-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UxGfAr06xE5kLQrfzwXeK2Go/IJCbz4xVb64IrGn92cwhbicz3I5JTy/dJthykga R2v9KmSPdOilRTzdBdu18A== 0000912057-95-010003.txt : 19951119 0000912057-95-010003.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-010003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GTS DURATEK INC CENTRAL INDEX KEY: 0000785186 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 222476180 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14292 FILM NUMBER: 95592963 BUSINESS ADDRESS: STREET 1: 8955 GUILFORD RD SUITE 200 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103125100 MAIL ADDRESS: STREET 2: 8955 GUILFORD RD SUITE 200 CITY: COLUMBIA STATE: MD ZIP: 21046 FORMER COMPANY: FORMER CONFORMED NAME: DURATEK CORP DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 30, 1995 OR / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ---------------- ------------------ Commission File Number 0-14292 GTS DURATEK, INC. (Exact name of Registrant as specified in its charter) Delaware 22-2476180 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8955 Guilford Road, Suite 200, Columbia, Maryland 21046 - ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (410) 312-5100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares outstanding of each of the issuer's classes of common stock as of November 3, 1995: Common Stock, par value $0.01 per share 8,962,972 shares GTS DURATEK, INC. AND SUBSIDIARIES TABLE OF CONTENTS PAGE PART I FINANCIAL INFORMATION ---- Item 1. Financial Statements Consolidated Condensed Balance Sheets as of September 30, 1995 and December 31, 1994 . . . . . . . 1 Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1994 . . . . . . 2 Consolidated Condensed Statement of Changes in Stockholders' Equity for the Nine Months Ended September 30, 1995 . . . . . 3 Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 . . . . 4 Notes to Consolidated Financial Statements . . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 6 Qualification Relating to Financial Information . . . . . . . . 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART I Financial Information Item 1. Financial Statements GTS DURATEK, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, December 31, 1995 1994 ------------- ------------ ASSETS (unaudited) * Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 2,724,375 $ Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,978,179 8,090,614 Costs and estimated earnings in excess of billings on uncompleted contracts . . . . . . . . . . . . . . . . . . 7,709,662 3,119,443 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,487 334,998 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 263,841 141,510 ------------- ------------ Total current assets . . . . . . . . . . . . . . . . . . . . . . . 17,965,544 11,686,565 ------------- ------------ Costs and estimated earnings in excess of billings, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,307,728 Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . 2,016,316 2,137,247 Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,682 637,553 Investments in and advances to joint venture, net . . . . . . . . . . . . . 3,902,798 2,417,771 Deferred charges and other assets . . . . . . . . . . . . . . . . . . . . . 964,564 1,013,220 ------------- ------------ $ 25,410,904 $ 19,200,084 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 7,630,512 Current maturities of long-term debt . . . . . . . . . . . . . . . . . . 635,073 707,094 Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . 2,572,924 3,427,236 ------------- ------------ Total current liabilities . . . . . . . . . . . . . . . . . . . . . 3,207,997 11,764,842 ------------- ------------ Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,409 502,417 ------------- ------------ Redeemable convertible preferred stock (Liquidation value $16,320,000) . . . . . . . . . . . . . . . . . . . . . 14,554,384 ------------- ------------ Stockholders' equity: Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,784 87,598 Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . 17,188,093 16,656,009 Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,504,986) (9,639,005) Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . (171,777) (171,777) ------------- ------------ Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 7,600,114 6,932,825 ------------- ------------ $ 25,410,904 $ 19,200,084 ============= ============
* The Consolidated Condensed Balance Sheet as of December 31, 1994 has been derived from the Company's audited Consolidated Balance Sheet as of that date. 1 GTS DURATEK, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ---------------------------- ---------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 9,426,299 $ 8,865,374 $ 28,947,692 $ 25,837,339 Cost of revenues . . . . . . . . . . . . . . . . . . . . 7,478,492 7,055,193 23,397,469 20,244,732 ------------ ------------ ------------ ------------ Gross profit . . . . . . . . . . . . . . . . . . . . . . 1,947,807 1,810,181 5,550,223 5,592,607 ------------ ------------ ------------ ------------ Expenses: Selling, general and administrative . . . . . . . . . 1,402,004 1,498,125 4,077,433 4,645,207 Royalties paid to related parties . . . . . . . . . . 25,000 25,000 75,000 75,000 ------------ ------------ ------------ ------------ 1,427,004 1,523,125 4,152,433 4,720,207 ------------ ------------ ------------ ------------ Income from operations . . . . . . . . . . . . . . . . . 520,803 287,056 1,397,790 872,400 Interest (income) expense, net . . . . . . . . . . . . . (47,209) 181,622 (73,124) 385,399 ------------ ------------ ------------ ------------ Income before income taxes and proportionate share of loss of joint venture . . . . . . . . . . . . . . . . . . . . 568,012 105,394 1,470,914 487,001 Income taxes . . . . . . . . . . . . . . . . . . . . . . 56,898 8,628 147,113 10,023 ------------ ------------ ------------ ------------ Income before proportionate share of loss of joint venture . . . . . . . . . . . . . . . . 511,114 96,766 1,323,801 476,978 Proportionate share of loss of joint venture . . . . . . . . . . . . . . . . . . . . . . (37,915) (45,548) (170,225) (254,548) ------------ ------------ ------------ ------------ Net income . . . . . . . . . . . . . . . . . . . . . . . $ 473,199 $ 51,218 $ 1,153,576 $ 222,430 ============ ============ ============ ============ Net income per share . . . . . . . . . . . . . . . . . . $ .01 $ .01 $ .02 $ .03 ============ ============ ============ ============ Weighted average number of shares outstanding . . . . . . . . . . . . . . . . . . . . . 8,784,859 8,687,917 8,731,551 8,684,630 ============ ============ ============ ============
2 GTS DURATEK, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Nine Months Ended September 30, 1995 (Unaudited)
Common Stock Capital in Total -------------------- Excess of Treasury Stockholders' Shares Amount Par Value Deficit Stock Equity --------- -------- ------------ ------------- ----------- ------------- Balance, December 31, 1994 8,759,775 $ 87,598 $ 16,656,009 $ (9,639,005) $ (171,777) $ 6,932,825 Net Income 1,153,576 1,153,576 Preferred dividends (875,200) (875,200) Issuance of stock options 280,000 280,000 Exercise of stock options 118,600 1,186 252,084 253,270 Accretion of redeemable preferred stock (144,357) (144,357) --------- -------- ------------ ------------- ----------- ------------- Balance, September 30, 1995 8,878,375 $ 88,784 $ 17,188,093 $ (9,504,986) $ (171,777) $ 7,600,114 ========= ======== ============ ============= =========== =============
3 GTS DURATEK, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended September 30, ------------------------------- 1995 1994 ------------ ------------ Cash flows from operations: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,153,576 $ 222,430 ------------ ------------ Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 451,636 376,683 Proportionate share of loss of joint venture . . . . . . . . . . . . . . 170,225 254,548 Changes in operating items: Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,112,435 (1,434,373) Cost in excess of billings . . . . . . . . . . . . . . . . . . . . . . (3,282,491) (2,841,749) Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,511 (32,982) Accounts payables and accrued expenses . . . . . . . . . . . . . . . . (1,174,312) 32,961 Other operating items . . . . . . . . . . . . . . . . . . . . . . . . (122,331) (247,716) ------------ ------------ Net cash used by operations . . . . . . . . . . . . . . . . . . . . (1,645,751) (3,670,198) ------------ ------------ Cash flows from investing activities: Additions to property, plant and equipment, net . . . . . . . . . . . . . (188,400) (425,271) Advances to joint venture . . . . . . . . . . . . . . . . . . . . . . . . (1,655,252) (568,444) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,778) (980) ------------ ------------ Net cash used by investing activities . . . . . . . . . . . . . . . (1,861,430) (994,695) ------------ ------------ Cash flows from financing activities: Net proceeds from (repayment of) short-term borrowings . . . . . . . . . (7,630,512) 3,409,367 Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . 970,000 Reduction of long-term debt . . . . . . . . . . . . . . . . . . . . . . . (526,029) (228,873) Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . 253,270 514,399 Proceeds from issuance of redeemable preferred stock . . . . . . . . . . 14,410,027 Payment of preferred stock dividends . . . . . . . . . . . . . . . . . . (555,200) Proceeds from issuance of stock option . . . . . . . . . . . . . . . . . 280,000 ------------ ------------ Net cash provided by financing activities . . . . . . . . . . . . . 6,231,556 4,664,893 ------------ ------------ Net change in cash and cash equivalents Cash and cash equivalents at beginning of period . . . . . . . . . . . . ------------ ------------ Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 2,724,375 $ ------------ ------------ Cash paid for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,380 $ 385,399 ============ ============ Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,711 $ 10,023 ============ ============
4 GTS DURATEK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION On January 24, 1995, the Company consummated a financing transaction (the "Financing Transaction") whereby it issued for $16 million 160,000 shares of 8% Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share (the "Convertible Preferred Stock") and an option (the "Company Option") to purchase up to an additional 1.25 million shares of the Company's newly issued common stock, par value at $.01 per share (the "Common Stock") at any time prior to January 24, 1999 for $3.75 per share to investment partnerships sponsored and controlled by the Carlyle Group, a Washington, D.C. based private merchant bank ("Carlyle"). The Convertible Preferred Stock is initially convertible into the Company's Common Stock at a conversion price of $3 per share and, if not previously converted, the Company is required to redeem the outstanding Convertible Preferred Stock on December 31, 2001 for $100 per share plus accrued and unpaid dividends. The Company is required to pay quarterly dividends on the Convertible Preferred Stock of $320,000. In addition, as part of the Financing Transaction, Carlyle acquired 1,666,667 shares of Common Stock of the Company owned by National Patent for $3 per share and has the option (the "NPD Option") to purchase up to an additional 500,000 shares of the Company's Common Stock from National Patent at any time prior to January 24, 1996 at an exercise price of $3.75 per share. The Company is using proceeds from the Financing Transaction to (i) finance the Company's obligations under the DuraChem joint venture with Chem-Nuclear Systems, Inc., estimated at $5 million, (ii) provide $5 million of working capital required in connection with the contract with Westinghouse Savannah River Company to construct a DuraMelterTM vitrification melter to remediate and stabilize low-level radioactive waste at the Department of Energy's Savannah River Site in South Carolina, and (iii) provide working capital for the Company's Technology Group. As of September 30,1995, assuming the conversion of all of the Convertible Preferred Stock into Common Stock, Carlyle would own 49.9% of the Common Stock of the Company, excluding the effects of the exercise of the Company and the NPD Options and all other outstanding warrants and employee stock options. Assuming the conversion of all of the Convertible Preferred Stock into Common Stock and assuming Carlyle's exercise in full of the Company and NPD Options (but not the exercise of outstanding warrants and employee stock options), Carlyle would own 57.3% of the Company's Common Stock. 2. INVENTORIES Inventories, consisting of material, labor and overhead, are classified as follows:
SEPTEMBER 30, December 31, 1995 1994 ------------- ------------ Raw materials . . . . . . . . . . . . . . . . . $ 35,895 $ 55,452 Finished goods . . . . . . . . . . . . . . . . 253,592 279,546 ------------- ------------ $ 289,487 $ 334,998 ============= ============
3. NET INCOME PER SHARE The net income per share for 1995 and 1994 was computed by dividing the net income applicable to common stock, which reflects the preferred stock dividend requirement and accretion, by the weighted average number of shares of common stock outstanding and common stock equivalents to the extent they result in additional dilution. As the Company has issued options and warrants which exceed 20% of the common stock outstanding, the Company determines the dilutive effect of such common stock equivalents using the modified treasury stock method. For the three and nine months ended September 30, 1995, the common stock equivalents were deemed to be anti-dilutive and, accordingly, are not included in the weighted average number of shares used in determining net income per share. 4. SUBSEQUENT EVENT On November 7, 1995 the Company and BNFL Inc. (BNFL) entered into a strategic alliance pursuant to which the two companies will jointly pursue up to five major United States Department of Energy (DOE) waste stabilization projects. BNFL is the U.S. subsidiary of British Nuclear Fuels plc, a United Kingdom based company with annual revenues of $2 billion worldwide. Under the terms of the strategic alliance, BNFL will 5 GTS DURATEK, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. SUBSEQUENT EVENT (CONTINUED) pay to the Company a fee of $1 million each time the two companies agree to pursue on an exclusive basis a waste stabilization project together. The first project to be pursued jointly by the Company and BNFL under this strategic alliance will be the separation and vitrification (conversion to glass) of high level radioactive waste at the DOE's Hanford, Washington site. Upon the execution of the definitive agreements, the Company received the $1 million fee for its agreement to pursue the Hanford project exclusively with BNFL. As part of the strategic alliance, BNFL invested $10 million in the Company in the form of a convertible debenture. The debenture accrues interest during the first five years at the one-year London Interbank Offered Rate (LIBOR) and is convertible into 1,381,571 shares of the Company's common stock prior to November 7, 2000, unless extended under certain circumstances, or repaid in installments over the five year period beginning in November 8, 2000. BNFL also agreed to provide the Company research and development funding of at least $500,000 per year over the next five years. The Company has agreed as part of the strategic alliance to sublicense its radioactive waste vitrification technologies to BNFL for use exclusively in the United Kingdom. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GTS DURATEK, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS OVERVIEW The Company had net income of $473,000 and $1,154,000 for the quarter and nine months ended September 30, 1995 as compared to $51,000 and $222,000 for the quarter and nine months ended September 30, 1994. The increase in net income was due to increased revenues in both the Technology and Services Group combined with lower selling, general and administrative expenses and a reduction in net interest expense. The Company's results of operations are significantly affected by the timing of the award of contracts and the timing and performance on contracts. These factors directly affect the Company's pre-tax income and net income. The quarter-to-quarter results continue to be affected by the Company's electric utility customers scheduling of nuclear power plant outages causing the demand for these services to often shift between quarters. Accordingly, results of operations for the quarter and quarter-to-quarter comparisons may not be as meaningful as comparisons over longer periods. REVENUES Revenues were $9,426,000 and $28,948,000 during the quarter and nine months ended September 30, 1995 as compared to $8,865,000 and $25,837,000 for the same periods in 1994. The increase in consolidated revenues of $561,000 or 6.3% for the quarter is attributable an increase in the Technology Group revenues of $1,911,000 and a decrease in the Services Group revenues of $1,350,000. The increase in consolidated revenues of $3,111,000 or 12.0% for the nine month period is attributable to increases in the Technology Group and Services Group revenues of $2,327,000 and $784,000, respectively. The increases in Technology Group revenues for the quarter and nine month period was primarily due to work performed on the Department of Energy's Savannah River M-Area low-level radioactive waste vitrification project. The increase in the Services Group revenues for the nine month period was partially offset by a decrease in revenues for the quarter due to the Company's electric utility customers scheduling of nuclear power plant outages resulting in lower demand for the quarter. GROSS PROFIT Gross profit was $1,948,000 or 20.7% and $5,550,000 or 19.2% for the quarter and nine months ended September 30, 1995 as compared to $1,810,000 or 20.4% and $5,593,000 or 21.6% for the same periods in 1994. The changes in gross profit for the quarter and nine month period were due to changes in the mix of revenues with a higher proportion of the total from the Services Group which generates a lower gross profit than the Technology Group. