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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FLUOR DANIEL GTI, INC.
(NAME OF SUBJECT COMPANY)
FLUOR DANIEL GTI, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
34386C 10 6
(CUSIP NUMBER OF CLASS OF SECURITIES)
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WALTER C. BARBER
PRESIDENT AND CEO
FLUOR DANIEL GTI, INC.
100 RIVER RIDGE DRIVE
NORWOOD, MA 02062
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPY TO:
GORDON H. HAYES, JR., ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
125 HIGH STREET
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Fluor Daniel GTI, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 100 River Ridge Drive, Norwood, Massachusetts 02062.
The title of the class of the Company's equity securities to which this
statement relates is Common Stock, par value $0.001 per share (each a "Share,"
and collectively, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by Tiger Acquisition Corporation,
a Delaware corporation (the "Purchaser"), a direct wholly-owned subsidiary of
International Technology Corporation, a Delaware corporation doing business as
The IT Group, Inc. ("Parent"), to purchase all of the outstanding Shares at a
price of $8.25 per Share, net to the seller in cash without interest (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 3, 1998 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements thereto collectively constitute the "Offer").
The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1, dated
November 3, 1998 (the "Schedule 14D-1"), which was filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules promulgated by the
Commission thereunder. The Offer is being made pursuant to the Agreement and
Plan of Merger (the "Merger Agreement") dated as of October 27, 1998 among
Parent, Purchaser, the Company and Fluor Daniel, Inc., a California
corporation ("FD"). The Merger Agreement provides that Purchaser's obligation
to accept for payment and to pay for any Shares tendered is subject to the
condition that (i) FD, which owns approximately 52.3% of the Shares, tender
and not withdraw the Shares it owns, and (ii) at least a majority of the
Shares not owned by FD are tendered and not withdrawn (collectively, the
"Minimum Condition"). The number of Shares that would satisfy the Minimum
Condition is referred to in this statement as the "Minimum Share Number."
Pursuant to the Merger Agreement, FD has agreed to tender and not withdraw the
Shares it owns in the Offer. The Merger Agreement provides, among other
things, that as soon as practicable after the completion of the Offer and the
satisfaction or waiver of the conditions set forth in the Merger Agreement,
including the Minimum Condition, Purchaser will be merged with and into the
Company (the "Merger"), and the Company will continue as the surviving
corporation of the Merger and as a wholly-owned subsidiary of Parent (the
"Surviving Corporation"). At the effective time of the Merger, each Share then
outstanding (other than Shares owned directly or indirectly by Parent or held
in the treasury of the Company, all of which will be canceled, and other than
Shares held by stockholders who perfect rights as dissenting stockholders
under Delaware law) will be converted into the right to receive $8.25 in cash
or any higher price per Share paid in the Offer. A copy of the Merger
Agreement has been filed as Exhibit 1 to this statement and is incorporated
herein by reference.
Pursuant to the Amended and Restated Marketing Agreement, dated as of
October 27, 1998, among the Company, FD and Parent (the "Amended Marketing
Agreement"), FD has agreed to continue the marketing relationship established
pursuant to the existing marketing agreement, dated as of May 10, 1996,
between the Company and FD (the "Existing Marketing Agreement"), and to expand
that relationship by, among other things, establishing a steering committee to
promote cooperation among the parties. Additional provisions of the Amended
Marketing Agreement are summarized in Item 3(b) below. A copy of the Amended
Marketing Agreement has been filed as Exhibit 2 to this statement and is
incorporated herein by reference.
As set forth in the Schedule 14D-1, the address of the principal executive
office of Parent and Purchaser is 2790 Mosside Boulevard, Monroeville,
Pennsylvania 15416-2792.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, is set forth above under Item 1.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or actual or potential conflicts of interest
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between the Company or its affiliates and (1) the Company and its executive
officers, directors or affiliates or (2) Parent or Purchaser or their
respective executive officers, directors or affiliates.
(1) CERTAIN CONTRACTS, AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS AND ANY
ACTUAL OR POTENTIAL CONFLICTS OF INTERESTS BETWEEN (A) THE COMPANY OR ITS
AFFILIATES AND (B) THE COMPANY AND ITS EXECUTIVE OFFICERS, DIRECTORS OR
AFFILIATES.
PROXY DISCLOSURE
Certain contracts, agreements, arrangements or understandings between the
Company and its directors, executive officers and affiliates are described on
pages 2-4 and 6-12 of the Company's Proxy Statement dated as of February 27,
1998 for its 1998 Annual Meeting of Stockholders (the "Proxy Statement").
Pages 2-4 and 6-12 of the Proxy Statement have been filed as Exhibit 3 to this
statement and are incorporated herein by reference.
RETENTION AND SEVERANCE ARRANGEMENTS
Retention Plan
The Company has in place an executive retention plan (the "Retention Plan")
covering six key executives, including all executive officers of the Company.
The Retention Plan provides that participating executives will be paid bonuses
as follows: 33% of the executive's 1998 base salary on January 1, 1999; and
67% of the executive's 1998 base salary on January 1, 2000.
The Retention Plan is designed to encourage participating executives to stay
with the Company through January 1, 2000 and is not tied to Company
performance. In the event a participating executive is terminated because of a
change of control or an involuntary reduction in force, the balance due to
such executive will be paid in full. If a participating executive leaves
voluntarily or is terminated for cause or for lack of performance, the balance
to be paid is forfeited. As of the date hereof, to the knowledge of the
Company, none of the executive officers of the Company covered by the
Retention Plan, other than Walter C. Barber, the Company's President and Chief
Executive Officer, have been informed by Parent that their employment will be
terminated in connection with the Offer or Merger.
Severance Plan
The Company has in place a severance plan (the "Severance Plan") covering 12
employees, including all executive officers of the Company other than Mr.
Barber, which is activated upon a Change of Control of the Company (as defined
in the Severance Plan), which includes the Merger. The Severance Plan provides
for the payment of the following compensation upon the termination in certain
circumstances of a participant's employment with the Company within one year
following a Change of Control of the Company: (i) a cash lump sum equal to the
sum of (a) the participant's annual salary through the date of such
termination, to the extent not theretofore paid, (b) the participant's target
bonus amount, pro-rated for the period ending on the date of termination, and
(c) any deferred compensation and accrued time off with pay, to the extent not
theretofore paid, and (ii) an amount equal to a multiple of either one or two
times the participant's base salary, as determined by the Compensation
Committee of the Company's Board of Directors. A copy of the Severance Plan
has been filed as Exhibit 4 to this statement and is incorporated herein by
reference. As of the date hereof, to the knowledge of the Company, none of the
executive officers of the Company covered by the Severance Plan have been
informed by Parent that their employment will be terminated in connection with
the Offer or Merger.
Settlement and Release Agreement
Mr. Barber entered into a Settlement and Release Agreement with the Company
dated as of September 11, 1998 (the "Settlement and Release Agreement"), which
has been filed as Exhibit 5 to this statement and is incorporated herein by
reference. Pursuant to the Settlement and Release Agreement, Mr. Barber has
agreed to resign his employment with the Company, as well as all offices and
directorships he holds with the Company,
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upon a Change of Control of the Company (as defined in the Settlement and
Release Agreement), which includes the consummation of the Offer. In exchange
for such resignation, the Company has agreed to provide Mr. Barber with (i) a
lump sum payment of $780,000, net of any federal withholding taxes and other
deductions the Company is required to make by law, and (ii) payment for
outplacement services in accordance with the Company's customary procedures
not to exceed $20,000. Pursuant to the Settlement and Release Agreement, Mr.
Barber agrees to release the Company and any related companies, and their
employees and directors, from any claims or demands based on Mr. Barber's
employment with the Company or the termination of that employment; and the
Company agrees to release Mr. Barber from all claims or demands based on Mr.
Barber's employment with the Company or the termination of that employment.
Mr. Barber further agrees that he will not, from the date of the Settlement
and Release Agreement through June 1, 1999, directly or indirectly, provide
services, advice or other assistance to a competitor of the Company concerning
or with respect to historic clients of the Company.
STOCK OPTION ACCELERATION
Pursuant to the Merger Agreement, the holders of Company stock options under
the Company's Amended and Restated 1987 Stock Plan, the Company's 1997 Stock
Plan and the Company's Amended and Restated 1995 Director Stock Option Plan,
including the executive officers of the Company and participating directors,
will receive a cash payment in connection with the cancellation of their
options. The cash payment for each Company option that has an exercise price
that is lower than $8.25 will equal the difference between $8.25 and the
exercise price of such option, multiplied by the number of Shares subject to
such option (whether vested or unvested). The cash payment for each Company
option that has an exercise price that is equal to or greater than $8.25 will
be $.10 per Share subject to such option (whether vested or unvested).
Pursuant to this provision of the Merger Agreement, the Company will make
aggregate payments equal to approximately $116,388. Of that total, Mr. Barber
will receive approximately $19,472; Mr. Glenn V. Batchelder will receive
approximately $6,508; Mr. J. Steven Paquette will receive approximately
$5,125; Mr. David L. Backus will receive approximately $500; Ms. Anne Nolan
will receive approximately $2,019; and Ms. Mary C. Stack will receive
approximately $479. The Company will make aggregate payments to non-employee
directors in the amount of $2,119. Of that total, Mr. Allan S. Bufferd will
receive approximately $1,221 and Mr. Ernie Green will receive approximately
$898.
STOCK PURCHASE PLAN
Pursuant to the Merger Agreement, the payment period ending November 30,
1998 (the "Payment Period") under the Company's Amended and Restated 1986
Employee Stock Purchase Plan (the "Purchase Plan") will be accelerated to
November 27, 1998 (the "Acceleration Date"), and each Participant (as defined
in the Purchase Plan) will receive in lieu of shares of Common Stock that
could have been purchased under the Purchase Plan when the Payment Period ends
on the Acceleration Date, an amount (subject to any applicable withholding
tax) in cash equal to the difference between $8.25 and the Option Price (as
defined in the Purchase Plan). Pursuant to this provision of the Merger
Agreement, the Company will make aggregate payments equal to approximately
$91,126. Of that total, Mr. Barber will receive approximately $1,005; Mr.
Batchelder will receive $0; Mr. Paquette will receive $0; Mr. Backus will
receive approximately $3,145; Ms. Nolan will receive $0; and Ms. Stack will
receive approximately $1,933. In addition, all funds contributed to the
Purchase Plan by Participants which have not been used to purchase shares of
Common Stock as of the Acceleration Date will be returned in cash, without
interest.
INVESTMENT AGREEMENT
Pursuant to that certain Investment Agreement among the Company, FD and a
subsidiary of each of the Company and FD, dated as of December 11, 1995 (the
"Investment Agreement"), FD and the Company agreed that, until April 30, 1999:
(a) neither FD nor any of its affiliates would enter into any contract,
agreement or transaction with the Company or any of its affiliates that is
material to the Company's business, taken as a whole, without the prior
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approval of a majority of the independent directors of the Company's Board of
Directors (the "Independent Directors") except for (i) any contract, agreement
or transaction contemplated by the Existing Marketing Agreement or the Option
Agreement, dated December 11, 1995, between the Company and FD (the "Option
Agreement"), pursuant to which the Company granted FD an option (the "FD
Option") to purchase 1,768,970 shares of Common Stock (as adjusted to date)
(the "FD Option Shares") at a purchase price of $13.1274 per share (as
adjusted to date), (ii) any contract, agreement or transaction which is
entered into between such parties in the ordinary course of business, and
(iii) any agreement or transaction governed by paragraphs (b), (c) or (d)
below;
(b) neither FD nor any of its affiliates would, directly or indirectly,
purchase or otherwise acquire, any Common Stock, securities of the Company
convertible into or exchangeable for Common Stock, or options, rights,
warrants and similar securities issued by the Company to acquire 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 Common Stock that would be owned of record or beneficially by FD
or its affiliates ("FD's Percentage") would not exceed 65%, provided, however,
that the foregoing restrictions on purchases would not apply to the exercise
by FD of the FD Option; provided, however, further, that if the FD Option is
exercised by FD, the FD Option Shares held, directly or indirectly, by FD
would be counted in any determination of FD's Percentage with respect to any
purchases by FD or its affiliates after the date of such exercise of the FD
Option;
(c) the Company would not, directly or indirectly, repurchase any shares of
Common Stock without the prior approval of a majority of the Independent
Directors, unless immediately after such repurchase, FD's Percentage would not
exceed 65%;
(d) FD would not sell, transfer, mortgage or otherwise dispose of any of the
Common Stock held by FD without the prior approval of a majority of the
Independent Directors; provided, however, that the prior approval of the
Independent Directors would not be required 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; and
(e) the Company would not enter into any amendment or terminate or waive any
provision of the Investment Agreement, the Option Agreement or the Existing
Marketing Agreement without the prior approval of a majority of the
Independent Directors.
The Independent Directors have approved the Merger Agreement and the
transactions contemplated thereby. See Item 4(a) below.
EXISTING MARKETING AGREEMENT
The Existing Marketing Agreement sets forth the understanding of the Company
and FD with respect to their arrangement (a) to work together to approach the
environmental services market, (b) for FD to use the Company's services in
connection with FD's engineering and construction business, and (c) to
provide, on an intercompany basis, support services to each other. The
Existing Marketing Agreement further provides that the Company will have
primary responsibility for the marketing and execution of environmental
services, and FD will have primary responsibility for the marketing and
execution of environmental services provided by the Company when they involve
an integration of such services with substantial non-environmental services or
involve a substantial increase in the scale and scope of services provided by
the Company. FD is further obligated to promote the use of the Company and to
retain the Company on a sole-source basis for environmental services that are
related or incidental to FD's businesses, 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, the Company and FD are to provide overhead support and contract
support services to each other on an intercompany basis. The Company is
permitted to use the name "Fluor Daniel GTI, Inc." during the term of the
Existing Marketing Agreement, and subsidiaries of the Company are permitted to
use a similar name if the parties decide it is useful in marketing the
operations of the Company's subsidiaries.
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The term of the Existing Marketing Agreement is ten years unless further
extended by the parties. In the event FD ceases to own at least 20% of the
issued and outstanding equity of the Company, then, under certain
circumstances, FD or the Company may terminate the Existing Marketing
Agreement prior to expiration of the term, and FD may revoke the license
granted to the Company and its subsidiaries to use the name "Fluor Daniel" in
the Company's corporate name.
The Existing Marketing Agreement will be replaced by the Amended Marketing
Agreement upon consummation of the Offer. See the discussion under the heading
"Amended Marketing Agreement."
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND MERGER. In considering the
recommendations of the Board set forth in Item 4(a) below, the Company's
stockholders (the "Stockholders") should be aware that certain members of the
Board of Directors have interests in the Merger and the Offer, which are
described in this statement, and in Annex A, and which may present them with
certain conflicts of interest.
(2) CERTAIN CONTRACTS, AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS AND ANY
ACTUAL OR POTENTIAL CONFLICTS OF INTEREST BETWEEN (A) THE COMPANY OR ITS
AFFILIATES AND (B) PARENT OR PURCHASER AND THEIR RESPECTIVE EXECUTIVE
OFFICERS, DIRECTORS OR AFFILIATES.
For a description of certain agreements or understandings between the
Company, on the one hand, and Parent or certain affiliates of Parent, on the
other, see the information set forth below and in Item 4 hereof under the
heading "Background of the Transaction: Past Contracts, Transactions and
Negotiations with Parent and Purchaser."
MERGER AGREEMENT
The following is a summary of the Merger Agreement. Defined terms used below
and not defined herein have the respective meanings assigned to those terms in
the Merger Agreement, a copy of which is filed as Exhibit 1 hereto and
incorporated herein by reference. The Merger Agreement should be read in its
entirety for a more complete description of the matters summarized below.
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering Stockholder shall receive the Offer
Price for each Share tendered in the Offer. Purchaser's obligation to accept
for payment or pay for Shares is subject to the satisfaction of the conditions
that are described in "Certain Conditions of the Offer" below (the "Conditions
of the Offer"). Any determination concerning the satisfaction of the terms and
conditions of the Offer will be made by Purchaser in its good faith judgment
and such determination will be final and binding on all tendering
Stockholders. Parent expressly reserves the right to increase the price per
Share payable in the Offer (although it has no present intention of doing so)
or to make any other changes in the terms and conditions of the Offer, except
that, pursuant to the Merger Agreement, unless previously approved by the
Special Committee and the Board of Directors in writing, Parent may not (i)
decrease the Offer Price, (ii) change the form of consideration payable in the
Offer, (iii) reduce the maximum number of Shares to be purchased in the Offer,
(iv) amend the Conditions of the Offer to broaden their scope, (v) impose
additional conditions of the Offer or amend any other term of the Offer in any
manner adverse to holders of Shares or extend the Offer if all of the
Conditions of the Offer are satisfied or waived, or (vi) amend the Minimum
Condition.
Notwithstanding the foregoing, Parent expressly reserves the right, in its
sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time and from time to time, without the consent of the
Special Committee or the Board of Directors, to (i) from time to time extend
the Offer (each such individual extension not to exceed 10 business days after
the previously scheduled expiration date of the Offer), if at the scheduled
expiration date of the Offer any of the conditions to the Offer shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived; (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable
to the Offer; or (iii) extend the Offer for any reason on up to two (2)
occasions in each case for a period of not more than five (5) business days
beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of
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this sentence if on such expiration date there shall have been tendered more
than the number of Shares sufficient to satisfy the Minimum Condition but less
than 90% of the Shares, provided the Purchaser agrees to permanently waive
paragraphs (b) and (e) of the Conditions of the Offer. If all of the
Conditions of the Offer are not satisfied on any scheduled expiration date of
the Offer then, provided that all such conditions are reasonably capable of
being satisfied prior to December 31, 1998, Parent shall extend the Offer from
time to time (each such individual extension not to exceed 10 business days
after the previously scheduled expiration date) until such conditions are
satisfied or waived, provided that Parent shall not be required to extend the
Offer beyond December 31, 1998.
Board Representation. Pursuant to the Merger Agreement, immediately
following the delivery of the notice of acceptance of Shares pursuant to the
Offer, if the Minimum Condition has been met, Parent shall be entitled to
designate four directors (the "Parent Directors") of the six authorized
directors on the Board. The Parent Directors shall be Anthony J. DeLuca,
Philip O. Strawbridge, James G. Kirk and James R. Mahoney. Immediately
following delivery to the Depositary of the Notice of Acceptance, the
resignations as directors of the Company of Walter C. Barber, David L. Myers
and Ronald G. Peterson, delivered to Parent concurrently with the execution
and delivery of the Merger Agreement, shall be deemed effective and Allan S.
Bufferd and Ernie Green as the "Continuing Directors" shall execute and
deliver a written consent or shall otherwise take effective action electing
the Parent Directors to the Board of Directors. The Continuing Directors shall
remain members of the Board of Directors until the effective time of the
Merger (the "Effective Time") and, in lieu of Continuing Directors, if the
same shall not serve, the Company shall use reasonable efforts to ensure that
the Board of Directors shall consist of at least two members who are neither
officers, stockholders, designees nor affiliates of Parent or FD or their
respective affiliates. In the event a Continuing Director resigns from the
Board of Directors, Parent, Purchaser and the Company shall permit the
remaining Continuing Director or Directors to appoint the resigning director's
successor who shall be deemed to be a Continuing Director. Immediately
following the election of the Parent Directors, the Company will use its
reasonable efforts to cause persons designated by Parent to constitute the
same percentage as the Parent Directors represent on the Board of Directors of
(i) each committee of such Board of Directors (other than any committee of
such Board of Directors established to take action under the Merger
Agreement), (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board. The Company's obligations to appoint
designees of Parent to the Board of Directors shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser or another direct or indirect wholly-owned
subsidiary of Parent will be merged with and into the Company, the separate
corporate existence of Purchaser or of such other subsidiary of Parent, as the
case may be, will cease and the Company will continue as the Surviving
Corporation. The Effective Time will occur at the date and time that a
certificate of merger, in such form as is required by, and executed in
accordance with, the relevant provisions of the Delaware General Corporate Law
("DGCL") (the "Certificate of Merger"), is filed with the Secretary of State
of the State of Delaware. The Surviving Corporation shall continue its
corporate existence under the laws of the State of Delaware. The Certificate
of Incorporation of the Company in effect at the Effective Time will be the
Certificate of Incorporation of the Surviving Corporation until duly amended
in accordance with the terms thereof and the DGCL, except that the Article
FOURTH of the Certificate of Incorporation shall be amended such that the
Surviving Corporation shall have the authority to issue 1,000 shares of its
common stock, par value $.01 per share. The Bylaws of the Company in effect at
the Effective Time shall be the Bylaws of the Surviving Corporation. The
directors of Purchaser at the Effective Time will be the directors of the
Surviving Corporation until their successors are duly elected and qualified,
and the officers of the Company at the Effective Time will be the officers of
the Surviving Corporation until replaced in accordance with the Bylaws of the
Surviving Corporation. It is expected that, immediately following the
Effective Time, the Board of Directors of the Surviving Corporation will
appoint Anthony J. DeLuca, Philip O. Strawbridge, James R. Mahoney and James
G. Kirk as the President, Executive Vice President, Senior Vice President and
Senior Vice President and Secretary of the Surviving Corporation,
respectively.
Parent Stock Option. Pursuant to the Merger Agreement, after Purchaser has
accepted for payment Shares tendered pursuant to the Offer (including the
Minimum Share Number), Parent has the irrevocable option (the
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"Parent Option") to purchase that number of authorized and unissued shares of
the Company's Common Stock equal to 14% of the Shares outstanding immediately
after the exercise of the Parent Option (the "Option Shares") at a purchase
price equal to the Offer Price. The Company's sole obligation to issue and
deliver the Option Shares is subject to certain conditions set forth in the
Merger Agreement, including the requirement that the number of Option Shares
plus the number of Shares accepted for payment pursuant to the Offer, upon
issuance of the Option Shares, will constitute at least 90% of then
outstanding Shares.
Use of Company Cash. Pursuant to the Merger Agreement the Company has agreed
that prior to the initial expiration date of the Offer it will take all steps
reasonably necessary, after consulting with Parent, to sell any marketable
securities owned by it so that on the initial expiration date of the Offer the
Company will have maximized its available cash and will thereafter until such
time as the Parent Directors are elected invest such cash in overnight
investments. Upon the election of the Parent Directors and at the direction of
the Company's Board of Directors, up to $20 million of the available cash of
the Company will be loaned to Parent and evidenced by an interest bearing
promissory note payable on demand. The proceeds of such loan will be delivered
to the depositary for the Offer to be used solely to fund the purchase of
Shares in the Offer.
Consideration to Be Paid in the Merger. At the Effective Time, each issued
and outstanding Share (other than Shares held by Parent, Purchaser or any
other direct or indirect subsidiary of Parent or Shares that are owned by the
Company or any direct or indirect subsidiary of the Company, which will be
canceled and retired without any payment with respect thereto, or Shares (the
"Dissenting Shares") with respect to which the holder properly exercises such
holder's appraisal rights in accordance with the DGCL), shall be converted
into, and become exchangeable for the Offer Price.
Employee/Director Stock Options. Pursuant to the Merger Agreement, at the
Effective Time, all options to purchase a share of Common Stock (whether
vested or unvested) (each a "Company Option") granted under the Company's
Amended and Restated 1987 Stock Plan, the Company's 1997 Stock Plan and the
Company's Amended and Restated 1995 Director Stock Option Plan, in each case
as amended to the date hereof (the "Stock Plans") that have an exercise price
that is lower than the Offer Price (the "In-the-Money Options") will be cashed
out by the Company by payment to each holder of such In-the-Money Options the
difference between the exercise price and the Offer Price. In accordance with
the terms of the Stock Plans or interpretations thereof by the Board of
Directors, the Company will notify all holders of Company Options that have an
exercise price that is equal to or higher than the Offer Price (the
"Underwater Options"), promptly after the Effective Time, that the Stock Plans
have been terminated and that, in connection with such termination, the
Company will pay to such holders an amount equal to the number of such
Underwater Options (whether vested or unvested) multiplied by $.10.
The Board of Directors will take the following actions with respect to the
Stock Purchase Plan: (1) accelerate the current Payment Period (as defined in
the Stock Purchase Plan) to November 27, 1998 (the "Acceleration Date") and
(2) pay each participant in lieu of each share that could have been purchased
under the Stock Purchase Plan when the Payment Period ends on the Acceleration
Date, an amount (subject to any applicable withholding tax) in cash equal to
the difference between the Offer Price and the Option Price (as defined in the
Stock Purchase Plan). In addition, all funds contributed to the Stock Purchase
Plan which have not been used to purchase shares of the Common Stock as of the
Acceleration Date will be returned, in cash, without interest, to participants
of the Stock Purchase Plan as soon as administratively feasible after the
Acceleration Date.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company, Purchaser and Parent with
respect to corporate existence and power, capitalization, subsidiaries,
corporate authorization relative to the Merger Agreement, governmental
consents and approvals, Commission reports, financial statements, absence of
certain changes or events, litigation and liabilities, employee benefits,
compliance with laws, environmental laws,
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intellectual property, taxes, government contracts, documents relating to the
Offer and the Merger and other matters. No representations or warranties made
by the Company, Parent or Purchaser will survive beyond the Effective Time,
and no covenants or agreements made in the Merger Agreement will survive
beyond the Effective Time, except for those covenants or agreements which by
their terms contemplate performance after the Effective Time. Certain of the
representations and warranties of the Company set forth in the Merger
Agreement will not be breached unless the matter constituting the breach would
have a material adverse effect on the financial condition, properties,
business, results of operations or prospects of the Company and its
subsidiaries taken as a whole (a "Company Material Adverse Effect"); provided,
however, that any adverse effect that is caused by conditions affecting the
economy or security markets generally shall not be taken into account in
determining whether there has been a Company Material Adverse Effect and any
adverse effect that is caused by conditions affecting the primary industry in
which the Company currently competes shall not be taken into account in
determining whether there has been a Company Material Adverse Effect (provided
that such effect does not adversely affect the Company in a disproportionate
manner). Certain of the representations and warranties of the Parent set forth
in the Merger Agreement will not be breached unless the matter constituting
the breach would have a material adverse effect on the ability of Parent or
Purchaser to conduct the Offer or consummate the Merger or any of the other
material transactions contemplated by the Merger Agreement (a "Parent Material
Adverse Effect").
Agreements of FD. Pursuant to the terms of the Merger Agreement, FD has
agreed, among other things, to tender in, and not withdraw from, the Offer,
all Shares owned by it and its affiliates. In addition, FD currently holds the
FD Option, which will be canceled upon consummation of the Offer. The FD
Option has an exercise price of $13.1274 per share, which is above the Offer
Price, and, if not canceled in connection with Offer, would expire on December
11, 1998.
Conduct of Business. The Company has agreed that, prior to the date on which
Parent's representatives are elected to the Board of Directors (unless Parent
shall otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, and except as otherwise expressly contemplated by the
Merger Agreement):
(a) the business of the Company and its subsidiaries will be conducted
only in the ordinary and usual course consistent with past practice;
(b) the Company will not, among other things (i) issue, sell or otherwise
dispose of or encumber any of its subsidiaries' capital stock owned by it;
(ii) amend its charter, bylaws, except for any amendment which will not
hinder, delay or make more costly to Parent the Offer or the Merger; (iii)
split, combine or reclassify its outstanding shares of capital stock; (iv)
declare, set aside or pay any dividend payable in cash, stock or property
in respect of any capital stock; (v) repurchase, redeem or otherwise
acquire or permit any of its subsidiaries to purchase or otherwise acquire,
any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock; or (vi)
adopt a plan of complete or partial liquidation or dissolution, merger or
otherwise restructure or recapitalize or consolidate with any Person (as
defined in the Merger Agreement) other than Purchaser or another wholly-
owned subsidiary of Parent;
(c) neither the Company nor any of its subsidiaries will (i) authorize
for issuance or issue, sell or otherwise dispose of or encumber any shares
of, or securities convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of its capital stock of any class or any voting debt (other than
shares of Common Stock issuable pursuant to Company Options outstanding on
the date hereof); (ii) other than in the ordinary and usual course of
business consistent with past practices, transfer, lease, license,
guarantee, sell or otherwise dispose of or encumber any other property or
assets or incur or modify any material indebtedness or other liability
(except for additional borrowings in the ordinary course under lines of
credit in existence on the date hereof); (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of
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any other Person except in the ordinary course of business consistent with
past practices and except for obligations of subsidiaries of the Company
incurred in the ordinary course of business; (iv) make any loans to any
other Person (other than to subsidiaries of the Company or, customary loans
or advances to employees in connection with business-related travel in the
ordinary course of business consistent with past practices); (v) make any
commitments for, make or authorize any capital expenditures other than in
amounts less than $50,000 individually and $250,000 in the aggregate or, by
any means, make any acquisition of, or investment in, assets or stock of
any other Person; (vi) except as may be required by applicable law or by
existing contractual commitments, enter into any new agreements or
commitments for any severance or termination pay to, or enter into any
employment or severance agreement with, any of its directors, officers or
employees or consultants except for those which have been previously
disclosed to Parent and reasonable severance payments made to employees in
the ordinary course of business and consistent with past practices; (vii)
except as may be required by applicable law or by existing contractual
commitments, terminate, establish, adopt, enter into, make any new grants
or awards under, amend or otherwise modify, any compensation and benefit
plan or increase or accelerate the salary, wage, bonus or other
compensation of any employees or directors (except for increases occurring
in the ordinary and usual course of business, which shall include normal
periodic performance reviews and related compensation and benefit
increases, but not any general across-the-board increases) or consultants
or pay or agree to pay any pension, retirement allowance or other employee
benefit not required by any existing compensation and benefit plan;
(viii) except as may be required as a result of a change in law or in GAAP,
change any of the accounting
principles or practices used by it; (ix) revalue in any respect any of its
material assets, including writing down the value of inventory or writing-
off notes or accounts receivable, other than in the ordinary course of
business consistent with past practices; (x) settle or compromise any
material claims or litigation or terminate or materially amend or modify
any of its material Contracts or waive, release or assign any material
rights or claims; (xi) make any tax election or permit any insurance policy
naming it as a beneficiary or loss-payable payee to be canceled or
terminated; (xii) take any action or omit to take any action that would
cause any of its representations and warranties herein to become untrue in
any material respect; and (xiii) authorize or enter into any agreement to
do any of the foregoing.
Indemnification. Pursuant to the Merger Agreement, Parent and the Surviving
Corporation will jointly and severally, after the Effective Time, indemnify,
defend and hold harmless, each person who is now, or has been at any time
prior to the date of the Merger Agreement or who becomes prior to the
Effective Time a director, officer, employee or agent of the Company or any of
its subsidiaries (when acting in such capacity), against any costs or expenses
(including reasonable attorneys' fees and expenses), judgments, settlement
amounts, fines, losses, claims, demands, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative arising out of
matters existing or occurring prior to or after the Effective Time, whether
threatened, asserted or claimed prior to, at or after the Effective Time,
which is based in whole or in part on, or arising in whole or in part out of
the fact that such person is or was a director (including as a member of the
Special Committee) or officer of the Company or any of its Subsidiaries
including, without limitation, all Costs based in whole or in part on, or
arising in whole or in part out of, or pertaining to the Merger Agreement or
the transactions contemplated thereby, to the fullest extent that the Company
would have been permitted under the DGCL and its certificate of incorporation,
bylaws and other agreements in effect as of the date of the Merger Agreement
to indemnify such individual. In addition, pursuant to the Merger Agreement,
the Company will purchase, and Parent will reimburse the Company at the
Closing (as defined in the Merger Agreement) for the fully prepaid premium
expense incurred for "Prior Acts" Directors' & Officers' Liability Insurance
(the "D&O Insurance") to be effective as of the date of the Merger Agreement.
The term of the D&O Insurance will be six (6) years from the date of the
Merger Agreement without restriction as to when any alleged or actual wrongful
acts or omissions may have occurred up to and including the date of sale of
the Shares owned by FD to Purchaser pursuant to the Offer. Subject to the
provisions and limitations of the Merger Agreement, the D&O Insurance will
provide individual directors and officers liability coverage and corporate
reimbursement coverage. In addition, the D&O Insurance is noncancellable
except for the nonpayment of premium or the ultimate failure of the Shares
owned by FD being purchased by Purchaser.
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Conditions to the Merger. Pursuant to the Merger Agreement, if Purchaser
shall have purchased Shares pursuant to the Offer, the respective obligations
of Parent, Purchaser and the Company to consummate the Merger shall be subject
to the fulfillment of each of the following conditions, any or all of which
may be waived in whole or in part by Parent, Purchaser or the Company, as the
case may be:
(a) The Merger Agreement and the Merger shall have been approved and
adopted by the holders of a majority of the Shares;
(b) The waiting period applicable to the consummation of the Merger under
the Hart-Scott-Rodino Antitrust Act of 1976, as amended (the "HSR Act")
shall have expired or been terminated and, other than filing the Delaware
Certificate of Merger, all filings with any governmental entity required to
be made prior to the Effective Time by the Company or Parent or any of
their respective subsidiaries, with, and all government consents required
to be obtained prior to the Effective Time by the Company or Parent or any
of their respective subsidiaries in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby by the Company, Parent and Purchaser shall have been
made or obtained (as the case may be), except where the failure to so make
or obtain will not result in either a Company Material Adverse Effect or a
Parent Material Adverse Effect; and
(c) No court or other governmental entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits
consummation of the transactions contemplated by the Merger Agreement
(collectively, an "Order"), and no governmental entity shall have
instituted any proceeding or formally threatened to institute any
proceeding seeking any such Order and such proceeding or threat remains
unresolved.
The respective obligations of Parent and Purchaser to consummate the Merger
shall be subject to the fulfillment of each of the following conditions, any
or all of which may be waived in whole or in part by Parent:
(a) The representations and warranties of the Company set forth in the
Merger Agreement shall be true and correct in all material respects as of
the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date (as defined in the Merger Agreement) as though made on and as
of the Closing Date it being understood that representations and warranties
shall be deemed to be true and correct unless the respects in which the
representations and warranties (without giving effect to any "materiality"
limitations or references to "material adverse effect" set forth therein)
are untrue or incorrect in the aggregate is likely to have a Company
Material Adverse Effect; and
(b) The Company and FD shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date;
The obligations of the Company to consummate the Merger shall be subject to
the fulfillment of each of the following conditions, any or all of which may
be waived in whole or in part by the Company:
(a) The representations and warranties of Parent and Purchaser set forth
in the Merger Agreement shall be true and correct in all material respects
as of the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date it being
understood that representations and warranties shall be deemed to be true
and correct unless the respects in which the representations and warranties
(without giving effect to any "materiality" limitations or references to
"material adverse effect" set forth therein) are untrue or incorrect in the
aggregate is likely to have a Parent Material Adverse Effect;
(b) Parent and Purchaser shall have performed in all material respects
all obligations to be performed by it under the Merger Agreement at or
prior to the Closing Date.
Acquisition Proposals. Pursuant to the Merger Agreement, the Company has
agreed that neither it nor any of its subsidiaries nor any director or
employee of the Company or its subsidiaries will, and that it will direct
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and use its best efforts to cause its and its subsidiaries' agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly
through another person or entity, initiate, solicit or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
The Company has further agreed that neither it nor any of its subsidiaries nor
any of their respective directors or employees will, and that it will direct
and use its best efforts to cause its and its subsidiaries agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly
through another person or entity, engage or participate in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
attempt to make or implement an Acquisition Proposal; provided, however, that
if at any time prior to the acceptance for payment of Shares pursuant to the
Offer, the Board of Directors determines in good faith, after taking into
consideration the advice of its outside legal counsel, that it is likely to be
required in order for its members to comply with their fiduciary duties under
applicable law, the Company may, in response to an inquiry, proposal or offer
for an Acquisition Proposal which was not solicited subsequent to the date of
the Merger Agreement, (x) furnish non-public information with respect to the
Company to any such person pursuant to a confidentiality agreement on terms
substantially similar to the Confidentiality Agreement entered into between
the Company and Parent prior to the execution of the Merger Agreement and (y)
participate in discussions and negotiations regarding such inquiry, proposal
or offer; and provided, further,
that nothing contained in the Merger Agreement shall prevent the Company or
its Board of Directors from complying with Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any proposed Acquisition Proposal.
The Board of Directors may withdraw its recommendation of the Merger and the
other transactions contemplated by the Merger Agreement, or approve or
recommend or cause the Company to enter into an agreement with respect to a
Superior Proposal (as defined below), if the Board of Directors determines in
its good faith judgment, after taking into consideration the advice of its
outside legal counsel, that it is likely to be required in order for its
members to comply with their fiduciary duties under applicable law; provided,
however, that the Company shall not be entitled to enter into any agreement
with respect to a Superior Proposal unless the Merger Agreement is
concurrently terminated in accordance with its terms. A "Superior Proposal"
means any bona fide proposal to acquire directly or indirectly for
consideration consisting of cash and/or securities more than 50% of the Shares
then outstanding or all or substantially all the assets of the Company and its
subsidiaries, taken as a whole, and otherwise on terms which the Board of
Directors by a majority vote determines in its good faith judgment (after
consultation with the Company's financial advisor or another financial adviser
of nationally recognized reputation) to be reasonably capable of being
completed (taking into account all material legal, financial, regulatory and
other aspects of the proposal and the Person making the proposal, including
the availability of financing therefor) and more favorable to the Stockholders
from a financial point of view than transactions contemplated by the Merger
Agreement.
Termination of the Merger Agreement. Subject to certain conditions and
exceptions set forth in the Merger Agreement, the Merger Agreement may be
terminated at any time prior to the Effective Time, whether before or after
its approval by the stockholders of the Company thereof, (i) by mutual written
consent of the Company (through the Continuing Directors, the Special
Directors or their designated successors), Parent and Purchaser, by action of
their respective boards of directors; (ii) by either Parent or the Company, by
action of their respective boards of directors if (A) any Order permanently
restraining, enjoining or otherwise prohibiting the Merger shall be entered
(whether before or after the approval by the stockholders of the Company) and
such Order is or shall have become nonappealable, provided that the party
seeking to terminate this Agreement shall have used its reasonable efforts to
remove or lift such Order, or (B) the Minimum Condition shall not have been
satisfied on or before December 31, 1998; (iii) by the Company if (A) (1)
Parent fails to commence the Offer as provided by the Merger Agreement or (2)
after December 31, 1998, Parent shall have failed to accept Shares for payment
pursuant to the Offer, (B) the Offer is terminated or withdrawn pursuant to
its terms without any Shares being purchased thereunder, (C) prior to Parent's
purchase of Shares pursuant to the Offer, (1) the Company
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<PAGE>
enters into a binding written agreement with respect to a Superior Proposal
after fully complying with the terms of the Merger Agreement and (2) the
Company concurrently with such termination pays to Parent in immediately
available funds all expense reimbursements due Parent pursuant to the terms of
the Merger Agreement, including the termination fee, or (D) there has been a
material breach by Parent or Purchaser of any representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured prior to the earlier of (1) twenty (20) days after
written notice of such breach is given by the Company to Parent and (2) two
(2) business days before the date on which the Offer expires; and (iv) by
Parent and Purchaser if (A) after December 31, 1998, Parent shall not have
paid for Shares pursuant to the Offer, (B) the Board shall have withdrawn or
modified its approval or recommendation of this Agreement in a manner
materially adverse to Parent, or (C) Parent shall have terminated the Offer in
accordance with the Conditions of the Offer.
If the Merger Agreement is terminated for any of the above reasons (subject
to the provisions of the Merger Agreement), the Merger Agreement shall become
void and be of no further effect; provided, however, that such a termination
shall not relieve any party to the Merger Agreement of any liability or
damages resulting from any breach of the Merger Agreement and, provided,
further, that, subject to certain exceptions set forth in the Merger
Agreement, the Company shall reimburse Parent in the amount of $400,000 as
reimbursement for all of Parent's costs and expenses in connection with the
Merger Agreement, the Offer and the Merger. Subject to certain exceptions, the
Company shall promptly, but in no event later than two days after the date of
such request, pay Parent a termination fee of $1.5 million in lieu of any
liability or obligation to pay damages (other than the $400,000 reimbursement
payable to Parent for its costs and expenses) if (i) there shall be an
Acquisition Proposal existing at the time of termination of the Merger
Agreement by Parent and Purchaser and (A) Parent and Purchaser shall have
terminated the Merger Agreement because the Board has withdrawn or modified
its approval or recommendation of the Merger Agreement in a manner materially
adverse to Parent or (B) Parent and Purchaser shall have terminated the Merger
Agreement because of Parent's termination of the Offer in accordance with the
Conditions of the Offer or (ii) if there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of Parent
or Purchaser and the Company shall have terminated the Merger Agreement to
accept a Superior Proposal.
Amendment and Waiver. The Merger Agreement can only be amended by a written
agreement executed by the parties signatory thereto.
Expenses. Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the negotiation, execution and delivery of the
Merger Agreement, the Merger and the other transactions contemplated by the
Merger Agreement, including the Offer, shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the Proxy Statement and the printing and mailing of such documents shall
be borne by the Parent.
Certain Conditions of the Offer. Notwithstanding any other provision of the
Offer or the Merger Agreement, and subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) relating to Parent's
obligation to pay for or return tendered Shares after termination or
withdrawal of the Offer, Parent shall not be required to accept for payment or
pay for any Shares tendered pursuant to the Offer, shall delay the acceptance
for payment of any Shares and if required by the Merger Agreement, shall
extend the Offer by one or more extensions until December 31, 1998, and may
terminate the Offer at any time after December 31, 1998 if (i) less than the
Minimum Share Number is tendered pursuant to the Offer by the expiration of
the Offer and not withdrawn; (ii) any applicable waiting period under the HSR
Act has not expired or terminated prior to the Expiration Date of the Offer;
or (iii) at any time after the date of the Merger Agreement, and before
acceptance for payment of any Shares, any of the following events shall occur
and be continuing on or after December 31, 1998:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any
domestic or foreign court or other governmental entity (other than the
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger) that, in the reasonable judgment of Parent,
12
<PAGE>
would be expected to, directly or indirectly (i) prohibit, or impose any
material limitations on, Parent's ownership or operation of all or a
material portion of the Company's businesses or assets, or compel Parent to
dispose of or hold separate any material portion of the business or assets
of the Company or Parent and its respective subsidiaries, in each case
taken as a whole, (ii) prohibit, or make illegal, the acceptance for
payment, payment for or purchase of Shares or the consummation of the
Offer, the Merger or the other transactions contemplated by the Merger
Agreement, (iii) result in the material delay in or restricts the ability
of Parent, or renders Parent unable, to accept for payment, pay for or
purchase some or all of the Shares, or (iv) impose material limitations on
the ability of Parent effectively to exercise full rights of ownership of
the Shares, including the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders;
(b) (i) the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in any material respect as of
the date of the Merger Agreement and as of consummation of the Offer as
though made on or as of such date (except for representations and
warranties made as of a specified date) but only if the respects in which
the representations and warranties made by the Company (without giving
effect to any "materiality" limitations or references to "material adverse
effect" set forth therein) are inaccurate would in the aggregate have a
Company Material Adverse Effect, (ii) the Company shall have failed to
comply with its covenants and agreements contained in this Agreement in all
material respects which failure is likely to have a Company Material Effect
and, with respect to any breach or failure described in clause (b)(i) or
(b)(ii) above that can be cured, the breach or failure shall not have been
cured prior to ten (10) business days after Parent has furnished the
Company with written notice of such breach or failure or (iii) there shall
have occurred any events or changes which have had or which are likely to
have a Company Material Adverse Effect;
(c) the Board shall have withdrawn, or modified or changed in a manner
adverse to Parent (including by amendment of the Schedule 14D-9), its
recommendation of the Offer, the Merger Agreement or the Merger, or
recommended another proposal or offer for the acquisition of the Company,
or the Board of Directors, shall have resolved to do any of the foregoing;
(d) the Merger Agreement shall have terminated in accordance with its
terms; or
(e) there shall have occurred and continue to exist (i) any general
suspension of, or limitation on prices for, trading in securities on the
NYSE (other than a shortening of trading hours or any coordinated trading
halt triggered solely as a result of a specified increase or decrease in a
market index), (ii) the declaration of any banking moratorium or any
suspension of payments in respect of banks, or any limitation (whether or
not mandatory) by any Governmental Entity (as defined in the Merger
Agreement) on, or other event materially adversely affecting, the extension
of credit by lending institutions in the United States, or (iii) a
commencement of a war or armed hostilities directly involving the United
States which has and continues to have a material adverse effect on the
trading of securities on the NYSE;
which in the reasonable judgment of Parent, in any such case, makes it
inadvisable to proceed with the Offer or the acceptance for payment of or
payment for the Shares.
The foregoing conditions, other than condition (i) above, are for the sole
benefit of Parent and may be waived by Parent, in whole or in part at any time
and from time to time, in the sole discretion of Parent. The failure by Parent
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time, except as otherwise
provided for in the Merger Agreement.
AMENDED MARKETING AGREEMENT
The following is a summary of the Amended Marketing Agreement. Defined terms
used below and not defined herein have the respective meanings assigned to
those terms in the Amended Marketing Agreement, a copy of which has been filed
as Exhibit 2 to this statement and is incorporated herein by reference. The
Amended Marketing Agreement should be read in its entirety for a more complete
description of the matters summarized below.
