not you plan to attend the Special Meeting,
please complete, date and sign your proxy card and promptly return it in the
enclosed envelope. If you attend the Special Meeting, you may vote in person
even though you have previously returned a proxy.
Please do not send in any stock certificates until you receive further
instructions.
On behalf of the Board of Directors,
/s/ Walter C. Barber
WALTER C. BARBER
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
GROUNDWATER TECHNOLOGY, INC.
100 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062
--------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1996
--------
To the Stockholders of
GROUNDWATER TECHNOLOGY, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the
"Special Meeting") of Groundwater Technology, Inc., a Delaware corporation
("GTI" or the "Company"), will be held at the Courtyard Marriott, 300 River
Ridge Drive, Norwood, Massachusetts on Friday, May 10, 1996, commencing at 9:30
a.m., local time.
The purpose of the Special Meeting will be:
(1) To consider and vote upon approval of certain transactions (the
"Transactions") contemplated by the Investment Agreement dated as of December
11, 1995, as amended (the "Investment Agreement") among GTI, Fluor Daniel, Inc.,
a California corporation ("Fluor"), Fluor Daniel Environmental Services, Inc., a
California corporation and wholly-owned subsidiary of Fluor ("FDESI") and GTI
Acquisition Corporation, a newly created California corporation and wholly-
owned subsidiary of GTI ("Merger Subsidiary"), pursuant to which (i) the
Restated Certificate of Incorporation will be amended to effect the conversion
of each outstanding share of GTI common stock, $.01 par value ("Common Stock"),
into the right to receive $8.62 in cash and .5274 of a share of newly authorized
common stock, $.001 par value ("New Common Stock"), and to amend Article FIRST
thereof to change the Company's name to "Fluor Daniel GTI, Inc.", to amend
Article THIRD to maximize the legally permissible purposes of the Company and to
delete Article SIXTH to eliminate the classified Board of Directors; (ii) Merger
Subsidiary will be merged with and into FDESI (the "Merger") with FDESI being
the surviving corporation; in the Merger GTI will issue to Fluor 4,400,000
shares of New Common Stock in exchange for Fluor's shares of FDESI common stock
and its payment of $33.35 million in cash; (iii) the Company's By-Laws will be
amended pursuant to the Investment Agreement; and (iv) the persons provided in
the Investment Agreement will be elected to the Board of Directors. Approval of
the Transactions by GTI stockholders will also constitute approval of the
treatment and disposition of outstanding stock options and rights under, and
certain amendments to, GTI's existing employee and director stock option plans
and employee stock purchase plan in connection with the Transactions.
(2) To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
Detailed information relating to the Transactions and related matters is
contained in the accompanying Proxy Statement/Prospectus, and the annexes
thereto, which form a part of this Notice.
The Board of Directors has fixed the close of business on March 20, 1996 as
the record date for determining the stockholders entitled to receive notice of,
and to vote at, the Special Meeting or any adjournment or postponement thereof.
A complete list of such stockholders will be available at GTI's headquarters,
100 River Ridge Drive, Norwood, MA 02062, for ten days before the Special
Meeting.
<PAGE>
YOUR VOTE IS IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING
THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED A
PROXY.
By Order of the Board of Directors,
/s/ Catherine L. Farrell
CATHERINE L. FARRELL
Vice President, General Counsel and
Secretary
Norwood, Massachusetts
April 5, 1996
STOCKHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO GTI
OR THE EXCHANGE AGENT FOR EXCHANGE IN THE RECAPITALIZATION PRIOR TO RECEIPT OF
INSTRUCTIONS THAT WILL BE SENT TO STOCKHOLDERS FOLLOWING THE SPECIAL MEETING.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION 3
INCORPORATION OF DOCUMENTS BY REFERENCE 3
SUMMARY 4
RISK FACTORS 11
GENERAL INFORMATION 13
Purpose of Special Meeting 13
Record Date; Voting Rights; Proxies 13
Solicitation of Proxies 14
Quorum 14
Required Vote 14
THE TRANSACTIONS 15
GTI's Strategic Planning 15
Background to the Transactions 16
GTI's Reasons for the Transactions; Recommendation of the Board of Directors 18
Opinion of Financial Advisor 19
Fluor's and FDESI's Reasons for the Transactions 23
Board of Directors and Officers 23
Conflicts of Interest 24
The Option Agreement 26
Certain Federal Income Tax Consequences 27
Certain Legal Matters 28
THE INVESTMENT AGREEMENT 29
General 29
The Recapitalization 29
The Merger 30
Treatment of Stock Options 31
Agreements of GTI Not to Solicit Other Offers 31
Certain Restrictions on Fluor and the Company following the Closing 32
Additional Covenants of the Parties 33
Representations and Warranties 35
Conditions to Consummation of the Merger 35
Termination 37
Termination Fee 37
Amendment; Waivers 37
Expenses 38
THE MARKETING AGREEMENT 38
THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 39
AMENDMENTS TO THE BY-LAWS 39
ELECTION OF DIRECTORS 40
AMENDMENTS TO STOCK PLANS 41
SHARE OWNERSHIP OF GTI MANAGEMENT AND PRINCIPAL HOLDERS 42
DESCRIPTION OF NEW COMMON STOCK 43
INFORMATION WITH RESPECT TO FDESI 44
FDESI Business 44
Selected Financial Data 47
Management's Discussion and Analysis of Financial Condition and Results of
Operations 47
Market Price; Dividends; Holders of Capital Stock 49
UNAUDITED PRO FORMA FINANCIAL INFORMATION 50
LEGAL MATTERS 54
EXPERTS 54
STOCKHOLDER PROPOSALS 54
INDEX TO FINANCIAL STATEMENTS F-1
ANNEX A: Investment Agreement by and among Fluor Daniel, Inc., Fluor Daniel
Environmental Services, Inc., Groundwater Technology, Inc. and GTI
Acquisition Corporation, dated as of December 11, 1995 (including
Exhibit A -- Form of Amended and Restated Certificate of
Incorporation, Exhibit B -- Form of Amended By-Laws; and Exhibit C --
Marketing Agreement) and Agreement of Amendment thereto dated as of
March 29, 1996 A-1
ANNEX B: Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated
March 27, 1996 B-1
</TABLE>
i
<PAGE>
PROXY STATEMENT/PROSPECTUS
GROUNDWATER TECHNOLOGY, INC.
100 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062
--------
PROXY STATEMENT/PROSPECTUS OF
GROUNDWATER TECHNOLOGY, INC.
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1996
--------
This Proxy Statement/Prospectus constitutes the Proxy Statement of
Groundwater Technology, Inc., a Delaware corporation ("GTI" or the "Company"),
and relates to the solicitation of proxies for use at the Special Meeting of
Stockholders of GTI (the "Special Meeting") scheduled to be held on Friday, May
10, 1996, at 9:30 a.m., local time, at the Courtyard Marriott, 300 River Ridge
Drive, Norwood, Massachusetts, and any adjournments or postponements thereof. At
the Special Meeting, GTI's stockholders will be asked to consider and vote upon
the approval of certain transactions (the "Transactions") contemplated by the
Investment Agreement dated as of December 11, 1995, as amended (the "Investment
Agreement") among GTI, Fluor Daniel, Inc., a California corporation ("Fluor"),
Fluor Daniel Environmental Services, Inc., a California corporation and
wholly-owned subsidiary of Fluor ("FDESI") and GTI Acquisition Corporation, a
newly created California corporation and wholly-owned subsidiary of GTI ("Merger
Subsidiary"), pursuant to which (i) the Restated Certificate of Incorporation of
GTI will be amended to effect the conversion (the "Recapitalization") of each
outstanding share (the "Shares") of GTI common stock, $.01 par value ("Common
Stock"), into a right to receive $8.62 in cash and .5274 of a share of newly
authorized common stock, $.001 par value ("New Common Stock"), and to amend
Article FIRST to change the Company's name to Fluor Daniel GTI, Inc., to Amend
Article THIRD to maximize the legally permissible purposes of the Company and to
delete Article SIXTH to eliminate the classified Board of Directors; (ii) Merger
Subsidiary will be merged with and into FDESI (the "Merger") with FDESI being
the surviving corporation and wholly-owned subsidiary of the Company; in the
Merger GTI will issue to Fluor 4,400,000 shares of New Common Stock in exchange
for Fluor's shares of FDESI common stock and its payment of $33.35 million in
cash; (iii) the Company's By-Laws will be amended pursuant to the Investment
Agreement; and (iv) those persons provided for in the Investment Agreement will
be elected to the Board of Directors. Approval of the Transactions shall also
constitute approval of the treatment and disposition of outstanding stock
options and rights under, and certain amendments to, GTI's existing employee and
director stock option plans and employee stock purchase plan in connection with
the Transactions.
Except for the $.001 par value per share, the rights, preferences,
privileges and restrictions of the New Common Stock are substantially identical
to those of the Common Stock. See "DESCRIPTION OF NEW COMMON STOCK."
This Proxy Statement/Prospectus also constitutes the Prospectus of GTI with
respect to (i) the shares of New Common Stock to be issued on conversion of the
Company's outstanding shares of Common Stock pursuant to the Recapitalization,
(ii) the 4,400,000 shares of New Common Stock to be issued to Fluor in the
Merger and (iii) the options for the purchase of shares of New Common Stock
issued in exchange for employee and director stock options outstanding prior to
the Transactions. GTI has filed a Registration Statement on Form S-4 (the
"Registration Statement"), of which this Proxy Statement is a part, with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), covering the shares of New Common
Stock to be issued pursuant to the Recapitalization and the Merger.
<PAGE>
On March 27, 1996, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), financial advisor to the Company, delivered its written opinion to the
Company's Board of Directors confirming its written opinion of December 11,
1995, to the effect that based upon and subject to the provisions set forth in
such opinion, the consideration to be received by the Company and its
stockholders pursuant to the Transactions, as a whole, is fair, from a financial
point of view, to the Company and its stockholders.
Consummation of the Transactions is subject to the receipt of approval from
the holders of Shares of GTI's Common Stock, as well as certain other
conditions, all of which are more fully described in this Proxy Statement/
Prospectus.
This Proxy Statement/Prospectus is first being mailed to GTI's stockholders
on or about April 5, 1996.
The Shares are currently traded on the Nasdaq National Market (the "NNM")
under the symbol "GWTI." The last reported sale price of the Shares on April 1,
1996 was $13.625. No shares of New Common Stock will have been issued prior to
the Recapitalization. The NNM has approved the listing, subject to notice of
issuance, of the New Common Stock which is to be issued pursuant to the
Recapitalization under the symbol "FDGT."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. UNDER THE RULES AND REGULATIONS OF THE COMMISSION, THE PROPOSAL
TO APPROVE THE TRANSACTIONS, INCLUDING THE RECAPITALIZATION, CONSTITUTES AN
OFFER OF NEW COMMON STOCK TO HOLDERS OF SHARES. THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION
OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED HEREBY OR A SOLICITATION OF A
PROXY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE OF ANY
SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GTI SINCE THE DATE AS OF WHICH
INFORMATION IS FURNISHED OR THE DATE HEREOF.
An investment in GTI's New Common Stock through approval of the Trans-
actions involves certain significant risks. See "RISK FACTORS."
THE NEW COMMON STOCK TO BE ISSUED PURSUANT TO THE TERMS OF INVESTMENT
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 5, 1996
2
<PAGE>
AVAILABLE INFORMATION
As permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement. For such information reference is made to the Registration Statement
and the annexes thereto. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Commission. The Registration Statement of which this Proxy
Statement/Prospectus forms a part, as well as reports, proxy statements and
other information filed by the Company, can be inspected and copied at the
Commission's Public Reference Room, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the public reference facilities maintained by the
Commission at its regional offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Commission at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Shares are listed on the Nasdaq National Market System and such reports, proxy
statements and other information concerning GTI should be available for
inspection at the offices of The Nasdaq National Market, Reports Section, 1735 K
Street, Washington, D.C. 20006.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT
CHARGE, UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS PROXY
STATEMENT/PROSPECTUS, FROM THE CORPORATE SECRETARY OF GROUNDWATER TECHNOLOGY,
INC., 100 RIVER RIDGE DRIVE, NORWOOD, MASSACHUSETTS 02062, (617) 769-7600. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
MAY 6, 1996.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
(a) Annual Report on Form 10-K for the year ended April 29, 1995;
(b) Proxy Statement for the Annual Meeting of Stockholders held on
September 19, 1995;
(c) Current Report on Form 8-K filed on July 26, 1995;
(d) Quarterly Report on Form 10-Q for the quarter ended July 29,
1995;
(e) Amendment No. 1 to Current Report on Form 8-K/A filed on August
1, 1995;
(f) Quarterly Report on Form 10-Q for the quarter ended October 28,
1995; and
(g) Quarterly Report on Form 10-Q for the quarter ended January 27,
1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting referred to herein shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing thereof. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Proxy Statement/Prospectus.
If the Transactions are consummated, the Company will continue to be required to
file periodic reports, proxy statements and other information with the
Commission pursuant to the Exchange Act.
3
<PAGE>
SUMMARY
The following is a brief summary of the more detailed information contained
in this Proxy Statement/Prospectus with respect to the Transactions discussed
herein. This Summary is not intended to be complete and is qualified in its
entirety by the more detailed information contained elsewhere in this Proxy
Statement/Prospectus, the Annexes hereto and other documents referred to in this
Proxy Statement/Prospectus. Terms used but not defined in this Summary have the
meanings ascribed to them elsewhere in this Proxy Statement/Prospectus. Cross
references in this Summary are to the captions of sections of this Proxy
Statement/Prospectus.
Stockholders are urged to read this Proxy Statement/Prospectus and the
Annexes hereto in their entirety.
THE COMPANIES
GTI and its subsidiaries provides a full range of environmental consulting,
engineering and remediation services to a variety of petroleum, commercial and
industrial customers and federal, state and local government agencies. The
Company was incorporated in Delaware in October 1975 and currently operates from
59 consulting offices throughout the United States and six foreign countries.
Also, the Company's joint venture with a German company has offices in six
additional locations in Germany, Austria and Hungary. The principal executive
offices of the Company are located at 100 River Ridge Drive, Norwood, MA 02062
and its telephone number is (617) 769-7600.
FDESI provides a full range of environmental consulting, engineering and
remediation services to commercial and industrial customers, and to federal,
state and local government agencies. FDESI is a wholly-owned subsidiary of
Fluor. Fluor is an indirect, wholly-owned subsidiary of Fluor Corporation, a
Delaware corporation, which is one of the largest publicly-owned engineering,
construction and diversified services firms in the United States. The shares of
Fluor Corporation are traded on The New York Stock Exchange. See "INFORMATION
WITH RESPECT TO FDESI." The principal executive offices of FDESI are located at
3333 Michelson Drive, Irvine, California 92730, and its telephone number is
(714) 975-2000.
THE MEETING
The Special Meeting will be held on Friday, May 10, 1996 at 9:30 a.m., local
time, at the Courtyard Marriott, 300 River Ridge Drive, Norwood, Massachusetts.
At the Special Meeting, GTI stockholders will be asked to consider and vote upon
the Transactions. Approval of the Transactions will constitute approval of the
Amended and Restated Certificate of Incorporation, the Amended By-Laws, the
issuance of shares of New Common Stock to Fluor in the Merger, the election of
the Board of Directors and the approval of the treatment and disposition of
outstanding stock options and rights under, and certain amendments to, GTI's
existing employee and director stock option plans and employee stock purchase
plan in connection with the Transactions. See "TRANSACTIONS AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION," "AMENDMENTS TO BY-LAWS," "THE INVESTMENT
AGREEMENT -- The Recapitalization" and "-- The Merger," "ELECTION OF DIRECTORS,"
"THE INVESTMENT AGREEMENT -- Treatment of Stock Options" and "AMENDMENTS TO
STOCK PLANS."
If the Transactions are approved and the Merger and Recapitalization are
consummated, each of GTI's stockholders (including stockholders who do not vote
or vote not to approve the transactions) will be entitled to receive for each of
their Shares: (i) $8.62 in cash, and (ii) .5274 of a share of New Common Stock
of the Company. In the Merger, the shares of common stock of FDESI held by Fluor
will be converted into the right to receive an aggregate of 4,400,000 shares of
New Common Stock of the Company, in exchange for which Fluor will pay
$33,350,000 and FDESI will become a wholly-owned subsidiary of GTI. After the
Merger and Recapitalization, Fluor will own approximately 55% and current GTI
holders will own approximately 45% of the Company. In addition, Fluor and GTI
will enter into a Marketing Agreement encompassing their arrangements to work
together to approach the environmental services market, for Fluor to use the
Company's services in connection with Fluor's engineering and construction
business and to provide, on an intercompany basis, support services to each
other. See "THE TRANSACTIONS -- The Marketing Agreement."
Approval of the Transactions by GTI's stockholders will constitute approval
of: (i) the Amended and Restated Certificate of Incorporation to effect the
conversion of the Shares into newly authorized shares of New Common Stock in the
Recapitalization, to change the Company's name, to maximize the legally
permissible purposes of the
4
<PAGE>
Company and to eliminate the classified Board of Directors; (ii) the amendments
to the Company's By-Laws; (iii) the issuance of 4,400,000 shares of New Common
Stock to Fluor in the Merger; (iv) the election of the Board of Directors and
(v) the approval of the treatment and disposition of outstanding stock options
and rights under, and certain amendments to, GTI's existing employee and
director stock option plans and employee stock purchase plan in connection with
the Transactions.
Only holders of shares of Common Stock of record at the close of business on
March 20, 1996 (the "Record Date") will be entitled to vote at the Special
Meeting. At such date, there were outstanding and entitled to vote 6,970,701
Shares. Stockholders have no dissenters' rights with respect to the
Transactions.
REQUIRED VOTE
Each holder of record of Shares on the Record Date is entitled to one vote
per Share on each matter to be considered at the Special Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the Shares entitled to vote at the Special Meeting is necessary to
constitute a quorum at the Special Meeting. The approval of the Transactions,
which shall constitute approval of the Amended and Restated Certificate of
Incorporation, the issuance of New Common Stock to Fluor in the Merger, the
amendments to the Company's By-Laws, the election of directors and the treatment
and disposition of outstanding stock options and rights under, and certain
amendments to, the Company's existing employee and director stock option plans
and employee stock purchase plan, will require the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
entitled to vote thereon.
As of the Record Date, directors and executive officers of GTI and their
affiliates owned beneficially an aggregate of 278,525 Shares (excluding shares
which may be received upon exercise of options or warrants) or approximately 4%
of the votes entitled to be cast on the proposal to approve the Transactions.
Each of the directors and executive officers has indicated to GTI individually
that all Shares owned by such person are intended to be voted for approval of
the Transactions.
CONFLICTS OF INTEREST
In connection with the Transactions, Walter C. Barber, current Chairman,
President and Chief Executive Officer of the Company and Allan S. Bufferd and
Robert P. Schechter, current independent directors of the Company will be
reelected to the Board of Directors of the Company. Pursuant to the terms of the
Investment Agreement, Fluor has agreed to vote its shares of New Common Stock
for the election of Messrs. Bufferd and Schechter until the annual meeting to be
held in 1998.
Pursuant to certain employment agreements with the Company which become
effective upon consummation of the Transactions, Mr. Barber and the Company's
executive officers, Wendell W. Lattz, Frank J. Gorry, J. Steven Paquette, Robert
E. Sliney, Jr., Glenn V. Batchelder, Catherine L. Farrell and Anne Nolan, will
be entitled to certain payments on termination of their employment and, with
respect to Mr. Barber, also upon termination of his service as a director, under
certain circumstances. In addition, upon the consummation of the Transactions,
certain restrictions on and forfeiture provisions relating to 20,000 shares of
Common Stock awarded by the Board on June 27, 1995 to Mr. Barber will be
terminated. See "THE TRANSACTIONS -- Conflicts of Interest."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of GTI has determined that the Transactions are fair
to and in the best interests of the Company and its stockholders and unanimously
recommends approval of the Transactions to the Company's stockholders. See "THE
TRANSACTIONS -- Background to the Transactions," "-- Reasons for the
Transactions," "-- Recommendation of the Board of Directors" and "-- Conflicts
of Interests."
5
<PAGE>
THE INVESTMENT AGREEMENT
Effective Time. The Recapitalization will become effective upon the
specified effective date of the Amended and Restated Certificate of
Incorporation filed with the Secretary of State of the State of Delaware. The
Merger will become effective (the "Effective Time") on the day that the
Certificate of Merger filed with the Secretary of State of California pursuant
to the California Corporations Code (the "California Code") is deemed effective.
It is currently expected that, if all conditions to the closing of the
Transactions set forth in the Investment Agreement have been met or waived, the
Amended and Restated Certificate of Incorporation, and immediately thereafter,
the Certificate of Merger, will be deemed effective and the closing of the
Transactions (the "Closing") will take place on May 10, 1996 or as soon
thereafter as practicable (the "Closing Date"). See "THE INVESTMENT AGREEMENT --
Conditions to Consummation of the Merger."
Conditions to Closing. The obligations of GTI to effect the Recapital-
ization and of GTI, the Merger Subsidiary, Fluor and FDESI to consummate the
Merger are subject to certain conditions, including, among others, the approval
of the Transactions by the stockholders of GTI in accordance with Delaware Law,
the execution and delivery of the Marketing Agreement by Fluor and GTI and the
absence of any injunction or other legal prohibition to consummation of the
Merger. See "THE INVESTMENT AGREEMENT -- Conditions to the Parties' Consummation
of the Merger."
"No Shop" Provisions. Pursuant to Section 5.4 of the Investment Agreement
(the "'No-Shop' Provisions"), GTI has also agreed that from December 11, 1995
until the earlier of the Closing or the termination of the Investment Agreement,
the Company and its subsidiaries will not take certain actions to solicit,
negotiate or agree to proposals of third parties (other than Fluor) to acquire
the Company, except where failure to do so could constitute a violation of the
fiduciary duties of the Board to the Company and its stockholders under Delaware
Law. See "THE INVESTMENT TO AGREEMENT -- Agreement of GTI Not to Solicit Other
Offers."
Termination. The Investment Agreement may be terminated at any time prior to
the Closing (notwithstanding any approval of the Transactions by the
stockholders of GTI): (i) by mutual written consent of GTI and Fluor; (ii) by
GTI or Fluor if the Closing has not occurred on or before May 31, 1996 (provided
that such failure is not caused by the terminating party's failure to fulfill
its obligations under the Investment Agreement); (iii) by GTI or Fluor if (a)
any law or regulation adopted or amended after December 11, 1995 makes
consummation of the Merger or effectiveness of the Option Agreement or Marketing
Agreement illegal or prohibited or (b) any final, nonappealable judgment,
injunction, order or decree enjoining consummation of such transactions has been
entered (provided that the terminating party has used all reasonable efforts to
remove such judgment, injunction, order or decree); (iv) by Fluor or by the
Company (so long as it complies with the "No-Shop" Provisions of the Investment
Agreement) if the Board modifies or withdraws its recommendation to GTI
stockholders to approve the Transactions or has recommended to GTI stockholders
an Acquisition Proposal (as defined in Section 5.4(b) of the Investment
Agreement); (v) by Fluor, so long as it is not in material breach under the
Investment Agreement, if a person or group other than Fluor or its affiliates
(a) has made an Acquisition Proposal and GTI shall have commenced discussion
with such person or group or (b) has become the beneficial owner of at least 20%
of the outstanding Shares; (vi)(a) by GTI or Fluor if GTI stockholders do not
approve the Transactions at the Special Meeting, or (b) by Fluor if such meeting
is not held prior to May 31, 1996; (vii) by GTI or Fluor if there is a breach by
the other party of any representation, warranty, covenant or agreement of the
other party which is incurable or has not been cured by May 31, 1996.
Termination Fee. The Investment Agreement provides that GTI will pay Fluor a
termination fee of $3 million, plus up to an additional $750,000 for fees and
disbursements actually incurred, upon the termination of the Investment
Agreement under the following circumstances: (i) upon termination pursuant to
the provisions described in clause (iv) under the heading "Termination" above;
(ii) upon termination pursuant to the provisions described in clauses (v) or
(vi)(a), provided that (a) an Acquisition Proposal is received prior to or
within 60 days after such termination and (b) an Acquisition Proposal involving
a business combination with GTI is entered into (or, in the case of a tender or
exchange offer, such offer commenced) within twelve months after such
termination; and (iii) upon termination pursuant to a breach by GTI described in
clause (vii) above if (a) prior to or within 60 days of such termination GTI has
entered discussions or negotiations or supplied information to, any third party
6
<PAGE>
making an Acquisition Proposal and (b) an agreement respecting an Acquisition
Proposal Transactions involving a business combination with GTI shall have been
entered into (or, in the case of a tender of exchange offer, such offer
commenced) within twelve months after such termination. See "THE INVESTMENT
AGREEMENT -- Termination Fee." The termination fee was required by Fluor as a
condition of its willingness to enter the Investment Agreement.
The Option Agreement. Simultaneously with the execution of the Investment
Agreement on December 11, 1995, GTI and Fluor entered into an Option Agreement
pursuant to which GTI sold to Fluor for a cash payment of $1,650,000 an option
(the "Option") to purchase up to 1,366,000 shares of Common Stock (or, if
exercised after the Closing under the Investment Agreement, New Common Stock) of
the Company at a per share exercise price of $17.00 per share, with the number
of shares and exercise price subject to adjustment pursuant to the terms of the
Option Agreement. The Option expires on December 11, 1998. See "THE TRANSACTIONS
- -- The Option Agreement."
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Upon the effective date of the Amended and Restated Certificate of
Incorporation, GTI's Restated Certificate of Incorporation will be amended to,
among other things, authorize 25,000,000 shares of New Common Stock, to effect
the Recapitalization, to eliminate the classified Board and to change the
Company's name to "Fluor Daniel GTI, Inc." Shares of New Common Stock will be
substantially identical to the Shares, except that shares of New Common Stock
will have a par value of $.001. See "AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION" and "DESCRIPTION OF NEW COMMON STOCK." The Board of Directors of
GTI has not assigned a specific value to the New Common Stock to be received by
stockholders in the Recapitalization.
