-----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, NYOol3jpHN/8O6NibVGRuFmj0+Oa3gfof6k+jLqeajgNPHVLRYTSvbk2aZ9iqZoO xpwkCAm7RKsIytU8YUDnGQ== 0000898430-96-002148.txt : 19960522 0000898430-96-002148.hdr.sgml : 19960522 ACCESSION NUMBER: 0000898430-96-002148 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960521 SROS: NYSE GROUP MEMBERS: FD ENGINEERS & CONSTUCTORS, INC. GROUP MEMBERS: FLUOR CORP/DE/ GROUP MEMBERS: FLUOR CORPORATION GROUP MEMBERS: FLUOR DANIEL, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GROUNDWATER TECHNOLOGY INC CENTRAL INDEX KEY: 0000795579 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 020324047 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-37965 FILM NUMBER: 96570260 BUSINESS ADDRESS: STREET 1: 100 RIVER RIDGE DR CITY: NORWOOD STATE: MA ZIP: 02062 BUSINESS PHONE: 6177697600 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FLUOR CORP/DE/ CENTRAL INDEX KEY: 0000037748 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 950740960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 3333 MICHELSON DR CITY: IRVINE STATE: CA ZIP: 92730 BUSINESS PHONE: 7149752000 FORMER COMPANY: FORMER CONFORMED NAME: FLUOR CORP LTD DATE OF NAME CHANGE: 19710624 SC 13D 1 SCHEDULE 13D -------------------------- OMB APPROVAL -------------------------- OMB NUMBER 3235-0145 Expires: October 31, 1994 Estimated average burden hours per form.......14.90 -------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. _______)* Fluor Daniel GTI, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Par Value $.001 - -------------------------------------------------------------------------------- (Title of Class of Securities) 34386C-10-6 ------------------------------------------------------- (CUSIP Number) Raymond M. Bukaty, Esq., Fluor Corporation 3333 Michelson Drive, Irvine, CA 92730 (714) 975-6692 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 10, 1996 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. Check the following box if a fee is being paid with the statement [X]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copes are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SEC 1746 (12-91) - ----------------------- --------------------- CUSIP NO. 34386C-10-6 SCHEDULE 13D PAGE 2 OF __ PAGES - ----------------------- --------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON FLOUR CORPORATION 95-0740960 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [X] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 WC - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) 5 [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 DELAWARE - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 4,400,000 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 4,400,000 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 4,400,000 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 54.5% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 2 of 7 - ----------------------- --------------------- CUSIP NO. 34386C-10-6 SCHEDULE 13D PAGE 3 OF __ PAGES - ----------------------- --------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON FD ENGINEERS & CONSTRUCTORS, INC. 95-3361207 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [X] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 WC, AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) 5 [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 CALIFORNIA - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 4,400,000 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 4,400,000 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 4,400,000 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 54.5% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 2 of 7 - ----------------------- --------------------- CUSIP NO. 34386C-10-6 SCHEDULE 13D PAGE 2 OF __ PAGES - ----------------------- --------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON FLUOR DANIEL, INC. 95-2758280 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [X] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 WC, AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) 5 [_] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 CALIFORNIA - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 0 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 4,400,000 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 0 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 4,400,000 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 4,400,000 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 54.5% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 2 of 7 Item 1. Security and Issuer. ------------------- This Schedule 13D relates to the common stock, par value $.001 per share (the "New Common Stock"), issued by Fluor Daniel GTI, Inc., a Delaware corporation (the "Company"), having its principal executive offices at 100 River Ridge Drive, Norwood, MA 02062. Item 2. Identity and Background. ----------------------- This Schedule 13D is filed by Fluor Daniel, Inc., a California corporation ("Fluor Daniel"), FD Engineers and Constructors, Inc., a California corporation ("FD Engineers") and Fluor Corporation, a Delaware corporation ("Fluor"), which together may be deemed a "group" within the meaning of Rule 13D-5(b)(i) of the Securities Exchange Act of 1934 (the "Act"). Fluor Daniel is a wholly owned subsidiary of FD Engineers. FD Engineers is a wholly owned subsidiary of Fluor. Fluor is a publicly traded company. Except as disclosed in the Schedule 13G-Amendment 1 dated April 9, 1996 jointly filed by FMR Corp., Edward C. Johnson 3d, Abigial P. Johnson, Fidelity Management & Research Company and Fidelity Magellan Fund, which discloses that the foregoing group owns approximately 10.66% of Fluor's common stock, no shareholder of Fluor owns more than 5% of the outstanding and issued shares of Fluor. The principal office and business address of Fluor Daniel, FD Engineers and Fluor is 3333 Michelson Drive, Irvine, CA 92730. Through Fluor Daniel and FD Engineers and other domestic and foreign subsidiaries, the principal business of Fluor is providing engineering, procurement, construction, maintenance and other diversified services on a worldwide basis to an extensive range of industrial, commercial, utility, natural resources, energy and governmental clients. In addition, Fluor maintains investments in a coal related business through its ownership of AT Massey Coal Company, Inc. The principal business of Fluor Daniel and FD Engineers is providing engineering, procurement, construction and other diversified services on a worldwide basis to an extensive range of industrial, commercial, utility, natural resources, energy and governmental clients. Page 5 of ___ The names of the executive officers and directors of Fluor Daniel and their positions in Fluor Daniel are as follows:
Fluor Daniel Business Name Position Address - ---- ------------ -------- Dennis G. Bernhart Group President - The Americas Group * Charles J. Bradley, Jr. Director; Vice President * Alan L. Boeckmann Group President - Chemical Process ** & Industrial Richard D. Carano Group President - Asia/Pacific * Hugh K. Coble Director; Vice Chairman of the Board * E. David Cole, Jr. Group President - Process Group ** J. Michal Conaway Chief Financial Officer * Charles R. Cox Group President - Industrial Group ** Lawrence N. Fisher Director; Vice President-Law & * Secretary Thomas P. Merrick Vice President - Strategic Planning * Leslie G. McCraw Director; Chairman of the Board, ** Chief Executive Officer and President Charles R. Oliver Group President - Sales, Marketing * & Strategic Planning James O. Rollans Director; Chief Administrative Officer * Carel J. C. Smeets Group President - Europe, Africa Fluor Daniel B.V. & Middle East Surinameweg 17 2035VA Haarlem The Netherlands James C. Stein Group President - Diversified Services * Richard M. Teater Group President - Power & Government *
- -------------------- * Fluor Daniel, Inc., 3333 Michelson Drive, Irvine, California 92730 ** Fluor Daniel, Inc., 100 Fluor Daniel Drive, Greenville, South Carolina 29607-2762 Page 6 of ____ The present principal occupation of each of them is fulfilling his or her duties as officers of Fluor Daniel, FD Engineers and Fluor, as applicable. The names of the executive officers and directors of FD Engineers and their positions in FD Engineers are as follows: FD Engineers Name Position - ---- ------------ J. Michal Conaway Chief Financial Officer Lawrence N. Fisher Director, Secretary James O. Rollans President The principal business address of each of these individuals is 3333 Michelson Drive, Irvine, CA 92730. The present principal occupation of each of them is fulfilling his or her duties as officers of Fluor Daniel, FD Engineers and Fluor. The names of the executive officers and directors of Fluor, their business addresses, their positions at Fluor and principal occupation are as follows:
Fluor Business Principal Name Position Address Occupation - ---- -------- --------- ---------- Dennis W. Benner Vice President & CIO * Vice President & CIO Dennis G. Bernhart Group President - The * Group President - The Americas Group of Americas Group of Fluor Daniel Fluor Daniel Don L. Blankenship Chairman of the Board A. T. Massey Coal Co. Chairman of the Board and CEO of A. T. Massey 4 North 4th Street and CEO of A. T. Massey Coal Company Richmond, VA 23219 Coal Company Alan L. Boeckman Group President - Fluor Daniel, Inc. Group President - Chemical Processes and 100 Fluor Daniel Drive Chemical Processes and Industrial of Greenville, SC 29607-2762 Industrial of Fluor Daniel Fluor Daniel Charles J. Bradley Vice President, Human * Vice President, Human Resources & Administration Resources & Admin.
Page 7 of ___
Fluor Business Principal Name Position Address Occupation - ---- -------- --------- ---------- Carroll A. Campbell Director American Council of Life Ins Business Executive 1001 Pennsylvania Ave NW Washington, DC 20004-2599 Richard D. Carano Group President - Asia/ * Group President - Asia/ Pacific of Fluor Daniel Pacific of Fluor Daniel Hugh K. Coble Director & Vice Chairman * Vice Chairman E. David Cole Group President - Process Fluor Daniel, Inc. Group President - Process of Fluor Daniel One Fluor Daniel Drive of Fluor Daniel Sugar Land, TX 77017 J. Michal Conaway Vice President & CFO * Vice President & CFO Charles R. Cox Group President - Fluor Daniel, Inc. Group President - Industrial of 100 Fluor Daniel Drive Industrial of Fluor Daniel Greenville, SC 29607-2762 Fluor Daniel Lawrence N. Fisher Sr. Vice President - Law * Sr. Vice President - Law & Secretary & Secretary Richard A. Flinton Chairman of the Board of * Chairman of the Board of Fluor Constructors Fluor Constructors International, Inc. International, Inc. Peter J. Fluor Director Texas Crude Energy, Inc. Business Executive 2803 Buffalo Speedway Houston, TX 77098 David P. Gardner Director The Wm R. & Flora Hewlett Fndn Business Executive 525 Middlefield Road, Suite 200 Menlo Park, CA 94025 William R. Grant Director Galen Associates Business Executive 666 Third Avenue, Suite 1400 New York, NY 10017-4011 Bobby R. Inman Director 701 Brazos, Suite 500 Business Executive Austin, TX 78701 Robert V. Lindsay Director Morgan Guaranty Trust Co of NY Business Executive 15 Broad St., 30th Floor New York, NY 10015 Vilma S. Martinez Director Munger, Tolles & Olson Attorney 355 South Grand Ave, 35th Floor Los Angeles, CA 90071-1560
Page 8 of ___
Fluor Business Principal Name Position Address Occupation - ---- -------- --------- ---------- Leslie G. McCraw Director, Chairman & CEO Fluor Daniel, Inc. Chairman and CEO 100 Fluor Daniel Drive Greenville, SC 29607-2762 Thomas P. Merrick Vice President, Strategic * Vice President, Strategic Planning of Fluor Daniel Planning of Fluor Daniel Buck Mickel Director Fluor Daniel, Inc. Business Executive 100 Fluor Daniel Drive P.O. Box 19019, DB051 Greenville, SC 29607 Charles R. Oliver Group President - Sales, * Group President - Sales, Marketing and Strategic Marketing and Strategic Planning of Fluor Daniel Planning of Fluor Daniel James O. Rollans Chief Admin Officer * Chief Admin Officer Martha R. Seger Director 4810 East Scarlett Street Business Executive; Tucson, AZ 85711 Professor of Finance Carel J. C. Smeets Group President - Europe/ Fluor Daniel B. V. Group President - Europe/ Africa and Middle East of Surinameweg 17 Africa and Middle East of Fluor Daniel 2035VA Haarlem Fluor Daniel The Netherlands James C. Stein Group President - * Group President - Diversified Services of Diversified Services of Fluor Daniel Fluor Daniel Richard M. Teater Group President - Power * Group President - Power and Government and Government - -------------------------- * Fluor Corporation, 3333 Michelson Drive, Irvine, California 92730
None of the individuals or entities referred to above has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the individuals or entities referred to above has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Page 9 of ___ Except for Smeets, all of Fluor Daniel's, FD Engineer's and Fluor's officers and directors are citizens of the United States. Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- The net investment cost of the 4,400,000 shares (the "Shares") of New Common Stock owned by Fluor Daniel is estimated to be in the range of $54 million to $60 million, based on a summary valuation prepared by the Company's financial advisor. This investment consists of $33,350,000 in cash and in addition, effective May 10, 1996, Fluor Daniel Environmental Services, Inc., a California corporation ("FDESI"), a wholly owned subsidiary of Fluor Daniel, was transferred to the Company pursuant to a merger of FDESI into GTI Acquisition Corporation, a California corporation ("Newco"), a wholly owned subsidiary of the Company. Fluor Daniel used funds from its ultimate parent, Fluor, to purchase the Shares. Pursuant to the certain Stock Option Agreement dated as of December 11, 1995 between the Company and Fluor Daniel (the "Option Agreement"), which is attached hereto as Exhibit 3, the Company sold to Fluor Daniel for a cash payment of --------- $1,650,000 an option to purchase up to an additional 1,366,000 shares of the Company's common stock (the "Common Stock") or, if exercised after the closing of the Transaction, the New Common Stock (the "Base Shares"), at a purchase price in cash of $17.00 per share (the "Per Share Price"), or $1,650,000 for all of the Base Shares, with both the Base Shares and Per Share Price subject to adjustment as described in Item 4 below. Fluor Daniel has not attempted to arrange financing for the purchase of the Base Shares. Item 4. Purchase of Transaction. ----------------------- The purpose of the purchase of the Shares was for Fluor Daniel to obtain control of the Company. The Board of Directors for Fluor Daniel, and the Board of Directors of its ultimate parent corporation, Fluor, considered a number of factors in connection with its acquisition of the Shares, including, without limitation, the following: (i) a review of the Company, including a presentation by Fluor Daniel's management regarding its due diligence review of the Company; (ii) a review of advice of management, financial and legal advisors regarding the terms of that certain Investment Agreement dated December 11, 1995 by and among Fluor Daniel, FDESI, the Page 10 of --- Company and Newco (the "Investment Agreement") which is attached hereto as Exhibit 2, and the transactions contemplated thereby (the "Transaction"); - --------- (iii) Fluor Daniel's existing position in the environmental service industry and its desire to strengthen and expand its presence in the industry; (iv) quality, diversity and experience of the personnel of the Company, and (v) the Company's experience in the environmental services industry which would be complimentary to the needs of Fluor Daniel, including the Company's extensive experience in remediation services utilizing a wide spectrum of technologies. In addition, the analysis included advice from Fluor Daniel's financial advisors concerning the (i) the historical results of the Company; (ii) the potential for growth and earnings of the Company following the proposed Transaction; (iii) historical market prices and trading volumes of the Company's common stock; (iv) comparable merger or acquisition transactions; and (v) ranges of estimates of value of the Company based on various analysis. The Fluor Daniel Board also considered the transactions prospective impact on Fluor's earnings per share, as well as opportunities for cost savings. The Fluor Daniel Board also focused on the revenue enhancements expected to result from the Transactions and the respective contributions the parties would bring to the combined corporation. The Fluor Daniel Board did not assign any specific or relative weight to the factors under its consideration. The Fluor Daniel Board determined that the transactions were in the best interest of Fluor Daniel and Fluor. On December 11, 1995 Fluor Daniel and the Company entered into the Option Agreement. Pursuant to the Option Agreement, the Company sold to Fluor Daniel for a cash payment of $1,650,000 the Option to purchase up to 1,366,000 shares of Common Stock or, if exercised after the closing of the Transaction, the New Common Stock at a per share exercise price of $17.00 per share, with both the Base Shares and the Per Share Price subject to adjustment as described below (the Base Shares, as adjusted are herein referred to as the "Optioned Shares"). Exercise of the Option. The Option will become exercisable after the first to occur of (i) December 11, 1996 and (ii) Fluor Daniel being entitled to terminate the Investment Agreement pursuant to the terms thereof. Once exercisable, the Option may be exercised in whole or in part prior to its expiration by delivery by Fluor Daniel to the Company of a written notice (the "Notice") specifying the number of Optioned Shares to be purchased and a place and date (the "Option Closing Date") not later than 10 business days from the date of the Notice for the closing of such purchase (the "Option Closing"), provided that if any approvals are required under the HSR Act with respect to such exercise, the Option Closing will be the later of (i) the Option Closing Date specified in the Notice and (ii) the next business day following the date on which the applicable waiting periods under the HSR Act shall have expired. The Option expires on December 11, 1998. Page 11 of --- Adjustment to Base Shares and Per Share Price. In connection with the recapitalization of the Company (so long as the Option is not exercised in full prior to the closing of the Transaction), the aggregate number of shares purchasable upon exercise of the Option will be adjusted by multiplying the Base Shares by the Adjustment Fraction (as defined below). The Per Share Price will be adjusted by dividing the Per Share Price by the Adjustment Fraction. The term "Adjustment Fraction" means a fraction, the numerator of which equals the Current Market Price of the Common Stock and the denominator of which equals the Current Market Price of the New Common Stock. For purposes of the Option, the "Current Market Price" means the average per share closing price for the five trading days (i) immediately preceding the closing of the Transaction, with respect to the Common Stock, and (ii) immediately following the closing of the Transaction, with respect to the New Common Stock. These adjustments have been made and the number of shares subject to the Option is 1,768,970 at an exercise price of $13.1274 per share. The number of Optioned Shares and the Per Share Price are also subject to adjustment upon any change in the outstanding shares of Common Stock or New Common Stock by reason of any stock dividend, stock split, recapitalization, combination, exchange of shares, merger, consolidation, reorganization or any other change in the corporate or capital structure of the Company (other than the recapitalization of the Company) to maintain without dilution the rights of Fluor Daniel under the Option. Registration Rights. Under the Option Agreement, Fluor Daniel is entitled to certain registration rights with respect to the Optioned Shares. At any time within three years of any Option Closing, the Company is obligated (i) to effect up to two registrations under the Securities Act (each a "Demand Registration") of any or all of the Optioned Shares, one of which such registrations may, at Fluor Daniel's request, so long as the Company satisfies the eligibility requirements of Form S-3 under the Securities Act, be required to be made on a continuous basis pursuant to Rule 415 under the Securities Act and (ii) at the written request of Fluor Daniel delivered within ten (10) days after the Company delivers a notice to Fluor Daniel of the Company's intent to file a registration statement for its common stock, to include any or all of the Optioned Shares in such registration (each an "Incidental Registration"). Fluor Daniel may not request a Demand Registration within 120 days following the effective date of a registration statement filed by the Company in which the Optioned Shares were entitled to join. In an Incidental Registration, upon the written opinion of the managing underwriter that the requested distribution of Optioned Shares would adversely effect the distribution of securities of the Company, the Company may, at its option, either (x) require Fluor Daniel to agree to delay the offering and sale of the Optioned Shares for a reasonable period as requested by the managing underwriter or (y) include in the registration statement only such portion, if any, of the Optioned Shares as the managing underwriter advises may be so included. In addition, The Company is Page 12 of ____ entitled to suspend any obligation to register Optioned Shares for 90 days in any 12-month period if there exists material non-public information about the Company which, in the reasonable opinion of the Company, should not be disclosed. Under the Option Agreement, each of Fluor Daniel and the Company agree to indemnify the other for all losses, claims, damages, liabilities and expenses arising out of statements or omissions of the other contained in any registration statement (and related prospectus). Pursuant to the Investment Agreement the Company filed an Amended and Restated Certificate of Incorporation on May 10, 1996, which amended Article FOURTH of the Company's Restated Certificate of Incorporation to authorize 25,000,000 shares of New Common Stock and establish the terms thereof and to effect the conversion of each outstanding share of Common Stock into the right to receive $8.62 in cash and .5274 of a share of New Common Stock pursuant to the Transaction. Under Article FOURTH the rights, preferences, privileges and restrictions of the New Common Stock are identical in all respects to those of the Common Stock, except the par value of the New Common Stock is $.001 per share. In addition, the Company's Restated Certificate of Incorporation amended (a) Article FIRST to change the Company's name to "Fluor Daniel GTI, Inc.", (b) Article THIRD to maximize the legally permissible purposes of the Company under Delaware Law and (c) to delete Article SIXTH, which contained provisions regarding a classified board of directors. Pursuant to the Investment Agreement, the Company's stockholders approved on May 10, 1996, certain amendments to the Company's Bylaws to, among other things, amend Article 2 (Meeting of Shareholders), Article 3 (Directors), Article 4 (Meeting of the Board of Directors), Article 7 (Officers), Article 8 (Resignations, Removals and Vacancies) and Article 15 (Amendments). Amended Article 2 of the Bylaws provides that special meetings of the stockholders may be called only upon the written request of the majority of directors then in office. Amended Article 3 of the Bylaws set the size of the Board of Directors at no more than seven members and eliminates the provision allowing enlargement of the Board by a majority vote of the Board or by affirmative vote of two-thirds of the outstanding shares entitled to vote in the election of the directors. Article 3 has also been amended to eliminate the classified board of directors, such that the term of office of each director shall expire at the next annual meeting of shareholders. Amended Article 4 of the Bylaws specifies that a quorum of the Board for the transaction of business shall be a majority of the Board, except as otherwise provided in the Amended and Restated Certificate of Incorporation or the Bylaws. Amended Article 7 of the Bylaws specifies that the Board shall have a Chairman of the Board who shall preside at all meetings of the stockholders and of the Board of Directors. Amended Article 8 of the Bylaws provides that any or all directors may be Page 13 of ____ removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the Amended and Restated Certificate of Incorporation. Amended Article 8 also eliminates provisions relating to the classified board structure to conform to amended Article 3. Amended Article 15 of the Bylaws provides that the Bylaws may be altered, amended or repealed, or new Bylaws adopted, by the stockholders or by a majority of the full Board of Directors (whether or not present at a meeting). The Bylaws were also amended throughout to reflect the change in the Company's name to "Fluor Daniel GTI, Inc." and to reference the Amended and Restated Certificate of Incorporation rather than the Restated Certificate of Incorporation. Pursuant to the Investment Agreement, the Amended Bylaws provide for a Board of Directors with no more than seven members, with each director to service until the next annual meeting of stockholders and until his or her successor is elected and qualified or his or her early resignation or removal. As of May 10, 1996 the directors of the Company are as follows: Walter C. Barber, former Chairman, President and Chief Executive Officer of the Company; Alan S. Bufferd and Robert P. Schechter, formerly independent directors of the Company; David L. Myers, J. Michal Conaway and James C. Stein, who are members of Fluor Management; and Ernie Green, an independent director designated by Fluor. In addition, three new vice presidents of the Company were elected, Rhonnie Smith, John Wood and Don Stokely, all former members of FDESI management. Except as described herein and more fully set forth in the Option Agreement and the Investment Agreement, neither Fluor Daniel, FD Engineers nor Fluor presently have any plans or proposals which relate to or would result in: (a) the acquisition of additional securities, or disposition of securities, of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) the sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Company, including any plans or proposals to change the number or term of directors or fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the insured; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, bylaws or instruments corresponding thereto or any actions which may impede the acquisition of control of the Company by any person; (h) causing any class of securities of the Company be delisted from a national securities exchange or cease being authorized to be quoted in a deal of quotation of a registered national securities association; (i) a class of equities Page 14 of _____ securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(iv) of the Act; or (j) any similar action in any of those numerated above. Each of Fluor Daniel, FD Engineers and Fluor intends to continually review the Company's business affairs and financial position, as well as conditions in the securities markets and general economic and industry conditions. Based on such evaluation and review and subject to the investment and disposition limitations contained in the Investment Agreement described in Item 6 below, each of Fluor Daniel, FD Engineers and Fluor will continue to consider various alternative courses of action and will in the future take such action with respect to the Company as it deems appropriate in light of circumstances existing from time to time. Such actions may include, but are not limited to, purchasing additional shares of New Common Stock of the Company, either in the open market or in privately negotiated transactions, or selling its shares of New Common Stock, either in the open market or in privately negotiated transactions. The foregoing actions may be taken by each of Fluor Daniel, FD Engineers and Fluor alone, or with other persons. Notwithstanding the foregoing, Fluor Daniel, FD Engineers and Fluor's purchase of additional shares of New Common Stock of the Company and transfer of the New Common Stock are subject to certain restrictions contained in the Investment Agreement, as more particularly described in Item 6 below. Item 5. Interest in Securities of the Issuer. ------------------------------------- (a) As of May 10, 1996, Fluor Daniel was the record owner of 4,400,000 shares of New Common Stock, which represents 54.5% of the Company's outstanding New Common Stock, based upon 8,077,288 outstanding shares (before taking into account the payment of cash in respect of fractional shares in the Company recapitalization) as reported by the Company to Fluor Daniel on May 10, 1996. (b) FD Engineers shares the power, in its capacity as the only parent of Fluor Daniel, to direct the vote and direct the disposition of the New Common Stock directly owned by Fluor Daniel. Fluor shares the power, in its capacity as the only parent of FD Engineers, to direct the vote and direct the disposition of the New Common Stock directly owned by Fluor Daniel. (c) Fluor Daniel received its shares of New Common Stock on May 10, 1996, as a result of the acquisition of the New Common Stock from the Company in accordance with the Investment Agreement. Page 15 of _____ (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect ---------------------------------------------------------------------- to Securities of the Issuer. --------------------------- As discussed in Items 3 and 4 above, Fluor Daniel and the Company are parties to the Option Agreement, which is incorporated herein by reference. The Marketing Agreement dated as of May 10, 1996 between Fluor Daniel and the Company (the "Marketing Agreement"), a copy of which is