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Worldwide Use of Parent for Environmental Services. Effective upon the
consummation of the Offer, the Amended Marketing Agreement provides that,
subject to the conditions set forth therein, FD and subsidiaries of which FD
owns more than 50% (collectively, the "Fluor Daniel Group"), will promote the
use of Parent and subsidiaries of which Parent owns more than 50%
(collectively, the "IT Group"), on a worldwide basis for certain environmental
services (the "Environmental Services") that are related or incidental to FD's
engineering and construction business. There was no separate monetary
consideration given in connection with the execution of this agreement. The
agreement also provides for the continuation of the services under contracts
presently being performed by FD for the Company, and by the Company for FD, on
the terms previously agreed to by such parties under the Existing Marketing
Agreement as well as a steering committee consisting of two senior executives
of each of FD and Parent, for purposes of discussing and promoting joint
marketing efforts under the agreement. The Amended Marketing Agreement has a
term of four (4) years.
Specified Environmental Services. Subject to specific exceptions set forth
in the Amended Marketing Agreement, the Environmental Services for which the
Fluor Daniel Group will promote the IT Group, are investigation, evaluation,
design, feasibility studies, management and pollution prevention, project
management, remediation, permitting, quality control, start-up assistance,
licensing and consulting (including incidental project finance, procurement,
construction and maintenance) relating to (i) the treatment of groundwater,
wastewater, soil and hazardous waste, or (ii) air emissions controls. The
Environmental Services exclude certain projects, such as FD's Fernald and
Hanford projects and other U.S. Department of Energy management and
operations, operating and maintenance, and management and integration
projects, and certain categories of projects.
The IT Group has committed to use commercially reasonable efforts to perform
Environmental Services as may be requested by FD, but will not be obligated to
provide such services. With respect to any clients common to the Fluor Daniel
Group and the IT Group, the IT Group will have the marketing lead for projects
that primarily involve Environmental Services and FD will have the marketing
lead for projects that primarily involve engineering and construction
services. In addition, pursuant to the Amended Marketing Agreement, the Fluor
Daniel Group and the IT Group have agreed to explore mutually beneficial ways
to involve each other in other future projects.
Restrictions on Environmental Acquisitions. The Amended Marketing Agreement
also provides that the Fluor Daniel Group will not acquire or merge with any
entity which is engaged primarily in performing Environmental Services without
the prior written consent of the Company. If the Fluor Daniel Group acquires
or merges with an entity which is not engaged primarily in performing
Environmental Services, but which performs some Environmental Services, the
Fluor Daniel Group will be permitted to perform Environmental Services through
such entity and the Amended Marketing Agreement will continue on a non-
exclusive basis. However, the Fluor Daniel Group would be required to enter
into discussions with the IT Group with a view to determining whether the IT
Group would have any interest in acquiring the portion of the entity acquired
by the Fluor Daniel Group which performs Environmental Services, other than
services for the United States government (the "Environmental Portion").
If after 60 days following any such acquisition, Parent and the Fluor Daniel
Group have not reached an agreement concerning the Environmental Portion, then
the Fluor Daniel Group will be required to engaged in a good faith effort to
divest the Environmental Portion. If the Fluor Daniel Group does not divest
the Environmental Portion or decide to liquidate or phase out the business of
the Environmental Portion, then the Fluor Daniel Group will give consideration
to any request by Parent that the terms and conditions of the Amended
Marketing Agreement be adjusted to avoid an inequitable hardship to Parent
resulting from any material diminution of value of the Amended Marketing
Agreement arising from such acquisition by the Fluor Daniel Group.
Intercompany Services. The Amended Marketing Agreement also allows for
certain services to be provided among Parent, the Company and FD at specified
rates of compensation. The Intercompany Services Agreement, dated October 27,
1998, by and among Parent, the Company and FD, sets forth certain terms for
performance and payment, as well as a form of written request for services and
work releases. A copy of the Intercompany Services Agreement has been filed as
Exhibit 6 to this statement and is incorporated herein by reference.
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Offices; Prohibition on Use of FD Name. The Amended Marketing Agreement
provides for the orderly disentanglement of the seven offices of the Company
presently co-located with offices of FD as well as for the Company to promptly
stop using the name and logo of FD, and to obtain such third-party consents,
licenses and permits as may be necessary to allow the complete disentanglement
of the Company and FD promptly following consummation of the Offer.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated as of July 28, 1998, between the Company and
Parent (the "Confidentiality Agreement"). This summary does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Confidentiality Agreement, a copy of which has been filed as Exhibit 7 to
this statement and is incorporated herein by reference.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent agreed to keep confidential all non-public,
confidential or proprietary information furnished to it by the Company
relating to the Company, subject to certain exceptions (the "Confidential
Information") and to use the Confidential Information solely for the purpose
of evaluating a possible transaction involving the Company and Parent.
In addition to the provisions of the Confidentiality Agreement with respect
to the maintenance of confidentiality and the permitted use of information
provided by or on behalf of the Company, Parent also agreed in the
Confidentiality Agreement to non-solicitation of executive, management and
other key employees.
SUBCONTRACT BETWEEN AFFILIATES OF FD AND PARENT
Certain affiliates of Parent and FD have entered into, or proposed to
perform, a number of contracts in the ordinary course of business. IT
Corporation, a wholly-owned subsidiary of Parent ("IT") is a subcontractor to
Fluor Daniel Fernald, Inc. ("FDF"), a wholly-owned subsidiary of FD. Pursuant
to the multi-year subcontract, which was awarded in September 1997, IT
anticipates performing in excess of $120 million in remediation services in
connection with remediation of the United States Department of Energy's
Fernald Environmental Management Project. IT is in negotiation with FDF with
respect to additional compensation or work resulting from changed conditions
existing at the site. Also with respect to the Fernald facility, IT has been
awarded an additional subcontract to perform approximately $305,000 in
stabilization testing regarding certain wastes at the facility. In September
1998, IT submitted a competitive bid (but to date has not been awarded a
contract) to perform, as a subcontractor to FDF, certain accelerated waste
retrieval services at the project, which FDF has publicly estimated to involve
between $25 million and $35 million of work. In October 1998 IT submitted a
competitive bid (but to date has not been awarded a contract) to perform, as a
subcontractor to FDF, additional waste removal, stabilization, and disposal
services at the project, which FDF has publicly estimated to involve between
$20 million and $25 million of work. In addition, in October 1997, FDF awarded
OHM Remediation Services Corp. ("OHMRSC"), an indirect wholly-owned subsidiary
of Parent, a subcontract to perform approximately $250,000 in engineering
studies at the facility. FDF has an option, which is exercisable until March
1999, to order from OHMRSC approximately $529,000 in remediation services with
respect to previously-studied thorium wastes.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the Company, acting on the unanimous
recommendation of a Special Committee of independent directors consisting of
Allan S. Bufferd and Ernie Green, has unanimously determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, are in the best interests of the Stockholders, has unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and recommends that the Stockholders
accept the Offer and tender their Shares pursuant to the Offer.
A copy of a letter to all Stockholders dated November 3, 1998 communicating
the recommendation of the Board has been filed as Exhibit 8 to this statement
and is incorporated herein by reference.
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(B) BACKGROUND OF THE TRANSACTION: PAST CONTRACTS, TRANSACTIONS AND
NEGOTIATIONS WITH PARENT AND PURCHASER.
Since the acquisition by FD of a majority interest in the Company, the Board
of Directors from time to time has evaluated the state of the environmental
remediation industry. At a regularly scheduled meeting of the Board of
Directors on February 10, 1998, the Board of Directors and certain members of
senior management analyzed a number of industry trends and conditions, as well
as issues specific to the Company. The Board of Directors also reviewed a
report by an outside consulting firm prepared at its direction, as well as
other reports by the Company's senior management.
On March 16 and 17, 1998, the Board of Directors held a regular meeting to,
among other things, consider strategic alternatives for the Company. In
connection with that purpose, several investment banking firms made
presentations to the Board of Directors to serve as the Company's financial
advisor.
The Board of Directors engaged BT Alex. Brown Incorporated ("BT Alex.
Brown") as its financial advisor on March 30, 1998 to undertake a review of
strategic alternatives, including continued internal growth, acquisitions of
or partnering with other companies and a sale to or combination with another
company, and to ascertain the parties that may have a potential interest in
partnering or combining with or acquiring the Company. BT Alex. Brown
presented an initial report to the Board of Directors at a special meeting
held April 15, 1998 . Based on this report, the Board of Directors asked BT
Alex. Brown to contact parties potentially interested in a partnering
arrangement or combination with the Company or an acquisition of the Company.
At a special telephonic meeting of the Board of Directors held on May 27,
1998, BT Alex. Brown updated the Board of Directors on its contacts.
Between April and June 1998 BT Alex. Brown contacted 16 companies, including
Parent, in the environmental remediation and consulting and engineering
industries. The Company entered into confidentiality agreements with ten
companies that expressed preliminary interest, and such companies received
non-public information regarding the Company, including certain projected
financial information regarding the Company. At a regularly scheduled meeting
of the Board of Directors held on June 15, 1998, BT Alex. Brown reported on
its contacts with potentially interested parties and noted that those parties
that had expressed potential interest in the Company were willing to consider
an acquisition but not a partnering arrangement or other strategic
alternatives. BT Alex. Brown reported at that Board meeting that it had
received only one expression of interest to combine operations with the
Company. The Board of Directors instructed BT Alex. Brown to continue
discussions with parties initially contacted and to contact additional
potentially interested parties.
Between June and August 1998, BT Alex. Brown contacted six additional
companies and the Company entered into confidentiality agreements with and
provided non-public information to two additional companies. The Company and
Parent entered into the Confidentiality Agreement dated July 28, 1998. During
August 1998, two companies, including Parent, conducted due diligence reviews
of the Company and met with Mr. Walter C. Barber, President and Chief
Executive Officer of the Company, and other members of the Company's senior
management to discuss the desirability of combining operations and general
approaches to a potential acquisition, to exchange non-public information and
to review likely synergies that could be created in a combination. At a
special telephonic meeting of the Board of Directors held on August 10, 1998,
BT Alex. Brown updated the Board on its discussions with potentially
interested parties.
On September 9, 1998, Parent submitted a non-binding letter of interest
outlining a proposed acquisition of the Company (the "September 9 Proposal").
In the September 9 Proposal Parent proposed to acquire all of the issued and
outstanding shares of common stock of the Company for aggregate cash in the
range of $65 to $70 million. The September 9 Proposal contemplated a tender
offer to the Stockholders, which would be conditioned on the ability of Parent
to acquire in excess of 50% of the common stock in the tender offer, the
continuation of the Existing Marketing Agreement between FD and the Company
and agreement on specific due diligence issues in addition to other customary
conditions to be contained in a definitive merger agreement. The September 9
Proposal was also subject to Parent's completing a due diligence review of the
Company.
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At a regularly scheduled meeting of the Board of Directors held on September
10 and 11, 1998, BT Alex. Brown reported on its contacts with potentially
interested parties and advised the Board of Directors regarding Parent's
September 9 Proposal. BT Alex. Brown also reported that Parent's proposal was
the only written proposal received since June 1998. The Board of Directors
discussed the Company's strategic alternatives and the status of discussions
with other potentially interested parties. The Board of Directors discussed
the September 9 Proposal, including the consideration offered, the express
lack of a financing condition for Parent, the extent to which Parent had
conducted due diligence, the requirement of the continuation of the Existing
Marketing Agreement between FD and the Company, the readiness and ability of
Parent to promptly effectuate a transaction and other issues. As a result of
this analysis the Board of Directors decided that the best means of maximizing
stockholder value and enhancing the competitive position of the Company would
be to pursue a sale of the Company. The Board of Directors noted that any
proposed sale of FD's majority interest in the Company would require the
approval of the disinterested, independent members of the Board of Directors
pursuant to the Investment Agreement between FD and the Company. In a
telephone conversation with BT Alex. Brown on September 11, 1998, Philip O.
Strawbridge, Senior Vice President and Chief Administrative Officer of Parent,
indicated a price of $8.00 per Share in the proposed tender offer and Parent's
willingness to consider increasing the price to $8.50 per Share if FD would
finance a portion of the transaction. They also discussed the possibility of
Parent making payments to FD in exchange for certain revenue commitments in a
new marketing agreement. BT Alex. Brown reported this conversation to the
Board of Directors during the September 11, 1998 meeting. The independent
directors separately discussed the September 9 Proposal and, together with the
full Board of Directors, instructed BT Alex. Brown to explore several
possibilities of increasing the price offered by Parent and eliminating
certain conditions set forth in the September 9 Proposal.
After several telephone conversations between BT Alex. Brown and Mr.
Strawbridge regarding terms of a possible transaction and one telephone
conversation between management of FD and Parent regarding a possible new
marketing agreement, Parent submitted a revised non-binding letter of interest
outlining a proposed acquisition of the Company (the "September 16 Proposal").
In the September 16 Proposal, Parent proposed to acquire all of the issued and
outstanding Shares for $8.50 per Share in cash in a tender offer to the
Stockholders. The September 16 Proposal was expressly conditioned on the
ability of Parent to acquire in excess of 50% of the Common Stock, the Company
having available at least $19 to $20 million in cash, the making by FD of a
$20 million subordinated loan to Parent to be used in financing the
acquisition, FD and the Company entering into a new, five-year marketing
agreement that would generate certain levels of annual revenues to the Company
and Parent, and for which FD would receive annual payments totalling $3
million, and other conditions to be contained in a definitive merger
agreement. The September 16 Proposal was also subject to Parent's completing a
due diligence review of the Company.
On September 22, 1998, the Board of Directors held a special telephonic
meeting to consider Parent's September 16 Proposal. The Board of Directors
discussed several aspects of the September 16 Proposal, including the
consideration offered, the request for a subordinated loan from FD to finance
part of the acquisition, the extent to which Parent had conducted due
diligence, the request for a new marketing agreement between FD and the
Company and the readiness and ability of Parent to effectuate a transaction
promptly. At the meeting, representatives of FD on the Board of Directors
agreed to explore the financing and marketing agreement conditions of the
September 16 Proposal with FD. BT Alex. Brown updated the Board of Directors
on its contacts with other potentially interested parties and advised the
Board of Directors that, except for Parent, no such parties had expressed an
interest in acquiring the Company. The Board of Directors was also informed
that a proposed draft merger agreement had been received from Parent's
counsel. The Board of Directors established the Special Committee, consisting
solely of independent, disinterested directors vested with exclusive authority
to evaluate Parent's September 16 Proposal, to negotiate with Parent and FD
regarding the terms and conditions of the proposed transaction, to determine
whether the proposed transaction is fair to, and in the best interests of, the
Company and the Stockholders, to make a recommendation to the full Board of
Directors with regard thereto and to take other actions related thereto.
Immediately following the Board of Directors meeting on September 22, 1998,
the Special Committee held a meeting to consider the merits of Parent's
September 16 Proposal. The Special Committee engaged Testa,
17
<PAGE>
Hurwitz & Thibeault, LLP as legal counsel. The Special Committee discussed
issues with certain terms contained in the proposed draft merger agreement and
instructed its counsel to negotiate the proposed draft merger agreement with
Parent and FD and to report back on the progress of negotiations. Parent's
legal counsel and legal counsel for the Special Committee began negotiations
regarding the draft merger agreement. The Special Committee met on October 1
and October 2, 1998 to discuss the progress of negotiations with its counsel.
Between September 22, 1998 and October 5, 1998, representatives of FD and
Parent, along with BT Alex. Brown, discussed the possible terms of a loan from
FD to Parent and a possible new marketing agreement between FD and the Company
following the proposed acquisition. On October 4, 5 and 6, 1998, Mr. David
Myers, Group President--Industrial of FD and a director of the Company, and
Mr. Strawbridge discussed the loan and the new marketing agreement requested
by Parent in its September 16 Proposal. Mr. Strawbridge indicated that, if no
loan from FD was possible and the new marketing agreement did not include
revenue commitments, Parent would lower the price set forth in the September
16 Proposal to $8.25 per Share and would not pay FD annual payments in
connection with the new marketing agreement. During this period, legal counsel
for the Special Committee negotiated terms of the proposed merger agreement
with FD and legal counsel for Parent, including the Minimum Condition,
approval of changes to the Offer after a definitive merger agreement was
executed by the parties and several other provisions.
On October 6, 1998, the Special Committee and the full Board of Directors
held meetings to discuss the status of negotiations and the results of FD's
discussions with Parent regarding Parent's request for a $20 million loan and
a new marketing agreement with FD. Representatives of FD on the Board of
Directors informed the members of the Special Committee that FD was unwilling
to provide the loan requested by Parent and that FD was unwilling to agree to
the commitments that Parent required in a new marketing agreement, as
indicated in Parent's September 16 Proposal and subsequent discussions between
FD and Parent. Mr. Myers informed the Special Committee and the full Board of
Directors of his discussions with Mr. Strawbridge on October 4, 5 and 6, 1998.
BT Alex. Brown continued discussions with Mr. Strawbridge, who confirmed
Parent's indication of interest to acquire the Company at a price of $8.25 per
Share. The Special Committee instructed its counsel and BT Alex. Brown to
continue negotiations of the proposed merger agreement with Parent and to
report back to the Special Committee. BT Alex. Brown also informed the Special
Committee and the full Board of Directors that Mr. Barber had received a
letter dated September 30, 1998 from a third party (the "Third Party")
expressing a non-binding interest in acquiring all the outstanding shares of
the Company, subject to due diligence review of the Company and entering into
a definitive agreement (the "Third Party Proposal"). Based on previous
contacts with the Third Party, the Board of Directors noted concerns about the
Third Party's commitment to, and interest in acquiring all the outstanding
shares of the Company, its ability to finance an acquisition at the proposed
price and its ability to perform due diligence and enter into a definitive
agreement in a reasonable time. However, the Special Committee instructed BT
Alex. Brown to arrange and attend a meeting between Mr. Barber and
representatives of the Third Party to discuss the Third Party Proposal.
On October 12, 1998 Mr. Barber and Mr. Jackman met with representatives of
the Third Party to discuss the Third Party Proposal. The Third Party's
representatives summarized a transaction that would provide only partial
liquidity to the Stockholders and that would require outside financing. Mr.
Jackman requested that the Third Party provide the Company a written summary
of its proposal. On October 15, 1998, Mr. Jackman received a call from a
representative of the Third Party informing him that the Third Party would
further revise its proposal as discussed at the October 12 meeting to provide
for the acquisition of all of the outstanding Shares for cash (the "Revised
Third Party Proposal"), and Mr. Jackman requested a written summary of the
proposal for the consideration of the Board of Directors.
On October 20, 1998, the Special Committee and the full Board of Directors
held meetings to discuss the status of negotiations with Parent regarding the
Merger Agreement and Amended Marketing Agreement. BT Alex. Brown also informed
the Board of Directors of the October 12 meeting with representatives of the
Third Party and that BT Alex. Brown had not yet received a summary of any
Revised Third Party Proposal.
Counsel for the Special Committee continued to negotiate the proposed draft
merger agreement with Parent's legal counsel, and FD and Parent continued to
negotiate the proposed marketing agreement through
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<PAGE>
October 27, 1998. The changes finally agreed upon in respect of the Merger
Agreement included: (i) imposing as a condition to the Offer the Minimum
Condition, which requires a majority of the Shares not held by FD to be
tendered, (ii) reducing the fees payable by the Company to Parent on certain
terminations of the Merger Agreement from $2,500,000 to $1,500,000 (plus
reimbursement of expenses of up to $400,000); (iii) requiring the approval of
the Special Committee for certain changes to or conditions of the Offer; and
(iv) eliminating a provision prohibiting the Company from entering into an
agreement with a third party that was more favorable to the Stockholders
unless it first provided Parent the opportunity to make an offer at least as
favorable as such third party offer. As agreed between Parent and FD, no
annual payments are to be made by Parent to FD and no revenue commitments are
made by FD under the final Amended Marketing Agreement.
On October 23, 1998, BT Alex. Brown received a further revised proposal from
the Third Party (the "Further Revised Third Party Proposal") expressing a non-
binding interest to acquire all the outstanding Shares of the Company at an
estimated range of $7 and $9 per Share, subject to, among other things,
financing, further due diligence review of the Company and entering into a
definitive agreement.
On October 26, 1998, Parent advised the Company that it had received the
necessary consent from its lender to enter into the Merger Agreement and
consummate the Offer, and that it had completed its selective due diligence.
Parent further advised the Company that it was prepared to immediately
commence and diligently complete all regulatory and governmental filings
necessary to effectuate a transaction and was prepared to execute the Merger
Agreement and Amended Marketing Agreement.
On the afternoon of October 27, 1998, the Special Committee and the full
Board of Directors held a special telephonic meeting with legal counsel to the
Special Committee, legal counsel to FD and representatives of BT Alex. Brown
participating, and discussed the Further Revised Third Party Proposal and the
status of negotiations with Parent regarding the proposed transaction,
including the Amended Marketing Agreement. Legal counsel to the Special
Committee reviewed the Further Revised Third Party Proposal and the terms of
the Merger Agreement. Legal counsel to FD reviewed the terms of the proposed
Amended Marketing Agreement. BT Alex. Brown then presented a review of its
financial analysis of the proposed tender offer of $8.25 per Share for all
Shares and then presented its opinion to the Special Committee and the full
Board of Directors that the consideration to be received in the proposed
transaction was fair from a financial point of view to the Stockholders, other
than FD, Parent or any affiliate either thereof (the "Public Stockholders").
At the conclusion of the presentation by BT Alex. Brown, the FD
representatives on the Board of Directors informed the Special Committee that,
other than the Amended Marketing Agreement and other than existing contractual
arrangements made in the ordinary course of business, there were no agreements
or understandings between FD and Parent.
The Special Committee then held a separate meeting without representatives
of FD present, reviewed the Further Revised Third Party Proposal and
determined it was not in the best interests of the Stockholders to delay
entering into the Merger Agreement with Parent given, among other things, the
conditions that proposal contained regarding financing, the proposed schedule
of due diligence and the need to negotiate a definitive agreement. Legal
counsel to the Special Committee discussed the Committee's fiduciary duties in
reviewing and approving the proposed transaction with Parent. The Special
Committee determined that, based on the opinion of BT Alex. Brown as to the
fairness of the consideration from a financial point of view to the Public
Stockholders and all other relevant factors in relation to the proposed
transaction with Parent, it would recommend that the full Board of Directors
approve the transaction as in the best interests of the Company and the
Stockholders.
After the separate meeting of the Special Committee, the full Board of
Directors continued its meeting. The Special Committee discussed with the
Board of Directors its review of the terms and conditions of the proposed
transaction with Parent and the Further Revised Third Party Proposal. At the
conclusion of those discussions and upon the unanimous recommendation of the
Special Committee, the Board of Directors unanimously voted to approve the
Merger Agreement and the Amended Marketing Agreement and to terminate
discussions with the Third Party (as required by the Merger Agreement).
Following the Board of Directors meeting, the Special Committee's legal
counsel and Parent's legal counsel continued the final negotiation of the
transaction documents. The Merger Agreement and Amended Marketing
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Agreement were executed on the evening of October 27, 1998, and press releases
were issued by the parties announcing the execution of the Merger Agreement on
the morning of October 28, 1998. The text of the press releases have been
filed as Exhibit 9 to this statement and are incorporated herein by reference.
Reference is made to the Offer to Purchase for a description of the matters
considered by Parent in connection with the transaction.
REASONS FOR THE RECOMMENDATIONS; FACTORS CONSIDERED BY THE BOARD OF
DIRECTORS
At the meetings held on October 27, 1998, the Special Committee and the full
Board of Directors unanimously approved the Merger Agreement, and determined
that the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger, are fair to and in the best interests of the
Stockholders, and the Board of Directors resolved to recommend that
Stockholders accept the Offer and tender their Shares. In making such
recommendation and approving the Merger Agreement and the transactions
contemplated thereby, the Special Committee and the full Board of Directors
considered a number of factors, including, but not limited to, the following:
(i) the financial and other terms and conditions of the Merger Agreement,
including the proposed structure of the Offer and the Merger involving a
cash tender offer of $8.25 per Share for all outstanding Shares to be
followed by a merger for the same consideration;
(ii) the fact that neither the Offer nor the Merger is subject to any
financing condition, and that Parent has represented that it has possession
of, or has available to it under existing lines of credit, sufficient funds
available to consummate the Offer and the Merger and the transactions
contemplated thereby;
(iii) the Company's business, financial condition, results of operations,
assets, liabilities, business strategy and prospects, as well as various
risks and uncertainties associated with those prospects, including the
Company's competitive environment;
(iv) the possible alternatives to the Offer and the Merger (including the
possibility of continuing to operate the Company as an independent entity),
the range of possible benefits to the Stockholders of such alternatives and
the timing and the likelihood of accomplishing the goal of any of such
alternatives;
(v) the fact that the only proposal to acquire the Company, other than
the proposed transaction with Parent, received by the Company was the
Further Revised Third Party Proposal, that the price range of that proposal
only partially exceeded $8.25 per Share, and the directors' view that the
uncertainties of that proposal regarding financing conditions, due
diligence to be performed by the Third Party and the need to negotiate a
definitive agreement made such proposal materially inferior to the Merger
Agreement and the transactions contemplated thereby;
(vi) the current environmental services industry trend toward increasing
price competition and consolidation, and management's belief that the
Company's core environmental remediation market will be controlled by large
providers in the near future, which are likely either to acquire the
Company's competitors or to gain more work from the Company's customers,
and the assumption that this development would be extremely detrimental to
the Company;
(vii) the fact that the $8.25 per Share to be paid in the Offer and as
the consideration in the Merger represents: a premium of approximately
50.0% over the closing sale price of $5.50 per Share on September 29, 1998,
approximately four weeks prior to the execution of the Merger Agreement;
and a premium of approximately 37.5% over the $6.00 closing sale price for
the Shares on the Nasdaq National Market on October 26, 1998, the last
trading day prior to the execution of the Merger Agreement;
(viii) current financial market conditions, and historical market prices,
volatility and trading information with respect to the Common Stock of the
Company;
(ix) the high likelihood that the proposed acquisition would be
consummated in light of the experience, reputation and financial
capabilities of Parent, and the risks to the Company if the acquisition
were not consummated or were not consummated for a significant period of
time, including a potential negative effect on the Company's sales and
operating results;
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(x) the financial presentation of BT Alex. Brown made on October 27, 1998
and the written opinion received by the Company from BT Alex. Brown on
October 27, 1998 to the effect that as of that date, and based upon its
review and analysis and subject to the assumptions, limitations and
qualifications set forth therein, the consideration to be received by the
Stockholders pursuant to the Merger Agreement, the Offer and the Merger is
fair to the Public Stockholders from a financial point of view. A copy of
the written opinion dated October 27, 1998 of BT Alex. Brown, which sets
forth the assumptions made, procedures followed, other matters considered
and limits of the review by BT Alex. Brown, is attached hereto as Annex B.
STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY;
(xi) the fact that the Company had carefully considered over several
months a full range of options, including acquiring smaller companies,
merging with similar-sized companies, or being acquired by an existing
environmental services firm, and that no other compelling opportunities of
these kinds became evident; the Board of Directors concluded, after a more
than seven month effort to canvass the market for merger and acquisition
possibilities that would maximize value for the Stockholders, that there
was not likely to be another financially capable potential acquirer who
would be interested in acquiring the Company on more attractive terms; and
(xii) the fact that, under the terms of the Merger Agreement, prior to
consummation of the Offer, the Board of Directors may approve a superior
proposal to be acquired by a third party if the Board of Directors has
determined in good faith, after taking into consideration advice of its
outside legal counsel, that such approval is likely to be required in order
for its members to comply with their fiduciary duties under applicable law,
and further provided that the Company shall have paid a break-up fee and
termination expenses of a total of $1,900,000 to Parent.
The Board of Directors' approval and recommendation was based on the
totality of the information considered by it. The Board of Directors did not
assign relative weights to the factors considered by it or determine that any
one factor was of primary importance.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On March 30, 1998, the Company engaged BT Alex. Brown to perform certain
financial advisory and investment banking services.
Pursuant to a letter agreement dated March 30, 1998 between the Company and
BT Alex. Brown, the Company, as compensation for financial advisory services
rendered by BT Alex. Brown, agreed to pay BT Alex. Brown (i) $50,000 upon
execution of such letter agreement, (ii) $218,225 if the Company requests and
BT Alex. Brown delivers an opinion on the fairness of the terms of a possible
Transaction (defined as one or a series of transactions, including, but not
limited to, transactions of the type contemplated in the Merger Agreement),
(iii) $100,000 if the Company requests and BT Alex. Brown delivers an
additional opinion with respect to amended or revised offers and (iv)
$872,900, if a Transaction is consummated with the Company, less the amount of
any fees paid pursuant to clauses (i) and (ii). In the event a Transaction is
not consummated within 12 months of the date of the letter agreement, the
Company agreed to pay BT Alex. Brown an advisory fee of $200,000. In addition,
the Company agreed to reimburse BT Alex. Brown for its reasonable out-of-
pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel. The Company
also agreed to indemnify BT Alex. Brown and its affiliates and their
directors, officers, agents, employees and controlling persons for certain
costs, expenses and liabilities, including liabilities under the federal
securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the Stockholders on its behalf with
respect to the Offer, except that such solicitations or recommendations may be
made by directors, officers or employees of the Company, for which services no
additional compensation will be paid.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Neither the Company nor, to the knowledge of the Company, any of its
executive officers, directors, affiliates or subsidiaries, has effected any
transaction in the Company's securities in the past 60 days.
(b) To the knowledge of the Company, all of its executive officers,
directors, affiliates or subsidiaries who are also Stockholders presently
intend either to tender their Shares in the Offer or vote in favor of the
Merger.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this statement, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization, involving
the Company, (ii) a purchase, sale or transfer of a material amount of assets
by the Company, (iii) a tender offer for or other acquisition of securities by
or of the Company, or (iv) any material change in the present capitalization
or dividend policy of the Company. Pursuant to the Merger Agreement, however,
and as described under the heading "Merger Agreement--Acquisition Proposals"
in Item 3 above, the Company may, subject to certain limitations, take certain
actions in respect of proposed transactions necessary for the directors of the
Company to discharge their fiduciary obligations under applicable law.
(b) Except as described in this statement, there are no transactions,
resolutions of the Board of Directors, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or
more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex A is being furnished in
connection with the contemplated designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the stockholders following the purchase by
Purchaser, pursuant to the Offer, of the number of shares representing not
less than the number of Shares that will satisfy the Minimum Condition.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger dated as of October 27, 1998 among
Parent, Purchaser, the Company and FD.
Exhibit 2 Amended and Restated Marketing Agreement dated as of October 27,
1998, between and among the Company, FD and Parent.
Exhibit 3 Excerpt from the Company's Proxy Statement dated as of February 28,
1998 (inclusive of pages 2-4 and 6-12 thereof).
Exhibit 4 Fluor Daniel GTI, Inc. Senior Executive Severance Plan.
Exhibit 5 Settlement and Release Agreement dated as of September 11, 1998, by
and between Walter C. Barber and the Company.
Exhibit 6 Intercompany Services Agreement, dated as of October 27, 1998,
between Parent, the Company and FD.
Exhibit 7 Confidentiality Agreement dated as of July 28, 1998 between the
Company and Parent.
Exhibit 8 Letter, dated November 3, 1998, from the Chairman of the Board and
the President of the Company to the stockholders of the Company
concerning the Offer.
Exhibit 9 Joint Press Release of the Company and FD, and Press Release of
Parent, each dated October 28, 1998.
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
FLUOR DANIEL GTI, INC.
/s/ Walter C. Barber
By: _________________________________
Walter C. Barber
President, Chief Executive
Officer, and Director
Dated: November 3, 1998
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ANNEX A
FLUOR DANIEL GTI, INC.
100 River Ridge Drive
Norwood, MA 02062
INFORMATION STATEMENT PURSUANT
TO SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S
STOCKHOLDERS IS REQUIRED IN CONNECTION WITH
THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement, which is being mailed on or about November 3,
1998 to the holders of shares of the common stock, par value $0.001 per share
(the "Common Stock") of Fluor Daniel GTI, Inc., a Delaware corporation (the
"Company"), is being furnished in connection with the designation by
International Technology Corporation, a Delaware corporation doing business as
The IT Group, Inc. ("Parent"), of persons to the Board of Directors of the
Company (the "Board"). Such designation is to be made pursuant to an Agreement
and Plan of Merger dated as of October 27, 1998 (the "Merger Agreement") among
the Company, Fluor Daniel, Inc., a California corporation ("Fluor Daniel"),
Parent and Tiger Acquisition Corporation, a Delaware corporation and a wholly-
owned subsidiary of Parent ("Purchaser").
Pursuant to the Merger Agreement, among other things, the Purchaser
commenced a tender offer on November 3, 1998 to purchase all of the issued and
outstanding Common Stock at a price of $8.25 per share, net to the seller in
cash, as described in the Purchaser's Offer to Purchase dated November 3, 1998
(the "Offer to Purchase") and the related Letter of Transmittal (which Offer
to Purchase and related Letter of Transmittal together constitute the
"Offer"). The Offer is scheduled to expire at 12:00 midnight, New York City
time, on Wednesday, December 2, 1998, unless extended. The Offer is subject
to, among other things, the condition that a number of shares representing all
of the shares owned by Fluor Daniel and at least a majority of issued and
outstanding shares not owned by Fluor Daniel be validly tendered prior to the
expiration of the Offer and not withdrawn (the "Minimum Condition"). The
Merger Agreement also provides for the merger of Purchaser with and into the
Company (the "Merger") as soon as practicable after the consummation of the
Offer. Following the consummation of the Merger (the "Effective Time"), the
Company will be the surviving corporation and a wholly-owned subsidiary of
Parent. In the Merger, each share issued and outstanding immediately prior to
the Effective Time (other than shares held by Parent, by Purchaser, in the
treasury of the Company or by any subsidiary of Parent, Purchaser or the
Company, all of which will be canceled, and other than shares, if any, held by
stockholders who have perfected rights as dissenting stockholders under
Delaware law) will be converted into the right to receive cash in the amount
of $8.25.
The Merger Agreement provides that promptly upon acceptance by Purchaser of
Common Stock pursuant to the Offer, if the Minimum Condition has been met,
Parent will have the right to designate four of the six authorized directors
of the Company (the "Parent Designees"); Walter C. Barber, David L. Myers and
Ronald G. Peterson will resign as directors of the Company (J. Michal Conaway
resigned as a director effective August 1998); and Allan S. Bufferd and Ernie
Green will continue as directors of the Company (the "Continuing Directors").
The Continuing Directors will take effective action to appoint the Parent
Designees to the Board. The Continuing Directors will remain on such Board
until the Effective Time (as defined in the Merger Agreement) or, if the same
will not serve as Continuing Directors, the Company will use reasonable
efforts to ensure that the Board has at least two members who are not
officers, stockholders, designees or affiliates of Parent of Fluor Daniel. If
the size of the Board is enlarged, the Company will take steps to ensure that
a proportionate number of Parent Designees remain on such Board.
Following the election or appointment of the Parent Designees and prior to
the Effective Time, any amendment or termination of the Merger Agreement by
the Company, any extension by the Company of the
A-1
<PAGE>
time for the performance of any of the obligations or waiver of any of the
Company's rights under the Merger Agreement, will require the concurrence of a
majority of the directors of the Company then in office who were not
designated by Parent (or if there are two or fewer members who are not Parent
Designees, the concurrence of at least one director who is not a Parent
Designee) if such amendment, termination, extension or waiver would be
reasonably likely to have an adverse effect on the minority stockholders of
the Company.
The terms of the Merger Agreement, a summary of the events leading up to the
Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase and
in the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
(the "Schedule 14D-9") with respect to the Offer, copies of which are being
delivered to stockholders of the Company contemporaneously herewith. Certain
other documents (including the Merger Agreement) were filed with the
Securities and Exchange Commission (the "SEC") as exhibits to the Tender Offer
Statement on Schedule 14D-1 of Purchaser and Parent (the "Schedule 14D-1").
The exhibits to the Schedule 14D-9 and the Schedule 14D-1 may be examined at,
and copies thereof may be obtained from, the regional offices of and public
reference facilities maintained by the SEC (except that the exhibits thereto
cannot be obtained from the regional offices of the SEC) in the manner set
forth in Section 7 of the Offer to Purchase.
No action is required by the stockholders of the Company in connection with
the election or appointment of the Parent Designees to the Board. However,
Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the mailing to the Company's stockholders of the
information set forth in this Information Statement prior to a change in a
majority of the Company's directors otherwise than at a meeting of the
Company's stockholders.
The information contained in this Information Statement concerning Parent,
Purchaser and the Parent Designees has been furnished to the Company by such
persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The Schedule 14D-1 indicates that the
principal executive offices of Parent and Purchaser are located at 2790
Mosside Boulevard, Monroeville, PA 15146-2792.
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each share is entitled to one vote. As of October 19, 1998, there
were 8,411,766 shares of Common Stock issued and outstanding.
THE PARENT DESIGNEES
The Merger Agreement provides that, promptly upon acceptance by Parent of
Common Stock pursuant to the Offer, if the Minimum Condition has been met,
Parent will have the right to designate four of the six authorized directors
of the Company. The Schedule 14D-1 states that the Parent Designees are
Anthony J. DeLuca, Philip O. Strawbridge, James G. Kirk and James R. Mahoney.
It is expected that the Parent Designees will assume office following the
purchase by Purchaser of such number of shares of Common Stock that satisfies
the Minimum Condition, which purchase cannot be earlier than December 3, 1998,
and that, upon assuming office, the Parent Designees will thereafter
constitute at least a majority of the Board.
Biographical information concerning each of the Parent Designees is
presented below.
PARENT DESIGNEES
Anthony J. DeLuca, Age 51
Mr. DeLuca was named Chief Executive Officer and President as of July 1997.
Mr. DeLuca was President and acting Chief Executive Officer from July 1996 to
July 1997. Mr DeLuca has been a director of Parent since July 1996. Prior
thereto, Mr. DeLuca had been Senior Vice President and Chief Financial Officer
of Parent since March 1990. Before joining the Parent Mr. DeLuca had been a
senior partner at the public accounting firm Ernst & Young LLP.
A-2
<PAGE>
Philip O. Strawbridge, Age 43
Mr. Strawbridge joined Parent through the merger with OHM in May 1998 as
Senior Vice President and Chief Administrative Officer, a position he has held
since March, 1997. Mr. Strawbridge joined OHM Corporation in February 1996 as
Senior Vice President, Chief Financial and Administrative Officer and was
given the additional responsibility of President of OHM's wholly-owned
subsidiary OHM Energy Services in October, 1996. Prior to joining OHM, Mr.
Strawbridge was employed by Fluor Corporation from 1988 to 1996 in various
managerial capacities including Senior Director of Contracts and Compliance
and acting Vice President of Fluor Daniel Fernald. From 1976 to 1988, Mr.
Strawbridge was employed by the U.S. Government in various management and
executive capacities.
James G. Kirk, Age 59
Mr. Kirk, who joined Parent as General Counsel, Eastern Operations, in 1991,
was named Vice President, General Counsel and Secretary in September 1996.
Prior to joining Parent, Mr. Kirk served as Vice President and General Counsel
for Limbach Constructors from 1978 to 1991. From 1973 to 1978, Mr. Kirk was
Assistant General Counsel for Dravo Corporation.
James R. Mahoney, Age 59
Mr. Mahoney, who joined Parent in January 1991 as Senior Vice President and
Director of Technology was named Senior Vice President, Corporate Development
and Sales in April 1992; Senior Vice President, Technical Operations and
Corporate Development in March 1995; and Senior Vice President, Consulting and
Ventures and Corporate Development in July 1996. Prior to joining the Parent,
Mr. Mahoney was Director of the National Acid Precipitation Assessment
Program, a U.S. government research and assessment program, from 1988 to 1991.
From 1984 to 1987, Mr. Mahoney served in various environmental managerial
capacities with Bechtel Group, Incorporated, a major engineering and
construction firm.
A-3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 19, 1998 concerning
the ownership of Common Stock by each current member of the Board of
Directors, each of the executive officers named in the Summary Compensation
Table included in this Information Statement, all current directors and
executive officers of the Company as a group and each stockholder known by the
Company to be the beneficial owner of more than 5 percent of its outstanding
Common Stock. Except as otherwise noted, the persons or entities identified
have sole voting and investment power with respect to such shares. As of
October 19, 1998, none of the Parent Designees owned any shares of the
Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER** OWNERSHIP CLASS
- -------------------------------------- ----------------- ----------
<S> <C> <C>
Ronald G. Peterson............................... 1,000 *
David L. Myers................................... 750 *
Walter C. Barber................................. 173,236(1) 2.0%
Allan S. Bufferd................................. 13,253(2) *
Ernie Green...................................... 6,817 *
J. Steven Paquette............................... 35,815(3) *
David L. Backus.................................. 3,215(4) *
Glenn V. Batchelder.............................. 52,636(5) *
Anne Nolan....................................... 12,476(6) *
All Current Directors and Executive Officers as a
group (10 persons).............................. 302,707(7) 3.6%
Fluor Daniel, Inc.
3353 Michelson Drive
Irvine, CA 92698................................ 6,168,970(8) 60.8%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017........................... 464,053(9) 5.6%
</TABLE>
- --------
* Represents beneficial ownership of less than 1 percent of the Company's
outstanding Common Stock.
** Addresses are given for beneficial owners of more than 5 percent of the
outstanding Common Stock only.
(1) Includes 142,785 shares subject to options under the Company's 1997 Stock
Plan which are exercisable at October 19, 1998, or within 60 days
thereafter.
(2) Includes 12,213 shares subject to options under the Company's Amended and
Restated 1995 Director Plan exercisable at October 19, 1998, or within 60
days thereafter. The Massachusetts Institute of Technology ("M.I.T.") owns
12,964 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.
(3) Includes 34,744 shares subject to options granted under the Company's 1997
Stock Plan which are exercisable at October 19, 1998, or within 60 days
thereafter.
(4) Includes 1,000 shares subject to options granted under the Company's 1997
Stock Plan which are exercisable at October 19, 1998, or within 60 days
thereafter.
(5) Includes 52,365 shares subject to options granted under the Company's 1997
Stock Plan which are exercisable at October 19, 1998, or within 60 days
thereafter. Includes 116 shares owned by Mr. Batchelder's spouse. Mr.
Batchelder is deemed to be the beneficial owner of such shares.
(6) Includes 11,960 shares subject to options granted under the Company's 1997
Stock Plan which are exercisable at October 19, 1998, or within 60 days
thereafter.
(7) Includes 265,381 shares subject to options granted under the Company's
1997 Stock Plan and Amended and Restated 1995 Director Plan which are
exercisable at October 19, 1998, or within 60 days thereafter.
(8) On May 10, 1996 (the "Closing Date") the Company closed a series of
transactions (the "Fluor Daniel Transactions") pursuant to which it issued
to Fluor Daniel 4,400,000 shares of Common Stock (the "FD Shares"). On
December 11, 1996, the Company granted Fluor Daniel an option to purchase
shares of Common Stock, which option was adjusted pursuant to the Fluor
Daniel Transactions to represent the right to purchase 1,768,970 shares of
Common Stock at a purchase price of $13.1274 per share, which is
exercisable between December 11, 1996 and December 11, 1998.
(9) According to a Schedule 13G received by the Company, these shares may also
be deemed owned by Robert Day, an individual who may be deemed to control
The TCW Group, Inc., and other holders of the Common Stock of the Company.
Mr. Day's address is 200 Park Avenue, Suite 2200, New York, NY 10166.
A-4
<PAGE>
THE CURRENT BOARD OF DIRECTORS
Pursuant to the Investment Agreement dated December 11, 1995, as amended,
between the Company, Fluor Daniel and a subsidiary of each of the Company and
Fluor Daniel (the "Investment Agreement"), Fluor Daniel has agreed (a) until
April 30, 1999, to vote all Common Stock owned by it in favor of fixing the
size of the Board at not more than seven and in favor of not less than three
Independent Directors, and (b) until the annual stockholders' meeting of the
Company (or written consent in lieu thereof) held in 1998, to vote all shares
of Common Stock owned by it in favor of Allan S. Bufferd and Robert P.
Schechter in any election of members of the Board. Under the Investment
Agreement, an "Independent Director" is defined as a director who is not
(apart from such directorship) (i) an officer, affiliate, employee, principal
stockholder, consultant or partner of Fluor Daniel or any affiliate of Fluor
Daniel or of any entity that was dependent upon Fluor Daniel or any affiliate
of Fluor Daniel for more than three percent of its revenues or earnings in its
most recent fiscal year, (ii) an officer, employee, consultant or partner of
the Company or any affiliate of the Company or an officer, employee, principal
stockholder, consultant or partner of an entity that was dependent upon the
Company or any affiliate of the Company for more than three percent of its
revenues or earnings in its most recent fiscal year (unless agreed to in
writing by Fluor Daniel) or (iii) an officer, director, employee, principal
stockholder, consultant or partner of a person that is a competitor of Fluor
Daniel or any of its affiliates (unless agreed to in writing by Fluor Daniel)
or of the Company or any of its affiliates.
There are presently five directors and one vacancy on the Board. The
directors of the Company are Ronald G. Peterson, Walter C. Barber, Allen S.
Bufferd, Ernie Green and David L. Myers.
Mr. Bufferd and Mr. Green have served as the Independent Directors since May
10, 1996. Effective December 31, 1996, Mr. Schechter resigned as a director of
the Company. Although the Board initiated a search to find a replacement
Independent Director, a suitable candidate was not identified, and only two
Independent Directors currently serve.