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $1,427,000 and $4,152,000 for the quarter and nine months ended September 30, 1995 as compared to $1,523,000 and $4,720,000 for the same periods in 1994. The decrease of $96,000 and $568,000 for the quarter and nine month period was due to cost saving measures taken in the second half of 1994 in the Services Group from personnel reductions, consolidation of offices and continued efforts to control costs, partially offset by higher operating costs incurred by the Technology Group for the advancement of the vitrification technology. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) GTS DURATEK, INC. AND SUBSIDIARIES INTEREST EXPENSE The decrease in interest expense, net for the quarter and nine months ended September 30, 1995 as compared to the same periods in 1994 reflects the repayment of short-term borrowings and investment income with the proceeds of the Financing Transaction (see Note 1). OTHER INCOME AND EXPENSE The Company's proportionate share of loss of the joint venture of $38,000 and $170,000 for the quarter and nine months ended September 30, 1995 relates to the start-up expenses and operation of a 50% joint venture formed to pursue vitrification of non-radioactive waste materials. LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations with short-term borrowings and as of September 30, 1995, the Company has available borrowings of $7,000,000 under the line of credit arrangement. On November 7, 1995 the Company and BNFL Inc. (BNFL) entered into a strategic alliance pursuant to which the two companies will jointly pursue up to five major United States Department of Energy (DOE) waste stabilization projects. BNFL is the U.S. subsidiary of British Nuclear Fuels plc, a United Kingdom based company with annual revenues of $2 billion worldwide. Under the terms of the strategic alliance, BNFL will pay to the Company a fee of $1 million each time the two companies agree to pursue on an exclusive basis a waste stabilization project together. The first project to be pursued jointly by the Company and BNFL under this strategic alliance will be the separation and vitrification (conversion to glass) of high level radioactive waste at the DOE's Hanford, Washington site. Upon the execution of the definitive agreements, the Company received the $1 million fee for its agreement to pursue the Hanford project exclusively with BNFL. As part of the strategic alliance, BNFL invested $10 million in the Company in the form of a convertible debenture. The debenture accrues interest during the first five years at the one-year London Interbank Offered Rate (LIBOR) and is convertible into 1,381,571 shares of the Company's common stock prior to November 7, 2000, unless extended under certain circumstances, or repaid in installments over the five year period beginning in November 8, 2000. BNFL also agreed to provide the Company research and development funding of at least $500,000 per year over the next five years. The Company has agreed as part of the strategic alliance to sublicense its radioactive waste vitrification technologies to BNFL for use exclusively in the United Kingdom. The Company believes that cash flow from operations, existing cash resources, funds invested by BNFL and borrowings availability under the line of credit will be sufficient to meet its operating needs and preferred dividend requirements. OTHER ITEMS Investments in and advances to joint venture, net, were $3,903,000 and $2,418,000 at September 30, 1995 and December 31, 1994, respectively. The increase of $1,485,000 for the nine month period is primarily attributable to expenditures on the DuraChem joint venture to design and construct a vitrification system at an existing Chem-Nuclear waste management facility. Costs and estimated earnings in excess of billings on uncompleted contracts were $7,710,000 and $3,119,000 at September 30, 1995 and December 31, 1994, respectively. The increase of $4,591,000 for the nine month period is primarily attributable to the work performed on the Department of Energy's Savannah River M-Area low level radioactive waste vitrification project mentioned above and a contract with Fernald Environmental Restoration Management Corporation to provide a joule-heated vitrification system. Such amounts are expected to be billed and collected over the next twelve month period. 8 Item 2. Qualification Relating to Financial Information GTS DURATEK, INC. AND SUBSIDIARIES The consolidated financial information included herein is unaudited, and does not include all disclosures required under generally accepted accounting principles because certain note information included in the Company's Annual Report, filed on Form 10-K, has been omitted; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of the 1995 interim period are not necessarily indicative of results to be expected for the entire year. 9 PART II OTHER INFORMATION GTS DURATEK, INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K a. EXHIBITS 4.5 Convertible Debenture issued by GTS Duratek, Inc., General Technical Services, Inc., GTS Instrument Services Incorporated to BNFL Inc. dated November 7, 1995. 10.20 Teaming Agreement by and between GTS Duratek, Inc. and BNFL Inc. dated November 7, 1995. 10.21 Sublicense Agreement by and between GTS Duratek, Inc. and BNFL Inc. dated November 7, 1995. 11.1 GTS Duratek, Inc., and Subsidiaries, Computation of Earnings Per Share for the three and nine months ended September 30, 1995 and 1994. 27 Financial Data Schedule 99.2 Press Release of GTS Duratek, Inc. dated November 8, 1995. b. REPORTS There were no reports on Form 8-K filed for the period ended September 30, 1995. 10 GTS DURATEK, INC. AND SUBSIDIARIES SEPTEMBER 30, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GTS DURATEK, INC. Dated: November 13, 1995 BY: /s/ Robert F. Shawver ------------------------------------ Robert F. Shawver Executive Vice President and Chief Financial Officer Dated: November 13, 1995 BY: /s/ Craig T. Bartlett ------------------------------------ Craig T. Bartlett Controller and Principal Accounting Officer 11 GTS DURATEK, INC. AND SUBSIDIARIES SEPTEMBER 30, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GTS DURATEK, INC. Dated: November 13, 1995 BY: ------------------------------------ Robert F. Shawver Executive Vice President and Chief Financial Officer Dated: November 13, 1995 BY: ------------------------------------ Craig T. Bartlett Controller and Principal Accounting Officer 11 EX-4.5 2 EXHIBIT 4.5 THIS CONVERTIBLE DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES ACT OF ANY STATE. THIS CONVERTIBLE DEBENTURE HAS BEEN ISSUED IN RELIANCE ON THE EXEMPTIONS FROM REGISTRATION CONTAINED IN THE ACT AND IN THE SECURITIES ACTS OF APPLICABLE STATES AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH ACTS OR IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS. GTS DURATEK, INC. CONVERTIBLE DEBENTURE $10,000,000.00 November 7, 1995 Columbia, Maryland FOR VALUE RECEIVED, GTS DURATEK, INC., a Delaware corporation ("Duratek"), GENERAL TECHNICAL SERVICES, INC., a Maryland corporation ("GTS"), and GTS INSTRUMENT SERVICES INCORPORATED, a Maryland corporation ("GTSIS"), (Duratek, GTS and GTSIS are hereinafter collectively referred to as the "Borrower"), jointly and severally promise to pay to the order of BNFL Inc., a Delaware corporation (the "Holder"), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the "Principal Amount"), pursuant to the terms and subject to the conditions set forth herein. The Holder agrees that the payment of principal, interest and all other fees and charges in connection with this Debenture is hereby expressly subordinated in right of payment to the prior payment of principal, interest and all other fees and charges in connection with any Senior Debt. For purposes of this Debenture, the term "Senior Debt" shall mean any indebtedness of the Borrower for money borrowed from banks, including without limitation First Fidelity Bank, N.A., or other institutional lenders, existing on the date hereof or hereafter created or incurred, which by its terms is senior to this Debenture and is secured by any of the assets of the Borrower; provided, however, that the Holder shall have the authority to negotiate in good faith and execute any documents required by the banks or institutional lenders in respect of such subordination. The following terms shall apply to this Debenture: Section 1. MATURITY DATE. Unless sooner paid in full, the Borrower promises to pay to the Holder the outstanding and unpaid balance of the Principal Amount, together with all accrued and unpaid interest thereon and any late charges, costs, expenses, fees and sums, in full on or before November 7, 2005 (the "Maturity Date"), unless the Holder has converted this Debenture into the Borrower's common stock pursuant to Section 11 below. SECTION 2. INTEREST RATE. From the date hereof until November 7, 2000 (the "Initial Period Termination Date," and such period shall be referred to as the "Initial Period"), interest shall accrue on the unpaid balance of the Principal Amount at the floating and fluctuating interest rate per annum equal to the one (1) year London Interbank Offered Rate ("LIBOR Rate") as quoted in the "Money Rates" column of the WALL STREET JOURNAL on the first business day of each calendar quarter or, if such day is not a business day or if the specified rate is not so quoted in the WALL STREET JOURNAL, then the next succeeding business day when such specified rate is quoted. The LIBOR Rate so quoted pursuant to the preceding sentence shall apply until the LIBOR Rate is determined at the beginning of the next succeeding calendar quarter. On the Initial Period Termination Date, all accrued and unpaid interest on the unpaid balance of the Principal Amount during the Initial Period shall be capitalized and thereafter treated as principal by adding such amount (the "Capitalized Interest Amount") to the unpaid balance of the Principal Amount, and the total of such unpaid balance of the Principal Amount plus the Capitalized Interest Amount is referred to herein as the "Adjusted Principal Balance," and the term "Principal Amount" shall be deemed to refer to the Adjusted Principal Balance at all times on and after the Initial Period Termination Date. From the Initial Period Termination Date until all sums due and owing hereunder have been paid in full, interest shall accrue upon the Adjusted Principal Balance at the LIBOR Rate. Interest shall be calculated on the basis of a three hundred sixty (360) day year applied to the actual number of days that the Principal Amount or the Adjusted Principal Balance, or any portion thereof, as the case may be, is outstanding. For purposes of this Debenture, the term "business day" shall mean any day, except a Saturday, Sunday or legal holiday, on which commercial banking institutions are open for business in the State of Maryland. Notwithstanding anything contained herein to the contrary, all interest shall compound annually. Section 3. PAYMENT. The Adjusted Principal Balance, along with accrued interest thereon, shall be paid in five (5) annual installments commencing on November 7, 2001 and continuing on the next four (4) anniversaries of such date, with the last such payment date being the Maturity Date (each such date shall be referred to as a "Payment Date"). The amount of such payment for the first four (4) Payment Dates shall be determined by the Borrower, in its sole discretion, provided that each such payment shall not be less than One Million Dollars ($1,000,000.00) and the amount of the fifth and final payment on the Maturity Date shall be equal to the outstanding and unpaid balance of the Adjusted Principal Balance together with all accrued and unpaid interest thereon, and any late charges, costs, expenses, fees and other sums due hereunder. If any amounts due under this Debenture are to be paid to the Holder on a day which is not a business day, then such amounts shall be due on the next following day which is a regular business day. Section 4. APPLICATION OF PAYMENTS. All payments made hereunder shall be applied first to late charges, costs, expenses, fees and other sums owing to the Holder, pursuant to this Debenture, next to accrued and unpaid interest, and then to the unpaid Principal Amount. Section 5. MANNER OF PAYMENT. All payments of the unpaid balance of the Adjusted Principal Balance and interest thereon, and all other sums due hereunder, shall be paid by wire transfer of immediately available funds, in lawful money of the United States of America, during regular business hours to such account in the United States as the Holder may at any time or -2- from time to time designate in writing to the Borrower effective on five (5) days prior written notice to the Borrower. Section 6. EVENTS OF DEFAULT; ACCELERATION. Any time after the occurrence of an Event of Default (as hereinafter defined), the Holder may, in the Holder's sole and absolute discretion, declare the entire unpaid balance of the Principal Amount, plus accrued interest and other sums due hereunder, to be immediately due and payable. The occurrence of any of the following shall be an event of default ("Event of Default") hereunder: (i) the failure of the Borrower to pay Holder when due any amount due hereunder, and such failure to pay is not cured within seven (7) calendar days, or the breach of any other material provision of this Debenture that is not cured by the Borrower within twenty (20) calendar days of receipt of written notice of such breach provided by the Holder to the Borrower, (ii) the occurrence of a default under any Senior Debt instrument that is not waived by the senior lender thereunder or cured by the Borrower within thirty (30) calendar days after notice of the default by the holder of the Senior Debt, (iii) the filing of any petition under the U.S. Bankruptcy Code, in effect from time to time, or any similar Federal or state statute by or against the Borrower or the failure of the Borrower generally to pay its debts as such debts become due, (iv) the filing of an application for the appointment of a receiver for, the making of a general assignment for the benefit of creditors by, or the insolvency of, the Borrower, or (v) the Borrower's liquidation, dissolution, termination of existence or cessation of the conduct of its business operations, or (vi) the material breach of the provisions of Article XII of the Teaming Agreement by and between Duratek and the Holder dated November 7, 1995 (the "Teaming Agreement"). Section 7. DEFAULT INTEREST RATE. Upon the occurrence of, and during the continuance of, an Event of Default, the rate of interest accruing on the unpaid balance of the Principal Amount and accrued interest thereon, shall increase by the lesser of (i) two (2) percentage points per annum above the rate of interest otherwise applicable and (ii) the maximum amount permitted by law, independent of whether the Holder elects to accelerate the unpaid balance of the Principal Amount as a result of such Event of Default. Section 8. INTEREST RATE AFTER JUDGMENT. If judgment is entered against the Borrower on this Debenture, the amount of the judgment entered (which may include the Principal Amount, interest, default interest, late charges, fees, expenses and costs) shall bear interest at the lesser of (i) the highest rate authorized under this Debenture and (ii) the maximum amount permitted by law, as of the date of entry of the judgment. Section 9. EXPENSES OF COLLECTION. Should this Debenture be referred to an attorney for collection, and whether or not a suit has been filed, the Borrower shall pay all of the Holder's actual costs, fees (including reasonable attorney's fees) and expenses resulting from such referral. Section 10. WAIVER OF PROTEST. The Borrower, and all parties to this Debenture, whether maker, endorser, or guarantor, waive presentment, notice of dishonor and protest. -3- Section 11. CONVERSION OF DEBENTURE. 11.1 RIGHT TO CONVERT. Subject to the provisions of this Section 11.1 and upon compliance with the provisions of this Debenture, the Holder of this Debenture shall have the right (the "Conversion Right"), at the Holder's option, at any time from the date hereof until November 7, 2000 (the "Exercise Period") to cause the conversion of all, but not less than all, of the unpaid Principal Amount and all accrued interest thereon into a total of 1,381,575 fully paid and nonassessable shares of Common Stock (as defined below) of the Borrower, subject to adjustment pursuant to Section 11.5 below; provided, however, that should there be any substantial U.S. regulatory obstacle to the receipt by BNFL of all such shares, then BNFL shall be entitled to convert less than all of the unpaid Principal Amount and accrued interest thereon in order to receive the maximum number of shares in such conversion (the "First Conversion") as may be permitted notwithstanding such obstacle (the "Maximum Convertible Number"), and in such case, the remainder of the Principal Amount and accrued interest thereon not so converted shall be treated thereafter as follows: the outstanding principal due under this Debenture shall be reset, to be an amount (the "New Principal Amount") equal to (1) the Principal Amount plus accrued but unpaid interest immediately prior to the First Conversion, minus (2) the product of (x) the Principal Amount plus all accrued but unpaid interest immediately prior to the First Conversion, multiplied by (y) the Maximum Convertible Number, divided by (z) 1,381,575 (as such number may be adjusted pursuant to Section 11.5 hereof). In such event, interest shall accrue on the New Principal Amount and the Exercise Period will be extended until not later than the Maturity Date for the conversion of the New Principal Amount and all accrued and unpaid interest thereon, provided that the Holder will use its best efforts to eliminate such U.S. regulatory obstacle and to convert such New Principal Amount into Common Stock (also referred to herein as a "Conversion Right") as soon as legally practicable, and the conversion rights hereunder shall terminate 90 days after receipt of applicable regulatory approval if not previously exercised. If the New Principal Amount is not converted hereunder into shares of Common Stock prior to the Maturity Date, the Borrower shall pay in full the outstanding and unpaid balance of the New Principal Amount, together with all accrued and unpaid interest thereon and any late charges, costs, expenses, fees and sums in full on the Maturity Date. Following the exercise in full of the Conversion Right, the Holder shall have no further right to collect the Principal Amount or any accrued interest thereon. 