attached as Exhibit 4, --------- sets forth the understanding of the Company and Fluor Daniel with respect to their arrangement (a) to work together to approach the environmental services market, (b) for Fluor Daniel to use the Company's services in connection with Fluor Daniel's engineering and construction business, and (c) to provide, on an intercompany basis, support services to each other. Fluor Daniel will continue to provide its customers with engineering and construction services, as well as certain environmental services, such as Department of Energy Management and Operations, Operating and Management, Management and Integration services and so-called "Total Business Solutions" services. Total Business Solutions services are differentiated from the environmental services that will continue to be provided by the Company in that they involve an integration of such services with substantial non-environmental services or involve a substantial increase in the scale and scope of services previously provided by the Company. The Company will continue to provide environmental assessment, remediation and monitoring services. The Marketing Agreement provides that the Company will have primary responsibility for the marketing and execution of environmental services and Fluor Daniel will have primary responsibility for marketing and execution of Total Business Solutions services. Fluor Daniel will promote the use of the Company, and will retain the Company on a sole-source basis, for environmental services that are related or incidental to Fluor Daniel's engineering and construction business and Total Business Solutions business, provided that use of the Company is acceptable to the customer, the Company has adequate available personnel and other resources to timely and satisfactorily perform the work and the Company's proposed commercial terms are competitive with the market. In addition, the Company and Fluor Daniel will provide overhead support and contract support services to each other on an intercompany basis. The Company will use the Page 16 of _____ name "Fluor Daniel GTI, Inc." during the term of the Marketing Agreement, and subsidiaries of the Company may also use a similar name if the parties decide it is useful in marketing the operations of the Company's subsidiaries. The term of the Marketing Arrangement is ten years from the closing of the Transaction unless further extended by the parties. In the event Fluor Daniel ceases to own at least 20% of the issued and outstanding equity of the Company, then (a) Fluor Daniel, provided it is not in breach of its obligations pursuant to Section 6.2(d) of the Investment Agreement (with respect to dispositions of New Common Stock held by it), or the Company may terminate the Marketing Agreement prior to expiration of the term; and (b) Fluor Daniel, pursuant to Section 7.9 of the Investment Agreement, may revoke the license of the Company and its subsidiaries to use the name "Fluor Daniel" in the Company's corporate name. The Investment Agreement sets forth restrictions on Fluor Daniel in connection with certain transactions between Fluor Daniel and the Company, and in connection with the acquisition, disposition and voting of its shares of New Common Stock. These restrictions are summarized below: Material Contracts. From May 10, 1996 until April 30, 1999, neither Fluor Daniel nor its affiliates will be permitted to enter into any contract, with the Company or any of its affiliates that is material to the Company's business as a whole without the prior approval of a majority of the Independent Directors (as defined below), other than any contract, agreement or transaction (a) contemplated by the Marketing Agreement or the Option Agreement, (b) entered into between the parties in the ordinary course of business or (c) governed by the other restrictive provisions described below. Acquisition of Securities. Until April 30, 1999, neither Fluor Daniel nor its affiliates will be permitted to purchase or otherwise acquire any New Common Stock, securities of the Company convertible into or exchangeable for New Common Stock or options, rights, warrants and similar securities issued by the Company to acquire New Common Stock, without the prior approval of a majority of the Independent Directors, unless immediately after such purchase or acquisition, the percentage of then outstanding New Common Stock that would be owned of record or beneficially by Fluor Daniel and its affiliates ("Fluor's Percentage") would not exceed 65%. The foregoing restrictions on purchases will not apply to the exercise by Fluor Daniel of the Option, but if the Option is exercised by Fluor Daniel, the Options Shares held by Fluor Daniel Page 17 of _____ will be counted in any determination of Fluor's Percentage with respect to any purchases by Fluor Daniel or its affiliates after the date of such exercise. Transfer of Securities. Until April 30, 1999, Fluor Daniel will not be ---------------------- permitted to sell, transfer, mortgage or otherwise dispose of any shares of New Common Stock held by it without the prior approval of a majority of the Independent Directors. The prior approval of the Independent Directors will not be required, however, if there occurs a substantial and extreme adverse change in the business, projects, or condition (financial or otherwise) of the Company that arises from corresponding substantial adverse changes of expected long term duration in the market for environmental services. Board of Directors; Voting. Until April 30, 1999, Fluor Daniel will be -------------------------- required to vote all shares of New Common Stock owned by it in favor of fixing the size of the Board of Directors of the Company at not more than seven and in favor of not less than three Independent Directors. Until the annual stockholders' meeting of the Company (or written consent in lieu thereof) held in 1998, Fluor Daniel is required to vote all shares of New Common Stock owned by it in favor of Allan S. Bufferd an Robert P. Schechter (whom Fluor Daniel will also cause to be nominated) in any election of members of the Company's Board of Directors. In addition, after May 10, 1996, and until April 30, 1999, the Company is prohibited from taking the actions described below. Repurchase of New Common Stock. Without the prior approval of a majority ------------------------------ of the Independent Directors, the Company will not be permitted to purchase any shares of New Common Stock unless immediately after such repurchase, Fluor Daniel's Percentage would not exceed 65%. Amendment of Agreements. Without the prior approval of a majority of the ----------------------- Independent Directors, the Company will not be permitted to enter into any amendment or terminate or waive any provision of the Investment Agreement, the Option Agreement or the Marketing Agreement. Definition of "Independent Director." For purposes of the Investment ------------------------------------- Agreement, an "Independent Director" is defined as a director of the Company who is not (apart from such directorship) (i) an officer, affiliate, employee, principal stockholder, consultant or partner of Fluor Daniel or any affiliate of Fluor Daniel or of any entity that was dependent upon Fluor Daniel or any affiliate of Fluor Daniel for more than 3% of its revenues or earnings in its most recent Page 18 of _____ fiscal year, (ii) an officer, employee, principal stockholder, consultant or partner of any entity that was dependent upon the Company or any affiliate of the Company for more than 3% of its revenues or earnings in its most recent fiscal year (unless agreed to in writing by Fluor Daniel) or (iii) an officer, director, employee, principal stockholder, consultant or partner of a person that is a competitor of Fluor Daniel or any of its affiliates (unless agreed to in writing by Fluor Daniel) or of the Company or any of its affiliates. Item 7. Material to be Filed as Exhibits. --------------------------------- Fluor Daniel, FD Engineers and Fluor file as Exhibits the following: Exhibit 1. Joint Reporting Agreement between Fluor Daniel, FD Engineers and Fluor. Exhibit 2. Investment Agreement dated as of December 11, 1995 by and among Fluor Daniel, FDESI, the Company and Newco. Exhibit 3. Stock Option Agreement dated as of December 11, 1995 between Fluor Daniel and the Company. Exhibit 4. Marketing Agreement dated as of May 10, 1996 between Fluor Daniel and the Company. Page 19 of _____ SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: May 20, 1996 Fluor Corporation Fluor Daniel, Inc. By: /s/ Lawrence N. Fisher By: /s/ Lawrence N. Fisher ------------------------------- ----------------------------------- Lawrence N. Fisher, Senior Vice Lawrence N. Fisher, Vice President- President-Law & Secretary Law & Secretary FD Engineers & Constructors, Inc. By: /s/ Lawrence N. Fisher ----------------------------------- Lawrence N. Fisher, Secretary Page 20 of ____ EX-99.1 2 JOINT REPORTING AGREEMENT DATED MAY 20, 1996 JOINT REPORTING AGREEMENT In consideration of the mutual covenants herein contained, each of the parties hereto represents to and agrees with the other party as follows: 1. Such party is eligible to file a statement on Schedule 13D pertaining to the common stock, par value $.001 per share, of Fluor Daniel GTI, Inc. to which this agreement is an exhibit, for the filing of the information contained therein. 2. Such party is responsible for timely filing of such statement and any amendments thereto, and for the completeness and accuracy of the information concerning such party contained therein; provided that no such party is responsible for the completeness or accuracy of the information concerning the other party making the filing, unless such party knows or has reason to believe that such information is inaccurate. 3. Such party agrees that such statement is filed by and on behalf of each such party and that any amendment thereto will be filed on behalf of each such party. This agreement may be executed in one or more counterparts, each of which shall be deemed to be an original instrument, but all of such counterparts together shall constitute but one agreement. Dated: May 20, 1996 FD Engineers & Constructors, Inc. Fluor Corporation By: /s/ Lawrence N. Fisher By: /s/ Lawrence N. Fisher ----------------------------- ------------------------------- Lawrence N. Fisher, Secretary Lawrence N. Fisher, Senior Vice President-Law & Secretary Fluor Daniel, Inc. By: /s/ Lawrence N. Fisher --------------------------------- Lawrence N. Fisher, Vice President- Law & Secretary EXHIBIT 1 EX-99.2 3 INVESTMENT AGREEMENT DATED DECEMBER 11, 1995 INVESTMENT AGREEMENT DATED AS OF DECEMBER 11, 1995 BY AND AMONG FLUOR DANIEL, INC., FLUOR DANIEL ENVIRONMENTAL SERVICES, INC., GROUNDWATER TECHNOLOGY, INC. AND GTI ACQUISITION CORPORATION EXHIBIT 2 TABLE OF CONTENTS
PAGE ---- Article I - The Plan of Recapitalization............................... 2 Section 1.1 The Recapitalization............................... 2 Section 1.2 Filing............................................. 2 Section 1.3 Conversion......................................... 3 Section 1.4 No Post-Closing Transfers.......................... 3 Section 1.5 Surrender of Certificates.......................... 3 Section 1.6 Exchange Agent..................................... 4 Article II - The Merger................................................ 5 Section 2.1 The Merger......................................... 5 Section 2.2 Effective Time..................................... 6 Section 2.3 Effects of the Merger.............................. 6 Section 2.4 Obligation to Transfer Funds to the Company........ 7 Section 2.5 Further Assurances................................. 7 Section 2.6 Articles of Incorporation and By-laws.............. 7 Section 2.7 Directors.......................................... 8 Section 2.8 Officers........................................... 8 Section 2.9 Closing; Closing Date.............................. 8 Article III - Representations and Warranties of the Company............ 8 Section 3.1 Corporate Existence and Power...................... 9 Section 3.2 Corporate Authorization............................ 9 Section 3.3 Governmental Authorization......................... 11 Section 3.4 Non-Contravention.................................. 11 Section 3.5 Capitalization..................................... 12 Section 3.6 Joint Ventures; Subsidiaries....................... 13 Section 3.7 SEC Filings........................................ 14 Section 3.8 Financial Statements............................... 14 Section 3.9 Disclosure Documents............................... 15 Section 3.10 Operations of the Company.......................... 16 Section 3.11 Litigation......................................... 17 Section 3.12 Taxes.............................................. 18 Section 3.13 Employee Benefit Plans............................. 18 Section 3.14 Compliance with Laws............................... 20 Section 3.15 Opinion of Financial Advisor....................... 21 Section 3.16 Intellectual Property.............................. 21 Section 3.17 Contracts and Other Agreements..................... 21 Section 3.18 Properties......................................... 22 Section 3.19 Environmental Matters.............................. 23 Section 3.20 Confidentiality Agreements......................... 24 Section 3.21 Disclosure......................................... 24 Article IV - Representations and Warranties of Holdings................ 24 Section 4.1 Corporate Existence and Power...................... 25 Section 4.2 Corporate Authorization............................ 25 Section 4.3 Governmental Authorization......................... 26 Section 4.4 Non-Contravention.................................. 26 Section 4.5 Capitalization of FDESI............................ 26 Section 4.6 FDESI Joint Ventures............................... 27
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PAGE ---- Section 4.7 FDESI Financial Statements....................... 27 Section 4.8 Disclosure Documents............................. 28 Section 4.9 Operations of FDESI.............................. 28 Section 4.10 Litigation of FDESI.............................. 30 Section 4.11 Taxes of FDESI................................... 30 Section 4.12 Properties of FDESI.............................. 30 Section 4.13 FDESI Contract List.............................. 31 Section 4.14 Purchase for Investment; Legend.................. 32 Section 4.15 Employees and Employee Benefit Plans............. 33 Section 4.16 Compliance with Laws............................. 35 Section 4.17 Intellectual Property............................ 35 Section 4.18 Contracts and Other Agreements................... 35 Section 4.19 Properties....................................... 36 Section 4.20 Confidentiality Agreements....................... 37 Section 4.21 FDESI Disclosure................................. 37 Article V - Covenants of the Company.................................... 37 Section 5.1 Conduct of the Business.......................... 37 Section 5.2 Stockholder Meeting; Proxy Material.............. 40 Section 5.3 Access to Information............................ 40 Section 5.4 No Solicitation of Other Offers.................. 41 Section 5.5 Board of Directors and Officers.................. 43 Section 5.6 Amendments to Certificate of Incorporation and By-laws...................... 43 Section 5.7 Stock Options.................................... 43 Section 5.8 Update to Opinion of Financial Advisor........... 44 Article VI - Covenants of Holdings and FDESI............................ 44 Section 6.1 Conduct of FDESI Business........................ 44 Section 6.2 Access to Information............................ 47 Section 6.3 Certain Additional Agreements of Holdings........ 47 Section 6.4 Holdings Debt.................................... 49 Section 6.5 Tax Indemnification.............................. 49 Section 6.6 Termination of Tax-Sharing Agreements............ 49 Section 6.7 Contract Indemnification......................... 50 Article VII - Covenants of Holdings and the Company..................... 50 Section 7.1 Reasonable Efforts............................... 50 Section 7.2 Certain Filings.................................. 50 Section 7.3 Public Announcements............................. 50 Section 7.4 Marketing Agreement.............................. 51 Section 7.5 Brokers or Finders............................... 51 Section 7.6 Notices of Certain Events........................ 51 Section 7.7 Post-Closing Tax Matters......................... 51 Section 7.8 FDESI Employee Benefits.......................... 52 Section 7.9 Use of Fluor Daniel Name......................... 52 Section 7.10 Non-Permitted Actions............................ 53 Article VIII - Conditions to the Closing............................... 53 Section 8.1 Conditions to the Obligations of Each Party.................................. 53 Section 8.2 Conditions to the Obligations of Holdings........ 54 Section 8.3 Conditions to the Obligations of the Company..... 55
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PAGE ---- Article IX - Termination................................................ 57 Section 9.1 Termination........................................ 57 Section 9.2 Effect of Termination.............................. 58 Article X - Miscellaneous............................................... 58 Section 10.1 Notices............................................ 58 Section 10.2 Non-Survival of Representations, Warranties and Covenants; Indemnification.......... 60 Section 10.3 Amendments; No Waivers............................. 60 Section 10.4 Fees and Expenses.................................. 60 Section 10.5 Successor and Assigns.............................. 61 Section 10.6 Entire Agreement................................... 62 Section 10.7 Governing Law...................................... 62 Section 10.8 Counterparts; Effectiveness........................ 62 Section 10.9 Severability....................................... 62 Section 10.10 "To Knowledge"..................................... 62
Exhibit A - Amended and Restated Certificate of Incorporation Exhibit B - Amendments to the By-laws Exhibit C - Marketing Agreement iii TABLE OF DEFINED TERMS
TERM SECTION PAGE - ---------------------------------- -------------- ---- Acquired Shares................... Recitals... 1 Acquisition Proposal.............. 5.4(b)..... 38 Acquisition Transaction........... 5.4(b)..... 38 Adjusted Option................... 5.7........ 43 Adjustment Fraction............... 5.7........ 43 Affiliate......................... 3.17(c).... 21 Agreement......................... Recitals... 1 Agreement of Merger............... 2.2........ 6 Balance Sheet..................... 3.8........ 15 Balance Sheet Date................ 3.8........ 15 Board of Directors................ 3.1........ 9 By-law Amendments................. Recitals... 2 California Code................... 2.1........ 5 Charter Amendments................ Recitals... 2 Closing........................... 2.8........ 8 Closing Date...................... 2.8........ 8 Code.............................. 3.12....... 15 Commonly Controlled Entity........ 3.13(a).... 16 Company........................... Recitals... 1 Company 8-K's..................... 3.7(a)..... 14 Company 10-K's.................... 3.7(a)..... 14 Company 10-Q...................... 3.7(a)..... 14 Company Contract Backlog.......... 3.22....... 23 Company Deposit................... 1.6........ 4 Company Disclosure Documents...... 3.9(a)..... 15 Company Disclosure Letter......... Article III 8 Company Material Adverse Change... 3.10(a).... 16 Company Material Adverse Effect... 3.1........ 9 Company Proxy Statement........... 3.9(a)..... 15 Company Securities................ 3.5........ 12 Company Stockholder Meeting....... 5.2(a)..... 6 Constituent Corporations.......... 2.3(d)..... 4 Control........................... 3.17(c).... 21 Current Market Price.............. 5.7........ 43 Delaware Law...................... 1.1........ 2 Director Stock Options............ 3.5........ 12 Director Stock Option Plan........ 3.5........ 12 Effective Time of the Merger...... 2.2........ 6 Employee Stock Options............ 3.5........ 12 Employee Stock Option Plans....... 3.5........ 12 Environmental Laws................ 3.19(a).... 22 ERISA............................. 3.13(a).... 16 Exchange Act...................... 3.2........ 9 Exchange Agent.................... 1.5(a)..... 3
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TERM SECTION PAGE - ---------------------------------- ----------- ---- FDESI............................. Recitals... 1 FDESI Balance Sheet............... 4.7........ 27 FDESI Balance Sheet Date.......... 4.7........ 27 FDESI Common Stock................ 2.3........ 6 FDESI Contract Backlog............ 4.13....... 31 FDESI Customer Contract........... 4.13....... 32 FDESI Deposit..................... 1.6........ 4 FDESI Disclosure Letter........... Article IV. 24 FDESI Employees................... 4.15(i).... 33 FDESI Financials.................. 4.7........ 27 FDESI Joint Venture............... 4.6........ 26 FDESI Joint Venture Agreements.... 4.6........ 26 FDESI Material Adverse Change..... 4.9(a)..... 28 FDESI Material Adverse Effect..... 4.1........ 25 FDESI Securities.................. 4.5........ 26 Financials........................ 3.8........ 15 GAAP.............................. 3.8........ 15 Governmental Entity............... 3.8........ 15 Governmental Entity............... 3.3........ 11 Hazardous Substance............... 3.19(a).... 24 Holdings.......................... Recitals... 1 Holdings Percentage............... 6.3........ 47 HSR Act........................... 3.3........ 11 Indebtedness...................... 3.17(b).... 20 Independent Director.............. 6.3........ Intellectual Property Rights...... 3.16(a).... 18 Interim Balance Sheet............. 3.8........ 15 Interim Balance Sheet Date........ 3.8........ 15 Interim Financials................ 3.8........ 15 Joint Venture..................... 3.6........ 13 Joint Venture Agreements.......... 3.6........ 13 License Rights.................... 3.16(a).... 18 Lien.............................. 3.4........ 11 Marketing Agreement............... 3.2........ 9 Merger............................ Recitals... 1 Merger Consideration.............. 2.3(c)..... 6 Multiple Employer Plan............ 3.13(d).... 19 Name Change....................... Recitals... 1 Newco............................. Recitals... 1 New Common Stock.................. Recitals... 1 NLRA.............................. 3.13(h).... 17
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TERM SECTION PAGE - --------------------------------- ----------- ---- Old Common Stock................. Recitals... 1 Option........................... Recitals... 2 Option Agreement................. Recitals... 1 Option Shares.................... Recitals... 2 Outstanding Old Common Stock..... 1.6........ 4 Parachute Payment................ 3.13(f).... 17 Patents.......................... 3.16(a).... 18 Payment Agreement................ 1.6........ 4 Payment Fund..................... 1.6........ 4 Pension Plan..................... 3.13(d).... 16 Permit........................... 3.4........ 11 Plan............................. 3.13(a).... 16 Prohibited Transaction........... 3.13(b).... 16 Recapitalization................. Recitals... 1 Recapitalization Consideration... 1.3(a)..... 3 Recapitalization Payment......... 1.3(a)..... 3 Recapitalization Shares.......... 1.3(a)..... 3 SEC.............................. 3.7(a)..... 14 SEC Reports...................... 3.7(a)..... 14 Securities Act................... 3.7(a)..... 14 Standstill Period................ 6.3........ 47 Subsidiary....................... 3.1........ 9 Surviving Corporation............ 2.1........ 5 Tasks............................ 4.13....... 32 Tax.............................. 3.12....... 15 Termination Fee.................. 10.4(b).... 51 Trademarks....................... 3.16(a).... 18 Transactions..................... Recitals... 2 WARN............................. 3.13(g).... 17 Welfare Plan..................... 3.13(e).... 17
vi INVESTMENT AGREEMENT -------------------- THIS INVESTMENT AGREEMENT, dated as of December 11, 1995 (this "Agreement"), is made and entered into by and among Groundwater Technology, Inc., a Delaware corporation (the "Company"), GTI Acquisition Corporation, a California corporation and a wholly owned subsidiary of the Company ("Newco"), Fluor Daniel, Inc., a California corporation ("Holdings"), and Fluor Daniel Environmental Services, Inc., a California corporation and a wholly owned subsidiary of Holdings ("FDESI"). WHEREAS, Holdings desires to make an equity investment in the Company and the parties desire to enter into other arrangements to further cooperation between the Company and Holdings in certain business matters; WHEREAS, in furtherance of the foregoing, Holdings desires to acquire from the Company, and the Company desires to issue to Holdings, 4,400,000 newly issued shares (the "Acquired Shares") of a newly authorized class of the Company's common stock, par value $.001 per share (the "New Common Stock"); WHEREAS, the acquisition of the Acquired Shares by Holdings will be accomplished by the merger of FDESI with Newco, with FDESI to survive such merger as a wholly owned subsidiary of the Company (the "Merger"), and Holdings to receive the Acquired Shares as a result of the Merger; on the terms and subject to the conditions contained herein; WHEREAS, the Board of Directors of the Company deems it advisable and in the best interests of its stockholders to implement, in conjunction with the Merger, a plan of recapitalization (the "Recapitalization") pursuant to which each share of common stock, par value $.01 per share, of the Company (the "Old Common Stock") outstanding on the Closing Date (as defined in Section 2.9) will be reclassified, cancelled and converted into the right to receive .5274 shares of New Common Stock and $8.62 in cash, all as more specifically set forth herein; WHEREAS, to emphasize the close relationship of Holdings and the Company after the Merger, at the completion of the transactions contemplated hereby, upon the consummation of such transactions, the Company will change its name to "Fluor Daniel/GTI, Inc." (the "Name Change"); 1 WHEREAS, concurrently with the execution and delivery of this Agreement, Holdings and the Company are entering into a stock option agreement (the "Option Agreement"), pursuant to which Holdings will purchase from the Company for a cash payment of $1,650,000, and the Company will sell to Holdings on the date hereof, an option (the "Option") to purchase up to an additional 1,366,000 shares of New Common Stock, as adjusted pursuant to the Option Agreement, or, if exercised before the Closing in certain circumstances, Old Common Stock (the "Option Shares"), on the terms and conditions set forth in the Option Agreement; WHEREAS, the Board of Directors of the Company has approved this Investment Agreement and the transactions contemplated hereby and resolved to recommend that the stockholders of the Company approve the Merger, the Recapitalization and the other transactions contemplated hereby, including the adoption of the Amended and Restated Certificate of Incorporation (the "Charter Amendments"), and amendments to the By-laws (the "By-law Amendments") of the Company set forth in Exhibit "A" and Exhibit "B" hereof, (collectively, the "Transactions"). ----------- ----------- NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE PLAN OF RECAPITALIZATION Section 1.1 The Recapitalization. Upon the terms and conditions hereinafter set forth and in accordance with the General Corporation Law of the State of Delaware (the "Delaware Law"), as of the Closing Date (as defined in Section 2.9), (i) the outstanding capital stock of the Company shall be reclassified in accordance with the Charter Amendments and the stockholders of record of the Company on the Closing Date shall be entitled to receive the Recapitalization Consideration (as defined in Section 1.3); and (ii) the name of the Company will be changed to "Fluor Daniel/GTI, Inc." Section 1.2 Filing. On the Closing Date, subject to the satisfaction or waiver of the conditions set forth in Article VIII, other than the condition set forth in Section 8.1, paragraph (a) which may not be waived, and conditions set forth in Section 8.2, paragraph (f) and Section 8.3, paragraph (b), the Company shall cause the Charter Amendments to be executed and filed with the Secretary of State of Delaware in accordance with Sections 242 and 103 of the Delaware Law. 2 Section 1.3 Conversion. At the Closing Date, by virtue of the Recapitalization and without any action on the part of the holders thereof: (a) Each issued and outstanding share of the Old Common Stock, other than shares of Old Common Stock held in the treasury of the Company, shall be reclassified and automatically converted into the right to receive consideration per share consisting of .5274 of a share of the New Common Stock (the "Recapitalization Shares") and $8.62 in cash without interest (the "Recapitalization Payment," and collectively with the Recapitalization Shares, the "Recapitalization Consideration"). (b) All shares of Old Common Stock which are held by the Company as treasury shares shall be canceled and retired and cease to exist, without any conversion thereof or payment with respect thereto. (c) No fraction of a share of New Common Stock will be issued in the Recapitalization, but, in lieu thereof, each holder of Old Common Stock who would otherwise be entitled to a fraction of a share of New Common Stock (after aggregating all fractional shares of New Common Stock to be received by the holder) will be entitled to receive from the Company an amount of cash (rounded to the nearest whole cent) equal to the product of (i) the fraction multiplied by (ii) the average of the closing price of the Old Common Stock on the NASDAQ National Market for the five days immediately prior to the Closing Date. Section 1.4 No Post-Closing Transfers. No transfer of shares of Old Common Stock of