On December 22, 1995, the Company entered into an employment agreement with
Walter C. Barber pursuant to which, among other things, the Company is
obligated to employ Mr. Barber as a director until May 10, 1999, and which is
described more fully on page A-9 of this Information Statement. See also
"Walter C. Barber's Settlement and Release Agreement" on page A-11 of this
Information Statement.
OCCUPATIONS OF CURRENT DIRECTORS
Ronald G. Peterson, Age 53
Mr. Peterson has been Chairman of the Board since December 8, 1997, and has
been a Director since May 19, 1997. He has been Group President--Government,
Environmental and Telecommunications of Fluor Daniel since March 1997. From
April 1995 through March 1997, he served as President, Government Services
Operating Company of Fluor Daniel. From 1990 to 1995, he served as Vice
President and General Manager, Space and Strategic Propulsion Business Unit of
Alliant Techsystems.
Walter C. Barber, Age 57
Mr. Barber has been a Director of the Company since 1989 and served as
Chairman from 1993 to May 1996. Mr. Barber has served as President and Chief
Executive Officer since joining the Company in 1989. From 1983 to 1989, Mr.
Barber was Vice President of Environmental Management and Administration of
Chemical Waste Management Inc., a hazardous waste management services company.
Previously, Mr. Barber was Director of Research and Technology Development for
the Uranium Mill Tailings Project of Jacobs Engineering Group, Inc., an
engineering and construction firm. Mr. Barber was also an executive with the
U.S. Environmental Protection Agency, holding positions as its Director of the
Office of Air Quality Planning and Standards and as Director of the Standards
and Regulations Division.
A-5
<PAGE>
Allan S. Bufferd, Age 60
Mr. Bufferd has been a Director of the Company since 1988. Since 1986 Mr.
Bufferd has been the Deputy Treasurer and Director of Investments of the
Massachusetts Institute of Technology ("M.I.T."). In such capacity Mr. Bufferd
manages the assets of M.I.T.'s endowment and pension funds. Prior to 1986, Mr.
Bufferd served as the Associate Treasurer and Recording Secretary of M.I.T. In
that position he was primarily responsible for private placements and
international and venture capital investments of M.I.T.'s endowment and
pension assets. Mr. Bufferd is also a Director of Massbank Corp., and he
serves as a Trustee of Wheelock College and of the Whiting Foundation, and as
Vice Chairman of the Board of the Beth Israel Deaconess Medical Center
(Boston).
Ernie Green, Age 59
Mr. Green has been a Director of the Company since May 10, 1996, when Fluor
Daniel acquired a majority interest in the Company. He is founder, President
and Chief Executive Officer of EGI, Inc., a manufacturer of automotive
components. 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.
David L. Myers, Age 51
Mr. Myers has been a Director of the Company since May 10, 1996, when Fluor
Daniel acquired a majority interest in the Company, and served as Chairman
until December 8, 1997. Since March 29, 1997, Mr. Myers has served as Group
President--Industrial, of Fluor Daniel. From July 1994 to March 1997, he
served as President, Environmental Strategies of Fluor Daniel. From 1984 until
July 1994, he served as Fluor Daniel's Vice President of Business Units and of
various other Fluor Daniel subsidiaries.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board held 13 meetings during the fiscal year ended October 31, 1998
("Fiscal Year 1998"). Each of the Directors attended at least 75% of the
meetings of the Board and of each Committee on which he serves. The Board has
two standing committees, the Audit Committee and the Compensation Committee.
The Audit Committee, of which Messrs. Bufferd (Chairman), Green, Myers and
Peterson are currently members, oversees the accounting and tax functions of
the Company, including matters relating to the appointment and activities of
the Company's auditors. The Audit Committee met three times during Fiscal Year
1998. The Compensation Committee, of which Messrs. Green (Chairman), Bufferd,
Myers and Peterson are currently members, reviews and makes recommendations
concerning executive salaries, bonuses and the Company's stock plans. The
Compensation Committee met three times during Fiscal Year 1998. The Board does
not currently have a standing nominating committee. On September 22, 1998, the
Board established a Special Committee, of which Messrs. Bufferd and Green are
the only members. The Special Committee was established to evaluate and
negotiate the terms and conditions of the transactions with Parent that were
finally contained in the Merger Agreement and to provide a recommendation to
the Board with respect thereto. The Special Committee met five times during
Fiscal Year 1998.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth information concerning compensation for
services in all capacities to the Company and its subsidiaries during Fiscal
Year 1998, the fiscal year ended October 31, 1997, the six-month interim
fiscal year ended October 31, 1996 (the "Interim Fiscal Year"), and the fiscal
year ended April 30, 1996 of those persons who were, at October 31, 1998, the
Company's Chief Executive Officer and its other four most highly compensated
executive officers (collectively, the "named executive officers"):
A-6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------- ----------------------------------
YEAR SALARY BONUS RESTRICTED STOCK OTHER
NAME AND PRINCIPAL (1) ($) ($) (2) STOCK OPTIONS COMPENSATION
POSITION IN FISCAL YEAR AWARDS($) (#) (3) ($) (4)
- ----------------------- ---- ------- ------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Walter C. Barber....... 1998 260,000 91,000 0 10,000 --
President and Chief
Executive Officer 1997 260,000 15,000 0 8,500 17,138
1996A 125,428 0 0 0 2,257
1996 260,000 78,000(5) 247,500(6) 77,700 6,243
J. Steven Paquette..... 1998 155,000 66,000 0 7,500 --
Vice President and
General Manager, 1997 148,462 10,000 0 7,000 86,287(7)
South Region 1996A 67,716 0 0 0 1,263
1996 140,000 40,000 0 25,900 19,307(8)
Glenn V. Batchelder.... 1998 155,000 66,000 0 7,500 --
Vice President and
General Manager, 1997 135,000 10,000 0 5,000 15,202
North Region 1996A 67,500 0 0 0 2,043
1996 135,000 30,000 0 15,000 4,664
Anne Nolan............. 1998 140,000 54,000 0 6,000 --
Vice President,
Business 1997 128,462 10,000 0 4,000 15,129
Administration 1996A 60,000 0 0 0 1,747
1996 113,077 22,000 0 10,000 3,702
David L. Backus(9)..... 1998 163,000 66,000 0 12,500 --
Vice President and
General Manager, 1997 126,353 37,500 0 0 --
West Region 1996A 86,852 0 0 0 --
</TABLE>
- --------
(1) Information regarding the Interim Fiscal Year is set forth in the row
headed "1996A".
(2) Amounts included in "Bonus" for Fiscal Year 1998 are target amounts only.
Fiscal Year 1998 ended on October 31, 1998 and information needed to
calculate actual bonus amounts for Fiscal Year 1998 was therefore not
available in time for this filing. All bonus amounts included in Fiscal
Year 1997 and prior fiscal years are actual amounts based on service
during such fiscal year, although paid in the subsequent fiscal year.
(3) Options granted during Fiscal Year 1998 were granted pursuant to the
Company's 1997 Stock Plan. Pursuant to the Fluor Daniel Transactions, all
outstanding options granted in the 1996 Fiscal Year and prior thereto were
adjusted, and the table sets forth the adjusted options.
(4) At the time of the mailing of this statement, this information was not
known for Fiscal Year 1998, however, "Other Compensation" included
compensation benefits paid to these officers in the past including: health
insurance offsets, Company contributions to defined contribution plans,
discounted employee stock purchases, benefits attributable to Company-
provided life insurance policy, vacation cash outs, cash surrender value
of life insurance policies, and attendance awards.
(5) Mr. Barber's bonus was paid 50% in cash ($39,000) and 50% in stock (3,714
shares of Common Stock, valued at $10.50 per share on June 10, 1996).
(6) Represents the dollar value on June 27, 1995, the award date, of an award
to Mr. Barber of 20,000 shares of restricted Common Stock. On such date,
the fair market value of the Common Stock was $12.375. Restrictions with
respect to 100% of these shares lapsed upon the change of control of the
Company pursuant to the Fluor Daniel Transactions described elsewhere in
this Information Statement. If a change of control had not occurred,
restrictions on these shares would have lapsed on September 19, 2002, or
earlier in the event certain operating performance targets for the Company
were met. The amount ultimately realized by Mr. Barber in respect of these
shares depends upon the value of the shares when he sells them. No other
executives in the Company hold restricted shares.
(7) Includes $70,168 for relocation expenses.
(8) Includes $16,219 in 1996 relating to forgiveness of a loan. Upon hiring
Mr. Paquette in February 1993, the Company agreed to continue a loan he
received from his previous employer for relocation expenses, which was
required to be repaid when he left to join the Company.
(9) Mr. Backus was not employed by the Company prior to Fiscal Year 1998. From
June 1996 until October 1997, while Mr. Backus was employed by Fluor
Daniel, the Company reimbursed Fluor Daniel for services he performed for
the Company in his position as Vice President and General Manager, West
Region. The amounts indicated for fiscal years 1997 and 1996A were paid by
the Company to Fluor Daniel.
A-7
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made during Fiscal Year 1998 under the Company's long-term incentive
program to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH)(2) DATE 5% ($) 10% ($)
---- ----------- ------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Walter C. Barber........ 10,000 9.2 6.375 6/15/05 25,953 60,481
J. Steven Paquette...... 7,500 6.9 6.375 6/15/05 19,464 45,361
Glenn V. Batchelder..... 7,500 6.9 6.375 6/15/05 19,494 45,361
Anne Nolan.............. 6,000 5.5 6.375 6/15/05 15,572 36,288
David L. Backus......... 5,000 4.6 9.375 12/04/04 19,464 44,471
7,500 6.9 6.375 6/15/05 19,464 45,361
</TABLE>
- --------
(1) As a matter of policy, no SARs were granted to any of the named executive
officers.
(2) Options were granted with an exercise price equal to the fair market value
of the underlying Common Stock on the date of grant. The exercise price
and tax withholding obligations related to exercise may be paid by
delivery of already owned shares or by offset of the underlying shares,
subject to certain conditions.
(3) Assumed annual appreciation rates are set by the SEC and are not a
forecast of future appreciation. The actual realized value depends on the
market value of the Company's Common Stock on the exercise date, and no
gain to the optionees is possible without an increase in the price of the
Company's Common Stock. All assumed values are pre-tax and do not include
dividends.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding options exercised by
the named executive officers during Fiscal Year 1998, as well as the number of
shares covered by all exercisable and non-exercisable stock options held by
these individuals at year-end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT FISCAL THE-MONEY OPTIONS AT
SHARES YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter C. Barber........ 0 0 141,085 63,637 0 16,800
J. Steven Paquette...... 0 0 33,344 25,403 0 12,600
Glenn V. Batchelder..... 0 0 51,365 21,213 0 12,600
Anne Nolan.............. 0 0 10,512 15,676 0 10,080
David L. Backus......... 0 0 0 12,500 0 12,600
</TABLE>
- --------
(1) The value of unexercised in-the-money options at year-end assumes a fair
market value for the Company's Common Stock of $8.055, the average of the
high and low prices of the Company's Common Stock on the Nasdaq National
Market on October 30, 1998 (the last business day before the end of Fiscal
Year 1998).
A-8
<PAGE>
LONG-TERM AWARDS
The following table provides information with respect to the named executive
officers concerning cash incentive awards made during fiscal 1997 under the
Company's Executive Compensation Program. Each award under the Company's
Executive Compensation Program represents the right to receive an amount in
cash if earnings targets for a specified period, as established by the
Compensation Committee, are achieved. If earnings fall below the threshold
amount, no award is payable. If earnings fall between the threshold amount and
the target amount or between the target amount and the maximum amount then the
amount of the award is prorated accordingly. In addition, an individual
performance factor multiplier of from 0 to 2.0 will adjust the actual award
level. No payments were made under the Executive Compensation Program in
Fiscal Year 1998.
EXECUTIVE COMPENSATION PROGRAM-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE UNDER NON-STOCK PRICE-
OR OTHER BASED PLANS ($)
PERIOD UNTIL ------------------------
MATURATION OR MIDDLE
NAME PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- --------- ------ -------
<S> <C> <C> <C> <C>
Walter C. Barber........................ 3 years 15,750 63,000 126,000
J. Steven Paquette...................... 3 years 12,000 48,000 96,000
Glenn V. Batchelder..................... 3 years 10,500 42,000 84,000
Anne Nolan.............................. 3 years 7,500 30,000 60,000
David L. Backus......................... 3 years 4,000 16,000 32,000
</TABLE>
EMPLOYMENT AGREEMENTS
In December 1995 the Board of Directors determined that the Fluor Daniel
Transactions posed significant personal uncertainty to certain key employees
who were important to either the consummation and implementation of the Fluor
Daniel Transactions, or the realization of the anticipated benefits of the
affiliation with Fluor Daniel and the conduct of the Company's business after
the Fluor Daniel Transactions, or both. For that reason, the Company entered
into employment agreements with certain of its employees, including all of the
named executive officers other than Mr. Backus.
The employment agreements provide that the named executive officer shall be
employed with the Company for a designated period (the "Employment Period"),
which for all executive officers other than Walter C. Barber, expired May 10,
1998. The Employment Period for Mr. Barber expires May 10, 1999. In general,
the employment agreements specify that the named executive officer is to
remain employed in a position having comparable responsibilities as that held
by the individual on the date of the relevant employment agreement at a salary
no lower than the salary payable to the individual on that date, except that
Mr. Barber's employment agreement specifies that he be employed as the Chief
Executive Officer and as a member of the Board of Directors of the Company.
The employment agreements of the other named executive officers 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 their employment agreements. The employment agreements also
provide that the Company will not require the named executive officers 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 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 agreements.
The employment agreements further provide that the Company may terminate the
named executive officer'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 named executive officer will be entitled to the
greater of (a) salary at a rate equal to the employee's salary at the time of
termination for the duration of the Employment Period,
A-9
<PAGE>
plus continued payment by the Company of its portion of all health benefits
(so long as the named executive officer elects to continue benefits and
continues to pay his share of the cost of such benefits) or (b) 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 named executive officer will automatically become
fully exercisable in accordance with their terms and (y) all restrictions on
any stock granted by the Company to the named executive officer, including
without limitation any repurchase or vesting provisions, will lapse and be of
no further force and effect. The named executive officer 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 named executive
officer.
Under the employment agreements the Company may terminate the named
executive officer's employment prior to the end of the Employment Period for
cause upon written notice to the individual. 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 individual's continuing,
repeated and willful failure or refusal to perform reasonable assignments
given to individual which are commensurate with his position or
responsibilities; (iii) conviction of the individual of a felony; (iv)
material breach by individual of any material Company policy or the terms of
any written agreement between named executive officer and the Company. Upon a
termination for cause, the Company will pay to the named executive officer
salary and benefits owed to him as of the date of such termination. If Mr.
Barber had been terminated without cause on the last day of Fiscal Year 1998,
the approximate value of the severance and other benefits (if he had elected
to continue health benefits) to him would have been $162,306.
RETENTION PLAN
The Company has in place an executive retention plan (the "Retention Plan")
covering six key executives, including all executive officers of the Company.
The Retention Plan provides that participating executives will be paid bonuses
as follows: 33% of the executive's 1998 base salary on January 1, 1999; and
67% of the executive's 1998 base salary on January 1, 2000.
The Retention Plan is designed to encourage participating executives to stay
with the Company through January 1, 2000 and is not tied to Company
performance. In the event a participating executive is terminated because of a
change of control or an involuntary reduction in force, the balance due to
such executive will be paid in full. If a participating executive leaves
voluntarily or is terminated for cause or for lack of performance, the balance
to be paid is forfeited. As of the date hereof, to the knowledge of the
Company, none of the executive officers of the Company covered by the
Retention Plan, other than Mr. Barber, have been informed by Parent that their
employment will be terminated in connection with the Offer or Merger.
SEVERANCE PLAN
The Company has in place a severance plan (the "Severance Plan") covering 12
employees, including all executive officers of the Company other than Mr.
Barber, which is activated upon a Change of Control of the Company (as defined
in the Severance Plan), which includes the Merger. The Severance Plan provides
for the payment of the following compensation upon the termination in certain
circumstances of a participant's employment with the Company within one year
following a Change of Control of the Company: (i) a cash lump sum equal to the
sum of (a) the participant's annual salary through the date of such
termination, to the extent not theretofore paid, (b) the participant's target
bonus amount, pro-rated for the period ending on the date of termination, and
(c) any deferred compensation and accrued time off with pay to the extent not
theretofore paid, and (ii) an amount equal to a multiple of either one or two
times the participant's base salary, as determined by the Compensation
Committee of the Board. As of the date hereof, to the knowledge of the
Company, none of the executive officers of the Company covered by the
Severance Plan have been informed by Parent that their employment will be
terminated in connection with the Offer or Merger.
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<PAGE>
WALTER C. BARBER'S SETTLEMENT AND RELEASE AGREEMENT
Mr. Barber entered into a Settlement and Release Agreement with the Company
dated as of September 11, 1998 (the "Settlement and Release Agreement").
Pursuant to the Settlement and Release Agreement, Mr. Barber has agreed to
resign his employment with the Company, as well as all offices and
directorships he holds with the Company, upon a Change of Control of the
Company (as defined in the Settlement and Release Agreement), which includes
the consummation of the Offer. In exchange for such resignation, the Company
agreed to provide Mr. Barber with (i) a lump sum payment of $780,000, net of
any federal withholding taxes and other deductions the Company is required to
make by law, and (ii) payment for outplacement services in accordance with the
Company's customary procedures not to exceed $20,000. Pursuant to the
Settlement and Release Agreement, Mr. Barber further agreed to release the
Company and any related companies, and their employees and directors, from any
claims or demands based on his employment with the Company or the termination
of his employment, and he agreed not to compete with the Company through June
1, 1999. The Company similarly agreed to release Mr. Barber from all claims or
demands based on his employment with the Company or the termination of that
employment.
STOCK OPTION ACCELERATION
Pursuant to the Merger Agreement, the holders of Company stock options under
the Company's Amended and Restated 1987 Stock Plan, the Company's 1997 Stock
Plan and the Company's Amended and Restated 1995 Director Stock Option Plan,
including the executive officers of the Company and participating directors,
will receive a cash payment in connection with the cancellation of their
options. The cash payment for each Company option that has an exercise price
that is lower than $8.25 will equal the difference between $8.25 and the
exercise price of such option, multiplied by the number of Shares subject to
such option (whether vested or unvested). The cash payment for each Company
option that has an exercise price that is equal to or greater than $8.25 will
be $.10 per share subject to such option (whether vested or unvested).
Pursuant to this provision of the Merger Agreement, the Company will make
aggregate payments equal to approximately $116,388. Of that total, Mr. Barber
will receive approximately $19,472; Mr. Glenn V. Batchelder will receive
approximately $6,508; Mr. J. Steven Paquette will receive approximately
$5,125; Mr. David L. Backus will receive approximately $500; Ms. Anne Nolan
will receive approximately $2,019; and Ms. Mary C. Stack will receive
approximately $479. The Company will make an aggregate payment to non-employee
directors in the amount of $2,119. Of that total, Mr. Allan S. Bufferd will
receive approximately $1,221 and Mr. Ernie Green will receive approximately
$898.
STOCK PURCHASE PLAN
Pursuant to the Merger Agreement, the payment period ending November 30,
1998 (the "Payment Period") under the Company's Amended and Restated 1986
Employee Stock Purchase Plan (the "Purchase Plan") will be accelerated to
November 27, 1998 (the "Acceleration Date"), and each Participant (as defined
in the Purchase Plan) will receive in lieu of shares of Common Stock that
could have been purchased under the Purchase Plan when the Payment Period ends
on the Acceleration Date, an amount (subject to any applicable withholding
tax) in cash equal to the difference between $8.25 and the Option Price (as
defined in the Purchase Plan). Pursuant to this provision of the Merger
Agreement, the Company will make aggregate payments equal to approximately
$91,126. Of that total, Mr. Barber will receive approximately $1,005; Mr.
Batchelder will receive $0; Mr. Paquette will receive $0; Mr. Backus will
receive approximately $3,145; Ms. Nolan will receive $0; and Ms. Stack will
receive approximately $1,933. In addition, all funds contributed to the
Purchase Plan by Participants which have not been used to purchase shares of
Common Stock as of the Acceleration Date will be returned in cash, without
interest.
A-11
<PAGE>
COMPENSATION OF DIRECTORS
The compensation for Fiscal Year 1998 to the non-employee directors was
$15,000 plus $1,000 for each day of attendance at meetings of the Board or
Committees. In addition, directors were reimbursed for out-of-pocket expenses
for attending Board and Committee meetings.
Under the Company's Amended and Restated 1995 Director Plan (the "Director
Plan"), each Independent Director automatically receives a one-time option to
purchase 5,000 shares of the Company's Common Stock. In addition, annually on
the third Tuesday of June, each Independent Director receives an option to
purchase 2,500 shares of the Company's Common Stock. The exercise price of the
options is 100% of the fair market value of the Common Stock on the date
options are granted. In the event of a change of control of the Company, all
outstanding options automatically become fully exercisable. Options become
exercisable in equal annual installments over three years, and they expire
seven years from their date of grant. Options granted pursuant to the Director
Plan are not assignable or transferable other than by will or the laws of
descent and distribution, and are exercisable during an optionee's lifetime
only by him.
In the event an optionee ceases to be a member of the Board for any reason
other than death or disability, any then unexercised options granted to such
optionee under the Director Plan will, to the extent not then exercisable,
immediately terminate and become void, and any options which are then
exercisable but have not been exercised at the time the optionee so ceases to
be a member of the Board may be exercised, to the extent they are then
exercisable, by the optionee within a period of thirty days following such
time the optionee so ceases to be a member of the Board, but in no event later
than the expiration date of the option.
In the event an optionee ceases to be a member of the Board by reason of his
disability or death, any option granted under the Director Plan to such
optionee shall be immediately and automatically accelerated and become fully
vested, and any unexercised option may be exercised by the optionee (or by the
optionee's personal representative, heir or legatee) until the scheduled
expiration date of the option.
Outstanding options under the Director Plan as of May 10, 1996 were adjusted
pursuant to the Fluor Daniel Transactions (as defined in footnote 8 of the
table set forth under the heading "Security Ownership of Certain Beneficial
Owners and Management").
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The executive compensation program is administered by the Compensation
Committee of the Board (the "Compensation Committee"), which is currently
composed of Messrs. Bufferd and Green, the two Independent Directors of the
Company, and Messrs. Myers and Peterson of Fluor Daniel. It has the
responsibility for all compensation matters for the Company's senior
management. The Compensation Committee alone sets the compensation for Mr.
Barber (the "CEO") and sets the compensation of the other executive officers
with recommendation from the CEO. All decisions by the Compensation Committee
are submitted to the full Board for final approval. No person who served as a
member of the Compensation Committee was, during the past fiscal year, an
officer or employee of the Company or any of its subsidiaries, was formerly an
officer of the Company or any of its subsidiaries, or had any relationship
requiring disclosure herein. No executive officer of the Company served as a
member of the compensation committee of another entity (or other committee of
the Board performing equivalent functions or, in the absence of any such
committee, the entire Board), one of whose executive officers served as a
director of the Company.
The SEC requires disclosure of companies' policies for executive
compensation to enable stockholders to better understand the reasons for the
compensation of the CEO and the four other most highly compensated executive
officers. The disclosure required for these named executive officers includes
compensation tables and a report explaining the rationale and considerations
that form the bases of the Compensation Committee's executive compensation
decisions affecting those individuals. Set forth below is the Compensation
Committee's report addressing these matters.
A-12
<PAGE>
COMPENSATION PHILOSOPHY AND PRINCIPLES
Under the direction of the Compensation Committee, the Company has
maintained the philosophy that compensation of all employees should be closely
linked to performance. Consequently, increases of employees' cash compensation
in the form of salary and bonus historically have been greater in more
profitable years and less in less profitable years. In addition, to provide
incentive for the Company's long-term success, certain employees have received
options at fair market value that vest over a period of years, and have an
opportunity to participate in the Company's Amended and Restated 1986 Employee
Stock Purchase Plan, which provides a discount on purchases of the Company's
Common Stock through payroll deductions. During Fiscal Year 1997, the
Compensation Committee adopted a cash-based long term incentive program,
discussed below. The Compensation Committee believes that executive officers,
who are ultimately responsible for the successful financial performance of the
Company, should be compensated under these same principles.
The Company's vision is to be the recognized world leader in environmental
solutions. To achieve this the Company will: have the best people, exceed
customer expectations, grow stockholder value, improve through innovation,
work as a team, conduct itself ethically and eliminate accidents. To achieve
these goals, the Compensation Committee believes the executive compensation
program must create financial opportunities for senior managers. The guiding
principles of the Compensation Committee are to:
--Create a compensation program that supports the Company's strategic goals
and thus enhances stockholder value;
--Provide a competitive compensation program to attract and retain
qualified senior managers necessary for long-term success;
--Establish a direct and substantial relationship between cash compensation
and performance to motivate senior managers for short-term results;
--Align the interests of senior managers with the long-term interests of
stockholders through award opportunities to receive long-term cash
incentives and to acquire the Company's shares; and
--Reevaluate compensation decisions annually to ensure alignment of
compensation practices with the Company's goals.
COMPENSATION POLICIES AND PRACTICES TOWARD EXECUTIVE OFFICERS
The Compensation Committee made important changes in the Company's executive
compensation program for Fiscal Year 1998. The program was comprised of cash
compensation in the form of base salary, potential profit sharing and bonus,
and benefits typically offered executives in corporations of similar size and
in similar businesses as the Company.
CASH COMPENSATION
The Compensation Committee believes that compensation of the Company's
executive officers, including the named executive officers, should be
substantially linked to operating performance. Base salaries are designed to
be competitive within the industry and reflect individual performance. The
Bonus Plan is intended to provide opportunity for cash compensation
competitive with median levels of the Company's competitors included in the
peer group index set forth in the Performance Graph on page 13 of the
Company's proxy statement dated February 26, 1998, as well as other companies
of similar size included in independent survey data. The Compensation
Committee made certain changes for cash compensation to executive officers
during the Fiscal Year. Specifically, all executive officers other than the
CEO received increases in base salary due to increased responsibilities
undertaken by each of them. In addition, to provide cash incentives to all
employees, including the CEO and the other executive officers, the Company
instituted a profit sharing plan in 1997, which provides that 20% of pre-tax
earnings on an annual basis are to be distributed to employees in proportion
to their base salary in the form of a contribution to a 401(k) plan. When this
plan was adopted, the Company agreed that it would make a minimum contribution
of 1% of base salary for Fiscal Year 1998.
A-13
<PAGE>
The Compensation Committee continued the Company's Bonus Plan to provide
that regular bonuses are to be computed using weighted factors tied to key
results areas ("KRA's") and individual performance. In addition, the
Compensation Committee established a supplemental bonus plan to provide
bonuses tied to earnings before interest and taxes and cash balance at the end
of Fiscal Year 1998. The Compensation Committee approves target bonus amounts
for senior executives based on recommendations of members of the Compensation
Committee. Bonuses may not be paid unless the Company's earnings before
interest and taxes exceed an amount established by the Compensation Committee
in its December meeting.
The Compensation Committee also adopted the Retention Plan and Severance
Plan, and approved Mr. Barber's Settlement and Release Agreement, described
elsewhere in this Information Statement, which provide cash incentives to
certain officers of the Company, including all of the executive officers.
These arrangements were intended to encourage participants to stay with the
Company through a period when the Board of Directors was evaluating a number
of alternatives, including a change of control.
LONG-TERM INCENTIVE PROGRAM
Under the Amended and Restated 1987 Stock Plan (the "1987 Plan"), the
Compensation Committee had established an incentive program to reward
executive officers and others in the Company for delivering long-term value to
the Company's stockholders. The 1987 Plan expired in January 1997 and a new
plan, the 1997 Stock Plan, was adopted and approved by stockholders in March
1997. This plan carried forward the remaining number of shares authorized by
the 1987 Plan. Stock option grants provide executive officers and other senior
managers rights to purchase shares of the Company's Common Stock at the fair
market value (the closing price of the Common Stock) on the date of grant,
which vest over a period of time. Since June 1990 the Compensation Committee
has typically granted options upon hire of the executive officer and at its
June or December meeting each year for all senior managers. In December 1996,
the Compensation Committee significantly reduced the number of employees who
received an option grant.
In Fiscal Year 1997 the Compensation Committee also adopted a cash feature
which was added to the Company's long-term incentive program. This feature is
intended to focus the management team on specific Company earnings objectives
approved annually by the Board of Directors. Under this feature, the
Compensation Committee may make grants of cash incentive awards which are
based upon meeting three-year Company earnings targets established by the
Compensation Committee. The cash incentive awards also may be adjusted by the
employee's supervisor, or in the case of the CEO, by the Chairman of the
Board, based on an individual performance factor multiplier of from 0 to 2.0,
as determined by an evaluation of performance relative to the employee's
KRA's.
TAX DEDUCTIBILITY LIMIT
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended (the "Code"). Section 162(m)
generally provides that certain compensation in excess of $1 million per year
paid to a company's chief executive officer and any of its four other highest
paid executive officers is not deductible by a company unless the compensation
qualifies for an exception. This deduction limit generally applies only to
compensation that could otherwise be deducted by a company in a taxable year.
The Compensation Committee has reviewed the Company's executive compensation
plans and believes that the impact of Section 162(m) upon the Company will not
be significant for the next several years because no executive officer of the
Company is likely to be paid compensation exceeding $1 million. The
Compensation Committee will consider the effect of Section 162(m) in
authorizing or recommending future executive compensation arrangements.
A-14
<PAGE>
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Compensation Committee fixed the CEO's base salary at $260,000, the same
as the previous three years, and planned no increase in base salary for the
next two years. In December 1997, the CEO's target regular bonus was set at
$70,000 and his target supplemental bonus was set at $21,000 under the Bonus
Plan. The target bonuses are anticipated to be paid to Mr. Barber for Fiscal
Year 1998 because, at the time of this filing, the performance goals appear to
have been met.
Ernie Green, Chairman
Allan S. Bufferd
David L. Myers
Ronald G. Peterson
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Investment Agreement, the Company and Fluor Daniel
entered into the Existing Marketing Agreement and an Intercompany Services
Agreement pursuant to which the Company has received, and it is anticipated
that the Company will receive in the future, revenues from Fluor Daniel; and
pursuant to which Fluor Daniel has received, and it is anticipated that it
will receive in the future, revenues from the Company. During the fiscal year
ended October 31, 1998 the amount of such revenues to either the Company or
Fluor Daniel did not equal at least 5% of that entity's respective
consolidated gross revenues. Messrs. Myers and Peterson are officers of Fluor
Daniel.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and ten percent stockholders to file with the
SEC reports of ownership and changes in ownership of the Company's Common
Stock. Copies of those reports must also be furnished to the Company. The
Company is required to identify any of those persons who do not file those
reports on a timely basis. Based solely on a review of the copies of reports
furnished to the Company and written representations that no other reports
were required, the Company believes that during Fiscal Year 1998 all filing
requirements applicable to directors, executive officers and ten percent
stockholders have been complied with, except that, Mr. Backus filed one report
late to report two transactions, and Ms. Stack filed one report late to report
two transactions.
A-15
<PAGE>
ANNEX B
[Letterhead Appears Here]
OCTOBER 27, 1998
Special Committee of the Board of Directors
Fluor Daniel GTI, Inc.
Board of Directors
Fluor Daniel GTI, Inc.
100 River Ridge Drive
Norwood, Massachusetts 02062
Gentlemen:
BT Alex. Brown Incorporated ("BT Alex. Brown") has acted as financial
advisor to Fluor Daniel GTI, Inc. ("the Company") in connection with the
proposed merger of the Company and IT Group ("IT") pursuant to the Agreement
and Plan of Merger, dated October 27, 1998, among the Company, IT, Fluor
Daniel, Inc. ("Fluor Daniel") and Tiger Acquisition Corporation, a wholly
owned subsidiary of IT ("Merger Sub" (the "Merger Agreement"), which provides,
among other things, for IT to commence a tender offer to the shareholders of
the Company for all outstanding shares of common stock, par value $0.001 per
share, of the Company ("Company Common Stock") for $8.25 in cash (the
"Consideration") (the "Tender Offer") and for the subsequent merger of Merger
Sub with and into the Company (the "Merger"), as a result of which the Company
will become a wholly owned subsidiary of IT. As set forth more fully in the
Merger Agreement, as a result of the Merger, all outstanding Company Common
Stock not owned directly or indirectly by IT or the Company will be converted
into the right to receive the Consideration. The terms and conditions of the
Tender Offer and the Merger are more fully set forth in the Merger Agreement.
You have requested BT Alex. Brown's opinion, as investment bankers, as to
the fairness, from a financial point of view, to the Company's shareholders
other than Fluor Daniel and IT or any affiliate either thereof (the "Public
Shareholder"), of the Corporation.
In connection with BT Alex. Brown's role as financial advisor to the
Company, and in arriving at its opinion, BT Alex. Brown has reviewed certain
publicly available financial and other information concerning the Company and
certain internal analyses and other information furnished to it by the
Company. BT Alex. Brown has also held discussions with members of the senior
management of the Company regarding the businesses and prospects of the
Company. In addition, BT Alex. Brown has (i) reviewed the reported prices and
trading activity for Company Common Stock, (ii) compared certain financial and
stock market information for the Company with similar information for certain
other companies whose securities are publicly traded, (iii) reviewed the
financial terms of certain recent business combinations, (iv) reviewed the
terms of the Merger Agreement and certain related documents, including the
marketing agreement entered into by the Company and Fluor Daniel on
October 27, 1998, and (v) performed such other studies and analyses and
considered such other factors as it deemed appropriate.
BT Alex. Brown has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Company, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, BT Alex. Brown has assumed and relied upon the
B-1
<PAGE>
accuracy and completeness of all such information. In addition, BT Alex. Brown
has not conducted a physical inspection of any of the properties or assets,
and has not prepared or obtained any independent evaluation or appraisal of
any of the assets or liabilities, of the Company. With respect to the
financial forecasts and projections made available to BT Alex. Brown and used
in its analyses, BT Alex. Brown has assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of the Company, as the case may be, as to the
matters covered thereby. In rendering its opinion, BT Alex. Brown expresses no
view as to the reasonableness of such forecasts and projections or the
assumptions on which they are based. BT Alex. Brown's opinion is necessarily
based upon economics, market and other conditions as in effect on, and the
information made available to it as of, the date hereof.
For purposes of rendering its opinions, BT Alex. Brown has assumed that, in
all respects material to its analysis, the representations and warranties of
the Company, Fluor Daniel, Merger Sub and IT contained in the Merger Agreement
are true and correct, and that the Company, Fluor Daniel, Merger Sub and IT
will each perform all of the covenants and agreements to be performed by it
under the Merger Agreement. BT Alex. Brown has also assumed that all material
governmental, regulatory or other approvals and consents required in
connection with the consummation of the Merger will be obtained and that in
connection with obtaining any necessary governmental, regulatory or other
approvals and consents, or any amendments, modifications or waivers to any
agreements, instruments or orders to which either the Company or IT is a party
or is subject or by which it is bound, no limitations, restrictions or
conditions will be imposed or amendments, modifications or waivers made that
would have a material adverse effect on the Company or IT or materially reduce
the contemplated benefits of the Merger to the Public Shareholders.
This opinion is addressed to, and for the use and benefit of, the Special
Committee of the Board of Directors of the Company and the Board of Directors
of the Company, and is not a recommendation to the stockholders of the Company
to tender their shares pursuant to the Tender Offer or to vote in favor of the
Merger. This Opinion is limited to the fairness, from a financial point of
view, to the Public Shareholders of the Consideration, and BT Alex. Brown
expresses no opinion as to the merits of the underlying decision by the
Company to enter into the Merger Agreement or engage in the Merger.
BT Alex. Brown (together with its affiliates, the "BT Group") is a
registered broker-dealer and member of the New York Stock Exchange. BT Alex.
Brown will be paid a fee for its services as financial advisor to the Company
in connection with the Merger, a substantial portion of which is contingent
upon consummation of the Merger. One or more members of the BT Group may have,
from time to time, provided investment banking, commercial banking (including
extension of credit) and other financial serves, for which it has received
compensation, to the Company or its affiliates, including Fluor Daniel and
Fluor Corporation. In the ordinary course of business, members of the BT Group
may actively trade in the securities and other instruments and obligations of
the Company and IT for their own accounts and for the accounts of their
customers. Accordingly, the BT Group may at any time hold a long or short
position in such securities, instruments and obligations.
Based upon and subject to the foregoing, it is BT Alex. Brown's opinion as
investment bankers that, as of the date hereof, the Consideration is fair,
from a financial point of view, to the Public Shareholders.
Very truly yours,
/s/ BT Alex. Brown Incorporated
------------------------------------
BT Alex. Brown Incorporated
B-2
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
Among
FLUOR DANIEL GTI, INC.,
FLUOR DANIEL, INC.,
INTERNATIONAL TECHNOLOGY CORPORATION
and
TIGER ACQUISITION CORPORATION
Dated as of October 27, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE OFFER........................................................ 1
1.1. The Offer......................................................... 1
---------
1.2. Company Actions................................................... 3
---------------
1.3. Boards of Directors and Committees; Section 14(f)................. 5
-------------------------------------------------
ARTICLE II THE MERGER; CLOSING; EFFECTIVE TIME............................. 6
2.1. The Merger........................................................ 6
----------
2.2. Closing........................................................... 6
-------
2.3. Effective Time.................................................... 7
--------------
2.4. Options........................................................... 7
-------
2.5. Company Employee Stock Purchase Plan.............................. 7
------------------------------------
ARTICLE III CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION; OFFICERS AND
DIRECTORS OF THE SURVIVING CORPORATION......................... 7
3.1. Certificate of Incorporation...................................... 7
----------------------------
3.2. Bylaws............................................................ 8
------
3.3. Directors......................................................... 8
---------
3.4. Officers.......................................................... 8
--------
ARTICLE IV EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES FOR MERGER
CONSIDERATION................................................... 8
4.1. Effect on Capital Stock........................................... 8
-----------------------
(a) Merger Consideration.......................................... 8
--------------------
(b) Cancellation of Excluded Shares............................... 8
-------------------------------
(c) Merger Sub.................................................... 8
----------
ii
<PAGE>
4.2. Exchange of Certificates for Payment.............................. 9
------------------------------------
(a) Exchange Agent................................................ 9
--------------
(b) Exchange Procedures........................................... 9
-------------------
(c) Transfers..................................................... 9
---------
(d) Termination of Merger Fund.................................... 9
--------------------------
(e) Return of Consideration....................................... 10
-----------------------
(f) Lost, Stolen or Destroyed Certificates........................ 10
--------------------------------------
4.3. Dissenters' Shares................................................ 10
------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES................................... 10
5.1. Representations and Warranties of the Company..................... 10
---------------------------------------------
(a) Organization, Good Standing, Corporate Power and
------------------------------------------------
Qualification; Subsidiaries and Other Interests............ 10
-----------------------------------------------
(b) Capital Structure............................................. 11
-----------------
(c) Corporate Authority; Approval and Fairness.................... 12
------------------------------------------
(d) Governmental Filings; No Violations........................... 12
-----------------------------------
(e) Company Reports; Financial Statements......................... 13
-------------------------------------
(f) Absence of Certain Changes.................................... 14
--------------------------
(g) Litigation and Liabilities.................................... 15
--------------------------
(h) Employee Benefits............................................. 15
-----------------
(i) Compliance with Laws.......................................... 17
--------------------
(j) Takeover Statutes............................................. 17
-----------------
(k) Environmental Matters......................................... 18
---------------------
(l) Intellectual Property......................................... 19
---------------------
(m) Taxes......................................................... 19
-----
(n) Labor Matters................................................. 20
-------------
iii
<PAGE>
(o) Insurance..................................................... 20
---------
(p) Brokers and Finders........................................... 20
-------------------
(q) Certain Business Practices.................................... 21
--------------------------
(r) Customers..................................................... 21
---------
(s) Government Contracts.......................................... 21
--------------------
(t) Cash Availability............................................. 22
-----------------
5.2. Representations and Warranties of Parent and Merger Sub........... 22
-------------------------------------------------------
(a) Organization, Good Standing and Qualification................. 22
---------------------------------------------
(b) Ownership of Merger Sub....................................... 23
-----------------------
(c) Corporate Authority........................................... 23
-------------------
(d) Governmental Filings; No Violations........................... 23
-----------------------------------
(e) Brokers and Finders........................................... 24
-------------------
ARTICLE VI COVENANTS....................................................... 24
6.1. Interim Operations................................................ 24
------------------
6.2. Third Party Acquisitions.......................................... 26
------------------------
6.3. Filings; Other Actions; Notification.............................. 28
------------------------------------
6.4. Information Supplied.............................................. 29
--------------------
6.5. Stockholders Meeting.............................................. 30
--------------------
6.6. Access............................................................ 30
------
6.7. Publicity......................................................... 31
---------
6.8. Status of Company Employees; Company Stock Options;
---------------------------------------------------
Employee Benefits.............................................. 31
------------------
6.9. Expenses.......................................................... 32
--------
6.10. Indemnification; Directors' and Officers' Insurance.............. 32
---------------------------------------------------
6.11. Other Actions by the Company and Parent.......................... 34
---------------------------------------
6.12. Tender of Shares by FD; Cancellation of FD Stock Option.......... 35
-------------------------------------------------------
iv
<PAGE>
6.13. Parent Stock Option; Exercise; Adjustments....................... 35
------------------------------------------
6.14. Use of Company Cash.............................................. 36
-------------------
ARTICLE VII CONDITIONS..................................................... 36
7.1. Conditions to Each Party's Obligation to Effect Merger............ 36
------------------------------------------------------
(a) Stockholder Approval.......................................... 36
--------------------
(b) Regulatory Consents........................................... 36
-------------------
(c) Litigation.................................................... 37
----------
7.2. Conditions to Obligations of Parent and Merger Sub................ 37
--------------------------------------------------
(a) Representations and Warranties................................ 37
------------------------------
(b) Performance of Obligations of the Company and FD.............. 37
------------------------------------------------
7.3. Conditions to Obligations of the Company.......................... 37
----------------------------------------
(a) Representations and Warranties................................ 37
------------------------------
(b) Performance of Obligations of Parent and Merger Sub........... 38
---------------------------------------------------
ARTICLE VIII TERMINATION................................................... 38
8.1. Termination by Mutual Consent..................................... 38
-----------------------------
8.2. Termination by Either Parent or the Company....................... 38
-------------------------------------------
8.3. Termination by the Company........................................ 38
--------------------------
8.4. Termination by Parent and Merger Sub.............................. 39
------------------------------------
8.5. Effect of Termination and Abandonment............................. 39
-------------------------------------
8.6. Procedure for Termination......................................... 40
-------------------------
ARTICLE IX MISCELLANEOUS................................................... 40
9.1. Survival.......................................................... 40
--------
9.2. Certain Definitions............................................... 41
-------------------
9.3. No Personal Liability............................................. 42
---------------------
9.4. Modification or Amendment......................................... 42
-------------------------
v
<PAGE>
9.5. Waiver of Conditions.............................................. 42
--------------------
9.6. Counterparts...................................................... 43
------------
9.7. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL..................... 43
---------------------------------------------
9.8. Notices........................................................... 44
-------
9.9. Entire Agreement.................................................. 45
----------------
9.10. No Third Party Beneficiaries..................................... 45
----------------------------
9.11. Obligations of the Company and Surviving Corporation............. 45
----------------------------------------------------
9.12. Severability..................................................... 45
------------
9.13. Interpretation................................................... 46
--------------
9.14. Assignment....................................................... 46
----------
vi
<PAGE>
SCHEDULES
Schedule Description
- -------- -----------
Schedule 5.1(a) Company Subsidiaries and Other Interests
Schedule 5.1(d) Consents
Schedule 5.1(f) Certain Changes
Schedule 5.1(g) Litigation and Liabilities
Schedule 5.1(h)(i) Compensation and Benefit Plans
Schedule 5.1(h) Outstanding Company Options and Other Benefit Plan Matters
Schedule 5.1(h)(viii) Amendments to be Made After the Closing Date
Schedule 5.1(k) Environmental Matters
Schedule 5.1(m) Certain Tax Matters
Schedule 5.1(n) Labor Matters
Schedule 5.1(s) Government Contracts
Schedule 6.10 Indemnity Contracts
vii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
---------
as of October 27, 1998, among FLUOR DANIEL GTI, INC., a Delaware corporation
(the "Company"), FLUOR DANIEL, INC., a California corporation ("FD"),
------- --
INTERNATIONAL TECHNOLOGY CORPORATION, a Delaware corporation ("Parent"), and
------
TIGER ACQUISITION CORPORATION, a Delaware corporation and a direct, wholly-owned
subsidiary of Parent ("Merger Sub"; the Company and Merger Sub sometimes being
----------
hereinafter together referred to as the "Constituent Corporations").