AMENDMENTS TO BY-LAWS
In connection with the Transactions, the By-Laws of the Company are to be
amended with respect to various matters, including amendments to Article 2
(Meetings of Stockholders), Article 3 (Directors), Article 4 (Meetings of the
Board of Directors), Article 7 (Officers), Article 8 (Resignations, Removals and
Vacancies) and Article 15 (Amendments). See "AMENDMENTS TO BY-LAWS."
ELECTION OF DIRECTORS
The Investment Agreement provides for the election of seven directors to
serve on the Company's Board of Directors immediately following the Closing,
including GTI's current President and Chief Executive Officer, two of GTI's
current independent directors, three members of Fluor management and a third
independent director designated by Fluor. Until April 30, 1999, Fluor is
obligated to vote its shares of New Common Stock for the election of not more
than seven directors and in favor of not less than three independent directors.
In addition, until April 30, 1998, Fluor is obligated to vote its shares of New
Common Stock for the election of the two current independent directors
referenced above. See "ELECTION OF DIRECTORS," and "THE INVESTMENT AGREEMENT --
Certain Restrictions on Fluor and the Company following the Closing."
TREATMENT OF STOCK OPTIONS; AMENDMENTS TO STOCK PLANS
Pursuant to the terms of the Investment Agreement, promptly after the
Closing Date each stock option or other right outstanding under the Company's
1987 Stock Plan and 1995 Director Plan on the Closing Date will be canceled and
the holder thereof will receive, in exchange therefor, a substitute option (an
"Adjusted Option") to purchase a number of shares of New Common Stock equal to
the number of shares of Common Stock subject to such canceled option multiplied
by the Adjustment Fraction at a per share exercise price equal to the per share
exercise price of such canceled option divided by the Adjustment Fraction. Any
Adjusted Option will be subject to the same terms and conditions (other than
number of shares and exercise price) as the option for which it is exchanged,
including the terms relating to vesting (treating such Adjusted Options as if
they were granted at the same time as the options for which they were exchanged)
and the conditions relating to exercise. In order to implement the above
disposition of options, certain amendments will be required to GTI's 1987 Stock
Plan and 1995 Director Plan. The 1995 Director Plan will also be amended so that
employees of the Company's affiliates (which, following the Closing, would
include Fluor) will not be eligible to receive options under that plan. The 1986
Purchase Plan will be amended so that no adjustments to outstanding options will
be made in the Recapitalization. See "THE INVESTMENT AGREEMENT -- Treatment of
Stock Options" and "AMENDMENTS TO STOCK PLANS."
7
<PAGE>
OPINION OF FINANCIAL ADVISOR
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has acted as
financial advisor to GTI in connection with its consideration of the
Transactions. DLJ has provided to the Company's Board of Directors a written
opinion, dated March 27, 1996, confirming an earlier written opinion dated
December 11, 1995, to the effect that, as of the date thereof, based upon and
subject to the provisions set forth in such opinion, the consideration to be
received by the Company and its stockholders pursuant to the Transactions, as a
whole, is fair from a financial point of view to the Company and its
stockholders. THE FULL TEXT OF THE MARCH 27, 1996 OPINION OF DLJ IS SET FORTH IN
ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS AND SHOULD BE READ IN ITS ENTIRETY.
See "THE TRANSACTIONS -- Opinion of Financial Advisors."
MARKET PRICES
The Shares have been listed and traded on the NNM under the symbol "GWTI"
since July 24, 1986. The following table sets forth certain information as to
the reported high and low bid quotations as reported on the NNM of the Common
Stock for the calendar quarters set forth.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 13.25 $11.625 $15.00 $11.50 $16.25 $12.38
Second Quarter 13.625 11.75 13.25 11.50 13.75 11.00
Third Quarter 19.25 12.25 15.25 11.75 15.00 11.00
Fourth Quarter N/A N/A 15.50 12.00 15.75 12.75
</TABLE>
On November 30, 1995, the last full trading day prior to the announcement
that GTI and Fluor were engaged in discussions regarding an investment by Fluor
in exchange for a majority interest in the Company, the closing sale price per
share of Common Stock, as reported on the NNM was $14. On December 11, 1995, the
last full trading day prior to the announcement of the execution of the
Investment Agreement, the closing sale price per share of Common Stock, as
reported on the NNM was $14.75. On April 1, 1996, the last full trading day for
which quotations were available at the time of printing this Proxy
Statement/Prospectus, the closing sale price per share of Common Stock as
reported on the NNM was $13.625.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE SHARES.
As of the Record Date, there were 1,092 holders of record of Shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In general, GTI stockholders exchanging shares of Common Stock for shares of
New Common Stock in the Recapitalization will recognize capital gain equal to
the lesser of (i) the excess, if any, of the sum of the fair market value of the
New Common Stock plus the cash received over the tax basis of such stockholder's
Common Stock and (ii) the cash received. Stockholders generally will not
recognize any loss on the exchange. The tax basis of the New Common Stock
received in the Recapitalization generally will be the stockholder's basis in
the Common Stock decreased by the cash received and increased by the amount of
gain recognized. Stockholders will recognize gain or loss on cash payments in
lieu of a fractional share of New Common Stock equal to the difference, if any,
between such stockholder's adjusted basis in the fractional share and the amount
of cash received for that fractional share. See "THE TRANSACTIONS -- Certain
Federal Income Tax Consequences."
8
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth historical consolidated financial data for
GTI for each of its last five fiscal years as well as for the nine months ended
January 27, 1996 and January 28, 1995. The selected historical consolidated
financial data for GTI for the five year period shown below has been derived
from the audited consolidated financial statements of GTI. The five year and
nine month periods reflect restatements due to discontinued manufacturing and
laboratory operations. In the opinion of management, adjustments necessary to
present fairly the financial position and results of operations at January 27,
1996 and January 28, 1995 have been made. The historical data are not
necessarily indicative of results to be expected after consummation of the
Merger and should be read in conjunction with the consolidated financial
statements and notes thereto of GTI incorporated herein by reference.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------- -----------------
APRIL 27, MAY 2, MAY 1, APRIL 30, APRIL 29, JANUARY 28, JANUARY 27,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross revenue $147,369 $179,473 $161,120 $157,749 $178,280 $133,036 $128,881
Net revenue 98,644 123,258 108,145 98,349 109,197 52,963 79,604
Net income 6,998 10,428 6,689 2,607 5,437 3,597 2,360
Earnings per share 0.88 1.31 0.86 0.35 0.77 0.51 0.34
Total assets 108,301 124,205 121,108 112,926 120,745 115,134 119,634
Stockholders' equity $ 89,549 $100,976 $101,098 $ 93,650 $ 96,770 $ 95,626 $ 99,732
Shares used to compute earnings per
common share 7,980 7,931 7,779 7,458 7,050 7,085 7,042
</TABLE>
- --------
1 Gross revenue, net revenue, net income and earnings per share amounts for
fiscal 1991, 1992 and 1993 have been restated to exclude discontinued
manufacturing operations.
2 Gross revenue, net revenue, net income and earnings per share amounts for all
periods presented have been restated to exclude discontinued laboratory
operations.
3 Fiscal 1994 amounts include a first quarter restructuring and consolidation
charge of approximately $5,000,000 before the provision for taxes.
4 In August 1993, the Board of Directors authorized the Company to repurchase an
aggregate of 2,173,500 shares of its common stock periodically through open
market purchases or privately negotiated transactions.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table presents summary unaudited pro forma consolidated
financial information of the Company ("Fluor Daniel GTI, Inc." after the
Transactions) for the year ended April 29, 1995 and the nine months ended
January 27, 1996, giving pro forma effect to the (i) conversion of each share of
Common Stock outstanding at each period end into $8.62 in cash and .5274 of a
share of New Common Stock, (ii) the issuance and sale of 4,400,000 shares of New
Common Stock to Fluor in exchange for all outstanding shares of FDESI and $33.35
million in cash, (iii) the issuance and sale of the Option to Fluor for $1.65
million, (iv) certain costs incurred in connection with the Transactions, (v)
amortization of goodwill and (vi) discontinued laboratory operations. The Merger
has been accounted for as a reverse acquisition of GTI by FDESI. For additional
assumptions reflected in the following table, see "UNAUDITED PRO FORMA FINANCIAL
INFORMATION."
9
<PAGE>
The summary unaudited pro forma consolidated financial information does not
purport to represent what the Company's financial position or results of
operations actually would have been had the transactions described in the
preceding paragraph in fact occurred on such date, or to project the Company's
financial position or results of operations for any future date or period.
The summary unaudited pro forma consolidated financial information should be
read in conjunction with the 1995 financial statements of FDESI and the notes
thereto included in this Proxy Statement/Prospectus and the 1995 consolidated
financial statements of GTI and the notes thereto incorporated by reference into
this Proxy Statement/Prospectus. See "INCORPORATION OF DOCUMENTS BY REFERENCE"
and "UNAUDITED PRO FORMA FINANCIAL INFORMATION."
SUMMARY UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION OF
FLUOR DANIEL GTI, INC.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 29, 1995
-------------------------
GTI FDESI PRO FORMA
ACTUAL ACTUAL CONSOLIDATED
------ ------ ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues $178,280 $35,425 $213,705
Net income $ 5,437 $ 656 $ 5,002
Earnings per share $ 0.77 -- $ 0.62
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 27, 1996
----------------------------------
GTI FDESI PRO FORMA
ACTUAL ACTUAL CONSOLIDATED
------ ------ ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues $128,881 $26,319 $155,200
Net income $ 2,360 $ 489 $ 2,102
Earnings per share $ 0.34 -- $ 0.26
BALANCE SHEET DATA:
Total assets $119,634 $ 5,453 $104,072
Stockholders' equity $ 99,732 $ 4,559 $ 81,276
OTHER DATA:
Book value per share $ 14.32 -- $ 10.07
</TABLE>
DILUTION OF VOTING POWER
The following table sets forth the percentage of outstanding voting power of
nonaffiliated stockholders of the Company and affiliated stockholders of the
Company (a) on an actual basis as of March 20, 1996 and (b) on a pro forma
basis, giving effect to the Recapitalization and the issuance to Fluor of shares
of New Common Stock in the Merger, as if the Transactions had occurred on March
20, 1996. For purposes of the table "affiliated stockholders" include all
directors and executive officers of the Company and, in the case of the pro
forma calculation, Fluor.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING PERCENTAGE OF
VOTING POWER PRO FORMA
BEFORE OUTSTANDING
TRANSACTIONS VOTING POWER
------------ ------------
<S> <C> <C>
Nonaffiliated Stockholders 96.0% 43.7%
Affiliated Stockholders 4.0% 56.3%
</TABLE>
10
<PAGE>
RISK FACTORS
The following risk factors should be considered by stockholders in
considering whether to approve the Transactions. For periods following
consummation of the Transactions, references to the "Company" should be
considered to refer to GTI and its subsidiaries, including FDESI, unless the
context otherwise requires. These factors should be considered in combination
with the other information included and incorporated by reference in this Proxy
Statement/Prospectus.
UNCERTAINTY OF GOVERNMENT MARKET FOR ENVIRONMENTAL SERVICES. One of the
bases for the Company's affiliation with Fluor is the potential for growth of
the Company through further penetration into the market for environmental
services, particularly services for the federal government. The Company will
seek to achieve further penetration into government market in substantial part
through the Merger with FDESI whose primary federal clients are the United
States Department of Defense and the United States Environmental Protection
Agency. The size of the government market and the extent of that market's demand
for environmental services is subject to change based on, among other factors,
legislative and regulatory developments and budget and spending decisions of
governmental bodies. There can be no assurance that the demand for environmental
services in the government market will achieve or remain at levels that will
permit the Company to grow by penetration of such market, through the Merger or
otherwise, and any reduction in the size of the government market could have an
adverse effect on the Company's financial condition and operating results and
the market price of the Company's stock.
DIFFICULTY OF IMPLEMENTING MARKETING STRATEGY. Growth of the Company through
further penetration of the environmental services market, particularly services
for the federal government, is dependent upon the Company's ability to realize
the benefits of the relationship with Fluor contemplated by the Marketing
Agreement and the integration of FDESI with GTI. Substantial attention and a
high level of coordination from management of both the Company and Fluor will be
required to realize the anticipated benefits of the relationship. Further, the
attention and resources devoted by Fluor to the implementation and realization
of the potential benefits of the relationship are not within the control of the
Company, and there can be no assurance that Fluor will either devote the
necessary attention and resources to successfully implement the Marketing
Agreement or that it will perform its obligations under the Marketing Agreement.
The diversion of the attention of the Company's management from other aspects of
the Company's business, and any difficulties encountered in the implementation
process, could have an adverse impact on the revenues and operating results of
the Company. There can be no assurance that the anticipated benefits of the
relationship will be realized, or that the results of operations and financial
condition of the Company after becoming affiliated with Fluor will be superior
to what would have been achieved by GTI were the Transactions not consummated.
DETERRENCE OF POTENTIAL CUSTOMERS. The Company anticipates that its close
affiliation with Fluor could deter other large engineering and construction
firms that compete with Fluor from retaining the Company as a subcontractor or
teaming partner for projects requiring environmental services. There can be no
assurance that the results of operations and financial condition of the Company
after becoming affiliated with Fluor will be superior to what GTI would have
achieved absent such affiliation and its deterrent effect on potential
customers.
DEPENDENCE ON KEY PERSONNEL. The Company's success after the Transactions is
dependent on its ability to attract and retain qualified scientific, management,
marketing and other personnel, for which competition is intense. It is possible
that the changes brought about by the Transactions may cause key employees of
the Company and FDESI to leave the Company's employ, which could have an adverse
effect on the Company's business. In particular, the Company believes that the
loss of the services of one or more members of senior management could have a
material adverse effect on the Company's business and future operations. There
can be no assurance that the Company will be able to retain its current senior
management or other personnel or attract and retain other qualified personnel
necessary for operation and growth of its business.
REDUCTION IN CAPITAL RESOURCES. Of the approximately $60 million in cash
payments to be made to the Company's stockholders, the Company will contribute
approximately $27.5 in cash (with the remaining amount to come from Fluor). As a
result, the Company's available capital resources will be
11
<PAGE>
significantly reduced and the Company may be required to seek additional
financing to fund its business operations, capital expenditures and any
expansion of its business. The Company may seek to raise such additional capital
through short- or long-term debt financing or equity financing. There can be no
assurance that additional capital will be available on terms acceptable to the
Company and any such financings may result in dilution to existing stockholders
of the Company.
CONTROL BY FLUOR; POSSIBLE ANTI-TAKEOVER EFFECTS. Upon consummation of the
Transactions, Fluor will own approximately 55% of the outstanding New Common
Stock of the Company. As a result, Fluor will hold the voting power to approve
all matters requiring stockholder approval and, upon the termination or waiver
of certain provisions respecting the voting of Fluor's shares of New Common
Stock on April 30, 1999, Fluor will be able to elect the entire Board of
Directors of the Company. Consequently, Fluor will have significant influence
over the affairs of the Company, including major corporate transactions such as
change of control transactions. The effects of Fluor's voting power could
include the delay or prevention of the offer, negotiation or consummation of a
change of control transaction in which consideration would be paid to the
Company's other stockholders. See "DILUTION OF VOTING POWER."
REDUCTION IN PUBLIC FLOAT. As a result of the Transactions, the number of
shares of publicly traded stock of the Company owned by non-affiliates will be
substantially reduced. There can be no assurance that, given such reduction, a
trading market for the New Common Stock as active as that for the Common Stock
will develop or be sustained, or that the market price of the New Common Stock
will not decline below the market price of the Common Stock prior to the
Transactions.
DILUTION. The issuance of shares of New Common Stock to Fluor pursuant to
the Merger will have the effect of reducing the Company's income per share
unless and until revenue growth and other business synergies sufficient to
offset the effect of such issuance can be achieved. There can be no assurance
that any such revenue growth or other business synergies will be achieved. A
reduction in the Company's income per share could result in a decline in the
market price of the New Common Stock.
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GENERAL INFORMATION
This Proxy Statement/Prospectus is furnished to stockholders of GTI in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of GTI for use at the Special Meeting to be held at 9:30 a.m., local
time, on Friday, May 10, 1996 at the Courtyard Marriott, 300 River Ridge Drive,
Norwood, Massachusetts, and any adjournment or postponement thereof. This Proxy
Statement/Prospectus and the related form of Proxy are first being mailed to
stockholders of GTI on or about April 5, 1996.
PURPOSE OF SPECIAL MEETING
At the Special Meeting, the stockholders of GTI will be asked to consider
and vote upon the Transactions. Approval of the Transactions will constitute (i)
approval of the Amended and Restated Certificate of Incorporation, (ii) approval
of the issuance of shares of New Common Stock to Fluor in the Merger, (iii)
approval of amendments to the By-Laws, (iv) election of the nominees to the
Board of Directors and (v) approval of the treatment and disposition of stock
options under, and certain amendments to, GTI's existing employee and director
stock option plans and employee stock purchase plan. If the Transactions are
approved and consummated, the size of GTI's Board of Directors will be increased
from four to seven members, including GTI's current President and Chief
Executive Officer, two of GTI's current independent directors, three members of
Fluor management and a third independent director designated by Fluor.
Pursuant to the Investment Agreement, each issued and outstanding Share will
be converted into the right to receive $8.62 in cash and .5274 of a share of New
Common Stock, and immediately thereafter, Merger Subsidiary will be merged with
and into FDESI, with FDESI being the surviving corporation. In the Merger, Fluor
will make a cash payment of $33.35 million, the shares of common stock of FDESI
held by Fluor will be converted into the right to receive an aggregate of
4,400,000 shares of New Common Stock of GTI such that Fluor will own
approximately 55% of the equity of the Company outstanding following the Merger,
and FDESI will become a wholly-owned subsidiary of the Company. See "THE
INVESTMENT AGREEMENT -- The Recapitalization" and "-- The Merger." Subject to
the fulfillment or waiver of the conditions set forth in the Investment
Agreement, the Merger and Recapitalization are expected to become effective as
soon as practicable following approval of the Transactions by the Company's
stockholders.
The Special Meeting will also be held for the purpose of transacting such
other business, if any, as may properly come before the Special Meeting.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of GTI has fixed the close of business on March 20,
1996 as the Record Date for determining holders of outstanding Shares entitled
to notice of and to vote at the Special Meeting. Only holders of Shares of
record on the books of the Company at the close of business on the Record Date
will be entitled to notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. As of the Record Date there were
6,970,701 Shares issued and outstanding, each of which entitles the holder
thereof to one vote. All shares of Common Stock entitled to vote and represented
by properly executed proxies will, unless such proxies have been previously
revoked, be voted. If instructions are indicated on any such proxy, such shares
shall be voted in accordance with the instructions indicated in such proxies. IF
NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE VOTED (1) FOR APPROVAL OF THE
TRANSACTIONS, WHICH SHALL CONSTITUTE APPROVAL OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, THE ISSUANCE OF NEW COMMON STOCK TO FLUOR IN THE
MERGER, THE AMENDED BY-LAWS, THE ELECTION OF THE BOARD AND OF THE TREATMENT AND
DISPOSITION OF STOCK OPTIONS OUTSTANDING UNDER, AND AMENDMENTS TO, THE COMPA-
NY'S EXISTING EMPLOYEE AND DIRECTOR STOCK OPTION PLANS AND EMPLOYEE STOCK
PURCHASE PLAN IN CONNECTION WITH THE TRANSACTIONS AND (2) IN THE DISCRETION OF
THE PROXY HOLDER AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE
SPECIAL MEETING. GTI does not know of any matters, other than as described in
the Notice of Special Meeting, that are to come before the Special Meeting. If
any other matter or matters are properly presented for action at the Special
Meeting, the persons named in the enclosed form of proxy and acting thereunder
will have the discretion to vote
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on such matters in accordance with their best judgment, unless such
authorization is withheld. A stockholder who has given a proxy may revoke it at
any time prior to its exercise by giving written notice thereof to the Secretary
of the Company, by signing and returning a later dated proxy, or by voting in
person at the Special Meeting; however, mere attendance at the Special Meeting
will not itself have the effect of revoking the proxy. Under the Company's
Restated Certificate of Incorporation and By-laws, abstentions and "non-votes"
will have the same effect as a vote "against" the Transactions. A "non-vote"
will occur in the event that a nominee does not have discretionary voting power
and has not received voting instructions from the beneficial owner with respect
to the proposal to approve the Transactions.
SOLICITATION OF PROXIES
GTI will bear the cost of solicitation of proxies on behalf of the Board of
Directors. In addition to soliciting proxies by mail, directors, officers and
employees of GTI, without receiving additional compensation therefor, may
solicit proxies by telephone, by telegram or in person. Arrangements will also
be made with brokerage firms and other custodians, nominees and fiduciaries for
the forwarding of solicitation materials to the beneficial owners of Shares held
of record by such persons, and the Company will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. The Company has retained Morrow & Co.,
Inc., a proxy solicitation firm, to assist in the solicitation of proxies in
connection with the Special Meeting for a fee estimated at $5,000 plus
reimbursement of specified out-of-pocket expenses.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the outstanding Shares entitled to vote at the Special Meeting is
necessary to constitute a quorum at the Special Meeting.
REQUIRED VOTE
The approval of the Transactions, which shall constitute approval of the
Amended and Restated Certificate of Incorporation, the issuance of New Common
Stock to Fluor in the Merger, the amendments to the Company's ByLaws, the
election of directors and the treatment and disposition of outstanding options
and rights under, and amendments to, the Company's existing employee and
director stock option plans and employee stock purchase plan, will require the
affirmative vote of the holders of at least a majority of the outstanding Shares
entitled to vote thereon. With respect to the Transactions, each Share will be
entitled to one vote.
As of the Record Date, 278,525 Shares (representing approximately 4% of the
outstanding Shares) were beneficially owned by directors and executive officers
of the Company (excluding options and warrants to purchase Shares in the
future). Each of the directors and executive officers has indicated to the
Company individually that all Shares owned by such persons are intended to be
voted for approval of the Transactions.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF GTI. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
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THE TRANSACTIONS
In July 1995 Walter C. Barber, GTI's Chairman and Chief Executive Officer,
was approached by David L. Myers, President of Fluor's Environmental Services
Operating Company ("Fluor ESOC"), regarding a possible relationship between the
companies to jointly approach the environmental services market. Mr. Barber and
Mr. Myers, along with David Backus, Vice President -- Commercial of Fluor ESOC,
and John A. Rasile, Vice President -- Strategic Programs of Fluor ESOC, had met
in June 1995 to review GTI's and Fluor's joint proposals for specific work with
the government, and discussed each company's plans in the environmental services
marketplace. GTI had an interest in the possibility of working with a company
such as Fluor on a broader basis because the Company had previously made the
strategic decision to diversify more aggressively into the government and
industrial markets, and viewed a relationship with a large engineering and
construction firm as beneficial for that strategy. The companies entered into a
Confidentiality Agreement, and Fluor was provided with certain non-public
information. As described more fully below, the companies engaged in a series of
discussions and negotiations that resulted in the Investment Agreement being
approved by the Board of Directors on December 11, 1995.
GTI'S STRATEGIC PLANNING
In the late 1980s and through 1991, GTI experienced growing demand for its
environmental assessment and remediation services. The Company opened offices
across the United States and in several foreign countries to serve customers.
During that period of growth, the Company was largely dependent on customers in
the retail petroleum industry, which was required to take measures to test and
replace underground storage tanks and to remediate sites where leaks had
occurred. In 1990, the Company made the decision to diversify into the
government market in anticipation of the growing demand for remediation services
by the public sector. In response to subsequent fundamental changes in the
environmental remediation marketplace, particularly the substantial reduction in
demand for services by retail petroleum customers, the Company conducted a
review of its strategy in 1992.
As a result of its strategic planning, the Company decided to continue with
its core business of providing environmental services related to soil and
groundwater remediation, but to further diversify into government and industrial
markets so that its customer base would roughly equate with the proportions of
the total market for soil and groundwater remediation services being purchased
by those customers. The Company further decided to divest several of its
non-core businesses, namely drilling services and equipment sales and rentals.
The Company also determined to pursue teaming opportunities for specific
projects to strengthen its position in the government and international markets.
Between 1992 and 1995, GTI made significant progress implementing its
strategic plan. The Company sold its drilling operations and equipment
manufacturing business, and, after discussing a number of alternative teaming
arrangements, the Company sold its other non-core business, the analytical
laboratories, in December 1995. During this period the Company focused on
significantly shifting its business toward the government and industrial
markets, which it accomplished through a combination of internal growth and two
acquisitions. The Company also continued to pursue teaming arrangements for
specific projects in the government and international businesses.
By 1995 two other changes in the market had become apparent to the Company's
management. The government market had begun to indicate a preference for
awarding substantial work to single source providers rather than the prime
contractor/subcontractor relationships which prevailed between 1990 and 1994.
Although the Company's efforts to serve as a subcontractor to the larger
engineering and construction firms had been successful during the earlier
period, the Company believed that to participate substantially in the government
and industrial markets in the future, it would require substantial increases in
program management capabilities. In addition, customers in the industrial
markets were moving from the assessment phase of their environmental projects
into the remediation phase. In this next phase of the environmental projects,
substantial resources in engineering and construction capabilities would be
required. Given these changes, GTI decided to explore potential joint marketing
and other similar relationships on a project-by-project basis to access the
program management and engineering and construction capabilities of other
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firms, which are needed to support growth in business with government and
industrial customers. The proposed investment by and marketing agreement with
Fluor, the Company believes, provides an excellent opportunity to aggressively
pursue the government and industrial markets, and to better access the
international markets, as well.