the Company shall be made from and after the Closing. If, after the Closing Date, certificates previously representing shares of Old Common Stock are presented to the Company or the Exchange Agent (as defined in Section 1.5), they shall be canceled and exchanged for the Recapitalization Consideration as provided in Section 1.3. Section 1.5 Surrender of Certificates. From and after the Closing Date, Boston EquiServ or such other bank and trust company as the Company, at least five days prior to the mailing of the Company Proxy Statement (as defined in Section 3.9), shall designate and Holdings shall approve (which approval shall not be unreasonably withheld), shall act as exchange agent (the "Exchange Agent") in effecting the reclassification by the exchange for cash and New Common Stock of certificates that, prior to the Closing Date, represented shares of Old Common Stock entitled to payment in cash and New Common Stock pursuant to Section 1.3(a). As soon as practicable after the Closing Date, the Exchange Agent shall send a notice and transmittal form to each holder of record of Old Common 3 Stock immediately prior to the Closing Date advising such holder of the effectiveness of the Recapitalization and the procedure for surrendering to the Exchange Agent (who may appoint forwarding agents with the approval of the Company) the certificate or certificates to be exchanged pursuant to the Recapitalization. Upon the surrender for exchange of such a certificate, together with such letter of transmittal duly completed and properly executed in accordance with instructions thereto and such other documents as may be required pursuant to such instructions, the holder shall be paid promptly, without interest thereon and subject to any required withholding of taxes, the amount of cash and New Common Stock to which such holder is entitled hereunder, and such certificate shall forthwith be canceled. Until so surrendered and exchanged, each certificate which immediately prior to the Closing Date represented outstanding shares of the Old Common Stock shall represent solely the right to receive the cash and New Common Stock into which the Old Common Stock it theretofore represented shall have been converted pursuant to Section 1.3(a), subject to any required withholding of taxes. If any payment for Old Common Stock is to be made to a person other than the person in whose name the certificates for such shares surrendered is registered, it shall be a condition of the exchange that the person requesting such exchange shall pay to the Exchange Agent any transfer or other taxes required by reason of the delivery of such check to a person other than the registered owner of the certificate surrendered or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. Section 1.6 Exchange Agent. Prior to the Closing Date, the Company and FDESI shall enter into an agreement (the "Payment Agreement") with the Exchange Agent. Immediately prior to the filing of the Charter Amendments, Holdings shall deposit or cause FDESI to be deposited with the Exchange Agent (the "FDESI Deposit") in trust for the benefit of stockholders of the Company, cash in the amount of $33,350,000, and the Company shall deposit or cause to be deposited with the Exchange Agent (the "Company Deposit") in trust for the benefit of the stockholders of the Company cash in an aggregate amount equal to the amount determined by subtracting the FDESI Deposit from the product obtained by multiplying (i) the number of shares of Old Common Stock outstanding immediately prior to the Closing Date (the "Outstanding Old Common Stock") by (ii) the Recapitalization Payment. The deposits made by FDESI and the Company pursuant to the preceding sentence is hereinafter referred to as the "Payment Fund." The Payment Agreement shall provide, among other things, that (a) the Exchange Agent shall maintain the Payment Fund as a separate fund to be held for the benefit of the holders of the Old Common Stock of the Company, which shall be promptly applied by the Exchange Agent to making the payments provided for in Section 1.5, (b) any portion of the Payment Fund that has not been paid to holders of the Old Common Stock pursuant to Section 1.5 prior to that date which is six months from the Closing Date shall be paid to the 4 Company, and any holders of Old Common Stock who shall not have theretofore complied with Section 1.5 shall thereafter look only to the Company for payment of the amount of cash and securities to which they are entitled under this Agreement, (c) the Payment Fund shall not be used for any purpose that is not provided for herein, (d) the Exchange Agent may invest, if so directed by the Company, the cash portion of the Payment Fund in obligations of the United States government or any agency or instrumentality thereof, or in obligations that are guaranteed or insured by the United States government or any agency or instrumentality thereof, (e) any net profit resulting from, or interest or income produced by, such investments shall be payable to the Company on demand, (f) the Exchange Agent shall make payment of the Recapitalization Consideration, to any holder who validly delivers at least 100,000 shares of Old Common Stock in the Recapitalization on or after the Closing Date, by wire transfer of the Recapitalization Payment to such holder within one business day of the later of the Closing Date or the date of such delivery, and by transmittal of the Recapitalization Shares by overnight courier, insured, on the next business day after the later of the Closing Date or the date of such delivery and (g) all expenses of the Exchange Agent shall be paid directly by the Company. Promptly following the date which is six months from the Closing Date, the Exchange Agent shall return to the Company all cash, securities and any other instruments in its possession relating to the transactions described in this Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each holder of a certificate formerly representing Old Common Stock may surrender such certificate to the Company and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the consideration payable in respect thereto pursuant to Section 1.3(a) hereof, without interest, but shall have no greater rights against the Company than may be accorded to general creditors of the Company under the Delaware Law. ARTICLE II THE MERGER Section 2.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the California Corporations Code (the "California Code"), Newco shall be merged with and into FDESI at the Effective Time of the Merger (as defined in Section 2.2). Following the Merger, the separate corporate existence of Newco shall cease and FDESI shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Newco in accordance with the California Code. 5 Section 2.2 Effective Time. As soon as practicable following the filing of Charter Amendments and the satisfaction or waiver of the conditions set forth in Article VIII, except the condition set forth in Section 8.3, paragraph (b), the parties shall file an agreement of merger or other appropriate documents (in any such case, the "Agreement of Merger") executed in accordance with the relevant provisions of the California Code and shall make all other filings or recordings required under the California Code. The Merger shall become effective at such time as the Agreement of Merger is duly filed with the California Secretary of State, notwithstanding that evidence of the acceptance of such filing might not have been received on the filing date, or at such other time as Newco and FDESI shall agree should be specified in the Agreement of Merger (the time the Merger becomes effective being the "Effective Time of the Merger"). Section 2.3 Effects of the Merger. The Merger shall have the effects set forth in Section 1107 of the California Code. As of the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holder of the shares of common stock, no par value, of FDESI ("FDESI Common Stock") or any shares of capital stock of Newco: (a) Capital Stock of Newco. Each issued and outstanding share of the capital stock of Newco shall be converted into and become one fully paid and nonassessable shares of common stock, no par value, of the Surviving Corporation. (b) Treasury Stock. No shares of FDESI Common Stock are owned by FDESI. (c) Conversion of FDESI Common Stock. Each of the 1,000 issued and outstanding shares of FDESI Common Stock shall be converted into the right to receive from the Company 4,400 shares of New Common Stock of the Company (the "Merger Consideration"), which shall be payable promptly upon the surrender of the certificate representing such share at the Closing (as hereinafter defined) against delivery of a certificate representing the aggregate Merger Consideration. As of the Effective Time of the Merger, all such shares of FDESI Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and the holder of the certificate representing such shares of FDESI Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) Rights and Duties Survive. The Surviving Corporation shall possess all the rights, privileges, powers and franchises of a public as well as of a private nature, and be subject to all the restriction, disabilities and duties of each of FDESI and Newco (collectively, the "Constituent 6 Corporations"); and all and singular rights, privileges, powers and franchises of each of the Constituent Corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of the Constituent Corporations, shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectually the property of the Surviving Corporation as they were of the Constituent Corporation, and the tittle to any real estate vested by deed or otherwise, in either of the Constituent Corporations shall not revert or be in any way impaired; but all rights of the creditors and all liens upon any property of either of the Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall thence forth attach to the Surviving Corporation and may be enforced against it to the same extent as if such debts, liabilities and dues had been incurred or contracted by it. Section 2.4 Obligation to Transfer Funds to the Company. Each of FDESI and Newco acknowledges and agrees that at the Effective Time of the Merger, the Surviving Corporation shall be obligated to irrevocably authorize the Exchange Agent to allow the FDESI Deposit to be held on behalf of the Company for the benefit of the stockholders of the Company, in accordance with the Company's instructions under the Payment Agreement (the "Transfer Authorization"). Section 2.5 Further Assurances. If at any time after the Effective Time of the Merger the Surviving Corporation shall consider or be advised that any further deeds, assignments or assurances in law or any other acts are necessary, desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, the title to any property or right of the Constituent Corporations acquired or to be acquired by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the purposes of this Agreement, the Constituent Corporations agree that the Surviving Corporation and its proper officers and directors shall and will execute and deliver all such deeds, assignments and assurances in law and do all acts necessary, desirable or proper to vest, perfect or confirm title to such property or right in the Surviving Corporation and otherwise to carry out the purposes of this Agreement, and that the proper officers and directors of the Constituent Corporations and the proper officers and directors of the Surviving Corporation are fully authorized in the name of the Constituent Corporations or otherwise to take any and all such action. Section 2.6 Articles of Incorporation and By-laws. (a) The Articles of Incorporation of FDESI, as in effect immediately prior to the Effective Time of the Merger, shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. 7 (b) The By-laws of FDESI as in effect at the Effective Time of the Merger shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. Section 2.7 Directors. The directors of FDESI at the Effective Time of the Merger shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 2.8 Officers. The officers of FDESI at the Effective Time of the Merger shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 2.9 Closing; Closing Date. The closing of the sale and purchase of the Shares and the Merger contemplated hereby (the "Closing") shall take place at the offices of Fluor Corporation, 3333 Michelson Drive, Irvine, California 92730, at 8:00 a.m. Los Angeles time, on a date to be mutually agreed upon by the parties, which date shall, subject to the satisfaction, or, to the extent permitted hereby, waiver, at or prior to the Closing, of all the conditions set forth in Article VIII hereof, be no later than the third business day after the satisfaction, or, to the extent permitted hereby, waiver, of the conditions set forth in Sections 8.1(a), (b), (c) and (e). The time and date on which the Closing occurs is herein called the "Closing Date." ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Holdings that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III), except as set forth in the disclosure letter delivered by the Company to the Holdings on the date hereof and initialed by the parties (the "Company Disclosure Letter"). Nothing in the Company Disclosure Letter shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Company Disclosure Letter identities the exception with particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a 8 representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other items itself). The Company Disclosure Letter will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Article III. Section 3.1 Corporate Existence and Power. Each of the Company and each of its Subsidiaries (as defined herein), including, without limiting the generality of the foregoing, Newco, is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and has all requisite corporate power and authority to carry on its business as now or currently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries taken as a whole (a "Company Material Adverse Effect"). The Company has heretofore delivered to Holdings true and complete copies of the Company's Certificate of Incorporation and By-laws and the certificates of incorporation and by-laws of the Subsidiaries, in each case as in effect on the date hereof. The minute books of the Company contain true and complete records of all meetings and consents in lieu of meeting of its Board of Directors (the "Board of Directors") (and any committees thereof), and of its stockholders. The term "Subsidiary" as used in this Agreement shall mean any corporation or other legal entity of which the Company or FDESI, as the case may be, (either alone or together with other Subsidiaries of the Company or FDESI, as the case may be) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are ordinarily and generally, in the absence of contingencies or understandings, entitled to vote for the election of a majority of the board of directors or governing body. Section 3.2 Corporate Authorization. The Company has all requisite corporate power and authority to execute and deliver this Agreement, the Agreement of Merger, the Option Agreement and the Marketing Agreement (as defined herein) and to perform its obligations under such agreements and to consummate the transactions contemplated hereby and thereby. Newco has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement, the Agreement of Merger, the Option Agreement and the Marketing Agreement, and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board 9 of Directors and no further corporate action on the part of the Company (except for the approval by the Company's stockholders of the Transactions and the filing of a Certificate of Amendment with the Secretary of State of Delaware with respect to the Charter Amendments as required by Delaware Law) is necessary to authorize the execution, delivery and performance by the Company of such agreements or the consummation by the Company of the transactions contemplated hereby or thereby. The execution, delivery and performance by Newco of this Agreement and the Agreement of Merger, and the consummation by Newco of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of Newco, and by the sole shareholder of Newco, and no further corporate action on the part of Newco or shareholder action on the part of Newco's sole shareholder (except for the approval by the Company's stockholders of the Transactions) is necessary to authorize the execution delivery and performance by Newco of such agreements or the consummation by Newco of the transactions contemplated hereby or thereby. Assuming Holdings is not and has not been the beneficial owner (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") of 15% or more of the outstanding New Common Stock prior to its execution and delivery of this Agreement, the foregoing authorization and approval by the Board of Directors constitutes prior approval by the Board of Directors of the transaction which resulted in Holdings becoming an "interested stockholder" within the meaning of paragraph (a)(1) of Section 203 of the Delaware Law. This Agreement, the Agreement of Merger, and the Option Agreement have been, and upon execution and delivery by the Company and, in the case of this Agreement and the Agreement of Merger, Newco, at the Closing, the Marketing Agreement will be, duly executed and delivered by the Company and constitute (or, in the case of the Marketing Agreement, will constitute at the Closing) valid and binding obligations of the Company and, in the case of this Agreement and the Agreement of Merger, Newco, enforceable against the Company and, in the case of this Agreement and the Agreement of Merger, Newco, in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, equity or redemption, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Acquired Shares received by Holdings in the Merger, and the shares to be issued upon exercise of the Option, will, when issued and delivered in accordance with the terms hereof, or the Option Agreement, as the case may be, be validly issued, fully paid and nonassessable and free and clear of any claim, lien, encumbrance, preemptive right or agreement. The term "Marketing Agreement" means that certain Marketing Agreement, dated the date hereof, between the Company and Holdings, a copy of which is attached hereto as Exhibit "C". ----------- 10 Section 3.3 Governmental Authorization. The execution, delivery and performance by each of the Company and Newco of this Agreement, and by the Company of the Option Agreement and the Marketing Agreement, and the consummation by the Company and Newco of the transactions contemplated hereby and thereby require no action by or in respect of, or filing by the Company or Newco with, any Federal, state or local government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity") other than: (i) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) compliance with any applicable requirements of the Exchange Act, and the rules and regulations promulgated thereunder; and (iii) compliance with any applicable federal or state securities laws. Section 3.4 Non-Contravention. The execution, delivery and performance by each of the Company and Newco of this Agreement, and by the Company of the Option Agreement and the Marketing Agreement and the consummation by the Company and Newco of the transactions contemplated hereby and thereby do not and will not: (i) contravene or conflict with the Certificate of Incorporation or By-laws of the Company or the Articles of Incorporation or By-laws of Newco; (ii) violate, conflict with or result in the breach of any of the terms of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default (by way of substitution, novation or otherwise) under, any contract or other agreement to which the Company or any of the Subsidiaries is a party or by which any of its assets or properties may be bound or affected; (iii) violate any order, judgment, injunction, award or decree of any United States federal or state court, domestic arbitrator or United States federal or state governmental or regulatory body against, or binding upon, the Company or its Subsidiaries or upon the properties or business of the Company or its Subsidiaries; (iv) violate any statute, law or regulation of the United States or any of the several states thereof as such statute, law or regulation relates to the Company or its Subsidiaries or to the properties or business of the Company or its Subsidiaries; (v) result in the creation or imposition of any Lien (as defined herein) on any asset of the Company or its Subsidiaries; or (vi) violate any Permit (as defined herein), except, with respect to clauses (ii), (iv), (v) or (vi) of this Section 3.4, for violations or Liens, which, individually or in the aggregate, would not have a Company Material Adverse Effect. For purposes of this Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For purposes of this Agreement, "Permit" means any license, permit, order or approval of any federal, state, or local regulatory body. 11 Section 3.5 Capitalization. (a) As of the date hereof, the authorized capital stock of the Company consists of 25,000,000 shares of Old Common Stock, and 1,000,000 shares of preferred stock, par value $.01 per share, none of which preferred stock is issued and outstanding. As of the date hereof, there are outstanding (a) 6,962,196 shares of Old Common Stock, (b) Employee Stock Options (as defined herein) to purchase an aggregate of 1,234,706 shares of Old Common Stock, and (c) Director Stock Options (as defined herein) to purchase an aggregate of 22,500 shares of Old Common Stock (Employee Stock Options and Director Stock Options to purchase an aggregate of 304,916 shares of Old Common Stock were vested and exercisable as of the date hereof). As of the date hereof, 1,459,600 shares of Old Common Stock were reserved for issuance pursuant to the Employee Stock Option Plans (as defined herein) and 100,000 shares of Common Stock were reserved for issuance pursuant to the Director Stock Option Plan (as defined herein). The 1988 Non-Employee Director Stock Option Plan has been terminated and no options are outstanding under such plan. All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except as contemplated by this Agreement and the Option Agreement and as set forth in this Section 3.5, as of the date hereof there are, and, except for changes occurring after the date hereof resulting from (x) the exercise of Employee Stock Options or Director Stock Options outstanding on such date or (y) the grant of Employee Stock Options in the ordinary course of business and the exercise of such Employee Stock Options, on the Closing Date there will be, no outstanding (i) shares of capital stock or other securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other securities of the Company or (iii) options, rights, subscriptions, warrants, calls, unsatisfied preemptive rights, or other agreements to acquire or otherwise receive from the Company any capital stock or other securities of, or securities convertible into or exchangeable for capital stock or other securities of, the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "Company Securities"). As of the date hereof there are, and except for Employee Stock Options granted in the ordinary course of business after the date hereof, as of the Closing Date there will be, no options, grants, stock appreciation rights or other awards outstanding under any Employee Stock Option Plan or any Director Stock Option Plan other than the options to purchase the shares of Old Common Stock as described in this Section 3.5. For purposes of this Agreement, the Company's 1986 Employee Stock Purchase Plan and 1987 Stock Plan shall be referred to individually as an "Employee Stock Option Plan", and collectively as the "Employee Stock Option Plans"; and the 1995 Director Stock Option Plan shall be referred to as the "Director Stock Option Plan." The outstanding options to purchase Old Common Stock granted under the Employee Stock Option Plans shall be referred to as "Employee Stock Options" and under the Director Stock Option Plan shall be referred to as "Director Stock Options". 12 (b) As of the date hereof, the authorized capital stock of Newco consists in its entirety of 1,000 shares of common stock, no par value, of which 1,000 shares are outstanding and owned of record and beneficially by the Company. All outstanding shares of capital stock of Newco have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except as set forth in this Section 3.5, as of the date hereof there are, and on the Closing Date there will be, no outstanding (i) shares of capital stock or other securities of Newco, (ii) securities of Newco convertible into or exchangeable for shares of capital stock or other securities of Newco or (iii) options, rights, subscriptions, warrants, calls, unsatisfied preemptive rights, or other agreements to acquire or otherwise receive from Newco any capital stock or other securities of, or securities convertible into or exchangeable for capital stock or other securities of, Newco. Section 3.6 Joint Ventures; Subsidiaries. (a) The Company Disclosure Letter sets forth a list of each entity in which the Company holds or has the right to acquire one percent (1%) or more of the equity, partnership or other interests of such entity (each such entity, except Subsidiaries, being referred to as a "Joint Venture") and a list of all material agreements relating thereto to which the Company is a party ("Joint Venture Agreements"). To the Company's knowledge and belief, the Company and each other party thereto is in compliance in all material respects with all of the terms, conditions and obligations binding upon it in respect of each of the Joint Venture Agreements, and as of the date hereof none of the Joint Venture Agreements has been terminated. The Company has delivered true and correct copies of each Joint Venture Agreement, as amended, modified or supplemented, to Holdings and all waivers executed thereunder. (b) The Company's interest in each of the Joint Ventures is directly owned by the Company and, except for any restrictions on transfer contained in the Joint Venture Agreements, free and clear of any material Lien or any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such interest). Except as expressly set forth in the Joint Venture Agreements, there are no outstanding obligations of the Company to fund or make a further investment in any Joint Venture. (c) The Company Disclosure Letter also sets forth a list of each Subsidiary of the Company. The Company or its Subsidiaries are, directly or indirectly, the record and beneficial owner of the percentage of outstanding shares of capital stock or other voting securities of each of its Subsidiaries listed thereon; there are no proxies with respect to such securities, and no securities of any of the Subsidiaries are or may become required to be issued, transferred or sold for any reason including, without limitation, by reason of any subscriptions, options, warrants, rights, calls, convertible securities 13 or other agreements or commitments of any character obligating the Company or any such Subsidiary to issue, transfer or sell any of such securities. All of such securities so owned by the Company or its Subsidiaries are validly issued, fully paid and nonassessable and are owned free and clear of any claim, lien, encumbrance, preemptive right or agreement with respect thereto. Section 3.7 SEC Filings. (a) The Company has delivered or made available to Holdings true and complete copies of: (i) its Annual Report on Form 10-K for the fiscal years ended April 29, 1995, April 30, 1994, and May 1, 1993 (the "Company 10-K's"), as filed with the Securities and Exchange Commission (the "SEC"), (ii) its Quarterly Report on Form 10-Q for its fiscal quarter ended July 31, 1995, as filed with the SEC (the "Company 10-Q"), (iii) its Current Reports on Form 8-K filed with the SEC since May 1, 1993 (the "Company 8-K's," and, together with the Company 10-K's and the Company 10-Q, the "SEC Reports"), (iv) its proxy or information statements relating to meetings of, or actions without a meeting by, the stockholders of the Company held since May 1, 1993 and (v) all of its other reports, statements, schedules and final registration statements (except registration statements filed on Form S-8) filed with the SEC since May 1, 1993. The Company has filed all required documents, schedules, form, statements and other documents with the SEC since May 1, 1992. (b) As of its filing date, no such report, schedule or statement (including all exhibits and schedules thereto and documents incorporated by reference therein) referred to in clauses (a)(i)-(iv), as amended or supplemented if applicable, filed pursuant to the Exchange Act contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (c) No such final registration statement (including all exhibits and schedules thereto and documents incorporated by reference therein) referred to in clause (a)(v), as amended or supplemented, if applicable, filed pursuant to the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act") as of the date such statement or amendment became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus, in light of the circumstances under which they were made). Section 3.8 Financial Statements. The audited balance sheets of the Company as at April 29, 1995, April 30, 1994, and May 1, 1993, and the related audited statements of operations, changes in 14 stockholders' equity and cash flows for the fiscal years then ended, together with the notes thereto certified by Ernst & Young, independent certified public accountants, included in the Company 10-K's which have been delivered to Holdings, comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis through the periods covered thereby, and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and its results of operations and cash flows for the periods then ended. The foregoing financial statements of the Company as at April 29, 1995, and for the year then ended, are sometimes herein called the "Financials," the balance sheet included in the Financials is sometimes herein called the "Balance Sheet" and April 29, 