------------------------
RECITALS
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "Merger") and approved the Merger upon the terms and subject to the
------
conditions set forth in this Agreement; and
WHEREAS, in furtherance thereof, pursuant to this Agreement, within five
(5) Business Days after the public announcement of the execution of this
Agreement by the parties, Parent has agreed to commence a tender offer (the
"Offer") to acquire all of the outstanding shares (the "Shares") of common
----- ------
stock, par value $.001 per share, of the Company (the "Common Stock"), at a
------------
price of $8.25 per Share, net to the seller in cash (such amount, or any greater
amount per share paid pursuant to the Offer, being hereinafter referred to as
the "Offer Price"), in accordance with the terms and subject to the conditions
-----------
provided herein;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, FD owns 4,400,000 Shares (the "FD Shares") representing
approximately 52.3% of the issued and outstanding shares of Common Stock and
pursuant to this Agreement and agrees to tender in the Offer all of the Shares
owned by it.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1. The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII and subject to the conditions set forth in Annex A
(as defined below), as promptly as practicable, but in no event later than five
(5) Business Days after the public announcement of the execution of this
Agreement by the parties, Parent shall commence (within
<PAGE>
the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), the Offer for any and all of the Shares, at the Offer
------------
Price. The parties agree such public announcement shall occur promptly after the
execution and delivery of this Agreement. The obligation of Parent to accept for
payment and to pay for any Shares tendered shall be subject only to (i) the
condition that the FD Shares and at least a majority of issued and outstanding
Shares not owned by FD be validly tendered and not withdrawn (the "Minimum
-------
Condition"), and (ii) the other conditions set forth in Annex A hereto ("Annex
- --------- -----
A"). Parent expressly reserves the right to increase the Offer Price or to make
- -
any other changes in the terms and conditions of the Offer; provided, however,
that, unless previously approved by the Special Committee (the "Special
-------
Committee") of the Board of Directors (the "Company's Board") and the Company's
- --------- ---------------
Board in writing, no change may be made which (i) decreases the Offer Price,
(ii) changes the form of consideration to be paid in the Offer, (iii) reduces
the maximum number of Shares to be purchased in the Offer, (iv) imposes
conditions to the Offer in addition to those set forth in Annex A, (v) amends
the conditions set forth in Annex A to broaden the scope of such conditions,
(vi) amends any other term of the Offer in a manner adverse to the holders of
the Shares, (vii) extends the Offer except as provided in Section 1.1(b), or
(viii) amends the Minimum Condition. It is agreed that the conditions set forth
in Annex A other than the Minimum Condition are for the sole benefit of Parent
and may be waived by Parent, in whole or in part at any time and from time to
time in its sole discretion, other than the Minimum Condition, as to which prior
written approval of the Special Committee and the Company's Board is required.
The failure by Parent at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. The
Company agrees that no Shares held by the Company or any of its Subsidiaries (as
defined in Section 9.2) will be tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer shall
expire at midnight, New York City time, on the date that is twenty (20) Business
Days after the date the Offer is commenced (the initial "Expiration Date", and
---------------
any expiration time and date established pursuant to an authorized extension of
the Offer as so extended, also an "Expiration Date"); provided, however, that
---------------
without the consent of the Special Committee and the Company's Board, Parent may
(i) from time to time extend the Offer (each such individual extension not to
exceed 10 Business Days after the previously scheduled Expiration Date), if at
the scheduled Expiration Date of the Offer any of the conditions to the Offer
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived; (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer; or (iii) extend the
---
Offer for any reason on up to two occasions in each case for a period of not
more than five (5) Business Days beyond the latest Expiration Date that would
otherwise be permitted under clause (i) or (ii) of this sentence if on such
Expiration Date there shall have been tendered more than the number of Shares
sufficient to satisfy the Minimum Condition but less than 90% of the Shares;
provided, the Purchaser agrees to permanently waive the conditions set forth in
paragraphs (b) and (e) of Annex A. Parent agrees that if all of the conditions
to the Offer set forth on Annex A are not satisfied on any scheduled Expiration
Date, then if all such conditions are reasonably capable of being satisfied
prior to December 31, 1998, Parent shall extend the Offer from time to time
(each
2
<PAGE>
such individual extension not to exceed 10 Business Days after the previously
scheduled Expiration Date) until such conditions are satisfied or waived;
provided, that Parent shall not be required to extend the Offer beyond December
31, 1998. Subject to the terms and conditions of the Offer and this Agreement,
Parent shall accept for payment, and pay for, all Shares validly tendered and
not withdrawn pursuant to the Offer that Parent becomes obligated to accept for
payment and pay for pursuant to the Offer, as promptly as practicable after the
expiration of the Offer.
(c) As soon as practicable on the date the Offer is commenced, Parent
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, and including all exhibits thereto,
the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall
--------------
contain as an exhibit or incorporate by reference the Offer to Purchase (or
portions thereof) and forms of the related letter of transmittal and summary
advertisement. Parent and Merger Sub agree that the Schedule 14D-1, the Offer
to Purchase and all amendments or supplements thereto (which together constitute
the "Offer Documents") shall comply in all material respects with the Exchange
---------------
Act and the rules and regulations thereunder and other applicable Laws (as
defined in Section 5.1(i)). Parent and Merger Sub further agree that the Offer
Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Parent or Merger Sub with respect to information supplied by the Company or any
of its stockholders in writing specifically for inclusion or incorporation by
reference in the Offer Documents. The Company agrees that the written
information provided by the Company for inclusion or incorporation by reference
in the Offer Documents shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of Parent, Merger Sub and the Company
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Parent and Merger Sub further agree to
take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed
with the SEC and the other Offer Documents as so corrected to be disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable laws. The Company and counsel for the Special Committee shall be
given reasonable opportunity to review and comment on the Offer Documents prior
to the filing thereof with the SEC. Parent agrees to provide the Company and
counsel for the Special Committee in writing with any comments Parent or its
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after receipt of such comments.
1.2. Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer and
represents that the Company's Board, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, (i) determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, taken together, are fair to and in the best interests of the Company and
its stockholders (other than Parent and its Affiliates), (ii) approved this
3
<PAGE>
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in all respects and such approval constitutes approval of the Offer,
this Agreement and the Merger for purposes of Section 203 of the Delaware
General Corporation Law (the "DGCL"), and (iii) resolved to recommend that the
----
stockholders of the Company accept the Offer, tender their Shares thereunder to
Parent and approve and adopt this Agreement and the Merger; provided, however,
that such recommendation and approval may be withdrawn, modified or amended to
the extent that the Company's Board determines in good faith, after taking into
consideration the advice of its outside legal counsel, that failure to take such
action is likely to result in a breach of the fiduciary obligations of the
Company's Board under applicable law. The Company consents to the inclusion of
such recommendation and approval in the Offer Documents. The Company also
represents that the Company's Board has reviewed the opinion of BT Alex. Brown,
Incorporated, financial advisor to the Company's Board (the "Financial
---------
Advisor"), that, as of the date of this Agreement, the consideration to be
- -------
received pursuant to this Agreement is fair to the stockholders of the Company
(other than Parent, FD and their respective Affiliates) from a financial point
of view (the "Fairness Opinion"). The Company has been authorized by the
----------------
Financial Advisor to permit, subject to the prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of the Fairness Opinion (or a reference thereto) in the Offer Documents, the
Schedule 14D-9 (as defined below) and the Proxy Statement (as defined below).
(b) The Company shall file with the SEC, concurrently with or as soon
as practicable following the filing of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, and including all exhibits thereto, the
"Schedule 14D-9") containing the recommendation described in Section 1.2(a) and
- ---------------
shall mail the Schedule 14D-9 to the stockholders of the Company to the extent
required by Rule 14d-9 promulgated under the Exchange Act and any other
applicable federal securities laws; provided, however, that if the Company's
Board determines in good faith, after taking into consideration the advice of
its outside legal counsel, that the amendment or withdrawal of such
recommendation is likely to be required in order for its members to comply with
their fiduciary duties under applicable law, then any such amendment or
withdrawal, and any related amendment of the Schedule 14D-9, shall not
constitute a breach of this Agreement. The Company agrees that the Schedule
14D-9 shall comply in all material respects with the Exchange Act and the rules
and regulations thereunder and other applicable laws. The Company further
agrees that Schedule 14D-9, on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied by the
Parent or Merger Sub in writing specifically for inclusion or incorporation by
reference in Schedule 14D-9. Each of the Company, Parent and Merger Sub agrees
promptly to correct any written information provided by it for use in the
Schedule 14D-9 or the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel
4
<PAGE>
shall be given reasonable opportunity to review and comment on the Schedule 14D-
9 prior to the filing thereof with the SEC.
(c) In connection with the Offer, the Company shall cause its transfer
agent to promptly furnish Parent with such information, including updated lists
of the stockholders of the Company, mailing labels and updated lists of security
positions, and such assistance as Parent or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Sub and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will deliver, and will use their
reasonable efforts to cause their agents to deliver, to the Company all copies
and any extracts or summaries from such information then in their possession or
control.
(d) Solely in connection with the tender and purchase of Shares
pursuant to the Offer and the consummation of the Merger, the Company hereby
waives any and all rights of first refusal it may have with respect to Shares
owned by, or issuable to, any Person, other than rights to repurchase unvested
shares, if any, that may be held by Persons following exercise of employee stock
options.
1.3. Boards of Directors and Committees; Section 14(f).
-------------------------------------------------
(a) Immediately following the delivery to the Depositary of Parent's
notice of acceptance of Shares pursuant to the Offer (the "Notice of
---------
Acceptance"), if the Minimum Condition has been met, Parent shall be entitled to
- ----------
designate four of the six authorized directors on the Company's Board (the
"Parent Directors"). The Parent Directors shall be Anthony J. DeLuca, Philip O.
----------------
Strawbridge, James G. Kirk and James R. Mahoney. Immediately following delivery
to the Depositary of the Notice of Acceptance, the resignations as directors of
the Company of Walter C. Barber, David L. Myers and Ronald G. Peterson,
delivered to Parent concurrently with the execution and delivery of this
Agreement, shall be deemed effective and Allan S. Bufferd and Ernie Green, as
the remaining directors of the Company (the "Continuing Directors") shall
--------------------
execute and deliver a written consent or shall otherwise take effective action
electing the Parent Directors to the Company's Board. The Continuing Directors
shall remain members of such Board until the Effective Time (as defined in
Section 2.3), and, in lieu of Continuing Directors, if the same shall not serve,
the Company shall use reasonable efforts to ensure that the Company's Board
shall consist of at least two members who are neither officers, stockholders,
designees nor Affiliates of Parent or FD or their respective Affiliates (the
"Special Directors"). In the event a Continuing Director resigns from the
-----------------
Company's Board, Parent, Merger Sub and the Company shall permit the remaining
Continuing Director or Directors to appoint the resigning director's successor
who shall be deemed to be a Continuing Director. Immediately following the
election of the Parent Directors, the Company will use reasonable efforts to
cause persons designated by Parent to constitute the same percentage as the
Parent Directors represent on the Company's Board of (i) each committee of such
Board (other than any committee of such Board established to take action under
this Agreement), (ii) each board of directors of each Subsidiary of the Company
and (iii) each committee of each such board.
5
<PAGE>
(b) The Company's obligation to appoint designees to the Company's
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.3.
Parent will supply to the Company in writing and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
Affiliates required by such Section and Rule.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 1.3 and prior to the Effective Time, if there shall be
any Continuing Directors and/or Special Directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the obligations or other
acts of Parent or any waiver of any of the Company's rights hereunder, will
require the concurrence of a majority of such Continuing Directors and Special
Directors.
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger. Upon the terms and subject to the conditions set forth
----------
in this Agreement, at the Effective Time (as defined in Section 2.3) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
---------
Corporation") and shall continue to be governed by the laws of the State of
- -----------
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Article III. At the election of Parent,
to the extent that such action would not cause a failure of a condition to the
Offer or the Merger, the Merger may be structured so that the Company shall be
merged with and into Merger Sub with the result that Merger Sub shall become the
"Surviving Corporation." The Merger shall have the effects specified in the
DGCL. Parent, as the sole stockholder of Merger Sub, hereby approves the Merger
and this Agreement.
2.2. Closing. The closing of the Merger (the "Closing") shall take place
------- -------
(i) at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los
Angeles, California at 9:00 a.m., Pacific time, on the first Business Day after
the day on which the last to be fulfilled or waived of the conditions set forth
in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
------------
2.3. Effective Time. As soon as practicable following the Closing, the
--------------
Company and Parent will cause a Certificate of Merger (the "Delaware Certificate
--------------------
of Merger") to be executed, acknowledged and filed with the Secretary of State
- ---------
of Delaware as provided in Section 251 of the DGCL. The Merger shall become
effective at the time when the Delaware Certificate of Merger has been duly
filed with the Secretary of State of Delaware (the "Effective Time").
--------------
6
<PAGE>
2.4. Options. At the Effective Time, all Company Options (as defined in
--------
Section 5.1(b)) (whether vested or unvested) that have an exercise price that is
lower than the then Offer Price (the "In-the Money Options") will be cashed out
--------------------
by the Company by payment to each holder of such In-the-Money Options the
difference between the exercise price and the Offer Price. The Company shall
notify all holders of Company Options (other than the FD stock option described
in Schedule 5.1(h) (the "FD Option")) that have an exercise price that is equal
--------------- ---------
to or higher than the then Offer Price (the "Underwater Options"), promptly
------------------
after the Effective Time, that the Stock Option Plans (as defined in Section
5.1(b)) have been terminated and that, in connection with such termination, the
Company will pay to such holders an amount equal to the number of such
Underwater Options (whether vest or unvested) multiplied by $.10. The Company
agrees that the foregoing treatment of Company Options will be in accordance
with the terms of the Stock Option Plans or interpretations thereof by the
Company's Board.
2.5. Company Employee Stock Purchase Plan. The Company's Board shall
------------------------------------
take the following actions with respect to the Amended and Restated 1986
Employee Stock Purchase Plan (the "Stock Purchase Plan"): (1) accelerate the
-------------------
current Payment Period (as defined in the Stock Purchase Plan) to November 27,
1998 (the "Acceleration Date") and (2) pay each participant in lieu of each
-----------------
share that could have been purchased under the Stock Purchase Plan when the
Payment Period ends on the Acceleration Date, an amount (subject to any
applicable withholding tax) in cash equal to the difference between the Offer
Price and the Option Price (as defined in the Stock Purchase Plan). In
addition, all funds contributed to the Stock Purchase Plan which have not been
used to purchase shares of the Common Stock as of the Acceleration Date shall be
returned, in cash, without interest, to participants of the Stock Purchase Plan
as soon as administratively feasible after the Acceleration Date.
ARTICLE III
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION; OFFICERS AND
DIRECTORS OF THE SURVIVING CORPORATION
3.1. Certificate of Incorporation. The certificate of incorporation of
----------------------------
the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
-------
duly amended as provided therein or by applicable Law, except that Article
Fourth of the Charter shall be amended to read in its entirety as follows: "The
aggregate number of shares that the Corporation shall have the authority to
issue is 1,000 shares of Common Stock, par value $.01 per share."
3.2. Bylaws. The bylaws of the Company in effect at the Effective Time
------
shall be the by-laws of the Surviving Corporation (the "Bylaws"), until
------
thereafter amended as provided therein or by applicable Law, subject to the
restrictions contained in Section 6.10(e).
3.3. Directors. The directors of Merger Sub at the Effective Time shall,
---------
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and Bylaws.
7
<PAGE>
3.4. Officers. The officers of the Company at the Effective Time shall,
--------
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES FOR MERGER CONSIDERATION
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
-----------------------
Merger and without any action on the part of the holder of any Capital Stock (as
defined in Section 9.2) of the Company:
(a) Merger Consideration. Each Share issued and outstanding
--------------------
immediately prior to the Effective Time (other than Shares owned by Parent,
Merger Sub or any other direct or indirect Subsidiary of Parent or Shares that
are owned by the Company or any direct or indirect Subsidiary of the Company
(collectively, the "Excluded Shares")) shall be converted into, and become
---------------
exchangeable for the Offer Price, without interest (the "Merger Consideration").
--------------------
At the Effective Time, all Shares shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each certificate (a
"Certificate") formerly representing any of such Shares (other than Excluded
- ------------
Shares) shall thereinafter represent only the right to receive the Merger
Consideration.
(b) Cancellation of Excluded Shares. Each Excluded Share issued
-------------------------------
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of Common Stock,
----------
par value $.01 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall be converted into one share of Common Stock of the
Surviving Corporation.
4.2. Exchange of Certificates for Payment.
------------------------------------
(a) Exchange Agent. As of the Effective Time, Parent shall deposit,
--------------
or shall cause to be deposited, with an exchange agent selected by Parent (the
"Exchange Agent"), for the benefit of the holders of Shares, cash in U.S.
--------------
dollars in an amount equal to the Merger Consideration multiplied by the
aggregate outstanding Shares (other than Excluded Shares) to be paid pursuant to
Section 4.1(a) in exchange for outstanding Shares upon due surrender of the
Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions
of this Article IV (such aggregate cash amount when paid to the Exchange Agent
being hereinafter referred to as the "Merger Fund").
-----------
(b) Exchange Procedures. Promptly after the Effective Time, the
-------------------
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of Shares (other
8
<PAGE>
than holders of Excluded Shares) (i) a letter of transmittal (which shall, among
other matters, specify that delivery of the Certificates shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual receipt
of the Certificates (or affidavits of loss in lieu thereof) by the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration due and payable to such
holder. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a check in the
amount (after giving effect to any required tax withholdings) of the Merger
Consideration due and payable in respect of such holder's Shares and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on any amount payable upon due surrender of the Certificates. All
Merger Consideration paid upon surrender for exchange of Shares in accordance
with the terms of this Agreement shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Shares. In the event of a transfer
of ownership of Shares that is not registered in the transfer records of the
Company, a check for the amount of cash to be paid upon due surrender of the
Certificate may be delivered to such a transferee if the Certificate formerly
representing such Shares is presented to the Exchange Agent, accompanied by all
documents required by the Exchange Agent to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
(c) Transfers. After the Effective Time, there shall be no
---------
transfers on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time.
(d) Termination of Merger Fund. Any portion of the Merger Fund
--------------------------
(including the proceeds of any investments thereof) that remains unclaimed by
the stockholders of the Company for 180 days after the Effective Time shall be
paid to Parent. Any stockholders of the Company who have not theretofore
complied with this Article IV shall thereafter look only to Parent for payment
of their Merger Consideration payable pursuant to Section 4.1 upon due surrender
of their Certificates (or affidavits of loss in lieu thereof), in each case,
without any interest thereon. Notwithstanding the foregoing, neither Parent,
the Surviving Corporation, the Exchange Agent nor any other Person shall be
liable to any former holder of Shares for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(e) Return of Consideration. Any portion of the Merger Fund
-----------------------
representing Merger Consideration payable in respect of Dissenters' Shares (as
defined in Section 4.3) for which appraisal rights have been perfected shall be
returned to Parent, upon demand.
(f) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in an amount determined by Parent as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration payable pursuant to Section 4.1 upon due surrender of the
Certificate representing such Shares pursuant to this Agreement.
9
<PAGE>
4.3. Dissenters' Shares. Notwithstanding Section 4.1, Shares outstanding
------------------
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Shares in accordance with the DGCL ("Dissenters' Shares")
------------------
shall not be converted into a right to receive the Merger Consideration, unless
such holder fails to perfect or withdraws or otherwise loses such holder's right
to appraisal. If after the Effective Time such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such Dissenters' Shares
shall be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of Dissenters'
Shares, and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Good Standing, Corporate Power and Qualification;
---------------------------------------------------------------
Subsidiaries and Other Interests.
- --------------------------------
(i) Each of the Company and its Subsidiaries (x) is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization, (y) has all requisite corporate
or similar power and authority to own and operate its properties and assets and
to carry on its business as presently conducted and (z) is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so qualified or in
good standing, individually or in the aggregate, has not had and is not
reasonably likely to have a Company Material Adverse Effect (as defined in
Section 9.2). The Company has made available to Parent a complete and correct
copy of the Company's and its Subsidiaries' certificates of incorporation and
bylaws (or comparable governing documents), each as amended to the date hereof.
The Company's and its Subsidiaries' certificates of incorporation and bylaws (or
comparable governing documents) made available are in full force and effect.
(ii) Schedule 5.1(a) contains a correct and complete list of each
---------------
of the Company's Subsidiaries, the jurisdiction where each of such Subsidiaries
is organized and the percentage of outstanding Capital Stock of such
Subsidiaries that is directly or indirectly owned by the Company. The Company or
another Subsidiary of the Company owns its shares of the Capital Stock of each
Subsidiary of the Company free and clear of all Liens except Permitted Liens (as
defined in Section 9.2). Schedule 5.1(a) sets forth a true and complete list of
---------------
each equity investment in an amount of $2,000,000 or more or which represents a
5% or greater ownership interest in the subject of such investment made by the
Company or any of its
10
<PAGE>
Subsidiaries in any other Person other than the Company's Subsidiaries ("Other
-----
Interests"). The Other Interests are owned by the Company, by one or more of the
- ---------
Company's Subsidiaries or by the Company and one or more of its Subsidiaries, in
each case free and clear of all Liens, except for Permitted Liens and Liens that
may be created by any partnership or joint venture agreements for Other
Interests.
(b) Capital Structure. The authorized Capital Stock of the Company
-----------------
consists of (i) twenty-five million (25,000,000) Shares, of which 8,411,766 were
outstanding as of the close of business on October 23, 1998, and (ii) one
million (1,000,000) shares of Preferred Stock, par value $.01 per share (the
"Preferred Shares"), none of which is outstanding. All of the outstanding Shares
----------------
have been duly authorized and are validly issued, fully paid and nonassessable.
The Company has no Preferred Shares reserved for issuance. Schedule 5.1(h)
---------------
contains a correct and complete list as of October 23, 1998 of each outstanding
purchase right or option (each a "Company Option") to purchase Shares, including
--------------
all Company Options issued under the Company's Amended and Restated 1987 Stock
Plan, the Company's 1997 Stock Plan, and the Company's Amended and Restated 1995
Director Stock Option Plan, in each case as amended to the date hereof
(collectively, the "Stock Option Plans"), including the holder, date of grant,
------------------
exercise price and number of Shares subject thereto. Other than the FD Stock
Option Agreement described in Schedule 5.1(h), the Stock Option Plans are the
only plans under which any Company Options are outstanding. As of October 23,
1998, other than the 3,055,853 Shares reserved for issuance upon exercise of
outstanding Company Options, there are no Shares reserved for issuance or any
commitments for the Company to issue Shares. Each of the outstanding shares of
Capital Stock or other securities of each of the Company's Subsidiaries directly
or indirectly owned by the Company is duly authorized, validly issued, fully
paid and nonassessable and owned by the Company or by a direct or indirect
Subsidiary of the Company, free and clear of any limitation or restriction
(including any restriction on the right to vote or sell the same except as may
be provided as a matter of Law). Except for Company Options, there are no
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements or
commitments to issue or sell any shares of Capital Stock or other securities of
the Company or any of its Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire from the Company, any shares of Capital Stock
or other securities of the Company or any of its Subsidiaries, and no securities
or obligations evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter ("Voting Debt"). If Parent takes the actions provided
-----------
for in Section 6.8(c) hereof, after the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
Capital Stock or other securities of the Surviving Corporation pursuant to the
Stock Option Plans. The Shares constitute the only class of securities of the
Company or any of its Subsidiaries registered or required to be registered under
the Exchange Act.
11
<PAGE>
(c) Corporate Authority; Approval and Fairness.
------------------------------------------
(i) The Company has all requisite corporate power and authority
and has taken all corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and to consummate the Merger,
subject (if required by law) only to approval of this Agreement by the holders
of a majority of the outstanding Shares (the "Company Requisite Vote").
----------------------
Assuming due execution and delivery by Parent and Merger Sub, this Agreement is
a valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy laws or creditors' rights generally or by general
principles of equity.
(ii) The Company's Board has unanimously approved this Agreement
and the Merger and the other transactions contemplated hereby including, without
limitation, the Offer, has received and reviewed the Fairness Opinion and duly
taken all other actions described in Sections 1.2(a) and 5.1(j).
(d) Governmental Filings; No Violations.
-----------------------------------
(i) Other than the filings and/or notices (A) pursuant to
Section 1.2, (B) with the Delaware Secretary of State, (C) under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
-------
Exchange Act, (D) to comply with state securities or "blue sky" laws and (E)
with the National Association of Securities Dealers (the "NASD"), no notices,
----
reports or other filings are required to be made nor are any consents,
registrations, approvals, permits or authorizations (collectively, "Government
----------
Consents") required to be obtained by the Company from any court or other
- --------
governmental or regulatory authority, agency, commission, body or other
governmental entity (a "Governmental Entity"), in connection with the execution
-------------------
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to result in a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
the Company does not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of or a default under, the certificate of incorporation or
bylaws of the Company or the comparable governing instruments of any of its
Subsidiaries, (B) a breach or violation of, or a default under, the acceleration
of any obligations or the creation of any Lien on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any agreement, lease, contract, note, mortgage, indenture or other
obligation (a "Contract") binding upon the Company or any of its Subsidiaries or
--------
any order, writ, injunction, decree of any court or any Law or governmental or
non-governmental permit or license to which the Company or any of its
Subsidiaries is subject or (C) any change in the rights or obligations of any
party under any Contract; except, in the case of clause (B) or (C) above, for
any breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to
12
<PAGE>
have a Company Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement. Except as set forth on Schedule 5.1(d), there
---------------
are no Contracts of the Company or its Subsidiaries which are material to the
Company and its Subsidiaries, taken as a whole, pursuant to which consents or
waivers are or may be required prior to consummation of the Offer or the Merger
and the other transactions contemplated by this Agreement.
(e) Company Reports; Financial Statements. The Company has made
-------------------------------------
available to Parent each registration statement, report, proxy statement or
information statement filed with the SEC by it since October 31, 1997 (the
"Audit Date"), including the Company's Annual Report on Form 10-K for the year
----------
ended October 31, 1997 (the "Company 10-K") in the form (including exhibits,
------------
annexes and any amendments thereto) filed with the SEC (collectively, including
any such reports filed subsequent to the date hereof, the "Company Reports"). As
---------------
of their respective dates, the Company Reports complied, and any Company Reports
filed with the SEC after the date hereof will comply, as to form in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act of 1933, as amended (the "Securities Act"), and the Company Reports did not,
--------------
and any Company Reports filed with the SEC after the date hereof will not, at
the time of their filing, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of income and of changes in financial position
included in or incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents, or will fairly present, the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal year-
end audit adjustments that will not be material in amount or effect), in each
case in accordance with United States generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except as may be
----
noted therein. The Company has heretofore made available or promptly will make
available to Parent a complete and correct copy of all amendments or
modifications (in draft or final form) which are required to be filed with the
SEC but have not yet been filed with the SEC to the Company Reports, agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act. For purposes of this Agreement,
"Balance Sheet" means the consolidated balance sheet of the Company as of
-------------
October 31, 1997 set forth in the Company 10-K. Except as set forth in Company
Reports filed with the SEC prior to the date hereof or as incurred in the
ordinary course of business since the date of the most recent financial
statements included in the Company Reports, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which would be required under GAAP to be set
forth on a consolidated balance sheet of the Company and its subsidiaries taken
as a whole and which individually or in the aggregate would have a Company
Material Adverse Effect.
(f) Absence of Certain Changes. Except as disclosed in Schedule
--------------------------
5.1(f) or in the Company Reports filed prior to the date hereof, since the Audit
Date, the Company and its
13
<PAGE>
Subsidiaries have conducted their respective businesses in all material respects
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses consistent with past
practices, and there has not been any (i) change in the financial condition,
properties, business or results of operations of the Company and its
Subsidiaries, except for those changes that, individually or in the aggregate,
have not had and are not reasonably likely to have a Company Material Adverse
Effect; (ii) material damage, destruction or other casualty loss with respect to
any material asset or property owned, leased or otherwise used by the Company or
any of its Subsidiaries, not covered by insurance; (iii) declaration, setting
aside or payment of any dividend or other distribution in respect of the Capital
Stock of the Company or any of its Subsidiaries (other than wholly-owned
Subsidiaries) or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries of any outstanding shares of Capital Stock or other
securities of, or other ownership interests in, the Company or any of its
Subsidiaries; (iv) amendment of any material term of any outstanding security of
the Company or any of its Subsidiaries; (v) incurrence, assumption or guarantee
by the Company or any of its Subsidiaries of any indebtedness for borrowed money
other than in the ordinary course of business and in amounts and on terms
consistent with past practices; (vi) creation or assumption by the Company or
any of its Subsidiaries of any Lien (other than Permitted Liens) on any material
asset other than in the ordinary course of business consistent with past
practices; (vii) making of any loan, advance or capital contributions by the
Company or any of its Subsidiaries to, or investment in, any Person other than
(x) loans or advances to employees in connection with business-related travel,
(y) loans made to employees consistent with past practices which are not in the
aggregate in excess of $250,000, and (z) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries, and in each case
made in the ordinary course of business consistent with past practices; (viii)
transaction or commitment made, or any contract or agreement entered into, by
the Company or any of its Subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by the Company or any of its Subsidiaries of any Contract or other right, in
either case, material to the Company and its Subsidiaries, taken as a whole,
other than transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement; (ix)
labor dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company or any of its Subsidiaries, or any lockouts, strikes, slowdowns,
work stoppages or threats thereof by or with respect to such employees; or (x)
change by the Company or any of its Subsidiaries in accounting principles,
practices or methods. Since the Audit Date, except as disclosed in the Company
Reports filed prior to the date hereof or increases in the ordinary course of
business consistent with past practices, there has not been any increase in the
compensation payable or that could become payable by the Company or any of its
Subsidiaries to (a) officers of the Company or any of its Subsidiaries or (b)
any employee of the Company or any of its Subsidiaries whose annual cash
compensation is $150,000 or more, or any amendment of any of the Compensation
and Benefit Plans (as defined in Section 5.1(h)).
(g) Litigation and Liabilities. Except as disclosed in Schedule
-------------------------- --------
5.1(g) or in the Company Reports filed prior to the date hereof, and except for
- ------
matters which, individually or in the aggregate, have not had and are not
reasonably likely to have a Company Material Adverse Effect or prevent, delay or
impair the ability of the Company to consummate the transactions
14
<PAGE>
contemplated by this Agreement, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or (ii) obligations or liabilities, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to matters involving any Environmental Law (as defined
in Section 5.1(k)) or any other facts or circumstances of which the Company has
knowledge that are reasonably likely to result in any claims against, or
material obligations or liabilities of, the Company or any of its Subsidiaries.
(h) Employee Benefits.
-----------------
(i) For purposes of this Agreement, "Compensation and Benefit
------------------------
Plans" means, collectively, each bonus, deferred compensation, pension,
- -----
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health, or other plan, agreement, policy or
arrangement, whether written or oral, that covers employees or directors of the
Company or any of its Subsidiaries, or pursuant to which former employees or
directors of the Company or any of its Subsidiaries are entitled to current or
future benefits. The Company has made available to Parent copies of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
-----
referred to herein as "Pension Plans"), "employee welfare benefit plans" (as
-------------
defined in Section 3(1) of ERISA) and all other Compensation and Benefit Plans
maintained, or contributed to, by the Company or of its subsidiaries or any
person or entity that, together with the Company and its Subsidiaries, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") (the Company and each
----
such other person or entity, a "Commonly Controlled Entity") for the benefit of
--------------------------
any current employees, officers or directors of the Company or any of its
subsidiaries. The Compensation and Benefit Plans are listed on Schedule 5(h)(i).
----------------
The Company has also made available to Parent true, complete and correct copies
of (1) the most recent annual report on Form 5500 filed with the Internal
Revenue Service with respect to each Compensation and Benefit Plan (if any such
report was required), (2) the most recent summary plan description for each
Compensation and Benefit Plan for which such summary plan description is
required and (3) each trust agreement and group annuity contract related to any
Compensation and Benefit Plan. Except as would not have a Company Material
Adverse Effect, each Compensation and Benefit Plan has been administered in
accordance with its terms. Except as would not have a Company Material Adverse
Effect, all the Compensation and Benefit Plans are in compliance with applicable
provisions of ERISA and the Code.
(ii) Except as would not have a Company Material Adverse Effect,
all Pension Plans have been the subject of determination letters from the
Internal Revenue Service to the effect that such Pension Plans are qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and no such determination letter has been revoked nor has any event
occurred since the date of its most recent determination letter or application
therefor that would adversely affect its qualification or materially increase
its costs. Each Compensation and Benefit Plan is in substantial compliance with
all reporting and disclosure requirements of ERISA and the Code and the Company,
its Subsidiaries and each
15
<PAGE>
Commonly Controlled Entity is, in respect of each such plan, in compliance with
the fiduciary responsibility provisions of ERISA.
(iii) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has maintained, contributed or been obligated to
contribute to any Benefit Plan that is subject to Title IV of ERISA.
(iv) Schedule 5.1(h) lists all outstanding Stock Options as of
---------------
October 23, 1998, showing for each such option: (1) the number of shares
issuable, (2) the number of vested shares, (3) the date of expiration and (4)
the exercise price.
(v) All contributions required to be made under the terms of
any Compensation and Benefit Plan as of the date hereof have been timely made.
Neither the Company, nor any of its Subsidiaries, nor any Commonly Controlled
Entity nor any officer, director or employee of any of them has, in respect of
any Compensation and Benefit Plans, committed any prohibited transaction under
ERISA Section 406 or 407 or Code Section 4975 or otherwise incurred excise tax
liability under Chapters 43 and 47 under Subtitle D of the Code.
(vi) Except as provided by this Agreement or in Schedule 5.1(h),
---------------
no employee of the Company or any of its Subsidiaries will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement.
(vii) All Compensation and Benefit Plans covering current or
former non-U.S. employees of the Company or any of its Subsidiaries comply in
all material respects with applicable local Laws. The Company and its
Subsidiaries have no unfunded liabilities with respect to any Pension Plan that
covers such non-U.S. employees.
(viii) Each Compensation and Benefit Plan complies in all
material respects with all applicable requirements of (i) the Age Discrimination
in Employment Act of 1967, as amended, and the regulations thereunder and (ii)
Title VII of the Civil Rights Act of 1964, as amended, and the regulations
thereunder and all other applicable laws. All amendments and actions required to
bring each of the Employee Benefit Plans into conformity with all of the
applicable provisions of ERISA and other applicable laws have been made or taken
except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the Closing Date.
(ix) Each group health plan as defined in Section 5000(b)(i) of
the Code sponsored by the Company materially complies with the health care
continuation provisions of COBRA and (ii) the Medicare Secondary Payor
Provisions of Section 1826 (b) of the Social Security Act, and the regulations
promulgated thereunder.
(x) Except as disclosed in Schedule 5.1(h)(i), neither the
Company nor any of its Subsidiaries provides any welfare benefits including
health, life, or disability insurance,
16
<PAGE>
pursuant to a welfare benefit plan (as defined in ERISA Section 3(1)) or
otherwise to any former employee except pursuant to Section 4980B of the Code.
(i) Compliance with Laws. Except as set forth in the Company Reports
--------------------
filed prior to the date hereof, the businesses of each of the Company and its
Subsidiaries have not been, and are not being, conducted in violation of any
law, ordinance, regulation, judgment, order, injunction, decree, arbitration
award, license or permit of any Governmental Entity (collectively, "Laws"),
----
except for violations or possible violations that, individually or in the
aggregate, have not had and are not reasonably likely to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement.
Except as set forth in the Company Reports filed prior to the date hereof, no
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same.
(j) Takeover Statutes. No "fair price," "moratorium" or "control
-----------------
share acquisition" anti-takeover statute or regulation of the State of Delaware
or the Commonwealth of Massachusetts (each a "Takeover Statute") is applicable
----------------
to the Company, the Shares, the Offer, the Merger or any of the other
transactions contemplated by this Agreement. The Board of Directors of the
Company has approved the Offer, the Merger and this Agreement, and such approval
is sufficient to render inapplicable to the Offer, the Merger, this Agreement,
and the transactions contemplated by this Agreement the provisions of Section
203 of DGCL to the extent, if any, such Section is applicable to the Offer, the
Merger, this Agreement and the transactions contemplated by this Agreement.
(k) Environmental Matters.
---------------------
(i) The term "Environmental Laws" means any Federal, state, local
or foreign statute, treaty, ordinance, rule, regulation, policy, permit,
consent, approval, license, judgment, order, decree or injunction relating to:
(A) Releases (as defined in 42 U.S.C. (S) 9601(22)) or threatened Releases of
Hazardous Material (as hereinafter defined) into the environment, (B) the
generation, treatment, storage, presence, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material, (C) natural
resources, or (D) the environment, and includes all "Environmental Laws" as they
are defined in any indemnification provision in any contract, lease, or
agreement to which Company is a party. The term "Hazardous Material" means (1)
hazardous substances (as defined in 42 U.S.C. (S) 9601(14)), (2) petroleum,
including crude oil and any fractions thereof, (3) natural gas, synthetic gas
and any mixtures thereof, (4) asbestos and/or asbestos containing materials, (5)
PCBs or materials containing PCBs, (6) radioactive materials, and (7) "Hazardous
Substance" or "Hazardous Material" as those terms are defined in any
indemnification provision in any contract, lease, or agreement to which the
Company is a party.
(ii) During the period of ownership or operation by the Company
and its Subsidiaries of any of their current or previously owned or leased
properties, and to the knowledge of the executive officers of the Company there
have been no Releases of Hazardous Material by the Company or any of its
Subsidiaries in, on, under or affecting such properties or
17
<PAGE>
any surrounding site, and neither the Company nor any of its Subsidiaries has
disposed of any Hazardous Material in a manner that has led, or could reasonably
be anticipated to lead to a Release, except in each case for those which
individually or in the aggregate would not have a Company Material Adverse
Effect, and except as disclosed in the Company Reports. Except as set forth on
Schedule 5.1(k), to the knowledge of the executive officers of the Company there
have been no Releases of Hazardous Material by the Company or any of its
Subsidiaries in, on, under or affecting such properties or any surrounding site
at times outside of such periods of ownership, operation, or lease or by any
other party except in each case for those which individually on in the aggregate
would not have a Company Material Adverse Effect. To the knowledge of the
executive officers of the Company no third party property is contaminated with
any Hazardous Substances that may subject the Company or any of its Subsidiaries
to liability under any Environmental Laws. The Company and its Subsidiaries have
not received any written notice of, or entered into any order, settlement or
decree relating to: (A) any violation of any Environmental Laws or the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any alleged
violation of Environmental Laws, (B) the response to or remediation of Hazardous
Material at or arising from any of the Company's properties or any Subsidiary's
properties. The properties currently owned or operated by the Company or any of
its Subsidiaries possesses all material permits, licenses, authorizations and
approvals required under applicable Environmental Laws with respect to the
conduct of business thereat, and are in compliance with all Environmental Laws,
except where instances of noncompliance would not, individually or in the
aggregate, be reasonable likely to have a Company Material Adverse Effect.
(iii) To the knowledge of the executive officers of the Company
there are no circumstances or conditions involving the Company, any of its
Subsidiaries or their respective employees that could reasonably be expected to
result in any material claims, liability or investigations under any
Environmental Law or relating to Hazardous Substances arising out of the
ownership, operation, management of all or any portion of a facility, or out of
the arrangement for the treatment, transportation, or disposal of, or ownership
or possession or choice of the treatment, storage or disposal facility for, any
material with respect and to the extent to which the Company or its Subsidiaries
provided services before the Closing.
(l) Intellectual Property. The Company and its subsidiaries own, or
---------------------
are validly licensed or otherwise have the right to use all (i) foreign and
United States federal and state patents, trademarks, trade names, service marks
and copyright registrations (other than the name and mark "Fluor Daniel"), (ii)
foreign and United States federal and state patent, trademark, trade name,
service mark and copyright applications for registration, (iii) common law
claims to trademarks, service marks and trade names (other than the name and
mark "Fluor Daniel"), (iv) claims of copyright which exist although no
registrations have been issued with respect thereto, (v) fictitious business
name filings with any state or local Governmental Entity and (vi) inventions,
concepts, designs, improvements, original works of authorship, computer
programs, know-how, research and development, techniques, modifications to
existing copyrightable works of authorship, data and other proprietary and
intellectual property rights (whether or not patentable or subject to copyright,
mask work or trade secret protection), in each case which are material to the
conduct of the business of the Company and its Subsidiaries, taken as a whole
(collectively, the "Intellectual Property Rights"). There are no Liens other
----------------------------
than
18
<PAGE>
Permitted Liens on the Intellectual Property Rights. There are no outstanding
and, to the Company's knowledge, no threatened disputes or disagreements with
respect to any Contract in respect of the Intellectual Property Rights.
(m) Taxes. Except as set forth on Schedule 5.1(m), (i) the
----- ---------------
Company and its Subsidiaries have timely filed or will timely file all returns
and reports required to be filed by them with any taxing authority with respect
to Taxes for any period ending on or before the date hereof, taking into account
any extension of time to file granted to or obtained on behalf of the Company or
any of its Subsidiaries, and all such returns and reports are correct and
complete in all material respects; (ii) all Taxes shown to be payable on such
returns or reports that are due prior to the date hereof have been timely paid;
(iii) as of the date hereof, no deficiency for any amount of Tax has been
asserted or assessed or, to the Company's knowledge, has been threatened or is
likely to be assessed by a taxing authority against the Company or any of its
Subsidiaries other than deficiencies as to which adequate reserves have been
provided for in the Company's consolidated financial statements; (iv) the
Company has provided in accordance with GAAP adequate reserves in its
consolidated financial statements for any Taxes that have not been paid, whether
or not shown as being due on any returns; (v) no claim has ever been made by an
authority in a jurisdiction where the Company or any of its Subsidiaries do not
file Tax Returns that any of the Company or its Subsidiaries are or may be
subject to taxation by that jurisdiction; (vi) no contract of the Company or any
Subsidiary that is a long-term contract (for purposes of Section 460 of the
Code) has been reported on a method of tax accounting other than the 100 percent
percentage of completion method for income tax purposes; (vii) neither the
Company nor any Subsidiary has been included in any consolidated, combined or
unitary Tax Return (other than for a group of which the Company is the common
parent) provided for under the laws of the United States, any state or locality
with respect to Taxes for any taxable period for which the statute of
limitations has not expired; and neither the Company nor any Subsidiary has any
liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise; (viii) as of the Closing Date there will
be no excess loss accounts, deferred intercompany gains or losses, or other like
items pertaining to the Company or any of its Subsidiaries; and (ix) none of the
Company or any of its Subsidiaries has entered into transfer pricing agreements
or other like arrangements with respect to any foreign jurisdiction. For
purposes of this Agreement, "Taxes" means any and all taxes, fees, levies,
-----
duties, tariffs, imposts and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or other taxing authority,
including taxes or other charges on or with respect to net or gross income,
franchises, windfall or other profits, gross receipts, property, sales, use,
Capital Stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges. Neither the Company nor any of its Subsidiaries is subject to
any Tax sharing agreement. No payments to be made to any of the employees of
the Company or any of its Subsidiaries will, as a direct or indirect result of
the Offer or the consummation of the Merger, be subject to the deduction
limitations of Section 280G of the Code.
19
<PAGE>
(n) Labor Matters. Except as disclosed in Schedule 5.1(n), neither
------------- ---------------
the Company nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of any proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to compel
it to bargain with any labor union or labor organization, nor is there pending
or, to the knowledge of the Company, threatened, any labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries.
(o) Insurance. The Company maintains insurance policies (the
---------
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. Other than the FD D&O Insurance policy, which has been previously
provided to Parent, none of the Insurance Policies will terminate or lapse (or
be affected in any other materially adverse manner) by reason of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have complied in all material respects with the provisions of each Insurance
Policy under which it is the insured party. No insurer under any Insurance
Policy has canceled or generally disclaimed liability under any such policy or,
to the Company's knowledge, indicated any intent to do so or not to renew any
such policy. All material claims under the Insurance Policies have been filed
in a timely fashion.
(p) Brokers and Finders. Neither the Company nor any of its
-------------------
Subsidiaries, officers, directors, or employees or other Affiliates has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Offer, the Merger or the
other transactions contemplated by this Agreement, except that the Company has
employed the Financial Advisor, the arrangements with which have been disclosed
to Parent prior to the date hereof.
(q) Certain Business Practices. Neither the Company, any of its
--------------------------
Subsidiaries nor any directors, officers, agents or employees of the Company or
any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity;
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii)
made any other payment prohibited by applicable Law.
(r) Customers. The documents and information supplied by the Company
---------
to Parent, Merger Sub or any of their representatives in connection with this
Agreement with respect to relationships and volumes of business done with
significant customers was accurate in all material respects.
(s) Government Contracts. Except as disclosed in Schedule 5.1(s):
--------------------
(i) With respect to each Government Contract or Bid to which the
Company and/or any of its Subsidiaries is a party: (1) all representations and
certifications were
20
<PAGE>
current, accurate and complete when made, and the Company and its Subsidiaries
have fully complied with all such representations and certifications; (2) since
October 1, 1995, no allegation has been made, either orally or in writing, that
the Company or any of its Subsidiaries is in breach or violation of any material
statutory, regulatory or contractual requirement; (3) since October 1, 1995, no
termination for convenience, termination for default, cure notice or show cause
notice has been issued; (4) since October 1, 1995, no cost in excess of $200,000
incurred by the Company, any of its Subsidiaries or any of their respective
subcontractors has been questioned or disallowed; and (5) since October 1, 1995,
no money due to the Company or any of its Subsidiaries has been (or has
threatened to be) withheld or set off.