BACKGROUND TO THE TRANSACTIONS
Mr. Barber and Mr. Myers, along with Mr. Backus and Mr. Rasile, met in June
1995 to review GTI's and Fluor's joint proposals for specific work with the
government, and discussed each company's plans in the environmental services
marketplace. In July 1995 Mr. Myers contacted Mr. Barber regarding the benefits
of the companies working together to approach the environmental services market.
GTI provided Fluor with certain limited non-public information, and in August
Mr. Barber, Mr. Myers and Mr. Rasile met again, at which time Fluor expressed an
interest in possibly acquiring a significant equity position in the Company, but
did not provide a proposal.
In September 1995 Fluor requested a meeting with GTI to present a proposal.
The Company engaged Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
to act as its financial advisor in connection with a possible transaction with
Fluor. At the meeting Fluor proposed acquiring a majority equity interest in GTI
in exchange for cash and the outstanding shares of FDESI, in a transaction that
would include a distribution of GTI's existing cash to its stockholders. Fluor
also proposed to purchase an option for 1,366,000 shares of the Company's Common
Stock. Mr. Myers, Mr. Rasile, Victor L. Prechtl, Vice President and Controller
of Fluor, and Raymond M. Bukaty, Senior Counsel of Fluor, and a representative
of Fluor's financial advisor presented the proposal to Mr. Barber, Robert E.
Sliney, Jr., Vice President and Chief Financial Officer, Glenn V. Batchelder,
Vice President of Sales and Marketing, Allan S. Bufferd, Director of GTI, and a
representative of DLJ. After the Fluor presentation, GTI conferred with DLJ and
determined that the financial aspects of the initial proposal were inadequate.
After DLJ and Fluor's financial advisor further discussed the proposal, Fluor
revised its proposal to GTI, which formed the basis for further discussions
between the companies.
Between October 26 and November 10, 1995, management of GTI and Fluor held a
series of intensive meetings to develop and validate a business plan for the
joint pursuit of environmental services business primarily with customers in the
government and industrial markets. Senior managers involved in various meetings
on behalf of GTI were Mr. Barber; Mr. Sliney; Mr. Batchelder; Frank J. Gorry,
Vice President and General Manager of the National Industrial Division; J.
Steven Paquette, Vice President, and President of Groundwater Technology
Government Services, Inc., a subsidiary of the Company; and Richard A. Brown,
Vice President of Remediation Technology. Senior managers involved in these
meeting on behalf of Fluor's Environmental Services Operating Company were Mr.
Myers; Mr. Rasile; Mr. Backus; Zenaido Quintana, Vice President -- Commercial
Sales and Marketing of Fluor ESOC; Rhonnie L. Smith, Vice President -- Federal
of Fluor ESOC; and Stan Kimmel, Vice President -- Technology of Fluor ESOC. The
companies prepared forecasts, developed a preliminary operating structure that
included Mr. Myers as Chairman, Mr. Barber as President and Chief Executive
Officer and Mr. Smith as Vice President and General Manager of Government
Operations, and reviewed integration issues related to human resources
(principally differences in benefits provided by GTI and FDESI), federal
government operations (principally organizational staffing of the combined
operations of GTI and FDESI) and marketing (principally differences between GTI
and Fluor in the ways the organizations market environmental services to their
respective customers). At the same time, the companies engaged in substantial
"due diligence" investigations and explored various legal and accounting issues
associated with alternative means of structuring the Transactions. Based upon
the perceived potential benefits of an investment by Fluor and the results of
initial meetings between management of the two companies, the Board concluded
that it was in the best interests of GTI's stockholders to continue to explore a
possible investment by Fluor and authorized the execution of a letter on
November 2, 1995 requested by Fluor that provided the Company would not solicit
any business combination or acquisition from a third party until December 31,
1995, but afforded the opportunity to other companies to make acquisition
proposals to GTI.
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Between November 14 and December 11, 1995, the companies conducted intensive
negotiations of the terms of Fluor's revised proposal, which negotiations
ultimately resulted in the Investment Agreement, the Option Agreement and the
Marketing Agreement. Negotiations focused upon the determination of a valuation
of FDESI, on Fluor's ownership percentage of the New Common Stock of the
Company, on corporate governance issues that would provide protections for the
minority stockholders of the Company for a period after the Transactions, and on
the payment for and exercise price of the Option. Other major issues were the
termination provisions, the fee and expense reimbursement provisions, and
indemnification by Fluor for certain matters covering FDESI. On December 1,
1995, GTI and Fluor each issued a press release which stated the parties were
engaged in discussions regarding a substantial investment by Fluor in exchange
for a majority interest in the Company, which would include a distribution of
cash to GTI's stockholders.
The negotiations involved, at various times, members of GTI's and Fluor's
respective management and the parties' legal and financial advisors. At the end
of negotiations, the parties agreed to a proposal that would result in Fluor
holding approximately 55% of the Company's outstanding New Common Stock after
the Recapitalization and Merger, and the holders of all of the Company's
outstanding Shares immediately prior to the Recapitalization and Merger would
hold approximately 45% of the Company's New Common Stock and would receive an
aggregate of approximately $60 million in the Recapitalization. At December 11,
1995, 6,962,196 Shares were outstanding. Accordingly, at December 11, 1995, an
aggregate of 4,400,000 shares of New Common Stock were to be issued to Fluor and
approximately 3,671,860 shares of New Common Stock were to be issued to the
holders of the Company's outstanding Shares, representing a ratio of .5274 of a
share of New Common Stock for each outstanding share of Common Stock,
immediately upon consummation of the Transactions.
In reviewing alternative structures to provide Fluor with majority interest
in the Company in a transaction that would involve distributing GTI's cash to
its stockholders as proposed by Fluor, the Board considered several factors.
Among the factors considered was the desire to simplify as much as possible the
transactions, given that Fluor offered a combination of cash and shares of FDESI
as consideration for the majority interest in GTI and given the desire of the
parties to distribute the Company's cash to its stockholders. In addition, the
Board considered it important to obtain more favorable capital gains treatment
instead of ordinary income treatment for the stockholders given that cash would
be distributed to the Company's stockholders. The Board also believed it was
desirable to treat all stockholders equally in the distribution of cash and in
providing an opportunity to continue to participate in the long-term prospects
of the Company following the transactions. To meet these objectives, the parties
agreed upon the Recapitalization and Merger.
The parties were also involved in intensive negotiations regarding issues of
corporate governance. The Board recognized that the Company's stockholders prior
to the Transactions would hold less than a majority of the New Common Stock
outstanding after the Transactions, and accordingly the Company negotiated for
provisions in the Investment Agreement that, until April 30, 1999, certain
transactions between the Company and Fluor, as well as the sale of New Common
Stock held by Fluor, be approved by a majority of independent Board members in
the exercise of their fiduciary responsibilities. See "THE INVESTMENT AGREEMENT
- -- Certain Restrictions on Fluor and the Company following the Closing."
On December 8, 1995, the Board of Directors convened to review the
Investment Agreement and related agreements. The Board of Directors had
previously convened formally on November 13 and 21, 1995 to discuss the status
of negotiations and to review terms of the Merger under negotiation and the
Recapitalization. At the December 8 meeting, DLJ made a presentation to the
Board with respect to its financial analysis of the proposed Transactions and
indicated that it was prepared to deliver an opinion as to the fairness, from a
financial point of view, of the consideration to be received by the Company and
its stockholders, pursuant to the Transactions, as a whole, subject to
satisfactory completion of the negotiation of definitive agreements for the
Transactions. The written opinion of DLJ was delivered to the Board of Directors
on December 11, 1995 and subsequently confirmed in writing as of March 27, 1996.
See "Opinion of Financial Advisor." A copy of the March 27, 1996 opinion of DLJ
is attached as Annex B and should be read in its entirety.
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The Board of Directors reconvened on December 11, 1995 and, based upon the
recommendation of management, the results of legal and accounting due diligence,
the written opinion of DLJ confirming its prior oral opinion, and the terms of
the Investment Agreement, approved the Investment Agreement, the Option
Agreement and the Recapitalization and determined to recommend that the
stockholders vote for the approval and adoption of the Investment Agreement and
the Recapitalization and Merger. The Investment Agreement and Option Agreement
were then executed by the parties on the evening of December 11, 1995, and GTI
and Fluor each announced the Transactions on the morning of December 12, 1995.
GTI'S REASONS FOR THE TRANSACTIONS; RECOMMENDATION OF THE BOARD OF DIRECTORS
By unanimous vote at the December 11 meeting, the Company's Board of
Directors approved the Investment Agreement and the transactions contemplated
thereby (including the Recapitalization and Merger) and the Option Agreement,
and determined that such transactions are fair to and in the best interests of
GTI and its stockholders. Each member of the Board of Directors has indicated
that he intends to vote all Shares that he owns in favor of the Transactions.
The Board of Directors unanimously recommends that stockholders vote for
approval of the Transactions.
The Board believes that the Transactions with Fluor provide a unique
opportunity for GTI and that it is consistent with the Company's strategy. See
"GTI'S STRATEGIC PLANNING."
First, the Board believes that the $8.62 in cash and .5274 of a share of New
Common Stock to be received by stockholders pursuant to the Recapitalization in
respect of each of their Shares, as negotiated by the parties, allows
stockholders to realize an immediate return on their investment in GTI at a fair
price. The Transactions represent an $8.62 per Share cash payout against an
approximately $13.11 per share 90-day average pre-December 1 announcement
trading price and permits stockholders to retain a substantial equity interest
in GTI in the form of the shares of New Common Stock. In this regard, the Board
views the Transactions as, in effect, a means for stockholders to sell
approximately 47% of their shares for cash at an effective price of
approximately $18.25 per share (calculated by dividing $8.62 to be paid per
Share by the .4726 of each Share to be relinquished in the Recapitalization) and
to retain (after taking into account the issuance of New Common Stock to Fluor)
ownership of 45% of the Company's outstanding capital stock. The Board also took
into account, however, that no assurances can be given that the value of the
equity interest in GTI retained by stockholders following the Transactions will
equal the consideration received by stockholders in respect of the portion of
their equity interest in GTI which is in effect sold by them in the Recapital-
ization, and also took into account that the voting power of GTI's existing
stockholders will, as a result of the acquisition of approximately 55% of the
equity of the Company by Fluor pursuant to the Merger, be substantially diluted
compared to that currently held by GTI's existing stockholders.
Second, the Board considers it important that the current stockholders will
have the opportunity to continue to participate in the long-term prospects of
the Company following the Transactions. As indicated below, the Board believes
that such prospects will be significantly enhanced as a result of the
affiliation with Fluor. Given the dilution in the voting power of GTI's existing
stockholders, the Board took into account that the corporate governance
provisions of the Investment Agreement which were designed to protect the
interests of minority stockholders following the Transactions. The Board was
aware that the reduced public float of the New Common Stock could also function
as a limit on the potential value of stockholders' continuing investment in GTI.
At the same time, the Board also took into account the corporate governance
provisions of the Investment Agreement that, subject to approval by the
independent members of the Board of Directors, restrict the ability of Fluor to
acquire the balance of the equity interest in the Company until April 30, 1999.
See "THE INVESTMENT AGREEMENT -- Restrictions on Fluor and the Company following
the Closing."
Third, the Board believes that the arrangements provided by the corporate
governance provisions of the Investment Agreement will help to alleviate
potential disruptions in the Company and the operation of its business due to
the new ownership structure. This will enable GTI's management to focus more
completely on realizing the potential benefits of the affiliation with Fluor,
and thus will serve the interests of its stockholders.
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Fourth, the affiliation of GTI with Fluor that will result from the
Marketing Agreement will provide access to Fluor's worldwide marketing,
engineering and construction, and program management resources, and thereby
better enable the Company to penetrate potential markets and, more generally, to
respond to the competitive challenges posed by current and anticipated
developments in the environmental services market. GTI will serve as the
preferred supplier for environmental assessment, permitting and remediation
services to Fluor and its affiliates worldwide. The Board recognized, however,
that there were no assurances provided in the Marketing Agreement. See "THE
MARKETING AGREEMENT."
The Board also considered the possibilities of other opportunities for a
strategic alliance that would serve the Company's strategic plan, using the
Company's cash and without incurring debt. The Board believes that using
substantial debt to finance growth is risky given the uncertainties of the
environmental services market. In its deliberations the Board also considered a
number of potential disadvantages which might result from the investment by
Fluor, including the increased management time required to create the synergies
anticipated between the two companies, the potential for fewer teaming
opportunities with other engineering and construction firms that compete with
Fluor, and risks involved in assignment of contracts from FDESI. After
discussions led by management, the Board concluded that these potential
disadvantages had been adequately addressed. Finally, the Board also considered
the opinion of DLJ that the consideration to be received by the Company and its
stockholders pursuant to the Transactions, as a whole, is fair from a financial
point of view to the Company and its stockholders. See "OPINION OF FINANCIAL
ADVISOR."
In view of the variety of factors considered by the Board in connection with
its evaluation of the Transactions, the Board did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination.
OPINION OF FINANCIAL ADVISOR
In its role as financial advisor to GTI, DLJ was asked by GTI to render an
opinion to the Board of Directors of GTI as to the fairness, from a financial
point of view, of the consideration to be received by the Company and its
stockholders, pursuant to the Transactions, as a whole. On December 11, 1995,
DLJ issued to the Board its written opinion subsequently confirmed in writing as
of March 27, 1996 (the "DLJ Opinion") that, based upon and subject to the
provisions set forth in such opinion, the consideration to be received by the
Company and its stockholders pursuant to the Transactions, as a whole, is fair
from a financial point of view to the Company and its stockholders. The DLJ
Opinion addresses fairness to the Company as well as the stockholders because
part of the consideration for the Transactions will be received directly by the
Company (namely, all of the shares of FDESI and the Marketing Agreement) with
the value being received indirectly by the stockholders in the form of their
equity interest in the newly constituted company, Fluor Daniel GTI, Inc.
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ, DATED MARCH 27, 1996, IS
ATTACHED HERETO AS ANNEX B. GTI STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION
CAREFULLY IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED, SCOPE AND
LIMITS OF THE REVIEW AND PROCEDURES FOLLOWED BY DLJ IN CONNECTION WITH SUCH
OPINION.
The Board of Directors selected DLJ as its financial advisor because it is a
nationally recognized investment banking firm and because the principals of DLJ
have substantial experience in the environmental services industry and are
familiar with GTI and its businesses. DLJ, as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, sales and distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
The DLJ Opinion does not constitute a recommendation to any stockholder as
to how such stockholder should vote at the Special Meeting nor does it
constitute an opinion as to the price at which the GTI Common Stock will
actually trade at any time. The Transactions were negotiated at arms-length by
GTI and Fluor, and DLJ did not, and was not requested by the Board to, make any
recommendation as to the form or amount of consideration to be paid by Fluor in
the Transactions. No restrictions or limitations were imposed by GTI upon DLJ
with respect to the investigations made or the procedures followed by DLJ in
rendering the DLJ Opinion. GTI did not authorize DLJ to solicit, and DLJ did not
solicit, any third party indications of interest in a purchase of, or business
combination with, GTI.
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In arriving at its opinion, DLJ reviewed the Investment Agreement, the
Option Agreement and the Marketing Agreement. DLJ also reviewed financial and
other information that was publicly available or furnished to it or on behalf of
GTI and Fluor, including information provided during discussions with their
respective managements, and (i) consolidated financial statements and other
information of GTI for the fiscal years 1993 through 1995 and for the interim
periods ending January 28 and January 27, respectively, for the fiscal years
1995 and 1996 and (ii) consolidated financial statements and other information
of FDESI for the year ended April 30, 1995 and the nine months ended January 31,
1996. Included in the information provided were certain financial projections
for GTI and GTI and FDESI combined for the years ended April 1997 to 2006
prepared by the managements of GTI and Fluor. In addition, DLJ examined the
impact of the Transactions on earnings per share of GTI taking into account,
among other things, the operating synergies expected to result from the
Transactions, as prepared by the respective managements of GTI and Fluor;
compared certain financial and securities data of GTI with selected companies
whose securities are traded in public markets; reviewed the historical stock
prices and trading volumes of GTI Common Stock; reviewed prices and premiums
paid in certain other selected business combinations; performed a discounted
cash flow analysis of GTI and valued the incremental contribution of the
Transactions to GTI. DLJ also reviewed with the managements of GTI and Fluor the
assumptions on which its analyses were based and other factors, including
historical and projected financial results of such companies. DLJ also conducted
such other financial studies, analyses and investigations as DLJ deemed
appropriate for purposes of rendering its opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was available to it from public sources,
and that was provided to it by the Company and Fluor, or their respective
representatives, or that was otherwise reviewed by it. With respect to the
financial projections supplied to DLJ, it assumed that they had been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the managements of the Company and Fluor as to the future operating
and financial performance of the Company following the Transactions. DLJ has not
assumed any responsibility for making any independent evaluation of the
Company's assets or liabilities or for making an independent verification of any
of the information reviewed by DLJ. DLJ has relied as to all legal matters on
advice of counsel to the Company.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect its opinions, DLJ does not have any
obligation to update, revise or reaffirm the DLJ Opinion.
The following is a summary of all material factors considered and principal
financial analyses performed by DLJ to arrive at the DLJ Opinion.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings, and operating and financial ratios for GTI to the corresponding
data and ratios of certain other companies whose securities are publicly traded,
which companies were selected for comparison because as a group they possess
business, operating and financial characteristics which are generally
representative of companies in the industry in which GTI and FDESI operate. The
selected companies were: Dames & Moore, Emcon, Harding Associates, ICF Kaiser
International, International Technology, Tetra Tech, TRC Companies and Roy F.
Weston. Such data and ratios included Enterprise Value (defined as the product
of the stock price and total shares outstanding plus Net Debt (debt and
preferred stock less cash and cash equivalents)) as a multiple of gross revenue,
earnings before interest, taxes and depreciation and amortization ("EBITDA") and
earnings before interest and taxes ("EBIT") for the latest reported twelve
months and the growth rates of each of such items for the three most recent
fiscal years and operating margins for the three most recent fiscal years. The
median multiple of Enterprise Value to gross revenue for the companies reviewed
was 0.35 times. A range of multiples of gross revenue of 0.33 to 0.38 times was
then applied to GTI's latest twelve months ended January 27, 1996 gross revenue
to arrive at an implied total Enterprise Value range for GTI of $57.5 to $66.2
million. The implied Enterprise Value for GTI was then adjusted for net cash of
$32.8 million by adding $32.8 million to the implied Enterprise Value at each
extreme of the range to yield an implied equity value range of $90.3 to $99.0
million. The median multiple of Enterprise Value to EBITDA for the
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companies reviewed was 5.5 times. A range of multiples of EBITDA of 5.0 to 6.0
times was then applied to GTI's latest twelve months ended January 27, 1996
EBITDA to arrive at an implied total Enterprise Value range for GTI of $59.5 to
$71.4 million. The implied Enterprise Value for GTI was then adjusted for net
cash of $32.8 million to yield an implied equity value range of $92.3 to $104.2
million. The median multiple of Enterprise Value to EBIT for the companies
reviewed was 8.2 times. A range of multiples of EBIT of 7.5 to 8.5 times was
then applied to GTI's latest twelve months ended January 27, 1996 EBIT to arrive
at an implied total Enterprise Value range for GTI of $42.0 to $47.6 million.
The implied Enterprise Value for GTI was then adjusted for net cash of $32.8
million to yield an implied equity value range of $74.8 to $80.4 million. In
addition, DLJ examined the ratios of current stock prices to latest twelve-month
net income and calendar year 1996 net income (as estimated by First Call Real
Time Earnings Estimates ("First Call")); and current stock prices to book value
for these companies and compared such ratios with those of GTI. The median
multiple of stock price to latest twelve months net income for the companies
reviewed was 13.1 times. A range of multiples of net income of 12.5 to 13.5
times was then applied to GTI's latest twelve months ended January 27, 1996 net
income to arrive at an implied equity value range for GTI of $52.5 to $56.7
million. The median multiple of stock price to estimated calendar 1996 net
income (as estimated by First Call) for the companies reviewed was 11.4 times. A
range of multiples of calendar 1996 net income of 11.0 to 12.0 times was then
applied to GTI's' estimated calendar 1996 net income to arrive at an implied
equity value range for GTI of $75.9 to $82.8 million. The median multiple of
stock price to book value for the companies reviewed was 0.8 times. A range of
multiples of Book Value of 0.7 to 0.9 times was then applied to GTI's' book
value to arrive at an implied equity value range for GTI of $69.8 to $89.7
million.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for
selected transactions completed since December 1993 involving the combination of
environmental consulting/engineering firms. The comparative transactions
reviewed (the "Comparative Transactions") included: (i) Tyco International/
Earth Technology; (ii) Tetra Tech/PRC Environmental; (iii) OHM Corpora-
tion/Rust International; (iv) Dames & Moore/Walk, Haydel; (v) Dames &
Moore/O'Brien-Krietzberg; (vi) Earth Technology/Hazwaste Industries; (vii)
Canonie Environmental/Riedel Environmental Services; (viii) Foster Wheeler/
Enserch Environmental; (ix) Earth Technology/Summit Environmental; (x) TRC
Companies/Environmental Solutions; and (xi) Heidemij N.V./Geraghty & Miller. The
Comparative Transactions selected are not intended to represent a complete list
of environmental consulting/engineering firm transactions which have occurred
during the last three years; rather they include only transactions involving
combinations of companies with operating size or financial performance
characteristics believed to be comparable to such characteristics of GTI. DLJ
reviewed the consideration paid in such transactions in terms of the Equity
Purchase Price (offer price per share multiplied by total common shares
outstanding) plus total debt less cash and cash equivalents ("Adjusted Purchase
Price") as a multiple of gross revenue, EBITDA and EBIT. The ratio of Adjusted
Purchase Price to gross revenue, computed for the Comparative Transactions had a
median multiple of 0.56 times. A range of multiples of gross revenue of 0.53 to
0.58 times was then applied to GTI's' latest twelve months ended January 27,
1996 gross revenue to arrive at an implied total Enterprise Value range for GTI
of $92.3 to $101.0 million. The implied Enterprise Value for GTI was then
adjusted for net cash of $32.8 million to yield an implied equity value range of
$125.1 to $133.8 million. The ratio of Adjusted Purchase Price to EBITDA,
computed for the Comparative Transactions had a median multiple of 7.7 times. A
range of multiples of EBITDA of 7.0 to 8.0 times was then applied to GTI's
latest twelve months ended January 27, 1996 EBITDA to arrive at an implied total
Enterprise Value range for GTI of $83.3 to $95.2 million. The implied Enterprise
Value for GTI was then adjusted for net cash of $32.8 million to yield an
implied equity value range of $116.1 to $128.0 million. The ratio of Adjusted
Purchase Price to EBIT, computed for the Comparative Transactions had a median
multiple of 11.8 times. A range of multiples of EBIT of 11.5 to 12.5 times was
then applied to GTI's' latest twelve months ended January 27, 1996 EBIT to
arrive at an implied total Enterprise Value range for GTI of $64.4 to $70.0
million. The implied Enterprise Value for GTI was then adjusted for net cash of
$32.8 million to yield an implied equity value range of $97.2 to $102.8 million.
DLJ also reviewed the consideration paid in such transactions in terms of
Equity Purchase Price as a multiple of the net income for the latest reported
twelve months prior to the announcement of such transaction. The median multiple
of Equity Purchase Price to latest twelve months net income for the
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companies reviewed was 15.3 times. A range of multiples of net income of 15.0 to
16.0 times was then applied to GTI's' latest twelve months ended January 27,
1996 net income to arrive at an implied equity value range for GTI of $63.0 to
$67.2 million.
DISCOUNTED CASH FLOW ANALYSIS. DLJ also performed a discounted cash flow
analysis of GTI. In conducting its analysis, DLJ relied on certain assumptions,
financial forecasts and other information provided by GTI management. Using the
information set forth in the GTI forecast, DLJ calculated the estimated "Free
Cash Flow" based on projected unleveraged operating income adjusted for: (i)
taxes; (ii) certain projected non-cash items (i.e., depreciation and
amortization); (iii) projected changes in non-cash working capital; and (iv)
projected capital expenditures. DLJ analyzed the GTI forecast and discounted the
stream of free cash flows from fiscal 1997 to fiscal 2006 provided in such
projections back to April 30, 1996 using discount rates ranging from 9% to 11%.
To estimate the residual value of GTI at the end of the forecast period, DLJ
applied terminal multiples of 4.5 times to 5.5 times to the projected fiscal
2006 EBITDA and discounted such value back to April 30, 1996 using discount
rates ranging from 9% to 11%. DLJ then summed the present value of the free cash
flows and the present value of the residual values to derive a range of implied
enterprise values for GTI of $83.7 million to $97.7 million. The range of
implied enterprise values of GTI was then adjusted for net cash and cash
equivalents of $32.8 million to yield an implied equity value range of GTI of
$116.5 million to $130.5 million (based on a terminal multiple midpoint of 5.0
times).
PRO FORMA TRANSACTION ANALYSIS. DLJ analyzed certain pro forma effects
resulting from the Transactions. DLJ reviewed, without independent verification,
the operating synergies contemplated to result from the merger by combining the
operations of GTI and FDESI as projected by the managements of GTI and Fluor.
DLJ analyzed the pro forma effect of such operating synergies on net income and
earnings per share for GTI. The analysis indicated that the pro forma earnings
per share of GTI, assuming the operating synergies contemplated to result from
the Transactions would be 28% higher in the fiscal year ending 1997 and 33%
higher in the fiscal year ending 1998 than comparable projections for GTI as a
stand-alone company during the same period. The results of the pro forma
combination analysis are not necessarily indicative of future operating results
or financial position.