1995 is sometimes herein called the "Balance Sheet Date." The financial statements of the Company for the three months ended July 31, 1995 and as included in the Company 10-Q which has been delivered to Holdings, fairly present the financial condition and results of operations of the Company as of and for the three months ended (subject to year-end adjustments consisting only of normal recurring accruals) in accordance with GAAP applied in a manner consistent with the principles applied during the fiscal year ended 1995. The foregoing unaudited financial statements of the Company as at July 31, 1995, and for the three months then ended are sometimes herein called the "Interim Financials," the balance sheet included in the Interim Financials is sometimes herein called the "Interim Balance Sheet" and July 31, 1995 is sometimes herein called the "Interim Balance Sheet Date." Except as set forth in the SEC Reports, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of the Company and its consolidated Subsidiaries or in the notes thereto. Since the date of its incorporation, Newco has had no assets other than a cash capital contribution of $100 and no liabilities. Section 3.9 Disclosure Documents. (a) The proxy statement of the Company on Schedule 14A (the "Company Proxy Statement") to be filed with the SEC in connection with the Transactions, and any amendments or supplements thereto (the Company Proxy Statement, as amended or supplemented, being referred to as the "Company Disclosure Documents") will, when filed, comply as to form in all material respects with the applicable requirements of the Exchange Act, and the rules and resolutions promulgated thereunder. At the time the Company Proxy Statement or any amendments or supplements thereto are first mailed to stockholders of the Company, and at the time such stockholders vote on approval of the Transactions, the Company Proxy Statement will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to 15 make the statements made therein, in the light of the circumstances under which they were made, not misleading. (b) The representations and warranties contained in Section 3.9(a) shall not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished in writing to the Company by Holdings specifically for use therein. Section 3.10 Operations of the Company. Except as contemplated by this Agreement or as disclosed in the Interim Balance Sheet, since the Interim Balance Sheet Date, the Company has conducted its business only in the ordinary course and has not: (a) suffered or incurred any material adverse change in the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries, taken as a whole (a "Company Material Adverse Change"), and the Company knows of no such change that is threatened; (b) amended its certificate of incorporation or by-laws or merged with or into or consolidated with any other person, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or other securities; (c) incurred any indebtedness for borrowed money other than in the ordinary course of business under the letters of credit referred to in the Company Disclosure Letter; (d) declared or paid any dividends or declared or made any other distributions or any kind to its shareholders, or made any direct or indirect redemption, retirement, purchase or other acquisition of any shares of its capital stock or other securities; (e) reduced its cash or short-term investments or their equivalent, other than to meet cash needs arising in the ordinary course or business, consistent with past practices; (f) except as required by GAAP, made any change in its accounting methods or practices or made any change in depreciation or amortization policies or rates adopted by it; (g) made any payment or commitment to pay any severance or termination pay to any of its officers, directors, employees, consultants, agents or other representatives, other than payments or 16 commitments to pay persons other than its officers, directors or shareholders made in the ordinary course of business; (h) made any acquisition of all or substantially all of the assets, properties, capital stock or business of any other person; (i) agreed to the sale, lease, transfer or other disposition (other than sales of assets in the ordinary course of business), in one or more transactions, of the business or assets of the Company (including by way of a merger, consolidation, tender or exchange offer, sale of stock, liquidation or dissolution or similar transaction); (j) entered into any employment agreement with any executive officers of the Company or any of its Subsidiaries, or granted any such executive officers any material increase in compensation, except in the ordinary course of business consistent with prior practice; (k) adopted any stock option or other stock-based employee benefits plans or agreed to accelerate the vesting or exercisability of any employee or director stock option; (l) incurred any damage, destruction or loss, whether or not covered by insurance, that has had or could have a Company Material Adverse Effect; or (m) issued, sold or otherwise disposed of any Company Securities or any debt or equity securities of any of its Subsidiaries. Section 3.11 Litigation. Except as set forth in the SEC Reports, as of the date hereof, there are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving the Company or any of its Subsidiaries which could reasonably be expected to result in a Company Material Adverse Change. Except as set forth in the SEC Reports, as of the date hereof, there are no actions, suits or claims or legal, administrative or arbitral proceedings of which the Company or any of its Subsidiaries has received notice, or, to the knowledge of the Company or any of the Subsidiaries, investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or involving the Company or any of its Subsidiaries or any of their respective properties or assets in which the amount in controversy or damages sought exceeds $20,000. 17 Section 3.12 Taxes. Each of the Company and each of its Subsidiaries has paid all federal, state, county, local, foreign and other taxes, including, without limitation, income taxes, estimated taxes, excise taxes, sales taxes, gross receipts taxes, franchise taxes, employment and payroll-related taxes, property taxes and import duties, whether or not measured in whole or in part by net income (hereinafter, "Taxes" or, individually, a "Tax") required to be paid by it through the date hereof and all deficiencies or other additions to tax, interest and penalties owed by it, in connection with any such Taxes (other than Taxes and deficiencies not material in the aggregate), and shall timely pay any Taxes, including additions, interest and penalties, required to be paid by it after the date hereof and on or before the Closing Date (other than Taxes being contested in good faith and the liability for which is reserved for by the Company in accordance with GAAP). All reserves or other provisions for taxes reflected in the Financials and the Interim Financials are, or will be, adequate, and there are no liens for delinquent taxes upon any property or asset of the Company or any of its Subsidiaries. The Company Disclosure Letter sets forth the status of the audit of any income tax returns of the Company or any of its Subsidiaries for each fiscal year for which the statute of limitations has not expired, including the amounts of any deficiencies and additions to tax, interest and penalties indicated on any notices of proposed deficiency of statutory notices of deficiency that may have been issued in connection therewith. The Company Disclosure Letter sets forth all federal tax elections under the Internal Revenue Code of 1986, as amended (the "Code") that are in effect with respect to the Company for the fiscal years ended May 1, 1993, April 30, 1994, and April 29, 1995. No extension of time with respect to any date on which any Tax return was or is to be filed by the Company or any of its Subsidiaries is in force, and no waiver or agreement by the Company or any of its Subsidiaries is in force for the extension of time for the assessment or payment of any Tax. The Company has not made any election under Section 341(f) of the Code. Each of the Company and each of its Subsidiaries has timely filed all tax returns required through the date hereof, and shall prepare and timely file, in a manner consistent with prior years and applicable laws and regulations, all tax returns to be filed on or before the Closing Date. Section 3.13 Employee Benefit Plans. Except as set forth in the SEC Reports: (a) There are no plans, practices, arrangements, policies or commitments, including, without limitation, any employment, consulting or deferred compensation arrangements or agreements, executive compensation, bonus or severance pay plans or practices, health or life insurance arrangements, vacation pay plans or any other fringe benefit plans, including, without limitation, any pension, profit sharing, savings or other plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (whether or not covered by ERISA) (each 18 individually, a "Plan") maintained or contributed to by or on behalf of the Company, or with respect to which the Company has or could have any material liability or obligation, whether actual or contingent, direct or indirect, through any Commonly Controlled Entity (as defined below or otherwise), other than the Employee Stock Option Plans and the Director Stock Option Plan. A "Commonly Controlled Entity" of a person shall mean any other person who is treated as a single employer (within the meaning of Code Section 414) with such person. (b) Each Plan is (and the Company is with respect to each Plan) in compliance in all material respects with all applicable laws, regulations, reporting and disclosure requirements and has been administered and operated in all material respects in accordance with its terms. With respect to each Plan: (i) no "prohibited transaction" (within the meaning of Code Section 4975 or ERISA Section 406) or breach of fiduciary duty has occurred; and (ii) there are no material actions, liens, claims or disputes pending or, to the knowledge of the Company, threatened. (c) With respect to each Plan (where applicable); on or before the date hereof, the Company has delivered or made available to Holdings complete copies of (i) each Plan document and individual agreement related thereto; and (ii) the most recent summary plan description, annual report, actuarial valuation and Internal Revenue Service determination letter. (d) No Plan is a "pension plan" (within the meaning of ERISA Section 3(2)) or a "multiple employer plan" (as described in Code Section 413(c)). The Company has not incurred any actual or contingent liability arising under Title IV of ERISA which is reasonably likely to have a Company Material Adverse Effect. Without limiting the foregoing, the Company has no secondary liability under any agreement described in ERISA Section 4204, or has been a party to a transaction described in ERISA Section 4069, in each case, which is reasonably likely to have a Company Material Adverse Effect. (e) With respect to each Plan which is a "welfare plan" (within the meaning of ERISA Section 3(1)): (i) except as required under Code Section 4980B or Part 6 of Title I of ERISA, no such plan provides medical or death benefits with respect to any individual beyond his or her termination of employment or service; and (ii) there are no reserves, assets, surplus or prepaid premiums under any such Plan. (f) The consummation of the Transactions and the exercise of the Option will not: (i) entitle any individual to severance pay, unemployment compensation or any similar payment; (ii) accelerate 19 the time of payment or vesting or increase the amount of compensation due to any individual; or (iii) entitle any individual to a "parachute payment" (within the meaning of Code Section 280G). (g) Neither the Company nor any Commonly Controlled Entity has incurred within the last two years or reasonably expects, as of the date hereof, to incur any liability or obligation under the Workers Adjustment Retraining Notification Act or any similar state law ("WARN"). (h) Each of the Company and each of its Subsidiaries is not, and has not been, a party to any collective bargaining agreement or any agreement with a labor union or association. There is no pending work stoppage, organizing effort, strike, slowdown, picketing or similar event affecting the Company or any of the Subsidiaries or, to the knowledge of the Company and each of its Subsidiaries, threatened, and no application for certification of a collective bargaining agent is pending or, to the knowledge of the Company and each of its Subsidiaries, threatened. Each of the Company and each of its Subsidiaries has not been cited for any unfair labor practice or other practice or conduct prohibited by the National Labor Relations Act (the "NLRA"). There is no pending or, to the knowledge of the Company and each of its Subsidiaries, threatened, complaint, charge or proceeding before the National Labor Relations Board or any other governmental authority alleging any violation of the NLRA by the Company or any of its Subsidiaries. Section 3.14 Compliance with Laws. Except as previously disclosed in writing in a letter to Holdings or in the SEC Reports, and except for violations which are not reasonably likely to have a Company Material Adverse Effect, each of the Company and each of its Subsidiaries is not, to its knowledge, in violation of, and to its knowledge has not violated, (i) any federal, state or local law, statute, ordinance or regulation or any other requirement of any federal, state or local governmental or regulatory body of competent jurisdiction applicable to the Company or any of its Subsidiaries or the business of the Company or any of its Subsidiaries or (ii) any term of any applicable judgment, decree, injunction, law and/or order issued by a governmental or regulatory body of competent jurisdiction. Except as set forth in the SEC Reports, each of the Company and each of its Subsidiaries, to its knowledge, has all Permits required as of the date hereof for the conduct of the business of the Company and each of its Subsidiaries as now conducted; to the Company's knowledge, such Permits are in full force and effect; the Company has not received notice of any violation in respect of any Permits and no proceeding is pending of which the Company has received notice or, to the knowledge of the Company, threatened to revoke or limit any Permit which revocations or limitations would have, in the aggregate, a Company Material Adverse Effect. 20 Section 3.15 Opinion of Financial Advisor. The Company has received the opinion of Donaldson, Lufkin & Jenrette, dated December 11, 1995, to the effect that the consideration to be received by the Company and its stockholders, pursuant to the Transactions, taken as a whole, is fair from a financial point of view to the Company and its stockholders, a true and complete copy of which opinion has been delivered to Holdings prior to the date hereof. Section 3.16 Intellectual Property. The Company is not aware of any patents held by any person or entity under which a license is reasonably likely to be required in connection with the conduct of the business of the Company as now conducted or as currently proposed to be conducted. The Company has not received any written notice of any adverse claim of any person or entity with respect to any intellectual property right or asserted against or threatened to be asserted against, the Company with respect to any intellectual property right. Section 3.17 Contracts and Other Agreements. (a) Except as set forth the SEC Reports (or filed as an exhibit thereto), there are no contracts or agreements to which the Company or any of its Subsidiaries is a party that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries taken as a whole. Each agreement, contract, lease, license, commitment or instrument of the Company set forth in the Company Disclosure Letter or the SEC Reports is in full force and effect and is a legal, valid and binding agreement of the Company and, to the best knowledge of the Company, of each other party thereto, enforceable in accordance with its terms except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. Neither the Company nor any of its Subsidiaries is in violation of or in default under (nor, to the knowledge of the Company, does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect. (b) Set forth in the Company Disclosure Letter is (x) a list of all loan or credit agreements, notes, bonds, indentures, and other agreements and instruments pursuant to which any Indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount in excess of $1,000,000 is outstanding or may be incurred and (Y) the respective principal amounts currently outstanding 21 thereunder. For purposes of this Agreement, "Indebtedness" shall mean, with respect to any person, without duplication, (A) all obligations of such person for borrowed money, or with respect to deposits or advances of any kind to such person, (B) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (C) all obligations of such person upon which interest charges are customarily paid, (D) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person, (E) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding obligations of such person to creditors for raw materials, inventory, services and supplies incurred in the ordinary course of such person's business), (F) all capitalized lease obligations of such person, (G) all obligations of others secured by any lien on property or assets owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (H) all obligations of such person under interest rate or currency hedging transactions (valued at the termination value thereof), (I) all letters of credit issued for the account of such person and (J) all guarantees and arrangements having the economic effect of a guarantee of such person of any Indebtedness of any other person. (c) The Company is not a party to or bound by any material written or oral (w) employment agreement or employment contract that is not terminable at will by the Company, (x) covenant not to compete, or (y) agreement, contract or other arrangement with (A) any stockholder of the Company, (B) any Affiliate (as defined herein) of the Company or, to the knowledge of the Company, any Affiliate of any stockholder of the Company or (C) any officer, director or employee of the Company (other than employment agreements covered by clause (w) above), or of any stockholder of the Company or of any Affiliate of the Company. The term "Affiliate" means, with respect to any person, any other person controlling, controlled by or under direct or indirect common control with such person (for the purposes of this definition "control," when used with respect to any specified person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing). (d) The Company is not a party to or bound by any material written or oral mortgage, pledge, security agreement, deed of trust or other document granting a Lien or security interest (including, but not limited to, Liens upon properties acquired under conditional sales, capital leases or other title retention or security devices). Section 3.18 Properties. (a) Except as set forth in the Company Disclosure Letter, each of the Company and each of its Subsidiaries has good and marketable title to, or valid leasehold interests 22 in, all its properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that, in the aggregate, do not and will not materially interfere with its ability to conduct its business as currently conducted. (b) Each of the Company and each of its Subsidiaries has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Each of the Company and each of its Subsidiaries enjoys peaceful and undisturbed possession under all such material leases. Section 3.19 Environmental Matters. (a) Neither the Company nor any of its Subsidiaries has (x) placed, released, transported, arranged for transportation of or disposed of any Hazardous Substances (as defined herein) on, under, from or at any of the Company's or any of its Subsidiaries' properties or any other properties (which for purposes of this Section 3.19 includes any facility formerly owned or operated by the Company), in violation of any applicable Environmental Laws (as defined herein) except where such violation would not have a Company Material Adverse Effect, (y) any knowledge of the presence of any Hazardous Substances on, under or at any of the Company's or any of its Subsidiaries' properties or any other property but arising from the Company's or any of its Subsidiaries' properties, in violation of any applicable Environmental Laws except where such violation would not have a Company Material Adverse Effect, or (z) during the preceding three years, received any written notice (A) from a Governmental Entity that the Company or any of its Subsidiaries is in violation of any statute, law, ordinance, regulation, rule, judgment, decree or order of any Governmental Entity relating to any matter of pollution, protection of the environment, environmental regulation or control or regarding Hazardous Substances (collectively, "Environmental Laws") on or under any of the Company's or any of its Subsidiaries' properties or any other properties, (B) of the institution or pendency of any suit, action, claim, proceeding or investigation by any Governmental Entity or any third party in connection with any such violation, (C) from a Governmental Entity requiring the response to or remediation of a release or threatened release of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties, or (D) demanding payment by the Company or any of its Subsidiaries for response to or remediation of a release or threatened release of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties. For purposes of this Agreement, the term "Hazardous Substance" shall mean any toxic or hazardous materials, wastes or substances, including asbestos, buried contaminants, chemicals, flammable explosives, radioactive materials, polychlorinated biphenyls, petroleum and petroleum products and 23 any substances defined as, or included in the definition of, "hazardous wastes", "hazardous materials" or "toxic substances" under any Environmental Law. (b) To the knowledge of the Company, no Environmental Law imposes any obligation upon the Company or its Subsidiaries arising out of or as a condition to any transaction contemplated by this Agreement or the Option Agreement, including, without limitation, any requirement to modify or to transfer any Permit or license, any requirement to file any notice or other submission with any Governmental Entity, the placement of any notice, acknowledgement or covenant in any land records, or the modification of or provision of notice under any agreement, consent order or consent decree. No Lien has been placed upon any of the Company's or its Subsidiaries' owned properties, or, to the knowledge of the Company, leased properties under any Environmental Law. Section 3.20 Confidentiality Agreements. To the Company's knowledge, all officers and employees of the Company who have access to confidential information have entered into confidentiality agreements and all employees providing services of a scientific nature have entered into invention agreements in the form then utilized by the Company. To the Company's knowledge, no officer or employee has disavowed his or her obligations under any such agreement and the Company is not aware of any facts or circumstances which would constitute a material breach of any such agreement. Section 3.21 Disclosure. No representations or warranties by the Company in this Agreement and no statement contained in any document (including, without limitation, the Financials, Interim Financials, Company Disclosure Letter, certificates, or other writings) furnished or to be furnished by the Company to Holdings or any of its representatives pursuant to the provisions hereof contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDINGS Holdings represents and warrants to the Company that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as 24 of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV), except as set forth in the disclosure letter delivered by FDESI to the Company on the date hereof and initialed by the parties (the "FDESI Disclosure Letter"). Nothing in the FDESI Disclosure Letter shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the FDESI Disclosure Letter identities the exception with particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other items itself). The FDESI Disclosure Letter will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Article IV. Section 4.1 Corporate Existence and Power. Each of Holdings and FDESI is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business as now conducted or currently proposed to be conducted. FDESI is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, properties, condition (financial or otherwise), results of operations or prospects of FDESI (a "FDESI Material Adverse Effect"). FDESI has heretofore delivered to the Company true and complete copies of the Company's Articles of Incorporation and By-laws in each case as in effect on the date hereof. The minute books of FDESI contain true and complete records of all meeting and consents in lieu of meeting of its Board of Directors (and any committees thereof), and of its stockholder. Section 4.2 Corporate Authorization. Each of Holdings and FDESI has all requisite corporate power and authority to execute and deliver this Agreement, the Option Agreement and the Marketing Agreement and perform its obligations under such agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Holdings and FDESI of this Agreement, the Option Agreement and the Marketing Agreement and the consummation by Holdings and FDESI of the transactions contemplated hereby and thereby have duly authorized by the board of directors of Holdings, FDESI and Fluor Corporation, and no other corporate action on the part of Holdings or FDESI is necessary to authorize the execution, delivery and performance of such agreements and consummation of the transactions contemplated hereby and 25 thereby. This Agreement and the Option Agreement have been, and the Marketing Agreement at the Closing will be, duly executed and delivered by Holdings and FDESI and constitute valid and binding obligations of Holdings and FDESI enforceable against Holdings and FDESI in accordance with their respective terms subject to applicable bankruptcy, insolvency, moratorium and similar laws relating to or affecting creditors' rights and to general equitable principles. Section 4.3 Governmental Authorization. The execution, delivery and performance by Holdings and FDESI of this Agreement, the Option Agreement and the Marketing Agreement and the consummation by Holdings and FDESI of the transactions contemplated hereby and thereby require no action by or in respect of, or filing by Holdings or FDESI with any Governmental Entity other than (i) compliance with any applicable requirements of the HSR Act; (ii) compliance with any applicable requirements of the Exchange Act, and the rules and regulations promulgated thereunder; and (iii) compliance with any applicable requirements of foreign or state securities laws. Section 4.4 Non-Contravention. The execution, delivery and performance by Holdings and FDESI of this Agreement, the Option Agreement and the Marketing Agreement and the consummation by Holdings and FDESI of the transactions contemplated hereby and thereby do not and will not (i) contravene or conflict with their respective certificate of incorporation or by-laws; (ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default (by way of substitution, novation or otherwise) under, any contract or other agreement to which Holdings or FDESI is a party or by or to which Holdings or FDESI or any of their respective assets or properties may be bound; (iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon Holdings or FDESI or upon the securities, properties or business of Holdings or FDESI; (iv) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Holdings or FDESI or to the securities, properties or business of Holdings or FDESI; (v) result in the creation or imposition of any Lien on any asset of Holdings or FDESI, or (vi) violate any Permit, except, with respect to clauses (ii), (iv), (v) and (vi) of this Section 4.4, for violations, or Liens, which, individually or in the aggregate, are not reasonably likely to have (x) a material adverse effect on the ability of Holdings to consummate the transactions contemplated hereby or (y) a FDESI Material Adverse Effect. Section 4.5 Capitalization of FDESI. As of the date hereof, the authorized capital stock of FDESI consists in its entirety of 1,000 shares of common stock, no par value, of which 1,000 shares 26 are outstanding and owned of record and beneficially by Holdings. All outstanding shares of capital stock of FDESI have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except as set forth in this Section 4.5, as of the date hereof there are, and on the Closing Date there will be, no outstanding (i) shares of capital stock or other securities of FDESI, (ii) securities of FDESI convertible into or exchangeable for shares of capital stock or other securities of FDESI or (iii) options, rights, subscriptions, warrants, calls, unsatisfied preemptive rights, or other agreements to acquire or otherwise receive from FDESI any capital stock or other securities of, or securities convertible into or exchangeable for capital stock or other securities of, FDESI (the items in clauses (i), (ii) and (iii) being referred to collectively as the "FDESI Securities"). Section 4.6 FDESI Joint Ventures. (a) The FDESI Disclosure Letter sets forth a list of each entity in which FDESI holds or has the right to acquire one percent (1%) or more of the equity, partnership or other interests of such entity (each such entity, except Subsidiaries, being referred to as an "FDESI Joint Venture") and a list of all material agreements relating thereto to which FDESI is a party ("FDESI Joint Ventures Agreements"). To FDESI's knowledge and belief, FDESI and each other party