(ii) Neither the Company, any of its Subsidiaries, any of their
respective Affiliates, nor any of the Company's or any of its Subsidiaries'
directors, officers, employees, agents or consultants is (or for the last three
years has been) (1) under administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission regarding a Government Contract
or Bid; or (2) suspended or debarred from doing business with any governmental
authority or declared nonresponsible or ineligible for government contracting.
None of the Company, any of its Subsidiaries or any of their respective
Affiliates has made a voluntary disclosure to any governmental authority with
respect to any alleged material irregularity, misstatement or omission arising
under or relating to any Government Contract or Bid. The Company knows of no
circumstances that would warrant the institution of suspension or debarment
proceedings or the finding of nonresponsibility or ineligibility on part of the
Company or any of its Subsidiaries in the future.
(iii) Since October 1, 1995, no governmental authority or any
prime contractor, subcontractor or vendor has asserted any claim or initiated
any dispute proceeding against the Company or any of its Subsidiaries, nor has
the Company or any of its Subsidiaries asserted any claim or initiated any
dispute proceeding, directly or indirectly, against any such party, concerning
any Government Contract or Bid, in each case involving an amount in excess of
$100,000. There are no facts of which the executive officers of the Company are
aware upon which such a claim or dispute proceeding may be based in the future.
(iv) Definitions. The following terms, as used herein, shall
-----------
have the following meanings:
"Bid" means any quotation, bid or proposal by the Company, any of its
---
Subsidiaries or any of their respective Affiliates which, if accepted or
awarded, would lead to a contract with a governmental authority or any other
entity, including a prime contractor or a higher tier subcontractor to a
governmental authority, for the design, manufacture or sale of products or the
provision of services by the Company or any of its Subsidiaries.
"Governmental Contract" means any prime contract, subcontract, teaming
---------------------
agreement or arrangement, joint venture, basic ordering agreement, letter
contract, purchase order, delivery order, Bid, change order, arrangement or
other commitment of any kind relating to the business of the Company or any of
its Subsidiaries between the Company and/or any of its
21
<PAGE>
Subsidiaries and (1) any governmental authority, (2) any prime contractor to a
governmental authority or (3) any subcontractor with respect to any contract
described in clause (1) or (2).
(t) Cash Availability. As of the date hereof, the Company has cash,
-----------------
cash equivalents and marketable securities which are free, unencumbered and
available for use (in the case of marketable securities, when liquidated),
including for payment for the Shares in the Offer following consummation of the
Offer, in the amount of at least $20 million.
5.2. Representations and Warranties of Parent and Merger Sub. Parent and
-------------------------------------------------------
Merger Sub each hereby represents and warrants to the Company as follows:
(a) Organization, Good Standing and Qualification. Each of Parent
---------------------------------------------
and Merger Sub (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) has all requisite
corporate or similar power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and (iii) is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in such good standing, when taken together with all other such
failures, has not had and is not reasonably likely to have a Parent Material
Adverse Effect (as defined in Section 9.2). Parent has made available to the
Company a complete and correct copy of Parent's certificate or incorporation and
bylaws, as amended to the date hereof. Parent's certificate of incorporation and
bylaws so delivered are in full force and effect.
(b) Ownership of Merger Sub. All of the issued and outstanding
-----------------------
Capital Stock of Merger Sub is, and at the Effective Time will be, owned by
Parent, and there are no (i) other outstanding shares of Capital Stock or other
voting securities of Merger Sub, (ii) securities of Merger Sub convertible into
or exchangeable for shares of Capital Stock or other voting securities of Merger
Sub or (iii) options or other rights to acquire from Merger Sub, and no
obligations of Merger Sub to issue, any Capital Stock, other voting securities
or securities convertible into or exchangeable for Capital Stock or other voting
securities of Merger Sub. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(c) Corporate Authority.
-------------------
(i) Each of Parent and Merger Sub has all requisite corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate the Offer and the Merger. Assuming due execution and delivery by the
Company, this Agreement is a valid and binding agreement of Parent and Merger
Sub, enforceable against each of them in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy laws or creditors'
rights generally or by general principles of equity.
22
<PAGE>
(ii) The Boards of Directors of Parent and Merger Sub have
unanimously approved this Agreement and the Merger and the other transactions
contemplated hereby, including, without limitation, the Offer.
(d) Governmental Filings; No Violations.
-----------------------------------
(i) Other than the filings and/or notices (A) pursuant to
Section 1.2, (B) under the HSR Act and the Exchange Act, (C) to comply with
state securities or "blue sky" laws, and (D) required to be made with the NASD,
no notices, reports or other filings are required to be made by Parent or Merger
Sub with, nor are any Government Consents required to be obtained by Parent or
Merger Sub from, any Governmental Entity, in connection with the execution and
delivery of this Agreement by Parent and Merger Sub, the Offer and the
consummation by Parent and Merger Sub of the Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby will not, constitute
or result in (A) a breach or violation of, or a default under, the certificate
or bylaws of Parent or Merger Sub, (B) a breach or violation of, or a default
under, the acceleration of or the creation of a Lien, on the assets of Parent or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any Contract binding upon Parent or any of its Subsidiaries or any Law to
which Parent or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any such Contract, except, in the case
of clause (B) or (C) above, for any breach, violation, default, acceleration,
creation or change that, individually or in the aggregate, is not reasonably
likely to have a Parent Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Parent or Merger Sub to consummate the
transactions contemplated by this Agreement.
(e) Brokers and Finders. Neither Parent nor Merger Sub, nor any of
-------------------
their respective officers, directors, employees or other Affiliates, has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Offer, the Merger or the
other transactions contemplated by this Agreement.
(f) Financing. Parent and Merger Sub have possession of, or have
---------
available to them under existing lines of credit and on the Expiration Date of
the Offer and at the Effective Time, Parent and Merger Sub will have possession
of, or have available, assuming that the Company has at least $15 million in
cash on the Expiration Date of the Offer, all the funds necessary for the
acquisition of all Shares pursuant to the Offer and to perform their respective
obligations under this Agreement, including without limitation payment in full
for all Shares validly tendered in the Offer or outstanding as of the Effective
Time.
(g) Directors' and Officers' Insurance. Parent has notified the
----------------------------------
insurance broker for its directors' and officers' insurance ("Parent D&O
----------
Insurance") of the transactions
- ---------
23
<PAGE>
contemplated hereby; within ten (10) Business Days of the date hereof will
obtain from the carrier for such insurance an acknowledgment that the Company
will become a "Subsidiary" (as that term is defined under the Parent D&O
Insurance policy) at the time that Merger Sub acquires the FD Shares pursuant to
the Offer; and will pay any additional premium required as a result of the
Company becoming a "Subsidiary".
ARTICLE VI
COVENANTS
6.1. Interim Operations. The Company covenants and agrees as to itself
------------------
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise expressly contemplated
by this Agreement):
(a) the business of it and its Subsidiaries shall be conducted in the
ordinary and usual course consistent with past practices and, to the extent
consistent therewith, it and its Subsidiaries shall use commercially reasonable
efforts to preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, distributors, creditors,
lessors, employees and business associates;
(b) it shall not, (i) issue, sell or otherwise dispose of or subject
to Lien (other than Permitted Liens) any of its Subsidiaries' Capital Stock
owned by it; (ii) amend its charter, bylaws or, except for any amendment which
will not hinder, delay or make more costly to Parent the Offer or the Merger;
(iii) split, combine or reclassify its outstanding shares of Capital Stock; (iv)
declare, set aside or pay any dividend payable in cash, stock or property in
respect of any Capital Stock; (v) repurchase, redeem or otherwise acquire or
permit any of its Subsidiaries to purchase or otherwise acquire, any shares of
its Capital Stock or any securities convertible into or exchangeable or
exercisable for any shares of its Capital Stock; or (vi) adopt a plan of
complete or partial liquidation or dissolution, merger or otherwise restructure
or recapitalize or consolidate with any Person other than Merger Sub or another
wholly-owned Subsidiary of Parent;
(c) neither it nor any of its Subsidiaries shall (i) authorize for
issuance or issue, sell or otherwise dispose of or subject to any Lien (other
than Permitted Liens) any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its Capital Stock of any class or
any Voting Debt (other than Shares issuable pursuant to Company Options
outstanding on the date hereof); (ii) other than in the ordinary and usual
course of business consistent with past practices, transfer, lease, license,
guarantee, sell or otherwise dispose of or subject to any Lien (other than
Permitted Liens) any other property or assets or incur or modify any material
indebtedness or other liability (except for additional borrowings in the
ordinary course under lines of credit in existence on the date hereof); (iii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person
except in the ordinary course of business consistent with past practices and
except for obligations of Subsidiaries of the Company incurred in the ordinary
course of business; (iv) make any loans to any other Person (other than to
Subsidiaries of the Company or, customary loans or advances
24
<PAGE>
to employees in connection with business-related travel in the ordinary course
of business consistent with past practices); or (v) make any commitments for,
make or authorize any capital expenditures other than in amounts less than
$50,000 individually and $250,000 in the aggregate or, by any means, make any
acquisition of, or investment in, assets or stock of any other Person;
(d) except as may be required to comply with applicable law or by
existing contractual commitments, neither it nor any of its Subsidiaries shall
(i) enter into any new agreements or commitments for any severance or
termination pay to, or enter into any employment or severance agreement with,
any of its directors, officers or employees or consultants except for (a)
specific arrangements with 13 of the Company's employees, including one of its
directors, which have been previously disclosed to Parent and (b) reasonable
severance payments made to employees in the ordinary course of business and
consistent with past practices, or (ii) terminate, establish, adopt, enter into,
make any new grants or awards under, amend or otherwise modify, any Compensation
and Benefit Plan or increase or accelerate the salary, wage, bonus or other
compensation of any employees or directors (except for increases occurring in
the ordinary and usual course of business, which shall include normal periodic
performance reviews and related compensation and benefit increases, but not any
general across-the-board increases) or consultants or pay or agree to pay any
pension, retirement allowance or other employee benefit not required by any
existing Compensation and Benefit Plan;
(e) neither it nor any of its Subsidiaries shall, except as may be
required as a result of a change in law or in GAAP, change any of the accounting
principles or practices used by it;
(f) neither it nor any of its Subsidiaries shall revalue in any
respect any of its material assets, including writing down the value of
inventory or writing-off notes or accounts receivable, other than in the
ordinary course of business consistent with past practices;
(g) neither it nor any of its Subsidiaries shall settle or compromise
any material claims or litigation or terminate or materially amend or modify any
of its material Contracts or waive, release or assign any material rights or
claims;
(h) neither it nor any of its Subsidiaries shall make any Tax
election or permit any insurance policy naming it as a beneficiary or loss-
payable payee to be canceled or terminated;
(i) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(j) neither it nor any of its Subsidiaries will authorize or enter
into any agreement to do any of the foregoing.
6.2. Third Party Acquisitions.
------------------------
(a) The Company agrees that neither it nor any of its Subsidiaries
nor any of its or its Subsidiaries' employees or directors shall, and it shall
direct and use its best efforts to
25
<PAGE>
cause its and its Subsidiaries' agents and representatives (including the
Financial Advisor or any other investment banker and any attorney or accountant
retained by it or any of its Subsidiaries (collectively, "Company Advisors"))
----------------
not to, directly or indirectly, initiate, solicit or otherwise facilitate any
inquiries in respect of, or the making of any proposal for, a Third Party
Acquisition (as defined in Section 6.2(b)). The Company further agrees that
neither it nor any of its Subsidiaries nor any of its or its Subsidiaries'
employees or directors shall, and it shall direct and use its best efforts to
cause all Company Advisors not to engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any Third Party (as defined in Section 6.2(b)) relating to the proposal of a
Third Party Acquisition, or otherwise attempt to make or implement a Third Party
Acquisition; provided, however, that if at any time prior to the acceptance for
payment of Shares pursuant to the Offer, the Company's Board determines in good
faith, after taking into consideration the advice of its outside legal counsel,
that it is likely to be required in order for its members to comply with their
fiduciary duties under applicable law, the Company may, in response to an
inquiry, proposal or offer for a Third Party Acquisition which was not solicited
subsequent to the date hereof, (x) furnish non-public information with respect
to the Company to any such person pursuant to a confidentiality agreement on
terms substantially similar to the confidentiality agreement entered into
between the Company and Parent prior to the execution of this Agreement and (y)
participate in discussions and negotiations regarding such inquiry, proposal or
offer; and provided, further, that nothing contained in this Agreement shall
prevent the Company or the Company's Board from complying with Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to any proposed Third Party
Acquisition or withdrawing its recommendation of the Offer or the Merger
pursuant to Section 6.2(b). The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Third
Parties conducted heretofore with respect to any of the foregoing. The Company
shall take the necessary steps to promptly inform all Company Advisors of the
obligations undertaken in this Section 6.2(a). The Company agrees to notify
Parent as promptly as reasonably practicable in writing if (i) any inquiries
relating to or proposals for a Third Party Acquisition are received by the
Company, any of its Subsidiaries or any of the Company Advisors, (ii) any
confidential or other non-public information about the Company or any of its
Subsidiaries is requested from the Company, any of its Subsidiaries or any of
the Company Advisors, or (iii) any negotiations or discussions in connection
with a possible Third Party Acquisition are sought to be initiated or continued
with the Company, any of its Subsidiaries or any of the Company Advisors
indicating, in connection with such notice, the principal terms and conditions
of any proposals or offers, and thereafter shall keep Parent informed in
writing, on a reasonably current basis, on the status and terms of any such
proposals or offers and the status of any such negotiations or discussions. The
Company also agrees promptly to request each Person that has heretofore executed
a confidentiality agreement in connection with its consideration of acquiring
the Company or any of its Subsidiaries, if any, to return all confidential
information heretofore furnished to such Person by or on half of the Company or
any of its Subsidiaries.
(b) Except as permitted by this Section 6.2(b), the Company's Board
shall not withdraw its recommendation of the Offer or the Merger and the other
transactions contemplated hereby or approve or recommend, or cause the Company
to enter into any agreement with respect to, any Third Party Acquisition.
Notwithstanding the preceding sentence, if the Company's
26
<PAGE>
Board determines in its good faith judgment, after taking into consideration the
advice of its outside legal counsel, that it is likely to be required in order
for its members to comply with their fiduciary duties under applicable law, the
Company's Board may withdraw its recommendation of the Offer or the Merger and
the other transactions contemplated hereby, or approve or recommend or cause the
Company to enter into an agreement with respect to a Superior Proposal (as
defined below); provided, however, that the Company shall not be entitled to
enter into any agreement with respect to a Superior Proposal unless this
Agreement is concurrently terminated by its terms pursuant to Section 8.3(c).
For purposes of this Agreement, "Third Party Acquisition" means the occurrence
-----------------------
of any of the following events: (i) the acquisition of the Company by merger or
otherwise by any Person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent, Merger Sub or any
Affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
-----------
20% or more of the total assets of the Company and its Subsidiaries, taken as a
whole (other than the purchase of the Company's products in the ordinary course
of business); (iii) the acquisition by a Third Party of 20% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of partial or
complete liquidation or the declaration or payment of an extraordinary dividend;
(v) the repurchase by the Company or any of its Subsidiaries of 20% or more of
the outstanding Shares; or (vi) the acquisition by the Company or any of its
Subsidiaries by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets is equal to or greater than 20% of the
annual revenues, net income or assets of the Company and its Subsidiaries, taken
as a whole. For purposes of this Agreement, a "Superior Proposal" means any bona
-----------------
fide proposal to acquire directly or indirectly for consideration consisting of
cash and/or securities more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company and its Subsidiaries, taken as a
whole, and otherwise on terms which the Board of Directors of the Company by a
majority vote determines in its good faith judgment (after consultation with the
Financial Advisor or another financial adviser of nationally recognized
reputation) to be reasonably capable of being completed (taking into account all
material legal, financial, regulatory and other aspects of the proposal and the
Third Party making the proposal, including the availability of financing
therefor) and more favorable to the Company's stockholders from a financial
point of view than the transactions contemplated by this Agreement.
6.3. Filings; Other Actions; Notification.
------------------------------------
(a) If a vote of the Company's stockholders is required by law in
order to consummate the Merger, the Company shall promptly, following
consummation of the Offer, prepare and file with the SEC the Proxy Statement,
which shall include the recommendation of the Company's Board that stockholders
of the Company vote in favor of the approval and adoption of this Agreement and
the written opinion of the Financial Advisor that the cash consideration to be
received by the stockholders of the Company pursuant to the Merger is fair to
such stockholders from a financial point of view. The Company shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing, and promptly thereafter mail the Proxy Statement
to the stockholders of the Company. The Company shall also use its best efforts
to obtain all necessary state securities law or "blue sky" permits and approvals
required in connection with the Merger and to consummate the other transactions
contemplated by this Agreement and will pay all expenses incident thereto.
27
<PAGE>
(b) Upon and subject to the terms and conditions set forth in this
Agreement, the Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all reasonable efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable under this Agreement and applicable Laws to
consummate and make effective the Offer, the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing and
filing as promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings and other documents and to obtain as
promptly as practicable all permits, consents, approvals and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Offer, the Merger or any of the
other transactions contemplated by this Agreement; provided, however, that
nothing in this Section 6.3 shall require, or be construed to require, Parent to
proffer to, or agree to, sell or hold separate and agree to sell, before or
after the Effective Time, any material assets, businesses or any interest in any
material assets or businesses of Parent, the Company or any of their respective
Affiliates (or to consent to any sale, or agreement to sell, by the Company of
any of its material assets or businesses) or to agree to any material change in
or material restriction on the operations of any such assets or businesses;
provided, further, that nothing in this Section 6.3 shall require, or be
construed to require, a proffer or agreement that would, in the reasonable
judgment of Parent, be likely to have a material adverse effect on the
anticipated financial condition, properties, business or results of operations
of the Parent and its Subsidiaries after the Merger, taken as a whole, in order
to obtain any necessary or advisable consent, registration, approval, permit or
authorization from any Governmental Agency. Subject to applicable Laws relating
to the exchange of information, Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to Parent or the Company, as the case may be, and
any of their respective Subsidiaries, that appears in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Offer, the Merger and the other transactions contemplated
by this Agreement, including the Proxy Statement. In exercising the foregoing
right, the Company and Parent shall act reasonably and as promptly as
practicable.
(c) Each of the Company and Parent shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with filings pursuant to the HSR Act, the
Proxy Statement or any other statement, filing, notice or application made by or
on behalf of Parent, the Company or any of their respective Subsidiaries to any
Governmental Entity or other Person (including the NASD) in connection with the
Offer, the Merger and the other transactions contemplated by this Agreement.
(d) Each of the Company and Parent shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
their respective Subsidiaries, from any third party and/or any Governmental
Entity alleging that the consent of such third party or Governmental Entity is
or may be required with respect to the Offer, the Merger and the other
transactions contemplated by this Agreement. Each of the Company and Parent
shall give prompt notice to the other of (i) the occurrence or non-occurrence of
any fact or event which would be reasonably likely (x) to
28
<PAGE>
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (y) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied and (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
6.4. Information Supplied. Each of Parent and the Company agrees, as to
--------------------
information provided by itself and its Subsidiaries, that none of the
information included or incorporated by reference in the proxy statement, if
any, delivered by the Company to its stockholders in connection with the Merger
and any amendment or supplement thereto (the "Proxy Statement") will, at the
---------------
time the Proxy Statement is cleared by the SEC, at the date of mailing to
stockholders of the Company, and at the time of the Stockholders Meeting (as
defined in Section 6.5),contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
6.5. Stockholders Meeting.
--------------------
(a) If a vote of the Company's stockholders is required by law in
order to consummate the Merger, the Company will, following consummation of the
Offer, take, in accordance with applicable Law and its certificate of
incorporation and bylaws, all action necessary to convene a meeting of holders
of Shares (the "Stockholders Meeting") as promptly as practicable after the
--------------------
Proxy Statement is cleared by the SEC to consider and vote upon the approval of
this Agreement. The Proxy Statement shall include a statement that the
Company's Board approved this Agreement and recommended that the Company's
stockholders vote in favor of this Merger, and the Company shall use all
reasonable and customary efforts to solicit such approval; provided, however,
that if the Company's Board determines in good faith, after taking into
consideration the advice of its outside legal counsel, that the Proxy Statement
not containing such recommendation is likely to be required in order for its
members to comply with their fiduciary duties under applicable law, then any
failure of the Proxy Statement to contain such recommendation shall not
constitute a breach of this Agreement. Notwithstanding the foregoing, if
Parent, Merger Sub and/or any other Subsidiary of Parent shall acquire at least
90% of the outstanding Shares, the parties shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after consummation of the Offer without a Stockholders Meeting in
accordance with Section 253 of the DGCL.
(b) Following the purchase of Shares, if any, pursuant to the Offer,
Parent shall ensure that all such Shares purchased continue to be held by
Parent, Merger Sub, and/or a direct or indirect wholly-owned subsidiary of
Parent until such time as the Merger is consummated. At the Stockholders
Meeting, Parent agrees to cause all Shares purchased pursuant to the Offer and
all other Shares owned by Parent, Merger Sub or any Subsidiary of Parent to be
voted in favor of the Merger.
6.6. Access. Upon reasonable notice, and except as may otherwise be
------
required by applicable law or relevant contractual provisions contained in such
agreements, the Company shall (and shall cause its Subsidiaries to) (i) afford
Parent's officers, employees, counsel,
29
<PAGE>
accountants and other authorized representatives (collectively,
"Representatives") access, during normal business hours throughout the period
---------------
prior to the Effective Time, to its properties, books, contracts and records
and, during such period, (ii) furnish promptly to Parent all information
concerning its business, properties and personnel as may reasonably be
requested; provided, however, that no investigation pursuant to this Section 6.6
shall affect or be deemed to modify any representation or warranty made by the
Company. All requests for information made pursuant to this Section 6.6 shall be
directed to an executive officer of the Company or such Person as may be
designated by its officers. All of the information provided to or obtained by
Parent, its Affiliates and Representatives shall be treated as "Confidential
Information" under, and the parties shall comply with, and shall cause their
respective Representatives to comply with, all their respective obligations
under, the Confidentiality Agreement, dated July 28, 1998, between the Company
and Parent (the "Confidentiality Agreement").
-------------------------
6.7. Publicity. The initial press release concerning the Merger has been
---------
approved by Parent and the Company and thereafter the Company and its
Subsidiaries, on the one hand, and Parent and Merger Sub, on the other hand,
shall consult with each other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any Governmental Entity or other Person (including the New York Stock Exchange
or the NASD) with respect hereto, except as may be required by law or by
obligations pursuant to any listing agreement.
6.8. Status of Company Employees; Company Stock Options; Employee Benefits
---------------------------------------------------------------------
(a) Parent agrees that following the Effective Time, the employees of
the Company and its Subsidiaries who are employed by the Surviving Corporation
or its Subsidiaries ("Company Employees") shall become eligible to participate
-----------------
in the employee benefit plans and arrangements maintained by Parent or its
Subsidiaries ("Parent Benefit Plans") including, without limitation, severance
--------------------
plans, in the same manner as similarly situated employees of Parent. Parent or
its Subsidiaries shall grant the Company Employees credit for all service
credited by the Company for purposes of eligibility, vesting and the
determination of benefits under vacation and severance pay plans. Parent shall,
and shall cause the Surviving Corporation to, honor in accordance with their
terms all employee benefit obligations to current and former employees under the
Compensation and Benefit Plans in existence on the date hereof (including,
without limitation, the plans and agreements listed on Schedule 5.1(h)(i)) and
------------------
all employment or severance agreements entered into by the Company or adopted by
the Company's Board prior to the Effective Date (collectively, the "Employment
----------
and Severance Agreements"); it being understood that nothing contained herein
- ------------------------ -------------------
shall limit or restrict the ability of Parent to modify or terminate any
Compensation and Benefit Plan, or to merge any Compensation and Benefit Plan
with any other plan, other than the Employment and Severance Agreements,
following the Effective Time.
(b) From and after the date hereof, the Company agrees that, except
with respect to grants in connection with offers of employment outstanding on
October 23, 1998, it will not grant additional stock options under the Stock
Option Plans.
30
<PAGE>
(c) Any pre-existing condition exclusion under any Parent Benefit Plan
providing medical or dental benefits shall be waived for any Company Employee
who, immediately prior to commencing participation in such Parent Benefit Plan,
was participating in a Company Benefit Plan providing medical or dental benefits
and had satisfied any pre-existing condition provision under such Company
Benefit Plan. Any expenses that were taken into account under a Company Benefit
Plan providing medical or dental benefits in which the Company Employee
participated immediately prior to commencing participation in a Parent Benefit
Plan providing medical or dental benefits shall be taken into account to the
same extent under such Parent Benefit Plan, in accordance with the terms of such
Parent Benefit Plan, for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions and life-time benefit limits.
6.9. Expenses. The Surviving Corporation shall pay all charges and
--------
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in
Sections 8.5, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense.
6.10. Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) From and after the Effective Time, Parent and the Surviving
Corporation shall jointly and severally indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this Agreement
or who becomes prior to the Effective Time a director, officer, employee or
agent of the Company or any of its Subsidiaries (when acting in such capacity)
(each individually an "Indemnified Party", and collectively, the "Indemnified
----------------- -----------
Parties"), against any costs or expenses (including reasonable attorneys' fees
- -------
and expenses), judgments, settlement amounts, fines, losses, claims, demands,
damages or liabilities (collectively, "Costs") incurred in connection with any
-----
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative (each, a "Claim") arising out of matters existing or occurring
-----
prior to or after the Effective Time, whether threatened, asserted or claimed
prior to, at or after the Effective Time, which is based in whole or in part on,
or arising in whole or in part out of the fact that such person is or was a
director (including as a member of the Special Committee) or officer of the
Company or any of its Subsidiaries including, without limitation, all Costs
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby, including
the Offer and the Merger, to the fullest extent that the Company would have been
permitted under the DGCL and its certificate of incorporation, bylaws and other
agreements in effect on the date hereof to indemnify such individual. Parent
shall, or shall cause the Company (or the Surviving Corporation after the
Effective Time) to, pay all Costs in advance of the final disposition of any
Claim to each Indemnified Party to the fullest extent provided in the Company's
certificate of incorporation or bylaws as in effect on the date hereof, subject
to receipt by Parent or the Company (or the Surviving Corporation after the
Effective Time) of an undertaking by or on behalf of such Indemnified Party
contemplated by Section 145(e) of the DGCL. Without limiting the generality or
effect of the foregoing, in the event any Claim is brought against any
Indemnified Party (whether arising before or after the Effective Time) and, in
the opinion of
31
<PAGE>
counsel to an Indemnified Party, under applicable standards of professional
conduct, there is a conflict on any significant issue between the position of
the Company and an Indemnified Party, the Indemnified Parties may retain counsel
of their choice, which counsel shall be reasonably satisfactory to Parent and
the Company (or the Surviving Corporation after the Effective Time) (it being
understood that Testa, Hurwitz & Thibeault, LLP is acceptable to Parent and the
Company (and the Surviving Corporation after the Effective Time)), and Parent
shall, or shall cause the Company (or the Surviving Corporation after the
Effective Time) to, pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received. The
Indemnified Parties as a group may not retain more than one law firm (in
addition to local counsel) to represent them with respect to each such matter
unless there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. The Company,
Parent and the Merger Sub (or the Surviving Corporation after the Effective
Time) agree that all rights to indemnification, including provisions relating to
advances of Costs incurred with respect to matters occurring through the
Effective Time, shall survive six years from the Effective Time; provided,
however, that all rights to indemnification in respect of any Claim asserted or
made within such period shall continue until the disposition of such Claim.
(b) Any Indemnified Party wishing to claim indemnification under
subsection (a) of this Section 6.l0, upon learning of any such Claim, shall
promptly notify Parent and the Surviving Corporation thereof (but the failure so
to notify Parent and the Surviving Corporation shall not relieve them from any
liability which they may have under this Section 6.10 except to the extent such
failure materially prejudices such party). In the event of any such Claim
(whether arising before or after the Effective Time), Parent and the Surviving
Corporation shall have the right to assume the defense of any Claim for which an
Indemnified Party is entitled to indemnification under subsection (a) of this
Section 6.10 with counsel reasonably acceptable to such Indemnified Party (which
right shall not affect the right of the Indemnified Parties to be reimbursed for
fees and expenses of separate counsel under the circumstances specified in
Section 6.10(a)). Except as otherwise provided in this Section 6.10, neither
the Parent nor the Surviving Corporation shall be liable to any such Indemnified
Party for any legal expenses of other counsel or any other expenses incurred by
such Indemnified Party in connection with the defense thereof after either the
Parent or the Surviving Corporation, as the case may be, have assumed the
defense of such Claim. The Indemnified Party will cooperate in all respects as
reasonably requested by Parent or the Surviving Corporation, as the case may be,
in the defense of any such matter and in connection therewith, shall be entitled
to reimbursement by Parent of reasonable expenses incurred in connection
therewith on a current basis. Neither Parent nor the Surviving Corporation, as
the case may be, shall have any obligation hereunder to any Indemnified Party if
and when a court shall ultimately determine, and such determination shall have
become final and nonappealable, that the indemnification of such Indemnified
Party in the manner contemplated by this Section 6.10 is prohibited by law. If
such indemnity is not available with respect to any Indemnified Party, then
Parent, the Company and the Merger Sub (or the Surviving Corporation after the
Effective Date), on the one hand, and the Indemnified Party, on the other hand,
shall contribute to the amount payable in such proportion as is appropriate to
reflect relative faults and benefits.
32
<PAGE>
(c) The Company shall purchase, and Parent shall reimburse the Company
at the Closing for the fully prepaid premium expense incurred for "Prior Acts"
Directors' & Officers' Liability Insurance to be effective with the signing of
this Agreement. It is agreed the policy term will be for six years from the
date of this Agreement without restriction as to when any alleged or actual
wrongful acts or omissions may have occurred up to and including the date of
sale of the FD Shares to Merger Sub pursuant to the Offer. The policy limits
combining both coverage agreements A & B (individual directors & officers
liability insurance and corporate reimbursement coverage) will be no less than
$25 million limits for the policy term with no more than a $250,000 deductible
for coverage B (corporate reimbursement coverage). The corporate reimbursement
coverage part is to be extended to provide indemnity to the Company, FD and
Parent for their obligations, if any, to indemnify the individual directors and
officers of the Company, including its predecessor or successor names, if any,
for the Company directors' and officers' actual or alleged acts, errors or
omissions committed prior to or on the date of sale of the FD Shares to Merger
Sub. Other terms and conditions are to be no less advantageous to the intended
beneficiaries thereof than FD's existing directors' and officers' liability
coverage. This insurance policy is also to be primary to any other insurance or
indemnity obligation owed to the individuals from any of the parties to this
Agreement. The Company shall not, without prior written consent of Parent,
purchase such coverage if the total cost of the coverage exceeds $200,000. This
insurance is to be noncancellable except for the nonpayment of premium or the
ultimate failure of the FD Shares being purchased by Merger Sub.
(d) The provisions of this Section 6.10 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties and
their respective heirs and estates. Nothing in this Section 6.10 shall limit in
any way any other rights to indemnification that any current or former director
or officer of the Company or any of its Subsidiaries may have by contract or
otherwise.
(e) Without limiting the effect of subsections (a) or (c) of this
Section 6.10, from and after the Effective Time, the Surviving Corporation shall
fulfill, assume and honor in all respects the obligations of the Company or any
of its Subsidiaries pursuant to the Company's or any of its Subsidiaries
certificate of incorporation, bylaws and any indemnification agreement between
the Company or any of its Subsidiaries which is set forth on Schedule 6.10 and
-------------
any of their respective directors and officers existing and in force as of the
Effective Time. The Surviving Corporation agrees that the indemnification
obligations set forth in the Company's certificate of incorporation and bylaws,
in each case as of the date of this Agreement, shall survive the Merger (and, as
of or prior to the Effective Time, Parent shall cause the bylaws of Merger Sub
to reflect such provisions). No subsequent amendment of the provisions of the
bylaws of the Surviving Corporation shall affect the indemnification obligations
of Parent or the Surviving Corporation in any manner that would adversely affect
the rights of the Indemnified Parties under this Section 6.10.
(f) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation or Person of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any Person, then and in each such case, proper
33
<PAGE>
provisions shall be made so that the successors and assigns of the Parent and
Surviving Corporation shall assume all of the obligations set forth in this
Section 6.10.
6.11. Other Actions by the Company and Parent. If any Takeover Statute is
---------------------------------------
or may become applicable to the Merger or the other transactions contemplated by
this Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or by the Merger and
otherwise act to eliminate or minimize the effects of such statute, and any
regulations promulgated thereunder, on such transactions.
6.12. Tender of Shares by FD; Cancellation of FD Stock Option. FD agrees
-------------------------------------------------------
that it will tender all Shares owned by it or any of its Affiliates (including
the FD Shares) in, and will not withdraw such Shares from, the Offer. FD
further agrees that FD Stock Option Agreement described in Schedule 5.1(h) shall
be deemed cancelled as of the date on which Parent delivers the Notice of
Acceptance to the Depositary.
6.13. Parent Stock Option; Exercise; Adjustments.
------------------------------------------
(a) Subject to the terms and conditions set forth herein, the Company
hereby grants to Parent an irrevocable option (the "Parent Option") to purchase
-------------
that number of authorized and unissued shares of Common Stock equal to 14% of
the outstanding Shares immediately after the exercise of the Parent Option (the
"Option Shares") at a purchase price per Option Share equal to the Offer Price
-------------
(the "Option Price"). Subject to the conditions set forth in subsection (c)
------------
below, the Parent Option may be exercised by Parent, in whole or in part, at any
time or from time to time after the date on which Parent has accepted for
payment the Shares tendered pursuant to the Offer and prior to the termination
of this Agreement pursuant to Article VIII. If Parent wishes to exercise the
Parent Option, Parent shall send a written notice to the Company (the "Exercise
--------
Notice") specifying a date (not earlier than the next Business Day following the
- ------
date such notice is given) for the closing of such purchase and containing a
representation by Parent that upon the issuance and delivery of the Option
Shares, there will be no further conditions precedent that need to be satisfied
for Parent and Merger Sub to effect the Merger, and that Parent and Merger Sub
will take all actions required on their respective parts to effect the Merger.
(b) In the event of any change in the number of issued and outstanding
Shares by reason of any stock dividend, stock split, split-up, recapitalization,
merger or other change in the corporate or capital structure of the Company, the
number of Option Shares and the Option Price shall be appropriately adjusted to
restore Parent to its rights hereunder.
(c) The Company's obligation to issue and deliver the Option Shares
upon exercise of the Parent Option is subject only to the following conditions:
(i) No preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Option Shares shall be in effect;
34
<PAGE>
(ii) Any applicable waiting periods under the HSR Act, or other
applicable United States or foreign Laws shall have expired or been terminated;
and
(iii) The number of Option Shares plus the number of Shares accepted
for payment by Parent pursuant to the Offer will, upon issuance of the Option
Shares, constitute at least ninety percent (90%) of the Company's issued and
outstanding shares of Common Stock.
(d) Any closing hereunder shall take place on the date specified by Parent
in its Exercise Notice delivered pursuant to subsection (a) above at 9:00 a.m.,
Pacific time, or the first day thereafter on which all of the conditions in
subsection (c) above are met, at the offices of Gibson, Dunn & Crutcher LLP, 333
South Grand Avenue, Los Angeles, California, or at such other time and places as
the parties may agree (the "Option Closing Date"). On the Option Closing Date,
-------------------
the Company will deliver to Parent a certificate or certificates representing
the Option Shares in the denominations designated by Parent in the Exercise
Notice and Parent will purchase such Option Shares from the Company at a price
per Option Share equal to the Option Price. Any payment made by Parent to the
Company pursuant to this subsection (d) shall be made by certified, cashier's or
bank check or by wire transfer of immediately available funds to an account
designated by the Company. The certificates representing the Option Shares may
bear an appropriate legend relating to the fact that such Option Shares have not
been registered under the Securities Act.
6.14. Use of Company Cash. The Company agrees that prior to the initial
-------------------
Expiration Date it will take all steps reasonably necessary, after consulting
with Parent, to sell any marketable securities owned by it so that on the
initial Expiration Date the Company will have maximized its available cash and
will thereafter until such time as the Parent Directors are elected invest such
cash in overnight investments. Upon the election of the Parent Directors and at
the direction of the Company's Board up to $20 million of the available cash of
the Company will be loaned to Parent and evidenced by an interest bearing
promissory note payable on demand. The proceeds of such loan will be delivered
to the Depositary to be used solely to fund the purchase of Shares in the Offer.
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect Merger. The
------------------------------------------------------
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. If required by applicable law this
--------------------
Agreement shall have been duly approved by holders of the number of Shares
constituting at least the Company Requisite Vote.
(b) Regulatory Consents. The waiting period applicable to the
-------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than filing the Delaware Certificate of Merger, all
filings with any Governmental Entity required to be made
35
<PAGE>
prior to the Effective Time by the Company or Parent or any of their respective
Subsidiaries, with, and all Government Consents required to be obtained prior to
the Effective Time by the Company or Parent or any of their respective
Subsidiaries in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by the Company, Parent
and Merger Sub shall have been made or obtained (as the case may be), except
where the failure to so make or obtain will not result in either a Company
Material Adverse Effect or a Parent Material Adverse Effect.
(c) Litigation. No court or other Governmental Entity of competent
----------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits consummation of the transactions contemplated by this
Agreement (collectively, an "Order"), and no Governmental Entity shall have
-----
instituted any proceeding seeking any such Order and such proceeding remains
unresolved.
7.2. Conditions to Obligations of Parent and Merger Sub. The obligations
--------------------------------------------------
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date it being
understood that representations and warranties shall be deemed to be true and
correct unless the respects in which the representations and warranties (without
giving effect to any "materiality" limitations or references to "material
adverse effect" set forth therein) are untrue or incorrect in the aggregate is
likely to have a Company Material Adverse Effect.
(b) Performance of Obligations of the Company and FD. The Company and
------------------------------------------------
FD shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
7.3. Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date it
being understood that representations and warranties shall be deemed to be true
and correct unless the respects in which the representations and warranties
(without giving effect to any "materiality" limitations or references to
"material adverse effect" set forth therein) are untrue or incorrect in the
aggregate is likely to have a Parent Material Adverse Effect.
36
<PAGE>
(b) Performance of Obligations of Parent and Merger Sub. Each of
---------------------------------------------------
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
-----------------------------
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after its approval by the stockholders of the Company, by mutual
written consent of the Company (through the Continuing Directors, the Special
Directors or their designated successors), Parent and Merger Sub, by action of
their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
-------------------------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time by either Parent or the Company, by action of their respective Boards of
Directors if (a) any Order permanently restraining, enjoining or otherwise
prohibiting the Merger shall be entered (whether before or after the approval by
the stockholders of the Company) and such Order is or shall have become
nonappealable, provided that the party seeking to terminate this Agreement shall
have used its reasonable efforts to remove or lift such Order, or (b) the
Minimum Condition shall not have been satisfied on or before December 31, 1998;
8.3. Termination by the Company. This Agreement may be terminated and the
--------------------------
Merger may be abandoned at any time prior to the Effective Time, whether before
or after its approval by the stockholders of the Company, by the Company if:
(a) (i) Parent fails to commence the Offer as provided in Section 1.1
or (ii) after December 31, 1998, Parent shall have failed to accept the Shares
for payment pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this subsection (a) shall not be available
to the Company if it has breached in any material respects its obligations under
this Agreement in any manner that shall have proximately contributed to the
failure referenced in this subsection (a);
(b) the Offer is terminated or withdrawn pursuant to its terms without
any Shares being purchased thereunder; provided, however, that the right to
terminate this Agreement pursuant to this subsection (b) shall not be available
to the Company if it has breached in any material respects its obligations under
this Agreement in any manner that shall have proximately contributed to the
termination or withdrawal of the Offer;
(c) prior to Parent's purchase of Shares pursuant to the Offer, (i)
the Company enters into a binding written agreement with respect to a Superior
Proposal after fully complying with the procedures set forth in Section 6.2 and
(ii) the Company concurrently with such termination pays to Parent in
immediately available funds all expense reimbursements due Parent pursuant to
Section 8.5(a) and the Termination Fee pursuant to Section 8.5(b)(ii); provided,
further, that notwithstanding anything in this Agreement to the contrary, the
termination of this
37
<PAGE>
Agreement by the Company pursuant to this subsection (c) shall not be deemed to
violate or breach other obligations of the Company under this Agreement; or
(d) there has been a material breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement that
is not curable or, if curable, is not cured prior to the earlier of (i) twenty
(20) days after written notice of such breach is given by the Company to Parent
and (ii) two (2) Business Days before the date on which the Offer expires.
8.4. Termination by Parent and Merger Sub. This Agreement may be
------------------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after its approval by the stockholders of the Company,
by Parent and Merger Sub if:
(a) after December 31, 1998, Parent shall not have accepted Shares for
payment pursuant to the Offer; provided, however, that the right to terminate
this Agreement pursuant to this subsection (a) shall not be available to Parent
and Merger Sub if either of them has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure referred to in this subsection (a);
(b) the Board of Directors of the Company shall have withdrawn or
modified its approval or recommendation of this Agreement in a manner materially
adverse to Parent; or
(c) Parent shall have terminated the Offer in accordance with the
provisions of Annex A; provided, however, that the right to terminate this
Agreement pursuant to this subsection (c) shall not be available to Parent and
Merger Sub if either of them has breached in any material respect its
obligations under this Agreement in any manner than shall have proximately
contributed to the termination of the Offer.
8.5. Effect of Termination and Abandonment.
-------------------------------------
(a) If this Agreement is terminated and the Merger abandoned pursuant
to this Article VIII, this Agreement (other than as set forth in Section 9.1)
shall become void and of no further effect with no liability of any party hereto
(or any of its directors, officers, employees, agents, stockholders, legal,
accounting and financial advisors or other representatives); provided, however,
that, except as otherwise provided herein, no such termination shall relieve any
party hereto of any liability or damages resulting from any breach of this
Agreement; and provided, further, that the Company shall reimburse Parent in the
amount of $400,000 as reimbursement for all of its costs and expenses in
connection with this Agreement, the Offer and the Merger unless: (i) the
Agreement has been terminated by the parties pursuant to Section 8.1 or by
either party pursuant to Section 8.2(a); (ii) the Company has terminated this
Agreement pursuant to Sections 8.3(a), 8.3(b) or 8.3(d); or (iii) the Parent has
terminated this Agreement pursuant to Section 8.4(a) or Section 8.4(c) and,
further, the Company has not breached in any material respect its obligations
under this Agreement in any manner which proximately contributed to the failure
to close the Merger or Parent's termination of the Offer, respectively.
38
<PAGE>
(b)(i) In lieu of any liability or obligation to pay damages (other
than the obligation to reimburse Parent for expenses pursuant to Section
8.5(a)), if (A) there shall be a proposal by a Third Party for a Third Party
Acquisition existing at the time of termination of the Agreement by Parent and
Merger Sub, and (B) Parent and Merger Sub shall have terminated this Agreement
pursuant to Section 8.4(b) or (c), the Company shall pay to Parent within two
(2) business days after entering into an agreement with respect to such Third
Party Acquisition a fee of $1,500,000.
(ii) In lieu of any liability or obligation to pay damages
(other than the obligation to reimburse Parent for expenses pursuant to Section
8.5(a)), (A) if there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub and (B) the Company shall have terminated this Agreement pursuant to Section
8.3(c), the Company shall pay to Parent concurrently with such termination a fee
of $1,500,000. (Such amounts payable pursuant to Section 8.5(b)(i) or this
Section 8.5(b)(ii) are referred to in the aggregate in this Agreement as the
"Termination Fee".)
(c) The Company acknowledges that the agreements contained in Section
8.5 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the amounts
required pursuant to Section 8.5 and, in order to obtain such payment Parent or
Merger Sub commences a suit which results in a final nonappealable judgment
against the Company for such amounts, the Company shall pay to Parent or Merger
Sub (i) its costs and expenses (including attorneys' fees) in connection with
such suit and (ii) if (and only if) this Agreement has been terminated pursuant
to Section 8.3(c) or 8.4(c), interest on the amount at the rate announced by
Citibank, N.A. as its "reference rate" in effect on the date such payment was
required to be made.
8.6. Procedure for Termination. A termination of this Agreement pursuant
-------------------------
to this Article VIII shall, in order to be effective, require in the case of
Parent, Merger Sub or the Company, action by its Board of Directors.
ARTICLE IX
MISCELLANEOUS
9.1. Survival. This Article IX and the agreements of the Company, Parent
--------
and Merger Sub contained in Sections 6.8 (Benefits), 6.9 (Expenses) and 6.10
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Section 6.9 (Expenses), Section 8.5 (Effect
of Termination and Abandonment) and the Confidentiality Agreement shall survive
the termination of this Agreement. All other representations, warranties,
agreements and covenants in this Agreement and in any certificate or schedule
delivered pursuant hereto shall not survive the consummation of the Merger or
the termination of this Agreement.
9.2. Certain Definitions. For the purposes of this Agreement each of the
-------------------
following terms shall have the meanings set forth below:
39
<PAGE>
(a) "Affiliate" means a Person that, directly or indirectly, through
---------
one or more intermediaries controls, is controlled by or is under common control
with the first-mentioned Person.
(b) "Business Day" means any day other than a day on which banks in
------------
the State of New York are authorized to close or the New York Stock Exchange is
closed.