11.2 EXERCISE OF CONVERSION RIGHTS. In order to exercise the Conversion Right in accordance with Section 11.1, the Holder shall send notice of the exercise of such Conversion Right to the Borrower (the "Conversion Notice") and shall simultaneously present this Debenture, or an affidavit of loss with appropriate provision for indemnification by the Holder, to the Borrower at the office of the Borrower. As soon as practicable after the receipt of the Conversion Notice and the presentation of this Debenture (or such affidavit and indemnification), the Borrower shall issue and shall deliver to the Holder a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of this Debenture. Such conversion shall be deemed to have been effected immediately prior to the close of business on -4- the date on which the Conversion Notice and this Debenture (or such affidavit and indemnification) shall have been received by the Borrower, and at such time the rights of the Holder under this Debenture shall cease and the Holder shall be deemed to have become the registered owner of record of the shares represented thereby; provided however that should the Holder be able to convert only the Maximum Convertible Number, then the Holder shall continue to hold this Debenture until the earlier of (i) the time the Holder is able to convert (and does convert) the balance of this Debenture into shares of Common Stock, or (ii) the Maturity Date. 11.3 NO FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Conversion Right. The number of shares so issued shall be only a whole number obtained by rounding up or down to the nearest whole number for any fractions resulting from the calculation of the number of shares to be delivered. 11.4 NOTICE OF CERTAIN ACTIONS. In case at any time: (a) the Borrower shall declare any dividend upon its common stock, $.01 par value per share (the "Common Stock"), payable in securities or make any special dividend or other distribution (other than a cash dividend to the holders of its Common Stock); (b) the Borrower shall offer for subscription pro rata to the holders of its Common Stock any additional securities of any class or other rights; (c) there shall be any capital reorganization, or reclassification of the capital stock of the Borrower (other than the conversion of the Borrower's outstanding 8% Cumulative Redeemable Preferred Stock), or consolidation or merger of the Borrower, or sale of all or substantially all its assets; (d) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Borrower; or (e) the Borrower shall enter into an agreement or adopt a plan for the purpose of effecting a consolidation, merger, or sale of all or substantially all of its assets; then, in any one or more of said cases, the Borrower shall give written notice to the Holder of the date on which (i) the books of the Borrower shall close or a record shall be taken for such dividend, distribution or subscription rights, or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the dates as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, as the case may be. Such written notice shall be given at least 30 days prior to the action -5- in question and not less than 30 days prior to the record date or the date on which the Borrower's transfer books are closed in respect thereto. 11.5 ADJUSTMENT TO NUMBER OF SHARES ISSUED UPON EXERCISE OF CONVERSION RIGHT. In the event that the Borrower shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the aggregate number of shares of Common Stock into which this Debenture is convertible shall be proportionately adjusted as of the effective date of such event by multiplying the number of shares of Common Stock issuable upon the conversion of this Debenture by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately following such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior thereto. 11.6 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any capital reorganization, reclassification, consolidation, merger or sale of all or substantially all of the Borrower's assets to another person which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change." Prior to the consummation of any Organic Change, the Borrower will make provisions to insure that the Holder will thereafter have the right to acquire and receive, in lieu of or in addition to the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of this Debenture, securities or assets as the Holder would have received in connection with such Organic Change if the Holder had converted this Debenture immediately prior to such Organic Change. The Borrower shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (of other than the Borrower) resulting from consolidation or merger or the corporation purchasing such assets assumes, by written instrument, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. 11.7 RESERVATION OF SHARES. The Borrower shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon conversion of this Debenture as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of the Conversion Right. The Borrower covenants that all such Common Stock which shall be so issuable shall, upon the conversion of this Debenture as herein provided, be duly and validly issued and fully paid and nonassessable by the Borrower. 11.8 REGISTRATION RIGHTS FOR ISSUED SHARES. Simultaneous with the issuance of the Common Stock upon the exercise by the Holder of the Conversion Right, the Borrower and the Holder shall enter into a registration rights agreement substantially in the form of the agreement attached hereto as EXHIBIT A. -6- 11.9 TAXES. The issuance of certificates for shares upon conversion of this Debenture shall be made without charge to the holder of this Debenture for any issuance tax in respect thereto. Section 12. MODIFICATION; WAIVER. No modification, change, waiver or amendment of this Debenture shall be effective unless in writing signed by the Holder and the Borrower. No delay on the part of the Holder in exercising any right or remedy hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right or remedy shall preclude other or future exercise thereof, or the exercise of any other right or remedy. Waiver by the Holder of any default by the Borrower or any other party shall not constitute a waiver of any subsequent defaults, but shall be restricted to the default so waived. All rights and remedies of the Holder hereunder are irrevocable and cumulative, and not alternate or exclusive, and shall be in addition to all rights and remedies given in any other instrument or by any laws, whether now existing or hereafter enacted. Section 13. PROVIDING INFORMATION TO THE HOLDER. For as long as this Debenture is outstanding, the Borrower shall provide to the Holder annual audited and quarterly financial statements of the Borrower on a consolidated basis. This provision shall be deemed satisfied by the Borrower providing to the Holder its Annual Report on Form 10-K and its quarterly reports on Form 10-Q, for as long as the Borrower is required to file such reports pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), no later than the date such reports are made available to the public. If the Borrower is not required to file such report pursuant to the 1934 Act, the quarterly financial statements of the Borrower will be provided to the Holder within 45 days of the end of the quarter for which they relate and the annual audited financial statements of the Borrower will be provided to the Holder within 90 days of the end of the fiscal year to which they relate. The Borrower shall promptly provide to the Holder copies of any notices of default or notices indicating noncompliance with any terms of the Senior Debt that it receives from any holder of Senior Debt. -7- Section 14. REPRESENTATIONS AND WARRANTIES OF GTS AND GTSIS. 14.1 GTS hereby represents and warrants to the Holder as of the date hereof as follows: (i) GTS is a corporation duly incorporated and validly existing under the laws of the State of Maryland. (ii) GTS has all requisite corporate power and authority to enter into this Debenture and carry out and perform its obligations hereunder. (iii) The execution, delivery and performance of this Debenture has been duly authorized and approved by all necessary corporate action and this Debenture, when duly executed and delivered by GTS, will constitute a valid and legally binding obligation of GTS, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. (iv) The execution and performance of this Debenture does not and will not (i) violate GTS's articles of incorporation or bylaws, or the terms of any judgment, decree or order of any court or administrative authority or the terms of any material agreement to which it is a party or by which it is bound or (ii) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any governmental authority or third party, excluding those that have already been obtained prior to the date hereof. (v) There is no litigation, arbitration, mediation or other investigation or proceeding pending or, to the best of GTS's knowledge, threatened or in prospect, against GTS with respect to the transactions contemplated by this Debenture. 14.2 GTSIS hereby represents and warrants to the Holder as of the date hereof as follows: (i) GTSIS is a corporation duly incorporated and validly existing under the laws of the State of Maryland. (ii) GTSIS has all requisite corporate power and authority to enter into this Debenture and carry out and perform its obligations hereunder. (iii) The execution, delivery and performance of this Debenture has been duly authorized and approved by all necessary corporate action and this Debenture, when duly executed and delivered by GTSIS, will constitute a valid and legally binding obligation of GTSIS, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. (iv) The execution and performance of this Debenture does not and will not (i) violate GTSIS's articles of incorporation or bylaws, or the terms of any judgment, decree or order of any court or administrative authority or the terms of any material agreement to which it is a party or by which it is bound or (ii) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any governmental authority or third party, excluding those that have already been obtained prior to the date hereof. (v) There is no litigation, arbitration, mediation or other investigation or proceeding pending or, to the best of GTSIS's knowledge, threatened or in prospect, against GTSIS with respect to the transactions contemplated by this Debenture. -8- Section 15. RIGHT OF OFFSET. Notwithstanding anything herein to the contrary, in the event that the Holder has defaulted on its obligation to pay the Article XII and Non-Competition Fee (as defined in the Teaming Agreement), to Duratek pursuant to Article III of the Teaming Agreement, then the Borrower has the right to offset any amounts due to Holder hereunder until such time as the payment default with respect to the Article XII and Non-Competition Fee has been cured by the Holder or waived by the Borrower. The offset by the Borrower of any amounts due to Holder pursuant to this Section 15 shall not constitute an Event of Default under Section 6 of this Debenture. Section 16. INVALIDITY OF ANY PART. If one or more provisions of this Debenture shall be found to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed to be modified consistent with the intent of the parties to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. Section 17. ASSIGNMENT. This Debenture may not be assigned by the Holder or the Borrower at any time, in whole or in part, without the approval of the other party. Section 18. TIME OF THE ESSENCE. Time is of the essence to this Debenture and to all obligations of the Borrower hereunder. Section 19. NOTICES. Except as otherwise expressly stated, all notices required to be given or which may be given under this Agreement shall be in writing and shall be deemed given upon the earlier of (i) when it is personally delivered, (ii) three (3) days after having been mailed by certified mail, postage prepaid, return receipt requested, (iii) two (2) days after having been sent by recognized overnight delivery service or (iv) one day after having been sent by facsimile transmission, addressed as follows: if to: (a) Borrower: GTS Duratek, Inc. 8955 Guilford Road, Suite 200 Columbia, Maryland 21046 Attn: Robert E. Prince, President and Chief Executive Officer Telecopy No.: (301) 621-8211 -9- (b) Holder: BNFL Inc. 9302 Lee Highway, Suite 950 Fairfax, Virginia 22031 Attn: K. Edward Newkirk, General Counsel Telecopy No.: (703) 359-0442 Section 20. GOVERNING LAW. This Debenture is executed and delivered in, and shall be governed by and construed under the laws of, the State of Maryland. The Borrower and the Holder agree that all claims of any kind arising from or relating to this Debenture shall be brought in a court of competent jurisdiction in the State of Maryland and agree to the jurisdiction of the Maryland courts (including the Unites States District Court for the District of Maryland) in all such matters. Both the Borrower and the Holder waive all objections to venue. IN WITNESS WHEREOF, the Borrower has caused this Debenture to be executed in its name, under its seal, by its duly authorized officer on its behalf, the day and year first above written. ATTEST: GTS DURATEK, INC. /s/ Diane Brown By: /s/ Robert E. Prince - --------------------------------- ---------------------------------- (SEAL) Diane Brown, Secretary Robert E. Prince, President ATTEST: GENERAL TECHNICAL SERVICES, INC. /s/ Diane Brown By: /s/ Robert E. Prince - --------------------------------- ---------------------------------- (SEAL) Diane Brown, Secretary Robert E. Prince, President ATTEST: GTS INSTRUMENT SERVICES, INC. /s/ Diane Brown By: /s/ Robert E. Prince - --------------------------------- ---------------------------------- (SEAL) Diane Brown, Secretary Robert E. Prince, President -10- EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT EX-10.20 3 EXHIBIT 10.20 TEAMING AGREEMENT THIS TEAMING AGREEMENT (this "Agreement") is made this 7th day of November 1995 by and between GTS Duratek, Inc., a Delaware corporation ("GTSD") and BNFL Inc., a Delaware corporation ("BNFL"). W I T N E S S E T H: WHEREAS, GTSD has specialized knowledge, experience and rights to technology for the vitrification of radioactive, hazardous and other wastes; WHEREAS, BNFL possesses experience in the processing and stabilization of radioactive waste which could complement the specialized knowledge, experience and technology rights of GTSD for the treatment and handling of wastes at DOE (as defined) sites throughout the United States and all of its territories and possessions; WHEREAS, GTSD and BNFL believe that a cooperative pursuit of contracts and other potential business opportunities with the DOE to treat and handle wastes at DOE sites throughout the United States and all of its territories and possessions would be to the mutual benefit of both companies; WHEREAS, GTSD and BNFL desire to establish a collaborative business relationship and to support each other in the pursuit of potential business opportunities for the treatment and handling of wastes at DOE sites; WHEREAS, it is in the interest of the parties to use their reasonable best efforts to apply marketing, contractual and technical resources in the most effective manner in pursuing potential business opportunities for the treatment and handling of wastes for the DOE; WHEREAS, it is the desire of the parties to develop a total program workshare that offers a satisfactory business opportunity for each while placing the GTSD/BNFL team in the best competitive position; WHEREAS, pursuant to the teaming arrangement provided herein, BNFL will invest $10.0 million in GTSD in the form of a convertible subordinated debenture (the "Convertible Debenture"), convertible into the common stock of GTSD, $.01 par value per share (the "Common Stock"), as provided herein; WHEREAS, pursuant to the teaming arrangement provided herein, BNFL will provide research and development funding to GTSD for five (5) years, as provided herein; and -1- WHEREAS, pursuant to the teaming arrangement provided herein, GTSD shall grant to BNFL a sublicense with respect to the vitrification technology for use in the United Kingdom, as provided herein. NOW, THEREFORE, in consideration of the promises and mutual covenants provided herein, and other good and sufficient consideration, the receipt of which is acknowledged by each party hereto, the parties agree as follows: ARTICLE I DEFINITIONS In addition to those terms defined elsewhere herein, when used herein, the following capitalized terms shall have the meanings indicated: "AFFILIATE" of a specified person means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "CONTRACT" means any contract awarded to GTSD, BNFL or a Project Organization by the DOE in response to a Proposal. "DOE" means the United States Department of Energy, its successor, or any other agency or Person administering or operating the United States Department of Energy sites around the United States and its territories and possessions. "PERSON" or "PERSON" means an individual, corporation, partnership, limited liability company, firm, association, joint venture, trust, unincorporated organization, government, governmental body, agency, political subdivision or other entity. "PROJECT" means a project for the treatment and handling of radioactive, hazardous and other wastes at a particular DOE site by means of vitrification and the related services in connection therewith. A Project will involve services to be provided by GTSD, BNFL and/or a Project Organization in accordance with the scope of work to be determined by the Steering Committee, on a project by project basis, and which may include technologies and services other than vitrification. "PROJECT ORGANIZATION" means a newly formed corporation, partnership, limited liability company, firm, joint venture, trust or other form of business organization that is jointly owned, directly or indirectly, by GTSD, BNFL and possibly other third parties, and was formed for the specific and limited purpose of undertaking a Project. "PROPOSAL" means a proposal submitted by either GTSD, BNFL or a Project Organization, as agreed, in response to an RFP. -2- "RFP" means any request for proposal issued by the DOE for the treatment and handling of radioactive, hazardous and other wastes at a DOE site and the related services in connection therewith. "STEERING COMMITTEE" means the Vitrification Technology Steering Committee established pursuant to Article VI hereof. "SUBCONTRACT" means any subcontract entered into by and between any of GTSD, BNFL and a Project Organization relating to work to be performed under a Contract. ARTICLE II SCOPE OF ACTIVITIES 2.1. GTSD and BNFL agree to collaboratively seek and pursue five (5) Projects with the DOE for the treatment and handling of radioactive, hazardous and other wastes at various DOE sites throughout the United States. 