INCREMENTAL CONTRIBUTION OF TRANSACTIONS TO GTI. DLJ also performed a
discounted cash flow analysis of the expected incremental contribution of the
Transactions to GTI. In conducting its analysis, DLJ relied on certain
assumptions, financial forecasts and other information provided by GTI and Fluor
management. Using the information set forth in the GTI and FDESI combined
forecast, DLJ calculated the estimated incremental "Free Cash Flow" expected to
be generated as a result of the Transactions based on projected unleveraged
operating income adjusted for: (i) taxes; (ii) certain projected non-cash items
(i.e., depreciation and amortization); (iii) projected changes in non-cash
working capital; and (iv) projected capital expenditures. DLJ analyzed the GTI
and FDESI combined forecast and discounted the stream of free cash flows from
fiscal 1997 to fiscal 2006 provided in such projections back to April 30, 1996
using discount rates ranging from 9% to 11%. To estimate the residual value of
the incremental contribution of the Transactions at the end of the forecast
period, DLJ applied terminal multiples of 4.5 times to 5.5 times to the
projected fiscal 2006 EBITDA and discounted such value back to April 30, 1996
using discount rates ranging from 9% to 11%. DLJ then summed the present value
of the free cash flows and the present value of the residual values to derive a
range of implied enterprise values for the incremental contribution of the
Transactions of $53.0 million to $66.8 million (based on a 5.0 times terminal
multiple). The range of implied enterprise values for the incremental
contribution of the Transactions was then adjusted for net cash and cash
equivalents of $7.8 million which would be remaining in the Company giving
effect to the recapitalization as of January 27, 1996 to yield an implied equity
value range of $60.8 to $74.6 million. Based on GTI's equity ownership of the
company after the Transactions of 45.5%, the value of the incremental
contribution of the Transactions to GTI was estimated at $27.7 to $34.0 million.
SUMMARY VALUATION. DLJ also prepared a summary valuation which compared the
value received by GTI as a result of the Transactions, with the value given to
Fluor. Value received, consisting of cash to be paid by Fluor for GTI Common
Stock and warrants on 1,366,000 additional shares (exercisable at $17 per
share), plus 45.5% of the incremental contribution of the Transactions, ranged
from $62.7 to $69.0 million. Value given to Fluor, consisting of 54.5% of the
GTI value range which was based on the GTI valuation analyses described above,
plus the estimated value of the Option, ranged from $59.0 million to $64.5
million.
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The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying the DLJ opinion. In performing its analyses,
DLJ made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated November 1, 1995, GTI
has agreed to pay DLJ a retainer fee of $50,000; a fee of $350,000 upon the
delivery of the DLJ Opinion; and an additional fee of $700,000 to be paid upon
consummation of the Transactions. GTI has also agreed to reimburse DLJ promptly
for all out-of-pocket expenses (including the reasonable fees and out-of-pocket
expenses of counsel) incurred by DLJ in connection with its engagement, and to
indemnify DLJ and certain related persons against certain liabilities in
connection with its engagement, including liabilities under the federal
securities laws.
In the ordinary course of business, DLJ actively trades the securities of
both GTI and Fluor for its own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
FLUOR AND FDESI'S REASONS FOR THE TRANSACTIONS
In reaching its determination to approve the Investment Agreement and the
Transactions, the Fluor Board of Directors (the "Fluor Board") and the Board of
Directors of its parent corporation, Fluor Corporation, considered a number of
factors, including, without limitation, the following: (i) a review of GTI,
including a presentation by Fluor management regarding its due diligence review
of GTI; (ii) a review of advice of management, financial and legal advisors
regarding the terms of the Investment Agreement and the Transactions; (iii)
Fluor's existing position in the environmental services industry and its desire
to strengthen and expand its presence in the industry; (iv) the quality,
diversity and experience of the personnel of GTI; and (v) GTI's experience in
the environmental services industry which would be complimentary to the needs of
Fluor, including GTI's extensive experience in remediation services utilizing a
wide spectrum of technologies.
The analysis included advice from Fluor's financial advisors concerning (i)
the historical results of GTI; (ii) the potential for growth in earnings of GTI
following the proposed Transactions; (iii) historical market prices and trading
volume of GTI Common Stock; (iv) comparable merger or acquisition transactions;
and (v) ranges of estimates of value of GTI based on various analyses. The Board
also considered the Transactions' prospective impact on Fluor Corporation's
earnings per share, as well as opportunities for cost savings. The Board also
focused on the revenue enhancements expected to result from the Transactions and
the respective contributions the parties would bring to the combined
corporation.
The Fluor Board did not assign any specific or relative weight to the
factors under its consideration. The Fluor Board determined that the
Transactions are in the best interests of Fluor and its sole stockholder and
therefore unanimously approved the Transactions. The Board of Directors of Fluor
Corporation also unanimously approved the Transactions. The Transactions are not
subject to the approval of the stockholder of Fluor, nor the stockholders of
Fluor Corporation.
BOARD OF DIRECTORS AND OFFICERS
Pursuant to the Investment Agreement, the directors of the Company
immediately upon the Closing shall consist of Walter C. Barber, current
Chairman, President and Chief Executive Officer of GTI; Allan S. Bufferd and
Robert P. Schechter, who are currently independent directors of GTI; David L.
Myers, J. Michal Conaway and James C. Stein, who are members of Fluor
management; and Ernie
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Green, an independent director designated by Fluor. See "ELECTION OF DIRECTORS."
In addition to its current officers, upon consummation of the Transactions,
three new Vice Presidents of GTI will be elected: Rhonnie Smith, John Wood and
Don Stokley, all currently members of FDESI management.
The Amended and Restated Certificate of Incorporation will eliminate the
current classified Board of Directors. After consummation of the Transactions,
all directors will be elected to serve until the next annual meeting of
stockholders or until their earlier resignation or removal. The Amended By-Laws
further provide that any vacancy in the Board of Directors may be filled only by
a majority vote of the directors then in office, with any such successor to hold
office for the unexpired term of his predecessor and until his successor is
elected or appointed, as the case may be, and qualified, or until he sooner
dies, resigns, is removed or becomes disqualified. See "AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION" and "AMENDMENTS TO BY-LAWS."
CONFLICTS OF INTEREST
Election of Directors. The Investment Agreement provides that Messrs.
Barber, Bufferd and Schechter shall be elected to the Company's Board of
Directors immediately upon the Closing. In addition, the Investment Agreement
provides that, until the annual meeting of stockholders of the Company to be
held in 1998, Fluor shall cause Messrs. Bufferd and Schechter to be nominated as
directors and will vote all of its shares of New Common Stock for those nominees
in any election of directors. See "THE INVESTMENT AGREEMENT -- Restrictions on
Fluor and the Company Following the Closing."
Employment Agreements. During the negotiation of the Investment Agreement,
the Board determined that the proposed Transactions posed significant personal
uncertainty to certain key employees who were important to either the
consummation and implementation of the Transactions, or the realization of the
anticipated benefits of the affiliation with Fluor and the conduct of the
Company's business after the Transactions, or both. For that reason, in December
1995 the Board authorized the Company to enter into employment agreements with
certain of its employees, including its executive officers, in order to insulate
them from the distractions and the personal uncertainties created by the
negotiation and potential execution of the Investment Agreement and the
implementation of the affiliation with Fluor thereafter so as to assure that the
stockholders and the Company would have the full benefit of the undivided
attention of these employees.
The Company entered into employment agreements with Mr. Barber, (the "Barber
Agreement") and the Company's executive officers: Wendell W. Lattz, Frank J.
Gorry, J. Steven Paquette, Robert E. Sliney, Jr., Glenn V. Batchelder, Catherine
L. Farrell and Anne Nolan (the "Executive Officer Agreements" and, collectively
with the Barber Agreement, the "Employment Agreements"), as well as other senior
employees of the Company.
Terms of Employment Agreements. The Employment Agreements provide that the
employee shall be employed with the Company for a designated period (the
"Employment Period") following the consummation of a Change of Control
Transaction (the "Effective Date"). A "Change of Control Transaction," is
defined as a single transaction or group of related transactions involving Fluor
resulting in the stockholders of the Company immediately prior to such
transaction holding less than 50% of the outstanding stock of the Company
immediately after such transaction. The Employment Period for the Barber
Agreement and the Executive Officer Agreements are three years and two years,
respectively. In general, the Employment Agreements specify that the employee is
to remain employed in a position having comparable responsibilities as that held
by the employee on the date of the relevant Employment Agreement at a salary no
lower than the salary payable to the employee on that date, except that the
Barber Agreement specifies that he be employed as the Chief Executive Officer
and as a member of the Board of Directors of the Company. The Executive Officer
Agreements state, however, that organizational changes resulting in
reassignments or changes in reporting relationships are to be expected and will
not by themselves result in a breach of Executive Officer Agreements.
The Executive Officer Agreements also provide that the Company will not
require the employee to relocate as a condition of continued employment except
where relocation is reasonably required by a customer in connection with
long-term work for such customer. The Employment Agreements also
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provide, however, that the employee consider in good faith any request by the
Company to relocate, and contain an acknowledgment by the employee that
employment may entail substantial travel, which travel shall not constitute a
breach of the Employment Agreement.
The Employment Agreements provide that if, during the Employment Period, the
employee intends to sell Company stock (either held by the employee or to be
acquired upon the exercise of stock options held by the employee), the employee
agrees to offer to Fluor (so long as Fluor owns at least 50% of the Company's
outstanding stock) the right to purchase the employee's stock, in the case of a
sale of stock, or the opportunity to pay the employee the difference between the
exercise price and the fair market value of the stock on the date of the
proposed exercise of the option in exchange for the employee's agreement not to
exercise, in the case of the intended sale of stock immediately upon exercise of
stock options.
The Employment Agreements terminate if the Effective Date does not occur
prior to June 30, 1996.
Benefits Payable Upon Termination. The Employment Agreements provide that
the Company may terminate the employee's employment prior to the end of the
Employment Period without cause upon thirty days' prior written notice. In the
event of a termination without cause, the employee will be entitled to the
greater of (i) salary at a rate equal to the employee's salary at the time of
termination for the duration of the Employment Period, plus continued payment by
the Company of its portion of all health benefits (so long as the employee
elects to continue benefits and continues to pay his or her share of the cost of
such benefits) or (ii) all amounts payable to the employee under the Company's
severance plan as in effect on the date of such termination. In addition, on the
date of such termination (x) all stock options held by the employee will
automatically become fully exerciseable in accordance with their terms and (y)
all restrictions on any stock granted by the Company to the employee, including
without limitation any repurchase or vesting provisions, will lapse and be of no
further force and effect. The employee is also entitled to the above
compensation in the event that the Company fails to correct its material breach
of the terms of the Employment Agreement within ten days following written
notification of such material breach by the employee.
Under the Employment Agreements the Company may terminate the employee's
employment prior to the end of the Employment Period for cause upon written
notice to the employee. The Employment Agreements define "for cause" to include
one or more of the following: (i) misappropriation by the employee of any money
or material amount of other assets or property (tangible or intangible) of the
Company; (ii) the employee's continuing, repeated and willful failure or refusal
to perform reasonable assignments given to employee which are commensurate with
such Employee's position or responsibilities; (iii) conviction of employee of a
felony; (iv) material breach by employee of any material Company policy or the
terms of any written agreement between employee and the Company. Upon a
termination for cause, the Company will pay to the employee salary and benefits
owed to employee as of the date of such termination.
If the Company's executive officers were terminated without cause im-
mediately following the anticipated Closing Date of May 10, 1996, the ap-
proximate value of the severance and other benefits (if the employee elects to
continue health benefits) to such officers would be as follows: Mr. Barber,
$825,692; Mr. Lattz, $322,503; Mr. Gorry, $311,636; Mr. Paquette, $303,127; Mr.
Sliney, $347,153; Mr. Batchelder, $287,537; Ms. Farrell, $241,700 and Ms. Nolan,
$249,398.
Restricted Stock Award. Under the terms of a Restricted Stock Award
Agreement between Mr. Barber and the Company in respect of 20,000 shares of
Common Stock, consummation of the Transactions will constitute a "change of
control" upon which all restrictions on the disposition of and all provisions
for forfeiture to the Company of such shares will lapse. Currently all of the
shares are subject to such restrictions.
Prohibition Against Additional Agreements; Acceleration. The Investment
Agreement provides that for the period from the date thereof to the Closing
Date, GTI will not and will not permit any of its subsidiaries to (i) enter into
any contract, agreement, plan or arrangement covering any director, officer or
employee of GTI or any of its subsidiaries that provides for the making of any
payments, the
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acceleration of vesting of any benefit or right or any other entitlement
contingent upon (A) consummation of the Transactions contemplated by the
Investment Agreement or the Option Agreement or any acquisition by Fluor of
securities of GTI (whether by merger, tender offer, private or market purchase
or otherwise) or (B) the termination of employment after the occurrence of any
such contingency if such payment, acceleration or entitlement would not have
been provided but for such contingency or (ii) amend any existing contract,
agreement, plan or arrangement to so provide. GTI also agrees in the Investment
Agreement not to take any steps to accelerate the vesting or exercisability of
any employee stock options or director stock options outstanding on the date
thereof, or otherwise modify the terms of such options, on or before the Closing
Date without the prior written consent of Fluor. See "THE INVESTMENT AGREEMENT
- -- Covenants of the Parties."
THE OPTION AGREEMENT
Simultaneously with the execution of the Investment Agreement on December
11, 1995, GTI and Fluor entered into an Option Agreement (the "Option
Agreement") pursuant to which GTI sold to Fluor for a cash payment of $1,650,000
an option to purchase up to 1,366,000 shares of Common Stock (or, if exercised
after the closing of the Transactions, New Common Stock) of the Company (the
"Base Shares") at a per share exercise price of $17.00 per share (the "Per Share
Price"), with both the Base Shares and the Per Share Price subject to adjustment
as described below (the Base Shares, as adjusted, are herein referred to as the
"Optioned Shares").
Exercise of the Option. The Option will become exerciseable after the first
to occur of (i) December 11, 1996 and (ii) Fluor being entitled to terminate the
Investment Agreement pursuant to the terms thereof. Once exerciseable, the
Option may be exercised in whole or in part prior to its expiration by delivery
by Fluor to the Company of a written notice (the "Notice") specifying the number
of Optioned Shares to be purchased and a place and date (the "Option Closing
Date") not later than 10 business days from the date of the Notice for the
closing of such purchase (the "Option Closing"), provided that if any approvals
are required under the HSR Act with respect to such exercise, the Option Closing
will be the later of (i) the Option Closing Date specified in the Notice and
(ii) the next business day following the date on which the applicable waiting
periods under the HSR Act shall have expired. The Option expires on December 11,
1998.
Adjustment to Base Shares and Per Share Price. In connection with the
Recapitalization (so long as the Option is not exercised in full prior to the
Closing of the Transactions), the aggregate number of shares purchasable upon
exercise of the Option will be adjusted by multiplying the Base Shares by the
Adjustment Fraction (as defined below). The Per Share Price will be adjusted by
dividing the Per Share Purchase Price by the Adjustment Fraction. The term
"Adjustment Fraction" means a fraction, the numerator of which equals the
Current Market Price of the Common Stock and the denominator of which equals the
Current Market Price of the New Common Stock. For purposes of the Option, the
"Current Market Price" means the average per share closing price for the five
trading days (i) immediately preceding the Closing of the Transactions, with
respect to the Common Stock, and (ii) immediately following the Closing of the
Transactions, with respect to the New Common Stock. The number of Optioned
Shares and the Per Share Price are also subject to adjustment upon any change in
the outstanding shares of Common Stock or New Common Stock by reason of any
stock dividend, stock split, recapitalization, combination, exchange of shares,
merger, consolidation, reorganization or any other change in the corporate or
capital structure of the Company (other than the Recapitalization) to maintain
without dilution the rights of Fluor under the Option.
Registration Rights. Under the Option Agreement, Fluor is entitled to
certain registration rights with respect to the Optioned Shares. At any time
within three years of any Option Closing, the Company is obligated (i) to effect
up to two registrations under the Securities Act (each a "Demand Registration")
of any or all of the Optioned Shares, one of which such registrations may, at
Fluor's request, so long as the Company satisfies the eligibility requirements
of Form S-3 under the Securities Act, be required to be made on a continuous
basis pursuant to Rule 415 under the Securities Act and (ii) at the written
request of Fluor delivered within ten (10) days after the Company delivers a
notice to Fluor of the Company's intent to file a registration statement for its
common stock, to include any or all of the Optioned Shares in such registration
(each an "Incidental Registration"). Fluor may not
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request a Demand Registration within 120 days following the effective date of a
registration statement filed by the Company in which the Optioned Shares were
entitled to join. In an Incidental Registration, upon the written opinion of the
managing underwriter that the requested distribution of Optioned Shares would
adversely effect the distribution of securities of the Company, the Company may,
at its option, either (x) require Fluor to agree to delay the offering and sale
of the Optioned Shares for a reasonable period as requested by the managing
underwriter or (y) include in the registration statement only such portion, if
any, of the Optioned Shares as the managing underwriter advises may be so
included. In addition, the Company is entitled to suspend any obligation to
register Optioned Shares for 90 days in any 12-month period if there exists
material non-public information about the Company which, in the reasonable
opinion of the Company, should not be disclosed. Under the Option Agreement,
each of Fluor and GTI agree to indemnify the other for all losses, claims,
damages, liabilities and expenses arising out of statements or omissions of the
other contained in any registration statement (and related prospectus).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the principal federal income tax
consequences of the Recapitalization to holders of Common Stock who are United
States persons within the meaning of Section 7701(a)(30) of the Internal Revenue
Code of 1986 (the "Code"), and is based upon the opinion of Testa, Hurwitz &
Thibeault, counsel to the Company. This discussion does not deal with all income
tax considerations that may be relevant to certain of these stockholders in
light of their particular circumstances, such as stockholders who are dealers in
securities, who do not hold both the Common Stock surrendered and the New Common
Stock received in the Recapitalization as capital assets within the meaning of
Section 1221 of the Code, who hold stock (directly or indirectly) in Fluor or
FDESI, or who acquired their Shares in connection with stock option or stock
purchase plans or in other compensatory transactions. The discussion also does
not address the federal income tax treatment of the Recapitalization to GTI
stockholders who are foreign persons. ACCORDINGLY, GTI STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
RECAPITALIZATION, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE RECAPITALIZATION TO THEM.
The Company will not recognize gain or loss as a result of the Merger or the
Recapitalization. The Recapitalization will constitute a "reorganization" under
Section 368(a)(1)(E) of the Code as well as a tax-free exchange of stock for
stock under Section 1036 of the Code. The tax consequences of the
Recapitalization to holders of Common Stock will be as follows.
Gain or Loss. Other than loss recognized, if any, upon the receipt of cash
in lieu of a fractional share of New Common Stock, a holder of Common Stock will
not recognize any loss upon the exchange of that stock for New Common Stock and
cash. However, a holder of Common Stock will recognize capital gain equal to the
lesser of (i) the excess, if any, of the sum of the fair market value of the New
Common Stock and the amount of cash received over the tax basis of the shares of
Common Stock surrendered by that holder in the Recapitalization and (ii) the
amount of cash received (other than cash received in lieu of a fractional share
of New Common Stock).
Basis and Holding Period. The tax basis of the New Common Stock received in
the Recapitalization (including a fractional share of New Common Stock deemed
received, as described below) will be the same as the tax basis of the Common
Stock exchanged, (i) decreased by the amount of cash received (other than cash
received for a fractional share of New Common Stock), and (ii) increased by the
amount of gain recognized on the receipt of New Common Stock and cash (other
than gain attributable to cash received in lieu of a fractional share of New
Common Stock). The holding period of the shares of New Common Stock received in
the Recapitalization will include the holding period of the shares of Common
Stock surrendered.
Fractional Shares. Cash payments in lieu of a fractional share of New Common
Stock will be treated as if that fractional share had been issued in the
Recapitalization and then redeemed by GTI. A holder of Common Stock receiving
such cash payment will recognize gain or loss equal to the
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difference, if any, between such holder's tax basis in the fractional share
(adjusted as described in the preceding paragraph) and the amount of cash
received for that fractional share. Such gain or loss will be long-term capital
gain or loss if the holding period of the Common Stock treated as exchanged for
the fractional share of New Common Stock was more than one year.
Backup Withholding. In order to avoid "backup withholding" of federal income
tax on payments of cash to GTI stockholders, unless an exception applies each
GTI stockholder must provide the payer of such cash with the stockholder's
correct taxpayer identification number ("TIN") on Form W-9 and certify under
penalties of perjury that such number is correct and that such stockholder is
not subject to backup withholding. If a stockholder fails to provide the correct
TIN or any certification necessary to establish that an exemption from backup
withholding is available, the cash received in the Recapitalization may be
subject to backup withholding at a 31% rate. A Form W-9 will be provided with
the instructions to be distributed by the Exchange Agent to GTI stockholders
after the Closing with respect to the conversion of shares of Common Stock into
shares of New Common Stock.
CERTAIN LEGAL MATTERS
Certain acquisition transactions such as those contemplated by the
Investment Agreement are reviewed by the Justice Department or the Federal Trade
Commission ("FTC") to determine whether they comply with applicable antitrust
laws. Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), the Transactions may not be consummated until
certain information has been furnished to the Justice Department and the FTC and
certain waiting period requirements of the HSR Act have been satisfied. Certain
information was filed with the Justice Department and the FTC under the HSR Act
by GTI and by Fluor in February 1996 and the waiting period was terminated on
March 14, 1996.
Regardless of the Company's compliance with the HSR Act, at any time before
or after the Closing, the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the Transactions or to cause the divestiture of substantial assets of
Fluor or GTI. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Closing on antitrust grounds will not be made or, if a challenge is made,
what the result will be. Consummation of the Transactions is conditioned upon,
among other things, the absence of any provisions of any applicable law or
regulation and any judgment, injunction, order or decree that will prohibit or
make illegal the consummation of the Transactions. The obligations of Fluor to
consummate the Merger are also conditioned upon, among other things, the absence
of any judgment, decree or order of any court or governmental authority of
competent jurisdiction prohibiting Fluor at any time after the Effective Time
from exercising all material rights and privileges pertaining to its ownership
of shares of stock of GTI to be acquired pursuant to the Option Agreement and
the Investment Agreement. See "THE INVESTMENT AGREEMENT -- Conditions to the
Parties' Consummation of the Merger."
Except as disclosed herein, GTI and Fluor are not aware of any federal,
state or foreign governmental or regulatory approval that is required in order
to consummate the Merger or the Transactions. Should any such approval be
required, it is currently contemplated that such approval would be sought.
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THE INVESTMENT AGREEMENT
GENERAL
THE FOLLOWING DESCRIPTION OF THE INVESTMENT AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INVESTMENT
AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS
ANNEX A AND INCORPORATED HEREIN BY REFERENCE. ALL STOCKHOLDERS ARE URGED TO READ
THE INVESTMENT AGREEMENT IN ITS ENTIRETY.
THE RECAPITALIZATION
Pursuant to the Investment Agreement, and subject to the approval of the
Transactions by GTI's stockholders and the filing and effectiveness of the
Amended and Restated Certificate of Incorporation with the Secretary of State of
Delaware, each share of Common Stock issued and outstanding immediately prior to
the Closing will be converted into the right to receive consideration per share
(the "Recapitalization Consideration") of (i) .5274 of a share of New Common
Stock (the "Recapitalization Shares") and (ii) $8.62 in cash, without interest
(the "Recapitalization Payment"). No fraction of a share of New Common Stock
will be issued. Any stockholder otherwise entitled to a fraction of a share
(after aggregating all fractional shares of New Common Stock to be received by
such stockholder) will be entitled to receive in lieu thereof an amount of cash
equal to the product of (x) the fraction multiplied by (y) the average closing
price of the New Common Stock as reported on the NNM for the five days
immediately following the Closing.
Exchange of Shares. As soon as practicable after the Closing, the Company's
exchange agent, State Street Bank and Trust Company (the "Exchange Agent"), will
send a notice and transmittal form (a "Transmittal Letter") to each holder of
record of Common Stock immediately prior to the Closing Date advising such
holder of the effectiveness of the Recapitalization and the procedure for
surrendering the certificate(s) for Common Stock to be exchanged for the
Recapitalization Consideration. Upon surrender of the certificate(s), together
with a properly completed and duly executed Transmittal Letter and such other
documents as may be required pursuant thereto, the holder will be paid promptly
the Recapitalization Consideration (less any required withholding of taxes) for
the Shares represented by such certificate(s) and the certificate(s) shall be
canceled. Until so surrendered and exchanged, each certificate representing
shares of Common Stock shall represent solely the right to receive the
Recapitalization Consideration with respect to such Shares. If the
Recapitalization Consideration is to be paid to any person other than the person
whose name is on the certificate(s) surrendered, it shall be a condition to such
exchange that the person requesting such exchange will pay to the Exchange Agent
any transfer or other taxes or establish to the satisfaction of the Exchange
Agent that such taxes have been paid or are not applicable.
Payment Fund. Prior to the Closing Date GTI, Fluor and the Exchange Agent
will enter into a Payment Agreement (the "Payment Agreement") whereby Fluor will
deposit with the Exchange Agent immediately prior to the filing of the Amended
and Restated Certificate of Incorporation in trust for the benefit of GTI
stockholders cash in the amount of $33,350,000 (the "Fluor Deposit") and GTI
will deposit with the Exchange Agent (the "Company Deposit") cash in an amount
determined by subtracting the Fluor Deposit from the product obtained by
multiplying (i) the number of shares of Common Stock outstanding immediately
prior to the Closing Date by (ii) $8.62. The Fluor Deposit and the Company
Deposit are collectively referred to as the "Payment Fund." The Payment
Agreement will provide, among other things, that (a) the Exchange Agent will
maintain the Payment Fund as a separate fund to be held for the benefit of
holders of Common Stock; (b) the Payment Fund will not be used for any purpose
not provided for in the Investment Agreement; (c) the Exchange Agent may invest
the cash portions of the Payment Fund, upon direction of the Company, in
obligations of the United States government or any agency or instrumentality
thereof, or obligations that are guaranteed or insured thereby; (d) any net
profit resulting from such investments will be payable to the Company on demand;
(e) to any holder of Common Stock who validly delivers at least 100,000 shares
of Common Stock, the Exchange Agent will make payment of the Recapitalization
Payment by wire transfer within one business day of the date of such delivery
and of the Recapitalization Shares by overnight courier on the
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next business day, (f) all expenses of the Exchange Agent will be paid directly
by the Company; and (g) any portion of the Recapitalization Consideration that
has not been paid to former holders of the Common Stock within six months after
the Closing Date will be delivered to the Company, and any former holders of
shares of Common Stock will thereafter look only to the Company for payment of
Recapitalization Consideration with respect to such shares, and the Exchange
Agent's duties will terminate. Thereafter, each holder of a certificate
representing shares of Common Stock may surrender such certificate to the
Company and (subject to applicable abandoned property, escheat and similar laws)
receive in exchange therefor the Recapitalization Consideration payable in
respect thereof, without interest, but will have no greater rights against the
Company than may be accorded to general creditors of the Company under Delaware
Law.