(c) "Capital Stock" means common stock, preferred stock, partnership
-------------
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(d) "Company Material Adverse Effect" means a material adverse effect
-------------------------------
on the financial condition, properties, business, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole (it being
understood that (i) any adverse effect that is caused by conditions affecting
the economy or security markets generally shall not be taken into account in
determining whether there has been a Company Material Adverse Effect and (ii)
any adverse effect that is caused by conditions affecting the primary industry
in which the Company currently competes shall not be taken into account in
determining whether there has been a Company Material Adverse Effect (provided
that such effect does not adversely affect the Company in a disproportionate
manner).
(e) "Depositary" means BankBoston, N.A. which will serve as the
----------
depositary for the Offer or its duly appointed successor.
(f) "Lien" means, with respect to any asset, any mortgage, lien,
----
pledge, charge, security interest, encumbrance, hypothecation, title defect or
adverse claim of any kind in respect of such asset.
(g) "Parent Material Adverse Effect" means a material adverse effect
------------------------------
on the ability of Parent or Merger Sub to conduct the Offer or consummate the
Merger or any of the other material transactions contemplated by this Agreement
(h) "Permitted Liens" means (i) Liens for Taxes or other governmental
---------------
assessments, charges or claims the payment of which is not yet due; (ii)
statutory liens of landlords and liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other liens imposed by applicable Law
incurred in the ordinary course of business for sums not yet delinquent or
immaterial in amount and being contested in good faith; (iii) liens specifically
identified as such in the Balance Sheet or the notes thereto; (iv) liens
constituting or securing executory obligations under any lease that constitutes
an "operating lease" under GAAP; and (v) any other Lien arising in the ordinary
course of business, the imposition of which would not constitute a Company
Material Adverse Effect; provided, however, that, with respect to each of the
foregoing clauses (i) through (iv), to the extent that any such lien arose prior
to the Audit Date and relates to, or secures the payment of, a liability that is
required to be accrued on the Balance Sheet under GAAP, such lien shall not be a
Permitted lien unless accruals for such liability have been established therefor
on the Balance Sheet in conformity with GAAP. Notwithstanding the foregoing, no
lien arising under the Code or ERISA with respect to the
40
<PAGE>
operation, termination, restoration or funding of any Compensation and Benefit
Plan sponsored by, maintained by or contributed to by the Company or any of its
ERISA Affiliates or arising in connection with any excise tax or penalty tax
with respect to such Compensation and Benefit Plan shall be a Permitted lien.
(i) "Person" means an individual, corporation (including not-for-
------
profit), partnership, limited liability company, association, trust,
unincorporated organization, joint venture, estate, Governmental Entity or other
legal entity.
(j) "Subsidiary" or "Subsidiaries" of the Company, Parent, the
---------- ------------
Surviving Corporation or any other Person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other Person, as the case may be, either alone or through or together
with any other Subsidiary, owns, directly or indirectly, 50% or more of the
Capital Stock, the holders of which are generally entitled to vote for the
election of the Board of Directors or other governing body of such corporation
or other legal entity.
9.3. No Personal Liability. This Agreement shall not create or be deemed
---------------------
to create any personal liability or obligation on the part of any direct or
indirect stockholder of the Company, Merger Sub or Parent, or any of their
respective officers, directors, employees, agents or representatives.
9.4. Modification or Amendment. Subject to the provisions of applicable
-------------------------
Law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.5. Waiver of Conditions. The conditions to each of the parties'
--------------------
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law. The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon strict compliance by any other party hereto
with its obligations hereunder, and any custom or practice of the parties at
variance with the terms hereof, shall not constitute a waiver by such party of
its rights to exercise any such or other right, power or remedy or to demand
such compliance.
9.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.7. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
---------------------------------------------
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the jurisdiction of the
courts of the State of Delaware and the Federal courts of the
41
<PAGE>
United States of America located in the State of Delaware solely in respect of
the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.8 or in such other manner as may
be permitted by applicable law, shall be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE INITIAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.7.
9.8. Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the others shall be deemed given if in writing
and delivered personally or sent by registered or certified mail (return receipt
requested) or overnight courier (providing proof of delivery), postage prepaid,
or by facsimile (which is confirmed):
42
<PAGE>
If to Parent or Merger Sub:
--------------------------
International Technology Corporation.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Attention: President
Fax: (412) 858-3311
with a copy to:
Peter F. Ziegler, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Fax: (213) 229-7520
If to the Company:
-----------------
Fluor Daniel GTI, Inc.
100 River Ridge Drive
Norwood, Massachusetts 02062
Attention: President
Fax: (781) 769-7992
with a copy to:
The Special Committee
Fluor Daniel GTI, Inc.
100 River Ridge Drive
Norwood, Massachusetts 02062
Fax: (781) 769-7992
Gordon H. Hayes, Jr.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Fax: (617) 248-7100
If to FD:
--------
Fluor Daniel, Inc.
3353 Michelson Drive
Irvine, California 92698
Attention: Ronald G. Peterson
Fax: (949) 975-2956
43
<PAGE>
with a copy to:
Raymond M. Bukaty
Fluor Daniel, Inc.
3353 Michelson Drive
Irvine, California 92698
Fax: (949) 975-4450
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.9. Entire Agreement. This Agreement (including any schedules, exhibits
----------------
or annexes hereto) and the Confidentiality Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.10. No Third Party Beneficiaries. Except as provided in Section 6.8
----------------------------
(Status of Company Employees; Company Stock Options; Employee Benefits) and
Section 6.10 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
9.11. Obligations of the Company and Surviving Corporation. Whenever this
----------------------------------------------------
Agreement requires a Subsidiary of the Company or Parent to take any action,
such requirement shall be deemed to include and undertaking on the part of the
Company or the Parent, as the case may be, to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.12. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.13. Interpretation. The table of contents and Article, Section and
--------------
subsection headings herein are for convenience of reference only, do not
constitute a part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Schedule, Annex or Exhibit, such reference shall
be to a Section of, or Schedule, Annex or Exhibit to, this Agreement, unless
otherwise indicated. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation." All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made
44
<PAGE>
or delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and assigns
and, in the case of an individual, to his or her heirs and estate, as
applicable.
9.14. Assignment. This Agreement shall not be assignable by operation of
----------
law or otherwise and any attempted assignment of this Agreement in violation of
this sentence shall be void; provided, however, that Parent may designate, by
written notice to the Company, another wholly-owned, direct subsidiary to be a
Constituent Corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
Subsidiary except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
45
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties hereto as of the date hereof.
FLUOR DANIEL GTI, INC.
By: /s/ Walter C. Barber
___________________________________
Name: Walter C. Barber
Title: President
FLUOR DANIEL, INC.
By: /s/ Ronald G. Peterson
___________________________________
Name: Ronald G. Peterson
Title: Group President
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/ Anthony J. DeLuca
___________________________________
Name: Anthony J. DeLuca
Title: President and Chief
Executive Officer
TIGER ACQUISITION CORPORATION
By: /s/ Anthony J. DeLuca
___________________________________
Name: Anthony J. DeLuca
Title: President and Chief
Executive Officer
46
<PAGE>
ANNEX A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule 14e-
1(c) relating to Parent's obligation to pay for or return tendered shares after
termination or withdrawal of the Offer, Parent shall not be required to accept
for payment or pay for any Shares tendered pursuant to the Offer, shall delay
the acceptance for payment of any Shares and if required by Section 1.1(b) of
this Agreement, shall extend the Offer by one or more extensions until December
31, 1998, as provided in Section 1.1(b) of the Agreement, and, except as
otherwise provided in this Agreement, may terminate the Offer at any time after
December 31, 1998 if (i) less than the number of Shares necessary to satisfy the
Minimum Condition have been tendered pursuant to the Offer prior to the
expiration of the Offer and not withdrawn; (ii) any applicable waiting period
under the HSR Act has not expired or terminated prior to the Expiration Date of
the Offer; or (iii) at any time after the date of this Agreement, and before
acceptance for payment of any Shares, any of the following events shall occur
and be continuing on or after December 31, 1998:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any domestic
or foreign court or other Governmental Entity (other than the application of the
waiting period provisions of the HSR Act to the Offer or to the Merger) that, in
the reasonable judgment of Parent, would be expected to, directly or indirectly
(i) prohibit or impose any material limitations on, Parent's ownership or
operation of all or a material portion of the Company's businesses or assets, or
compel Parent to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and its respective Subsidiaries, in
each case taken as a whole, (ii) prohibit, or make illegal, the acceptance for
payment, payment for or purchase of Shares or the consummation of the Offer, the
Merger or the other transactions contemplated by this Agreement, (iii) result in
the material delay in or restricts the ability of Parent, or renders Parent
unable, to accept for payment, pay for or purchase some or all of the Shares, or
(iv) impose material limitations on the ability of Parent effectively to
exercise full rights of ownership of the Shares, including the right to vote the
Shares purchased by it on all matters properly presented to the Company's
stockholders;
(b) (i) the representations and warranties of the Company set forth in this
Agreement shall not be true and correct in any material respect as of the date
of this Agreement and as of consummation of the Offer as though made on or as of
such date (except for representations and warranties made as of a specified
date) but only if the respects in which the representations and warranties made
by the Company (without giving effect to any "materiality" limitations or
references to "material adverse effect" set forth therein) are inaccurate would
in the aggregate have a Company Material Adverse Effect, (ii) the Company shall
have failed to comply with its covenants and agreements contained in this
Agreement in all material respects which failure is likely to have a Company
Material Adverse Effect and, with respect to any breach or failure described in
clause (b)(i) or (b)(ii) above that can be cured, the breach or failure shall
not have been cured prior to ten (10) Business Days after Parent has furnished
the Company written notice
<PAGE>
of such breach or failure, or (iii) there shall have occurred any events or
changes which have had or which are likely to have a Company Material Adverse
Effect;
(c) the Board of Directors of the Company shall have withdrawn, or modified
or changed in a manner adverse to Parent (including by amendment of the Schedule
14D-9), its recommendation of the Offer, this Agreement or the Merger, or
recommended another proposal or offer for the acquisition of the Company, or the
Board of Directors of the Company, shall have resolved to do any of the
foregoing;
(d) this Agreement shall have terminated in accordance with its terms; or
(e) there shall have occurred and continue to exist (i) any general
suspension of, or limitation on prices for, trading in securities on the NYSE
(other than a shortening of trading hours or any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index), (ii) the declaration of any banking moratorium or any suspension of
payments in respect of banks, or any limitation (whether or not mandatory) by
any Governmental Entity on, or other event materially adversely affecting, the
extension of credit by lending institutions in the United States, or (iii) a
commencement of a war or armed hostilities directly involving the United States,
which has and continues to have a material adverse effect on the trading of
securities on the NYSE;
which in the reasonable judgment of Parent, in any such case, makes it
inadvisable to proceed with the Offer or the acceptance for payment of or
payment for the Shares.
The foregoing conditions, other than condition (i) above, are for the sole
benefit of Parent and may be waived by Parent, in whole or in part at any time
and from time to time, in the sole discretion of Parent. The failure by Parent
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time, except as otherwise provided in
this Agreement.
2
<PAGE>
Exhibit 2
AMENDED AND RESTATED
MARKETING AGREEMENT
BETWEEN AND AMONG,
INTERNATIONAL TECHNOLOGY CORPORATION
FLUOR DANIEL GTI, INC.
AND
FLUOR DANIEL, INC.
October 27, 1998
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<PAGE>
THIS AMENDED AND RESTATED MARKETING AGREEMENT (this "Agreement") is entered into
effective as of the 27TH day of October, 1998.
BETWEEN AND AMONG:
INTERNATIONAL TECHNOLOGY CORPORATION, a corporation organized
under the laws of the State of Delaware, having its principal
office at 2790 Mosside, Monroeville, Pennsylvania ("IT"),
FLUOR DANIEL GTI, INC., a corporation organized under the laws
of the State of Delaware, having its principal office at 100
River Ridge Drive, Norwood, Massachusetts ("FDGTI"),
AND FLUOR DANIEL, INC. a corporation organized under the laws of
the State of California, having its principal office at 3353
Michelson Drive, Irvine, California, ("Fluor Daniel").
WHEREAS, FDGTI and Fluor Daniel previously entered into a Marketing Agreement
dated May 10, 1996 (the "Original Agreement");
WHEREAS, the Parties desire to amend and restate the Original Agreement in its
entirety by executing this Agreement, which shall become effective only upon the
consummation of that certain cash tender offer for the shares of common stock of
FDGTI proposed by IT (the "Tender Offer");
WHEREAS, the Parties wish to continue and expand upon the spirit of cooperation
which has developed between the Parties under the Original Agreement and which
has resulted in significant revenues to FDGTI and important benefits to Fluor
Daniel and its customers;
WHEREAS, Fluor Daniel recognizes that following the consummation of the Tender
Offer, FDGTI will have available the increased resources of IT, which has
greater scale and skills than FDGTI alone, and Fluor Daniel wishes to maximize
the strategic value of a relationship with FDGTI and IT;
WHEREAS, the Parties wish to strengthen the exclusive joint marketing efforts
which have been underway under the Original Agreement, and to that end wish to
establish a Steering Committee of senior management of both Parties to maintain
a high-level dialogue on these subjects; and
WHEREAS, the Parties wish to enter into this Agreement to set forth the basis
upon which such Parties will continue to engage in the global conduct of the
environmental services business on the one hand and the engineering and
construction services business on the other hand, and the basis for providing
continued mutual support and assistance in conducting their own respective
businesses.
NOW, THEREFORE, in consideration of the above premises and mutual covenants
contained herein, the Parties have agreed as follows:
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1. DEFINITIONS
-----------
The following terms as used in this Agreement shall have the meanings set forth
below:
1.1 "Affiliate" shall mean any corporation or other legal entity of which a
Party (either alone or together with other Affiliates of that Party) owns,
directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are ordinarily and generally, in the absence
of contingencies or other understandings, entitled to vote for the election
of a majority of the board of directors or governing body.
1.2 "Contract Support Services" shall mean services provided by one Party
to or on behalf of the other Party, in connection with a project being
performed for a client, but which by themselves do not constitute a scope
of work within the project being performed.
1.3 "DOE Management and Operations/Operating and Maintenance/Management and
Integration (M&O/O&M/M&I) Projects" shall mean projects involving the
management and operation, and/or management integration of sites and
facilities and environmental engineering services for the U.S. Department
of Energy or any successor agencies.
1.4 "Engineering and Construction Business" and "Engineering and
Construction Services" shall mean the providing of feasibility studies,
conceptual design, detailed design, engineering, procurement, project and
construction management, construction, maintenance, plant operations,
technical, project finance, quality control, start-up assistance, site
evaluation, site location, asset optimization, licensing and consulting
with respect to actual or proposed sites or facilities.
1.5 "Environmental Business" or "Environmental Services" shall mean the
providing of investigation, evaluation, design, feasibility studies,
management and pollution prevention, project management, remediation,
permitting, quality control, start-up assistance, licensing and
consulting services (including incidental project finance,
procurement, construction and maintenance) relating to (i) the
treatment of groundwater, wastewater, soil and hazardous waste, or
(ii) air emissions controls; provided, however, that such terms shall
not include:
(a) the Excluded Projects;
(b) DOE Management and Operations/Operating and Maintenance/
Management and Integration (M&O/O&M/M&I) Projects;
(c) Infrastructure projects related to government or industrial water
supply, water treatment, wastewater treatment or pollution
control facilities; and
(d) Facilities that are built due to environmental drivers but that
are mainly capital plant investments by a client, such as
waste-to-energy, waste recycle and clean air emission process
upgrades.
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1.6 "Excluded Projects" shall mean those projects listed on Exhibit A
attached hereto and made a part hereof.
1.7 "Fluor Daniel Group" shall mean Fluor Daniel and each of its Affiliates
1.8 "FDGTI Group" shall mean FDGTI and each of its Affiliates.
1.9 "Good Faith" shall have the meaning set forth in Section 2.1.
1.10 "Intercompany Services Agreement" shall mean the Intercompany
Services. Agreement of even date herewith attached hereto as Exhibit G.
1.11 "IT Group" shall mean IT and each of its Affiliates.
1.12 "Marketing Agreement" or "Agreement" shall mean the present Agreement
together with its Exhibits, Schedules and any amendments thereof.
1.13 "Overhead and Proposal Support" shall have the meaning set forth in
Section 3.1.
1.14 "Party" means either FDGTI and IT on the one hand or Fluor Daniel on
the other hand, depending on the context. "Parties" means all of them.
1.15 "Project Services" shall mean services provided by one Party to or on
behalf of the other Party which constitute a scope of work within a project
being performed for a client.
1.16 "Steering Committee" shall have the meaning set forth in Section 2.6
1.17 The Exhibits to this Marketing Agreement are the following:
Exhibit A Excluded Projects
Exhibit B Ongoing FDGTI Services to Fluor Daniel
Exhibit C Ongoing Fluor Daniel Services to FDGTI
Exhibit D Overhead Support Services and Commercial Contract
Support - Billing Terms
Exhibit E Commercial Project Services - Billing Terms
Exhibit F Government Project Services - Billing Terms
Exhibit G Intercompany Services Agreement
Exhibit H Co-located Offices
2. BUSINESS PURPOSE
----------------
2.1 Environmental Services Worldwide. The Parties agree that the purpose of
--------------------------------
this Marketing Agreement is to establish the respective rights, roles and
responsibilities of the Parties and their Affiliates with regard to the
pursuit of the Environmental Business on a worldwide basis. The Parties
agree to enter into this Agreement and to work together during the term of
this Agreement in Good Faith and use commercially-reasonable efforts
4
<PAGE>
to provide Environmental Services to their respective clients. "Good Faith"
shall mean the Parties shall abide by a standard of good faith and fair
dealing in all aspects of their business relationship and dealings with
each other, including with respect to the performance of their respective
obligations and the exercise of their respective rights under the
Agreement.
2.2 Responsibilities. The Parties agree that, subject to the terms of this
Agreement:
(a) as between the Fluor Daniel Group and the IT Group, the IT Group
shall have primary responsibility for the marketing and execution
of the Environmental Business, and the Fluor Daniel Group shall
have primary responsibility for the marketing and execution of
Engineering and Construction Services.
(b) Fluor Daniel, on its behalf and on behalf of the Fluor Daniel
Group, will promote the use of the IT Group for Environmental
Services that are related or incidental to its Engineering and
Construction Business, provided that (i) the use of the IT Group
is not objected to by the client, (ii) the IT Group has adequate
available personnel and other resources to timely and
satisfactorily perform the work, and (iii) the IT Group proposed
commercial terms are competitive with the market. For purposes of
this Agreement, Fluor Daniel will evaluate the competitiveness of
the IT Group's commercial terms by comparing them to terms and
conditions of other providers of Environmental Services of the
same quality and scope as the IT Group in the location where the
services are to be provided, and reviewing them with the IT
Group. The Steering Committee shall attempt to resolve any
disagreements that may arise under this paragraph (b). In the
event that anyone in the Fluor Daniel Group refuses to promote
the use of the IT Group for such Environmental Services for a
particular project because of one of the reasons set forth in
clauses (i), (ii) or (iii) in this paragraph (b), the IT Group
may promptly appeal such decision to the Steering Committee for
reconsideration. The Steering Committee shall decide any such
appeal promptly, or if practical, before the proposal or bid on
the subject project is due.
(c) With respect to the types of projects referred to in paragraph
(b), (c) and (d) of Section 1.5, the Parties agree that either
Party may participate without the other in the types of projects
set forth therein. The Parties recognize that there are potential
benefits from working together in these areas, and therefore, the
Parties shall explore mutually beneficial ways in which a Party
may involve the other Party in such projects.
(d) The IT Group shall commit in Good Faith and use its commercially
reasonable efforts to perform such Environmental Services as may
be requested by Fluor Daniel, but shall not be obligated to
provide such
5
<PAGE>
Environmental Services if there is a valid business reason for
its refusal to perform such services.
(e) With any common clients the IT Group shall have the marketing
lead for projects that primarily involve Environmental Services
and Fluor Daniel shall have the marketing lead for projects that
primarily involve Engineering and Construction Services, except
as otherwise provided in Section 2.7, concerning ongoing
activities.
2.3 Fluor Daniel Notification. Fluor Daniel shall notify its management and
-------------------------
the management of its Affiliates of the marketing relationship formed
between the Parties and of the obligations of the Fluor Daniel Group under
this Agreement. Periodically throughout the term of this Agreement, Fluor
Daniel will communicate with its management and the management of its
Affiliates to remind them of the marketing relationship formed between the
Parties and of the obligations of the Fluor Daniel Group under this
Agreement.
2.4 IT Notification. Within 30 days of the date of this Agreement, IT shall
---------------
notify its management and the management of its Affiliates of the marketing
relationship formed between the Parties and of the obligations of the IT
Group under this Agreement. Periodically throughout the term of this
Agreement, IT will communicate with its management and the management of
its Affiliates to remind them of the marketing relationship formed between
the Parties and of the obligations of the IT Group under this Agreement.
2.5 Prior Review of Notification. Prior to either Party forwarding a
----------------------------
written communication to their respective management pursuant to Sections
2.3 and 2.4 above, the Party preparing to forward the communication shall
give the other Party a reasonable opportunity to review and comment on the
communication.
2.6 Steering Committee. Fluor Daniel and IT shall each designate two senior
------------------
executives to serve on a steering committee for joint efforts under this
Agreement (the "Steering Committee"). The initial members of the Steering
Committee shall be Dave Myers, Ron Peterson, Jim Mahoney and Phil
Strawbridge. The Steering Committee shall meet periodically during the term
of the Agreement to review the joint efforts of the Parties under this
Agreement, to determine any future course of cooperation between the
Parties and to make such other determinations as they may be called upon to
make pursuant to the terms of this Agreement. The Steering Committee shall
also discuss joint marketing opportunities and initiatives and may delegate
to other executives within their respective organizations the
responsibility to implement such opportunities and initiatives. The members
of the Steering Committee and their delegates shall use commercially
reasonable efforts to keep the others advised of their respective marketing
efforts with common clients and, with respect to the foregoing, establish
mutually acceptable communications procedures. The Steering Committee shall
attempt to reach consensus on all matters, and in the absence of a
consensus, shall make determinations by
6
<PAGE>
majority vote. For the first three (3) months following the Effective Date,
these representatives shall meet at least once a month. Following that
initial period, the Steering Committee shall meet at least once each
quarter during the first year and at least twice a year thereafter.
2.7 Ongoing Activities
------------------
(a) Services to Fluor Daniel. Prior to the effective date of this
------------------------
Agreement, FDGTI provided Environmental Services to members of
the Fluor Daniel Group. Attached as Exhibit B is a summary of
---------
substantially all of the ongoing projects in which FDGTI is
providing Environmental Services to the Fluor Daniel Group,
including contract numbers and contact persons. From the
effective date of this Agreement, and except as otherwise
provided in Exhibit B, the terms and conditions previously agreed
---------
to between the Parties for all projects ongoing shall govern. In
the event the terms and conditions of this Agreement are not
inconsistent with such previously agreed to terms and conditions,
the terms set forth in this Agreement shall apply. The Steering
Committee shall attempt to resolve any disagreements that may
arise under this paragraph (a).
(b) Services to FDGTI. Prior to the effective date of this Agreement,
-----------------
the Fluor Daniel Group provided Engineering and Construction
Services and certain Environmental Services to FDGTI. Attached as
Exhibit C is a summary of substantially all of the ongoing
---------
projects in which the Fluor Daniel Group is providing Engineering
and Construction Services or Environmental Services to FDGTI,
including contract numbers and contact persons. From the
effective date of this Agreement, and except as otherwise
provided in Exhibit C, the terms and conditions previously agreed
---------
to between the Parties for all ongoing projects shall govern. In
the event the terms and conditions of this Agreement are not
inconsistent with such previously agreed to terms and conditions,
the terms set forth in this Agreement shall apply. FDGTI wishes
to self perform all ongoing administrative support services
presently provided by Fluor Daniel and to that end agrees to
transition such services to FDGTI or its designee promptly, and
in no event later than six (6) months following the date of this
Agreement. During such transition, the provisions of Section 3.1
shall apply to such administrative support services. The Steering
Committee shall attempt to resolve any disagreements that may
arise under this paragraph (b).
(c) Existing Projects. The Parties understand that a number of the
-----------------
clients of the FDGTI Group view the previous involvement of the
Fluor Daniel Group in the business of the FDGTI Group as a
benefit to such clients. The Parties agree that it is in the best
interests of the clients and the Parties to minimize disruption
to such clients that may arise from the sale by the
7
<PAGE>
Fluor Daniel Group of its ownership interest in FDGTI.
Accordingly, the Parties agree that they will work together in
Good Faith to minimize any such possible disruption and to use
commercially reasonable efforts to maintain for FDGTI its
existing projects. Fluor Daniel shall not, however, be required
by the terms of this Agreement to give any corporate guarantees
or other contractual assurances to such clients.
2.8 Possible Acquisitions.
---------------------
(a) Restrictions on Environmental Acquisitions. The Fluor Daniel
------------------------------------------
Group shall not, during the term of this Agreement, acquire,
merge with, form a joint venture with or enter into a
business combination with any entity which is engaged
primarily in performing Environmental Services, without the
prior written consent of FDGTI; provided, however, that the
-------- -------
Fluor Daniel Group shall be permitted on a case-by-case
basis to team, joint venture or contract with any such
entity on any specific project (i) which the FDGTI Group
fails or refuses to perform or (ii) where the conditions set
forth in Section 2.2, paragraph (b), clauses (i), (ii) and
(iii) are not met.
(b) Non-Environmental Acquisitions. It is not the present
------------------------------
intention of Fluor Daniel to acquire an Environmental
Services capability; however, in the event that during the
term of this Agreement, the Fluor Daniel Group consummates
an acquisition, merger, or consolidation ("Acquisition")
with any entity which is not engaged primarily in performing
the Environmental Services, but which performs Environmental
Services, the Fluor Daniel Group shall be permitted to
perform Environmental Services by, through or with such
entity instead of the FDGTI Group, which shall not be deemed
a breach or violation of this Agreement. Following any such
Acquisition, this Agreement shall continue on a
non-exclusive basis, and contracts in effect on the date of
the closing of such Acquisition between the FDGTI Group and
the Fluor Daniel Group shall continue, unless otherwise
agreed.
(c) Discussions on Divestiture. In the event the Fluor Daniel
--------------------------
Group commences preparation to consummate such an
Acquisition, it shall, subject to the limitations of any
applicable confidentiality agreements, discuss such
acquisition with the Steering Committee on a confidential
basis with a view to determining whether IT would have any
interest in considering the acquisition of such portion of
the target business which performs Environmental Services,
other than services for the United States Government, (the
"Environmental Portion") if any. If the Fluor Daniel Group
consummates any such Acquisition, it shall, for a period of
60 days following the entering into of a written agreement
to consummate such Acquisition, engage in Good Faith
discussions with IT regarding the divestiture and sale of
the Environmental Portion to IT. Such discussions
8
<PAGE>
shall be exclusively with IT during such period unless
otherwise agreed (the "No-shop Period"). Following the
expiration of the No-shop Period, unless IT and the Fluor
Daniel Group have reached an agreement, the Fluor Daniel
Group shall, for a period of 120 days, engage in a Good
Faith effort to divest the Environmental Portion on
commercially reasonable terms (in its discretion). In the
event that the Fluor Daniel Group has not within such
120-day period (a) entered an agreement to sell the
Environmental Portion, or (b) decided to liquidate or phase
out the business of the Environmental Portion, then the
Fluor Daniel Group shall give consideration to any request
by IT through the Steering Committee that the terms and
conditions of this Agreement should be adjusted to avoid an
inequitable hardship to IT resulting from any material
diminution of value of this Agreement arising from such
Acquisition; provided, however, that no such adjustment
shall be made without the express written agreement of all
Parties.
3. INTERCOMPANY SERVICES
---------------------
3.1 Overhead and Proposal Support Services. Subject to
--------------------------------------
availability of qualified personnel, each Party agrees to provide to the
other Party, during the first six (6) months of the term of this Agreement,
the services of its employees (including technical, financial and
administrative personnel) and proposal support as may be reasonably
requested by the other Party in connection with activities of a general
nature which are not related to a specific contract or in connection with a
proposal ("Overhead and Proposal Support"), upon the terms and conditions
set forth in Exhibit D attached. Overhead and Proposal Support shall
---------
include without limiting the generality of the foregoing, the following
administrative services, as may be requested by a Party from time to time:
Insurance services, accounting services, payroll services, legal services,
real estate services and information technology services.
3.2 Contract Support. All Contract Support Services to be
----------------
provided by one Party to the other Party, shall be performed pursuant to
Work Releases issued pursuant to the terms of the Intercompany Services
Agreement and containing the commercial terms and conditions set forth in
Exhibit D, and in the case of government projects, in Exhibit F.
--------- ---------
3.3 Project Services. All Project Services to be provided
----------------
by one Party to the other Party shall be performed pursuant to Work
Releases issued pursuant to the terms of the Intercompany Services
Agreement and containing commercial terms and conditions set forth in
Exhibit E, and in the case of government projects in Exhibit F.
--------- ---------
3.4 Facilities. Attached hereto as Exhibit H is a list of
---------- ---------
offices of FDGTI which are co-located with offices of Fluor Daniel,
including a summary of applicable lease terms. Except as otherwise agreed
on a case-by-case basis, FDGTI shall relocate such offices at its expense
out of the offices of Fluor Daniel in an orderly and expeditious manner
following the execution of this Agreement, and in no event later than six
(6) months following the date hereof; provided, however, that Fluor Daniel
shall make available to FDGTI during the term of this Agreement, on
commercially reasonable license terms,
9
<PAGE>
office space for no more than five employees of FDGTI in areas designated
by Fluor Daniel, on the premises of Fluor Daniel, but outside the card-
keyed access areas, where practical at the following locations: Greenville,
S.C., Marlton, N. J., Sugar Land, TX. and Irvine, CA. Fluor Daniel shall
cooperate in the relocation of FDGTI offices and corresponding FDGTI
employees.
3.5 Other Activities. Each Party understands that the other Party will
----------------
be involved in other activities and undertakings not within the scope of
this Marketing Agreement. The Parties hereby agree that the execution of
this Marketing Agreement and the assumption by each of the Parties of its
duties hereunder shall be without prejudice to its rights to have such
other interests and activities and to receive and enjoy the profits or
compensation therefrom. Except as otherwise provided herein, the Parties
may engage in or possess any interest in any other business, undertaking,
or venture of any nature or description independently or with others and
neither Party shall have any right by virtue of this Marketing Agreement in
and to such business, undertaking or venture of the other Party or the
income or profits derived therefrom.
4. LIABILITIES
-----------
4.1 No Agency or Partnership; Indemnity. Neither Party shall hold
-----------------------------------
itself out as being the agent, representative, employee or the
principal of the other Party. This Marketing Agreement does not
constitute either Party the agent of the other, nor does it create a
partnership, a consortium, an association, a joint venture, or any form
of juristic person or entity. Neither Party shall have any authority or
right to assume or create obligations of any kind or nature, express or
implied, on behalf of, or in the name of the other Party, not to accept
service of any legal process of any kind addressed to or intended for
the other Party, nor to bind the other Party in any respect, without
the specific prior written authorization of the other Party. If either
Party acts in violation of the foregoing, said Party hereby covenants
to indemnify and hold harmless the other Party from and against any and
all claims, demands, losses, damages, liabilities, law suits, and other
proceedings, judgments and awards, and costs and expenses (including,
but not limited to, reasonable attorneys' fees) arising directly or
indirectly in whole or in part out of the breach of this Section 4.1 by
such Party, whether committed by the indemnifying Party, its employees,
agents, successors, assigns, or its Affiliates.
4.2 Personal Injury or Property Damage; Indemnity. Unless as otherwise
---------------------------------------------
required by any prime or subcontract pertaining to a project, each
Party shall indemnify and hold harmless the other Party from and
against any and all claims, demands, losses, damages, liabilities,
lawsuits and other proceedings, judgments and awards, and the costs and
expenses (including, but not limited to, reasonable attorneys' fees) of
any action resulting from the death of any person, or for damage or
destruction of property, but only to the extent resulting solely from
the negligent acts or omissions of such Party .
4.3 Waiver of Certain Damages. Unless as otherwise required by any
-------------------------
prime or subcontract pertaining to a project. in no event shall either
Party ever be liable to, or required to provide indemnity to, the other
Party for any incidental, special, consequential or punitive damages of
the other Party, or its Affiliates, including without limitation,
10
<PAGE>
liability for loss of profits or business interruption, however the
same may be caused.
4.4 Proposals and Contracts; Indemnity. Unless as otherwise required
----------------------------------
by any prime contract or subcontract pertaining to a project, each
Party shall be solely responsible for the accuracy and completeness of
information and representations supplied by each Party and
incorporated in any proposal, prime or sub contract, including, but
not limited to, cost or pricing data, materials, specifications, and
certifications, and each Party agrees to release defend, indemnify and
hold the other harmless from and against any and all claims,
liabilities and causes of action arising out of or relating to the
provision of such information and/or representations.
4.5 Applicability of Indemnities. Indemnities against, releases from
----------------------------
and limitation on liability expressed in Sections 4.1 through 4.4
shall apply even in the event of the fault, negligence or strict
liability of the Party indemnified or released or whose liability is
limited.
4.6 Exclusive Rights. The Parties make no other representations,
----------------
covenants, warranties or guarantees, express or implied, other than
those set forth in this Marketing Agreement, the Intercompany Services
Agreement or in a Work Release (as defined in the Intercompany
Services Agreement) or an applicable purchase order or subcontract.
The Parties' rights, and responsibilities with respect to the matters
set forth in this Marketing Agreement, shall be exclusively those set
forth in this Marketing Agreement, the Intercompany Services Agreement
or in a Work Release.
5. CONFIDENTIALITY
---------------
5.1 Restrictions on Use and Disclosure. Each Party covenants and
----------------------------------
agrees it will not, and it will not permit its Affiliates to, directly
or indirectly, or in any capacity whatsoever, divulge or disclose
Confidential Information (as hereinafter defined), in whole or in
part, to any person or entity, except to the extent such divulgence or
disclosure is specifically permitted by the Originator (as hereinafter
defined) or is required by law. The Recipient (as hereinafter defined)
shall use Confidential Information for the purpose of carrying out the
activities that are the subject of this Agreement, and the
Intercompany Services Agreement, and for no other purpose.
5.2 Confidential Information Defined. As used herein, the term
--------------------------------
"Confidential Information" shall mean: all technical, economic or
descriptive information, data, concepts, or know-how disclosed to a
Party, including any officers, directors, managers, partners or
employees of such Party or any of such Party's Affiliates (the
"Recipient") by the other Party (the "Originator") (1) in written or
documentary form marked "Confidential" or with words of similar
import, or (2) in an oral presentation or visual demonstration and
identified as confidential at the time of such disclosure, and
subsequently confirmed in written or tangible form marked
"Confidential", or with words of similar import, except any portion of
such information which:
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(i) the Recipient can show was in its possession prior to the earliest
disclosure by the Originator, provided that the Recipient has the
right of free and unlimited disclosure thereof; or
(ii) is presently or hereafter becomes a part of the public knowledge
or literature without default by the Recipient of its obligations
pursuant to this Agreement; or
(iii) the Recipient can show was developed by the Recipient from
independent information not subject to restrictions of
confidentiality; or
(iv) is or has been disclosed to the Recipient by a third party, so
long as Recipient does not know or have reason to know such third
party acquired that information directly or indirectly from the
Originator under an obligation of confidentiality, provided
Recipient's use of such information is in accordance with the
terms under which it is received.
5.3 Disclosure to Employees. The Recipient shall use all reasonable
-----------------------
efforts to (i) limit disclosure of Confidential Information within its
organization to only those employees who need to use such Confidential
Information for the purpose authorized in Section 5.1, and who are
obligated to the Recipient by a secrecy agreement with terms concerning
disclosure and use at least as restrictive as those herein in a form
acceptable to the disclosing Party, and (ii) advise each of those
employees of Recipient's obligations under this Agreement.
5.4 No License. Nothing contained herein shall be construed to grant
----------
Recipient any immunity or license under any patent or other intellectual
property right.
5.5 Term of Non-Disclosure. The Parties' obligations concerning
----------------------
non-disclosure and the use of Confidential Information contained in this
Section 5 shall continue for three (3) years from the termination of this
Agreement and shall then terminate.
6. USE OF FLUOR DANIEL NAME
------------------------
Fluor Daniel's name and logo are proprietary to Fluor Daniel. The right
of FDGTI or any member of the FDGTI Group to continue to use the Fluor
Daniel name (or any derivation thereof) shall cease upon the consummation
of the Tender Offer and the Fluor Daniel name shall be removed from all
company documents (including without limitation, its corporate name as
reflected in its charter documents) promptly and in any event within 30
days following such closing and all future use is hereby prohibited. No
further notice of Fluor Daniel's rights pursuant to this Article is
required. FDGTI shall be allowed to use the name "GTI" and "Groundwater
Technology" following the consummation of the Tender Offer. The Parties
acknowledge that the change in ownership of FDGTI will require the
written consent of certain parties to certain existing contracts with
FDGTI and its Affiliates, including certain United States government
agencies, and may require FDGTI to apply for certain permits and licenses
domestically and internationally in order
12
<PAGE>
to allow the complete disentanglement of FDGTI and Fluor Daniel in these
areas. FDGTI agrees to promptly, and in no event later than 60 days
following consummation of the Tender Offer (or such shorter period as may
be required by contract or law), apply for all of such consents, licenses
and permits and to obtain the same as promptly as reasonably possible
thereafter and in no event later than one year following the date of this
Agreement. Fluor Daniel agrees to use commercially reasonable efforts to
cooperate with FDGTI to accomplish a prompt and orderly disentanglement.
Each party shall execute and deliver such further documents and take such
other actions as may be necessary or appropriate to consummate or implement
the disentanglement contemplated hereby or to evidence such events or
matters.
7. TERM, TERMINATION
-----------------
This Marketing Agreement shall commence and become effective only on the
date of consummation of the Tender Offer and the term of this Marketing
Agreement shall be four (4) years from such date, whereupon it shall lapse
and terminate without formality unless it has been extended by mutual
written agreement.
8. ASSIGNMENT, SUBCONTRACTING
--------------------------
Neither Party shall sell, assign or in any manner transfer, convey or
alienate (by operation of law or otherwise) its interest or part thereof in
this Marketing Agreement without first obtaining the written consent of the
other Party. This Marketing Agreement shall inure to the benefit of and be
binding upon the Parties, their successors, trustees, permitted assigns,
receivers and legal representatives, but shall not inure to the benefit of
any other person or entity.
9. AMENDMENTS
----------
No amendment of this Marketing Agreement or its Exhibits or Schedules shall
be of any force or effect unless reduced to writing and executed by the
Parties.
10. NOTICES
-------
All notices under this Marketing Agreement shall be given in writing and
shall be delivered by (i) certified or registered mail, postage prepaid,
return receipt requested, or (ii) reputable overnight commercial courier or
delivery service, or (iii) by facsimile transmission confirmed by certified
or registered mail or commercial courier or delivery service as follows:
(a) To: FLUOR DANIEL, INC.
3353 Michelson Drive
Irvine, California 92698
Attention: Ronald G. Peterson
Facsimile number: 949-975-2956
13
<PAGE>
(b) To: FLUOR DANIEL GTI, INC.
River Ridge Drive
Norwood, MA 02062
Attention: President
Facsimile number: 781-769-7992
(c) To: INTERNATIONAL TECHNOLOGY CORPORATION
K Street, N. W.
Washington, D.C. 20005
Attention: Philip Strawbridge
Facsimile number: 202-682-1171
or to such other address of which either Party shall have notified the other.
All notices shall be effective only upon receipt by the receiving Party.
11. GOVERNING LAW
-------------
This Marketing Agreement shall be governed by the laws of the State of
California without regard to conflict of law rules, whose courts, state or
federal, shall have sole and exclusive jurisdiction.
12. FORCE MAJEURE
-------------
A Party shall not be liable for non-performance or delay in performance
caused by any event reasonably beyond the control of such Party including,
but not limited to, hostilities, revolutions, riots, civil commotion,
national emergency, strikes, work stoppages, slowdowns, labor disputes,
lockouts, unavailability of supplies, epidemics, fire, flood, earthquake,
force of nature, explosion, embargo, or any other Act of God, or any law,
proclamation, regulation, ordinance, or other act or order of any court,
government, or governmental agency; provided, however, that this Article
shall not affect the liability of any Party for its failure to pay any sum
of money required by this Marketing Agreement.
13. SEVERABILITY
------------
In the event that any of the provisions of this Marketing Agreement are
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision thereof and this Marketing Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein and the Parties shall to the fullest extent possible modify any such
provision to the extent required to carry out the general intention of this
Marketing Agreement and to impart validity thereto.
14. EFFECT OF WAIVERS
-----------------
No forbearance, indulgence, or relaxation or inaction by any Party at any
time to require performance of any provisions of this Marketing Agreement
shall in any way affect,
14
<PAGE>
diminish or prejudice the right of a Party to require performance of that
provision and any waiver or acquiescence by either Party in any breach of
any provision of this Marketing Agreement shall not be construed as a
waiver or acquiescence in any continuing or succeeding breach of such
provision, a waiver or an amendment of the provision itself or a waiver of
any right under or arising out of this Marketing Agreement or acquiescence
in or recognition of rights and/or positions other than as expressly
stipulated in this Marketing Agreement.
15. COUNTERPARTS
------------
This Marketing Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original and all of which shall
constitute one and the same Marketing Agreement.
16. ENTIRE AGREEMENT
----------------
This Agreement (including any schedules, exhibits or annexes hereto) and
the Intercompany Services Agreement constitute the entire agreement, and
supersede all other prior agreements, understandings, representations and
warranties both written and oral, among the parties, with respect to the
subject matter hereof.
17. NO THIRD PARTY BENEFICIARIES.
----------------------------
This Agreement is not intended to confer upon any person or entity other
than the Parties any rights or remedies hereunder.
18. DISPUTE RESOLUTION.
------------------
(a) All claims, disputes, and other matters in question arising out of, or
relating to, this Agreement or the breach hereof, shall be decided
first, by the Steering Committee, second, if the Steering Committee
fails to resolve the matter within 90 days, by nonbinding mediation,
and third, if mediation fails to resolve the matter within 90 days, by
binding arbitration in accordance with the Construction Industry
Mediation and Arbitration Rules of the American Arbitration
Association then prevailing unless the parties mutually agree
otherwise. This agreement to mediate and arbitrate shall be
specifically enforceable under prevailing law.
(b) Notice of the demand for mediation and/or arbitration shall be filed
in writing with the other parties to this Agreement and with the
American Arbitration Association. The demand shall be made within a
reasonable time after the Steering Committee fails to resolve the
matter in question. In no event shall the mediation and/or arbitration
be made after the date when institution of legal or equitable
proceedings based on such claim, dispute, or other matter in question
would be barred by the applicable statute of limitation.
(c) The award rendered by the Steering Committee or mediation shall not be
binding upon the parties. The award rendered by the arbitration shall
be final and binding,
15
<PAGE>
and judgment may be entered upon it in accordance with applicable law
in any court having jurisdiction thereof.
(d) All mediation and arbitration shall be conducted in Irvine,
California.
IN WITNESS WHEREOF the Parties have signed this Marketing Agreement effective as
of the date first above written.
FLUOR DANIEL GTI, INC. FLUOR DANIEL, INC.
By: /s/Walter C. Barber By: /s/Ronald G. Peterson
-------------------- ---------------------
Name: Walter C. Barber Name: Ronald G. Peterson
-------------------- --------------------
Title: President Title: Group President
-------------------- --------------------
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/Anthony J. DeLuca
---------------------------
Name: Anthony J. DeLuca
---------------------------
Title: President and Chief Executive Officer
-------------------------------------
16
<PAGE>
Exhibit 3
ELECTION OF DIRECTORS
PROPOSAL 1
Set forth below is information concerning the nominees for director to be
elected at the Annual Meeting. The Board of Directors expects that all the
nominees will be available for election. In the event that any of the nominees
for any reason should become unavailable, proxies will be voted for a nominee or
nominees designated by the Board of Directors, unless the Board of Directors
reduces the number of directors.
Pursuant to the Investment Agreement dated December 11, 1995, as amended,
between the Company, Fluor Daniel, Inc. ("Fluor Daniel") and a subsidiary of
each of the Company and Fluor Daniel (the "Investment Agreement"), Fluor Daniel
has agreed (a) until April 30, 1999, to vote all shares of Common Stock owned by
it in favor of fixing the size of the Board of Directors at not more than seven
and in favor of not less than three Independent Directors, and (b) until the
annual stockholders' meeting of the Company (or written consent in lieu thereof)
held in 1998, to vote all shares of Common Stock owned by it in favor of Allan
S. Bufferd and Robert P. Schechter in any election of members of the Board of
Directors. Under the Investment Agreement, an "Independent Director" is defined
as a director who is not (apart from such directorship) (i) an officer,
affiliate, employee, principal stockholder, consultant or partner of Fluor
Daniel or any affiliate of Fluor Daniel or of any entity that was dependent upon
Fluor Daniel or any affiliate of Fluor Daniel for more than 3% of its revenues
or earnings in its most recent fiscal year, (ii) an officer, employee,
consultant or partner of the Company or any affiliate of the Company or an
officer, employee, principal stockholder, consultant or partner of an 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 Daniel) or (iii) an officer, director, employee,
principal stockholder, consultant or partner of a person that is a competitor of
Fluor Daniel or any of its affiliates (unless agreed to in writing by Fluor
Daniel) or of the Company or any of its affiliates.