thereto is in compliance in all material respects with all of the terms, conditions and obligations binding upon it in respect of each of the FDESI Joint Ventures Agreements, and as of the date hereof none of the FDESI Joint Ventures Agreements has been terminated. FDESI has delivered true and correct copies of each FDESI Joint Ventures Agreement, as amended, modified or supplemented, to the Company and all waivers executed thereunder. (b) FDESI's interest in each of the FDESI Joint Ventures is directly owned by FDESI and, except for any restrictions on transfer contained in the FDESI Joint Ventures Agreements, free and clear of any material Lien or any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such interest). Except as expressly set forth in the FDESI Joint Ventures Agreements, there are no outstanding obligations of FDESI to fund or make a further investment in any FDESI Joint Ventures. (c) FDESI has no Subsidiaries. Section 4.7 FDESI Financial Statements. The unaudited balance sheets of FDESI as at April 30, 1995 and October 31, 1995, and the related unaudited statements of operations for the fiscal year and six month period, respectively, then ended, (except for the absence of footnotes and for normal year end adjustments and for the other matters set forth in that certain letter from Vic L. Prechtl to Robert E. Sliney, Jr. dated November 30, 1995) have been prepared in accordance with GAAP 27 applied on a consistent basis through the periods covered thereby, and fairly present the consolidated financial position of FDESI as of the date thereof and its results of operations for the period then ended. The foregoing unaudited financial statements of FDESI as at October 31, 1995, and for the period then ended, are sometimes herein called the "FDESI Financials," the balance sheet included in the FDESI Financials is sometimes herein called the "FDESI Balance Sheet" and October 31, 1995 is sometimes herein called the "FDESI Balance Sheet Date." Except as set forth in the FDESI Disclosure Letter, FDESI does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) to Holdings or any Affiliate of Holdings ("Holdings Debt") or otherwise required by GAAP to be set forth on a balance sheet of FDESI or in the notes thereto. Section 4.8 Disclosure Documents. The information with respect to Holdings and its Affiliates furnished to the Company by Holdings in writing specifically for use in any Company Disclosure Document will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, in the case of the Company Proxy Statement, at the time the Company Proxy Statement and or any amendment or supplement thereto is first mailed to stockholders of the Company, and, in the case of the Company Proxy Statement, at the time the stockholders vote on approval of the Transactions. Section 4.9 Operations of FDESI. Except as contemplated by this Agreement or as disclosed in the FDESI Balance Sheet, since the FDESI Balance Sheet Date, FDESI has conducted its business only in the ordinary course and has not: (a) suffered or incurred any material adverse change in the business, properties, condition (financial or otherwise), results of operations or prospects of FDESI (a "FDESI Material Adverse Change"), and FDESI knows of no such change that is threatened; (b) amended its certificate of incorporation or by-laws or merged with or into or consolidated with any other person, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or other securities; (c) incurred any indebtedness for borrowed money other than in the ordinary course of business; 28 (d) declared or paid any dividends or declared or made any other distributions or any kind to its shareholder, or made any direct or indirect redemption, retirement, purchase or other acquisition of any shares of its capital stock or other securities; (e) reduced its cash or short-term investments or their equivalent, other than to meet cash needs arising in the ordinary course or business, consistent with past practices; (f) except as required by GAAP, made any change in its accounting methods or practices or made any change in depreciation or amortization policies or rates adopted by it; (g) made any payment or commitment to pay any severance or termination pay to any of its officers, directors, employees, consultants, agents or other representatives, other than payments or commitments to pay persons other than its officers, directors or shareholders made in the ordinary course of business; (h) made any acquisition of all or substantially all of the assets, properties, capital stock or business of any other person; (i) agreed to the sale, lease, transfer or other disposition (other than sales of assets in the ordinary course of business), in one or more transactions, of the business or assets of FDESI (including by way of a merger, consolidation, tender or exchange offer, sale of stock, liquidation or dissolution or similar transaction); (j) entered into any employment agreement with any executive officers of FDESI or granted any such executive officers any material increase in compensation, except in the ordinary course of business consistent with prior practice; (k) adopted any stock option or other stock-based employee benefits plans or agreed to accelerate the vesting or exercisability of any employee or director stock option; (l) incurred any damage, destruction or loss, whether or not covered by insurance, that has had or could have a FDESI Material Adverse Effect; or (m) issued, sold or otherwise disposed of any FDESI Securities. 29 Section 4.10 Litigation of FDESI. As of the date hereof, there are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving FDESI which could reasonably be expected to result in a FDESI Material Adverse Change. As of the date hereof, there are no actions, suits or claims or legal, administrative or arbitral proceedings of which Holdings or FDESI has received notice, or, to the knowledge of Holdings or FDESI, investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or, to the knowledge of Holdings or FDESI, threatened against or involving FDESI or any of its properties or assets. Section 4.11 Taxes of FDESI. FDESI has paid all Taxes required to be paid by it through the date hereof and all deficiencies or other additions to tax, interest and penalties owed by it, in connection with any such Taxes (other than Taxes and deficiencies not material in the aggregate), and shall timely pay any Taxes, including additions, interest and penalties, required to be paid by it after the date hereof and on or before the Closing Date (other than Taxes being contested in good faith and the liability for which is reserved for by FDESI in accordance with GAAP). All reserves or other provisions for taxes reflected in the FDESI Financials are, or will be, adequate, and there are no liens for delinquent taxes upon any property or asset of FDESI. The FDESI Disclosure Letter sets forth the status of the audit of any income tax returns of FDESI (and of any consolidated, unitary or combined returns which included FDESI, but only insofar as such returns pertain specifically to FDESI) for each fiscal year for which the statute of limitations has not expired, including the amounts of any deficiencies and additions to tax, interest and penalties indicated on any notices of proposed deficiency of statutory notices of deficiency that may have been issued in connection therewith. The FDESI Disclosure Letter sets forth all federal tax elections under the Code that are in effect with respect to FDESI for the fiscal years ended May 1, 1993, April 30, 1994, and April 29, 1995. No extension of time with respect to any date on which any Tax return was or is to be filed by FDESI is in force, and no waiver or agreement by FDESI is in force for the extension of time for the assessment or payment of any Tax. FDESI has not made any election under Section 341(f) of the Code. FDESI has timely filed all tax returns required through the date hereof, and shall prepare and timely file, in a manner consistent with prior years and applicable laws and regulations, all tax returns to be filed on or before the Closing Date. Section 4.12 Environmental Matters of FDESI (a) FDESI has not (x) placed, released, transported, arranged for transportation of or disposed of any Hazardous Substances on, under, from or at any of FDESI's properties or any other properties (which for purposes of this Section 4.12 includes any facility formerly owned or operated by FDESI), in violation of any applicable 30 Environmental Laws, except where such violation would not have a FDESI Material Adverse Effect, (y) any knowledge of the presence of any Hazardous Substances on, under or at any of FDESI's properties or any other property but arising from FDESI's properties, in violation of any applicable Environmental Laws, except where such violation would not have a FDESI Material Adverse Effect, or (z) except in each case for notices set forth in the FDESI Disclosure Letter, during the preceding three years, received any written notice (A) from a Governmental Entity that FDESI is in violation of any Environmental Laws on or under any of FDESI's properties or any other properties, (B) of the institution or pendency of any suit, action, claim, proceeding or investigation by any Governmental Entity or any third party in connection with any such violation, (C) from a Governmental Entity requiring the response to or remediation of a release or threatened release of Hazardous Substances at or arising from any of FDESI's properties or any other properties, or (D) demanding payment by FDESI for response to or remediation of a release or threatened release of Hazardous Substances at or arising from any of FDESI's properties or any other properties. (b) Except as set forth in the FDESI Disclosure Letter, to the knowledge of FDESI, no Environmental Law imposes any obligation upon FDESI or its Subsidiaries arising out of or as a condition to any transaction contemplated by this Agreement or the Option Agreement, including, without limitation, any requirement to modify or to transfer any Permit or license, any requirement to file any notice or other submission with any Governmental Entity, the placement of any notice, acknowledgement or covenant in any land records, or the modification of or provision of notice under any agreement, consent order or consent decree. No Lien has been placed upon any of FDESI's or its Subsidiaries' owned properties, or, to the knowledge of FDESI, leased properties under any Environmental Law. Section 4.13 FDESI Contract List. (a) Except as set forth in paragraph 4.13 of the FDESI Disclosure Letter, FDESI is not a party to or subject to any contract to provide services, materials or goods to third parties (an "FDESI Customer Contract"). (b) The FDESI Disclosure Letter sets forth with respect to the FDESI Customer Contracts, a summary of work performed as of the date of this Agreement and work to be performed after the date of this Agreement not yet completed. (c) Neither FDESI or Holdings has received notice or any other communication, written or oral, from any customer terminating or not renewing any FDESI Customer Contract or indicating the 31 customer's formal non-acceptance of work performed by FDESI or Holdings under any FDESI Customer Contract. (d) FDESI or Holdings has completed in all material respects all work in progress under all FDESI Customer Contracts pursuant to the terms of each such contract, including all warranty terms, and substantially in accordance with customer specifications. Neither FDESI nor Holdings has been provided with written notice of any claims for material defects in performance under any of the contracts, and neither FDESI nor Holdings has knowledge of any state of facts or anticipated event which FDESI or Holdings in good faith, reasonably believes may give rise to any such claim. Section 4.14 Purchase for Investment; Legend. Holdings hereby: (a) acknowledges that Holdings has been advised that the Acquired Shares have not been registered under the Securities Act or under any state securities laws; (b) represents and warrants that the Acquired Shares are being acquired by Holdings for Holdings' own sole benefit and account for investment and not with a view to, or for resale in connection with, a public offering or distribution thereof; (c) agrees that the Shares will not be sold or otherwise disposed of except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations promulgated thereunder, or any other applicable securities laws; (d) consents that stop transfer instructions in respect of the Acquired Shares, relating only to the restrictions in Section 4.14 (c), may be issued to any transfer agent, transfer clerk or other agent at any time acting for the Company; and (e) consents that the certificate or certificates representing the Acquired Shares not registered under the Securities Act may be impressed with a legend in substantially the following form: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE 32 SHARES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. THE SHARES REPRESENTED BY THIS AGREEMENT ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON SALE OR TRANSFER PURSUANT TO THE PROVISIONS OF THAT CERTAIN INVESTMENT AGREEMENT DATED AS OF DECEMBER 11, 1995 AS TO WHICH THE COMPANY AND REGISTERED OWNER ARE PARTIES." Section 4.15 Employees and Employee Benefit Plans. Except as set forth in the FDESI Disclosure Letter: (a) There are no Plans maintained or contributed to by or on behalf of FDESI or Holdings, or with respect to which FDESI has or could have any material liability or obligation, whether actual or contingent, direct or indirect, through any Commonly Controlled Entity. (b) Each Plan is (and FDESI and Holdings is with respect to each Plan) in compliance in all material respects with all applicable laws, regulations, reporting and disclosure requirements and has been administered and operated in all material respects in accordance with its terms. With respect to each Plan: (i) no "prohibited transaction" (within the meaning of Code Section 4975 of ERISA Section 406) or breach of fiduciary duty has occurred; and (ii) there are no material actions, liens, claims or disputes pending or, to the knowledge of FDESI or Holdings, threatened. (c) With respect to each Plan (where applicable), (i) on or before the date hereof, FDESI has delivered or made available to the Company complete copies of (i) each Plan document and individual agreement related thereto; and (ii) the most recent summary plan description, annual report, actuarial valuation and Internal Revenue Service determination letter. (d) No Plan is a "pension plan" (within the meaning of ERISA Section 3(2)) or a "multiple employer plan" (as described in Code Section 413(c)). FDESI has not incurred any actual or contingent liability arising under Title IV of ERISA which is reasonably likely to have a Company Material Adverse Effect. Without limiting the foregoing, FDESI has no secondary liability under any agreement described in ERISA Section 4204, or has been a party to a transaction described in ERISA Section 4069, in each case, which is reasonably likely to have a FDESI Material Adverse Effect. 33 (e) With respect to each Plan which is a "welfare plan" (within the meaning of ERISA Section 3(1)): (i) except as required under Code Section 4980B or Part 6 of Title I of ERISA, no such plan provides medical or death benefits with respect to any individual beyond his or her termination of employment or service; and (ii) there are no reserves, assets, surplus or prepaid premiums under any such Plan. (f) The consummation of the Transactions will not: (i) entitle any individual to severance pay, unemployment compensation or any similar payment; (ii) accelerate the time of payment or vesting or increase the amount of compensation due to any individual; or (iii) entitle any individual to a "parachute payment" (within the meaning of Code Section 280G). (g) Neither Holdings, FDESI nor any Commonly Controlled Entity has incurred within the last two years or reasonably expects, as of the date hereof, to incur any liability or obligation under WARN. (h) Each of Holdings (with respect to the business of FDESI) and FDESI is not, and has not been, a party to any collective bargaining agreement or any agreement with a labor union or association. There is no pending work stoppage, organizing effort, strike, slowdown, picketing or similar event affecting FDESI or Holdings (with respect to the business of FDESI) or, to the knowledge of Holdings and FDESI, threatened, and no application for certification of a collective bargaining agent is pending or, to the knowledge of the Holdings and FDESI, threatened. Neither Holdings (with respect to the business of FDESI) nor FDESI has been cited for any unfair labor practice or other practice or conduct prohibited by the NLRA. There is no pending or, to the knowledge of Holdings and FDESI, threatened, complaint, charge or proceeding before the National Labor Relations Board or any other governmental authority alleging any violation of the NLRA by FDESI or Holdings (with respect to the business of FDESI). (i) Set forth in paragraph 4.15(i) of the FDESI Disclosure Letter is a true, correct and complete list of all employees of FDESI (or employees of Holdings whose duties relate primarily to the business of FDESI and who Holdings intends to transfer to FDESI on or before the Closing)(the "FDESI Employees") and their rates of pay. No FDESI employee has sued or threatened to sue FDESI or Holdings, or bought or threatened to bring any administrative complaint against FDESI or Holdings, within the two years prior to the date hereof. FDESI has possession of or access to all personnel files with respect to each FDESI Employee. 34 Section 4.16 Compliance with Laws. Except for violations which are not reasonably likely to have a FDESI Material Adverse Effect, each of Holdings (with respect to the business of FDESI) and FDESI is not, to its knowledge, in violation of, and to its knowledge has not violated, (i) any federal, state or local law, statute, ordinance or regulation or any other requirement of any federal, state or local governmental or regulatory body of competent jurisdiction applicable to FDESI or Holdings (with respect to the business of FDESI) or the business of FDESI or Holdings (with respect to the business of FDESI) or (ii) any term of any applicable judgment, decree, injunction, law and/or order issued by a governmental or regulatory body of competent jurisdiction. Except as set forth in the FDESI Disclosure Letter, each of the FDESI and Holdings (with respect to the business of FDESI), to its knowledge has all Permits required as of the date hereof for the conduct of the business of the FDESI or Holdings (with respect to the business of FDESI) as now conducted; to the knowledge of Holdings and FDESI, such Permits are in full force and effect; neither FDESI nor Holdings has received notice of any violation in respect of any Permits and no proceeding is pending of which Holdings or FDESI has received notice or, to the knowledge of Holdings or FDESI, threatened to revoke or limit any Permit which revocations or limitations would have, in the aggregate, a FDESI Material Adverse Effect. Section 4.17 Intellectual Property. Except as set forth in the FDESI Disclosure Letter, neither FDESI nor Holdings is aware of any patents held by any person or entity under which a license is reasonably likely to be required in connection with the conduct of the business of FDESI as now conducted or as currently proposed to be conducted. Except as set forth in the FDESI Disclosure Letter, neither Holdings nor FDESI has received any written notice of any adverse claim of any person or entity with respect to any intellectual property right relating to the business of FDESI or asserted against or threatened to be asserted against FDESI or Holdings (with respect to the business of FDESI) with respect to any intellectual property right. Section 4.18 Contracts and Other Agreements. (a) Except as set forth in the FDESI Disclosure Letter, there are no contracts or agreements to which Holdings or FDESI is a party that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of FDESI. Each agreement, contract, lease, license, commitment or instrument of FDESI set forth in the FDESI Disclosure Letter is in full force and effect and is a legal, valid and binding agreement of the FDESI and, to the best knowledge of Holdings and FDESI, of each other party thereto, enforceable in accordance with its terms except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. Neither Holdings nor 35 FDESI is in violation of or in default under (nor, to the knowledge of Holdings or FDESI, does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not, individually or in the aggregate, reasonably be expected to result in a FDESI Material Adverse Effect. (b) Set forth in the FDESI Disclosure Letter is (x) a list of all loan or credit agreements, notes, bonds, indentures, and other agreements and instruments pursuant to which any Indebtedness of FDESI in an aggregate principal amount in excess of $25,000 is outstanding or may be incurred and (y) the respective principal amounts currently outstanding thereunder. (c) Except as set forth in the FDESI Disclosure Letter, neither FDESI nor Holdings is a party to or bound by any material written or oral (w) employment agreement or employment contract that is not terminable at will by the Company or FDESI, (x) covenant not to compete which would limit or restrict the Company or FDESI from conducting business anywhere in the world, or (y) agreement, contract or other arrangement with (A) any stockholder of FDESI, (B) any Affiliate (as defined herein) of FDESI or, to the knowledge of FDESI or Holdings, any Affiliate of any stockholder of FDESI or (C) any officer, director or employee of FDESI (other than employment agreements covered by clause (w) above), or of any stockholder of FDESI or of any Affiliate of FDESI. (d) Except as set forth in the FDESI Disclosure Letter, FDESI is not a party to or bound by any material written or oral mortgage, pledge, security agreement, deed of trust or other document granting a Lien or security interest (including, but not limited to, Liens upon properties acquired under conditional sales, capital leases or other title retention or security devices). Section 4.19 Properties. (a) Except as set forth in the FDESI Disclosure Letter, FDESI has good and marketable title to, or valid leasehold interests in, all its properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that, in the aggregate, do not and will not materially interfere with its ability to conduct its business as currently conducted. 36 Section 4.20 Confidentiality Agreements. To the knowledge of Holdings and FDESI, all FDESI Employees who have access to confidential information have entered into confidentiality agreements and all employees providing services of a scientific nature have entered into invention agreements in the form then utilized by Holdings. The rights to all such agreements will be assigned by Holdings to FDESI prior to Closing. To the knowledge of Holdings and FDESI, no officer or employee has disavowed his or her obligations under any such agreement and neither Holdings nor FDESI is aware of any facts or circumstances which would constitute a material breach of any such agreement. Section 4.21 FDESI Disclosure. No representations or warranties by FDESI in this Agreement and no statement contained in any document (including, without limitation, the Financials, Interim Financials, FDESI Disclosure Letter, certificates, or other writings) furnished or to be furnished by FDESI to the Company or any of its representatives pursuant to the provisions hereof contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading. ARTICLE V COVENANTS OF THE COMPANY The Company agrees that: Section 5.1 Conduct of Business. (a) Ordinary Course. During the period from the date of this Agreement to the Closing Date, the Company shall and shall cause its Subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall, in all material respects, be unimpaired at the Closing Date. Except for the matters listed in Section 5.1 of the Company Disclosure Letter, without limiting the generality of the foregoing, during the period from the date of this Agreement to the Closing Date, the Company shall not, and shall not permit any of its Subsidiaries, without the prior written consent of Holdings, to: 37 (i) (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than dividends and distributions by any direct or indirect wholly owned Subsidiary of the Company to its parent, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than (x) the issuance of Common Stock upon the exercise of Employee Stock Options and Director Stock Options outstanding on the date of this Agreement in accordance with their present terms, and (y) the issuance of Common Stock pursuant to the Option Agreement); (iii) amend its certificate of incorporation, by-laws or other comparable charter or organizational documents or reincorporate in any jurisdiction; (iv) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof, except for such actions undertaken in the ordinary course of business and consistent with past practice and involving no more than $250,000 in the aggregate or (y) any assets that are material, individually or in the aggregate, to the Company and its Subsidiaries taken as a whole, except purchases of inventory in the ordinary course of business consistent with past practice; (v) sell, lease, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of, any of its properties or assets, except sales of properties or assets no longer used by the Company or its Subsidiaries in the conduct of its business and sales of inventory in the ordinary course of business consistent with past practice; (vi) (y) incur any Indebtedness for borrowed money or guarantee any such Indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of 38 another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowing not in excess of $1,000,000 in the aggregate incurred in the ordinary course of business consistent with past practice, the endorsement of checks in the normal course of business and the extension of credit in the normal course of business or (z) make any loans, advances or capital contributions to, or investments in, any other person, other than to the Company or any direct or indirect wholly owned Subsidiary of the Company; (vii) make or agree to make any new capital expenditures or commitments, purchases of property or acquisitions of other businesses, capital assets or properties which, individually, is in excess of $250,000 or, in the aggregate, are in excess of $1,000,000 or enter into any new real property lease with an annual rental of more than $60,000; (viii) make any Tax election (other than in the ordinary course of preparing and filing its Tax returns) or settle or compromise any material Tax liability; (ix) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, or liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the SEC Reports or incurred after the date of such financial statements in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality or similar agreement to which the Company or any of its Subsidiaries is a party; (x) adopt any shareholder rights or similar plan or take any other action with the intention of, or which may have the effect of, discriminating against Holdings as a shareholder of the Company (or any successor); (xi) adopt or amend in any material respect any Plan; (xii) enter into any contract, agreement, plan or arrangement covering any director, officer or employee providing for the making of any payments, the acceleration of vesting of any benefit or right or any other entitlement contingent upon (A) the consummation of the transactions contemplated hereby or by the Option Agreement or any acquisition by Holdings of securities of the Company (whether by merger, tender offer, private or market purchases or otherwise) or (B) the 39 termination of employment after the occurrence of any such contingency if such payment, acceleration of entitlement would not have been provided but for such contingency; or amend any existing contract, agreement, plan or arrangement to so provide; or (xiii) authorize any of, or commit or agree to take any of, the foregoing actions. (b) Other Actions. The Company shall not, and shall not permit any of its Subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in this Agreement or the Option Agreement becoming untrue, or, (ii) any of the conditions to the Merger set forth in Article VIII, not being satisfied. (c) Advice of Changes. The Company shall promptly advise Holdings orally and in writing of any change or event having, or which, insofar as can reasonably be foreseen, would have, a material adverse effect on the Merger or the Recapitalization, or a Company Material Adverse Effect. Section 5.2 Stockholder Meeting; Proxy Material. The Company shall cause a meeting of its stockholders (the "Company Stockholder Meeting") to be duly called and held as soon as practicable for the purpose of voting on approval of the Transactions. Subject to Section 5.4(a), the Board of Directors shall unanimously recommend approval and adoption of the matters submitted to the Company's stockholders, including the issuance of the Acquired Shares to Holdings pursuant to the Merger, as required pursuant to the rules of the NASDAQ National Market, and the execution and filing of the Charter Amendments, pursuant to the Recapitalization. In connection with the Company Stockholder Meeting, the Company: (i) shall promptly prepare and file with the SEC in accordance with the Exchange Act the Company Proxy Statement, shall use all reasonable efforts to have the Company Proxy Statement and/or any amendment or supplement thereto cleared by the SEC and shall thereafter mail to its stockholders as promptly as practicable the Company Proxy Statement; (ii) shall use all reasonable efforts to obtain the necessary approvals by its stockholders of the Transactions; and (iii) shall otherwise comply with all legal requirements applicable to such meeting. The Company shall make available to Holdings prior to the filing thereof with the SEC copies of the preliminary Company Proxy Statement