2.2. The decision to pursue a Project will be determined by the Steering Committee. To the extent that the Steering Committee identifies and decides that GTSD and BNFL shall jointly pursue a Project, the Steering Committee shall acknowledge in writing the pursuit of such Project in accordance with the terms of this Agreement and a copy of such written acknowledgment shall be provided to both GTSD and BNFL. The written acknowledgment shall also contain the date, or the basis for determining the date, by which the Article XII and Non-Competition Fee (as hereinafter defined) is required to be paid pursuant to Section 3.2. 2.3 Once the DOE has issued an RFP for a Project that the Steering Committee has determined that the parties should jointly pursue, the parties shall collaborate in preparing and submitting a Proposal in response to the RFP. At such time that such an RFP is issued, the Steering Committee shall determine which party is to serve as the prime contractor (the "Prime Contractor") with the DOE and which party shall serve as the subcontractor (the "Subcontractor"). The parties shall regulate their relationship on a particular Project through the issuance of subcontracts and agree to work together in an exclusive prime contractor/subcontractor relationship as per Article III herein. The scope of work shall be decided upon by the parties in accordance with Article V below. Alternatively, the Steering Committee may elect in its sole discretion to form a Project Organization to pursue the Project and shall determine the structure and ownership of such entity and the contribution of each party to such entity. -3- ARTICLE III EXCLUSIVITY; PAYMENT OF CERTAIN FEES 3.1. For Projects which the Steering Committee has determined that the parties shall jointly pursue, upon such determination and the receipt by each party of the written acknowledgment of such determination, each party hereto shall: (i) not participate in any manner in the preparation or submission of proposals to the DOE by itself or with a third party to the exclusion of the other party; and (ii) not participate in any manner in furtherance of the preparation of proposals to the DOE by or with any third party for opportunities related to the Project, without the written consent of the other party, which consent may be withheld in such other party's sole discretion. Nothing herein shall be deemed to confer any right or impose any obligation or restriction on either party with respect to any other project other than a Project which the Steering Committee has determined to pursue. Each party hereto shall not be precluded from its normal marketing and business efforts in connection with the sale of standard products or services not covered by this Agreement. Each party hereto shall not be precluded from participating in a DOE project, as a subcontractor or otherwise, once the DOE has awarded the project to a party other than BNFL, GTSD or a Project Organization, provided that such party uses its best efforts to participate in such DOE project with the other party hereto, unless the types of goods or services required to be provided for such project or the economics of the party's participation in such project do not make it commercially reasonable, as determined in the reasonable discretion of the Steering Committee, to jointly participate in such project. 3.2 Unless otherwise agreed upon by the Steering Committee, upon the earlier of (i) three (3) business days after the issuance of an RFP by the DOE for a Project that the Steering Committee has determined that the parties should jointly pursue or (ii) the determination by the Steering Committee to jointly pursue a Project and the determination by the Steering Committee to commence work in earnest to prepare a Proposal for such Project (but in any event not later than the submission of a Proposal pursuant to this provision (ii)), BNFL shall pay to GTSD, subject to Section 3.6, the sum of $1.0 million (the "Article XII and Non-Competition Fee") in consideration of GTSD's agreement to, (i) exclusively pursue the Project with BNFL, (ii) provide the technology required under Article XII, and (iii) not compete with BNFL and to exclusively team with BNFL and mutually acceptable third parties with respect to preparing a proposal for the stabilization of radioactive waste contained in the underground tanks of the DOE's Hanford Washington site. 3.3 GTSD shall be deemed to have earned the Article XII and Non-Competition Fee simply by its agreement to the items specified in Section 3.2 and no further conditions or obligations shall be required to be satisfied after the payment of the Article XII and Non-Competition Fee. 3.4 In the event that GTSD has not received the Article XII and Non-Competition Fee within thirty (30) calendar days of when the obligation of BNFL to pay such Article XII and Non-Competition Fee arose pursuant to Section 3.2 above, then, in addition to its right to -4- receive the Article XII and Non-Competition Fee, GTSD shall be free to pursue the Project with another party and shall not be subject to the exclusivity provisions of Section 3.1 herein with respect to that Project. 3.5 For purposes of this Agreement, the Steering Committee has determined to pursue the Project for the stabilization of the radioactive waste contained in the underground tanks at the DOE's Hanford, Washington site and all of the conditions of Section 3.2 herein shall be deemed to have been satisfied as of the date hereof. Accordingly, BNFL shall pay to GTSD $1.0 million upon the execution and delivery of this Agreement. 3.6 The maximum aggregate amount of Article XII and Non-Competition Fees to be paid by BNFL to GTSD pursuant to this Agreement shall be $5.0 million. In the event that BNFL, GTSD or a Project Organization is not awarded any one or more of the Projects that the Steering Committee has determined to pursue, GTSD agrees to exclusively team with BNFL on one (1) additional Project for no additional Article XII and Non-Competition Fee, provided that GTSD has received an aggregate of $5.0 million in Article XII and Non-Competition Fees from BNFL. 3.7 Notwithstanding anything contained herein to the contrary, in the event that BNFL is (i) debarred or suspended from doing business with the DOE or the United States Government or (ii) legally prohibited in any way from being involved in a Project, then the exclusivity provisions contained in this Article III shall be suspended until such time as BNFL is legally permitted do business with the DOE and to be involved in a Project. 3.8 Notwithstanding anything herein to the contrary, in the event that GTSD has defaulted on any of its payment obligations under the Convertible Debenture, BNFL shall be entitled to offset the amounts owed to GTSD as Article XII and Non-Competition Fees until such time as the payment default has been cured or the payment default has been waived by BNFL. All amounts so offset shall be applied in whole toward the cure of the payment default under the Convertible Debenture. ARTICLE IV PREPARATION AND SUBMISSION OF PROPOSALS 4.1. The parties agree that the Prime Contractor shall serve as the primary interface with the DOE in the pursuit of a Contract for a Project. 4.2. The Subcontractor shall submit in a timely manner an offer to the Prime Contractor for the Subcontractor's respective scope of work to be integrated into the Proposal to be submitted to the DOE by the Prime Contractor. The offer to be submitted by the Subcontractor to the Prime Contractor shall include the necessary technical and price information for the goods and/or services to be provided by the Subcontractor, and support and backup -5- therefor, so that the Prime Contractor can complete the Proposal in an appropriate manner. The Subcontractor shall bear all of the costs and expenses associated with preparing the offer that is submitted to the Prime Contractor. The Prime Contractor shall incorporate the relevant offer by the Subcontractor in the Proposal and shall submit the Proposal to the DOE. 4.3 The Prime Contractor shall have the overall responsibility for the preparation and submission of a Proposal, including the document preparation cost for the Proposal. The parties agree to submit the Proposal for review by the Steering Committee before submission to the DOE and the Steering Committee shall have approved the Proposal prior to its submission. In no event shall the Prime Contractor be entitled to modify or amend the offer from the Subcontractor to be incorporated in the Proposal without the prior written consent of the Subcontractor. Each party shall bear its own risks, costs, fees and other expenses incurred in connection with the preparation and submission of a Proposal. After submission of a Proposal to the DOE, the parties shall provide such services and information as are reasonably required for evaluation of the Proposal and negotiation of the resulting Contract. 4.4. The Prime Contractor shall be responsible for carrying out all negotiations with the DOE. If requested by the Prime Contractor, the Subcontractor, at its own expense, shall participate in presenting and negotiating with the DOE with a view to obtaining an award to the Prime Contractor of the Contract. The Prime Contractor shall keep the Subcontractor informed of the progress and content of the negotiations with the DOE. The Prime Contractor shall not agree to any amendment to the Proposal which affects the rights and obligations of the Subcontractor without the prior written consent of the Subcontractor, which consent shall not be unreasonably withheld or delayed. 4.5. The parties hereby undertake to provide each other with prompt notification in the event either party determines that it may not be in its best interest, or the best interest of both parties, to pursue the Project and enter into a Contract with the DOE. ARTICLE V SUBCONTRACTS 5.1 In the event that a Contract is awarded to the Prime Contractor based on a Proposal, the Prime Contractor shall, as soon as practicable, place a subcontract (the "Subcontract") with the Subcontractor for its respective scope of work consistent with the terms of the offer submitted by the Subcontractor to the Prime Contractor and included in the Proposal. 5.2 It is understood by the parties that the Prime Contractor may enter into an agreement with other potential subcontractors in support of opportunities in which the parties hereto are jointly pursuing provided that such potential subcontractor shall not provide goods or services which the Subcontractor is capable of providing and willing to provide on commercially reasonable terms. Subcontractor shall be permitted (as a subcontractor) to enter into a -6- subcontract with a third party provided that the Steering Committee has approved such third party subcontractor and the terms and conditions of the subcontract with such third party. 5.3 The parties agree that the proportion and content of work to be undertaken by each party in respect of each Project shall be generally consistent with the scope of work as determined by the Steering Committee. The parties recognize that as the RFP and as a Project are more clearly defined, changes to the scope of work to be performed by each party may be necessary to meet the requirements of the DOE. In such cases the parties shall agree upon reasonable variations to the scope of work for each party for that particular Project in such a way so that the final scope of work for each party for that particular Project shall be as close as possible to the proportion and content of its scope of work initially determined by the Steering Committee. ARTICLE VI STEERING COMMITTEE 6.1 A Steering Committee shall be established by the parties. The Steering Committee shall consist of one representative of GTSD and one representative of BNFL (each a "Representative" and collectively the "Representatives"). The initial Representative designated by GTSD shall be Robert E. Prince and the initial Representative designated by BNFL shall be Richard H. Peebles. Replacement of the designated Representative, either permanently or at any time, by a particular party shall require the written consent of the other party, which consent shall not be unreasonably withheld or delayed. 6.2 Meetings of the Steering Committee shall be held at least once every three (3) months upon five (5) business days notice to the Representatives and such notice shall be accompanied by an agenda determined by the Representatives. Should circumstances so require, a meeting shall be held at any time at the request of either of the parties. The meeting shall only be held with the presence of both of the Representatives. Decisions of the Steering Committee shall be made by mutual agreement with each Representative acting and negotiating in good faith. The Steering Committee cannot act or make any determination without the approval of both Representatives. 6.3 The Representatives shall, prior to the commencement of each meeting, elect a secretary to take minutes of the meeting. The secretary of a Steering Committee meeting need not be one of the Representatives. The secretary shall distribute copies of the minutes of the meeting to both of the parties within ten (10) calendar days after the meeting. Such minutes shall be deemed to have been accepted by the parties unless comments are made in writing within ten (10) calendar days of their receipt by said parties. 6.4 The Steering Committee shall have the following responsibilities and shall be empowered to take the following actions: -7- (i) Overall governance of the collaborative relationship of the parties as contemplated by this Agreement; (ii) Determine the Projects to be pursued jointly by the parties and provide written acknowledgment of such determination to each of the parties; (iii) Determine which party shall serve as the Prime Contractor and which shall serve as the Subcontractor on a particular Project or, alternatively, determine to form a Project Organization to undertake a particular Project and the structure, ownership and contribution of each of the parties to such Project Organization; (iv) Determine when to commence work on a particular Project; (v) Determine the scope of work to be provided by each of the parties and any appropriate modifications or amendments thereto; (vi) Review the final Proposal to be submitted to the DOE in response to an RFP and have final approval over such Proposal; (vii) Approve the appointment of any agents engaged or retained by any of the parties in connection with the pursuit of a Project; (viii) Act in an advisory capacity concerning the negotiation of Contracts and the performance of such Contracts and resulting Subcontracts; (ix) Interpret the meanings of "most favored nation" and "preferred partner," as such terms are used in Article VIII, and set forth such meanings in a memorandum submitted to each of the parties; (x) Determine the total capital cost of a Project and the capital cost of the Project related to the verification portion and provide written notice to each of the parties of such determination; (xi) Determine the budget for the expenditure of research and development funds and provide authorization to expend such funds pursuant to Article XIV; (xii) Attempt to solve expeditiously any conflict between the parties related to this Agreement; and (xiii) Delegate any of the authority of the Steering Committee to appropriate individuals or groups as may be determined unanimously by the Steering Committee, provided that such delegation can be revoked by either Representative upon written notice. -8- 6.5 Each Representative has an obligation to inform the other Representative of any possible projects or business opportunities which may be contemplated by this Agreement, and the Representatives will make a decision whether to jointly pursue such projects or business opportunities in a timely fashion in light of all relevant and appropriate business considerations. 6.6 Each Representative shall designate a deputy (each a "Deputy Representative" and collectively the "Deputy Representatives") who shall act on his behalf only in the event that the Representative is unavailable and action of the Steering Committee is to be taken. Each Deputy Representative may attend all meetings of the Steering Committee and may participate in such meetings but shall not vote at such meetings unless the Deputy Representative is acting on behalf of his Representative pursuant to the preceding sentence. The initial Deputy Representative designated by Robert E. Prince shall be Robert F. Shawver and the initial Deputy Representative designated by Richard H. Peebles shall be determined at a later time provided that such initial Deputy Representative is subject to the approval of Robert E. Prince. Replacement of the designated Deputy Representative, either permanently or at any time, by a particular Representative shall require the written consent of the other Representative, which consent shall not be unreasonably withheld or delayed. 