THE MERGER
The Investment Agreement provides that, subject to the approval of the
Transactions by GTI's stockholders, the satisfaction or waiver of the other
conditions to the Merger, and the filing by the parties of an agreement of
merger or other appropriate documents (the "Agreement of Merger"), and the
effectiveness thereof, Merger Subsidiary will be merged with and into FDESI in
accordance with the California Law, whereupon the separate existence of Merger
Subsidiary will cease and FDESI, the surviving corporation (the "Surviving
Corporation"), will be wholly-owned by the Company.
The Merger will become effective at such time as the Agreement of Merger is
duly filed with the Secretary of State of California or at such later time as is
specified in the Agreement of Merger (the "Effective Time"). It is currently
anticipated that the filing of the Agreement of Merger will be made as soon as
practicable after all conditions contemplated by the Investment Agreement have
been satisfied or waived, currently anticipated to be May 10, 1996, and that the
Effective Time specified in the Agreement of Merger will be May 10, 1996, or as
soon thereafter as practicable. See "THE TRANSACTIONS -- Certain Legal Matters"
and "THE INVESTMENT AGREEMENT -- Conditions to the Parties' Consummation of the
Merger."
Effect of the Merger. At the Effective Time by virtue of the Merger and
without any further action on the part of GTI and Fluor, the sole stockholders
of Merger Subsidiary and FDESI, respectively:
(i) The Surviving Corporation will be obligated to irrevocably authorize
the Exchange Agent to allow the $33,350,000 Fluor Deposit to be held on
behalf of GTI for the benefit of GTI's stockholders in accordance with the
terms of the Payment Agreement;
(ii) Each share of issued and outstanding common stock, no par value, of
Merger Subsidiary will be converted into and become one fully-paid and
nonassessable share of common stock, no par value, of the Surviving
Corporation;
(iii) Each of the 1,000 issued and outstanding shares of common stock, no
par value, of FDESI (the "FDESI Shares") will be converted into the right to
receive 4,400 shares of New Common Stock (the "Merger Consideration"), and
the FDESI shares will no longer be outstanding and will automatically be
canceled and retired and will ease to exist, and Fluor, the holder of the
FDESI Shares, will cease to have any rights with respect thereto, except the
right to receive the Merger Consideration;
(iv) The Articles of Incorporation and By-Laws of FDESI at the Effective
Time will be the Articles of Incorporation and By-Laws of the Surviving
Corporation; and
(v) The directors and officers of FDESI at the Effective Time will be the
directors and officers of the Surviving Corporation until the earlier of
their resignation or removal or until their successors are duly elected or
appointed and qualified.
The Surviving Corporation will possess all of the rights, privileges, powers
and be subject to the restrictions, disabilities and duties of each of FDESI and
Merger Subsidiary.
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TREATMENT OF STOCK OPTIONS
Pursuant to the terms of the Investment Agreement, promptly after the
Closing Date each outstanding option under the Company's Amended and Restated
1987 Stock Plan (the "1987 Stock Plan") and 1995 Director Stock Option Plan (the
"1995 Director Plan") shall be canceled and the holder thereof shall receive, in
exchange therefor, a substitute option (an "Adjusted Option") to purchase a
number of shares of New Common Stock equal to the number of shares of Common
Stock subject to such canceled option multiplied by the Adjustment Fraction at a
per share exercise price equal to the per share exercise price of such canceled
option divided by the Adjustment Fraction. Any Adjusted Option shall be subject
to the same terms and conditions (other than number of shares and exercise
price) as the option for which it is exchanged, including the terms relating to
vesting (treating such Adjusted Options as if they were granted at the same time
as the options for which they were exchanged) and the conditions relating to
exercise.
For purposes of the Investment Agreement, "Adjustment Fraction" means a
fraction, the numerator of which equals the Current Market Price of a share of
Common Stock and the denominator of which equals the Current Market Price of a
share of New Common Stock. The "Current Market Price" of a share of Common Stock
or a share of New Common Stock means the average per share closing price for the
five trading days immediately preceding the Closing Date, in the case of the
Common Stock , and the five trading days immediately following the Closing Date,
in the case of the New Common Stock, as reported on the NNM.
AGREEMENT OF GTI NOT TO SOLICIT OTHER OFFERS
Pursuant to Section 5.4 of the Investment Agreement (the "'No-Shop'
Provisions"), GTI has agreed that from December 11, 1995 until the earlier of
the Closing or the termination of the Investment Agreement, GTI and its
subsidiaries will not take, (nor authorize or permit their officers, directors,
employees representatives, investment bankers, attorneys, accountants or other
agents to take), any action to (i) encourage, solicit or initiate the submission
of any Acquisition Proposal (as defined below), (ii) enter into any agreement
with respect to or propose any Acquisition Proposal or (iii) participate in any
way in any discussions or negotiations with, or furnish any information to, any
person or entity (other than Fluor or its officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates of Fluor) in connection with, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal; provided, however, that (x)
GTI may participate in discussions or negotiations (including as a part thereof
making any counter proposal) with or furnish information to any third party
pursuant to a customary confidentiality agreement (so long as GTI has complied
with the prohibitions of clause (i) above) if (A) a majority of the Board
determines in good faith, after receipt of written advice of outside counsel,
that the failure to provide such information or participate in such discussions
or negotiations would be more likely than not to cause the members of the Board
to be in breach of their fiduciary duties under Delaware Law and (B) a majority
of the Board, after consultation with GTI's independent financial advisors,
determines in good faith that there is a reasonable possibility that such third
party will submit to GTI an Acquisition Proposal which is a Superior Proposal
(as defined below); (y) if a majority of the Board determines in good faith,
after receipt of written advice of outside counsel, that the failure to
recommend to GTI's stockholders an Acquisition Proposal which is a Superior
Proposal would cause the members of the Board to be in breach of their fiduciary
duties under Delaware Law, GTI may withdraw its recommendation of the
Transactions to the stockholders and recommend to GTI's stockholders such an
Acquisition Proposal which is a Superior Proposal; and (z) after termination of
the Investment Agreement, GTI may enter into an agreement with any third party
with respect to any Acquisition Proposal which is a Superior Proposal; provided,
further, however, that GTI will not take any action described in clause (x), (y)
or (z) above except after prompt notice to Fluor of its receipt of any
Acquisition Proposal or of any inquiry or request for information contemplating
an Acquisition Proposal.
For purposes of the Investment Agreement, "Acquisition Proposal" means any
bona fide proposal made by a third party to acquire (A) beneficial ownership (as
defined under Rule 13(d) of the Exchange Act) of a majority equity interest in
GTI pursuant to a merger, consolidation or other business
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combination, sale of shares of capital stock, tender offer or exchange offer or
similar transactions involving GTI including, without limitation, any single or
multi-step transaction or series of related transactions which is structured in
good faith to permit such third party to acquire beneficial ownership of a
majority or greater equity interest in GTI or (B) all or substantially all of
the business or assets of GTI (other than the transactions contemplated by the
Investment Agreement and the Option Agreement).
For purposes of the Investment Agreement the term "Superior Proposal" means
any bona fide Acquisition Proposal which a majority of the members of the Board
of Directors determines in their good faith judgment (based on the written
advice of independent financial advisors) to be more favorable to the Company
and its stockholders than the Transactions, taken as a whole, and for which
financing is then committed or which, in the good faith judgment of a majority
of the Board (based on the written advice of independent financial advisors) is
capable of being financed by such third party.
GTI is obligated to promptly notify Fluor of its receipt of any Acquisition
Proposal or of any inquiry or request for information contemplating an
Acquisition Proposal. GTI will keep Fluor informed, on a current basis, of the
status of any such proposal, negotiations or discussions except to the extent
that a majority of the Board of Directors determines in good faith, after
receipt of written advice of outside counsel, that the provision of such
information to Fluor would be more likely than not to cause the members of the
Board to be in breach of their fiduciary duties under Delaware Law.
CERTAIN RESTRICTIONS ON FLUOR AND THE COMPANY FOLLOWING THE CLOSING
The Investment Agreement sets forth restrictions on Fluor in connection with
certain transactions between Fluor and the Company, and in connection with the
acquisition, disposition and voting of its shares of New Common Stock following
the Closing.
Material Contracts. From the Closing Date until April 30, 1999, neither
Fluor nor its affiliates will be permitted to enter into any contract, agreement
or transaction with the Company or any of its affiliates that is material to the
Company's business as a whole without the prior approval of a majority of the
Independent Directors (as defined below), other than any contract, agreement or
transaction (a) contemplated by the Marketing Agreement or the Option Agreement,
(b) entered into between the parties in the ordinary course of business or (c)
governed by the other restrictive provisions described below in this section
"Certain Restrictions on Fluor and the Company Following the Closing."
Acquisition of Securities. Until April 30, 1999, neither Fluor not its
affiliates will be permitted to purchase or otherwise acquire any New Common
Stock, securities of the Company convertible into or exchangeable for New Common
Stock or options, rights, warrants and similar securities issued by the Company
to acquire New Common Stock, without the prior approval of a majority of the
Independent Directors, unless immediately after such purchase or acquisition,
the percentage of then outstanding New Common Stock that would be owned of
record or beneficially by Fluor and its affiliates ("Fluor's Percentage") would
not exceed 65%.
The foregoing restrictions on purchases will not apply to the exercise by
Fluor of the Option, but if the Option is exercised by Fluor, the Option Shares
held by Fluor will be counted in any determination of Fluor's Percentage with
respect to any purchases by Fluor or its affiliates after the date of such
exercise.
Transfer of Securities. Until April 30, 1999, Fluor will not be permitted to
sell, transfer, mortgage or otherwise dispose of any shares of New Common Stock
held by it without the prior approval of a majority of the Independent
Directors. The prior approval of the Independent Directors will not be required,
however, if there occurs a substantial and extreme adverse change in the
business, prospects, or condition (financial or otherwise) of the Company that
arises from corresponding substantial adverse changes of expected long term
duration in the market for environmental services.
Board of Directors; Voting. Until April 30, 1999, Fluor will be required to
vote all shares of New Common Stock owned by it in favor of fixing the size of
the Board of Directors of the Company at not more than seven and in favor of not
less than three Independent Directors. Until the annual
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stockholders' meeting of the Company (or written consent in lieu thereof) held
in 1998, Fluor is required to vote all shares of New Common Stock owned by it in
favor of Allan S. Bufferd and Robert P. Schechter (whom Fluor will also cause to
be nominated) in any election of members of the Company's Board of Directors.
In addition, after the Closing Date and until April 30, 1999, the Company is
prohibited from taking the actions described below.
Repurchase of New Common Stock. Without the prior approval of a majority of
the Independent Directors, the Company will not be permitted to purchase any
shares of New Common Stock unless immediately after such repurchase, Fluor's
Percentage would not exceed 65%.
Amendment of Agreements. Without the prior approval of a majority of the
Independent Directors, the Company will not be permitted to enter into any
amendment or terminate or waive any provision of the Investment Agreement, the
Option Agreement or the Marketing Agreement.
Definition of "Independent Director." For purposes of the Investment
Agreement, an "Independent Director" is defined as a director of the Company who
is not (apart from such directorship) (i) an officer, affiliate, employee,
principal stockholder, consultant or partner of Fluor or any affiliate of Fluor
or of any entity that was dependent upon Fluor or any affiliate of Fluor for
more than 3% of its revenues or earnings in its most recent fiscal year, (ii) an
officer, employee, principal stockholder, consultant or partner of any entity
that was dependent upon the Company or any affiliate of the Company for more
than 3% of its revenues or earnings in its most recent fiscal year (unless
agreed to in writing by Fluor) or (iii) an officer, director, employee,
principal stockholder, consultant or partner of a person that is a competitor of
Fluor or any of its affiliates (unless agreed to in writing by Fluor) or of the
Company or any of its affiliates.
ADDITIONAL COVENANTS OF THE PARTIES
Covenants Respecting Operation of Business. Pursuant to the Investment
Agreement, GTI has agreed for itself and its subsidiaries, and Fluor and FDESI
have agreed with respect to the business of FDESI, that prior to the Effective
Time, that GTI and FDESI, respectively, will carry on their respective
businesses in the usual, regular and ordinary course and will use all reasonable
efforts to preserve intact their business organizations, to keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall, in all material respects, be unimpaired at the Closing
Date.
In connection with the above covenant, GTI, for itself and its subsidiaries,
and Fluor and FDESI, with respect to the business of FDESI, have specifically
agreed that from the date of the Investment Agreement until the Closing Date,
except as previously disclosed, they will not take or authorize, commit or agree
to take, any of the following actions, without the prior written consent of the
other: (i) declare, set aside, pay dividends on or make any distributions in
respect of its capital stock; (ii) split, combine or reclassify any of its
capital stock, or issue or authorize any other securities in respect thereof;
(iii) purchase, redeem or otherwise acquire any shares of its capital stock or
the capital stock of a subsidiary or any rights, warrants, or options to acquire
any such shares; (iv) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock or any securities convertible into or any rights,
warrants or options to acquire any such shares or convertible securities (other
than, with respect to GTI, issuance of Common Stock (a) upon exercise of
Employee Stock Options and Director Stock Options outstanding on the date of the
Investment Agreement and (b) pursuant to the Option Agreement); (v) amend its
Certificate of Incorporation, By-Laws or comparable organizational documents, or
reincorporate in any jurisdiction; (vi) acquire or agree to acquire by merger,
consolidation, purchase of assets or any other manner any business, corporation,
partnership, joint venture, association or other business organization other
than in the ordinary course of business, consistent with past practice and
involving no more than $250,000 in the aggregate; (vii) acquire or agree to
acquire any assets with respect to GTI, material to GTI and its subsidiaries
taken as a whole, other than purchases of inventory in the ordinary course of
business consistent with past practice and, with respect to FDESI, material
individually or in the aggregate to FDESI; (viii) sell, lease, mortgage or
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otherwise encumber or subject to any lien or otherwise dispose of any of its
properties or assets, except sale of properties or assets no longer used in the
conduct of business and sales of inventory in the ordinary course of business
consistent with past practice; (ix) incur any Indebtedness (as defined in the
Investment Agreement) for borrowed money or guarantee any such Indebtedness of
another person, issue or to sell any debt securities or warrants or other rights
to acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or to enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowing not in excess of $1,000,000 in the
aggregate incurred in the ordinary course of business consistent with past
practice, the endorsement of checks in the normal course of business and the
extension of credit in the normal course of business; (x) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or any subsidiary; (xi) make or agree to make any new
capital expenditures or commitments, purchases of property of acquisitions of
other businesses, capital assets or properties which, individually, is in excess
of $250,000, with respect to GTI and $50,000 with respect to FDESI or, in the
aggregate, are in excess of $1,000,000 with respect to GTI and $250,000 with
respect to FDESI, or enter into any new real property lease with an annual
rental which, with respect to GTI, is in excess of $60,000; (xii) make any tax
election (other than in the ordinary course of preparing and filing its tax
returns) or settle or compromise any material tax liability; (xiii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of GTI included in reports filed pursuant to
the 1934 Act, and of FDESI, provided to the Company or incurred after the date
of such financial statements in the ordinary course of business consistent with
past practice, or waive the benefits of, or agree to modify in any manner, any
confidentiality or similar agreement to which the Company or any of its
subsidiaries is a party; (xiv) adopt any shareholder rights or similar plan or
take any other action with the intention of, or which may have the effect of,
discriminating against Fluor as a stockholder of GTI, or of GTI as a stockholder
of FDESI; (xv) adopt or amend in any material respect any employee benefit plan;
(xvi) enter into any contract, agreement, plan or arrangement covering any
director, officer or employee providing for the making of any payments, the
acceleration of vesting of any benefit or right or any other entitlement
contingent upon (a) the consummation the Transactions or, with respect to GTI,
any acquisition by Fluor of securities of the Company and, with respect to
FDESI, any acquisition by GTI of securities of FDESI or (b) the termination of
employment after the occurrence of any such contingency if such payment
acceleration of entitlement would not have been provided but for such
contingency; or (xvii) amend any existing contract, agreement, plan or
arrangement to so provide for any of the foregoing.
Certain Covenants With Respect to FDESI. The Investment Agreement provides
that, on or before the Closing Date, Fluor will cancel all FDESI debt. In
addition, after the Closing Date, Fluor will pay to and indemnify the Company
for any liability for or arising out of any taxes of Fluor or taxes attributable
to Fluor for which FDESI may be liable on any basis with respect to the business
of FDESI prior to the Closing Date. FDESI will reimburse Fluor for the
liabilities attributable to FDESI on all tax returns which include FDESI and
Fluor. In addition, Fluor will indemnify the Company and its subsidiaries
(including FDESI) from and against any and all loss, cost and expense arising
from or as a result of a breach of Fluor or FDESI of their representations and
warranties relating to FDESI contracts from and after the Closing Date.
Other Covenants of GTI, Fluor and FDESI. GTI, for itself and its
subsidiaries, Fluor and FDESI have agreed (i) that they will not take any action
that would, or that could reasonably be expected to, result in any of the
representations and warranties set forth by such party in the Investment
Agreement or the Option Agreement becoming untrue, or any of the conditions to
the Merger set forth in the Investment Agreement, not being satisfied; (ii) to
promptly notify the other of, (x) any notice of other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by the Investment Agreement, (y)
any notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by the Investment
Agreement, and (z) any actions, suits, claims, investiga-
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tions or proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting such party which, if
pending on the date of the Investment Agreement, would have been required to be
disclosed pursuant to the Investment Agreement or which relate to the
consummation of the transactions contemplated by the Investment Agreement; and
(iii) that from December 11, 1995 to the Effective Time, it will give the other
party, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices,
properties, books and records of such party and will furnish to them such
financial and operating data and such other information as such persons may
reasonably request.
Agreements of GTI with respect to Stockholder Approval. The Investment
Agreement provides that GTI and/or its Board of Directors will take certain
actions with respect to the preparation of this Proxy Statement/Prospectus and
the convening of the Special Meeting, including (i) the unanimous recommendation
of GTI's directors, subject to certain fiduciary duties as set forth in the "No
Shop" Provisions, that GTI's stockholders approve and adopt the Transactions,
(ii) the prompt preparation, filing and clearance with the Commission of this
Proxy Statement/Prospectus and the prompt mailing thereafter to GTI stockholders
entitled to vote on the Transactions, (iii) the use of all reasonable efforts to
obtain the necessary approvals of GTI stockholders of the Transactions and (iv)
the compliance with all legal requirements applicable to the Special Meeting.
REPRESENTATIONS AND WARRANTIES
The Investment Agreement contains certain representations and warranties of
the parties with respect to the execution of the Investment Agreement and the
Closing.
Representations of Fluor and FDESI. Fluor has made representations as to
itself and FDESI regarding, among other things, organization and qualification,
corporate authority, required governmental consents, non-contravention of other
agreements of Fluor and FDESI. Fluor has also made representations regarding the
capitalization and business of FDESI, including representations regarding FDESI
joint ventures, financial statements, litigation, taxes, environmental matters,
existing contracts, employees and employee benefit plans, compliance with laws,
intellectual property, properties, confidentiality agreements and the absence of
certain changes in its business operations and financial condition.
Representations of GTI. The Company has made representations regarding,
among other things, its organization and qualification, corporate authority,
required governmental consents, non-contravention of other agreements,
capitalization, joint ventures and subsidiaries, filings with the Commission,
financial statements, litigation, employee benefit plans, compliance with laws,
intellectual property, contracts, properties, environmental matters,
confidentiality agreements, and the absence of certain changes in its business
operations and financial condition.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of GTI, Fluor, FDESI and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions: (i) the
transactions contemplated by the Investment Agreement, including the amendments
to the Company's Restated Certificate of Incorporation and the Recapitalization,
shall have been approved by GTI's stockholders; (ii) the expiration or
termination of any applicable waiting period under the HSR Act relating to the
Transactions; (iii) the absence of any applicable law or regulation or judgment,
injunction, order or decree prohibiting the consummation of the Merger or the
effectiveness as between the parties of the Marketing Agreement; (iv) obtaining,
taking and making of all consents or actions or filings with any governmental
body, agency, official, or authority required to permit the consummation of the
Merger and the effectiveness as between the parties of the Marketing Agreement
(other than those consents, actions or filings which, if not obtained, taken or
made prior to the consummation of the Merger, as would not have a material
adverse effect on the Company, and (v) the absence of any banking moratorium or
suspension of payments in respect of banks in the United States.
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The obligations of Fluor and FDESI to consummate the Merger are subject to
the satisfaction of the following further conditions: (i)(a) the performance by
GTI, in all material respects, of all its obligations under the Investment
Agreement required to be performed by it at or prior to the Closing; (b) the
representations and warranties of GTI contained in the Investment Agreement
being true in all material respects as of the Closing (except to the extent such
representations and warranties are expressly made as of an earlier date); and
(c) the receipt by Fluor of a certificate signed by an officer of GTI to the
foregoing effect; (ii) from July 31, 1995 to the Closing Date, the absence of
any material adverse change in the condition of the Company; (iii) the absence
of any pending or threatened action or proceeding before any court or
governmental or regulatory authority or body that seeks, or threatens to seek,
to prevent or delay the consummation of the Transactions or that challenges any
of the terms or provisions of the Investment Agreement; (iv) the absence of any
order, judgment or decree issued by any court or governmental or regulatory
authority or body and of any statute, rule, regulation or executive order that
(a) prevents the consummation of the Transactions, (b) prohibits Fluor at any
time after the Closing from exercising all materials rights and privileges
pertaining to its ownership of New Common Stock acquired in the Merger or
purchasable upon exercise of the Option, or (c) materially and adversely affects
the condition (financial or otherwise), properties, assets, earnings, business
or operations of the Company or a subsidiary; (v) the execution and delivery by
GTI of the Marketing Agreement; (vi) the filing of the Amended and Restated
Certificate of Incorporation with the Delaware Secretary of State; (vii) the
making by GTI of the Company Deposit with the Exchange Agent and the furnishing
of reasonably satisfactory evidence to Fluor thereof; and (viii) the furnishing
by GTI to Fluor of (a) a certified copy of the resolution or resolutions duly
adopted by the Board of Directors of GTI respecting the Transactions and the
submission thereof to the vote of GTI's stockholders, (b) a certified copy of
the resolution or resolutions duly adopted by the holders of a majority of the
outstanding shares of Common Stock of the Company approving the Transactions and
(c) a favorable opinion of counsel for the Company, dated the Closing Date, with
respect to certain matters.
The obligations of GTI and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following further conditions: (i)(a) the
performance by each of Fluor and FDESI, in all material respects, of all
obligations under the Investment Agreement required to be performed by it at or
prior to the Closing; (b) the representations and warranties of Fluor and FDESI
contained in the Investment Agreement being true in all material respects as of
the Closing (except to the extent such representations and warranties are
expressly made as of an earlier date) and (c) the receipt by GTI of a
certificate signed by an officer of Fluor to the foregoing effect; (ii) the
submission of the Agreement of Merger to the California Secretary of State for
filing in accordance with the California Code; (iii) the making by Fluor or
FDESI of the FDESI Deposit with the Exchange Agent and the furnishing of
reasonably satisfactory evidence to the Company thereof and of the Transfer
Authorization; (iv) the furnishing by Fluor to GTI of (a) a certified copy of
the resolution or resolutions duly adopted by the Board of Directors of Fluor
respecting the Transactions (b) a certified copy of a resolution or resolutions
duly adopted by the Board of Directors and sole stockholder of FDESI approving
the Investment Agreement, and (c) a favorable opinion of counsel for Fluor,
dated the Closing Date with respect to certain matters; (v) from October 31,
1995 to the Closing Date, the absence of any material adverse change in the
condition of FDESI; (vi) the absence of any pending or threatened action or
proceeding before any court or governmental or regulatory authority or body,
that seeks or threatens to seek, to prevent or delay the consummation of the
Transactions or that challenges any of the terms or provisions of the Investment
Agreement; (vii) the absence of any order, judgment or decree issued by any
court or governmental or regulatory authority and of any statute, rule,
regulation or executive order that (a) prevents the consummation of the
Transactions (b) prohibits the Company at any time after the Closing from
exercising all material rights and privileges pertaining to its ownership of the
stock of the Surviving Corporation, or (c) materially and adversely affects the
condition (financial or otherwise), properties, assets, earnings, business or
operations of FDESI; and (viii) the execution and delivery by Fluor of the
Marketing Agreement, which shall be set in full force and effect to the extent
set forth therein.
The Investment Agreement provides that at any time prior to the Effective
Time, the parties may waive compliance with any of the agreements or conditions
contained in the Investment Agreement which may be legally waived. As of the
date of this Proxy Statement/Prospectus, GTI, Fluor, FDESI and Merger Subsidiary
have no present intention of waiving any conditions under the Investment
Agreement.