and any amendments or supplements thereto and shall make any changes therein reasonably requested by Holdings insofar as such changes relate to any matters relating to Holdings, FDESI or the description of the Transactions. Section 5.3 Access to Information. From the date hereof until the Closing, the Company shall give Holdings, its counsel, financial advisors, auditors and other authorized representatives reasonable 40 access during normal business hours to the offices, properties, books and records of the Company and its Subsidiaries and, to the extent the Company may do so, its Joint Ventures, shall furnish to Holdings, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such persons may reasonably request to the extent available to the Company and shall instruct the Company's employees, counsel and financial advisors to cooperate with Holdings in its investigation of the business of the Company, its Subsidiaries and its Joint Ventures; provided, that no investigation pursuant to this Section 5.3 shall affect any representation or warranty given by the Company to Holdings hereunder. All requests for information made pursuant to this Section 5.3 shall be directed to the Chief Financial Officer of the Company or such other persons as may be designated by him. Section 5.4 No Solicitation of Other Offers. (a) From the date hereof until the earlier of the Closing or the termination of this Agreement, the Company shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, take (nor shall the Company authorize or permit its officers, directors, employees, representatives, investment bankers, attorneys, accountants or other agents or affiliates, to take) any action to: (i) encourage, solicit or initiate the submission of any Acquisition Proposal (as defined below), (ii) enter into any agreement with respect to or propose any Acquisition Proposal or (iii) participate in any way in any discussions or negotiations with, or furnish any information to, any person or entity (other than Holdings or its officers, directors, employees, representatives, investment bankers, attorneys, accountants or other agents or affiliates of Holdings) in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal; provided, however, that (x) the Company may participate in discussions or negotiations (including as a part thereof making any counterproposal) with or furnish information to any third party pursuant to a customary confidentiality agreement (so long as it has complied with the prohibitions of paragraph (a), subparagraph (i) above) if (i) a majority of the Board of Directors determines in good faith, after receipt of written advice of outside counsel, that the failure to provide such information or participate in such discussions or negotiations would be more likely than not to cause the members of the Board of Directors to be in breach of their fiduciary duties under Delaware Law and (ii) a majority of the Board of Directors, after consultation with the Company's independent financial advisors, determines in good faith that there is a reasonable possibility that such third party will submit to the Company an Acquisition Proposal which is a Superior Proposal (as defined below), (y) if a majority of the Board of Directors determines in good faith, after receipt of written advice of outside counsel, that the failure to recommend to the Company's stockholders an Acquisition Proposal which is a Superior Proposal would cause the members of the Board of Directors to be in breach of their fiduciary duties 41 under Delaware Law, the Company may withdraw its recommendation to the stockholders in favor of the Transactions and recommend to its stockholders such an Acquisition Proposal which is a Superior Proposal and (z) after termination of this Agreement, the Company may enter into an agreement with any third party with respect to any Acquisition Proposal which is a Superior Proposal; provided, further however, that the Company shall not take any action described in clause (x), (y) or (z) of the immediately preceding provision except after prompt notice to Holdings of its receipt of any Acquisition Proposal or of any inquiry or request for information contemplating an Acquisition Proposal. The Company shall promptly notify Holdings of its receipt of any Acquisition Proposal or of any inquiry or request for information contemplating an Acquisition Proposal. The Company shall keep Holdings informed, on a current basis, of the status of any such proposals, negotiations or discussions except to the extent that a majority of the Board of Directors determines in good faith, after receipt of written advice of outside counsel, that the provision of such information to Holdings would be more likely than not to cause the members of the Board to be in breach of their fiduciary duties under Delaware Law. Any actions permitted under, and taken in compliance with, this Section 5.4 shall not be deemed a breach of any other covenant or agreement of the Company contained in this Agreement. (b) (i) For purposes of this Agreement, "Acquisition Proposal" shall mean any bona fide proposal made by a third party to acquire (A) beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of a majority equity interest in the Company pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, tender offer or exchange offer or similar transactions involving the Company including, without limitation, any single or multi-step transaction or series of related transactions which is structured in good faith to permit such third party to acquire beneficial ownership of a majority or greater equity interest in the Company or (B) all or substantially all of the business or assets of the Company (other than the transactions contemplated by this Agreement and the Option Agreement). Any transaction described in the preceding sentence is herein referred to as an "Acquisition Transaction." (ii) The term "Superior Proposal" shall mean any bona fide Acquisition Proposal which a majority of the members of the Board of Directors determines in its good faith judgment (based on the written advice of independent financial advisors) to be more favorable to the Company and the holders of Common Stock than the transactions contemplated hereby (including, without limitation, the Marketing Agreement), taken as a whole, and for which financing is then committed or which, in the good faith judgment of a majority of such members (based on the written advice of independent financial advisors) is capable of being financed by such third party. 42 Section 5.5 Board of Directors and Officers. The Company shall cause the Board of Directors of the Company, effective upon the Closing, to consist of seven members, and shall cause the filing of the Charter Amendments to terminate the classification of the Board of Directors. Until such time as their successors are duly elected or appointed, effective upon the Closing, the directors who shall serve shall be Walter C. Barber, Allan S. Bufferd, Robert P. Schechter, David L. Myers, J. Michal Conaway, James C. Stein and an additional Independent Director to be named by Holdings prior to the mailing of the Company Proxy Statement. The Company shall also cause the Board of Directors of the Surviving Corporation, immediately following the Closing, to consist of three members, Walter C. Barber, David L. Myers and J. Michal Conaway, who shall serve until their successors are duly elected or appointed. The Surviving Corporation shall cause the following individuals to be appointed to the offices indicated, effective upon the Closing, to serve at the pleasure of the Board of Directors: Walter Barber President Robert Sliney Vice President and CFO Steve Paquette Vice President Keith Angell Vice President Ronnie Smith Vice President John Wood Vice President Don Stokley Vice President Section 5.6 Amendments to Certificate of Incorporation and By-laws. The Board of Directors shall adopt, subject to stockholder approval, the Charter Amendments and By-law Amendments and submit such amendments for approval by the stockholders of the Company at the Company Stockholder Meeting. The Charter Amendments shall include a provision changing the name of the Company as set forth therein. The Board of Directors shall recommend approval and adoption of such amendments by the Company's stockholders, subject to Section 5.4(a). Section 5.7 Stock Options. The Company shall not take any steps to accelerate the vesting or exercisability of any Employee Stock Options or Director Stock Options outstanding on the date of this Agreement, or otherwise modify the terms of such options on or before the Closing, without the prior written consent of Holdings. Promptly after the Closing Date (but effective as of the Closing Date of the Merger), each of the outstanding Employee Stock Options and each of the outstanding Director Stock Options shall be canceled, and the holder thereof shall receive, in exchange therefore, a substitute option (an "Adjusted Option") to purchase a number of shares of New Common Stock equal to the number of shares of Old Common Stock subject to such canceled option multiplied by 43 the Adjustment Fraction (as defined below), at a per share exercise price equal to the per share exercise price of such canceled option multiplied by a fraction equal to one divided by the Adjustment Fraction. Any Adjusted Option issued as described above shall be subject to the same terms and conditions (other than number of shares and exercise price) as the option for which it is exchanged, including the terms relating to vesting (treating such Adjusted Options as if they were granted at the same time as the options for which they were exchanged) and the conditions relating to exercise. For purposes of the adjustments described in this section, the "Adjustment Fraction" means a fraction, the numerator of which equals the Current Market Price (as defined below) of a share of Old Common Stock, and the denominator of which equals the Current Market Price of a share of New Common Stock. The "Current Market Price" of a share of Old Common Stock or a share of New Common Stock means the average per share closing price for the five trading days immediately preceding the Closing Date, in the case of the Old Common Stock, and the five trading days immediately following the Closing Date, in the case of the New Common Stock, as reported on the NASDAQ National Market. Section 5.8 Update to Opinion of Financial Advisor. The Company shall request and thereafter use its best efforts to obtain, prior to the mailing of the Company Proxy Statement, an additional opinion of Donaldson, Lufkin & Jenrette, to the effect that as of such date the consideration to be received by the Company and its stockholders, pursuant to the Transactions, taken as a whole, is fair from a financial point of view to the Company and its stockholders. ARTICLE VI COVENANTS OF HOLDINGS AND FDESI Section 6.1 Conduct of FDESI Business. (a) Ordinary Course. During the period from the date of this Agreement to the Closing Date, Holdings and FDESI covenant that FDESI and Holdings (with respect to the business of FDESI) shall carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall, in all material respects, be 44 unimpaired at the Closing Date. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Closing Date, FDESI shall not: (i) (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of capital stock of FDESI or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities; (iii) amend its certificate of incorporation, by-laws or other comparable charter or organizational documents or reincorporate in any jurisdiction; (iv) acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof, except for such actions undertaken in the ordinary course of business and consistent with past practice and involving no more than $250,000 in the aggregate or (y) any assets that are material, individually or in the aggregate, to FDESI; (v) sell, lease, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of, any of its properties or assets, except sales of properties or assets no longer used by FDESI in the conduct of its business and sales of inventory in the ordinary course of business consistent with past practice; (vi) (y) incur any Indebtedness for borrowed money or guarantee any such Indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of FDESI, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowing on an inter-company basis not in excess of $1,000,000 in the aggregate incurred in the ordinary course of business consistent with past practice, the endorsement of checks in the normal course of business 45 and the extension of credit in the normal course of business or (z) make any loans, advances or capital contributions to, or investments in, any other person, other than to FDESI; (vii) make or agree to make any new capital expenditures or commitments, purchases of property or acquisitions of other businesses, capital assets or properties which, individually, is in excess of $50,000 or, in the aggregate, are in excess of $250,000 or enter into any new real property lease; (viii) make any Tax election (other than in the ordinary course of preparing and filing its Tax returns) or settle or compromise any material Tax liability; (ix) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, or liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of FDESI included in the FDESI Disclosure Letter or incurred after the date of such financial statements in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality or similar agreement to which FDESI is a party; (x) adopt any shareholder rights or similar plan or take any other action with the intention of, or which may have the effect of, discriminating against the Company as a shareholder of FDESI (or any successor); (xi) adopt or amend in any material respect any Plan; (xii) enter into any contract, agreement, plan or arrangement covering any director, officer or employee providing for the making of any payments, the acceleration of vesting of any benefit or right or any other entitlement contingent upon (A) the consummation of the transactions contemplated hereby or by the Option Agreement or any acquisition by the Company of securities of FDESI (whether by merger, tender offer, private or market purchases or otherwise) or (B) the termination of employment after the occurrence of any such contingency if such payment, acceleration of entitlement would not have been provided but for such contingency; or amend any existing contract, agreement, plan or arrangement to so provide. 46 (xiii) authorize any of, or commit or agree to take any of, the foregoing actions. (b) Other Actions. Neither FDESI nor Holdings shall take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of Holdings or FDESI set forth in this Agreement or the Option Agreement becoming untrue, or (ii) any of the conditions to the Merger set forth in Article VIII, not being satisfied. (c) Advice of Changes. FDESI shall promptly advise the Company orally and in writing of any change or event having, or which, insofar as can reasonably be foreseen, would have, a material adverse effect on the Merger or the Recapitalization, or a FDESI Material Adverse Effect. Section 6.2 Access to Information. From the date hereof until the Closing, FDESI and Holdings (with respect to the business of FDESI) shall give the Company, its counsel, financial advisors, auditors and other authorized representatives reasonable access during normal business hours to the offices, properties, books and records of FDESI and Holdings (with respect to the business of FDESI) and, to the extent FDESI may do so, the FDESI Joint Ventures, shall furnish to the Company, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such persons may reasonably request to the extent available to FDESI and shall instruct FDESI's employees, counsel and financial advisors to cooperate with the Company in its investigation of the business of FDESI and the FDESI Joint Ventures; provided, that no investigation pursuant to this Section 6.2 shall affect any representation or warranty given by FDESI to the Company hereunder. All requests for information made pursuant to this Section 6.2 shall be directed to the President of FDESI or such other persons as may be designated by him. Section 6.3 Certain Additional Agreements of Holdings. With respect to paragraphs (a), (b), (c), (d) and (e), until April 30, 1999, and with respect to paragraph (f), for the periods specified therein (in each case the "Standstill Period"), Holdings and the Company agree: (a) Neither Holdings nor any of its Affiliates shall enter into any contract, agreement or transaction with the Company or any of its Affiliates after the Closing Date that is material to the Company's business, taken as a whole, without the prior approval of a majority of the Independent Directors (as defined herein) except for (i) any contract, agreement or transaction contemplated by the Marketing Agreement or the Option Agreement, (ii) any contract, agreement or transaction 47 which is entered into between such parties in the ordinary course of business, and (iii) any contract, agreement or transaction governed by paragraphs (b), (c), (d) or (f); (b) Neither Holdings nor any of its Affiliates shall, directly or indirectly, purchase or otherwise acquire, any New Common Stock, securities of the Company convertible into or exchangeable for New Common Stock or options, rights, warrants and similar securities issued by the Company to acquire New Common Stock, without the prior approval of a majority of the Independent Directors, unless immediately after such purchase or acquisition, the percentage of then outstanding New Common Stock that would be owned of record or beneficially by Holdings of its Affiliates ("Holdings' Percentage") would not exceed 65%, provided, however, that the foregoing restrictions on purchases shall not apply to the exercise by Holdings of the Option; provided, however, further, that if the Option is exercised by Holdings, the Option Shares held, directly or indirectly, by Holdings shall be counted in any determination of Holdings' Percentage with respect to any purchases by Holdings or its Affiliates after the date of such exercise of the Option; (c) The Company shall not, directly or indirectly, purchase any shares of New Common Stock without the prior approval of a majority of the Independent Directors, unless immediately after such repurchase, Holdings' Percentage would not exceed 65%; (d) Holdings shall not sell, transfer, mortgage or otherwise dispose of any of the New Common Stock held by Holdings without the prior approval of a majority of the Independent Directors; provided, however, that the prior approval of the Independent Directors shall not be required if there occurs a substantial and extreme adverse change in the business, prospects, or condition (financial or otherwise) of the Company that arises from corresponding substantial adverse changes of expected long term duration in the market for environmental services; (e) The Company shall not enter into any amendment or terminate or waive any provision of this Agreement, the Option Agreement or the Marketing Agreement without the prior approval of a majority of the Independent Directors; and (f) Until April 30, 1999, Holdings shall vote all shares of New Common Stock owned by it in favor of fixing the size of the Board of Directors of the Company at not more than seven and in favor of not less than three Independent Directors. Until the annual stockholders' meeting of the Company (or written consent in lieu thereof) held in 1998, Holdings shall vote all shares of New 48 Common Stock owned by it in favor of Allan S. Bufferd and Robert P. Schechter (whom Holdings shall also cause to be nominated) in any election of members of the Company's Board of Directors. For purposes of this Agreement, "Independent Director" means a director of the Company who is not (apart from such directorship) (i) an officer, Affiliate, employee, principal stockholder, consultant or partner of Holdings or any Affiliate of Holdings or of any entity that was dependent upon Holdings or any Affiliate of Holdings for more than 3% of its revenues or earnings in its most recent fiscal year, (ii) an officer, employee, consultant or partner of the Company or any Affiliate of the Company or an officer,employee, principal stockholder, consultant or partner of an entity that was dependent upon the Company or any Affiliate of the Company for more than 3% of its revenues or earnings in its most recent fiscal year (unless agreed to in writing by Holdings) or (iii) an officer, director, employee, principal stockholder, consultant or partner of a person that is a competitor of Holdings or any of its Affiliates (unless agreed to in writing by Holdings) or of the Company or any of its Affiliates of such competitor for more than 3% of its revenues or earnings in its most recent fiscal year. Section 6.4 Holdings Debt. On or before the Closing Date, any and all Holdings Debt shall be cancelled and forgiven. Section 6.5 Tax Indemnification. Subject to the provisions of Section 7.7(c) from and after the Closing Date, Holdings shall pay or cause to be paid and shall indemnify and hold harmless the Company and any director, officer, employee, advisor, parent, subsidiary or Affiliate of the Company, and any successor thereof from any liability for or arising out of, any Taxes of Holdings (including, without limiting the generality of the foregoing, any obligation (including any joint and several liability pursuant to Treasury Regulations Section 1.1502-6 or otherwise) to contribute to the payment of Taxes) determined on a combined or consolidated basis (x) of Holdings and any current or former member of Holdings' group of corporations filing on a combined or consolidated basis for any taxable period or (y) attributable to the income, business, property or operations of Holdings for which FDESI may be liable on any basis, including, but not limited to, liability as a transferee or on a joint and several basis under the consolidated return provisions in respect of a pre-Closing Date tax period, or resulting from FDESI ceasing to be affiliated with the affiliated group of corporations (as defined in Section 1504 of the Code) of which Holdings is a member. Section 6.6 Termination of Tax-Sharing Agreements. Before the Closing Date, all agreements between FDESI and any member of Holdings' consolidated, unitary or combined group of 49 corporations with respect to the apportionment of consolidated, unitary or combined tax liability imposed by any taxing jurisdiction shall have been terminated and all payments required to be made by FDESI to any other member of any such group pursuant to any such agreement shall have been made, other than payments referred to in Section 7.7(c) hereof or reflected in the FDESI Disclosure Letter. Section 6.7 Contract Indemnification. From and after the Closing Date Holdings shall indemnify and hold harmless the Company and its Subsidiaries (including FDESI) from and against any and all loss, cost and expense arising from or as a result of a breach by Holdings or FDESI of the representations and warranties contained in Section 4.13 hereof. ARTICLE VII COVENANTS OF HOLDINGS AND THE COMPANY The parties hereto agree that: Section 7.1 Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions, including, without limitation, all reasonable efforts to oppose any judgments, decrees or orders of the type referred to in Section 8.2(c). Section 7.2 Certain Filings. The Company and Holdings shall cooperate with one another (a) in connection with the preparation of the Company Disclosure Documents, (b) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the Transactions and (c) in seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith or with the Company Disclosure Documents and seeking timely to obtain any such actions, consents, approvals or waivers. Section 7.3 Public Announcements. Holdings and the Company will consult with each other before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby and will not issue any such press release or make any such 50 public statement prior to such consultation unless required by law or a party has not responded to reasonable efforts to effect such consultation. Section 7.4 Marketing Agreement. Holdings, FDESI and the Company each agree to execute and deliver the Marketing Agreement concurrently with the Closing. Section 7.5 Brokers or Finders. Each of Holdings and the Company represents, as to itself, its subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with this Agreement or any of the transactions contemplated by this Agreement, except Donaldson, Lufkin & Jenrette whose fees and expenses will be paid by the Company in accordance with the Company's agreement with such firm, and Merrill Lynch, whose fees and expenses, except as provided in Section 10.4, will be paid by Holdings in accordance with Holdings' agreement with such firm, and each of the Company and Holdings respectively agrees to indemnify and hold the other harmless from and against any and all claims, liabilities or obligations with respect to any other broker's, finder's or similar fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by such party or any of its Affiliates in connection with this Agreement or any of the transactions contemplated hereby. Section 7.6 Notices of Certain Events. The parties hereto will notify one another of: (a) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (c) any actions, suits, claims, investigations or proceedings commenced of which such party has received notice or, to its knowledge, threatened, against the Company or which relate to the consummation of the transactions contemplated by this Agreement. Section 7.7 Post-Closing Tax Matters. The following provisions shall govern the allocation of responsibility for certain Tax matters following the Closing: 51 (a) The Company shall prepare and file all FDESI tax returns which are due, originally or as extended, after the Closing (other than income tax returns with respect to periods for which a consolidated, unitary or combined return includes Holdings and the operations of FDESI). (b) The Company, Holdings and FDESI shall cooperate fully, as and to the extent reasonably requested, in connection with the filing of tax returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and, upon request, the provision of records and information which are reasonably relevant to the filing of tax returns or any such audit, litigation or other proceeding and employees shall be made available on a mutually convenient basis to provide information and explanation of any material provided hereunder. (c) FDESI shall reimburse Holdings for such portion of the tax liability on all consolidated, unitary and combined Tax returns which include FDESI and Holdings, as is attributable to FDESI. This portion shall be determined as if FDESI had filed a separate return for such purposes and the highest marginal corporate tax rate had applied to all of FDESI's income. Holdings and the Company shall cooperate to allocate on a fair and reasonable basis tax liabilities which are reported for periods after the Closing Date on consolidated, unitary or combined returns which include both Holdings or its affiliates and the Company or its affiliates. Section 7.8 FDESI Employee Benefits. Holdings agrees to provide, on a reimbursed cost basis, continued participation by FDESI Employees in the Holdings benefit plans and programs listed in Schedule 4.15(a) of the FDESI Disclosure Letter during the period from the Closing through December 31, 1996. Section 7.9 Use of Fluor Daniel Name. Effective upon Closing, Holdings hereby grants to the Company the right and license to use the name "Fluor Daniel" in its corporate name and in the conduct of its business, without payment of any license fee or royalty. In the event that at any time Holdings holds less than 20% of the outstanding New Common Stock of the Company and provided that Holdings is not in breach of any of its obligations under Section 6.3(d) hereof, Holdings may by written notice to the Company revoke this right and license; provided that the Company shall change its corporate name and cease using the name Fluor Daniel as soon as reasonably possible but in no event later than three months after such revocation. 52 Section 7.10 Non-Permitted Actions. For a period of one year after the Closing the Company shall cause FDESI to maintain its corporate existence and will not allow it to transfer any of the contracts to which it is a party. ARTICLE VIII CONDITIONS TO THE CLOSING Section 8.1 Conditions to the Obligations of Each Party. The obligations of each of the Company, Newco, Holdings and FDESI to consummate the Merger are subject to the satisfaction of the following conditions (which may be waived in whole or in part by the party against whom the waiver is to be effective, unless such a waiver is prohibited by law): (a) the Transactions, including the Charter Amendments and the Recapitalization, shall have been approved by the holders of a majority of the outstanding Common Stock; (b) any applicable waiting period under the HSR Act relating to the transactions contemplated hereby shall have expired or been terminated; (c) no provision of any applicable law or regulation and no judgment, injunction, order or decree of any court or other governmental body of competent jurisdiction shall be in effect which prohibits or makes illegal the consummation of the Merger or the effectiveness as between the parties of the Marketing Agreement; (d) all consents or actions by or in respect of or filings with any governmental body, agency, official, or authority required to permit the consummation of the Merger and the effectiveness as between the parties of the Marketing Agreement as between the parties shall have been obtained, taken or made (other than those consents, actions or filings which, if not obtained, taken or made prior to the consummation of the Merger and the effectiveness as between the parties of the Marketing Agreement, as would not have a Company Material Adverse Effect); and (e) there shall not be in effect any banking moratorium or suspension of payments in respect of banks in the United States. 