6.7 In the event that the Representatives cannot agree on a matter under the authority of the Steering Committee and such inability to reach an agreement continues for sixty (60) calendar days or such other period of time that causes the interests of one or both of the parties to be adversely affected, then the Representatives shall consider in good faith either (i) delegating the authority of the Steering Committee to such other members of their respective organizations who may be appropriate to assume such authority or (ii) adopting such other appropriate means for resolving the disagreement. ARTICLE VII CLASSIFIED INFORMATION Access to classified information may be required in the performance of the services hereunder and both parties shall use their best efforts to meet the applicable security clearance requirements of the DOE and the United States Government at all times relevant to this Agreement. ARTICLE VIII OTHER COVENANTS AND AGREEMENTS BETWEEN THE PARTIES 8.1 Unless otherwise agreed, until the later of (i) the termination of this Agreement or (ii) BNFL no longer owns an interest in GTSD, BNFL hereby agrees to perform, directly or through a subcontractor or other party, vitrification of any substance only with GTSD, provided that BNFL and GTSD can agree on mutually acceptable terms and conditions. -9- 8.2 BNFL and GTSD agree to extend to each other a "most favored nation" approach for working jointly on any projects. 8.3 (a) BNFL and GTSD intend to jointly pursue vitrification projects on a "preferred partner" basis. (b) The parties will meet at least once every six (6) months to discuss potential opportunities and strategies for pursuing projects outside of the United States. 8.4 The parties will use their reasonable efforts to cause their respective Affiliates to comply with the provisions of Sections 8.1, 8.2 and 8.3(a). 8.5 If GTSD is intending to borrow funds from a lender whereby it is contemplated that such lender would have a security interest in the GTSD Technology (as hereinafter defined), then GTSD covenants and agrees that it shall use its best efforts to cause such lender (the "Lender") to execute as part of the loan documents (the "Loan") a non-disturbance agreement, or similar provision having like effect, granting to GTSD, BNFL or their Affiliates, as appropriate, the limited, non-exclusive right to continue using the GTSD Technology on any projects jointly undertaken by GTSD and BNFL or by a Project Organization with terms substantially similar to those given by First Fidelity Bank, N.A. to GTSD and BNFL in its non-disturbance agreement of even date herewith (as determined in the reasonable discretion of the Steering Committee) (any such agreement or provision referred to herein as a "Non-Disturbance Agreement"). If, after GTSD uses such best efforts for a reasonable time and the Lender will not agree to give a Non-Disturbance Agreement, BNFL shall join the negotiations with GTSD and the Lender solely on the issue of the Non-Disturbance Agreement and BNFL shall use its best efforts to persuade the Lender to give a Non-Disturbance Agreement. If, after BNFL uses such best efforts for a reasonable time, the Lender will not agree to give a Non-Disturbance Agreement, GTSD shall be permitted to enter into the Loan arrangement only if BNFL first consents in writing to the Loan (the "Consent"); provided, however, that the Consent shall be required only for the portions of the Loan which are required in order to protect continuing access to the GTSD Technology as such GTSD Technology relates to any Project. The Consent shall not be unreasonably withheld by BNFL; and, in determining whether to grant such Consent, the sole consideration of BNFL shall be whether the withholding of such Consent is necessary in order to protect access to the GTSD Technology covered by the Sublicense Agreement or BNFL's continuing access to the GTSD Technology as such access is contemplated under this Agreement. -10- ARTICLE IX PROPRIETARY AND CONFIDENTIAL INFORMATION 9.1 Proprietary or confidential information (relating to technical and non-technical matters) may be transferred between the parties during the term of this Agreement, subject to the confidentiality and use restrictions provided herein. Notwithstanding any other provisions herein, the parties agree that during the term of this Agreement and for a period of five (5) years thereafter, any proprietary or confidential information exchanged during the performance of this Agreement shall be used by the receiving party for the exclusive purpose of performing this Agreement, of preparing a Proposal hereunder or performing a Contract pursuant hereto. 9.2 Each of the parties hereto agrees that during the term of this Agreement and for a period of five (5) years thereafter, it shall not, and it shall use reasonable efforts to cause its Affiliates, directors, officers, employees, agents and advisors not to, reveal, divulge or make known to any person (other than the other party hereto or the Project Organization) or use for its own account or for the account of any person any proprietary or confidential information. For purposes of this Agreement, "proprietary or confidential information" includes, without limitation, any method, record, data, report, trade secret, pricing policy, bid amount, bid strategy, rate structure, personnel policy, method or practice of soliciting or obtaining or doing business by a party or any other information regarding a party, other than information that can be demonstrated to have (i) been publicly known prior to the date of this Agreement, (ii) become well known by publication or otherwise not due to the unauthorized act or omission on the part of a party hereto or (iii) been obtained by a party hereto from a source other than the other party hereto, provided that such source was not bound by an obligation of confidentiality. 9.3 Notwithstanding anything herein to the contrary, a party may disclose proprietary or confidential information regarding the other party to one of its Affiliates provided that such Affiliate executes and delivers a confidentiality agreement reasonably satisfactory to the other party. 9.4 In addition to the confidentiality provisions provided in the preceding paragraph, BNFL shall ensure that in any project undertaken by it or an Affiliate of BNFL within a period of five (5) years beyond the later of (i) the termination of this Agreement, or (ii) the termination of BNFL's right to designate a member or observer to GTSD's Board of Directors pursuant to Article XVI hereto, which involves the performance of vitrification of any substance other than high level radioactive waste, and which does not involve GTSD, all intellectual property, including know-how, technical data, designs and the like relating to the GTSD vitrification technology and any other proprietary or confidential information of GTSD, is protected and not made available to that project, without the written consent of GTSD. -11- ARTICLE X INTELLECTUAL PROPERTY RIGHTS 10.1 Each party shall remain the sole owner of its intellectual property rights, technical data, know-how, designs, specifications and the like generated or acquired prior to the execution of this Agreement, and any transfer of such information from one party to another (or to a Project Organization) under this Agreement is to be used only for the express purpose for which it was transferred. Any additional use of that information would be the subject of a separate license or other agreement to be entered into between the parties. 10.2 No license to the other party (or to a Project Organization) under any intellectual property rights is granted or implied by conveying proprietary or confidential information to that party (or to a Project Organization) for any purpose whatsoever other than the limited purposes of the parties permitted under this Agreement. None of such information which may be transmitted or exchanged by the respective parties (or by a Project Organization) shall constitute any representation, warranty, assurance, guaranty or inducement by either party to the other (or to a Project Organization) with respect to the infringement of patents or other rights of others. 10.3 Subject to the right, if any, of the DOE and to any express provisions contained in any Subcontract between the parties hereto (which said provisions shall prevail in the event of any conflict with this clause) and subject to the provisions herein contained, all intellectual property produced pursuant to this Agreement shall vest in and at all times remain vested in the party originating that intellectual property; provided that if the parties jointly produce material pursuant to this Agreement then unless the parties previously agree in writing to the contrary, all intellectual property rights in such jointly produced material shall vest jointly in each of the parties without accounting to the other. The parties undertake to enter into good faith negotiations to agree upon such measures of protection as patents and like instruments and the establishment thereof, as the parties agree to be appropriate. 10.4 In this regard, it is recognized that the parties may be required under provisions contained in the Contract to grant licenses or other rights to the DOE and, in that event they shall by reasonable agreement do so. Any such granting of licenses or other rights shall be mutually agreed by the parties. ARTICLE XI LOAN FROM BNFL TO GTSD In connection with the teaming arrangement contemplated by this Agreement and contemporaneous with the execution of this Agreement, BNFL shall loan to GTSD $10.0 million. Such loan shall be evidenced by a Convertible Debenture, a form of which Convertible Debenture is attached hereto as APPENDIX I. All of the terms and conditions with respect to the loan by BNFL to GTSD are included in the Convertible Debenture. -12- ARTICLE XII PROVIDING TECHNOLOGY TO JOINT PROJECTS 12.1 With respect to any Projects jointly undertaken by GTSD and BNFL or by a Project Organization pursuant to the terms of this Agreement, GTSD shall provide to such Projects through its involvement in such Projects all of the rights and know-how in the technology currently owned by GTSD, or owned by GTSD in the future, or in which GTSD has rights of use now or in the future, including without limitation all of the Intellectual Property as defined in Section 19.1 and all improvements and enhancements thereto for the vitrification of worldwide radioactive and mixed waste (excluding Germany) (all such technologies are collectively referred to herein as the "GTSD Technology"). The contribution of the GTSD Technology to a Project shall be undertaken through GTSD and shall not be deemed in any way to constitute an assignment or sublicense of such technology to any other party. 12.2 In the event that GTSD is (i) debarred or suspended from doing business with the DOE or the United States Government, (ii) legally prohibited in any way from being involved in a Project and providing the GTSD Technology to the Project pursuant to Section 12.1 or (iii) unwilling or unable to provide the GTSD Technology to any Project pursuant to Section 12.1 for any reason, then GTSD shall license or sublicense, as applicable, such technology to the Project Organization or take such other action as is determined by the Steering Committee to enable either BNFL or the Project Organization that continues to be engaged in the Project to continue to use the GTSD Technology until completion of such Project. In the event that GTSD shall be required to provide a license or sublicense pursuant to this Section 12.2, such license or sublicense shall be provided on terms which enable GTSD to receive the same economic benefit it would have received had it been able to participate in the Project and GTSD will not be entitled to receive any additional consideration above such amount for the granting of the license or sublicense hereunder. 12.3 GTSD hereby covenants and agrees that it will not take any action, or fail to take a required action, either of which results in the termination of the license agreement by and between GTSD and Drs. Pedro B. Macedo and Theodore A. Litovitz (collectively the "Inventors") dated August 17, 1992 (the "License Agreement") prior to the expiration of its natural term. GTSD hereby covenants and agrees that it will use its best efforts to maintain the License Agreement and the underlying Intellectual Property (as hereinafter defined) in full force and effect so long as GTSD and BNFL are jointly pursuing a Project or participating jointly in a Project, however, GTSD shall have the right to amend the License Agreement or enter into a new license agreement with the Inventors provided that the terms of such new license agreement would not adversely affect GTSD's performance of its obligations hereunder. -13- ARTICLE XIII SHARING OF PROJECT FEES 13.1 Notwithstanding any other arrangement for the sharing of fees with respect to a Project or the compensation for goods or services provided to a Project by each of the parties, which shall be determined by Steering Committee for each particular Project, the parties hereby covenant and agree that they will share a portion of the fees from each Project in the following manner: (a) A fee (the "Project Fee") equal to three percent (3%) of the total revenues related to the vitrification portion of a Project will be shared equally by GTSD and BNFL until such time as BNFL has received an amount (including amounts previously distributed to BNFL pursuant to this paragraph) equal to a twelve percent (12%) cumulative annual yield on the amount of the Article XII and Non-Competition Fee paid by BNFL to GTSD pursuant to Article III for the particular Project. Thereafter, such Project Fee will be distributed eighty percent (80%) to GTSD and twenty percent (20%) to BNFL. (b) In order to determine the total revenues related to the vitrification portion of a given Project, the total revenues from such Project shall be multiplied by a fraction, the numerator of which is the capital cost of the Project related to the vitrification portion and the denominator of which is the total capital cost of the Project. For purposes of this Section 13.1, the term "total revenues from a Project" shall mean all amounts or proceeds received by GTSD, BNFL or a Project Organization on a Project, less the following deductions: (i) discounts allowed and taken for prompt payment, (ii) allowances for returns or other trade credits, (iii) all sales, use and other taxes imposed, (iv) packaging and transportation costs and (v) the cost of services contracted to other subcontractors providing technologies and services complimentary to the Technology. The total capital cost of the Project and the capital cost of the Project related to the vitrification portion will be determined by the Steering Committee prior to commencement of the Project. (c) In the event that GTSD, in order to provide the GTSD Technology, must obtain from a third party a license or other authorization under such third party's valid patent or other proprietary rights and must pay a license or other fees thereunder to such third party in order to use any portion of the GTSD Technology, then in such event, GTSD shall be entitled to recover such license or other fees payable to such third party out of the Project Fee prior to the distribution arrangement contemplated by paragraph (a) of this Section 13.1 and such license or other fees payable to such third party shall reduce on a dollar for dollar basis the amount of the Project Fee distributable to each of GTSD and BNFL pursuant to paragraph (a) of this Section 13.1. (d) The Project Fee provided for in this Article XIII shall be based on Project revenues received by GTSD, BNFL or a Project Organization during each calendar year and shall be paid by March 31st of the following year. All payments required to be made under this -14- Agreement shall be made in United States funds. At the time of payment of the Project Fee, the Steering Committee shall render to the parties hereto a statement in writing showing computation of such Project Fee payable for such year. (e) Notwithstanding anything herein to the contrary, in the event that GTSD has defaulted on any of its payment obligations under the Convertible Debenture, BNFL shall be entitled to receive the entire Project Fee, less amounts owed to GTSD pursuant to paragraph (c) of this Section 13.1, until such time as the payment default has been cured or the payment default has been waived by BNFL. All of GTSD's portion of the Project Fee directed to BNFL pursuant to this paragraph shall be applied in whole toward the cure of the payment default under the Convertible Debenture. 13.2 All other fees and compensation for goods and services provided by the parties to a Project shall be determined by the Steering Committee prior to the commencement of the Project and shall be reflected in an appropriate Subcontract. ARTICLE XIV RESEARCH AND DEVELOPMENT COST SHARING ARRANGEMENT 14.1 In connection with the teaming arrangement contemplated by this Agreement, BNFL hereby covenants and agrees to provide research and development funding to GTSD of at least $500,000 per year commencing on the date hereof and continuing until the fifth anniversary of the date of this Agreement in order to develop, enhance and improve the GTSD Technology and to develop related technologies. 14.2 The budget for the expenditure of the research and development funds and the authorization to expend such funds shall be determined by the Steering Committee. Within thirty (30) calendar days of when the budget for the expenditure of the research and development funds and the authorization to expend such funds has been established by the Steering Committee, BNFL shall provide such funds to GTSD for the research and development efforts. The budget for the expenditure of the research and development funds and the authorization to expend such funds for the one year period commencing on the date hereof shall be determined within thirty (30) calendar days of the date hereof. For each successive year, the budget for the expenditure of the research and development funds and the authorization to expend such funds shall be determined by the Steering Committee at least thirty (30) calendar days prior to the commencement of such one year period. 