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TERMINATION
Section 9.1 of the Investment Agreement provides that the Investment
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Closing (notwithstanding approval of the Transactions by GTI's stockholders)
(i) by mutual written consent of GTI and Fluor; (ii) by GTI or Fluor, if the
Closing has not been held by May 31, 1996; (iii) by GTI or Fluor, if there is
any law or regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Fluor or
GTI from consummating the Merger is entered and such judgment, injunction, order
or decree becomes final and nonappealable (provided that the party seeking to
terminate the Investment Agreement must have used all reasonable efforts to
remove such judgment, injunction, order or decree); (iv) by GTI (so long as it
complies with the "No-Shop" Provisions) or by Fluor if the Board of Directors of
GTI has withdrawn or materially modified its approval or recommendation of the
Transactions or has recommended an Acquisition Proposal; (v) by Fluor, if it is
not in material breach of its obligations under the Investment Agreement and a
person or group (other than Fluor or any affiliate) (a) has made an Acquisition
Proposal and GTI has commenced discussions with that party or (b) has become the
beneficial owner of at least 20% of GTI's outstanding Common Stock; or (vi) by
GTI or Fluor, if the Special Meeting (a) has been held and GTI's stockholders
have failed to approve and adopt the Transactions at such meeting or (b) by
Fluor, if such meeting is not held by May 31, 1996; and (vii) by GTI or Fluor if
there has been a breach by the other party of any representation, warranty,
covenant or agreement contained in the Investment Agreement which is incurable
or has not been cured by May 31, 1996.
TERMINATION FEE
The Investment Agreement provides that, so long as Fluor has not materially
breached its obligations under the Investment Agreement, GTI will pay Fluor a
Termination Fee (as defined below) under certain circumstances. The Termination
Fee is payable promptly, but in no event later than two business days, after the
termination of the Investment Agreement because the Board has withdrawn or
materially modified its approval or recommendation of the Transactions to the
Company's stockholders or recommended an Acquisition Proposal. The Termination
Fee is also payable simultaneously with the consummation of an Acquisition
Proposal effected after the termination of the Investment Agreement because (a)
a person or group (other than Fluor or any affiliate) (i) has made an
Acquisition Proposal and GTI has commenced discussions with that party or (ii)
has become the beneficial owner of at least 20% of the outstanding shares of
Common Stock, or (b) if the Special Meeting has been held and GTI's stockholders
have failed to approve and adopt the Transactions at such meeting provided that
(A) prior to or within 60 days after the termination of the Investment
Agreement, an Acquisition Proposal was been received and (B) if the Acquisition
Proposal involves a merger, sale of assets, purchase of shares from GTI or
similar business combination, the agreement with respect thereto was entered
into within twelve months of the date of termination of the Investment
Agreement, or if the Acquisition Proposal involves a tender or exchange offer,
the tender or exchange offer was commenced within such twelve-month period. In
addition, the Termination Fee is payable simultaneously with the consummation of
an Acquisition Proposal effected after the termination of the Investment
Agreement due to a breach by GTI of a covenant or agreement contained in the
Investment Agreement if (i) prior to or within 60 days after the termination of
the Investment Agreement negotiations or discussions have been held with, or
information supplied to, a third party who makes an Acquisition Proposal and
(ii) the agreement with respect to such or any other Acquisition Proposal is
entered into, or if the Acquisition Proposal is a tender or exchange offer, such
offer is commenced, within twelve months after termination of the Investment
Agreement. For purposes of the Investment Agreement, "Termination Fee" means
$3,000,000 plus up to an additional $750,000 as reimbursement for fees and
expenses actually incurred by Fluor and FDESI in connection with the Investment
Agreement and the Transactions.
AMENDMENT; WAIVERS
Any provision of the Investment Agreement may be amended or waived prior to
the Closing if such amendment or waiver is in writing and signed, in the case of
an amendment, by GTI and Fluor, or in the case of a waiver, by the party against
whom the waiver is to be effective; provided that after the
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authorization and approval of the Transactions by GTI's stockholders, no such
amendment or waiver will, without the further approval of GTI's stockholders,
alter or change any term of the Amended or Restated Certificate of Incorporation
or the amendments to the By-Laws if such alteration or change would adversely
affect the holder of any Shares.
GTI intends to notify stockholders in the event that any material provision
of the Investment Agreement is amended or waived in any material respect,
independent of whether such amendment or waiver occurs prior to or after
stockholder approval of the Transactions. GTI expects that any such notification
would be given through issuance of a press release or, if appropriate, a
supplement to this Proxy Statement/Prospectus.
EXPENSES
The Investment Agreement provides that, except for any Termination Fee, all
costs and expenses incurred in connection with the Investment Agreement and the
Transactions will be paid by the party incurring such costs or expenses.
THE MARKETING AGREEMENT
THE FOLLOWING DESCRIPTION OF THE MARKETING AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MARKETING
AGREEMENT, THE FORM OF WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS
EXHIBIT C TO ANNEX A AND IS INCORPORATED HEREIN BY REFERENCE. ALL STOCKHOLDERS
ARE URGED TO READ THE MARKETING AGREEMENT IN ITS ENTIRETY.
The Marketing Agreement sets forth the understanding of GTI and Fluor with
respect to their arrangement (a) to work together to approach the environmental
services market, (b) for Fluor to use the Company's services in connection with
Fluor's engineering and construction business, and (c) to provide, on an
intercompany basis, support services to each other. Fluor will continue to
provide its customers with engineering and construction services, as well as
certain environmental services, such as Department of Energy Management and
Operations, Operating and Management, Management and Integration services and
so-called "Total Business Solutions" services. Total Business Solutions services
are differentiated from the environmental services that will continue to be
provided by GTI in that they involve an integration of such services with
substantial non-environmental services or involve a substantial increase in the
scale and scope of services currently provided by GTI. GTI will continue to
provide environmental assessment, remediation and monitoring services.
The Marketing Agreement provides that GTI will have primary responsibility
for the marketing and execution of environmental services and Fluor will have
primary responsibility for marketing and execution of Total Business Solutions
services. Fluor will promote the use of GTI, and will retain GTI on a
sole-source basis, for environmental services that are related or incidental to
Fluor's engineering and construction business and Total Business Solutions
business, provided that use of the Company is acceptable to the customer, the
Company has adequate available personnel and other resources to timely and
satisfactorily perform the work and the Company's proposed commercial terms are
competitive with the market. In addition, GTI and Fluor will provide overhead
support and contract support services to each other on an intercompany basis.
The Company will use the name "Fluor Daniel GTI, Inc." during the term of the
Marketing Agreement, and subsidiaries of the Company may also use a similar name
if the parties decide it is useful in marketing the operations of the Company's
subsidiaries.
The term of the Marketing Agreement is ten years from the Closing of the
Transactions unless further extended by the parties. In the event Fluor ceases
to own at least 20% of the issued and outstanding equity of the Company, then
(a) Fluor, provided it is not in breach of its obligations pursuant to Section
6.3(d) of the Investment Agreement (with respect to dispositions of New Common
Stock held by it), or GTI may terminate the Marketing Agreement prior to
expiration of the term; and (b) Fluor, pursuant to Section 7.9 of the Investment
Agreement, may revoke the license of the Company and its subsidiaries to use the
name "Fluor Daniel" in the Company's corporate name. See "INVESTMENT AGREEMENT
- -- Certain Restrictions on Fluor and the Company Following the Closing."
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THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Pursuant to the Investment Agreement, GTI is required to obtain stockholder
approval and to file an Amended and Restated Certificate of Incorporation
effecting the Recapitalization as a condition to Fluor's consummation of the
Merger. THE FOLLOWING DESCRIPTION OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE TEXT OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS EXHIBIT A
TO ANNEX A, AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE ENCOURAGED
TO READ THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION IN ITS ENTIRETY.
Recapitalization. Effective upon the specified effective date set forth in
the Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State, GTI's Restated Certificate of Incorporation will be amended
to amend Article FOURTH ("Article Fourth") to authorize 25,000,000 shares of New
Common Stock and establish the terms thereof and to effect the conversion of
each outstanding Share into the right to receive $8.62 in cash and .5274 of a
share of New Common Stock. Under Article Fourth the rights, preferences,
privileges and restrictions of the New Common Stock will be identical in all
respects to those of the Common Stock, except that the par value of the New
Common Stock will be $.001 per share.
Other Amendments. In addition, upon the effective date set forth in the
Amended and Restated Certificate of Incorporation filed with the Delaware
Secretary of State, GTI's Restated Certificate of Incorporation will be amended
to (a) amend Article FIRST to change the Company's name to "Fluor Daniel GTI,
Inc.", (b) amend Article THIRD to maximize the legally permissible purposes of
the Company under Delaware Law and (c) delete Article SIXTH, which contains
provisions regarding a classified board of directors.
AMENDMENTS TO THE BY-LAWS
The Investment Agreement requires that, prior to the Closing, the Com-
pany's stockholders approve certain amendments to the By-Laws to, among other
things, amend Article 2 (Meetings of Stockholders), Article 3 (Directors),
Article 4 (Meetings of the Board of Directors), Article 7 (Officers), Article 8
(Resignations, Removals and Vacancies) and Article 15 (Amendments). (Such
By-Laws, as proposed to be amended, are referred to herein as the "Amended
By-Laws"). THE FOLLOWING DESCRIPTION OF THE AMENDMENTS TO THE BY-LAWS DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT
OF THE AMENDED AND BY-LAWS WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS
AS EXHIBIT B TO ANNEX A, AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS
ARE ENCOURAGED TO READ THE AMENDED BY-LAWS IN THEIR ENTIRETY.
Amendments to Article 2 (Meetings of Stockholders). Amended Article 2 of the
By-Laws provides that special meetings of the stockholders may be called only
upon the written request of a majority of the directors then in office.
Amendments to Article 3 (Directors). Amended Article 3 of the By-Laws sets
the size of the Board of Directors at no more than seven (7) members and
eliminates the provision allowing enlargement of the Board by a majority vote of
the Board or by the affirmative vote of two-thirds of the outstanding shares
entitled to vote in the election of directors. Article 3 has also been amended
to eliminate the classified board of directors, such that the term of office for
all directors shall expire at the next annual meeting of stockholders.
Amendments to Article 4 (Meetings of the Board of Directors). Amended
Article 4 of the By-Laws specifies that a quorum of the Board for the
transaction of business shall be a majority of the Board, except as otherwise
provided in the Amended and Restated Certificate of Incorporation or the
By-Laws.
Amendment to Article 7 (Officers). Amended Article 7 of the By-Laws
specifies that the Board shall have a Chairman of the Board who shall preside at
all meetings of stockholders and of the Board of Directors.
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Amendments to Article 8 (Resignations, Removals and Vacancies). Amended
Article 8 of the By-Laws provides that any or all directors may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors, unless otherwise specified by law or the
Amended and Restated Certificate of Incorporation. Amended Article 8 also
eliminates provisions relating to the classified board structure to conform to
amended Article 3.
Amendment to Article 15 (Amendments). Amended Article 15 of the ByLaws
provides that the By-Laws may be altered, amended or repealed, or new By-Laws
adopted, by the stockholders or by a majority of the full Board of Directors
(whether or not present at a meeting).
The By-Laws are also amended throughout to reflect the change in the
Company's name to Fluor Daniel GTI, Inc., and to reference the Amended and
Restated Certificate of Incorporation rather than the Restated Certificate of
Incorporation.
ELECTION OF DIRECTORS
Pursuant to the Investment Agreement, the Amended By-Laws provide for a
Board of Directors with no more than seven members, which each director to serve
until the next annual meeting of stockholders and until his or her successor is
elected and qualified or his or her earlier resignation or removal. The
following are the nominees for the Board of Directors to serve effective as of
the Closing: Walter C. Barber, Allan S. Bufferd, Robert P. Schechter, David L.
Myers, J. Michal Conaway, James C. Stein and Ernie Green.
In the event any of such nominees becomes unable or unwilling to serve, the
shares of Common Stock represented by the enclosed Proxy will be voted for the
election of the balance of those named and may be voted for such other person(s)
as the Board of Directors may select. The Board of Directors has no reason to
believe that any such nominee will be unable to serve.
Below is information setting forth the name, age, business background and
other information regarding those nominees who do not currently serve on the
Company's Board of Directors. None of the New Directors has previously served as
either an officer or director of GTI, and each of them is serving pursuant to
the terms of the Investment Agreement. See "THE TRANSACTIONS -- Board of
Directors and Officers." Information regarding Messrs. Barber, Bufferd and
Schechter, each of whom is currently a director of the Company, can be found in
the Company's Proxy Statement for the Annual Meeting of Stockholders held on
September 19, 1995 (the "1995 Proxy Statement"), which is incorporated herein by
reference.
DAVID L. MYERS, age 49
Mr. Myers has served as President, Environmental Services of Fluor since
July 1994. From 1984 until July 1994, Mr. Myers served as Fluor's Vice President
of Business Units and of various other Fluor subsidiaries. Mr. Myers joined
Fluor Corporation in 1975.
J. MICHAL CONAWAY, age 47
Mr. Conaway has served as Vice President and Chief Financial Officer of
Fluor Corporation since May 1994. From 1993 to May 1994, he served as Vice
President, Finance, of Fluor Corporation. From 1988 until joining Fluor
Corporation, Mr. Conaway was a Vice President and Chief Financial Officer of
National Gypsum Company and its parent, Aancor Holdings, Inc.
JAMES C. STEIN, age 52
Mr. Stein has served as Group President, Diversified Services of Fluor since
May 1994. He served as Fluor's President, Business Units, from 1993 to May 1994,
and as President, Industrial Sector, of Fluor from 1986 to 1994. Mr. Stein
joined Fluor Corporation in 1964.
ERNIE GREEN, age 57
Mr. Green is founder, President and Chief Executive Officer of EGI, Inc., a
manufacturer of automotive components founded in 1981. He is also President of
Florida Engineering, Inc., a subsidiary of EGI. Mr. Green is a director of
Acordia, Inc., Bank One, Dayton, N.A., DPL, Inc., Duriron Company, Inc., and
Eaton Corporation.
Director Compensation. It is currently anticipated that only directors who
are not employees of either the Company or Fluor ("Non-Employee Directors"),
will receive compensation from the Company for service on the Board. Currently,
Non-Employee Directors are paid $10,000 without regard to attendance at
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meetings of the Board of Directors or Committees, and the Chairmen of the Audit
and Compensation Committees are paid an additional $5,000. Non-Employee
Directors will also receive options under the 1995 Director Plan, which is more
fully described in the Company's 1995 Proxy Statement. The 1995 Director Plan
will be amended so that any employee of an affiliate of the Company (which,
after the Transactions, will include Fluor) will be ineligible for option grants
under that plan. See "AMENDMENTS TO STOCK PLANS."
Employment Agreements. In December 1995, GTI entered into Employment
Agreements with its executive officers, including Walter C. Barber, who also
serves as a director of the Company. See "THE TRANSACTIONS -- Conflicts of
Interest."
AMENDMENTS TO STOCK PLANS
Recapitalization Amendments. Pursuant to the Investment Agreement, promptly
after the Closing all options under the Company's 1987 Stock Plan and 1995
Director Plan outstanding on the Closing Date will be exchanged for Adjusted
Options. See "THE INVESTMENT AGREEMENT -- Treatment of Stock Options." Effective
as of the Closing Date, the Company's 1987 Stock Plan, 1995 Director Plan will
be amended in order to implement the disposition of such options set forth in
the Investment Agreement. In addition, the Amended and Restated 1986 Employee
Stock Purchase Plan (the "1986 Purchase Plan") will be amended so that an
adjustment under its existing terms which would operate to reduce the number of
shares purchasable under, and the aggregate number of shares issuable pursuant
to that plan will not be made in the Recapitalization.
Under the current terms of paragraph 13(A) and Article 12(A) of the 1987
Plan and 1986 Purchase Plan, respectively, grantees of the options or other
rights under these plans would be entitled to purchase that number of shares of
New Common Stock as were exchangeable for the number of shares of Common Stock
which a grantee would have been entitled to purchase, except for the
Recapitalization. Under current paragraph 10(b) of the 1995 Director Plan, upon
the Recapitalization adjustments to the number and kind of shares authorized
under the plan, and the number and kind of shares covered by and the option
price of outstanding options under the plan "necessary to maintain the
proportionate interest of the options and preserve, without exceeding, the value
of such options", would be made.
Because the terms of the Transactions are not clearly addressed by the above
provisions, and because the above provisions do not contemplate the treatment of
stock options set forth in the Investment Agreement, the Board has determined
advisable amendments to the 1987 Stock Plan, the 1986 Purchase Plan and the 1995
Director Plan in order to implement the terms of the Investment Agreement.
Specifically, paragraph 13(G) of the 1987 Stock Plan and Section 10(B) of
the 1995 Director Plan shall be amended so that each option granted under each
such plan and outstanding on the Closing Date shall be exchanged for an option
to purchase a number of shares of New Common Stock equal to the number of shares
of Common Stock subject to such outstanding option multiplied by the Adjustment
Fraction (as defined above) at a per share exercise price equal to the per share
exercise price of such outstanding option divided by the Adjustment Fraction. No
option to purchase fractional shares of New Common Stock will be issued, and
each new option will be adjusted upward to the nearest full share of New Common
Stock.
Under the current terms of the 1987 Stock Plan and the 1995 Director Plan,
the plans will automatically be adjusted to reflect the change of the class of
shares issuable from Common Stock to New Common Stock and to effect the
increase, if any, in the aggregate number of shares authorized under such plans
necessary due to the issuance of Adjusted Options. The 1986 Purchase Plan will
be amended so that the recapitalization adjustment in Article 12(A) will not
apply in connection with the Recapitalization.
Additional Amendment to 1995 Director Plan. Pursuant to the Investment
Agreement, three members of Fluor management will be added to the Company's
Board, and, under the current terms of the 1995 Director Plan, would be eligible
for stock options. The Board has determined that the grant of options to
employees of the Company's affiliates (such as Fluor) would not serve the
purposes of the 1995 Director Plan, which is designed to attract and retain
qualified outside directors. Accordingly, the Board deems advisable an amendment
to Section 1 of the 1995 Director Plan to define "employees" (who are not
eligible for option grants under the 1995 Director Plan) to include employees of
affiliates of the Company. For purposes of the 1995 Director Plan, the term
"affiliate" will include any entity which controls, is controlled by, or is
under common control with the Company. See "ELECTION OF DIRECTORS."
41
<PAGE>
SHARE OWNERSHIP OF GTI MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth information as of March 20, 1996 concerning
the ownership of Common Stock by each current member of the Company's Board of
Directors, each nominee for Director at the Special Meeting, each of the
executive officers named in the Summary Compensation Table included in the
Company's 1995 Proxy Statement, all current Directors and executive officers as
a group and each stockholder known by the Company to be the beneficial owner of
more than 5% of its outstanding shares of Common Stock. Except as otherwise
noted, the person or entities identified have sole voting and investment power
with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS** OWNERSHIP PERCENT
------------------ --------- -------
<S> <C> <C>
Walter C. Barber 80,863(1) 1.2%
Bayard Henry 229,666(2) 3.3%
Allan S. Bufferd 3,638(3) *
Robert P. Schechter 3,538(4) *
David L. Myers 0 *
J. Michal Conaway 0 *
James C. Stein 0 *
Ernie Green 0 *
Robert E. Sliney, Jr. 9,637(5) *
Wendell W. Lattz 9,623(6) *
Frank J. Gorry 4,473(7) *
J. Steven Paquette 4,537(8) *
All Current Directors and Executive Officers as a group (11 persons) 367,350(9) 5.2%
The Parnassus Fund 520,000(10) 7.5%
244 California Street, Suite 400
San Francisco, CA 94111
The TCW Group, Inc. 398,700(11) 5.7%
865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
* Represents beneficial ownership of less than 1% of the Company's outstanding
shares of Common Stock.
** Addresses are given for beneficial owners of more than 5% of the outstanding
Common Stock only.
(1) Includes 38,900 shares subject to options under the Company's 1987 Stock
Plan which are exercisable at February 16, 1996, or within 60 days
thereafter.
(2) Includes 1,666 shares subject to options under the Company's 1995 Director
Plan excercisable at February 16, 1996, or within 60 days thereafter. Mr.
Henry is not standing for election at the Special Meeting.
(3) Includes 1,666 shares subject to options under the Company's 1995 Director
Plan exercisable at February 16, 1996, or within 60 days thereafter. The
Massachusetts Institute of Technology ("M.I.T.") owns 24,582 shares with
respect to which Mr. Bufferd has voting and investment power by virtue of
his position as Deputy Treasurer and Director of Investments of M.I.T.,
subject to the policies and procedures of the Investment Committee of M.I.T.
Mr. Bufferd disclaims beneficial ownership of such shares.
(4) Includes 1,666 shares subject to options under the Company's 1995 Director
Plan exercisable at February 16, 1996, or within 60 days thereafter.
(5) Includes 8,133 shares subject to options granted under the Company's 1987
Stock Plan which are exercisable at February 16, 1996, or within 60 days
thereafter.
(6) Includes 8,700 shares subject to options granted under the Company's 1987
Stock Plan which are exercisable at February 16, 1996, or within 60 days
thereafter.
(7) Includes 4,333 shares subject to options granted under the Company's 1987
Stock Plan which are exercisable at February 16, 1996, or within 60 days
thereafter.
(8) Includes 4,333 shares subject to options granted under the Company's 1987
Stock Plan which are exercisable at February 16, 1996, or within 60 days
thereafter.
(9) Includes 88,825 shares subject to options granted under the Company's 1987
Stock Plan and 1995 Director Plan which are exercisable at February 16,
1996, or within 60 days thereafter.
(10) Information with respect to the beneficial ownership of Common Stock as
reported on Stockholder's Schedule 13G dated February 9, 1996.
(11) Information with respect to the beneficial ownership of Common Stock as
reported on such stockholder's Schedule 13G dated February 12, 1996.
42
<PAGE>
DESCRIPTION OF NEW COMMON STOCK
Upon the effective date specified in the Amended and Restated Certificate of
Incorporation of the Company filed with the Delaware Secretary of State,
1,000,000 shares of preferred stock, par value $.01 ("Preferred Stock") and
25,000,000 shares of New Common Stock, par value $.001 per share, will be
authorized. The rights of holders of New Common Stock (which are substantially
identical to the rights of holders of Common Stock) are as set forth below.
Voting Rights. The holders of New Common Stock will, on all matters
submitted to a vote of the stockholders of the Company, each be entitled to one
vote per share, voting together as a single class unless otherwise required by
applicable law.
Dividends; Reclassifications; Mergers. Holders of New Common Stock will be
entitled to receive such dividends and other distributions in cash, property or
shares of capital stock, when and if declared by the Board from time to time out
of assets or funds of the Company legally available therefor, subject to the
preferential rights, if any, of the Preferred Stock.
Liquidation. In the event of any dissolution, liquidation or winding-up of
the affairs of the Company, after distribution in full of the preferential
amounts, if any, to be distributed to the holders of shares of the Preferred
Stock, holders of New Common Stock will be entitled, unless otherwise provided
herein by law, to receive all of the remaining assets of the Company of whatever
kind available for distribution to stockholders ratably in proportion to the
number of shares of New Common Stock held by them respectively. The Board may
distribute in kind to the holders of New Common Stock such remaining assets to
any other corporation, trust or other entity and receive payment therefore in
cash, stock or obligations of such other corporation, trust or entity or any
combination so received and distribute any balance thereof in kind to holders of
New Common Stock. Neither the merger or consolidation of the Company into or
with any other corporation nor the merger of any other corporation into it, nor
any purchase or redemption of shares of stock of the Company of any class, will
be deemed to be a dissolution, liquidation or winding-up or the Corporation for
the purposes of the above provisions.
Rights Relative to Preferred Stock. All voting powers, designations,
preferences or relative participating, optional or other special rights, and
such qualifications, limitations or restrictions thereof, of the New Common
Stock are expressly subject and subordinate to those that may be filed with
respect to any shares of Preferred Stock. No shares of Preferred Stock are
currently outstanding, nor have any terms of any Preferred Sock been fixed by
the Company.
43
<PAGE>
INFORMATION WITH RESPECT TO FDESI
FDESI BUSINESS
GENERAL
FDESI provides a full range of environmental consulting and engineering
services, including assessment and remediation services, to commercial and
industrial clients, and to federal, state and local government agencies.
FDESI is a wholly-owned subsidiary of Fluor. Fluor is an indirect, wholly
owned subsidiary of Fluor Corporation, a Delaware corporation, which is one of
the largest public-owned engineering, construction and diversified services
firms in the United States. The shares of Fluor Corporation are traded on The
New York Stock Exchange. Through Fluor, and other domestic and foreign
subsidiaries, Fluor Corporation provides engineering, procurement, construction,
maintenance and other diversified services on a worldwide basis to an extensive
range of industrial, commercial, utility, natural resources, energy and
governmental clients.
FDESI's executive offices are located in Irvine, California. FDESI operates
principally from six regional offices in the United States.
The services provided by FDESI include the preparation of studies, reports
and designs, and construction and construction management associated with the
following environmental areas: regulatory compliance, air, water, waste water
and solid wastes, waste minimization, environmental assessment, risk assessment,
waste water treatment and hazardous waste remediation. FDESI also provides
substantial support to other Fluor operating companies in the area of
environmental licensing and permitting of major industrial, commercial and
government facilities.
These services are provided by engineers and scientists of various
disciplines employed by FDESI. The services provided are generally the result of
regulatory programs promulgated by state and U.S. federal agencies which include
the National Environmental Policy Act, the Clean Water Act, the Clean Air Act,
the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund")
and the National Pollutant Discharge Elimination System. The business of both
FDESI and GTI are subject to many of the same environmental regulations.
FDESI does not own any hazardous or solid waste treatment, storage or
disposal facility. At January 23, 1996, FDESI had 159 employees, including 143
professionals such as civil engineers, environmental engineers, geologists and
hydrogeologists.
CLIENTS
FDESI's clients fall into two broad categories: federal government clients
and private commercial clients. The primary federal clients of FDESI are the
United States Department of Defense (the "DOD") and the United States
Environmental Protection Agency (the "EPA"). FDESI's private clients are
diverse, and include oil and gas companies and chemical companies.