Allan S. Bufferd and Ernie Green have served as the Independent Directors
since May 10, 1996. Messrs. Bufferd and Green have been nominated to serve as
the Independent Directors for the next year; however, effective December 31,
1996, Mr. Schechter resigned as a director of the Company. Although the Board
of Directors has initiated and is continuing a search to find a replacement
Independent Director, a suitable candidate has not been identified at the date
of mailing this proxy statement. Mr. Schechter has not been nominated, and only
two Independent Directors have been nominated. Accordingly, the Company has for
this Annual Meeting waived the requirement under the Investment Agreement that
Fluor Daniel vote its shares in favor of three Independent Directors and for Mr.
Schechter at the Annual Meeting. Proxies cannot be voted for more than six
nominees. Pursuant to Section 223 of the Delaware General Corporation Law and
Section 8.1(c) of the Company's By-laws, the Board of Directors intends to
appoint a third Independent Director to serve until the next annual meeting of
stockholders.
On December 22, 1995, the Company entered into an employment agreement with
Walter C. Barber pursuant to which, among other things, the Company is obligated
to employ Mr. Barber as a director until May 10, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES FOR
DIRECTOR.
RONALD G. PETERSON, AGE 53
Mr. Peterson has been Chairman of the Board of the Company since December
8, 1997, and has been a Director since May 19, 1997. He has been Group President
- -- Government, Environmental and Telecommunications of Fluor Daniel since March
1997. From April 1995 through March 1997, he served as President,
2
<PAGE>
Government Services Operating Company of Fluor Daniel. From 1990 to 1995, he
served as Vice President and General Manager, Space and Strategic Propulsion
Business Unit of Alliant Techsystems.
WALTER C. BARBER, AGE 56
Mr. Barber has been a Director of the Company since 1989 and served as
Chairman from 1993 to May 1996. Mr. Barber has served as President and Chief
Executive Officer since joining the Company in 1989. From 1983 to 1989, Mr.
Barber was Vice President of Environmental Management and Administration of
Chemical Waste Management Inc., a hazardous waste management services company.
Previously, Mr. Barber was Director of Research and Technology Development for
the Uranium Mill Tailings Project of Jacobs Engineering Group, Inc., an
engineering and construction firm. Mr. Barber was also an executive with the
U.S. Environmental Protection Agency, holding positions as its Director of the
Office of Air Quality Planning and Standards and as Director of the Standards
and Regulations Division.
ALLAN S. BUFFERD, AGE 60
Mr. Bufferd has been a Director of the Company since 1988. Since 1986 Mr.
Bufferd has been the Deputy Treasurer and Director of Investments of the
Massachusetts Institute of Technology ("M.I.T."). In such capacity Mr. Bufferd
manages the assets of M.I.T.'s endowment and pension funds. Prior to 1986, Mr.
Bufferd served as the Associate Treasurer and Recording Secretary of M.I.T. In
that position he was primarily responsible for private placements and
international and venture capital investments of M.I.T.'s endowment and pension
assets. Mr. Bufferd is also a director of Massbank Corp., and he serves as a
Trustee of Wheelock College and of the Whiting Foundation, and as Vice Chairman
of the Board of the Beth Israel Deaconess Medical Center (Boston).
J. MICHAL CONAWAY, AGE 49
Mr. Conaway has been a Director of the Company since May 10, 1996, when
Fluor Daniel acquired a majority interest in the Company. Since December 1996 he
has served as Senior Vice President and Chief Financial Officer of Fluor
Corporation, the holding company of Fluor Daniel. From May 1994 to December
1996, he served as Vice President and Chief Financial Officer, and 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, Chief
Financial Officer and a director of National Gypsum Company and its parent,
Aancor Holdings, Inc.
ERNIE GREEN, AGE 59
Mr. Green has been a Director of the Company since May 10, 1996, when Fluor
Daniel acquired a majority interest in the Company. He is founder, President and
Chief Executive Officer of EGI, Inc., a manufacturer of automotive components.
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.
DAVID L. MYERS, AGE 51
Mr. Myers has been a Director of the Company since May 10, 1996, when Fluor
Daniel acquired a majority interest in the Company, and served as Chairman until
December 8, 1997. Since March 29, 1997, Mr. Myers has served as Group President
- -- Industrial, of Fluor Daniel. From July 1994 to March 1997, he served as
President, Environmental Strategies of Fluor Daniel. From 1984 until July 1994,
he served as Fluor Daniel's Vice President of Business Units and of various
other Fluor Daniel subsidiaries.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES.
GENERAL
The Board of Directors of the Company held four meetings during the Fiscal
Year. Each of the Directors attended at least 75% of the meetings of the Board
of Directors and of each Committee on which he serves. The Board of Directors
has two standing committees, the Audit Committee and the Compensation Committee.
The Audit Committee, of which Messrs. Bufferd (Chairman), Conaway, Green, Myers
and Peterson are currently members, oversees the accounting and tax functions of
the Company, including matters relating to the appointment and activities of the
Company's auditors. The Audit Committee met twice during the Fiscal Year. The
Compensation Committee, of which Messrs. Green (Chairman), Bufferd, Conaway,
Myers and Peterson are currently members, reviews and makes recommendations
concerning executive salaries, bonuses and the Company's stock plans. The
Compensation Committee met twice during the Fiscal Year. The Board of Directors
does not currently have a standing nominating committee.
COMPENSATION OF DIRECTORS
The compensation for the Fiscal Year to the non-employee directors was
$7,500 plus $1,000 for each day of attendance at meetings of the Board of
Directors or Committees. (The full year compensation has been set at $15,000
plus $1,000 for each day of attendance at meetings.) In addition, directors were
reimbursed for out-of-pocket expenses for attending Board and Committee
meetings.
Under the Company's Amended and Restated 1995 Director Plan (the "Director
Plan"), each non-employee director automatically receives a one-time option to
purchase 5,000 shares of the Company's Common Stock. In addition, annually on
the third Tuesday of June, each non-employee director receives an option to
purchase 2,500 shares of the Company's Common Stock. The exercise price of the
options is 100% of the fair market value of the Common Stock on the date options
are granted. In the event of a change of control of the Company, all outstanding
options automatically become fully exercisable. Options become exercisable in
equal annual installments over three years, and they expire seven years from
their date of grant. Options granted pursuant to the Director Plan are not
assignable or transferable other than by will or the laws of descent and
distribution, and are exercisable during an optionee's lifetime only by him.
In the event an optionee ceases to be a member of the Board of Directors
for any reason other than death or disability, any then unexercised options
granted to such optionee under the Director Plan will, to the extent not then
exercisable, immediately terminate and become void, and any options which are
then exercisable but have not been exercised at the time the optionee so ceases
to be a member of the Board of Directors may be exercised, to the extent they
are then exercisable, by the optionee within a period of thirty days following
such time the optionee so ceases to be a member of the Board of Directors, but
in no event later than the expiration date of the option.
In the event an optionee ceases to be a member of the Board of Directors by
reason of his disability or death, any option granted under the Director Plan to
such optionee shall be immediately and automatically accelerated and become
fully vested, and any unexercised option may be exercised by the optionee (or by
the optionee's personal representative, heir or legatee) until the scheduled
expiration date of the option.
Outstanding options under the 1995 Director Plan as of May 10, 1996 were
adjusted pursuant to the Fluor Daniel Transactions (as defined in footnote 8 of
the table set forth under the heading "Share Ownership of Management and
Principal Holders").
CERTAIN BUSINESS RELATIONSHIPS
In connection with the Investment Agreement, the Company and Fluor Daniel
entered into a Marketing Agreement and an Intercompany Services Agreement
pursuant to which the Company has received, and it is anticipated that the
Company will receive in the future, revenues from Fluor Daniel; and pursuant to
which Fluor Daniel has received, and it is anticipated that it will receive in
the future, revenues from the Company. During the Fiscal Year the amount of such
revenues to either the Company or Fluor Daniel did not equal at least 5% of that
entity's respective consolidated gross revenues. Messrs. Myers and Peterson are
officers of Fluor Daniel, and Mr. Conaway is an executive officer of Fluor
Corporation, the holding company of Fluor Daniel.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for
services in all capacities to the Company and its subsidiaries during the Fiscal
Year, the six-month interim fiscal year ended October 31, 1996 (the "Interim
Fiscal Year"), and the previous full fiscal year of those persons who were, at
October 31, 1997, the Company's Chief Executive Officer and its other four most
highly compensated executive officers (collectively, the "named executive
officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------ ----------------------------------------------------
NAME AND PRINCIPAL POSITION IN YEAR (1) SALARY ($) BONUS ($) (2) RESTRICTED STOCK OPTIONS OTHER
INTERIM FISCAL YEAR STOCK (#) (3) COMPENSATION
AWARDS ($) (4)
($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Walter C. Barber............... 1997 260,000 15,000 0 8,500 17,138
President and Chief 1996A 125,428 0 0 0 2,257
Executive Officer 1996 260,000 78,000(5) 247,500(6) 77,700 6,243
J. Steven Paquette............. 1997 148,462 10,000 0 7,000 86,287
Vice President and 1996A 67,716 0 0 0 1,263
General Manager, 1996 140,000 40,000 0 25,900 19,307(7)
North Region
Wendell W. Lattz............... 1997 150,000 0 0 7,000 5,873
Sr. Vice President and 1996A 72,540 0 0 0 1,039
General Manager, 1996 150,000 35,000 0 25,900 3,321
South Region
Glenn V. Batchelder............ 1997 135,000 10,000 0 5,000 15,202
Vice President and 1996A 67,500 0 0 0 2,043
Regional Manager 1996 135,000 30,000 0 15,000 4,664
Anne Nolan..................... 1997 128,462 10,000 0 4,000 15,129
Vice President, 1996A 60,000 0 0 0 1,747
Business Administration 1996 113,077 22,000 0 10,000 3,702
</TABLE>
6
<PAGE>
- ---------------------
(1) Information regarding the Interim Fiscal Year is set forth in the row
headed "1996A".
(2) The amounts indicated under "Bonus" are based on service during the fiscal
years indicated, although paid during the following fiscal year.
(3) Options granted during the Fiscal Year were granted pursuant to the
Company's Amended and Restated 1987 Stock Plan. Pursuant to the Fluor
Daniel Transactions, all outstanding options were adjusted, and the table
sets forth the adjusted options.
(4) The total amounts shown in this column for the last fiscal year consist of
the following: (i) Mr. Barber: $638 -- Health insurance offset; $8,400 --
Company contributions to defined contribution plans; $6,209 -- discounted
employee stock purchase; $1,890 -- Benefit attributable to Company-provided
life insurance policy; (ii) Mr. Paquette: $638 -- Health insurance offset;
$455 -- Vacation cash out; $9,000 -- Cash surrender value of life insurance
policy; $300 -- Attendance award; $5,526 -- Company contributions to
defined contribution plans; $70,168 -- Relocation expenses; $200 -- Benefit
attributable to Company-provided life insurance policy; (iii) Mr. Lattz:
$638-- Health insurance offset; $300 -- Attendance award; $4,731 -- Company
contributions to defined contribution plans; $204 -- Benefit attributable
to Company-provided life insurance policy; (iv) Mr. Batchelder: $638 --
Health insurance offset; $9,000 -- Cash surrender value of life insurance
policy; $5,452 -- Company contributions to defined contribution plans;
$112 -- Benefit attributable to Company-provided life insurance policy; and
(v) Ms. Nolan: $638 -- Health insurance offset; $9,000 -- Cash surrender
value of life insurance policy; $5,219 -- Company contributions to defined
contribution plans; $272 -- Benefit attributable to Company-provided life
insurance policy.
(5) Mr. Barber's bonus was paid 50% in cash ($39,000) and 50% in stock (3,714
shares of Common Stock, valued at $10.50 per share on June 10, 1996).
(6) Represents the dollar value on June 27, 1995, the award date, of an award to
Mr. Barber of 20,000 shares of restricted Old Common Stock. On such date,
the fair market value of the Old Common Stock was $12.375.
Restrictions with respect to 100% of these shares lapsed upon the change of
control of the Company pursuant to the Fluor Daniel Transactions described
elsewhere in this Proxy Statement. If a change of control had not occurred,
restrictions on these shares would have lapsed on September 19, 2002, or
earlier in the event certain operating performance targets for the Company
were met. The amount ultimately realized by Mr. Barber in respect of these
shares depends upon the value of the shares when he sells them. No other
executives in the Company hold restricted stock.
(7) Includes $16,219 in 1996 and $11,035 in 1995 relating to forgiveness of a
loan. Upon hiring Mr. Paquette in February 1993, the Company agreed to
continue a loan he received from his previous employer for relocation
expenses, which was required to be repaid when he left to join the Company.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options made during the Fiscal Year under the Company's long-term incentive
program to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN FISCAL PRICE ($/SH) PRESENT VALUE
NAME GRANTED (#) YEAR (2) EXPIRATION DATE ($)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Walter C. Barber........... 8,500 8.1 8.25 12/02/02 33,065
J. Steven Paquette......... 7,000 6.6 8.25 12/02/02 27,230
Wendell W. Lattz........... 7,000 6.6 8.25 12/02/02 27,230
Glenn V. Batchelder........ 5,000 4.7 8.25 12/02/02 19,450
Anne Nolan................. 4,000 3.8 8.25 12/02/02 15,560
</TABLE>
7
<PAGE>
___________________
(1) As a matter of policy, no SARs were granted to any of the named executive
officers.
(2) Options were granted with an exercise price equal to the fair market value
of the underlying common stock on the date of grant. The exercise price and
tax withholding obligations related to exercise may be paid by delivery of
already owned shares or by offset of the underlying shares, subject to
certain conditions.
(3) The Grant Date Present Value is computed using the Black-Scholes option
pricing model based on the following general assumptions: (a) an Expected
Option Life of five years which reflects a reduction of the actual seven
year term of the option based on historical data regarding the average
length of time an executive holds an option before exercising; (b) a Risk-
Free Interest Rate that represents the interest rate on a U.S. Treasury
Strip with a maturity date corresponding to that of the Expected Option
Life; (c) Stock Price Volatility is calculated using daily stock prices
over an eight-month period preceding the grant date; and (d) Dividend Yield
is assumed to be zero. Notwithstanding the fact that these options are non-
transferable, no discount for lack of marketability was taken. The option
value was not discounted for risk of forfeiture during the vesting period.
The actual value, if any, an executive may realize will depend upon the
excess of the stock price over the exercise price on the date the option is
exercised, so there is no assurance that the value realized by the
executive will be at or near the amount shown. Options were granted for a
term of seven years, subject to earlier termination in certain events
related to termination of employment, and vest in five equal annual
installments commencing 12 months after the date of grant. The specific
option pricing model assumptions for this grant were as follows: $8.25
Exercise Price; 6.0% Risk Free Interest Rate; 44.4% Stock Price Volatility;
and 0% Dividend Yield.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information regarding options exercised
by the named executive officers during the Fiscal Year, as well as the number of
shares covered by all exercisable and non-exercisable stock options held by
these individuals at year-end.
<TABLE>
<CAPTION>
NAME SHARES ACQUIRED VALUE NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ON EXERCISE (#) REALIZED ($) UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL YEAR-END
YEAR-END (#) ($) (1)
---------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Walter C. Barber......... 0 0 138,467 79,969 1,169 4,675
J. Steven Paquette....... 0 0 24,926 26,321 963 3,850
Wendell W. Lattz......... 0 0 36,235 26,969 963 3,850
Glenn V. Batchelder...... 0 0 44,329 21,484 686 2,750
Anne Nolan............... 0 0 7,922 12,266 550 2,200
</TABLE>
________________
(1) The value of unexercised in-the-money options at year-end assumes a fair
market value for the Company's Common Stock of $8.9375, the average of the
high and low prices of the Company's Common Stock on October 31, 1997 (the
end of the Fiscal Year).
LONG-TERM AWARDS
The following table provides information with respect to the named
executive officers concerning cash incentive awards made during fiscal 1997
under the Company's Executive Compensation Program. Each award under the
Company's Executive Compensation Program represents the right to receive an
amount in cash if earnings targets for a specified period, as established by the
Compensation Committee, are achieved. If earnings fall below the threshold
amount, no award is payable. If earnings fall between the threshold amount and
the target amount or between the target amount and the maximum amount then the
amount of the award is prorated accordingly. In addition, an individual
performance factor multiplier of from 0 to 2.0 will adjust the actual award
level. Payments made under the Executive Compensation Program are reported in
the Summary Compensation Table in the year of payout, if any.
8
<PAGE>
EXECUTIVE COMPENSATION PROGRAM-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NAME PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
OTHER PERIOD UNTIL PRICE-BASED PLANS ($)
MATURATION OR
PAYOUT (#) ---------------------------------------------
THRESHOLD MIDDLE TARGET MAXIMUM
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter C. Barber........ 3 years 15,750 63,000 126,000
J. Steven Paquette...... 3 years 12,000 48,000 96,000
Wendell W. Lattz........ 3 years 12,000 48,000 96,000
Glenn V. Batchelder.... 3 years 10,500 42,000 84,000
Anne Nolan.............. 3 years 7,500 30,000 60,000
</TABLE>
EMPLOYMENT AGREEMENTS
In December 1995 the Board of Directors determined that the Fluor Daniel
Transactions posed significant personal uncertainty to certain key employees who
were important to either the consummation and implementation of the Fluor Daniel
Transactions, or the realization of the anticipated benefits of the affiliation
with Fluor Daniel and the conduct of the Company's business after the Fluor
Daniel Transactions, or both. For that reason, the Company entered into
employment agreements with certain of its employees, including the named
executive officers.
The employment agreements provide that the named executive officer shall be
employed with the Company for a designated period (the "Employment Period").
The Employment Period for Mr. Barber is three years and the Employment Period
for the other named executive officers is two years. In general, the employment
agreements specify that the named executive officer is to remain employed in a
position having comparable responsibilities as that held by the individual on
the date of the relevant employment agreement at a salary no lower than the
salary payable to the individual on that date, except that Mr. Barber's
employment agreement specifies that he be employed as the Chief Executive
Officer and as a member of the Board of Directors of the Company. The employment
agreements of the other named executive officers 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 their employment agreements. The employment agreements also provide that the
Company will not require the named executive officers 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 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 agreements.
The employment agreements further provide that the Company may terminate
the named executive officer'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 named executive officer will be entitled to the
greater of (a) 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 named
executive officer elects to continue benefits and continues to pay his share of
the cost of such benefits) or (b) 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
named executive officer will automatically become fully exercisable in
accordance with their terms and (y) all restrictions on any stock granted by the
Company to the named executive officer, including without limitation any
repurchase or vesting provisions, will lapse and be of no further force and
effect. The named executive officer 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 named executive officer.
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<PAGE>
Under the employment agreements the Company may terminate the named
executive officer's employment prior to the end of the Employment Period for
cause upon written notice to the individual. 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 individual's continuing, repeated and
willful failure or refusal to perform reasonable assignments given to individual
which are commensurate with his position or responsibilities; (iii) conviction
of the individual of a felony; (iv) material breach by individual of any
material Company policy or the terms of any written agreement between named
executive officer and the Company. Upon a termination for cause, the Company
will pay to the named executive officer salary and benefits owed to him as of
the date of such termination. If the named executive officers were terminated
without cause on the last day of the Fiscal Year, the approximate value of the
severance and other benefits (if the named executive officer had elected to
continue health benefits) to such individuals would be as follows: Mr. Barber,
$410,495; Mr. Paquette, $84,173; Mr. Lattz, $156,547; Mr. Batchelder, $74,866;
and Ms. Nolan, $70,606.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"), which is
currently composed of Messrs. Bufferd and Green, the two Independent Directors
of the Company, and Messrs. Conaway, Myers and Peterson of Fluor Daniel. It has
the responsibility for all compensation matters for the Company's senior
management. The Compensation Committee alone sets the compensation for Walter C.
Barber (the "CEO") and sets the compensation of the other executive officers
with recommendation from the CEO. All decisions by the Compensation Committee
are submitted to the full Board of Directors for final approval.
The Securities and Exchange Commission requires disclosure of companies'
policies for executive compensation to enable stockholders to better understand
the reasons for the compensation of the CEO and the four other most highly
compensated executive officers. The disclosure required for these named
executive officers includes compensation tables and a report explaining the
rationale and considerations that form the bases of the Compensation Committee's
executive compensation decisions affecting those individuals. Set forth below is
the Compensation Committee's report addressing these matters.
COMPENSATION PHILOSOPHY AND PRINCIPLES
Under the direction of the Compensation Committee, the Company has
maintained the philosophy that compensation of all employees should be closely
linked to performance. Consequently, increases of employees' cash compensation
in the form of salary and bonus historically have been greater in more
profitable years and less in less profitable years. In addition, to provide
incentive for the Company's long-term success, certain employees have received
options at fair market value that vest over a period of years, and have an
opportunity to participate in the Company's Amended and Restated 1986 Employee
Stock Purchase Plan, which provides a discount on purchases of the Company's
Common Stock through payroll deductions. During the fiscal year, the
Compensation Committee adopted a cash-based long term incentive program,
discussed below. The Compensation Committee believes that executive officers,
who are ultimately responsible for the successful financial performance of the
Company, should be compensated under these same principles.
The Company's vision is to be the recognized world leader in environmental
solutions. To achieve this the Company will: have the best people, exceed
customer expectations, grow shareholder value, improve through innovation, work
as a team, conduct itself ethically and eliminate accidents. To achieve these
goals, the Compensation Committee believes the executive compensation program
must create financial opportunities for senior managers. The guiding principles
of the Compensation Committee are to:
. Create a compensation program that supports the Company's strategic goals and
thus enhances stockholder value;
10
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. Provide a competitive compensation program to attract and retain qualified
senior managers necessary for long-term success;
. Establish a direct and substantial relationship between cash compensation and
performance to motivate senior managers for short-term results;
. Align the interests of senior managers with the long-term interests of
stockholders through award opportunities to receive long-term cash incentives
and to acquire the Company's stock; and
. Reevaluate compensation decisions annually to ensure alignment of compensation
practices with the Company's goals.
COMPENSATION POLICIES AND PRACTICES TOWARD EXECUTIVE OFFICERS
The Compensation Committee made important changes in the Company's
executive compensation program for the Fiscal Year. The program has been
comprised of cash compensation in the form of base salary, potential profit
sharing and bonus, and benefits typically offered executives in corporations of
similar size and in similar businesses as the Company. After an evaluation of
the compensation program, the Compensation Committee added a cash-based long-
term incentive program, and made certain other changes for the 1997 fiscal year.
CASH COMPENSATION
The Compensation Committee believes that compensation of the Company's
executive officers, including the named executive officers, should be
substantially linked to operating performance. Base salaries are designed to be
competitive within the industry and reflect individual performance. The Bonus
Plan is intended to provide opportunity for cash compensation competitive with
median levels of the Company's competitors included in the peer group index set
forth in the Performance Graph on page 13 of this proxy statement, as well as
other companies of similar size included in independent survey data. The
Compensation Committee made certain changes for cash compensation to executive
officers during the Fiscal Year. Specifically, two executives received increases
in base salary, and bonus target amounts were changed from a percentage of base
salary to a fixed dollar amount. In addition, to provide cash incentives to all
employees, including the CEO and the other executive officers, the Company
instituted a new profit sharing plan, which provides that 20% of pre-tax
earnings on an annual basis are to be distributed to employees in proportion to
their base salary in the form of a contribution to a 401(k) plan. When this plan
was adopted, the Company agreed that it would make a minimum contribution of 2%
of base salary for fiscal 1997, and would make a minimum contribution of 1% of
base salary for fiscal 1998.
The Compensation Committee also modified the Company's Bonus Plan to
provide that bonuses are to be computed using weighted factors tied to key
results areas ("KRA's") and individual performance. The Compensation Committee
approves target bonus amounts for senior executives based on recommendations of
members of the Compensation Committee. Bonuses in excess of the target amount,
if any, will be paid in the form of Company stock. Bonuses may not be paid
unless the Company's earnings before interest and taxes exceed an amount
established by the Compensation Committee in its December meeting.
LONG-TERM INCENTIVE PROGRAM
Under the Amended and Restated 1987 Stock Plan (the "1987 Plan"), the
Compensation Committee had established an incentive program to reward executive
officers and others in the Company for delivering long-term value to the
Company's stockholders. The 1987 Plan expired in January 1997 and a new plan,
the 1997 Stock Plan, was adopted and approved by shareholders in March 1997.
This plan carried forward the remaining number of shares authorized by the 1987
Plan. Stock option grants provide executive officers and other senior managers
rights to purchase shares of the Company's Common Stock at the fair market value
(the closing price of the Common Stock) on the date of grant, which vest over a
period of time. Since June 1990 the Compensation Committee has typically granted
options upon hire of the executive officer and at
11
<PAGE>
its June or December meeting each year for all senior managers. In December
1996, the Compensation Committee significantly reduced the number of employees
who received an option grant.
The Compensation Committee also adopted a cash feature which was added to
the Company's long-term incentive program. This feature is intended to focus the
management team on specific Company earnings objectives approved annually by the
Board of Directors. Under this feature, the Compensation Committee may make
grants of cash incentive awards which are based upon meeting three-year Company
earnings targets established by the Compensation Committee. The cash incentive
awards also may be adjusted by the employee's supervisor, or in the case of the
CEO, by the Chairman of the Board, based on an individual performance factor
multiplier of from 0 to 2.0, as determined by an evaluation of performance
relative to the employee's KRA's.
TAX DEDUCTIBILITY LIMIT
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986 (the "Code"). Section 162(m) generally provides
that certain compensation in excess of $1 million per year paid to a company's
chief executive officer and any of its four other highest paid executive
officers is not deductible by a company unless the compensation qualifies for an
exception. This deduction limit generally applies only to compensation that
could otherwise be deducted by a company in a taxable year. The Compensation
Committee has reviewed the Company's executive compensation plans and believes
that the impact of Section 162(m) upon the Company will not be significant for
the next several years because no executive officer of the Company is likely to
be paid compensation exceeding $1 million. The Compensation Committee will
consider the effect of Section 162(m) in authorizing or recommending future
executive compensation arrangements.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Compensation Committee fixed the CEO's base salary at $260,000, the
same as the previous two years, and planned no increase in base salary for the
next two years. The CEO's target bonus was set, in December 1997, at $70,000
under the Bonus Plan, with any amount in excess of such target to be paid in
Company stock. The Board did not increase the CEO's base salary for the Fiscal
Year and no bonus was paid to Mr. Barber for the Fiscal Year because the Company
did not meet performance goals. However, a bonus of $15,000 in recognition of
the outstanding improvements in the Company's safety performance was paid to Mr.
Barber.
Ernie Green, Chairman
Allan S. Bufferd
J. Michael Conaway
David L. Myers
Ronald G. Peterson
12
<PAGE>
Exhibit 4
FLUOR DANIEL GTI, INC. SENIOR EXECUTIVE SEVERANCE PLAN
------------------------------------------------------
Introduction
------------
The Board of Directors of Fluor Daniel GTI, Inc. recognizes that, as is the
case with many publicly held corporations, there exists the possibility of a
Change of Control of the Company. This possibility and the uncertainty it
creates may result in the loss or distraction of employees of the Company and
its Subsidiaries to the detriment of the Company and its shareholders.
The Board considers the avoidance of such loss and distraction to be
essential to protecting and enhancing the best interests of the Company and its
shareholders. The Board also believes that when a Change of Control is perceived
as imminent, or is occurring, the Board should be able to receive and rely on
disinterested service from employees regarding the best interests of the Company
and its shareholders without concern that employees might be distracted or
concerned by the personal uncertainties and risks created by the perception of
an imminent or occurring Change of Control.
In addition, the Board believes that it is consistent with the Company's
employment practices and policies and in the best interests of the Company and
its shareholders to treat fairly its employees whose employment terminates in
connection with or following a Change of Control.
Accordingly, the Board has determined that appropriate steps should be
taken to assure the Company of the continued employment and attention and
dedication to duty of its employees and to seek to ensure the availability of
their continued service, notwithstanding the possibility, threat or occurrence
of a Change of Control.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
---------------------
As of the Effective Date, the Company hereby establishes a separation
compensation plan known as the Fluor Daniel GTI, Inc. Senior Executive Severance
Plan, as set forth in this document.
1
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ARTICLE II
DEFINITIONS
-----------
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) Annual Bonus. The annual cash bonus that a Participant is eligible to
------------
earn pursuant to the Company's Bonus Plan.
(b) Annual Compensation. The sum of a Participant's Annual Salary and
-------------------
Annual Bonus.
(c) Annual Salary. The Participant's regular annual base salary immediately
-------------
prior to his or her termination of employment, including compensation converted
to other benefits under a flexible pay arrangement maintained by the Company or
deferred pursuant to a written plan or agreement with the Company, but excluding
overtime pay, allowances, premium pay, compensation paid or payable under any
Company long-term or short-term incentive plan or any similar payment.
(d) Board. The Board of Directors of Fluor Daniel GTI, Inc.
-----
(e) Cause. With respect to any Participant: (i) the willful and continued
-----
failure of the Participant to perform substantially the Participant's duties
with the Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the Board or the
Chief Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Participant has
not substantially performed the Participant's duties, or (ii) the willful
engaging by the Participant in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. For purposes of this
definition, no act or failure to act on the part of the Participant shall be
considered "willful" unless it is done, or omitted to be done, by the
Participant in bad faith or without reasonable belief that the Participant's
action or omission was in the best interests of the Company. Any act or failure
to act based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive Officer or a senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Participant
in good faith and in the best interests of the Company.
(f) Change of Control. The occurrence of any of the following events:
-----------------
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3
2
<PAGE>
promulgated under the Exchange Act) of 20% or more of either (x) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C) of
paragraph (iii) below; or
(ii) Individuals who, as of the date of this Plan, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date of this Plan whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or an
acquisition of assets of another corporation (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
3
<PAGE>
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(g) Code. The Internal Revenue Code of 1986, as amended from time to time.
----
(h) Committee. The Compensation Committee of the Board.
---------
(i) Company. Fluor Daniel GTI, Inc. and any successor thereto.
-------
(j) Date of the Change of Control. The date on which a Change of Control
-----------------------------
occurs.
(k) Date of Termination. The date on which a Participant
-------------------
ceases to be an Employee.
(l) Disability. A termination of a Participant's Employment for Disability
----------
shall have occurred if the Termination occurs because illness or injury has
prevented the Participant from performing his or her duties (as they existed
immediately prior to the illness or injury) on a full time basis for 180
consecutive business days.
(m) Effective Date. The date specified in the resolution of the Board
--------------
adopting this Plan.
(n) Employee. Any full-time, regular-benefit, non-bargaining employee of an
--------
Employer.
(o) Employer. The Company or a Subsidiary which has adopted the Plan
--------
pursuant to Article V hereof.
(p) ERISA. The Employee Retirement Income Security Act of 1974, as amended,
-----
and the regulations thereunder.
(q) Good Reason. With respect to any Participant, (i) any material
-----------
reduction in the Participant's Annual Salary, opportunity to earn Annual
Bonuses, or other compensation or employee benefits, other than as a result of
an isolated and inadvertent action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the
Participant; (ii) any purported termination of the Plan otherwise than as
expressly permitted by the Plan; or (iii) any failure by the Company to comply
with and satisfy Article VI of the Plan. For purposes of the Plan, any good
faith determination of "Good Reason" made by the Participant shall be
conclusive.
(r) Multiple. With respect to any Participant, the number set forth
--------
opposite the Participant's name under the heading "Benefit Level" on Schedule I
hereto or, if less, the number of years and fractions thereof remaining, as of
the Participant's Date of Termination, until the
4
<PAGE>
Participant reaches his or her mandatory retirement age (if any) under the
applicable Company policy.
(s) Participant. An individual who is designated as such pursuant to
-----------
Section 3.1.
(t) Plan. The Fluor Daniel GTI, Inc. Senior Executive Severance Plan.
----
(u) Retention Program. The Company's Retention Program for certain senior
-----------------
executives adopted by the Board on December 11, 1997.
(v) Retirement. A termination by Retirement shall have occurred where a
----------
Participant's termination is due to his or her late, normal or early retirement
under the applicable Company policy.
(w) Separation Benefits. The benefits described in Section 4.2 that are
-------------------
provided to qualifying Participants under the Plan.
(x) Subsidiary. Any corporation in which the Company, directly or
----------
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(y) Target Annual Bonus. The Annual Bonus that the Participant would have
-------------------
received for the year in which his or her Date of Termination occurs, if the
target goals had been achieved.
ARTICLE III
ELIGIBILITY
-----------
3.1 Participation. Each of the individuals named on Schedule I hereto shall
------------- ----------
be a Participant in the Plan. Schedule I may be amended by the Board from time
----------
to time to add individuals as Participants.
3.2 Duration of Participation. A Participant shall only cease to be a
-------------------------
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VII of the Plan, or when he or she ceases to be an
Employee of any Employer, unless, at the time he or she ceases to be an
Employee, such Participant is entitled to payment of a Separation Benefit as
provided in the Plan or there has been an event or occurrence constituting Good
Reason that would enable the Participant to terminate his or her employment and
receive a Separation Benefit. A Participant entitled to payment of a Separation
Benefit or any other amounts under the Plan shall remain a Participant in the
Plan until the full amount of the Separation Benefit and any other amounts
payable under the Plan have been paid to the Participant.
5
<PAGE>
ARTICLE IV
SEPARATION BENEFITS
-------------------
4.1 Terminations of Employment Which Give Rise to Separation Benefits Under
-----------------------------------------------------------------------
This Plan. A Participant shall be entitled to Separation Benefits as set forth
- ---------
in Section 4.2 below if, at any time before the first anniversary of the Date of
the Change of Control, the Participant's Employment is terminated (i) by the
Company for any reason other than Cause, death, Disability or Retirement or (ii)
by the Participant within 90 days after the occurrence of Good Reason.
4.2 Separation Benefits
-------------------
(a) If a Participant's employment is terminated in circumstances entitling
him or her to a separation benefit as provided in Section 4.1, the Participant's
Employer shall pay such Participant, within ten days of the Date of Termination,
a cash lump sum as set forth in subsection (b) below, subject to subsection (c)
below. For purposes of determining the benefit set forth in subsection (b), if
the termination of the Participant's employment is for Good Reason based upon a
reduction of the Participant's Annual Salary, opportunity to earn Annual
Bonuses, or other compensation or employee benefits, such reduction shall be
ignored.
(b) The cash lump sum referred to in Section 4.2(a) is the aggregate of the
following amounts:
(i) the sum of (1) the Participant's Annual Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
Target Annual Bonus and (y) a fraction, the numerator of which is the number of
days in the such year through the Date of Termination, and the denominator of
which is 365, and (3) any compensation previously deferred by the Participant
(together with any accrued interest or earnings thereon) and any accrued TOWP,
in each case to the extent not theretofore paid and in full satisfaction of the
rights of the Participant thereto; and
(ii) an amount equal to the product of the Participant's Multiple times
the Participant's Annual Salary.
(c) With respect to participants in the Retention Program, the amount
payable pursuant to clause (ii) of subsection paragraph (b) above shall be
reduced by the amount of the payment the Participant is entitled to receive
under the Retention Program as a result of the Change of Control, but such
reduction shall be made only if such payment is actually made to the Participant
within 30 days following the Date of Termination.
6
<PAGE>
4.3 Other Benefits Payable. The cash lump described in Section 4.2 above
----------------------
shall be payable in addition to, and not in lieu of, all other accrued or vested
or earned but deferred compensation, rights, options or other benefits which may
be owed to a Participant upon or following termination, including but not
limited to accrued vacation or sick pay, amounts or benefits payable under the
Company severance policy or any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, life insurance plan, health
plan, disability plan or similar or successor plan, but excluding any severance
pay or pay in lieu of notice required to be paid to such Participant under
applicable law.
4.4 Certain Reductions of Payments by the Company.
---------------------------------------------
(a) (i) Notwithstanding any other provision of this Plan, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of a Participant (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise) (a "Payment")
would be nondeductible by the Company for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of such Participant pursuant to the Plan
(such payments or distributions pursuant to the Plan are hereinafter referred to
as "Plan Payments") shall be reduced (but not below zero) to the Reduced Amount.
The "Reduced Amount" shall be an amount expressed in present value that
maximizes the aggregate present value of Plan Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.
For purposes of this Section 4.4(a), present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(ii) All determinations required to be made under this Section 4.4(a) shall
be made by Ernst & Young (the "Accounting Firm"), which shall provide detailed
supporting calculations to both the Company and the Participant within 30
business days of the Date of the Change of Control or such earlier time as is
requested by the Company. Any such determination by the Accounting Firm shall be
binding upon the Company and the Participant. The Participant shall determine
which and how much of the Plan Payments (or, at the election of the Participant,
other Payments) shall be eliminated or reduced consistent with the requirements
of this Section 4.4(a), provided that, if the Participant does not make such
determination within ten business days of the receipt of the calculations made
by the Accounting Firm, the Company shall elect which and how much of the Plan
Payments shall be eliminated or reduced consistent with the requirements of this
Section 4.4(a) and shall notify the Participant promptly of such election.
(iii) As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Plan Payments will have been made by the Company
that should not have been made ("Overpayment") or that additional Plan Payments
that will have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm determines that an
Overpayment
7
<PAGE>
has been made, any such Overpayment shall be treated for all purposes as a loan
to the Participant, which the Participant shall repay to the Company together
with interest at the applicable Federal rate provided for in Section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the
Participant to the Company (or if paid by the Participant to the Company shall
be returned to the Participant) if and to the extent such payment would not
reduce the amount which is subject to taxation under Section 4999 of the Code.
In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Participant together with interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Code.
(b) Notwithstanding any other provision of this Plan, no payment shall be
made hereunder if, as a result of the amount or timing thereof, this Plan would
be deemed to constitute an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA or Department of Labor Regulation Section 2510.3-2.
4.5 Payment Obligations Absolute.
----------------------------
Subject to Section 4.4, the obligations of the Company and the Employers to
pay the Separation Benefits described in Section 4.2 shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company or any of its Subsidiaries may have against any Participant. In no
event shall a Participant be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to a Participant under
any of the provisions of this Plan, nor shall the amount of any payment
hereunder be reduced by any compensation earned by a Participant as a result of
employment by another employer.
ARTICLE V
---------
PARTICIPATING EMPLOYERS
-----------------------
This Plan may be adopted by any Subsidiary of the Company. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the Employees of that Subsidiary who
are Participants pursuant to Section 3.1.
ARTICLE VI
SUCCESSOR TO COMPANY
--------------------
This Plan shall bind any successor of the Company, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise), in the same manner
8
<PAGE>
and to the same extent that the Company would be obligated under this Plan if no
succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the Company
shall require such successor expressly and unconditionally to assume and agree
to perform the Company's obligations under this Plan, in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. The term "Company," as used in this Plan, shall mean
the Company as hereinbefore defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by this Plan.
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION
-----------------------------------
7.1 Duration. If a Change of Control has not occurred, this Plan shall
--------
expire one year from the Effective Date, unless extended for an additional
period or periods by resolution adopted by the Board. If a Change of Control
occurs while this Plan is in effect, this Plan shall continue in full force and
effect and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full and
all adjustments required to be made pursuant to Section 4.4 have been made.
7.2 Amendment or Termination. The Board may amend or terminate this Plan at
------------------------
any time; provided, that this Plan may not be terminated or amended (i)
--------
following a Change of Control, (ii) at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control, or (iii)
otherwise in connection with or in anticipation of a Change of Control, in any
manner that could adversely affect the rights of any Participant.
7.3 Procedure for Extension, Amendment or Termination. Any extension,
-------------------------------------------------
amendment or termination of this Plan by the Board in accordance with the
foregoing shall be made by action of the Board in accordance with the Company's
charter and by-laws and applicable law, and shall be evidenced by a written
instrument signed by a duly authorized officer of the Company, certifying that
the Board has taken such action.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Indemnification. If a Participant institutes any legal action in
---------------
seeking to obtain or enforce, or is required to defend in any legal action the
validity or enforceability of, any right or benefit provided by this Plan, the
Company or the Employer will pay for all actual legal fees and expenses incurred
(as incurred) by such Participant, regardless of the outcome of such
9
<PAGE>
action and whether such action is between the Company or the Employer and the
Employee or between either of them and any third party.
8.2 Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Participant or the Participant's Employer any
obligation for the Participant to remain an Employee or change the status of the
Participant's employment or the policies of the Company and its affiliates
regarding termination of employment.
8.3 Named Fiduciary; Administration. Fluor Daniel GTI, Inc. is the named
-------------------------------
fiduciary of the Plan, with full authority to control and manage the operation
and administration of the Plan, acting through the Human Resources Department.
8.4 Claim Procedure. If an Employee or former Employee makes a written
---------------
request alleging a right to receive benefits under this Plan or alleging a right
to receive an adjustment in benefits being paid under the Plan, the Company
shall treat it as a claim for benefit. All claims for benefit under the Plan
shall be sent to the Human Resources Department of the Company and must be
received within 30 days after termination of employment. If the Company
determines that any individual who has claimed a right to receive benefits, or
different benefits, under the Plan is not entitled to receive all or any part of
the benefits claimed, it will inform the claimant in writing of its
determination and the reasons therefor in terms calculated to be understood by
the claimant. The notice will be sent within 90 days of the claim unless the
Company determines additional time, not exceeding 90 days, is needed. The notice
shall make specific reference to the pertinent Plan provisions on which the
denial is based, and describe any additional material or information is
necessary. Such notice shall, in addition, inform the claimant what procedure
the claimant should follow to take advantage of the review procedures set forth
below in the event the claimant desires to contest the denial of the claim. The
claimant may within 90 days thereafter submit in writing to the Company a notice
that the claimant contests the denial of his or her claim by the Company and
desires a further review. The Company shall within 60 days thereafter review the
claim and authorize the claimant to appear personally and review pertinent
documents and submit issues and comments relating to the claim to the persons
responsible for making the determination on behalf of the Company. The Company
will render its final decision with specific reasons therefor in writing and
will transmit it to the claimant within 60 days of the written request for
review, unless the Company determines additional time, not exceeding 60 days, is
needed, and so notifies the Participant. If the Company fails to respond to a
claim filed in accordance with the foregoing within 60 days or any such extended
period, the Company shall be deemed to have denied the claim.
8.5 Unfunded Plan Status. This Plan is intended to be an unfunded plan
--------------------
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, within the meaning
of Section 401 of ERISA. All payments pursuant to the Plan shall be made from
the general funds of the Company and no special or separate fund shall be
established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in
any particular property or assets of the Company as a result of participating in
the Plan.
10
<PAGE>
Notwithstanding the foregoing, the Company may (but shall not be obligated to)
create one or more grantor trusts, the assets of which are subject to the claims
of the Company's creditors, to assist it in accumulating funds to pay its
obligations under the Plan.
8.6 Validity and Severability. The invalidity or unenforceability of any
-------------------------
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.7 Governing Law. The validity, interpretation, construction
-------------
and performance of the Plan shall in all respects be governed by the laws of
Massachusetts, without reference to principles of conflict of law, except to the
extent pre-empted by federal law.
11
<PAGE>
Schedule I
<TABLE>
<CAPTION>
Name* Benefit Level
---- -------------
<S> <C> <C>
Tier I: David Backus 2.0
- ------ Glenn Batchelder 2.0
Anne Nolan 2.0
Steve Paquette 2.0
Tier II: V. P. District Manager, Western 1.0
- ------- V. P. District Manager, NY 1.0
V. P. District Manager, NE 1.0
V. P. District Manager, SE 1.0
V. P. District Manager, SC 1.0
District Manager, Chicago 1.0
District Manager, Mid Atlantic 1.0
Vice President Finance 1.0
</TABLE>
* Note: The severance benefits of the Company's Chief Executive Officer are
provided for by separate agreement.
12
<PAGE>
Exhibit 5
SETTLEMENT AND RELEASE AGREEMENT
Walter C. Barber ("Employee" or "Barber") and Fluor Daniel GTI, Inc.
(the "Company" or "FDGTI") have reached the following Agreement, dated as of
September 11, 1998, in connection with Employee's separation from the Company.
1. Resignation from Company. The parties acknowledge and agree that
------------------------
Barber shall voluntarily resign his employment with FDGTI effective upon the
consummation of a Change of Control of the Company, as such term is defined in
the Fluor Daniel GTI, Inc. Senior Executive Severance Plan ("Change of
Control"). Barber shall also resign from all offices and directorships he holds
with the Company effective on such date.
2. Payments. The Company agrees to make the payments and
--------
accommodations described on Exhibit A, which is part of this Agreement and
---------
attached hereto. Employee understands that the Company will deduct from these
amounts federal withholding taxes and other deductions the Company is required
by law to make from wage payments to employees. Employee further understands
that these amounts are all Employee is entitled to receive from the Company
except for those amounts described in Paragraph 8 to which Employee may be
entitled and except for (a) the Employee's salary and accumulated time off with
pay ("TOWP") which shall be paid through the date of his resignation, (b)
Employee's bonus payment for fiscal 1998, (c) Employee's entitlement to a profit
sharing contribution into the Company's 401(k) plan in respect of fiscal 1998,
and (d) Employee's entitlement to payments in connection with the Company's
Employee Stock Purchase Plan and stock option plans or stock options held by
Employee occasioned by or arising from a Change of Control. Employee will
receive no further wage, vacation or other similar payments from the Company.