14.3 GTSD will administer and manage the research and development efforts performed in the United States and an Affiliate of BNFL will administer and manage the research and development efforts performed in the United Kingdom, but GTSD shall participate in such research and development activities in the United Kingdom and shall provide any necessary technology rights that it owns to such activities. The Steering Committee shall determine who is to administer and manage the research and development efforts performed outside of the -15- United States and the United Kingdom. Any party other than GTSD that is to administer and manage the research and development efforts relating to the GTSD Technology will be required to execute an appropriate confidentiality agreement, prior to its commencement of research and development efforts, containing restrictions on the disclosure and use by such party of such technology. 14.4 All goods and services provided by each of the parties in furtherance of the research and development efforts contemplated by this Article XIV shall be at such party's cost, including an allocation of reasonable overhead costs and expenses (including without limitation general and administrative expenses), without any markup or built-in profit to such party. 14.5 As to the research and development efforts which are the subject of this Article XIV, each party shall remain the sole owner of its technologies (including any enhancements or improvements thereto) resulting from the research and development efforts contemplated by this Article XIV, and the ownership and access rights of the parties with respect to any such intellectual property regarding any such technologies, other than each party's respective technologies, shall be determined on a case by case basis by the Steering Committee in its reasonable discretion either (i) at the time the budget for the expenditure of the research and development funds and the authorization to expend such funds is determined or (ii) at the time such intellectual property is developed. 14.6 In consideration of its agreement to provide the research and development funding commitment specified herein, BNFL shall receive the benefit of such enhancements or improvements to the GTSD Technology through its sublicense arrangement pursuant to Article XV below and shall also receive all information, data and know-how that are the product of the research and development activities under the arrangement specified by this Article XIV. 14.7 The research and development funding provided by BNFL pursuant to this Article XIV is to be used solely for research and development of the GTSD Technology and is not in any way to be construed as part of the consideration for the sublicense granted by GTSD to BNFL pursuant to Article XV. 14.8 The obligations of each of the parties pursuant to this Article XIV hall be a material obligation of this Agreement. -16- ARTICLE XV GRANT OF SUBLICENSE TO BNFL In connection with the teaming arrangement contemplated by this Agreement and contemporaneous with the execution of this Agreement, GTSD and BNFL shall enter into a sublicense agreement (the "Sublicense Agreement"), a form of which is attached hereto as APPENDIX II, pursuant to which GTSD shall grant to BNFL a sublicense to the GTSD Technology for the United Kingdom, subject to such other terms, conditions, limitations and conditions as are contained in the Sublicense Agreement. ARTICLE XVI BNFL REPRESENTATION ON GTSD BOARD OF DIRECTORS 16.1 As long as the Convertible Debenture is outstanding, BNFL shall have the right to designate an observer to GTSD's Board of Directors who shall have visitation rights on GTSD's Board of Directors, but no right to vote on any matter that comes before GTSD's Board of Directors. The observer designated by BNFL pursuant to this Section 16.1 shall not be considered a member of GTSD's Board of Directors for any purpose. As long as the observer rights provided herein are in effect, the observer designated by BNFL shall be notified in writing of any action taken by written consent of the Board of Directors without a meeting having been held. The visitation rights provided in this Section 16.1 shall be subject to the sole discretion of GTSD's Board of Directors who may suspend such rights for a portion of a meeting, for an entire meeting, for any action taken by written consent of the Board of Directors of GTSD or terminate such rights altogether. BNFL shall be promptly notified of any action taken by written consent of the Board of Directors. 16.2 GTSD covenants and agrees that it shall take all action that may be required of it in order to effect the terms of the agreement by and between BNFL and The Carlyle Group of even date herewith relating to the rights of BNFL to designate a member or an observer to GTSD's Board of Directors under certain circumstances. ARTICLE XVII TERM OF THE AGREEMENT This Agreement shall commence on the date hereof and remain in effect for a period of five (5) years thereafter, unless terminated prior thereto in accordance with Article XVIII. ARTICLE XVIII TERMINATION EVENTS 18.1 This Agreement may be terminated prior to the end of its natural term as provided in Article XVII at any time by mutual agreement of both parties. -17- 18.2 A party hereto shall have the right to terminate this Agreement by giving prior written notice upon the occurrence of any of the following events involving the other party hereto: (i) A material breach of this Agreement by the other party, including without limitation the representations and warranties contained in Article XIX, which if capable of remedy, has not been remedied by such breaching party within thirty (30) calendar days of written notice by the non-breaching party; (ii) The filing of any petition under the United States Bankruptcy Code, in effect from time to time, or any similar Federal or state statute by or against the other party if such petition is not dismissed within 120 days after service upon the other party, or the failure of the other party generally to pay its debts as such debts become due; (iii) The filing of an application for the appointment of a receiver for, the making of a general assignment for the benefit of creditors by, or the insolvency of, the other party; or (iv) The other party's liquidation, dissolution, termination of existence or cessation of the conduct of its business operations. 18.3 The following provisions shall survive termination of this Agreement: SECTION 8.1 ARTICLE IX - PROPRIETARY AND CONFIDENTIAL INFORMATION ARTICLE X - INTELLECTUAL PROPERTY RIGHTS ARTICLE XII - PROVIDING TECHNOLOGY TO JOINT PROJECTS ARTICLE XVI - BNFL REPRESENTATION ON GTSD BOARD OF DIRECTORS ARTICLE XX - PUBLIC DISCLOSURE ARTICLE XXIII - RESPONSIBILITY FOR COSTS INCURRED ARTICLE XXIV - COMPLIANCE WITH LAWS ARTICLE XXX - ARBITRATION -18- ARTICLE XIX REPRESENTATIONS AND WARRANTIES OF THE PARTIES 19.1 GTSD hereby represents and warrants to BNFL as of the date hereof as follows: (i) GTSD is a corporation duly incorporated and validly existing under the laws of the State of Delaware. (ii) GTSD has all requisite corporate power and authority to enter into this Agreement, the Convertible Debenture and the Sublicense Agreement and carry out and perform its obligations under the terms of such agreements. (iii) The execution, delivery and performance of this Agreement, the Convertible Debenture and the Sublicense Agreement have been duly authorized and approved by all necessary corporate action and this Agreement, the Convertible Debenture and the Sublicense Agreement, when duly executed and delivered by GTSD, will constitute valid and legally binding obligation of GTSD, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. (iv) The execution and performance of this Agreement, the Convertible Debenture and the Sublicense Agreement do not and will not (i) violate GTSD's certificate of incorporation or bylaws, or the terms of any judgment, decree or order of any court or administrative authority or the terms of any material agreement to which it is a party or by which it is bound or (ii) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any governmental authority or third party, excluding those that have already been obtained prior to the date hereof. (v) There is no litigation, arbitration, mediation or other investigation or proceeding pending or, to the best of GTSD's knowledge, threatened or in prospect, against GTSD with respect to the transactions contemplated by this Agreement. (vi) Schedule 19.1 attached hereto sets forth, as of the date hereof, a true, complete and accurate list of all (i) United States and foreign patents and patent applications, (ii) unpatented technology, including trade secrets, know-how, proprietary rights and information, and expertise, (iii) United States, state and foreign trademark applications and registrations, trade names and material common-law marks, (iv) United States and foreign registered and material unregistered copyrighted works, including any computer programs and (v) any license, joint venture or other material agreements relied on, related to, used or enjoyed by GTSD in connection with its business of vitrifying radioactive and mixed wastes (collectively, the "Intellectual Property"). -19- (vii) Except as set forth in SCHEDULE 19.1, GTSD either (a) owns or (b) holds adequate, enforceable, valid and binding licenses to use, transfer, sublicense and otherwise grant rights to third parties in, all of the Intellectual Property. (viii) Except as set forth in SCHEDULE 19.1, GTSD has no knowledge nor any basis to believe that (a) any of the Intellectual Property or (b) any past operations or currently planned operations, activities or products of GTSD, infringe on any intellectual property, proprietary, contract or other rights of any third party. (ix) Except as set forth in SCHEDULE 19.1, to the best of GTSD's knowledge, no entity or person is infringing the rights of GTSD with respect to the Intellectual Property and GTSD has no reasonable basis to claim such infringement. (x) Except as set forth in SCHEDULE 19.1 and other than the rights of the Inventors, (a) the Intellectual Property is free and clear of any liens, pledges, assignments, obligations or any other encumbrances of any nature, and (b) no consents or approvals of any person or entity are necessary to sell, convey, transfer, assign, deliver or sublicense any of the Intellectual Property to any third party. (xi) The patents, registered trademarks and registered copyrights listed on SCHEDULE 19.1 are subsisting, valid and enforceable, and have been maintained by the Company. (xii) Except as set forth in SCHEDULE 19.1, none of (a) the Catholic University, (b) the Vitreous State Laboratory of the Catholic University, (c) the United States Government or any United States government agency, (d) any foreign government or foreign government agency or (e) any other person or entity (other than GTSD, the Inventors and First Fidelity Bank, N.A.) have any rights whatsoever in any of the Intellectual Property. 19.2 BNFL hereby represents and warrants to GTSD as of the date hereof as follows: (i) BNFL is a corporation duly incorporated and validly existing under the laws of the State of Delaware. (ii) BNFL has all requisite corporate power and authority to enter into this Agreement and the Sublicense Agreement and carry out and perform its obligations under the terms of such agreements. (iii) The execution, delivery and performance of this Agreement and the Sublicense Agreement have been duly authorized and approved by all necessary corporate action and this Agreement and the Sublicense Agreement, when duly executed and delivered by BNFL, will constitute valid and legally binding obligation of BNFL, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. -20- (iv) The execution and performance of this Agreement and the Sublicense Agreement do not and will not (i) violate BNFL's certificate of incorporation or bylaws, or the terms of any judgment, decree or order of any court or administrative authority or the terms of any material agreement to which it is a party or by which it is bound or (ii) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any governmental authority or third party, excluding those that have already been obtained prior to the date hereof. (v) There is no litigation, arbitration, mediation or other investigation or proceeding pending or, to the best of BNFL's knowledge, threatened or in prospect, against BNFL with respect to the transactions contemplated by this Agreement. 19.3 Each of the parties hereto covenants and agrees to indemnify the other party and its Affiliates, directors, officers, employees, agents, successors and assigns and hold such other person harmless against any and all liabilities, losses, damages, claims, deficiencies, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) actually suffered or incurred by such other person (hereinafter a "Loss"), arising out of or resulting from the breach of any representation or warranty by such party contained herein. 19.4 Promptly after the assertion by any third party of any claim against any party entitled to be indemnified under this Article XIX (the "Indemnitee") that, in the judgment of such Indemnitee, may result in the incurrence by such Indemnitee of Losses for which such Indemnitee would be entitled to indemnification pursuant to this Agreement, such Indemnitee shall deliver to the other party who has indemnified such Losses hereunder ("Indemnitor") a written notice describing such claim. Such Indemnitor may participate in and, at its option upon acknowledgment of Indemnitee's right to indemnification for such matter, assume the defense of the Indemnitee against such claim, including the employment of counsel, who shall be reasonably satisfactory to such Indemnitee. In such case, any Indemnitee shall have the right to employ separate counsel in any such action or claim and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnitor unless (i) the Indemnitor shall have failed, within a reasonable time after having been notified by the Indemnitee of the existence of such claim as provided in the preceding sentence, to assume the defense of the such claim, (ii) the employment of such counsel has been specifically authorized in writing by the Indemnitor or (iii) the named parties to any such action (including impleaded parties) include both such Indemnitee and the Indemnitor and such Indemnitee shall have been advised in writing by Indemnitor's counsel that there may be conflicting interests between Indemnitee and the Indemnitor in the legal defense thereof. No Indemnitor shall be liable to indemnify any Indemnitee for any compromise or settlement of any such action or claim effected without the consent of the Indemnitor. 19.5 In the event that GTSD is required under Section 19.3 to make any indemnification to BNFL, and GTSD cannot or does not make such required payment when -21- required, for whatever reason, BNFL or the Project Organization, as applicable, shall be entitled to offset any such unpaid amounts against any payment otherwise due to GTSD under this Agreement. In the event that BNFL is required under Section 19.3 to make any indemnification to GTSD, and BNFL cannot or does not make such required payment when required, for whatever reason, GTSD or the Project Organization, as applicable, shall be entitled to offset any such unpaid amounts against any payment otherwise due to BNFL under this Agreement or under the Convertible Debenture. In the event the Project Organization withholds amounts otherwise due a party pursuant to this Section 19.5, the Project Organization will promptly forward such amounts to the other party. 19.6 All representations and warranties made pursuant to or in connection with this Agreement shall survive the date hereof, but shall terminate three (3) years after the date hereof; provided, that there shall be no such termination with respect to any representation or warranty as to which a bona fide claim has been asserted prior to such date. 19.7 Notwithstanding anything herein to the contrary, each party hereto shall not be liable as Indemnitor for any Losses of the other party under this Article XIX unless and until the aggregate amount of all Losses hereunder by such other party equals or exceeds $50,000, in which case the indemnifying party shall be liable for all such losses of the other party equal to or greater than $50,000, up to a maximum aggregate amount of $10,000,000. ARTICLE XX PUBLIC DISCLOSURE Any news release, public announcement, advertising, publicity or discussion with any other contractor or vendor whatsoever pertaining to the performance or the nature of the work related to this Agreement shall be subject to the express prior written approval of all of the parties hereto. ARTICLE XXI WAIVER AND SEVERABILITY 21.1 The waiver by any of the parties of any breach of any provision hereof by another shall not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself. 21.2 If one or more of the provisions of the Agreement shall be found to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed to be modified consistent with the intent of the parties to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. -22- ARTICLE XXII RELATIONSHIP OF THE PARTIES Nothing contained in this Agreement shall be construed to create any joint venture, pooling arrangement or partnership, whether statutory or otherwise, and the rights and obligations of the parties hereto shall be limited to those expressly recited herein. Nothing in this Agreement shall be construed to grant to either of the parties hereto any right to make commitments of any kind for or on behalf of the other party hereto without the prior written consent of said other party. ARTICLE XXIII RESPONSIBILITY FOR COSTS INCURRED Each party shall bear all of the costs and expenses entailed in its own performance of its activities contemplated by this Agreement, excluding any work to be performed pursuant to any Subcontract resulting from this Agreement. ARTICLE XXIV COMPLIANCE WITH LAWS Each party agrees to comply with applicable provisions of all laws, ordinances, orders, rules and regulations of the United States as they relate to the parties' performance of this Agreement and each of the parties agrees to require any and all consultants, vendors and agents retained in conjunction with the activities described in this Agreement to do likewise; and such compliance shall be a material obligation of this Agreement. ARTICLE XXV NOTICES Except as otherwise expressly stated, all notices required to be given or which may be given under this Agreement shall be in writing and shall be deemed given upon the earlier of (i) when it is personally delivered, (ii) three (3) days after having been mailed by certified mail, postage prepaid, return receipt requested, (iii) two (2) days after having been sent by recognized overnight delivery service or (iv) one (1) day after having been sent by facsimile transmission, addressed as follows: -23- If to: (a) GTSD: GTS DURATEK, INC. 8955 Guilford Road, Suite 200 Columbia, MD 21046 Attn: Robert E. Prince, President and Chief Executive Officer Telecopy No.: (301) 621-8211 (b) BNFL: BNFL INC. 9302 Lee Highway, Suite 950 Fairfax, Virginia 22031 Attn: K. Edward Newkirk, General Counsel Telecopy No.: (703) 359-0442 ARTICLE XXVI COMPLETE AGREEMENT This Agreement together with the other agreements referenced herein to be entered into between the parties contains the complete agreement and understanding between the parties concerning the subject matter hereof and shall supersede all other agreements, understandings or commitments between the parties as to such subject matter. ARTICLE XXVII ASSIGNMENT The obligations and rights of each party hereunder shall not be assignable without the prior written consent of the other party; provided, however, that a party hereto may without the consent of the other party assign this Agreement to any successor owner of such party or its business resulting from merger, consolidation, sale of the business or otherwise so long as such successor agrees in writing to assume the party's obligations under this Agreement in a form and manner reasonably acceptable to the other party. Notwithstanding anything herein to the contrary, BNFL may assign its obligations and rights hereunder to an Affiliate upon the written consent of GTSD, which consent will not be unreasonably withheld or delayed. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties' respective heirs, legal representatives, successors and assigns. -24- ARTICLE XXVIII WAIVER, MODIFICATION OR AMENDMENT No waiver, modification or amendment of any provision of this Agreement shall be effective, binding or enforceable unless in writing and signed by all of the parties hereto. ARTICLE XXIX GOVERNING LAW The validity of this Agreement and of any of the terms or provisions as well as the rights and duties of the parties hereunder shall be governed by the laws of the State of Maryland, without reference to any conflict of law or choice of law principles in the State of Maryland that might apply the law of another jurisdiction. ARTICLE XXX ARBITRATION Any disputes between the parties relating to the terms of this Agreement, or the breach thereof, shall be submitted to binding arbitration in Baltimore, Maryland, in accordance with the rules of the American Arbitration Association. In the event that either party desires to arbitrate any such dispute, such party shall so notify the other party and the parties shall endeavor, for a period of thirty (30) days, to resolve such dispute without arbitration. In the event that the parties cannot resolve the dispute within such thirty (30) day period, then within ten (10) days thereafter, the parties shall jointly designate an arbitrator to hear the dispute, or, if the parties are unable to jointly select an arbitrator, an arbitrator shall be chosen by the President of the American Arbitration Association from lists of candidates provided by each of the parties. The decision of the arbitrator shall be final and binding upon the parties, their successor and assigns, and they shall comply with such decision in good faith, and each party hereby submits itself to the jurisdiction of the courts of the place where the arbitration is held, but only for the entry of judgment with respect to and to enforce the decision of the arbitrator hereunder. The arbitrator may order specific performance or other equitable relief or remedies to the extent it deems it appropriate, in any situation in which a court could so order. Each party shall pay all of its own expenses in connection with such arbitration and one-half of the arbitrator's fees and expenses. -25- ARTICLE XXXI CONSTRUCTION Headings or captions of this Agreement are for reference only and are not to be construed in any way as part of this Agreement, nor in the interpretation of this Agreement. The masculine pronoun shall include the feminine and neuter, and vice versa, where the context so requires. ARTICLE XXXII COUNTERPARTS This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] -26- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WITNESS/ATTEST: GTS DURATEK, INC. /s/ Diane R. Brown By: /s/ Robert E. Prince - ---------------------------------- ------------------------------------ Diane R. Brown, Secretary Name: Robert E. Prince Title: President and Chief Executive Officer BNFL INC. /s/ Richard H. Peebles By: /s/ Rolland A. Langley - ---------------------------------- ------------------------------------ Richard H. Peebles, Vice President Name: Rolland A. Langley Title: President -27- APPENDIX I FORM OF CONVERTIBLE DEBENTURE EX-10.21 4 EXHIBIT 10.21 SUBLICENSE AGREEMENT THIS SUBLICENSE AGREEMENT (the "Agreement") is made this 7th day of November, 1995, by and between GTS Duratek, Inc., a Delaware corporation ("GTSD") and BNFL Inc., a Delaware corporation ("BNFL"). W I T N E S S E T H : WHEREAS, Dr. Pedro B. Macedo and Dr. Theodore A. Litovitz (collectively the "Inventors") are the owners of certain patents and patent applications, and possess certain technology and know-how relating to in-furnace vitrification of radioactive and hazardous waste, to the use of glass matrices suitable for the encapsulation of these materials and to the use of ion exchange as a method of removing radioactive and hazardous materials from liquids; WHEREAS, GTSD has obtained an exclusive license, with the right to grant sublicenses, under said patents and patent applications and the exclusive right to use such technology pursuant to that certain License Agreement between GTSD and the Inventors dated August 17, 1992 (the "License Agreement"), a copy of which is attached hereto as ANNEX A; WHEREAS, GTSD and BNFL have entered into a Teaming Agreement dated as of the date hereof (the "Teaming Agreement") pursuant to which GTSD and BNFL have agreed to jointly pursue contracts and other potential business opportunities providing services to the United States Department of Energy; WHEREAS, as contemplated by the Teaming Agreement, BNFL will invest $10.0 million in GTSD in the form of a convertible debenture (the "Convertible Debenture"), convertible into the common stock of GTSD; WHEREAS, BNFL desires a sublicense under said patents and patent applications and the right to utilize such technology for processing radioactive or mixed waste in the United Kingdom, and GTSD is willing to grant such sublicense and rights; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: I. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: a. "Patent Rights" shall mean United States patents and foreign patents, and United States and foreign patent applications listed on SCHEDULE A, and all other future United States and foreign patent applications relating thereto in the Sublicensed Field, including any -1- continuations, continuations-in-part, divisions, reissues, renewals, additions and extensions thereof; and all United States and foreign patents that may be granted thereon. b. "Affiliate" of a specified person shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. c. "Technology" shall mean all ideas, inventions (patentable and unpatentable), know-how and technical information either conceived, invented, discovered or possessed by GTSD, including but not limited to processes, articles, devices, equipment, techniques, compositions, formulations, data, etc., and any use thereof, all in the Sublicensed Field and either acquired by GTSD through the License Agreement or otherwise. d. "Sublicensed Subject Matter" shall mean (i) any process, composition of matter, article of manufacture or apparatus covered by any valid product or process claim, in any patent included in the Patent Rights or arising out of or resulting from the use of the Technology. e. "Sublicensed Field" shall mean stabilizing, fixating or immobilizing by melting, vitrification, sintering or any other thermal or chemical method any radioactive material and/or any other non-radioactive material when intermingled with the radioactive material ("mixed waste"), and to all uses thereof. f. "License Year" shall mean any calendar year. g. "Sublicensed Territory" shall mean only the United Kingdom and no other territory. Unless a particular context clearly indicates to the contrary, all terms not herein defined shall have the same meanings given to them in the License Agreement. II. GRANT OF SUBLICENSE GTSD hereby grants to BNFL a non-exclusive sublicense, without the right to sublicense, to market, sell and practice the inventions covered by the Patent Rights and the Technology in the Sublicensed Field in the Sublicensed Territory to the full end of the term of this Sublicense. BNFL shall not be permitted by this Agreement to market, sell and practice the inventions covered by the Patent Rights and the Technology outside of the Sublicensed Territory. Nothing in this Agreement shall be construed to prohibit GTSD from the granting of other similar sublicenses to any person or entity within the Sublicensed Territory or to prohibit GTSD from marketing, selling and practicing the inventions covered by the Patent Rights and the Technology in the Sublicensed Territory. -2- III. DISCLOSURE AND SUBLICENSE OF FUTURE TECHNOLOGY All Technology in the Sublicensed Field which GTSD creates, develops or acquires through the License Agreement, the research and development cost sharing arrangement contemplated by Article XIV of the Teaming Agreement or as GTSD otherwise acquires and comes into being during the term of this Agreement ("Future Technology") shall be included within the definition of Technology and sublicensed to BNFL pursuant to the terms of this Agreement, and such Future Technology shall be fully disclosed to BNFL in a timely manner. IV. ROYALTY PAYMENTS a. In consideration of the sublicense and rights herein granted, BNFL shall pay to GTSD in the manner herein provided unless terminated as hereinafter provided the following: 1. An annual royalty (the "Annual Royalty") of three percent (3%) of the Net Sales Value (as defined below) of the Sublicensed Subject Matter in the Sublicensed Territory so long as (i) the Teaming Agreement is in effect, (ii) GTSD and BNFL are actively pursuing or participating in joint projects, to the extent able, pursuant to the terms of the Teaming Agreement, as determined in the reasonable discretion of the Steering Committee (as such term is defined in the Teaming Agreement) and (iii) BNFL retains in whole the Convertible Debenture (other than for U.S. regulatory restrictions as contemplated by Section 11.1 of the Convertible Debenture) or has not sold, transferred, disposed of, pledged or hypothecated any of the shares of GTSD common stock received upon conversion of the Convertible Debenture. Upon the earlier of the following: (i) the termination of the Teaming Agreement, (ii) GTSD and BNFL are no longer actively pursuing or participating in joint projects, to the extent able, pursuant to the terms of the Teaming Agreement, as determined in the reasonable discretion of the Steering Committee (as such term is defined in the Teaming Agreement) or (iii) BNFL no longer retains in whole the Convertible Debenture (other than for U.S. regulatory restrictions as contemplated by Section 11.1 of the Convertible Debenture) or has sold, transferred, disposed of, pledged or hypothecated any of the shares of GTSD common stock received upon conversion of the Convertible Debenture, the Annual Royalty shall be seven and one-half percent (7.50%) of the Net Sales Value. 2. As used in this Agreement, "Net Sales Value" of Sublicensed Subject Matter shall mean all amounts or proceeds received by BNFL or its Affiliates from the sale, lease or use of the Sublicensed Subject Matter, except with respect to the vitrification of high level radioactive waste, and less the following deductions where applicable: (i) discounts allowed and taken for prompt payment, (ii) allowances for prompt returns, (iii) all sales and use tax imposed upon and with specific reference to particular sales, (iv) packaging and transportation costs separately billed or prepaid, (v) services contracted to other subcontractors providing technologies and services complimentary to and outside of the Sublicensed Field and packaged for sale with the Sublicensed Subject Matter, and (vi) the revenues associated with ancillary processes. (Services that directly support sale of Technology in the Sublicensed Field such as outside laboratory services or brick installation services, etc. are not deducted from gross sales.) -3- No allowance or deduction shall be made for collections or commissions by whatever name known. 3. The Net Sales Value of Sublicensed Subject Matter sold by BNFL to any Affiliate of, or person, firm or corporation enjoying a specially favored course of dealing with, BNFL, shall be the amount which BNFL would receive for such Sublicensed Subject Matter on an arm's length sale to a bona fide third party less the deductions under Article IV(a)(2). b. In the event the United States Government has royalty-free rights under the Patent Rights or Technology, then in such event any amounts or proceeds received by BNFL in respect of any Sublicensed Subject Matter caused to be manufactured by or through BNFL and sold or leased to the United States Government or services performed for the United States Government shall not be included within the definition of "Net Sales Value" and no Annual Royalty shall be required to be paid thereon. c. Notwithstanding anything herein to the contrary, in the event that GTSD has defaulted on any of its payment obligations under the Convertible Debenture, then the Annual Royalty percentage provided in Section IV(a)(i) shall remain at three percent (3%) until such time as the payment default has been cured or the payment default has been waived by BNFL, and BNFL shall be entitled to offset the amounts owed to GTSD as the Annual Royalty under this Article IV until such time as the payment default has been cured or the payment default has been waived by BNFL. All amounts so offset shall be applied in whole toward the cure of the payment default under the Convertible Debenture. V. AVOIDANCE OF DUPLICATION OF ROYALTY PAYMENTS In no event shall more than one royalty payment be due under this Agreement on the same Sublicensed Subject Matter or component part thereof. VI. BNFL FEES PAYABLE TO THIRD PARTIES In the event BNFL, in order to continue to practice in the Sublicensed Field, must obtain from a third party (other than an Affiliate) a license under such third party's valid patent and must pay license fees thereunder to such third party in order to use any portion of the Technology or to operate under any significant patent included in the Patent Rights, then in such event, BNFL may credit the license or other fees payable to such third party against the Annual Royalty payable to GTSD pursuant to Article IV hereof. -4- VII. PAYMENT OF ROYALTIES AND ACCOUNTING The Annual Royalty provided for in Section IV shall be based on the Net Sales Value generated by BNFL or its Affiliates during each License Year and shall be paid within 60 days of the end of each License Year less any deductions allowable hereunder. All payments required to be made under this Agreement shall be made in U.S. funds. At the time of payment of the Annual Royalty, BNFL shall render to GTSD a statement in writing showing the computation of the Annual Royalty payable for such License Year. Any statement hereunder shall be conclusively presumed to be accurate and deemed acceptable by GTSD unless it notifies BNFL in writing as to any objections within one (1) year of GTSD's receipt of such statement. For purposes of determining the royalty payments owed to GTSD pursuant to Section IV, the first License Year shall be the calendar year beginning January 1, 1996. The accounting shall be in accordance with generally accepted accounting principles in the United Kingdom. In the event that BNFL shall be in default in the payment of the Annual Royalty, then GTSD may terminate this Agreement upon 30 days written notice unless during said period the default is cured. VIII. AUDIT RIGHTS BNFL and its Affiliates shall maintain normal business records accurately showing all transactions necessary to compute the Net Sales Value hereunder. GTSD shall have the right, at its option and sole expense and within one (1) year after receipt of any payments made to it pursuant to Article IV hereof, to have BNFL's or its Affiliates' books and records relating to the Patent Rights and the Technology audited by an independent certified public accountant ("CPA") selected by GTSD and approved by BNFL, such approval not to be unreasonably withheld or delayed. BNFL and its Affiliates will make such books and records available to such CPA during reasonable business hours upon fourteen (14) calendar days written notice. The CPA shall agree to advise GTSD only of the accuracy or inaccuracy of BNFL's royalty payments to GTSD, and if not accurate, the actual amounts as computed by such CPA. Notwithstanding anything herein to the contrary, in the event that the CPA reports that the books and records have not been maintained or are not accurate or that BNFL has failed to make payment of any of the Annual Royalty required by the Agreement as shown by such books and records, BNFL shall reimburse GTSD for the cost of reviewing the books and records, including without limitation, reimbursement of the reasonable fees and expenses of the CPA if such recalculation results in an increased royalty payment to GTSD; provided, however, that BNFL shall