Federal. FDESI currently has five significant contracts with various
departments and agencies of the federal government. These contracts are
generally of the Basic Ordering Agreement type, under which a master contract
defines the general scope of work to be performed and the financial
consideration to be paid. Individual task orders are then issued for specific
projects to be performed under the master contract. The following are those
contracts:
* U.S. Army, Omaha District: The Company is a prime contractor under a
multi-year contract providing field investigations, remedial designs and
construction oversight at various military and civil sites across the
U.S. Work includes the investigation of contaminated soil and
groundwater resulting from petroleum spills, landfills, pesticide
facilities and other uses, and providing recommendations for cleanup
actions.
44
<PAGE>
* U.S. Army Environmental Center: The Company is a prime contractor under
a five and one-half year contract with the DOD involving preliminary
assessments, investigations under RCRA and CERCLA, corrective measures
or feasibility studies, and emergency removal actions for inorganic
(e.g., heavy metals) and organic contaminants (e.g., solvents and
explosives) in soils and groundwater on Army installations. Substantial
remaining activities to be completed under this contract are at two such
installations.
* U.S. Navy Environmental Restoration Program: Under a subcontract to
Ogden Energy, FDESI is assisting the United States Navy's Pacific
Division of the Naval Facilities Engineering Command in meeting its
mandate to clean up Naval Installations under the Navy's Environmental
Restoration Program. This work involves intensive background searches on
past practices and land use, as well as multi-media environmental
studies and investigative work, resulting in actions to be taken by the
Navy to effect the clean-up. Recent work included the review of land use
since World War II of 33 different parcels within the Navy boundary, and
well drilling to identify the nature and scope of the contamination.
FDESI is also determining the nature and extent of contamination at
active Naval Bases, such as the Pearl Harbor Naval Shipyard, where FDESI
has identified the source of fuel oil that is contaminating Pearl Harbor
and has developed a plan for containing the fuel oil migration and
ultimate clean-up.
* U.S. Navy, Facilities Engineering Command: FDESI has a prime contract
with the Navy for clean-up of hazardous waste sites at certain Navy and
Marine Corps activities worldwide. Under this contract FDESI must
identify, assess and clean-up hazardous waste sites, including both soil
and water, to safe and acceptable levels. This may include rapid
response to meet emergency requirements, and demonstration of new
technologies to accelerate clean-up. FDESI has recently commenced work
on this contract and the initial work has been focused on determining
the nature and extent of contamination at the former Navy Dry-dock and
Repair Facility in San Juan, Puerto Rico prior to turning the facility
over to the Commonwealth of Puerto Rico.
* U.S. EPA, ARCS: FDESI has provided engineering and technical services to
the EPA at a variety of hazardous waste sites (also known as Superfund
Sites) in 15 states throughout the midwest. The work performed has
included technical assistance, field investigations, site
characterization, evaluation ofremediation alternatives, engineering
designs, and management of cleanup of hazardous waste sites. Work under
this contract has included development and design of treatment methods
for several acidic refinery sludge pits. FDESI completed the
investigations, developed the treatment methods, designed the remedial
actions and managed completion of the cleanup construction projects.
Commercial. In addition to the federal contracts noted above, FDESI staff
provide environmental services to a number of private clients through
sub-contracts to FDESI. These projects currently include managing and
implementing hazardous waste remediations in California, Indiana, Illinois,
Missouri, New York and other locations. Examples of these projects include:
* FDESI is operating and maintaining a desorption and recovery unit at a
former refinery site in Missouri. The unit is processing soil
contaminated with organics, petroleum products and metals and recovering
hydrocarbons for re-refining. Other activities at this site include the
preparation of a Health and Safety plan, Performance Test plan, risk
assessment, and a Comprehensive Site Treatment Plan.
* At Crab Orchard National Wildlife Refuge in Marion, Illinois, an FDESI
project team is serving as the Project Manager on the remediation of a
Superfund Site known as the Sangamo/Crab Orchard PCB Operable Unit. A
thermal treatment facility will be erected and the contaminated soils
and lake sediments treated prior to backfilling. A RCRA landfill will be
built to contain soils and sediments which remain contaminated with lead
and cadmium after thermal treatment.
45
<PAGE>
BACKLOG
The FDESI backlog of awarded projects and tasks at January 31, 1995 and 1996
was approximately $36.4 million and $63.9 million, respectively. Other work
authorizations from existing Basic Ordering Agreement contracts may be issued
from time to time, however, current backlog is not necessarily indicative of the
future earnings of FDESI related to the performance of such work. Although
backlog represents only business which is considered by FDESI to be firm, there
are no assurances that cancellations or scope adjustments will not occur.
CONTRACTS
FDESI conducts business under various types of contractual arrangements,
including cost reimbursable (plus fixed or percentage fee), all-inclusive rate,
unit price, fixed or maximum price and incentive fee contracts. These contracts
are either competitively bid and awarded or individually negotiated. In terms of
dollar amount, the majority of FDESI's contracts are of the cost reimbursable
type. Under a fixed-price contract, the customer agrees to pay a specified price
for FDESI's performance of the entire contract. Fixed-price contracts carry
certain inherent risks, including risks of losses from underestimating costs,
problems with new technologies and economic and other changes that may occur
over the contract period. Consequently, the profitability of fixed-price
contracts may vary substantially. The amount of the fee received for a
cost-reimbursement plus fixed and award fee contract partially depends upon the
government's discretionary periodic assessment of FDESI's performance on that
contract. FDESI's fee from a cost-reimbursement plus fixed and award fee
contract may vary based upon FDESI's performance.
Agencies of the Federal government are FDESI's most significant clients. For
the nine months ended January 31, 1996, the DOD accounted for 29.7% of FDESI's
net revenue. Some contracts made with the Federal government are subject to
annual approval of funding. Limitations imposed on spending by Federal
government agencies may limit the continued funding of FDESI's existing
contracts with the Federal government and may limit FDESI's ability to obtain
additional contracts. These limitations, if significant, could have a material
adverse effect on FDESI. To date, spending limitations have not had a
significant effect on FDESI. All contracts made with the Federal government may
be terminated by the government at any time, with or without cause, however,
none of FDESI's government contracts are subject to renegotiation of profits
with out a change in the contractual scope of work.
Federal government agencies have formal policies against continuing or
awarding contracts that would create actual or potential conflicts of interest
with other activities or a contractor. These policies, among other things, may
prevent FDESI in certain cases from bidding for or performing contracts
resulting from or relating to certain work FDESI has performed for the
government. FDESI has not experienced disqualification during a bidding or award
negotiation process by any government or private client expressly as a result of
a conflict of interest. In addition, services performed for a private client may
create conflicts of interest which preclude or limit FDESI's ability to obtain
work for another private entity. FDESI attempts to identify actual or potential
conflicts of interest and to minimize the possibility that such conflicts would
affect its work under current contracts or its ability to compete for future
contracts.
MARKETING
The sales force of FDESI is organized separately from its operations group.
It is comprised of a Vice President of federal sales, and includes sales and
marketing representatives located in Greenville, South Carolina, Irvine,
California, Washington, D.C. and Houston, Texas.
COMPETITION
The markets served by FDESI are highly competitive and for the most part
require substantial resources, particularly highly skilled and experienced
technical personnel. There are a large number of companies competing in the
markets served by FDESI some of which may have greater size or financial
resources. Competition is primarily centered on performance and the ability to
provide the scientific, engineering, planning and management skills required to
complete complex projects in a timely and cost efficient manner. FDESI derives
its competitive strength from its diversity, reputation for quality, procurement
capability, project management expertise, geographic coverage, ability to
execute projects of varying sizes, strong safety record and experience with a
wide range of services and technologies.
46
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
-------------------- -----------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues $ 9,596 $ 33,951 $ 41,253 $ 52,755 $ 35,425 $24,889 $ 26,319
Net Earnings (loss)(1) (994) (980) 316 682 656 892 489
FINANCIAL POSITION
Total assets 1,062 2,267 1,658 1,475 3,022 322 5,453
Parent Company Investment 1,062 2,267 1,515 1,155 2,661 (782) 4,559
</TABLE>
(1) Substantially all net earnings have been remitted to Fluor to repay
intercompany advances. FDESI has never declared or paid dividends.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is provided to increase understanding
of, and should be read in conjunction with, the financial statements and
accompanying notes respecting FDESI included elsewhere in this Proxy
Statement/Prospectus.
OVERVIEW
Pursuant to the Investment Agreement, FDESI will merge into GTI as part of
an overall transaction wherein Fluor will acquire approximately a 55 percent
ownership interest in GTI.
The financial data presented herein reflects the financial position and
results of operations as if the contracts and personnel which constitute the
environmental remediation business of Fluor Corporation had been operating
entirely through FDESI for all periods presented. Operations reflect all
environmental remediation contract work performed by Fluor personnel for all
federally funded non-Department of Energy contracts, remediation projects for
other government agencies and environmental risk assessment, permitting and
remediation for commercial clients, for the periods presented. Additionally
FDESI provides certain environmental consulting services to Fluor and other
affiliated entities. Revenues from these consulting services have been reflected
in accordance with the Marketing Agreement to be signed in conjunction with the
Investment Agreement. Under the terms of the Marketing Agreement, affiliates are
charged for labor cost plus established multipliers on base compensation. Due to
the variable and often unpredictable nature of FDESI's work load, services are
provided to Fluor as conditions allow.
Indirect expenses include non-project costs of all environmental services
personnel assigned to the environmental operations of Fluor who are available to
provide services to FDESI's clients and other Fluor clients. Additionally, other
indirect expenses primarily include charges from Fluor for the fair value of
rent for occupied space, computer usage and other costs. There has been no
allocation of corporate general and administrative expenses by Fluor as
management believes that no significant general and administrative expenses were
incurred with respect to FDESI's operations beyond those reflected in the
financial statements.
FDESI's operations include projects in both the commercial and government
sectors. Although the mix of projects fluctuates from year to year, government
projects represent a significant portion of total revenues. Revenues from
government projects contributed 38 percent and 50 percent to total revenues for
47
<PAGE>
the nine months ended January 31, 1995 and 1996, respectively, and 17 percent,
13 percent and 39 percent for the years ended April 30, 1993, 1994 and 1995,
respectively. The uncertain timing of project awards can create variability in
FDESI's operations, consequently, trends are difficult to predict with
certainty.
The effective tax rate on earnings is essentially unchanged for all periods
presented. Under a tax allocation practice, FDESI is charged or credited by
Fluor for Federal income taxes, if any, generally at the U.S. statutory rate.
FDESI is also charged or credited for State income taxes.
NINE MONTHS ENDED JANUARY 31, 1995 COMPARED WITH NINE MONTHS ENDED JANUARY
31,1996
Revenues and net earnings for the nine months ended January 31, 1995 were
$24,889,000 and $892,000, respectively, compared with $26,319,000 and $489,000
for the nine months ended January 31, 1996. The increase in revenues is
primarily attributable to higher revenues on Department of Defense contracts in
1996 compared with 1995. These projects contributed $9,578,000 to total revenues
for the nine months ended January 31, 1995 compared with $13,302,000 for the
same period of 1996. This increase was partially offset by lower revenues on
commercial projects in 1996 compared with 1995. Government projects contributed
38 percent of total revenues for the nine months ended January 31, 1995 compared
with 50 percent for the same period of 1996.
Total indirect expenses increased from $3,477,000 for the nine months ended
January 31, 1995 to $4,963,000 for the same period of 1996, due primarily to
increased proposal costs for environmental remediation on Department of Defense
prospects.
FISCAL 1994 COMPARED WITH FISCAL 1995
Revenues and net earnings for the year ended April 30, 1994 were $52,755,000
and $682,000, respectively, compared with $35,425,000 and $656,000 for the year
ended April 30, 1995. The decrease in revenues is primarily attributable to the
completion of two large commercial projects in early 1995. These projects
contributed $39,408,000 to total revenues in 1994 compared with $10,174,000 in
1995. This decrease was partially offset by higher revenues on DOD contracts in
1995 compared with 1994. Government projects contributed 13 percent of total
revenues for the year ended April 30, 1994 compared with 39 percent for the year
ended April 30, 1995.
Total indirect expenses increased from $4,229,000 for the year ended April
30, 1994 to $5,939,000 for the same period of 1995 due primarily to increased
proposal costs for environmental remediation on DOD prospects. These increased
costs contributed to a net loss of approximately $200,000 experienced in the
last half of fiscal 1995.
FISCAL 1993 COMPARED WITH FISCAL 1994
Revenues and net earnings for the year ended April 30, 1993 were $41,253,000
and $316,000, respectively, compared with $52,755,000 and $682,000 for the year
ended April 30, 1994. These increases are primarily attributable to two large
commercial projects that contributed $24,699,000 to total revenues in 1993
compared with $39,408,000 in 1994. Government projects contributed 17 percent of
total revenues for the year ended April 30, 1993 compared with 13 percent for
the year ended April 30, 1994.
Total indirect expenses decreased from $5,277,000 for the year ended April
30, 1993 to $4,229,000 for the year ended April 30, 1994 due primarily to
increased utilization of available personnel in connection with the two large
commercial projects in 1994.
FINANCIAL POSITION AND LIQUIDITY
FDESI advances to and receives from Fluor non-interest bearing funds. FDESI
is dependent upon Fluor for continued financing, including funding required, if
any, for settlement of claims, working capital requirements and third party bid
and performance guarantees made in the ordinary course of business. Amounts
required to fund working capital are provided by Fluor and the excess is
advanced to Fluor. For all periods presented in the accompanying financial
statements, changes in the components of working capital reflect the impact of
project activity on billed and unbilled work in progress. FDESI has no
commitments for capital expenditures.
48
<PAGE>
MARKET PRICE; DIVIDENDS; HOLDERS OF CAPITAL STOCK
OUTSTANDING STOCK
All of the outstanding shares of FDESI, which consist of 1,000 shares of
Common Stock, no par value, are owned by Fluor, and have been owned by Fluor
since the incorporation of FDESI in 1990. Accordingly, there is no public
trading market for FDESI common stock, and no sales price information for such
stock is available. FDESI has not issued any options or warrants to purchase its
common stock, nor any securities convertible into its common stock. No shares of
common stock of FDESI may be sold pursuant to Rule 144 under the Securities Act
of 1933, as amended. FDESI has not agreed to register any of its securities for
public sale, nor is it presently proposing any such public offering. As a result
of the Merger, all of the shares of FDESI held by Fluor will be converted into
the right to receive an aggregate of 4,400,000 shares of New Common Stock of the
Company at the Closing.
DIVIDENDS
As a wholly owned subsidiary of Fluor, substantially all net earnings of
FDESI have been remitted to Fluor to repay intercompany advances. FDESI has
never declared or paid dividends. FDESI will become a wholly owned subsidiary of
GTI following the Merger, and may from time to time declare and pay dividends to
GTI. FDESI is not aware of any restrictions at present on its ability to pay
dividends.
HOLDERS
All of the outstanding stock of FDESI is owned of record and beneficially by
Fluor. No other person, including the directors and officers of FDESI, own any
securities of FDESI. There have been no changes in control of FDESI since the
beginning of the last fiscal year of FDESI.
49
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following tables represent summary unaudited pro forma consolidated
income statement information of the Company ("Fluor Daniel GTI, Inc." after the
Transactions) for the year ended April 29, 1995 and the nine months ended
January 27, 1996 and balance sheet information as of January 27, 1996 giving pro
forma effect to the (i) conversion of each share of Common Stock outstanding at
each period end into $8.62 in cash and 0.5274 of a share of New Common Stock,
(ii) the issuance and sale of 4,400,000 shares of New Common Stock to Fluor in
exchange for all outstanding shares of FDESI and $33.35 million in cash, (iii)
the issuance and sale of the Option to Fluor for $1.65 million, (iv) certain
costs incurred in connection with the Transactions, (v) amortization of
goodwill, and (vi) discontinued laboratory operations. The Merger has been
accounted for as a reverse acquisition of GTI by FDESI.
The summary unaudited pro forma consolidated financial information does not
purport to represent what the Company's financial position or results of
operations actually would have been had the transactions described in the
preceding paragraph in fact occurred on such date, or to project the Company's
financial position or results of operations for any future date or period.
The unaudited pro forma consolidated financial information should be read in
conjunction with the 1995 financial statements of FDESI and the notes thereto
included in this Proxy Statement/Prospectus, the 1995 consolidated financial
statements of the Company and the notes thereto and the unaudited quarterly
consolidated financial information of the Company incorporated by reference into
this Proxy Statement/ Prospectus. See "INCORPORATION OF DOCUMENTS BY REFERENCE."
50
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION OF
FLUOR DANIEL GTI, INC.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 29, 1995
-------------------------
GTI FDESI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS CONSOLIDATED
------ ------ ----------- ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross revenue $178,280 $35,425 $ -- $213,705
Cost of subcontracted services 69,083 -- 9,454 78,537
------ ------- ----- ------
Net revenue 109,197 35,425 (9,454) 135,168
Cost of net revenues 62,338 28,410 (9,454) 81,294
------ ------ ------ ------
Gross profit 46,859 7,015 -- 53,874
Selling, general and administrative expenses (39,647) (5,939) (204) (45,790)
Licenses and other income 683 -- -- 683
------ ------ ------ ------
Operating income 7,895 1,076 (204) 8,767
Investment and other income, net 1,138 -- (887) 251
------ ------ ------ ------
Income before taxes 9,033 1,076 (1,091) 9,018
Income tax provision 3,596 420 -- 4,016
------ ------ ------ ------
Net income $ 5,437 $ 656 $(1,091) $ 5,002
======== ======= ======= ========
Earnings per share $ 0.77 $ 0.62
======== ========
Shares used to compute earnings per common share 7,050 8,118
===== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 27, 1996
----------------------------------
GTI FDESI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS CONSOLIDATED
------ ------ ----------- ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross revenue $128,881 $26,319 $ -- $155,200
Cost of subcontracted services 49,277 -- 9,679 58,956
------ ------- ----- ------
Net revenue 79,604 26,319 (9,679) 96,244
Cost of net revenues 48,433 20,554 (9,679) 59,308
------ ------ ------ ------
Gross profit 31,171 5,765 -- 36,936
Selling, general and administrative expenses (28,867) (4,963) (142) (33,972)
Licenses and other income 562 -- -- 562
------ ------ ------ ------
Operating Income 2,866 802 (142) 3,526
Investment and other income, net 1,038 -- (605) 433
------ ------ ------ ------
Income before taxes 3,904 802 (747) 3,959
Income tax provision 1,544 313 -- 1,857
------ ------ ------ ------
Net income $ 2,360 $ 489 $ (747) $ 2,102
======== ======= ======= ========
Earnings per share $ 0.34 $ 0.26
======== ========
Shares used to compute earnings per common share 7,042 8,114
===== =====
</TABLE>
51
<PAGE>
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION OF
FLUOR DANIEL GTI, INC.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 27, 1996
----------------
GTI FDESI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS CONSOLIDATED
------ ------ ----------- ------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
ASSETS
Current assets:
Cash and cash equivalents $ 9,351 $ -- $ (3,186) $ 6,165
Marketable securities 23,491 -- (23,491) --
Accounts receivable, less allowance 43,215 2,564 -- 45,779
Unbilled revenues 16,327 2,889 -- 19,216
Other current assets 9,649 -- -- 9,649
----- ------- ------ -----
Total current assets 102,033 5,453 (26,677) 80,809
Property, plant and equipment, net 8,643 -- -- 8,643
Other assets, net 8,958 -- 5,662 14,620
----- ------ ----- ------
$119,634 $5,453 $(21,015) $104,072
======== ====== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,613 $ -- $ -- $ 6,613
Accrued salaries and benefits 3,508 -- -- 3,508
Other accrued liabilities 9,781 894 2,000 12,675
----- --- ----- ------
Total current liabilities 19,902 894 2,000 22,796
Stockholders' equity:
Preferred stock -- -- -- --
Common stock 81 1 (74) 8
Additional paid-in capital 55,965 335 24,799 81,099
Treasury stock, at cost (17,210) -- 17,210 --
Parent company investment -- 4,054 (4,054) --
Cumulative currency translation adjustment (1,192) -- 1,192 --
Retained earnings 62,088 169 (62,088) 169
------ --- ------- ---
Total stockholders' equity 99,732 4,559 (23,015) 81,276
====== ===== ======= ======
Total liabilities and stockholders' equity $119,634 $5,453 $(21,015) $104,072
======== ====== ======== ========
</TABLE>
- --------
(1) Pro forma adjustments have been made to reflect FDESI's cost of
subcontracted services in the Company's reporting presentation format.
(2) Pro forma adjustments to reflect the impact to interest income that would
have occurred had the Transactions taken place at the beginning of the
periods have been presented. The average interest rate earned on cash and
cash equivalents and marketable securities was approximately 4.35% and 4.17%
in fiscal 1995 and for the nine months ended January 27, 1996, respectively.
The interest income earned was substantially all federal tax-free.
(3) As a result of the Recapitalization, each share of Common Stock (par value
$.01) outstanding at the Effective Time will be converted into $8.62 in cash
and 0.5274 of a share of newly issued New Common Stock (par value $.001). A
52
<PAGE>
pro forma adjustment has been made to reflect the conversion of 6,963,550
shares of Common Stock outstanding at January 27, 1996 into 3,672,576 shares
of New Common Stock. In connection with the Recapitalization, pro forma
adjustments have been made to additional paid-in capital to reflect the
distribution to the Company's stockholders of $60,025,801. In the
Recapitalization, all treasury shares, in the dollar amount of $17,210,000,
will be eliminated.
(4) In the Merger, the Company will issue to Fluor 4,400,000 shares of New
Common Stock (approximately 55% of the New Common Stock after the
Transactions) in exchange for all of the outstanding shares of Fluor's
wholly-owned subsidiary FDESI and $33,350,000 in cash, and FDESI will become
a wholly-owned subsidiary of the Company. The Merger has been accounted for
as a reverse acquisition of GTI by FDESI. The pro forma adjustments include
the recognition of goodwill in the amount of $5,662,000, which will be
amortized over 30 years, and the elimination of (a) retained earnings of the
Company of $62,088,000, (b) currency translation adjustment of the Company
of $1,192,000 and (c) FDESI's parent investment of $4,054,000.
(5) Pro forma adjustments reflect transaction costs estimated to be
$2,000,000.
(6) Pro forma weighted average shares used to compute earnings per share have
been calculated by multiplying the weighted average shares for the periods
presented by the 0.5274 conversion factor in the Recapi- talization, and
then adding 4,400,000 shares of New Common Stock to be issued to Fluor in
the Merger.
(7) The allocation of the purchase price is not expected to significantly change
from that shown on the pro forma balance sheet.
53
<PAGE>
LEGAL MATTERS
The legality of the shares of New Common Stock to be issued in connection
with the Transactions will be passed upon for the Company by Testa, Hurwitz &
Thibeault, counsel for the Company.
EXPERTS
The consolidated financial statements of Groundwater Technology, Inc.
incorporated by referenced in Groundwater Technology, Inc.'s Annual Report (Form
10-K) for the year ended April 29, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Fluor Daniel Environmental Services, Inc. at
April 30, 1995, and for the year ended April 30, 1995, appearing in this Proxy
Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be mailed to all stockholders entitled to vote at the next annual meeting of the
Company must be received at the Company's principal executive offices not later
than April 12, 1996. In order to curtail controversy as to the date on which a
proposal was received by the Company, it is suggested that proponents submit
their proposals by Certified Mail -- Return Receipt Requested.
In addition, the Company's By-laws require the stockholders to give advance
notice and furnish certain information to the Company in order to bring matters
of business before an annual meeting or to nominate a person for election as a
director at an annual meeting or special meeting at which directors are to be
elected. Any such notice must be received on or before April 26, 1996, for
purposes of the Special Meeting (with respect to the election of directors
only), and on or before August 25, 1996 for purposes of the next annual meeting.