3. No Obligation to Make Payment under Normal Policies. Employee
---------------------------------------------------
agrees that the payments and accommodations described in Exhibit A are more than
---------
the Company is required to provide under its normal policies and procedures and
that Employee is not entitled to them unless and until this Agreement becomes
effective.
4. No Further Obligations by Company. Employee acknowledges and
---------------------------------
agrees that the compensation, benefits and/or payments made pursuant to
Paragraph 2 of this Agreement fully and completely discharges any and all
obligations owed to him and/or his successors by Company pursuant to the terms
of his Employment Agreement, the Company Retention Plan adopted by the Board of
Directors on December 12, 1997, the Company's bonus programs for fiscal 1999,
the Company's severance policy and any other agreements that may exist between
Employee and Company, and that no further compensation is due Employee. Except
as provided in this Agreement, including Exhibit A, the Company shall have no
---------
further obligations whatsoever to Employee with respect to the terms and
conditions of his employment, including without limitation the circumstances
surrounding his separation of employment.
5. Complete Release. Employee agrees to release the Company, any
----------------
related companies, and the employees and directors of any of them from all
claims or demands Employee may have, of every kind and nature, known or unknown
to the Employee and in particular any claims or demands based on Employee's
employment with the Company or the termination of that employment. This includes
a release of any rights or
1
Initialed: RGP
--------
WCB
--------
<PAGE>
claims Employee may have under the Age Discrimination in Employment Act, which
prohibits age discrimination in employment; Title VII of the Civil Rights Act of
1964, which prohibits discrimination in employment based on race, color,
national origin, religion or sex; the Americans With Disabilities Act, which
prohibits discrimination in employment based on an individual's physical or
mental disabilities; the Equal Pay Act, which prohibits paying men and women
unequal pay for equal work; or any other federal, state or local laws or
regulations prohibiting employment discrimination. This also includes a release
by Employee of any claims for wrongful discharge.
6. Complete Release by the Company. The Company agrees to release
-------------------------------
Employee from all claims or demands the Company may have, of every kind and
nature, known or unknown to the Company and in particular any claims or demands
based on Employee's employment with the Company or the termination of that
employment. However, nothing in the release should be construed to release the
Company's right to sue for breach of this Agreement.
7. Additional Facts. Employee agrees and acknowledges that he may
----------------
hereafter discover facts different from, or in addition to, those he now
believes to be true with respect to any or all of the claims or demands herein
released. Nevertheless, the Company and Employee agree that the release set
forth above shall be and remain effective in all respects, notwithstanding the
discovery of such different or additional facts.
8. Release Inapplicable to Retirement Benefits. This release does not
-------------------------------------------
include a release of Employee's right, if any, to retirement benefits under the
Company's standard retirement programs.
9. No Future Lawsuits. Employee promises never to file a lawsuit
------------------
asserting any claims that are released in Paragraphs 5 and 7. Similarly, Company
promises never to file a lawsuit asserting any claims that are released in
Paragraph 6 of this Agreement.
10. Non-Admission of Wrongdoing. By making this Agreement, neither
---------------------------
the Company nor the Employee admits that they have done anything wrong.
11. Non-Release of Future Claims. This Agreement does not waive or
----------------------------
release any rights or claims that Employee may have under the Age Discrimination
in Employment Act, Title VII of the Civil Rights Act of 1964 or the Americans
With Disabilities Act which arise after the date the Employee signs this
Agreement.
12. Consequences of Employee Violation of Promises. If Employee
----------------------------------------------
breaks Employee's promise in Paragraph 9 of this Agreement and files a lawsuit
based on legal claims that Employee has released, Employee will pay for all
costs incurred by the Company, any related companies or the directors or
employees of any of them, including reasonable attorneys' fees if the Company is
successful, in defending against the Employee's claim.
13. Confidential Information. Employee promises that Employee will
------------------------
keep the terms, amounts and fact of this Agreement completely confidential, and
promises not to disclose any information about this Agreement to anyone other
than Employee's spouse, attorney, financial or tax advisor, or senior members of
the Company's Human Resources Department. Before Employee tells his spouse or
attorney, financial or tax advisor anything about this Agreement, he will inform
them of this confidentiality clause and have them agree to follow it. If this
Agreement is sought by court order or otherwise by compulsion of law, Employee
will promptly provide Company and its counsel with sufficient notice in advance
of such proposed disclosure to enable the Company to be heard with respect to
any such disclosure.
14. Confidential Information; No Solicitation. Employee understands
-----------------------------------------
and agrees that in the
2
Initialed: RGP
--------
WCB
--------
<PAGE>
course of Employee's employment with the Company, Employee has acquired
confidential information and trade secrets concerning the Company's operations,
its future plans and its methods of doing business. Employee understands and
agrees it would be extremely damaging to the Company if Employee disclosed such
information to a competitor or made it available to any other person or company.
Employee understands and agrees that such information has been divulged to
Employee in confidence and Employee understands and agrees that Employee will
keep such information secret and confidential unless disclosure is required by
court order or otherwise by compulsion of law. Employee further agrees that
Employee will not solicit for employment, or participate in or assist in any way
in the solicitation for employment of any other employees of the Company or any
of its affiliates. In view of the nature of Employee's employment and the
information and trade secrets which Employee has received during the course of
Employee's employment, Employee also agrees that the Company would be
irreparably harmed by any violation, or threatened violation of the agreements
in this paragraph and that, therefore, the Company shall be entitled to an
injunction prohibiting Employee from any violation or threatened violation of
such agreements. The obligations of paragraph 14 do not apply to any information
which has been publicly released or is in the public knowledge or literature.
15. Non-Competition. From the date of this Agreement through June 1,
---------------
1999, Employee agrees that he will not in any manner, whether as an Employee of
or consultant to another company, directly or indirectly provide services,
advice or other assistance to a competitor of Fluor Daniel GTI, concerning or
with respect to, historic clients of the Company such as, but not limited to,
Southland, Sears, Arco, Chevron, Sun and Shell. Further, Employee understands
and agrees that he will take no action which would adversely affect the business
interest, business prospects and/or public image of the Company.
16. Certain Reductions of Payments by the Company.
---------------------------------------------
(a) (i) Notwithstanding any other provision of this Agreement, in
the event it shall be determined that any payment or distribution or portion
thereof by the Company to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code of
1986, as amended from time to time (the "Code"), then the aggregate present
value of amounts payable or distributable to or for the benefit of Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Severance Payments") shall be reduced
(but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an
amount expressed in present value that maximizes the aggregate present value of
Severance Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this paragraph 16,
subparagraph (a), present value shall be determined in accordance with Section
280G(d)(4) of the Code.
(ii) All determinations required to be made under this
paragraph 16, subparagraph (a), shall be made by Ernst & Young (the "Accounting
Firm"), which shall provide detailed supporting calculations to both the Company
and Employee within 30 business days of the date of this Agreement or such
earlier time as is requested by the Company. Any such determination by the
Accounting Firm shall be binding upon the Company and Employee. Employee shall
determine which and how much of the Severance Payments (or, at the election of
Employee, other Payments) shall be eliminated, reduced or deferred consistent
with the requirements of this paragraph 16, subparagraph (a), provided that, if
Employee does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, the Company shall elect
which and how much of the Severance Payments shall be eliminated or reduced
consistent with the requirements of this paragraph 16, subparagraph (a), and
shall notify Employee promptly of such election.
(iii) As a result of the uncertainty in the application of
Section 280G of the Code at the
3
Initialed: RGP
--------
WCB
--------
<PAGE>
time of the initial determination by the Accounting Firm hereunder, it is
possible that Severance Payments will have been made by the Company that should
not have been made ("Overpayment") or that additional Severance Payments that
will have not been made by the Company could have been made ("Underpayment"), in
each case, consistent with the calculations required to be made hereunder. In
the event that the Accounting Firm determines that an Overpayment has been made,
any such Overpayment shall be treated for all purposes as a loan to Employee,
which Employee shall repay to the Company together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by Employee to the Company
(or if paid by Employee to the Company shall be returned to Employee) if and to
the extent such payment would not reduce the amount which is subject to taxation
under Section 4999 of the Code. In the event that the Accounting Firm determines
that an Underpayment has occurred, any such Underpayment shall be promptly paid
by the Company to or for the benefit of Employee together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code.
(b) Notwithstanding any other provision of this Agreement, no
payment shall be made hereunder if, as a result of the amount or timing thereof,
this Agreement would be deemed to constitute an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA or Department of Labor Regulation
Section 2510.3-2.
17. Period for Review and Consideration of Agreement. Employee
------------------------------------------------
acknowledges that Employee has been given a period of at least 21 days to review
and consider this Agreement before signing it. Employee further understands that
Employee may use as much of this 21 day period as Employee wishes prior to
signing.
18. Consult with Attorney. Employee is advised to consult with an
---------------------
attorney before signing this Agreement. Further, it is the Company's
understanding that the Employee has consulted an attorney prior to signing this
Agreement.
19. Employee's Right to Revoke Agreement. Employee may revoke this
------------------------------------
Agreement within seven days after the date Employee signs it by delivering
written notice to Ronald G. Peterson, Fluor Daniel, Inc., 3353 Michelson Drive,
Irvine, California 92698. Such written notice must be received no later than the
close of business on the seventh day after Employee signs this Agreement. If
Employee revokes this Agreement it shall not be effective or enforceable and
Employee will not receive the payments and accommodations described in Exhibit
-------
A. This Agreement will not be effective or enforceable until the seven day
- -
revocation period has expired.
20. Applicable Law. This Agreement shall be governed by and construed
--------------
and enforced under Illinois law, excluding the provisions thereof which refer to
the laws of another jurisdiction.
21. Severability. If any provision or part of this Agreement is held
------------
or determined to be invalid or unenforceable for any reason, each such provision
or part shall be severed from the remaining provisions of the Agreement or the
Agreement shall be read and interpreted as if it did not contain such provision
or part. The validity and enforceability of remaining provisions shall not be
affected by any such invalid or unenforceable part or provision.
22. Entire Agreement. This Agreement, which includes Exhibit A, is
---------------- ---------
the entire Agreement between Employee and Company. The Company has made no
promises to Employee other than those in this Agreement.
4
Initialed: RGP
--------
WCB
--------
<PAGE>
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS IT AND
IS VOLUNTARILY ENTERING INTO IT.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN
AND UNKNOWN CLAIMS.
FLUOR DANIEL GTI, INC.
BY: /s/ Ronald G. Peterson
-----------------------------------
Ronald G. Peterson
Chairman of the Board of Directors
/s/ Walter C. Barber
-----------------------------------
Walter C. Barber
5
Initialed: RGP
--------
WCB
--------
<PAGE>
EXHIBIT A TO
SETTLEMENT AND RELEASE AGREEMENT
BETWEEN WALTER C. BARBER AND FLUOR DANIEL GTI, INC.
SEVERANCE BENEFITS
------------------
For entering into this agreement, Fluor Daniel GTI, Inc. (the "Company" or
"FDGTI") will make the following payments and accommodations which are more than
the Company is required to do under normal policy:
1. A lump sum payment in the amount of $780,000 will be paid within seven (7)
days of the effective date of the Settlement and Release Agreement to the
account of Walter C. Barber ("Barber" or "Employee") under the Fluor Corporation
Deferred Compensation Program (the "Program") and Barber shall be entitled to
defer such amount on the terms and conditions of the Program.
2. FDGTI shall provide outplacement services in accordance with FDGTI's
customary procedures, at the expense of FDGTI, not to exceed $20,000. Payments
will be made directly to the provider. This accommodation is more than Employee
would otherwise be entitled to.
CONSENT TO PARTICIPATE
----------------------
The undersigned, Fluor Corporation, hereby consents to the
participation by Barber in the Fluor Corporation Deferred Compensation Program.
FLUOR CORPORATION
By: /s/ Lawrence N. Fisher
------------------------------
Lawrence N. Fisher
Senior Vice President-Law and Secretary
Initialed: RGP
--------
WCB
--------
<PAGE>
Exhibit 6
---------
INTERCOMPANY SERVICES AGREEMENT
Between
INTERNATIONAL TECHNOLOGY CORPORATION
FLUOR DANIEL, INC.,
and
FLUOR DANIEL GTI, INC.
October 27, 1998
<PAGE>
INTERCOMPANY SERVICES AGREEMENT
THIS AGREEMENT for the performance of services is executed and made effective as
of October 27, 1998, between International Technology Corporation, a Delaware
corporation, Fluor Daniel, Inc., a California corporation, and Fluor Daniel GTI,
Inc., a Delaware corporation
WITNESSETH:
WHEREAS, concurrently herewith the Parties have entered into an Amended and
Restated Marketing Agreement (the "Marketing Agreement") which sets forth the
basis upon which such parties shall engage in the conduct of the environmental
services business and the basis for providing mutual support and assistance in
conducting their own respective business;
WHEREAS, Fluor Daniel, Inc. and Fluor Daniel GTI, Inc. have previously entered
into an Intercompany Services Agreement, dated as of May 10, 1996 (the "Original
ISA");
WHEREAS, the Parties desire to amend and restate the Original ISA in its
entirety by executing this Agreement, which shall become effective only upon the
effectiveness of the Marketing Agreement; and
WHEREAS, the Parties by this Agreement now desire to establish certain of the
terms and conditions which shall apply to the provision of Contract Support
Services and Project Services by one Party to another Party.
NOW, THEREFORE, it is agreed as follows:
ARTICLE I - DESCRIPTION OF AGREEMENT
1.1 Documents Included
This Agreement consists of this contract document and the following
attachments:
Attachment I: Requests for Services on a cost reimbursable basis,
Attachment II: Request for Services on a fixed or unit price basis.
<PAGE>
1.2 Entire Agreement
----------------
This Agreement, together with the Marketing Agreement, sets forth the full and
complete understanding of the parties as of the date first above stated with
regard to the subject matter hereof, and it supersedes any and all agreements
and representations made or dated prior thereto, except for contracts between
the parties in existence on the date hereof.
1.3 Conflicting Provisions
----------------------
In the event of any conflict between the Marketing Agreement and this contract
document, the terms of the Marketing Agreement shall control. In the event of
any conflict between this contract document and any of the Attachments hereto,
the terms and provisions of this contract document shall control. In the event
of any conflict among the Attachments, the Attachment of the latest date shall
control. In the event of any conflict between this Agreement and any Requests
for Services issued pursuant to Section 2, this Agreement shall control.
1.4 Definitions
-----------
Unless specifically provided otherwise herein, all capitalized terms used herein
shall have the meaning described to such term in the Marketing Agreement.
ARTICLE II - SCOPE OF SERVICES
- ------------------------------
2.1 Description of Work, Requests for Services
------------------------------------------
As and when required pursuant to the terms of the Marketing Agreement, a Party
shall perform Project Services and/or Contract Support Services (the "Services")
in accordance with a written Request for Services in a Work Release issued by
the Parties from time to time during the term of this Agreement, specimen forms
of which are attached hereto as Attachment I and Attachment II, to which may be
------------ -------------
attached plans, drawings and specifications governing such services. Such
Requests for Services shall make specific reference to this Agreement and shall
be subject to performing Party's written acceptance, and performing Party shall
accept or reject a Request for Services as promptly as practicable under the
circumstances.
2.2 Work Release
------------
Attachment I shall be used for services provided on a cost reimbursable basis
- ------------
and Attachment II shall be used for services provided on a fixed or unit price
-------------
basis. A Work Release, when accepted by the Parties, shall be binding upon the
Parties hereto and shall incorporate by reference all of the terms and
conditions hereof, and the Marketing Agreement. In addition to the description
of the Services to be performed by the performing Party, a Work Release shall
set forth the performing Party's compensation for the services and the date on
which such services are to be completed. A Work Release may vary the terms of
this Agreement only when the Work Release expressly so states and sets forth the
particular paragraph hereof that is to be varied, and any such variations shall
apply only to the Work Release in which they are included.
3
<PAGE>
A performing Party, by accepting a Work Release, represents that it has
carefully inspected the Work Release along with any attached plans, drawings and
specifications, and has called the other Party's attention to any error,
omission and question of intent associated with the Work Release. All such
questions shall be resolved to the satisfaction of the Parties prior to
execution of the Work Release.
ARTICLE III - METHOD OF PERFORMANCE
- -----------------------------------
The performing Party shall perform its Services as an independent contractor in
accordance with good engineering and construction practices, applicable laws and
regulations. Except as otherwise specifically provided in the Work Release, the
performing Party shall perform Project Services in accordance with the Prime
Contract, the terms and conditions of which are incorporated in the applicable
Work Release by reference for any such Project Services as if copied therein in
full. To the extent that the provisions of the Prime Contract are applicable to
the performing Party, the requesting Party shall provide the performing Party
with a copy of the Prime Contract (if permitted pursuant to the terms of the
Prime Contract) and, if the Prime Contract has been provided, the performing
Party represents that it is totally familiar with the terms of the Prime
Contract and agrees to be bound by the same.
ARTICLE IV - COMPENSATION
- -------------------------
The receiving Party agrees to pay the performing Party a total compensation
specified in the Work Release and such compensation shall not be subject to
adjustment for any reason except as provided for in Section VI hereof
ARTICLE V - EXCLUSIONS, LIMITATIONS
- -----------------------------------
To be determined as provided in the Marketing Agreement.
ARTICLE VI - WORK CHANGES
- -------------------------
The requesting Party may, at any time by written notice to the performing Party,
require changes in the Request for Services under a Work Release, including
increases and decreases therein. In such event the compensation payable to the
performing Party shall be adjusted by the mutual agreement of the Parties except
where the increase or decrease in the Services under a Work Release involves
items of Services to be performed on a time and material or other cost basis, or
on a basis of units of Services, in which event the performing Party shall be
compensated on such basis for all such items or units of Services performed
under a Work Release, whether there is an increase or decrease in such items or
units of Services. No claim by the performing Party for extra, additional, or
different Services under a Work Release, or any extension of time within which
to complete such Services, will be allowed without the requesting Party's
written authorization and consent given prior to the undertaking of incurring of
any expense in connection therewith.
4
<PAGE>
In the event the Request for Services under a Work Release is decreased, the
performing Party shall be entitled to all expenses and costs reasonably and
necessarily incurred by the performing Party as a result of such decrease in the
Services. In no event, however, shall by the performing Party be entitled to any
prospective profits or reimbursement of prospective overhead, general expenses,
administrative expenses or damages (consequential or otherwise) because of such
decrease in the Request for Services.
ARTICLE VII - WARRANTY FOR CONTRACT RELATED SERVICES
- ----------------------------------------------------
To be determined as provided in the Marketing Agreement.
ARTICLE VIII - METHOD OF PAYMENT
- --------------------------------
Unless otherwise specifically provided in the Work Release, the performing Party
shall promptly furnish the requesting Party with a detailed invoice for all
costs which are reimbursable to the performing Party for the Services performed
during the preceding month.
Each invoice shall be supported by one (1) copy each of all payrolls, expense
reports and/or any other documentation reasonably necessary to substantiate the
billing payment. The requesting Party shall pay such invoices in full within
thirty (30) days after receipt of each invoice, provided however, that in the
case of Project Services, payment may be withheld by the requesting Party until
the corresponding payment has been made under the Prime Contract.
All invoices shall be marked with the following:
Contract Number:
Project Name:
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first hereinabove set forth.
FLUOR DANIEL GTI, INC. FLUOR DANIEL, INC.
By: /s/Walter C. Barber By: /s/Ronald G. Peterson
---------------------------- --------------------------
Name: Walter C. Barber Name: Ronald G. Peterson
---------------------------- --------------------------
Title: President Title: Group President
---------------------------- --------------------------
5
<PAGE>
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/Anthony J. DeLuca
----------------------------
Name: Anthony J. DeLuca
----------------------------
Title: President and Chief Executive Officer
--------------------------------------
6
<PAGE>
ATTACHMENT I to Intercompany Services Agreement
- SPECIMEN -
WORK RELEASE NO. ________
_________________________("Subcontractor") agrees to perform and complete the
following services ("Services") for _____________________ ("Contractor")
at________("Facility"):
(INSERT REQUEST FOR SERVICES HERE)
Contractor agrees to pay Subcontractor a total compensation for its Services in
Accordance with Attachment I consisting of Subcontractor's actual Field, Home
Office and Subcontract costs, except as noted below. Field staff labor rates
apply when the employee is assigned to a field site for an assignment of six
months or longer in expected duration. Otherwise home office labor rates apply.
(a) Subcontractor's Field Staff Labor
---------------------------------
Subcontractor shall be paid hourly billing rates established as hourly
base compensation for its Field Staff plus an allowance as a percentage
of base compensation to give a total multiplier on base compensation of
_____________. This allowance is compensation for payroll taxes and
insurance, sick leave, holidays, vacation and other employee benefits
and burdens. Overtime to be paid with Contractor's prior written
approval.
(b) Subcontractor's home office labor
---------------------------------
Subcontractor shall be paid hourly billing rates established as hourly
base compensation for its Home Office Labor plus an allowance as a
percentage of base compensation to give a total multiplier on base
compensation of __________. This allowance is compensation for payroll
taxes and insurance, sick leave, holidays, vacation and other employee
benefits and burdens. Overtime to be paid with Contractors prior
written approval. Home office expenses shall be paid at actual cost,
subject to the provisions of Paragraph (d), below.
(c) Field Costs
-----------
Subcontractor shall be paid the actual costs of material, machinery,
equipment, temporary facilities, supplies, parts, and miscellaneous
services; travel and relocation expenses; field labor wages and
benefits, and other employer portion of payroll taxes and insurance;
taxes, excluding income taxes permits, testing and inspections;
subcontracts; insurance; repairs, construction tools and equipment,
freight; and all other direct field costs incurred in connection with
the work.
7
<PAGE>
(d) Unless agreed otherwise, standard charge schedules will be used for
computer and reproduction charges; all-in rates, or lump sum values may
be used where convenient and as agreed in writing between Contractor
and Subcontractor for other items such as:
- Payroll Burdens and Benefits on Field Labor
- Small Tools, Expendables and Consumables
- Construction Equipment
The Services shall be done in accordance with the terms and provisions of the
Intercompany Services Agreement between the parties dated October 27, 1998, all
of which are incorporated herein by reference.
Subcontractor agrees to promptly commence the Services and to complete them
by________________.
Contractor and Subcontractor shall each designate a representative to consent,
approve and otherwise act on behalf of the designating party under this Work
Release. The designated representatives are:
For Contractor: For Subcontractor:
By: ____________________ By: ____________________
Title: ____________________ Title: ____________________
Dated: ____________________ Dated: ____________________
8
<PAGE>
ATTACHMENT II to Intercompany Services Agreement
- SPECIMEN -
WORK RELEASE NO.
__________________("Subcontractor") agrees to perform and complete the following
services ("Services") for ______________("Contractor") at__________________
("Facility):
(INSERT REQUEST FOR SERVICES HERE)
GENERAL
Contractor agrees to pay Subcontractor for full and complete performance of the
Services, compliance with all terms and conditions of this Work Release shall be
in the total of Section 1.0, Lump Sum Portion and Section 2.0, Fixed Unit Price
Portion, described in more detail below.
1.0 LUMP SUM PORTION*
The breakdown of the Lump Sum Portion against individual items for payment is
detailed as follows:
<TABLE>
<CAPTION>
- -------------------------- ---------------------------------------------------------------- -------------------------
ITEM DESCRIPTION LUMP SUM
- -------------------------- ---------------------------------------------------------------- -------------------------
<S> <C> <C>
1.10 Treatment Demonstration $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.20 Mobilization and Demobilization $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.30 Temporary Parking, Office Facilities, and Fences
- -------------------------- ---------------------------------------------------------------- -------------------------
1.40 Decontamination Pad $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.50 Surveying $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.60 Bonding $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.6.1 100 Percent of Performance Bond $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.6.2 Firm Performance bond Rae $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.6.3 100 Percent Payment Bond $
- -------------------------- ---------------------------------------------------------------- -------------------------
1.6.4 Firm Payment Bond Rate $
- -------------------------- ---------------------------------------------------------------- -------------------------
</TABLE>
2.0 FIXED UNIT PRICE PORTION*
The following Unit Prices are for payment for actual quantities in the event
that the need arises for the materials or services listed below and described
herein. Unit prices will be applied to the actual quantities furnished,
installed, and documented in conformance with the Contract Documents, and
payment shall be adjusted accordingly.
9
<PAGE>
* The items described are for illustrative purposes only. Different or
additional categories may be appropriate in a particular circumstance.
<TABLE>
<CAPTION>
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
UNIT ESTIMATED
ITEM DESCRIPTION UNITS PRICE QUANTITY TOTAL
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
2.10 Site Clearing and Grubbing Acre $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.20 Finish Grading and Seeding Acre $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.30 Site Demolition Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.40 Decontamination Hour $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.50 Scale Rental Month $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.60 Stockpile and Backfill of
Decontaminated Debris Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.70 Off-Site Debris Disposal Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.80 Soil Borings Month $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.90 Waste Treatment Reagents $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.9.1 Reagent X Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.9.2 Reagent Y Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.9.3 Reagent Z Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.10 In-Situ Waste Treatment CY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.11 Waste Retreatment CY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.12 Treated Waste Disposal Ton $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.13 Contaminated Water Disposal Kgal $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.14 Non-Contaminated Material CY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.15 Imported Select Fill CY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.16 Temporarily Placed Gravel SY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.17 Stand-by time (as directed)
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.17.1 Hourly Stand-by time Hour $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.17.2 Daily Stand-by Time Day $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
2.18 Imported Gravel (Additive
Alternative) SY $
- --------------------- --------------------------------- ------------ ----------- ------------------ -----------------
</TABLE>
10
<PAGE>
3.0 ESTIMATED CONTRACT VALUE*
The Total Contract Value for performing all Services of the Work Release is
$______, that is (in Words) _________________Dollars. The price of this Work
Release shall be the sum of the Lump Sum Portion and the product of the actual
quantities of Unit Price work ordered and the Unit Prices for the work. It is
firm and fixed for the duration of the Work Release and is not subject to
escalation for any cause, unless authorized in writing by Contractor. Payment of
the Total Contract Value shall constitute full payment for performance of the
Services of the Work Release and covers all costs of whatever nature incurred by
Subcontractor in accomplishing the Services in accordance with the provisions of
this Work Release.
<TABLE>
<CAPTION>
- ------------------------------ -------------------------------------------------- ----------------- -----------------
SUBTOTAL TOTAL
ITEM DESCRIPTION AMOUNT AMOUNT
- ------------------------------ -------------------------------------------------- ----------------- -----------------
<S> <C> <C> <C>
3.1.1 Subtotal Lump Sum
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.1.2 Subtotal Unit Rate Items
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.10 Subtotal Lump sum and Unit Rate Items (3.1. and
3.12)
$
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.20 Total Bonding $
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.30 Approval Risk Contingency $
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.40 Market Competitive Fee $
- ------------------------------ -------------------------------------------------- ----------------- -----------------
3.50 Total Contract Value (total Items 3.1 and 3.2)
- ------------------------------ -------------------------------------------------- ----------------- -----------------
Total $
- ------------------------------ -------------------------------------------------- ----------------- -----------------
</TABLE>
The Contract Price as set forth herein includes all applicable and required
taxes, duties and fees.
The Services shall be done in accordance with the terms and provisions of the
Intercompany Services Agreement between the parties dated October 27, 1998, all
of which are incorporated herein by reference.
Subcontractor agrees to promptly commence the Services and to complete them
by__________.
11
<PAGE>
Contractor and Subcontractor shall each designate a representative to consent,
approve and otherwise act on behalf of the designating party under this Work
Release. The designated representatives are:
For Contractor: For Subcontractor:
By: ____________________ By: ____________________
Title: ____________________ Title: ____________________
Dated: ____________________ Dated: ____________________
12
<PAGE>
Exhibit H
- ---------
Co-located Offices
- ------------------
Location: Term:
- -------- ----
1. Irvine, CA Expires July 31, 1999*
2. Bakersfield, CA Terminable on 30 days' notice
3. Chicago, IL Terminable on 30 days' notice
4. Golden, CO Terminable on 30 days' notice
5. Greenville, SC Terminable on 30 days' notice
6. Marlton, NJ Terminable on 30 days' notice
7. Sugar Land, TX Terminable on 30 days' notice
- ---------------------
* Fluor Daniel will accommodate earlier termination
** - vacating this office by 10/31/98
13
<PAGE>
Exhibit 7
July 28, 1998
Mr. Philip O. Strawbridge
Chief Financial Officer
International Technology Corporation
1575 I Street N.W., Suite 425
Washington, D.C. 20005
Dear Philip:
We understand from BT Alex. Brown incorporated ("BT Alex. Brown"), our
financial adviser, that you may be interested in pursuing a transaction with
Fluor Daniel GTI, Inc. (the "Company") on a mutually agreeable basis. In
connection with your possible interest in a transaction with the Company, we
propose to furnish you ("Recipient") with certain product, financial, marketing,
manufacturing, organizational, technical and other information related to the
Company (herein collectively referred to as the "Confidential Information"). In
consideration of our furnishing you with the Confidential Information, and as a
condition to such disclosure, Recipient agrees to treat all Confidential
Information provided by the Company confidentially (except as otherwise provided
herein) and to observe the terms and conditions set forth herein.
The Recipient agrees that it will keep Confidential Information secret
and confidential and will not use Confidential Information for any purpose other
than determining whether it wishes to enter into a transaction. The Recipient
agrees not to disclose or allow disclosure to others of any Confidential
Information, except that the Recipient may disclose Confidential Information to
its directors, officers, employees, partners, affiliates, agents, advisors, or
representatives (hereinafter, "Representatives") to the extent necessary to
permit such Representatives to assist in making the determination referred to in
the prior sentence, provided, however, that the Recipient shall obtain from its
external Representatives agreements in favor of the Company to protect the
confidential nature of the Confidential Information in accordance with the terms
of this agreement.
For purposes of this Agreement, Confidential Information shall include
all non-public confidential or proprietary information, regardless of the form
in which it is communicated or maintained (whether prepared by Company, BT Alex.
Brown or otherwise) that contains or otherwise reflects information concerning
the Company that may be provided to the Recipient or its Representatives in the
course of its evaluation of a possible transaction. The term "Confidential
Information" shall also include all reports, analyses, notes or other
information that are based on, contain or reflect any Confidential Information
("Notes"). The terms and conditions of this Agreement shall not apply to those
portions of the Confidential Information that (i) become generally available to
the public other than as a result of a disclosure by the Recipient or any of its
Representatives, (ii) were available to the Recipient on a non-confidential
basis prior to the disclosure of such Confidential Information to the Recipient
pursuant to this Agreement, provided that the source of such information was not
known by the Recipient or any of its
<PAGE>
Mr. Philip O. Strawbridge
[Date]
Page 2
Representatives, to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any of its agents, advisors, representatives or affiliate with respect to such
material or (iii) become available on a nonconfidential basis from a source
other than the Company or its agents, advisors, representatives or affiliate
provided that the source of such information was not known by the Recipient or
any of its Representatives, after inquiry, to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any of its agents, advisors, representatives
or affiliate with respect to such material.
In addition, without the prior written consent of the Company, the
Recipient will not make any disclosure that it is having or has had discussions
concerning a transaction, that it has received Confidential Information or that
it is considering a possible transaction; provided that if Recipient has
received the opinion of counsel that such disclosure must be made in order that
the Recipient not commit a violation of law and, Recipient promptly advises and
consults with the Company and its legal counsel concerning the information for
which disclosure is required and will provide such disclosure only with consent
of the Company, such consent will not be unreasonably withheld.
You hereby acknowledge that you are aware, and that you will advise
your Representatives who are informed as to the matters which are the subject of
this letter, (a) that the Company is a public corporation the securities of
which trade on the NASDAQ National Market and (b) that federal and many state
securities laws prohibit any person who has received material, non-public
information concerning the matters which are the subject of this letter from
purchasing or selling securities of the Company or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
Although the Company has endeavored to include in the Confidential
Information such information known to it which it believes to be relevant for
the purpose set forth herein, neither the Company nor any of its agents,
advisors, representatives or affiliates (i) have made or make any representation
or warranty, expressed or implied, as to the accuracy or completeness of the
Confidential Information or (ii) shall have any liability whatsoever to the
Recipient or its Representatives relating to or resulting form the use of the
Confidential Information or any errors therein or omissions therefrom.
Furthermore, the Company shall not be obligated to provide any information
concerning pricing, cost or bidding, which in its or its counsel's opinion may
involve or lead to involvement in or be the basis for allegations of violations
of antitrust or procurement laws.
In the event that the Recipient or anyone to whom the Recipient
transmits any Confidential Information in accordance with this Agreement is
requested or required (by deposition, interrogatories, requests for information
or documents in legal proceedings, subpoenas, civil investigative demand or
similar process), in connection with any proceeding, to disclose any
Confidential Information, the Recipient will give the Company prompt written
notice of such request or requirement so that the Company may at its cost seek
an appropriate protective
<PAGE>
Mr. Philip O. Strawbridge
[Date]
Page 3
order or other remedy and/or waive compliance with the provisions of this
Agreement, and the Recipient will cooperate with the Company to obtain such
protective order. In the event that such protective order or other remedy is not
obtained or the Company waives compliance with the relevant provisions of this
Agreement, the Recipient (or such other persons to whom such request is
directed) will furnish only that portion of the Confidential Information which,
in the opinion of counsel, is legally required to be disclosed and, upon the
Company's request, use best efforts to obtain assurances that confidential
treatment will be accorded to such information.
If the Recipient decides that it does not wish to explore a possible
transaction, it will promptly notify the Company of that decision. In that case,
or if the Company shall by written notice to the Recipient elect at any time to
terminate further access to the Confidential Information for any reason,
Recipient and its Representatives shall promptly return to the Company all
copies of the Confidential Information and all Notes or destroy the Confidential
Information and Notes and certify in writing as to such destruction.
Notwithstanding the return or destruction of Confidential Information and Notes,
the Recipient and its Representatives will continue to be bound by its
obligations of confidentiality and other obligations hereunder.
The Recipient understands that the Company shall have the right to
reject or accept any proposal by the Recipient, for any reason whatsoever, in
its sole discretion and neither the Recipient nor any of its Representatives
shall have any claims whatsoever against Company or any of their respective
directors, officers, stockholders, owners, affiliates or agents arising out of
or relating to any transaction (other than those against the parties to a
definitive agreement in accordance with the terms thereof).
Without the Company's prior written consent, Recipient [Addendum
Attached] will not for a period of two (2) years from the date of this
Agreement, directly or indirectly solicit for employment any person who is now
employed at the Company in an executive or management level position or
otherwise considered by the Company and as agreed by the Recipient in advance to
be a key employee, provided that the placement of or an advertisement in print
media or the retention of an executive search firm to conduct a search not
specifically targeted at the Company shall not be deemed "direct or indirect
solicitation" for the purposes of this paragraph.
Recipient agrees that money damages would not be a sufficient remedy
for any breach of this Agreement by it or its Representative, that in addition
to all other remedies, the Company shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and the
Recipient further agrees to waive, and to use its best efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with such remedy. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
Recipient or any of its Representatives have breached this letter agreement, the
Recipient shall be liable and pay to the Company the reasonable legal fees
incurred by the Company and its agents, advisors, representatives or affiliate
in connection with such litigation, including any appeal therefrom.
<PAGE>
Mr. Philip O. Strawbridge
[Date]
Page 4
All modifications of, waivers and amendments to this Agreement or any
part hereof must be in writing signed on behalf of each party. It is further
understood and agreed that no failure or delay by the Company in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege hereunder.
Recipient hereby irrevocably and unconditionally submit to the
exclusive jurisdiction of any State or Federal court sitting in Chicago over any
suit, action or proceeding arising out of or relating to this letter. Each
hereby agrees that service of any process, summons, notice or document by U.S.
registered mail addressed to either party shall be effective service of process
for any action, suit or proceeding brought against you in any such court. Each
party hereby irrevocably and unconditionally waives any objection to the laying
of venue of any such suit, action or proceeding brought in any such court any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Each party agrees that a final judgment
in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon either party and may be enforced in any court to
whose jurisdiction either party is or may be subject, by suit upon such
judgment.
In the event that any provision or portion of this letter is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this letter shall be unaffected thereby and shall remain
in full force and, effect to the fullest extent permitted by applicable law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois.
Your obligations under this Agreement shall terminate two (2) years
after the date hereof. If you are in agreement with the foregoing, please so
indicate by signing, dating and returning one copy of this Agreement, which will
constitute our agreement with respect to the matters set forth herein.
Agreed and Accepted:
AS RECIPIENT
By: /s/ Drew E. Park, Jr.
--------------------------------------
Title: Vice President
-----------------------------------
Date: 8/3/98
------------------------------------
<PAGE>
Addendum to July 28, 1998 Confidential Disclosure Agreement
- -----------------------------------------------------------
Paragraph 12.
...'s officers, directors, employees and representatives who participate in
the review of the Confidential Information...
Agreed and Accepted by:
/s/ Drew E. Park, Jr.
- ------------------------------- ------------------------------------
Flour Daniel GTI, Inc. Drew E. Park, Jr. VP, IT Corporation
<PAGE>
[LETTERHEAD APPEARS HERE]
Exhibit 8
November 3, 1998
To Our Stockholders:
On behalf of the Board of Directors of Fluor Daniel GTI, Inc. (the
"Company"), we are pleased to inform you that, on October 27, 1998, the Company
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
International Technology Corporation, a Delaware corporation doing business as
The IT Group, Inc. ("Parent"), Tiger Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Purchaser"), and Fluor
Daniel, Inc., a California corporation, pursuant to which Purchaser has today
commenced a cash tender offer (the "Offer") to purchase all of the outstanding
shares (the "Shares") of the Company's Common Stock at $8.25 per Share. Under
the terms of the Merger Agreement, the Offer will be followed by a merger of
Purchaser with and into the Company (the "Merger") in which any Shares not
tendered will be converted into the right to receive $8.25 per Share in cash,
without interest.
Your Board of Directors, upon the unanimous recommendation of a Special
Committee of the Board of Directors consisting solely of the independent
directors, has unanimously determined that the Offer and the Merger are fair to,
and in the best interests of, the Company and its stockholders, and has approved
the Offer and the Merger. The Board of Directors recommends that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.
In arriving at this recommendation, the Special Committee and the full
Board of Directors gave careful consideration to a number of factors described
in the attached Schedule 14D-9 that is being filed today with the Securities and
Exchange Commission. These factors included, among other things, the terms and
conditions of the Merger Agreement and the fairness opinion of BT Alex. Brown
Incorporated ("BT Alex. Brown"), the Company's financial advisor, addressed to
the Special Committee and the full Board of Directors, the text of which is
more fully described in the attached Schedule 14D-9. Stockholders are urged to
read the BT Alex. Brown opinion in its entirety.
In addition to the attached Schedule 14D-9 relating to the Offer, we
are enclosing the Offer to Purchase, dated November 3, 1998, of Purchaser
and Parent, together with related materials, including a Letter of Transmittal,
to be used for tendering your Shares. These documents set forth the terms and
conditions of the Offer and the Merger and provide instructions as to how to
tender your Shares. We urge you to read the enclosed materials carefully in
making your decision with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
/s/ Ron Peterson
Ronald G. Peterson
Chairman of the Board
/s/ Walter C. Barber
Walter C. Barber
President and CEO
<PAGE>
Exhibit 9
Contact: Rick Maslin Lila Churney
Media Relations Investor Relations
(949) 975-3967 (949) 975-3909
FLUOR DANIEL TO SELL ITS GTI ENVIRONMENTAL BUSINESS
TO THE IT GROUP
IRVINE, Calif., October 28, 1998 - Fluor Daniel, the principal subsidiary of
Fluor Corporation (NYSE:FLR), and Fluor Daniel GTI (NASDAQ:FDGT) announced today
that they have entered into an agreement with The IT Group (NYSE:ITX) that will
result in the sale of Fluor Daniel GTI (FDGTI), its Massachusetts-based
environmental company, to The IT Group (IT). Under terms of the agreement, IT
will acquire all outstanding shares in FDGTI for $8.25 per share, in cash,
including the 4.4 million shares, or approximately 52 percent, owned by Fluor
Daniel. Fluor Corporation will realize $36.3 million in proceeds from the
transaction with no material earnings impact.
Jim Stein, Fluor Daniel president and chief operating officer, said,
"We believe that this transaction with IT is in the best interests of Fluor
Corporation and its shareholders due to broad-based consolidation in the
environmental market."
Fluor Daniel acquired its stake in FDGTI, formerly Groundwater
Technology, Inc., in May 1996, to assist clients in solving problems with
contaminated soil, water and air.
IT (NYSE:ITX) is a leading diversified services company offering a full
range of consulting, facilities management and engineering & construction
services in the environmental remediation industry. The IT Group's common stock
and depositary shares are traded on the New York Stock Exchange under the
symbols ITX and ITXpr, respectively.
FDGTI (NASDAQ:FDGT) is a leading environmental engineering, consulting
and remediation firm with 1,200 employees in offices throughout North America,
Europe and Australia. The company has been a pioneer in the application of new
technologies to provide increasingly cost-effective solutions for contaminated
soil and groundwater.
Fluor Daniel, the principal subsidiary of Fluor Corporation (NYSE:FLR),
is a leading engineering, construction, maintenance and diversified services
company, with more than 50 offices worldwide.
<PAGE>
THE IT GROUP ANNOUNCES AGREEMENT TO ACQUIRE FLUOR DANIEL GTI
$10 million of synergies generates substantial earnings and free cash flow
accretion
Strategically achieves broad private sector diversification
Pittsburgh, Pennsylvania -- October 28, 1998 --- Continuing its growth and
diversification strategy, The IT Group, Inc. (NYSE: ITX) (formerly International
Technology Corporation) (the Company) announced today that it has entered into a
definitive agreement to acquire Fluor Daniel GTI, Inc. (NASDAQ: FDGT), a
broad-based environmental services firm. The acquisition is expected to add
approximately $165 million in revenue and operating cash flow of $15 million
after synergies. The transaction is also expected to add approximately $0.20 of
earnings per share and $0.30 of free cash flow per share in 1999. As a result of
the transaction, the Company's engineering and consulting business is expected
to increase in size to a $250 million business with the depth, scale, and
efficiencies required to increase competitiveness in the market. In addition,
The IT Group entered into a four year, worldwide marketing agreement with Fluor
Daniel to become their contractor of choice for environmental services.
According to the terms of the transaction, the purchase price is $69 million
($8.25 per share). The tender offer is expected to commence within the next five
business days. The purchase price will be financed with existing credit capacity
under the Company's bank facility. The transaction will be accounted for under
the purchase method of accounting and is expected to result in a minimal amount
of goodwill.
The acquisition substantially advances the strategic objectives of The IT Group
to balance and strengthen the commercial and government revenue mix of the
Company. Fluor Daniel GTI's long-term client list enhances the Company's
commitment to the commercial market while diversifying and expanding the
services Fluor Daniel GTI (FDGTI) can offer its clients. The acquisition will
also offer significant cross-selling opportunities for members of The IT Group.
Anthony J. DeLuca, chief executive officer and president of The IT Group, said,
"Fluor Daniel GTI has a very strong client relationship culture and an excellent
reputation for providing technology-driven environmental solutions to its
clients. They are well managed and have exceptional technical resources that
will be important additions to The IT Group. FDGTI will strengthen our core
businesses through economies of scale and geographic and client diversification.
They bring more than 400 new clients, many of which are Fortune 100 companies.
They are also a critical building block for our targeted industry sector program
in the
<PAGE>
petroleum, chemical, aerospace, utility and manufacturing sectors. The marketing
agreement with Fluor Daniel will further offer us project diversification on a
worldwide basis. We welcome FDGTI into The IT Group." Mr. DeLuca added, "We have
been impressed with how FDGTI has maintained its leadership and strong
relationships with the retail petroleum market while diversifying its business
mix to provide consulting and engineering services to a broad mix of industrial
and commercial clients. Through our recent experience of the merger with OHM,
the Company has demonstrated its capability to realize the $10 million of
synergies in connection with this acquisition."
Walter Barber, president of FDGTI said, "We are delighted to become a member of
The IT Group. Their leadership and commitment in the environmental industry will
allow us to expand the traditional services we offer our clients with more
comprehensive consulting, construction and remediation capabilities. This
transaction will add value to our clients, and will offer new career
opportunities for our employees. FDGTI clients can look forward to a continued
high level of service, combined with a more diverse group of special resources."
Fluor Daniel GTI is a leading global environmental services company with
approximately 1200 employees located in more than 50 offices throughout North
America, Europe and Australia.
The IT Group, Inc., with more than 4,600 employees in over 60 offices, is a
leading diversified services company offering a full range of consulting,
facilities management, engineering & construction and remedial services. The IT
Group's common stock and depositary shares are traded on the New York Stock
Exchange under the symbols ITX and ITXpr, respectively.
Statements of the Company's or management's intentions, beliefs, expectations or
predictions denoted by the words anticipate, believe, expect and similar
expressions are forward-looking statements that reflect the current views of the
Company and its management about future events and are subject to certain risks,
uncertainties and assumptions. The Company's actual results could differ
materially from those projected in such forward-looking statements as a result
of a number of factors including competitive factors and pricing pressures,
bidding opportunities and success, project results, funding of backlog and
industry-wide factors.