53 Section 8.2 Conditions to the Obligations of Holdings. The obligation of Holdings and FDESI to consummate the Merger is subject to the satisfaction of the following further conditions (which may be waived in whole or in part by Holdings, unless such a waiver is prohibited by law): (a) (i) the Company shall have performed, in all material respects, all of its obligations hereunder required to be performed by it at or prior to the Closing; (ii) each of the representations and warranties of the Company contained in this Agreement shall be true in all material respects as of the date hereof and as of the Closing (except to the extent such representations and warranties are expressly made as of an earlier date) as if made at and as of such time; and (iii) Holdings shall have received a certificate signed by an officer of the Company to the foregoing effect; (b) From the Interim Balance Sheet Date to the Closing Date, there shall have been no Company Material Adverse Change; (c) No action or proceeding before any court or governmental or regulatory authority or body, United States federal or state or foreign, shall have been constituted (and be pending) or threatened, by any government or governmental authority, that seeks, or threatens to seek, to prevent or delay the consummation of the Transactions or that challenges any of the terms or provisions of this Agreement; (d) No order, judgment or decree issued by any United States federal or state or foreign governmental or regulatory authority or body, or by any court of competent jurisdiction nor any statute, rule, regulation or executive order promulgated or enacted by any United States federal or state or foreign government or governmental authority that (i) prevents the consummation of the Transactions; (ii) prohibits Holdings at any time after the Closing from exercising all material rights and privileges pertaining to its ownership of the Acquired Shares or the Option Shares purchasable upon exercise of the Option; or (iii) materially and adversely affects the condition (financial or otherwise), properties, assets, earnings, business or operations of the Company or a Subsidiary shall be in effect; (e) The Marketing Agreement shall have been executed and delivered by the Company and shall be in full force and effect to the extent set forth therein; (f) The Charter Amendments shall have been filed with the Delaware Secretary of State for filing in accordance with the Delaware Law; 54 (g) The Company shall have made the Company Deposit with the Exchange Agent and furnished Holdings evidence, reasonably satisfactory to Holdings, thereof; and (h) The Company shall have furnished Holdings with: (i) a copy of a resolution or resolutions duly adopted by the Board of Directors of the Company approving this Agreement, the Option Agreement and the Marketing Agreement, and the transactions contemplated hereby and thereby and directing that a proposal to approve the Transactions be submitted to a vote of the stockholders of the Company, certified by the Secretary of the Company; (ii) a copy of a resolution or resolutions duly adopted by the holders of a majority of the outstanding shares of Common Stock of the Company approving the Transactions, certified by the Secretary of the Company; and (iii) a favorable opinion of Testa, Hurwitz & Thibeault, counsel for the Company, dated the Closing Date, with respect to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.9 and 3.11. Section 8.3 Conditions to the Obligations of the Company. The obligation of the Company to consummate the Merger and the Recapitalization is subject to the satisfaction of the following further conditions (which may be waived in whole or in part by the Company, unless such waiver is prohibited by law): (a) (i) Each of Holdings and FDESI shall have performed, in all material respects, all its obligations hereunder required to be performed by it at or prior to the Closing; (ii) each of the representations and warranties of Holdings and FDESI contained in this Agreement shall be true in all material respects as of the date hereof and at and as of the Closing (except to the extent such representations and warranties are expressly made as of an earlier date) as if made at and as of such time; and (iii) the Company shall have received a certificate signed by an officer of Holdings to the foregoing effect; (b) The Agreement of Merger shall have been submitted to the California Secretary of State for filing in accordance with the California Code; 55 (c) FDESI shall have made the FDESI Deposit with the Exchange Agent and furnished the Company evidence, reasonably satisfactory to the Company, thereof and evidence, reasonably satisfactory to the Company, of the Transfer Authorization; (d) Holdings shall have furnished the Company with: (i) a certified copy of a resolution or resolutions duly adopted by the Board of Directors of Holdings approving this Agreement, the Option Agreement and the Marketing Agreement, and the transactions contemplated hereby and thereby; (ii) a certified copy of a resolution or resolutions duly adopted by the Board of Directors and sole stockholder of FDESI approving this Agreement; and (iii) a favorable opinion of Lawrence N. Fisher counsel for Holdings, dated the Closing Date with respect to the matters set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.8 and 4.10; (e) from the FDESI Balance Sheet Date to the Closing Date there shall have been no FDESI Material Adverse Change; (f) No action or proceeding before any court or governmental or regulatory authority or body, United States federal or state or foreign, shall have been constituted (and be pending) or threatened, by any government or governmental authority, that seeks, or threatens to seek, to prevent or delay the consummation of the Transactions or that challenges any of the terms or provisions of this Agreement; (g) No order, judgment or decree issued by any United States federal or state or foreign governmental or regulatory authority or body, or by any court of competent jurisdiction nor any statute, rule, regulation or executive order promulgated or enacted by any United States federal or state or foreign government or governmental authority that (i) prevents the consummation of the Transactions; (ii) prohibits Holdings at any time after the Closing from exercising all material rights and privileges pertaining to its ownership of the stock of the Surviving Corporation; or (iii) materially and adversely affects the condition (financial or otherwise), properties, assets, earnings, business or operations of FDESI, shall be in effect; and 56 (h) The Marketing Agreement shall have been executed and delivered by Holdings and shall be in full force and effect to the extent set forth therein. (i) The Company shall have received the additional opinion of Donaldson, Luftkin & Jenrette referenced in Section 5.8. ARTICLE IX TERMINATION Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing (notwithstanding any approval of the Transactions by the stockholders of the Company): (i) by mutual written consent of the Company and Holdings; (ii) by the Company or Holdings, if the Closing shall not have occurred on or before April 30, 1996; provided, however, that the right to terminate this Agreement under this clause (ii) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; (iii) by the Company or Holdings, if there shall be any law or regulation adopted or amended after the date hereof that makes consummation of the Merger or the effectiveness as between the parties of the Option Agreement or the Marketing Agreement illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining Holdings or the Company from consummating the Merger or the effectiveness as between the parties of the Option Agreement and the Marketing Agreement is entered and such judgment, injunction, order or decree shall become final and nonappealable; provided, that the party seeking to terminate this Agreement pursuant to this clause (iii) shall have used all reasonable efforts to remove such judgment, injunction, order or decree; (iv) by Holdings, or by the Company so long as the Company has complied with Section 5.4, if the Board of Directors of the Company fails to recommend, or modifies or withdraws its recommendation to the Company's stockholders that they vote to approve the Transactions or shall have recommended to the Company's stockholders an Acquisition Proposal. 57 (v) by Holdings if it is not in material breach of its obligations under this Agreement, and a person or group (as defined in Section 13(d)(iii) of the Exchange Act) (other than Holdings or any of its Affiliates) shall have (a) made an Acquisition Proposal and the Company shall have commenced discussions with such person or group or (b) become the beneficial owner (as defined in Rule 13d- 3 promulgated under the Exchange Act) of at least 20% of the outstanding shares of Common Stock; (vi) (a) by Holdings or the Company, if the Company Stockholder Meeting shall have been held and the stockholders of the Company shall have failed to approve the Transactions at such meeting or (b) by Holdings if the Company Stockholder Meeting shall not have been held on or before April 30, 1996; (vii) by Holdings if there has been a breach of any representation, warranty, covenant or agreement of the Company which breach is incurable, or which is not cured on or prior to April 30, 1996; and/or (viii) by the Company if there has been a breach of any representation, warranty, covenant or agreement of Holdings contained in this Agreement, which breach is incurable or has not been cured on or prior to April 30, 1996. Section 9.2 Effect of Termination. If this Agreement is terminated pursuant to Section 9.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto, except (a) to the extent such termination results from the breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement and (b) that the agreements contained in Section 7.5, Article X and this Section 9.2 shall survive the termination hereof. ARTICLE X MISCELLANEOUS Section 10.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be given (and shall be deemed to have been given upon receipt) if delivered in person or sent by facsimile, telegram, telex, by registered or certified mail (postage prepaid, return receipt requested) or by reputable overnight courier to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.1): 58 if to Holdings, to: Fluor Daniel, Inc. 3333 Michelson Drive Irvine, California 92730 Attention: David L. Myers Facsimile: (714) 975-5545 with a copy to: Fluor Daniel, Inc. 3333 Michelson Drive Irvine, California 92730 Attention: General Counsel Facsimile: (714) 975-4450 if to the Company, to: Groundwater Technology, Inc. 100 River Ridge Drive Norwood, Massachusetts 02062 Attention: Walter C. Barber Facsimile: (617) 769-7992 with a copy to: Groundwater Technology, Inc. 100 River Ridge Drive Norwood, Massachusetts 02062 Attention: Brian D. Goldstein, Esq. Facsimile: (617) 769-7992 and: Testa, Hurwitz & Thibeault 125 High Street Boston, Massachusetts 02110 Attention: Andrew E. Taylor, Jr., Esq. Facsimile: (617) 248-7100 59 Section 10.2 Non-Survival of Representations, Warranties and Covenants; Indemnification. All representations, warranties and agreements contained in this Agreement or in any instrument delivered pursuant to this Agreement (except the Option Agreement) shall terminate and be extinguished at the Closing or the earlier date of termination of this Agreement pursuant to Section 9.1, as the case may be, except that this Section 10.2 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Closing, (including, without limiting the generality of the foregoing, Sections 6.3, 6.5, 6.7, 7.5, 7.7, 7.8, 7.9, 7.10 and 10.4.) Section 10.3 Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Closing, if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company and Holdings or in the case of a waiver, by the party against whom the waiver is to be effective; provided that after the authorization and approval of the Transactions by the stockholders of the Company, no such amendment or waiver shall, without the further approval of such stockholders, alter or change any term of the Charter Amendments or the By-law Amendments, respectively, if such alteration or change would adversely affect the holders of any shares of capital stock of the Company. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.4 Fees and Expenses. (a) Except as otherwise provided in this Section 10.4, all costs and expenses incurred by Holdings or FDESI in connection with this Agreement shall be paid by Holdings, and all costs and expenses incurred by the Company or Newco shall be paid by the Company. (b) So long as Holdings shall not have materially breached its obligations under this Agreement, the Company will pay Holdings, in immediately available funds, the amounts referred to below (x) promptly, but in no event later than two business days, after the termination of this Agreement pursuant to clause (iv) of Section 9.1 hereof or (y) simultaneously with the consummation of an Acquisition Transaction effected after the termination of this Agreement pursuant to clause (v), or paragraph (a) of clause (vi) of Section 9.1 hereof, provided that (i) prior to or within 60 days after the termination of this Agreement as aforesaid, an Acquisition Proposal has been received and (ii) 60 if the Acquisition Transaction involves a merger, sale of assets, purchase of shares from the Company or similar business combination, the agreement with respect thereto shall have been entered into within twelve months of the date of termination of this Agreement, or if the Acquisition Transaction involves a tender or exchange offer, the tender or exchange offer shall have been commenced within such twelve month period; and (z) simultaneously with the consummation of an Acquisition Transaction effected after the termination of this Agreement pursuant to clause (vii) of Section 9.1 due to a breach by the Company of a covenant or agreement contained in this Agreement (it being understood that termination pursuant to such clause (vii) due to a breach of a representation or warranty shall not give rise to any fee payment or expense reimbursement obligation hereunder, but without prejudice to any other rights of Holdings with respect to such a breach), if (i) prior to or within 60 days after the termination of this Agreement as aforesaid, any negotiations or discussions have been held with, or information supplied to, any third party who makes an Acquisition Proposal and (ii) the agreement with respect to such or any other Acquisition Transaction is entered into, or if the Acquisition Transaction is a tender or exchange offer, such offer is commenced, within twelve months after such termination. In addition, if the Closing does not occur because of a failure by the Company to obtain the additional opinion of Donaldson, Lufkin and Jenrette referenced in Section 5.8 and such failure is not due to an FDESI Material Adverse Change, then within two business days after the termination of the Agreement pursuant to Section 9.1 hereof, the Company shall pay Holdings, in immediately available funds, the amounts referred to below. The amounts referred to in each of the two preceding sentences are (a) a termination fee (the "Termination Fee") of $3,000,000 and (b) up to an additional $750,000 as reimbursement for fees and expenses actually incurred by Holdings and FDESI in connection with this Agreement and the transactions contemplated hereby. For purposes of the foregoing, the reimbursement referred to in clause (b) shall be payable only if and to the extent Holdings provides a written statement to the Company that it or FDESI has incurred such fees and expenses. Section 10.5 Successor and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto. This Agreement shall be binding upon and is solely for the benefit of each of the parties hereto and their respective successors and assigns, and nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 61 Section 10.6 Entire Agreement. This Agreement (including all Exhibits and Disclosure Letters hereto), together with the Confidentiality Agreements dated July 7, 1995, and September 26, 1995, between the Company and Holdings, constitutes the entire agreement among the parties and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. Section 10.7 Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware applicable to agreements made and to be performed entirely within such state. Section 10.8 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Section 10.9 Severability. If any provision of this Agreement or the application of any provision hereof to any party hereto or set of circumstances is held invalid, the remainder of this Agreement and the application of such provision to the other parties hereto or sets of circumstances shall not be affected, unless the provisions held invalid shall substantially impair the benefits of the remaining portions of this Agreement. Section 10.10 "To Knowledge". Any reference herein to the "knowledge of the Company (or FDESI)" or "known to the Company (or FDESI)" or any variation thereof shall mean to the actual knowledge of one or more officers of the Company or FDESI, as the case may be. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date and year first above written. FLUOR DANIEL, INC. By: _________________________________ Name: _________________________________ Title: _________________________________ FLUOR DANIEL ENVIRONMENTAL SERVICES, INC. By: _________________________________ 62 Name: _________________________________ Title: _________________________________ GROUNDWATER TECHNOLOGY, INC. By: _________________________________ Name: _________________________________ Title: _________________________________ GTI ACQUISITION CORPORATION By: _________________________________ Name: _________________________________ Title: _________________________________ 63 EX-99.3 4 STOCK OPTION AGREEMENT DATED DECEMBER 11, 1995 EXHIBIT 3 EXECUTION COPY STOCK OPTION AGREEMENT between FLUOR DANIEL, INC. and GROUNDWATER TECHNOLOGY, INC. December 11, 1995 STOCK OPTION AGREEMENT ---------------------- THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of December 11, 1995, is entered into between FLUOR DANIEL, INC. a Delaware corporation (the "Purchaser"), and GROUNDWATER TECHNOLOGY, INC. a Delaware corporation (the "Company"). WHEREAS, the Purchaser, Fluor Daniel Environmental Services, Inc., a California corporation ("FDESI"), the Company and GTI Acquisition Corporation ("Newco") propose to enter into an Investment Agreement of even date herewith (the "Investment Agreement") providing for the merger of FDESI and Newco and the issuance to Purchaser of shares in a new class of shares of Common Stock par value $0.001 per share (the "New Common Stock"), of the Company to be created in the reclassification of the Common Stock, par value $0.01 per share, of the Company (the "Old Common Stock") immediately prior to the closing (the "Closing") of the merger under the Investment Agreement; WHEREAS, as a condition to their willingness to enter into the Investment Agreement, the Purchaser and FDESI have requested that the Company agree, and the Company has agreed, to sell to the Purchaser an irrevocable option as set forth herein to purchase up to 1,366,000 shares of Old Common Stock, if exercised prior to the Closing, or up to 1,366,000 shares of New Common Stock (subject to adjustment as set forth in Section 1) if exercised on or after the Closing (such Old Common Stock and such New Common Stock, collectively, the "Optioned Shares"), and grant Purchaser certain other rights; 2 NOW THEREFORE, to induce the Purchaser and FDESI to enter into the Investment Agreement, and in consideration of the premises and the representations, warranties and agreements herein contained, the parties agree as follows: 1. Purchase and Sale of Option. Upon the terms and subject to the --------------------------- conditions set forth herein, the Company hereby sells, issues and delivers to the Purchaser and the Purchaser hereby purchases and accepts, an irrevocable option (the "Option") to purchase for $17.00 per share in cash (the "Per Share Price") up to 1,366,000 (the "Base Shares") authorized but unissued shares of the Optioned Shares; provided, however, that after the Closing, the Option shall be automatically adjusted so that the Base Shares shall equal 1,366,000 multiplied by the Adjustment Fraction (as defined below) and the Per Share Price shall equal $17.00 multiplied by a fraction equal to one divided by the Adjustment Fraction. The Option shall expire if not exercised on or prior to December 11, 1998. The price the Purchaser shall pay for the Option is $1,650,000 (the "Option Purchase Price"). The Option Purchase Price shall be payable by wire transfer of immediately available funds, in accordance with the Company's written instructions, on the date hereof. For purposes of the adjustments described in this section, the "Adjustment Fraction" means a fraction, the numerator of which equals the Current Market Price (as defined below) of a share of Old Common Stock, and the denominator of which equals the Current Market Price of a share of Old Common Stock or a share of New Common Stock. The "Current Market Price of a share of Old Common Stock or a share of New Common Stock means the average per share closing price for the five trading days immediately preceding the Closing Date, in the case of the 3 Old Common Stock, and the five trading days immediately following the Closing Date, in the case of the New Common Stock, as reported on the NASDAQ National Market. 2. Exercise of Option. The Purchaser may exercise the Option in whole or ------------------ in part at any time or from time to time prior to the expiration of the Option and after the first to occur of (a) December 11, 1996, or (b) the Purchaser becoming entitled to terminate the Investment Agreement by virtue of Section 9.1 thereof. In the event that the Purchaser wishes to exercise the Option, the Purchaser shall give written notice (the date of any such notice being herein called a "Notice Date") to the Company specifying the number of Optioned Shares it will purchase pursuant to such exercise and a place and date (the "Closing Date") not later then 10 business days from such Notice Date for the closing of such purchase ("Closing"); provided, however, that if any approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall be required with respect to such exercise, then the Closing shall be the later of the Closing Date as specified or the next business day following the date on which the applicable waiting periods under the HSR Act shall have expired. 3. Payment of Purchase Price and Delivery of Certificates for Optioned ------------------------------------------------------------------- Shares. At any Closing hereunder, (a) the Purchaser will make payment to the - ------ Company of the aggregate price for the Optioned Shares purchased at such Closing in New York Clearing House funds by certified or official bank check payable to the order of the Company, in an amount equal to the product of the Per Share Price multiplied by the number of Optioned Shares being purchased at such Closing and (b) the Company will deliver to the Purchaser a duly executed certificate or 4 certificates, as requested by the Purchaser, representing the number of Optioned Shares so purchased, registered in the name of the Purchaser or its nominee in the denominations designated by the Purchaser in its notice of exercise. 4. Representations and Warranties of the Company. --------------------------------------------- (a) Incorporation of Company's Representations and Warranties by ------------------------------------------------------------ Reference. The representations and warranties of the Company contained in - --------- Article III of the Investment Agreement are incorporated by reference into this Agreement with the same effect as though set forth in full at this place (the representations and warranties contained in the first sentence of Section 3.1 and in Section 3.2 of the Investment Agreement being deemed repeated at each Closing at which Optioned Shares are purchased). (b) Compliance with Securities Laws. None of the Company, any of its ------------------------------- Affiliates (as defined in the Investment Agreement) or anyone acting on its or their behalf has issued, sold or offered any security of the Company to any person under circumstances that would cause the issuance and sale of the Optioned Shares, as contemplated by this Agreement, to be subject to the registration requirements of the Securities Act of 1933 (the "Securities Act"). Assuming the representations of Purchaser contained in Section 4.14 of the Investment Agreement are true and correct on the date hereof and on the date of each Closing at which Optioned Shares are purchased, the issuance, sale and delivery of the Optioned Shares hereunder are exempt from the registration and prospectus delivery requirements of the Securities Act. 5 (c) The Optioned Shares. The Company has taken all necessary ------------------- corporate action to authorize and reserve for issuance upon exercise of the Option 1,366,000 (as adjusted pursuant to Section 1) shares of authorized but unissued Old Common Stock or New Common Stock, as the case may be, including approval by the Board of Directors of the Company. Such approval by the Board of Directors of the Company is intended to be and is sufficient to render inapplicable to this Agreement and the transactions contemplated hereby as well as any future acquisitions of Old Common Stock or New Common Stock or other transactions involving the Purchaser or any of its Affiliates and the Company, the provisions of Section 203 of the Delaware General Corporation Law (whether or not this Agreement is terminated). No vote is required by the holders of any securities of the Company to approve this Agreement and the transactions contemplated hereby. 5. Representations and Warranties of the Purchaser. ----------------------------------------------- (a) Incorporation of the Purchaser's Representations and Warranties --------------------------------------------------------------- by Reference. The representation s and warranties of the Purchaser contained in - ------------ Article IV of the Investment Agreement are incorporated by reference into this Agreement with the same effect as though set forth in full at this place. (b) Securities Act. Any Optioned Shares purchased by the Purchaser -------------- will be acquired for investment only and not with a view to any public distribution thereof and the Purchaser will not offer to sell or otherwise dispose of any Optioned Shares so acquired by it in violation of the registration requirements of the Securities Act. 6 6. Adjustment upon Changes in Capitalization. In the event of any change ----------------------------------------- in the number of outstanding shares of Old Common Stock or New Common Stock by reason of any stock dividend, stock split, recapitalization, combination, exchange of shares, merger, consolidation, reorganization or the like or any other change in the corporate or capital structure of the Company (except for the reclassification of Old Common Stock at the Closing) that would have the effect of diluting the Purchaser's rights hereunder, the number of Optioned Shares and the Per Share Price shall be adjusted appropriately so as to restore the Purchaser to its rights hereunder; provided, however, that nothing in this Agreement shall be construed as permitting the Company to take any action or enter into any transaction prohibited by the Investment Agreement, it being understood and agreed that Section 6.3 of the Investment Agreement shall not restrict in any way the ability of the Purchaser to exercise this Option. 