in no event have any such reimbursement obligation in excess of the amount of such increase. -5- IX. EXPENSES: PREPARATION, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS. a. Upon request for the duration of this Agreement, GTSD and BNFL shall jointly review the question of patentability or other protection of any idea, work, invention or discovery which is conceived, invented or discovered by the Inventors or GTSD in the Sublicensed Field, or any idea, work, invention or discovery which results from or arises out of any research work conducted by the Inventors, GTSD, BNFL or any of their Affiliates pursuant to a grant provided by BNFL pursuant to the research and development cost sharing arrangement contemplated by Article XIV of the Teaming Agreement, irrespective of whether or not any such idea, work, invention or discovery is included or required to be included in the Technology. Conduct of this joint review does not, in itself, constitute an obligation to grant to BNFL a license or sublicense, as applicable, for discoveries, works or inventions outside of the Sublicensed Field. b. BNFL shall have the power and authority to file and prosecute applications for patents on any idea, invention or discovery in the Sublicensed Field in the Sublicensed Territory and to procure and maintain patents thereon on behalf of the Inventors or GTSD, as appropriate. The parties shall use their best efforts to ensure that the inventor of any such idea, invention or discovery shall, at BNFL's request, execute such documents and perform such acts as BNFL's counsel may deem necessary and advisable to perfect the filing of such applications for patent in the Sublicensed Territory and to assist BNFL in procuring, maintaining, enforcing and defending patents, and other applicable statutory protection granted or issued thereon, on behalf of the Inventors or GTSD, as appropriate, all at the expense of BNFL. c. Any application for patent thus filed and any patent granted or issued thereon shall be included in the Patent Rights and subject to the terms and conditions of this Agreement. d. BNFL shall bear all costs and expenses associated with maintaining and defending the Patent Rights in the Sublicensed Territory in their discretion. e. Anything in this Agreement to the contrary notwithstanding, BNFL may elect to relinquish its sublicense under any application for patent or patent included in the Patent Rights by giving GTSD at least sixty (60) days prior written notice of such election. Any such application for patent or patent thereafter shall be excluded from the Patent Rights and the Technology and BNFL thereafter shall not be liable for any costs incurred in the prosecution, procurement, maintenance, enforcement and defense thereof. X. INFRINGEMENT a. BNFL shall have the right, but shall not be obligated, to bring and prosecute any suit or action in the Sublicensed Territory against an infringer of any patent included in the Patent Rights in the name of GTSD and/or the Inventors, as appropriate, at BNFL's sole cost and expense and for BNFL's own account, and in any such case BNFL shall have control of the -6- conduct or settlement of any such suit or action. Any and all recoveries of any kind from any such suit or action shall be the property of BNFL, except in the event any recoveries are reasonably considered to be royalties for past infringement and/or considered to be future royalties and/or for a paid-up license under any patent included in the Patent Rights, then any such recoveries less pro rata costs incurred by BNFL for attorney's fees, witnesses' fees, and court costs shall be considered in the Annual Royalty calculation according to Section IV hereof. b. Should BNFL exercise its rights under Section X(a), BNFL agrees to indemnify the Inventors and GTSD from countersuit by an infringer of any patent with respect to their roles as inventors or licensees of the patents, as applicable. Such indemnification is limited to issues related to or arising out of patent validity or patent infringement only. c. GTSD shall give promptly upon request and without compensation (other than reasonable out-of-pocket expenses and as provided in this Article X) all reasonable information and assistance necessary to enable BNFL to bring and prosecute any such suit or action. d. In the event that BNFL shall fail to cause any infringement of Patent Rights in the Sublicensed Territory to terminate or shall fail to bring suit or action against any such infringer within six (6) months after request in writing from GTSD to do so, then in such event GTSD shall have the right, but shall not be obligated, to bring and prosecute any such suit or action in its own name and/or the Inventors, at GTSD's sole cost and expense and for its own account, and in any such case, GTSD shall have sole control of the conduct or settlement of any such suit or action. Any and all recoveries for damages, royalties, costs and awards form any such suit or action shall be the sole property of GTSD, less any reasonable out-of-pocket costs which may be incurred by BNFL in support of such action or suit. e. Should GTSD exercise its rights under Section X(d), GTSD agrees to indemnify BNFL from countersuit by an infringer of any patent with respect to BNFL's role as sublicensee. Such indemnification is limited to issues related to patent validity or patent infringement only. f. The party not bringing such suit or action shall have the right, at its sole expense, to be represented by counsel during all proceedings of such suit or action. XI. WARRANTIES AND COVENANT a. Each of GTSD and BNFL represents to the other that the respective representations and warranties contained in Article XIX of the Teaming Agreement by GTSD and BNFL, respectively, are true and accurate and such representations and warranties are repeated herein by each of the respective parties. b. GTSD hereby covenants and agrees that it will not take any action, or fail to take a required action, either of which results in the termination of the License Agreement prior to the expiration of its natural term. GTSD hereby covenants and agrees that it will use its best -7- efforts to maintain the License Agreement and the underlying Patent Rights and Technology in full force and effect during the term of this Agreement, however, GTSD shall have the right to amend the License Agreement or enter into a new license agreement with the Inventors provided that the terms of such new license agreement would not adversely affect GTSD's performance of its obligations hereunder. XII. TERMINATION a. In the event any party to this Agreement shall fail to perform or fulfill, at the time and in the manner herein provided, any material obligation or condition required to be performed or fulfilled by such party under this Agreement, and in the event such party shall fail to remedy such default within thirty (30) days after written notice thereof from a party not at fault, such party not at fault shall have the right to terminate this Agreement by giving written notice of termination to the party at fault. b. This Agreement shall terminate immediately upon the termination of the License Agreement. c. BNFL shall have the right to terminate this Agreement at any time by giving at least sixty (60) days written notice of termination to GTSD. d. In the event of termination pursuant to this Section XII, the sublicenses, rights and privileges granted to BNFL hereunder shall terminate forthwith. e. Any such termination of this Agreement by GTSD or BNFL pursuant to this Article XII shall be in addition to and shall not be exclusive of or prejudicial to any other rights or remedies GTSD may have on account of such termination. f. The termination of this Agreement shall not affect any accrued monetary obligation owed to GTSD by BNFL. XIII. TERMINATION: PRORATED ROYALTIES In the event of any termination under Section XII hereof, the Annual Royalty payable hereunder for the License Year in which this Agreement is terminated shall be reduced by an amount which bears the same relationship to such royalties that the number of days of such License Year after such termination bears to three hundred sixty-five (365). -8- XIV. RECORDS AND CONFIDENTIAL DATA a. All memoranda, notices, files, records and other information related to the Technology shall be retained in confidence by the parties hereto and their agents, and shall not be disclosed to any third party, except to the extent reasonably necessary to pursue the business objectives of the parties hereto or to comply with the contractual commitments of this Agreement. b. Each of the parties agrees that the other party will be entitled (without posting bond or other security) to injunctive or other equitable relief, as deemed appropriate by any such court or tribunal, to prevent a breach of the other party's obligations set forth in this Article XIV. XV. TERM OF THE AGREEMENT This Agreement shall commence on the date hereof, and unless sooner terminated as herein provided shall continue in full force and effect until the expiration of the last expiring patent or patent application included in the Patent Rights. XVI. PRIOR RIGHTS The rights of each party regarding the sublicensing of the Technology shall be as stipulated in this Agreement. Notwithstanding any other provision herein to the contrary, this Agreement shall be subject to the Prior Rights of certain parties included in Article XXI of the License Agreement. XVII. WAIVER AND SEVERABILITY a. The waiver by any of the parties of any breach of any provision hereof by the other shall not be construed to be a waiver of any succeeding breach of such provision or a waiver of the provision itself. b. If one or more of the provisions of this Agreement shall be found to be illegal or invalid, it shall not affect the legality or validity of any of the remaining provisions hereof. XVIII. NOTICES Except as otherwise expressly stated, all notices required to be given or which may be given under this Agreement shall be in writing and shall be deemed given upon the earlier of (i) when personally delivered, (ii) three (3) days after having been mailed by certified mail, -9- postage prepaid, return receipt requested, (iii) two (2) days after having been sent by recognized overnight delivery service or (iv) one (1) day after having been sent by facsimile transmission, addressed as follows: If to: (a) GTSD: GTS DURATEK, INC. 8955 Guilford Road, Suite 200 Columbia, MD 21046 Attn: Robert E. Prince, President and Chief Executive Officer Telecopy No.: (301) 621-8211 (b) BNFL: BNFL INC. 9302 Lee Highway, Suite 950 Fairfax, Virginia 22031 Attn: K. Edward Newkirk Telecopy No.: (703) 359-0442 XIX. COMPLETE AGREEMENT This Agreement and the Teaming Agreement and all documents referenced therein to be entered into between the parties hereto contains the complete agreement and understanding between the parties concerning the subject matter hereof and shall supersede all other agreements, understandings or commitments between the parties as to such subject matter, and the representations and warranties contained in Article XIX of the Teaming Agreement are incorporated herein pursuant to Article XI of this Agreement. XX. ASSIGNMENT The obligations and rights of each party hereunder shall not be assignable without the prior written consent of the other party, which consent may be withheld in such party's sole discretion; provided, however, that if BNFL assigns this Agreement to an Affiliate, then GTSD will not unreasonably withhold or delay consent to such assignment. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties' respective heirs, legal representatives, successors and assigns. -10- XXI. WAIVER, MODIFICATION OR AMENDMENT No waiver, modification or amendment of any provision of this Agreement shall be effective, binding or enforceable unless in writing and signed by all of the parties hereto. XXII. GOVERNING LAW The validity of this Agreement and of any of the terms or provisions as well as the rights and duties of the parties hereunder shall be governed by the laws of the State of Maryland, without reference to any conflict of law or choice of law principles in the State of Maryland that might apply the law of another jurisdiction. XXIII. ARBITRATION Any disputes between the parties relating to the terms of this Agreement, or the breach thereof, shall be submitted to binding arbitration in Baltimore, Maryland, in accordance with the rules of the American Arbitration Association. In the event that either party desires to arbitrate any such dispute, such party shall so notify the other party and the parties shall endeavor, for a period of thirty (30) days, to resolve such dispute without arbitration. In the event that the parties cannot resolve the dispute within such thirty (30) day period, then within ten (10) days thereafter, the parties shall jointly designate an arbitrator to hear the dispute, or, if the parties are unable to jointly select an arbitrator, an arbitrator shall be chosen by the President of the American Arbitration Association from lists of candidates provided by each of the parties. The decision of the arbitrator shall be binding upon the parties. The arbitrator may order specific performance or other equitable relief or remedies to the extent it deems it appropriate, in any situation in which a court could so order. Each party shall pay all of its own expenses in connection with such arbitration and one-half of the arbitrator's fees and expenses. XXIV. CONSTRUCTION Headings or captions of this Agreement are for reference only and are not to be construed in any way as part of this Agreement, nor in the interpretation of this Agreement. The masculine pronoun shall include the feminine and neuter, and vice versa, where the context so requires. XXV. COUNTERPARTS This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document. -11- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WITNESS/ATTEST: GTS DURATEK, INC. /s/ Diane R. Brown By: /s/ Robert E. Prince - ----------------------------------- ------------------------------------ Diane R. Brown, Secretary Name: Robert E. Prince Title: President and Chief Executive Officer BNFL INC. /s/ Richard H. Peebles By: /s/ Rolland A. Langley - ----------------------------------- ------------------------------------ Richard H. Peebles, Vice President Name: Rolland A. Langley Title: President -12- SCHEDULE A PATENTS AND PATENT APPLICATIONS See Attched EX-11.1 5 EXHIBIT 11.1 Exhibit 11.1 GTS DURATEK, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Three Months Nine Months Ended September 30 Ended September 30 ------------------------------- ------------------------------ 1995 1994 1995 1994 ------------- ------------- -------------- ------------- Primary: Net earnings $ 473,199 $ 51,218 $1,153,576 $ 222,430 Accrued dividend on preferred stock (320,000) 0 (875,200) 0 Accretion of redeemable preferred stock (54,303) 0 (144,358) 0 ---------- ---------- ---------- ---------- Net earnings applicable to common stock $ 98,896 $ 51,218 $ 134,018 $ 222,430 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average common shares outstanding 8,784,859 8,687,917 8,731,551 8,684,630 Earnings per common share $ 0.01 $ 0.01 $ 0.02 $ 0.03 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EX-27 6 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1995 (UNAUDITED) AND THE CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) OF GTS, DURATEK, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 SEP-30-1995 SEP-30-1995 2,724,375 0 14,805,573 (117,732) 289,487 17,965,544 6,063,115 (4,046,799) 25,410,904 3,207,997 48,409 88,784 14,554,384 0 7,511,330 25,410,904 0 28,947,692 0 23,397,469 4,091,433 61,000 (73,124) 1,470,914 147,113 1,153,576 0 0 0 1,153,576 0.02 0.02
EX-99.2 7 EXHIBIT 99.2 **** FOR IMMEDIATE RELEASE **** Date: November 8, 1995 Contact: Robert Prince, Pres. & CEO Diane Brown, Investor Relations (410) 312-5100 Richard Peebles, Vice President, BNFL Inc. (703) 385-7100 GTS Duratek and BNFL Strategic Alliance GTS DURATEK AND BNFL INC. COMPLETE STRATEGIC ALLIANCE COLUMBIA, Md. GTS Duratek (Nasdaq: DRTK) and BNFL Inc. today announced that they have executed the definitive agreements formalizing their previously announced strategic alliance, under which the two companies will jointly pursue major Department of Energy (DOE) waste stabilization projects. GTS Duratek president and CEO, Robert E. Prince, said, "This agreement really gives our company a turbo charge. With a world-class partner like BNFL, we are eager to put our combined knowhow and technical capabilities to work." As a part of the alliance, BNFL is investing $10 million in GTS Duratek in the form of a convertible debenture. In addition, BNFL will contribute up to $7.5 million in fees and technology development funding over the next five years. (more) GTS Duratek and BNFL Strategic Alliance/2 The first DOE project to be jointly pursued by GTS Duratek and BNFL will be the separation and vitrification (conversion to glass) of high-level radioactive waste at the DOE's Hanford Washington site. This site contains 61 million gallons of highly toxic and radioactive waste currently stored in 177 underground tanks. The DOE, which has previously stated that this cleanup could last 20 years and cost $41 billion, announced that the Draft Request for Proposal for the first phase of the privatized cleanup of the tanks will be issued on November 13, 1995. In other recent public presentations, the DOE has stated its intent to award contracts by August 1996. BNFL Inc. is the U.S. subsidiary of British Nuclear Fuels plc, a U.K.-based company with annual sales of $2 billion worldwide. It is one of only two companies in the world with commercial experience in processing and stabilizing high-level radioactive wastes similar to those at Hanford. BNFL has been working with the DOE for the last four years to determine the best solution for these wastes. GTS Duratek is an environmental technology and services firm that uses its proprietary vitrification processes to convert radioactive and hazardous waste into glass for storage and recycling. The DOE has already determined that GTS Duratek's joule-heated vitrification technology is appropriate for the conversion of radioactive waste into glass. ### -----END PRIVACY-ENHANCED MESSAGE-----