54
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1993, 1994, 1995 AND
NINE MONTHS ENDED JANUARY 31, 1995 AND 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors F-2
Financial Statements
Statements of Earnings F-3
Balance Sheets F-4
Statements of Cash Flows F-5
Statements of Parent Company Investment F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
We have audited the accompanying balance sheet of Fluor Daniel Environmental
Services, Inc. as of April 30, 1995, and the related statements of earnings,
cash flows and parent company investment for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As more fully described in Notes 1 and 4, the Company is a wholly owned
subsidiary of Fluor Daniel, Inc. and has material transactions with Fluor
Daniel, Inc. and its affiliates.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fluor Daniel Environmental
Services, Inc. at April 30, 1995 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Orange County, California
December 22, 1995
F-2
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF EARNINGS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
-------------------- -----------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues $41,253 $52,755 $35,425 $24,889 $26,319
Direct project costs 35,463 47,408 28,410 19,950 20,554
Indirect expenses:
Payroll and related costs 4,034 2,924 4,229 2,417 3,265
Other 1,243 1,305 1,710 1,060 1,698
----- ----- ----- ----- -----
40,740 51,637 34,349 23,427 25,517
------ ------ ------ ------ ------
Earnings before taxes 513 1,118 1,076 1,462 802
Income tax expense 197 436 420 570 313
--- --- --- --- ---
Net earnings $ 316 $ 682 $ 656 $ 892 $ 489
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
APRIL 30,
---------
JANUARY 31,
1994 1995 1996
---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable $ 215 $2,617 $2,564
Contract work in progress 1,260 405 2,889
----- --- -----
Total current assets $1,475 $3,022 $5,453
====== ====== ======
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
Advance billings on contracts $ 320 $ 361 $ 894
Contingencies and commitments Parent company investment:
Common stock -- $1 par value, $1,000 shares authorized, issued
and outstanding 1 1 1
Additional capital 335 335 335
Retained earnings (defict) (976) (320) 169
Advances (to) from parent 1,795 2,645 4,054
----- ----- -----
Total parent company investment 1,155 2,661 4,559
----- ----- -----
$1,475 $3,022 $5,453
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
-------------------- -----------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITY:
Net earnings $ 316 $ 682 $ 656 $ 892 $ 489
Adjustments to reconcile net earnings to net cash
provided (utilized) by operating activities:
Changes in operating assets and liabilities:
Accounts receivable 40 999 (2,402) (55) 53
Contract work in progress 569 (816) 855 1,208 (2,484)
Advance billing on contracts 143 177 41 784 533
Advances (to) from parent (1,068) (1,042) 850 (2,829) 1,049
------ ------ --- ------ -----
Net cash provided (utilized) by
operating activities -- -- -- -- --
Cash and cash equivalents at beginning of period -- -- -- -- --
------- ------- ------- ------ -------
Cash and cash equivalents at end of period $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
STATEMENTS OF PARENT COMPANY INVESTMENT
($ IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED ADVANCES PARENT
COMMON ADDITIONAL EARNINGS (TO) FROM COMPANY
STOCK CAPITAL (DEFICIT) PARENT INVESTMENT
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1992 $1 $335 $(1,974) $ 3,905 $ 2,267
Net earnings -- -- 316 -- 316
Advances (to) from parent -- -- -- (1,068) (1,068)
-- ---- ------- ------- -------
Balance, April 30, 1993 1 335 (1,658) 2,837 1,515
Net earnings -- -- 682 -- 682
Advances (to) from parent -- -- -- (1,042) (1,042)
-- ---- ------- ------- -------
Balance, April 30, 1994 1 335 (976) 1,795 1,155
Net earnings -- -- 656 -- 656
Advances (to) from parent -- -- -- 850 850
-- ---- ------- ------- -------
Balance, April 30, 1995 1 335 (320) 2,645 2,661
Net earnings -- -- 489 -- 489
Advances (to) from parent -- -- -- 1,409 1,409
-- ---- ------- ------- -------
Balance, January 31, 1996 $ 1 $ 335 $ 169 $ 4,054 $ 4,559
=== ===== ======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Fluor Daniel Environmental Services, Inc. (the Company), is a wholly-owned
subsidiary of Fluor Daniel, Inc. (Fluor Daniel), which through a holding company
is indirectly a wholly-owned subsidiary of Fluor Corporation (Fluor). For
purposes of this presentation, the Company's fiscal year has been designated as
the annual period ending on April 30, however, for tax purposes, the year end is
October 31. Pursuant to an Investment Agreement dated December 11, 1995, between
Groundwater Technology, Inc. (GTI) and Fluor Daniel, the Company will merge into
GTI as part of an overall transaction wherein Fluor will acquire a 55 percent
ownership interest in GTI.
The accompanying financial statements have been adjusted to reflect the
"carved-out" financial position, results of operations and cash flows of the
Company as if the contracts and personnel that constitute the environmental
remediation business of Fluor had been operating as a separate entity.
Operations reflect all environmental remediation contract work performed by
Fluor personnel for all federally funded non-Department of Energy contracts,
remediation projects for other government agencies and environmental risk
assessment, permitting and remediation for commercial clients. Additionally, the
Company provides certain environmental consulting services to Fluor and other
affiliated entities. Revenues from these consulting services have been reflected
in the accompanying statements in accordance with a Marketing Agreement (the
Agreement), signed in conjunction with the Investment Agreement between GTI and
Fluor Daniel. Under the terms of the Agreement, affiliates are charged for labor
cost plus established multipliers on base compensation. Due to the variable and
often unpredictable nature of the Company's work load, consulting services are
provided to Fluor as conditions allow.
The financial statements do not include an allocation of corporate general
and administrative expenses by Fluor as management believes that no significant
general and administrative expenses were incurred with respect to the Company's
operations beyond those reflected in the accompanying financial statements.
The Balance Sheet at April 30, 1995 and Statements of Earnings, Cash Flows
and Parent Company Investment for the year ended April 30, 1995, have been
audited whereas all other periods presented are unaudited.
SERVICE CONTRACTS
The Company recognizes revenues on long-term service contracts on the
percentage-of-completion method, primarily based on contract costs incurred to
date compared with total estimated contract costs. Changes to total estimated
contract costs and losses, if any, are recognized in the period in which they
are determined. Revenues recognized in excess of amounts billed are classified
as current assets under contract work in progress. Amounts billed to clients in
excess of revenues recognized to date are classified as current liabilities
under advance billings on contracts. The Company anticipates that substantially
all incurred costs associated with contract work in progress at January 31, 1996
will be billed and collected within twelve months. Accounts receivable do not
contain any significant amounts billed but not paid under retainage provisions
or claims.
INDIRECT EXPENSES
Indirect expenses include non-project costs of all environmental services
personnel assigned to the environmental operations of Fluor Daniel who are
available to provide services to the Company's clients and other Fluor Daniel
clients. Additionally, other indirect expenses primarily include charges from
Fluor Daniel for the fair value of rent for occupied space, computer usage and
other costs.
F-7
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
The majority of accounts receivable and contract work in progress are from
services provided to various U.S. government agencies. These contracts are
typically cost reimbursable government funded contracts that require payments as
projects progress or in certain cases advance payments. The Company maintains
reserves for potential credit losses and such losses, which have been minimal,
have been within management's estimates.
INTERIM FINANCIAL INFORMATION
The interim unaudited financial statements presented include all adjustments
(consisting only of normal adjustments) that management considers necessary for
a fair presentation of its financial position at such dates and its operating
results and cash flows for those periods. Results for interim periods are not
necessarily indicative of results for the entire year.
EARNINGS PER SHARE
Earnings per share information has been omitted since the Company has no
publicly traded equity securities.
2. INCOME TAXES
The operations of the Company are included in the consolidated federal
income tax return of Fluor. Under a tax allocation practice, the Company is
charged or credited by Fluor for federal income taxes, generally at the U.S.
statutory rate. The Company is also charged or credited for state income taxes.
As a result of the tax allocation practice, tax benefits associated with pre
1993 losses were recognized in the year the loss occurred. If the Company had
filed a separate return, these tax benefits would have been recognized in later
years, resulting in the elimination of substantially all of the income tax
expense for the years 1993 through 1995.
Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
amount recorded for income tax purposes. The Company does not have any deferred
income taxes.
The income tax expense included in the Statement of Earnings is as follows
($ in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
-------------------- -----------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal $174 $380 $366 $418 $273
State 23 56 54 62 40
-- -- -- -- --
Total Income Expense $197 $436 $420 $480 $313
==== ==== ==== ==== ====
</TABLE>
State taxes are the only significant difference between the Company's total
tax expense and the U.S. Statutory Federal income tax.
F-8
<PAGE>
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. EMPLOYEE BENEFITS
Employees of the Company who meet certain eligibility requirements
participate in the non-contributory defined contribution retirement plan of
Fluor. Contributions to this plan are based on a percentage of the par-
ticipants' gross salaries. In addition, eligible employees are allowed to
contribute up to 10 percent of their salaries to a savings investment plan with
Fluor providing a matching contribution up to 4 percent of their salaries. The
cost of these plans is included in the payroll burden rate charged to the
Company by Fluor Daniel.
4. RELATED PARTY TRANSACTIONS
The Company advances to and receives non-interest bearing funds from Fluor
Daniel. The Company is dependent upon Fluor Daniel for continued financing,
including funding required, if any, for settlement of claims, working capital
requirements and third party bid and performance guarantees made in the ordinary
course of business.
All direct and indirect labor has been provided by employees of Fluor Daniel
and the Company is charged for all related labor and benefit costs. Employee
benefit costs are charged to the Company by application of a payroll burden rate
to total base compensation. Such costs remain the liability of Fluor Daniel.
Intercompany revenues were $6,167,000, $4,613,000 and $4,941,000 for the
years ended April 30, 1993, 1994 and 1995, respectively, and $3,456,000 and
$3,498,000 for the nine months ended January 31, 1995 and 1996, respectively.
5. CONTINGENCIES AND COMMITMENTS
The Company is not currently involved in any legal proceedings, although
from time to time, it could become involved in litigation in the ordinary course
of business. The Company is contingently liable for commitments and performance
guarantees arising in the ordinary course of business. Claims arising from
service contracts have been made against the Company by clients, and the Company
has made certain claims against clients for costs incurred in excess of the
current contract provisions. The Company does not expect that the foregoing
matters will have a material adverse effect on its financial position or results
of operations.
6. INDUSTRY SEGMENT INFORMATION
The Company provides a wide range of environmental services to both the
private and government sectors including scientific and engineering applications
from environmental assessment, permitting and remediation through design and
construction to operations and maintenance services. These services are provided
to a variety of different industries including petroleum, chemical, power,
pharmaceutical and others.
In the fiscal year ended 1993, 1994 and 1995 and for the nine month periods
ended January 31, 1995 and 1996, revenues from U.S. Federal agencies were as
follows ($ in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
-------------------- -----------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Department of Defense $1,065 $2,256 $10,255 $7,127 $7,827
Percent of total revenues 2.6% 4.3% 28.9% 28.6% 29.7%
Environmental Protection Agency $5,741 $4,518 $ 3,712 $2,451 $5,375
Percent of total revenues 13.9% 8.6% 10.5% 9.8% 20.4%
</TABLE>
F-9
<PAGE>
Registration Statement on Form S-4
Groundwater Technology, Inc.
Annex A - Investment Agreement, as amended
Intentionally Omitted
See Exhibits 2.1 and 2.2 to Registration Statement
<PAGE>
ANNEX B
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 * (212) 892-3000
March 27, 1996
Board of Directors
Groundwater Technology, Inc.
100 River Ridge Drive
Norwood, MA 02062
Dear Sirs:
We understand that Groundwater Technology, Inc. (the "Company"), GTI
Acquisition Corporation ("Newco"), Fluor Daniel, Inc. ("FDI") and Fluor Daniel
Environmental Services, Inc. ("FDESI") contemplate entering into an Investment
Agreement dated as of December 11, 1995 (the "Investment Agreement"). Under the
terms of the Investment Agreement (i) FDI will acquire, in the merger of Newco
with and into FDESI (the "Merger"), 4,400,000 shares of a new class of common
stock of the Company (the "New Common Stock"), at which time it will deposit in
an exchange fund for the benefit of the shareholders of the Company $33,350,000
of the approximately $60,000,000 in the aggregate payable by the Company to its
shareholders in the Recapitalization (as defined below), (ii) the Company will
implement, in conjunction with the Merger, a plan of recapitalization (the
"Recapitalization") pursuant to which all of the existing shares of common stock
of the Company (the "Old Common Stock") will be reclassified into the right to
receive $8.62 per share in cash and 0.5274 of a share of New Common Stock, (iii)
the Company will issue to FDI for $1,650,000 an option (the "Option") to
purchase for $17.00 per share in cash up to 1,366,000 shares of New Common Stock
(subject to adjustment under certain circumstances), exercisable under the terms
and conditions set forth in the proposed Option Agreement between the Company
and FDI dated as of December 11, 1995 (the "Option Agreement"), and (iv) the
Company, FDI and FDESI will enter into the proposed Marketing and Intercompany
Services Agreements (such agreements, together with the Investment and Option
Agreements hereafter collectively referred to as the "Transaction Agreements")
which provide, among other things, for the conduct of their environmental
services business and certain arrangements for mutual support and assistance
(the Merger, Recapatilization and other transactions described above hereafter
collectively referred to as the "Transaction").
We have been requested by the Company to render our opinion as to the
fairness, from a financial point of view, to the Company and its shareholders of
the consideration to be received by the Company and its shareholders other than
FDI pursuant to the Transaction.
In arriving at our opinion, we have reviewed the Transaction Agreements and
financial and other information that was publicly available or furnished to us
by the Company, FDESI or FDI, including information provided during discussions
with their managements. Included in the information provided during discussions
with management were certain financial projections of the Company on a
stand-alone basis prepared by the management of the Company and projections for
the Company following the transaction, prepared by the managements of the
Company and FDI. In addition, we have compared certain financial and securities
data of the Company on a stand-alone basis and in combination with FDESI
pursuant to the Transaction with various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the common
B-1
<PAGE>
Board of Directors
Groundwater Technology, Inc.
Page 2 March 27, 1996
stock of the Company, reviewed prices and premiums paid in other transactions
involving disposition of assets and securities and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion. We were not requested to, nor did we, solicit the
interest of any other party in acquiring the outstanding common stock of the
Company or the Company or its constituent businesses.
In rendering our opinion, we have relied upon and assumed the accuracy,
without independent verification, completeness and fairness of all of the
financial and other information that was available to us from public sources,
and that was provided to us by the Company and FDI, or their respective
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the managements of the Company and FDI as to the
future operating and financial performance of the Company following the
Transaction. We have not assumed any responsibility for making any independent
evaluation of the Company's assets or liabilities or for making an independent
verification of any of the information reviewed by us. We have relied as to all
legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the securities of the Company may actually trade at any time.
Our opinion does not constitute a recommendation to any shareholder as to how
such shareholder should vote on the proposed Transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distribution of listed and unlisted securities, private placements and
valuation for estate, corporate and other purposes. DLJ has performed investment
banking and other services for the Company in the past and has been compensated
for such services. In the ordinary course of business, DLJ may actively trade
the equity securities of the Company for its own account and for the account of
customers and, accordingly, may hold a long or short position in such
securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the Company and its
shareholders, pursuant to the Transaction, as a whole, is fair from a financial
point of view to the Company and its shareholders.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
B-2
<PAGE>
GROUNDWATER TECHNOLOGY, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -- MAY 10, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Groundwater Technology, Inc., a Delaware
corporation, revoking all prior proxies, hereby appoints Walter C. Barber and
Allan S. Bufferd and each of them, proxies, with full power of substitution, to
vote all of the shares of common stock of Groundwater Technology, Inc., which
the undersigned is entitled to vote at the Special Meeting of Stockholders of
Groundwater Technology, Inc. to be held at the Courtyard Marriott, 300 River
Ridge Drive, Norwood, Massachusetts on Friday, May 10, 1996, at 9:30 a.m.,
local time, and at any adjournment or adjournments thereof, as set forth on the
reverse side and, in their discretion, upon any other business that may properly
come before the meeting. Attendance of the undersigned at the meeting or any
adjournment session thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate the intention of the undersigned to
vote said shares in person.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_______________________________ _________________________________
_______________________________ _________________________________
_______________________________ _________________________________
DETACH CARD
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1.) Proposal to approve and adopt the transactions contemplated by the
Investment Agreement by and among Fluor Daniel, Inc., Fluor Daniel Environmental
Services, Inc., Groundwater Technology, Inc. and GTI Acquisition Corporation
dated as of December 11, 1995, as amended, which shall constitute your approval
of the Amended and Restated Certificate of Incorporation, amendments to the
By-Laws, the issuance of New Common Stock to Fluor Daniel, Inc., the election of
Directors and the treatment and disposition of outstanding stock options and
rights under, and certain amendments to, Groundwater Technology, Inc.'s existing
stock plans in connection with the transactions.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
RECORD DATE SHARES:
2.) To transact such other business as may properly come before the meeting
and any adjournment thereof.
Please be sure to sign and date this Proxy. Date
Stockholder sign here Co-owner sign here
Mark box at right if comments or address change have been noted on reverse
side of this card. [ ]
DETACH CARD DETACH CARD
GROUNDWATER TECHNOLOGY, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Special Meeting of Stockholders, May
10, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Groundwater Technology, Inc.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation eliminates the
personal liability of directors for monetary damages for breach of fiduciary
duty as a director other than liability for (i) any breach of the director's
duty of loyalty to the Company, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) acts
covered by Section 174 of the General Corporation Law of Delaware or (iv) for
any transaction from which such director derived an improper personal benefit.
In general, under the Company's By-Laws directors and officers are indemnified
for liabilities and expenses they may incur with respect to actions taken in
their capacities as a director or officer, so long as such actions are taken
good faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company, and, with respect to any criminal action or
proceeding, actions that such director or officer had no reasonable cause to
believe were unlawful. The stated intent of the indemnification provisions
contained in the By-Laws is to provide for indemnification to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware as in effect
from time to time. These provisions remain unchanged in the Amended and Restated
Certificate of Incorporation and the Amended By-Laws as described in the Proxy
Statement/Prospectus included in this Registration Statement on S-4.
The Company has obtained directors' and officers' liability insurance
for the benefit of its officers and directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed pursuant to Item 601 of Regulation
S-K.
Exhibit No. Description
2.1 Investment Agreement by and among Fluor Daniel, Inc., Fluor
Daniel Environmental Services, Inc., Groundwater Technology,
Inc. and GTI Acquisition Corporation dated as of December 11,
1995. (Previously filed as Exhibit 2.1 to Quarterly Report on
Form 10-Q for the quarter ended January 27, 1996 and
incorporated herein by reference.)
2.2 Agreement of Amendment by and among Fluor Daniel, Inc., Fluor
Daniel Environmental Services, Inc., Groundwater Technology,
Inc. and GTI Acquisition Corporation dated as of March 29,
1996.
5.1 Legal Opinion of Testa, Hurwitz & Thibeault.
II-1
<PAGE>
23.1 Consent of Ernst & Young, LLP re financial statements of
Groundwater Technology, Inc.
23.2 Consent of Ernst & Young, LLP re financial statements of
Fluor Daniel Environmental Services, Inc.
23.3 Consent of Testa, Hurwitz & Thibeault (included in Exhibit 5)
24.1 Power of Attorney (see Page II-4)
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annul report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(c) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim of indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
II-2
<PAGE>
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Norwood, Massachusetts
on April 4, 1996.
GROUNDWATER TECHNOLOGY, INC.
By: /s/ Walter C. Barber
-----------------------------------
Walter C. Barber
Chairman of the Board of Directors,
President and
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Groundwater Technology,
Inc., hereby severally constitute and appoint Walter C. Barber, Robert E.
Sliney, Jr. and Brian D. Goldstein, Esq., and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement on Form S-4 filed herewith and any and all pre-effective and
post-effective amendments to said Registration Statement, and generally to do
all such things in our names and on our behalf in our capacities as officers and
directors to enable Groundwater Technology, Inc. to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
Registration Statement and any and all amendments thereto.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
<S> <C> <C>
/s/ Walter C. Barber Chairman of the Board of Directors and April 4, 1996
- --------------------------------- President and Chief Executive Officer
Walter C. Barber (Principal Executive Officer)
/s/ Robert E. Sliney, Jr. Vice President, Treasurer and Chief Financial April 4, 1996
- --------------------------------- Officer (Principal Financial and Accounting
Robert E. Sliney, Jr. Officer)
/s/ Allan S. Bufferd Director April 4, 1996
- ---------------------------------
Allan S. Bufferd
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
/s/ Bayard Henry Director April 4, 1996
- ---------------------------------
Bayard Henry
/s/ Robert P. Schechter Director April 4, 1996
- ---------------------------------
Robert P. Schechter
</TABLE>
II-5
AGREEMENT OF AMENDMENT
AGREEMENT OF AMENDMENT dated March 29, 1996 by and among Groundwater
Technology, Inc., a Delaware corporation (the "Company"), GTI Acquisition
Corporation, a California corporation and a wholly owned subsidiary of the
Company ("Newco"), Fluor Daniel, Inc., a California corporation ("Holdings"),
and Fluor Daniel Environmental Services, Inc., a California corporation and a
wholly owned subsidiary of Holdings ("FDESI").
WHEREAS, the Company, Newco, Holdings and FDESI entered into that certain
Investment Agreement dated as of December 11, 1995 (the "Investment Agreement")
pursuant to which, among other things, the Company will effect a
recapitalization of its capital stock, FDESI will be merged with and into Newco,
and Holdings will receive certain shares of capital stock of the Company; and
WHEREAS, the parties desire to amend the Investment Agreement as set forth
below;
NOW, THEREFORE, the parties hereto, in consideration of the premises and
agreements herein contained and intending to be legally bound hereby, agree as
follows:
1. That the fifth "whereas" clause be amended and restated to read in
its entirety as follows:
"WHEREAS, to emphasize the close relationship of Holdings and the Company
after the Merger at the completion of the transactions contemplated
hereby, upon consummation of such transactions, the Company will change
its name to 'Fluor Daniel GTI, Inc.' (the "Name Change");
2. That subclause (ii) of Section 1.1 be amended to read in its entirety as
follows:
"(ii) the name of the Company will be changed to 'Fluor Daniel
GTI, Inc.'"
3. That clause (ii) of subsection (c) of Section 1.3 be amended and restated
to read in its entirety as follows:
"(ii) the average of the closing price of the New Common Stock on
the NASDAQ National Market for the five trading days immediately
following the Closing Date."
4. That the second sentence of Section 5.7 be amended and restated to
read in its entirety as follows:
"Promptly after the Closing Date (but effective as of the Closing Date of
the Merger), each of the Employee Stock Options outstanding under the
Company's 1987 Stock Plan and each of the outstanding Director Stock
Options shall be canceled, and the holder thereof shall receive, in
exchange therefore, a substitute option (an "Adjusted Option") to
purchase a number of shares of New Common Stock equal to the number of
shares of Old Common Stock subject to such canceled option multiplied by
the Adjustment Fraction (as defined below), at a per share exercise price
equal to the per share exercise price of such canceled option multiplied
by a fraction equal to one divided by the Adjustment Fraction."
5. That clause (iii) of the last paragraph of Section 6.3 be amended
and restated to read in its entirety as follows:
"(iii) an officer, director, employee, principal stockholder, consultant
or partner of a person that is a competitor of Holdings or any of its
Affiliates (unless agreed to in writing by Holdings) or of the Company or
any of its Affiliates (unless agreed to in writing by the Company)."
6. That the references to April 30, 1996 contained in subsections (ii),
(vi), (vii) and (viii) of Section 9.1 be amended to read May 31, 1996.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Investment Agreement
This Agreement of Amendment may be executed in counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument.
Except as amended herein, the Investment Agreement shall remain in full
force and effect.
A-71
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date and year first
above written.
GROUNDWATER TECHNOLOGY, INC.
By: /s/ WALTER C. BARBER
--------------------------------
Name: Walter C. Barber
Title: President
GTI ACQUISITION CORPORATION
By: /s/ WALTER C. BARBER
--------------------------------
Name: Walter C. Barber
Title: President
FLUOR DANIEL, INC.
By: /s/ D.L. MYERS
--------------------------------
Name: D.L. Myers
Title: President
FLUOR DANIEL ENVIRONMENTAL
SERVICES, INC.
By: /s/ D.L. MYERS
--------------------------------
Name: D.L. Myers
Title: President
[LETTERHEAD OF TESTA, HURWITZ & THIBEAULT]
April 4, 1996
Groundwater Technology, Inc.
100 River Ridge Drive
Norwood, MA 02062
RE: Groundwater Technology, Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have represented Groundwater Technology, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of the Company's
Registration Statement on Form S-4 (the "Registration Statement") covering the
issuance of shares of Common Stock, par value $.001 per share (the "Shares") of
the Company to its stockholders in a recapitalization of the Company and to
Fluor Daniel, Inc., a California corporation ("Fluor") in respect of the merger
of GTI Acquisition Corporation, a wholly owned subsidiary of the Company
("Newco") with and into Fluor Daniel Environmental Services, Inc., a wholly
owned subsidiary of Fluor ("FDESI") pursuant to that certain Investment
Agreement dated as of December 11, 1995 by and among the Company, GTI
Acquisition Corporation, Fluor Daniel, Inc. and Fluor Daniel Environmental
Services, Inc., as amended by that certain Agreement of Amendment dated March
29, 1996 by and among the Company, GTI Acquisition Corporation, Fluor Daniel,
Inc. and Fluor Daniel Environmental Services, Inc. (the "Investment Agreement"),
all as more fully described in the Registration Statement. Unless the context
otherwise requires, all capitalized terms used herein shall have the meanings
ascribed to them in the Proxy Statement/Prospectus constituting part of the
Registration Statement (the "Proxy Statement/Prospectus").
We have reviewed the corporate proceedings taken by the Board of Directors
of the Company with respect to the authorization and issuance of the Shares. We
have also examined and relied upon originals or copies, certified or otherwise
authenticated to our satisfaction, of all corporate records, documents,
agreements or other instruments of the Company and have made all investigations
of law and have discussed with the Company's officers all questions of fact that
we have deemed necessary or appropriate.
For purposes of each of the opinions expressed below, we have assumed (i)
the effectiveness of the Registration Statement and the issuance and
distribution of the Shares as contemplated by the Investment Agreement as
described by the Proxy Statement/Prospectus,
<PAGE>
(ii) the approval of the Transactions by the stockholders of the Company, (iii)
the effective filing of the Amended and Restated Certificate of Incorporation of
the Company and (iv) the effective filing of a certificate of merger intended to
effect the merger of Newco with and into FDESI.
Based upon and subject to the foregoing, we are of the opinion that the
Shares shall have been duly authorized and, when issued in accordance with the
Amended and Restated Certificate of Incorporation and the terms of the
Investment Agreement as described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Proxy
Statement/Prospectus contained in the Registration Statement under the caption
"Legal Matters."
Very truly yours,
/s/ TESTA, HURWITZ & THIBEAULT
TESTA, HURWITZ & THIBEAULT
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the capition "Experts" in the
Proxy Statement/Prospectus of Groundwater Technology, Inc. that is made part of
the Registration Statement (Form S-4) of Groundwater Technology, Inc. for the
registration of 8,076,347 shares of its common stock and to the incorporation by
reference therein of our report dated May 26, 1995, with respect to the
consolidated financial statements of Groundwater Technology,Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended April 29, 1995 and
the related financial statement schedule included therein, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 2, 1996
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 22, 1995, with respect to the financial
statements of Fluor Daniel Environmental Services, Inc. included in the Proxy
Statement of Groundwater Technology, Inc. that is made part of the Registration
Statement (Form S-4) and Prospectus of Groundwater Technology, Inc. for the
registration of new shares of its common stock.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Orange County, California
April 1, 1996