7. Registration Rights. Upon the request of the Purchaser at any time and ------------------- from time to time within three years of any Closing hereunder, the Company agrees (i) to effect, as promptly as practicable, up to two registrations (each a "Demand Registration") under the Securities Act covering any part or all (as may be requested by the Purchaser) of the Optioned Shares (or any other securities that have been acquired by or are issuable to the Purchaser upon exercise of the Option), and to use its best efforts to qualify such Optioned Shares (or such other securities) under any applicable state securities laws and to ensure that they are qualified for trading through the NASDAQ National Market (or on any securities exchange on which the Common Stock is traded at such time) and (ii) at the written request of the Purchaser delivered within ten (10) days after notice of the intent to file such registration statements is delivered to the Purchaser, to 7 include any part or all of the Optioned Shares (or such other securities) in any registration statement for common stock filed by the Company under the Securities Act in which such inclusion is permitted under applicable rules and regulations (other than a registration statement on Form S-8, S-4 or any successor form) provided that no request for registration pursuant to clause (i) of this Section 7 may be made within 120 days after the effective date of a registration statement filed by the Company in which the Optioned Shares have been entitled to join. So long as the Company satisfies the eligibility requirements for use of a registration statement on Form S-3 under the Securities Act, the Purchaser may request one Demand Registration for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act and will file all supplements to the prospectus and take all other actions necessary to facilitate an offering thereunder. The Company will use its best efforts to keep each such registration described above effective for a period of not less than one year (or, if sooner, until the Purchaser shall have disposed of all of the Optioned Shares). Notwithstanding anything to the contrary herein, the Company's obligation to file a registration statement or to cause such registration to become and remain effective shall be suspended upon notice to Purchaser for a period of up to 90 days in any 12-month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed. Such obligation of the Company shall continue after any such suspension. The Purchaser shall choose the managing underwriter in any Demand Registration, which managing underwriter shall be of recognized national standing. If the managing underwriter of a proposed offering of securities by the Company shall advise the Company in writing that, in the reasonable opinion of such managing underwriter, the distribution of the Optioned Shares requested by the Purchaser to be 8 included in a registration statement concurrently with securities being registered for sale by the Company would adversely affect the distribution of such securities by the Company, then the Company shall, at its option, either (x) include such Optioned Shares in the registration statement, but the Purchaser shall agree to delay the offering and sale of such Optioned Shares for such period of time as the managing underwriter may reasonably request (provided that the Purchaser may at any time withdraw its request to include Optioned Shares in such offering) or (y) include such portion, if any, of the Optioned Shares in the registration statement as the managing underwriter advises may be so included for sale simultaneously with sales by the Company. The registrations effected under this Section 7 shall be effected at the Company's expense except for underwriting commissions allocable to the Optioned Shares and the fees and disburse ments of the Purchaser's counsel. The Company shall indemnify and hold harmless the Purchaser its Affiliates and controlling persons and their respective officers, directors, agents and representatives, and the underwriters for any such offering, in accordance with the indemnification provisions customarily included by the managing underwriter in its standard-form underwriting agreement for offerings of common stock, from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation, all out-of-pocket expenses and all fees and disbursements of counsel and accountants) arising out of or based upon any statements contained in, or omissions or alleged omissions from, each registration statement (and related prospectus) filed pursuant to this Section 7 (other than statements or omissions made in reliance upon, and in conformity with, written information furnished to the Company with respect to it specifically for use in the preparation of such documents by such indemnified persons). The Purchaser shall indemnify and hold harmless the Company, its Affiliates and controlling persons and their respective officers, 9 directors, agents and representatives, and the underwriters for any such offering, in accordance with the indemnification provisions customarily included by the managing underwriter in its standard-form underwriting agreement for offerings of common stock, from and against any and all losses, claims, damages, liabilities and expenses and all fees and disbursements of counsel and accountants) arising out of or based upon any statements contained in, or omissions from, each registration statement (and related prospectus) filed pursuant to this Section 7 which statements or omissions were made in reliance upon, and in conformity with, written information furnished by the Purchaser to the Company with respect to the Purchaser specifically for use in the preparation of such documents by the Company. 8. Further Assurances. ------------------ (a) Each of the Company and the Purchaser shall as promptly as practicable following the execution and delivery of this Agreement make all necessary filings and use all reasonable efforts to obtain any clearance required under the HSR Act for, and to provide assistance to the other in any antitrust proceedings related to, the transactions contemplated by this Agreement. (b) If the Purchaser shall exercise the Option in whole or in part in accordance with the terms of this Agreement, from time to time and without additional consideration the Company will execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements, consents and other instruments as the Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated 10 by this Agreement, including the transfer of any and all of the Optioned Shares to the Purchaser and the release of any and all liens, claims and encumbrances with respect thereto. 9. Survival of Agreement: Termination. All representations and warranties ---------------------------------- made by the Company and the Purchaser herein (including those incorporated by reference) survive the execution and delivery of this Agreement and any exercise or expiration of the Option and shall terminate on the fifth anniversary of the date of this Agreement. The covenants and agreements contained in this Agreement shall survive and shall continue in accordance with their terms notwithstanding the expiration of the Option provided in Section 1 hereof. 10. Assignment. This Agreement and the rights hereunder shall not be ---------- assignable or transferable by either party (except by operation of law in connection with a merger, consolidation or sale of substantially all the assets of such party) without the prior written consent of the other party hereto; provided that the Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to any other wholly owned, direct or indirect, subsidiary of the Purchaser. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 11. Expenses. All costs and expenses incurred in connection with this -------- Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses, except as otherwise provided in this Agreement. 11 12. Waivers: Amendment. ------------------ (a) No failure or delay of the Purchaser or the Company in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Purchaser hereunder are cumu lative and are not exclusive of any rights or remedies which the Purchaser would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Company therefrom shall in any event be effective except pursuant to a writing signed by the Purchaser, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstance. 13. Severability. In the event any one or more of the provisions ------------ contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or enforceable provisions. 14. Notices. All notices, requests, claims, demands and other ------- communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by 12 overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to the Purchaser, to Fluor Daniel, Inc. 3333 Michelson Drive Irvine, California 92730 Attention: David L. Myers with a copy to: Fluor Daniel, Inc. 3333 Michelson Drive Irvine, California 92730 Attention: General Counsel (b) if to the Company, to Groundwater Technology, Inc. 100 River Ridge Drive Norwood, Massachusetts 02062 Attention: Walter C. Barber 13 with a copy to: Groundwater Technology, Inc. 100 River Ridge Drive Norwood, Massachusetts 02062 Attention: Brian D. Goldstein, Esq. and: Testa, Hurwitz & Thibeault 125 High Street Boston, Massachusetts 02110 Attention: Andrew E. Taylor, Jr., Esq. 15. Interpretation. When a reference is made in this Agreement to a -------------- Section such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". 16. Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. 17. Entire Agreement: No Third-Party Beneficiaries. This Agreement and ---------------------------------------------- the Investment Agreement constitute the entire agreement, and supersede all prior agreements and 14 understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and the Investment Agreement and are not intended to confer upon any person other than the parties any rights or remedies hereunder and therewith. 18. Governing Law. This Agreement shall be governed by, and construed in ------------- accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflict of laws thereof. 19. Enforcement. The parties agree that irreparable damage would occur in ----------- the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal Court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware or a Delaware state court. 15 IN WITNESS WHEREOF, the Company and Purchaser have duly executed this Stock Option Agreement as of the day and year first above written. GROUNDWATER TECHNOLOGY, INC. By: _____________________________________ Name: _____________________________________ FLUOR DANIEL, INC. By: _____________________________________ Name: _____________________________________ 16 EX-99.4 5 MARKETING AGREEMENT DATED MAY 10, 1996 EXHIBIT 4 MARKETING AGREEMENT BETWEEN GROUNDWATER TECHNOLOGY, INC. AND FLUOR DANIEL, INC. May 10, 1996 ------ THIS MARKETING AGREEMENT is entered into effective as of the 10th day of , ---- May, 1996. - --- BETWEEN: GROUNDWATER TECHNOLOGY, INC., a corporation organized under the laws of the State of Delaware, having its principal office at 100 River Ridge Drive, Norwood, Massachusetts. ("GTI") AND FLUOR DANIEL, INC. a corporation organized under the laws of the State of California, having its principal office at 3333 Michelson Drive, Irvine, California, ("FLUOR DANIEL") WHEREAS, prior to the execution and delivery of this Agreement, GTI and FLUOR DANIEL (both directly and through its wholly-owned subsidiary, Fluor Daniel Environmental Services, Inc. ("FDESI")) were each engaged in the business of providing investigation, evaluation, project management and remediation services with regard to the restoration of environmentally impacted sites and facilities; and WHEREAS, concurrently with the execution of this Agreement, Fluor Daniel has acquired a majority ownership interest in GTI and in connection therewith Fluor Daniel has transferred to GTI all of the issued and outstanding shares of FDESI. 2 WHEREAS, the Parties wish to enter into this Marketing Agreement to set forth the basis upon which such Parties shall engage in the global conduct of the environmental services business and the basis for providing mutual support and assistance in conducting their own respective businesses. NOW, THEREFORE, in consideration of the above premises and mutual covenants contained herein, the Parties have agreed as follows: 1. DEFINITIONS ----------- The following terms as used in this Agreement shall have the meanings set out below: 1.1 "Affiliate" shall mean any corporation or other legal entity of which a Party (either alone or together with other Affiliates of that Party) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are ordinarily and generally, in the absence of contingencies or other understandings, entitled to vote for the election of a majority of the board of directors or governing body. 1.2 "Contract Support Services" shall mean services provided by one Party to or on behalf of the other Party, in connection with a project being performed for a client, but which by themselves do not constitute a scope of work within the project being performed. 3 1.3 "DOE Management and Operations/Operating and Maintenance/Management and Integration (M&O/O&M/M&I) Projects" shall mean projects involving the management and operation, and/or management integration of sites and facilities and environmental engineering services for the U.S. Department of Energy. 1.4 "Duality" shall mean the joint resolution of issues by the Parties to the overall best combined market approach of the Parties balancing short and long term considerations, and consistent with the spirit of this Agreement. 1.5 "Engineering and Construction Business" and "Engineering and Construction Services" shall mean the providing of feasibility studies, conceptual design, engineering, procurement, project and construction management, construction, maintenance, plant operations, technical, project finance, quality control, start-up assistance, site evaluation, licensing and consulting with respect to actual or proposed sites or facilities provided, however, that "Engineering and Construction Business" and "Engineering and Construction Services" does not include services that are typically provided in connection with Environmental Services. 1.6 "Environmental Business" or "Environmental Services" shall mean the providing of investigation, evaluation, design, feasibility studies, management and pollution prevention, project management, remediation, permitting, quality control, start-up assistance, licensing and consulting services (including incidental project finance 4 procurement, construction and maintenance) relating to (a) the treatment of groundwater, wastewater, soil and hazardous waste, or (b) air emissions controls; provided, however, that such terms shall not include: a). the Excluded Projects. b). DOE Management and Operations/Operating and Maintenance/ Management and Integration (M&O/O&M/M&I) Projects. c). Substantial Infrastructure projects related to government or industrial water supply, water treatment, wastewater treatment or pollution control facilities. Industrial wastewater facilities may be performed by either Party, and shall be a subject of Duality. d). Molten Metal Technology and M4 (and successor) Projects. e). Facilities that are built due to environmental drivers but that are mainly capital plant investments by a client, such as waste-to-energy and oil refinery clean air emission process upgrades. The Parties shall use Duality where there is uncertainty as to where services would fall under this agreement. 1.8 "Excluded Projects" shall mean the Fernald environmental remediation management contract and the contract with Ciba-Geigy for construction management for remediation activities at their Toms River, New Jersey facility. 5 1.9 "Fluor Daniel Group" shall mean Fluor Daniel and each of its Affiliates, excluding members of the GTI Group. 1.10 "GTI Group" shall mean GTI and each of its Affiliates, including without limitation, FDESI. 1.11 "Investment Agreement" shall mean that certain Investment Agreement dated as of December 11, 1995 by and among Fluor Daniel, FDESI, GTI and GTI Acquisition Corporation. 1.12 "Marketing Agreement" or "Agreement" shall mean the present Agreement together with its Exhibits, Schedules and any amendments thereof. 1.13 "Party" means either GTI on the one hand or FLUOR DANIEL on the other hand, depending on the context. "Parties" means both of them. 1.14 "Project Services" shall mean services provided by one Party to or on behalf of the other Party which constitute a scope of work within a project being performed for a client. 6 1.15 "TBS Opportunities" shall mean the pursuit of environmental opportunities with clients to provide total business solutions to environmentally impacted real estate and operating facilities, which opportunities are differentiated from Environmental Business or Environmental Services in that they (a) include providing, in the context of a single project or program, substantial non-environmental services to a client in addition to investigation, assessment, remediation and monitoring services currently provided by GTI, or (b) involve a substantial increase in the scale and scope of, and the integration of, solutions to be provided, including, in the aggregate, the potential for high value of work (greater than $5 million), the complexity of the financing arrangement with the client and the strategic value of the services to the client in connection with solving the client's environmental issues. 1.16 The Exhibits to this Marketing Agreement are the following: Exhibit A Terms and Conditions - Overhead Support Services Exhibit B Intercompany Services Agreement Exhibit C Contract Support Services - Billing Terms Exhibit D Project Services - Billing Terms 2. BUSINESS PURPOSE/EXCLUSIVITY ---------------------------- 2.1 The Parties agree that the purpose of this Marketing Agreement is to establish the respective rights, roles and responsibilities of the Parties and their Affiliates with regard to the pursuit of the Environmental Business and TBS Opportunities on a 7 worldwide basis. The Parties acknowledge that, in their opinion, the future environmental services market will favor service providers that can differentiate themselves from other providers by offering creative solutions to environmental problems. These creative solutions may involve the service provider becoming a "stakeholder" in the client's solution and may include accepting more risk in exchange for more reward (beyond accepting a fee for services rendered on a time and materials basis). The Parties acknowledge that these creative solutions will be applicable to both the Environmental Business and to TBS Opportunities, and the Parties have agreed to enter into this Marketing Agreement and to work together in Duality to provide services to their respective clients. The Parties also agree to operate in Duality for areas of potential overlap, including where such overlap is created by agreements with other parties. 2.2 The Parties agree that, subject to the terms of this Agreement, as between the Fluor Daniel Group and the GTI Group, the GTI Group shall have primary responsibility for the marketing and execution of the Environmental Business and the Fluor Daniel Group shall have primary responsibility for the marketing and execution of TBS Opportunities. Fluor Daniel , on its behalf and on behalf of the Fluor Daniel Group, will promote the use of the GTI Group for Environmental Services that are related or incidental to its Engineering and Construction Business or its TBS Opportunities, provided that the use of GTI is acceptable to the client, that GTI has adequate available personnel and other resources to timely and 8 satisfactorily perform the work and its proposed commercial terms are competitive with the market. GTI shall commit in good faith to perform such Environmental Services as may be requested by Fluor Daniel, but shall not be obligated to provide such Environmental Services if there's a valid business reason for its refusal to perform such services. For purposes of this Agreement, Fluor Daniel will evaluate the competitiveness of GTI's commercial terms by comparing them to terms and conditions of other providers of Environmental Services of the same quality and scope in the location of where the services are to be provided, and reviewing them with GTI. 2.3 Within 30 day of the date of this Agreement, Fluor Daniel shall notify its management and the management of its Affiliates of the marketing relationship formed between the Parties and of the obligations of the Fluor Daniel Group under this Agreement. Periodically throughout the terms of this Agreement, Fluor Daniel will communicate with its management and the management of its Affiliates to remind them of the marketing relationship formed between the Parties and of the obligations of the Fluor Daniel Group under this Agreement. 2.4 Within 30 days of the date of this Agreement, GTI shall notify its management and the management of its Affiliates of the marketing relationship formed between the Parties and of the obligations of the GTI Group under this Agreement. Periodically throughout the term of this Agreement, GTI will communicate with its 9 management and the management of its Affiliates to remind them of the marketing relationship formed between the Parties and of the obligations of the GTI Group under this Agreement. 2.5 Prior to either Party forwarding a written communication to their respective management pursuant to Sections 2.3 and 2.4 above, the Party preparing to forward the communication shall give the other Party a reasonable opportunity to review and comment on the communication. 3. INTERCOMPANY SERVICES --------------------- 3.1 Overhead Support Services. Subject to availability of qualified personnel, ------------------------- each Party agrees to provide to the other Party, the services of its employees (including technical, financial and administrative personnel) as may be reasonably requested by the other Party in connection with activities of a general nature which are not related to a specific contract upon the terms and conditions set forth in Exhibit A attached, which terms and conditions shall be reviewed by the Parties bi-annually. 3.2 Contract Support. All Contract Support Services to be provided by one ---------------- Party to the other Party, shall be performed pursuant to Work Releases issued pursuant to the terms of the Intercompany Services Agreement attached hereto as Exhibit B, and containing the commercial terms and conditions set forth in Exhibit C, which terms and conditions shall be reviewed by the Parties bi-annually. 10 3.3 Project Services. All Project Services to be provided by one Party to the ---------------- other Party shall be performed pursuant to Work Releases issued pursuant to the terms of the Intercompany Services Agreement attached hereto as Exhibit B and containing commercial terms and conditions set forth in Exhibit D, which terms and conditions shall be reviewed by the Parties bi-annually. 3.4 Facilities. If and to the extent that Fluor Daniel provides office space ---------- to GTI or a member of the GTI Group, applicable costs shall be charged for such office space on the same basis as Fluor Daniel charges its other operating subsidiaries. Fluor Daniel agrees to maintain appropriate health and safety programs and procedures for the benefit of Fluor Daniel and GTI employees at such office locations. 3.5 Each Party understands that the other Party will be involved in other activities and undertakings not within the scope of this Marketing Agreement. The Parties hereby agree that the execution of this Marketing Agreement and the assumption by each of the Parties of its duties hereunder shall be without prejudice to its rights to have such other interests and activities and to receive and enjoy the profits or compensation therefrom. Except as otherwise provided herein, the Parties may engage in or possess any interest in any other business, undertaking, or venture of any nature or description independently or with others and neither Party shall have any right by virtue of this Marketing Agreement in and to such business, undertaking or venture of the other Party or the income or profits derived 11 therefrom. The Parties agree to meet periodically to discuss joint marketing opportunities and initiatives, to use reasonable efforts to keep each other fully advised of its own marketing efforts with common clients and, with respect to the foregoing, to establish mutually acceptable communications procedures. With any such common clients it is understood that GTI will have the marketing lead for projects that primarily involve Environmental Services and that Fluor Daniel will have the marketing lead for TBS Opportunities and for projects that primarily involve Engineering and Construction Services. 4. LIABILITIES ----------- 4.1 Neither Party shall hold itself out as being the agent, representative, employee or the principal of the other Party. This Marketing Agreement does not constitute either Party the agent of the other, nor does it create a partnership, a consortium, an association, a joint venture, or any form of juristic person or entity. Neither Party shall have any authority or right to assume or create obligations of any kind or nature, express or implied, on behalf of, or in the name of the other Party, not to accept service of any legal process of any kind addressed to or intended for the other Party, nor to bind the other Party in any respect, without the specific prior written authorization of the other Party. If either Party acts in violation of the foregoing, said Party hereby covenants to indemnify and hold harmless the other Party from and against any and all claims, demands, losses, damages, liabilities, law suits, and other proceedings, judgments and awards, and costs and expenses 12 (including, but not limited to, reasonable attorneys' fees) arising directly or indirectly in whole or in part out of the breach of this Section by such Party or out of the breach of Section 4.1, whether committed by the indemnifying Party, its employees, agents, successors, assigns, or its Affiliates. 4.2 Each Party shall indemnify and hold harmless the other Party from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and the costs and expenses (including, but not limited to, reasonable attorneys' fees) of any action resulting from the death of any person, or for damage or destruction of property, but only to the extent resulting solely from the negligent acts or omissions of such Party. 4.3 In no event shall either Party ever be liable to, or required to provide indemnity to, the other Party for any incidental, special, consequential or punitive damages of the other Party, or its Affiliates, including without limitation, liability for loss of profits or business interruption, however the same may be caused. 4.4 Each Party shall be solely responsible for the accuracy and completeness of information and representations supplied by each Party and incorporated in any proposal, prime or sub contract, including, but not limited to, cost or pricing data, materials, specifications, and certifications, and each Party agrees to release defend, indemnify and hold the other harmless from and against any and all claims, 13 liabilities and causes of action arising out of or relating to the provision of such information and/or representations. 4.5 Indemnities against, releases from and limitation on liability expressed in Sections 4.1 and 4.4 shall apply even in the event of the fault, negligence or strict liability of the Party indemnified or released or whose liability is limited. 4.6 The Parties make no other representations, covenants, warranties or guarantees, express or implied, other than those set forth in this Marketing Agreement, the Intercompany Services Agreement or in a Work Release. The Parties' rights, and responsibilities with respect to the matters set forth in this Marketing Agreement, shall be exclusively those set forth in this Marketing Agreement, the Intercompany Services Agreement or in a Work Release. 5. CONFIDENTIALITY --------------- 5.1 Restrictions on Use and Disclosure. Each Party covenants and agrees it ---------------------------------- will not, and it will not permit its Affiliates to, directly or indirectly, or in any capacity whatsoever, divulge or disclose the Confidential Information, in whole or in part, to any person or entity (including its Affiliates or shareholders), except to the extent such divulgence or disclosure is specifically permitted by the Party disclosing the Confidential Information or is required by law. The Recipient (as hereinafter defined) shall use Confidential Information for the purpose of carrying 14 out the activities that are the subject of this Agreement, and the Intercompany Services Agreement, and for no other purpose. 5.2 Confidential Information Defined. As used herein, the term "Confidential -------------------------------- Information" shall mean: all technical, economic or descriptive information, data, concepts, or know-how disclosed to a Party, including any officers, directors, managers, partners or employees of such Party or any of such Party's Affiliates (the "Recipient") by the other Party (the "Originator") (1) in written or documentary form marked "Confidential" or with words of similar import, or (2) in an oral presentation or visual demonstration and identified as confidential at the time of such disclosure, and then, within ten (10) days, confirmed in written or tangible form marked "Confidential", or with words of similar import, except any portion of such information which: (i) the Recipient can show was in its possession prior to the earliest disclosure by the Originator, provided that the Recipient has the right of free and unlimited disclosure thereof; or (ii) is presently or hereafter becomes a part of the public knowledge or literature without default by the Recipient of its obligations pursuant to this Agreement; or (iii) the Recipient can show was developed by the Recipient from independent information not subject to restrictions of confidentiality; or 15 (iv) is or has been disclosed to the Recipient by a third Party, so long as Recipient does not know or have reason to know such third Party acquired that information directly or indirectly from the Originator under an obligation of confidentiality, provided Recipient's use of such information is in accordance with the terms under which it is received. 5.3 Disclosure to Employees. The Recipient shall use all reasonable efforts to ----------------------- (1) limit disclosure of Confidential Information within its organization to only those employees who need to use such Confidential Information for the purpose authorized in Section 5.3, and who are obligated to the Recipient by a secrecy agreement with terms concerning disclosure and use at least as restrictive as those herein in a form acceptable to the disclosing Party, and (2) advise each of those employees of Recipient's obligations under this Agreement. 5.4 No License. Nothing contained herein shall be construed to grant Recipient ---------- any immunity or license under any patent or other intellectual property right. 5.5 Term. The Parties' obligations concerning non-disclosure and the use of ---- Confidential Information contained in this Section 6 shall continue for five (5) years from the termination of this Agreement and shall then terminate. 16 6. USE OF FLUOR DANIEL NAME ------------------------ Fluor Daniel's name and logo are proprietary to Fluor Daniel. Fluor Daniel hereby authorizes the use of the corporate name "Fluor Daniel/GTI, Inc." by GTI until such right is terminated as set forth below. In addition, Fluor Daniel will not unreasonably withhold its consent to the use of similar name configurations by other Affiliates of GTI on the same terms and conditions. In the event this Agreement is terminated pursuant to Article 8, or GTI or an Affiliate of GTI that is using the Fluor Daniel name (or any derivation thereof) discontinues business operations or is otherwise liquidated, then the right of GTI or any such member of the GTI Group to continue to use the Fluor Daniel name (or any derivation thereof) shall cease and the respective name shall be removed from all company documents (including without limitation, its corporate name as reflected in its charter documents) promptly and in any event within three months after notice thereof and all future use is hereby prohibited. No further notice of Fluor Daniel's rights pursuant to this Article is required. 7. TERM, TERMINATION ----------------- 7.1 This Marketing Agreement shall commence on the date set forth on the first page hereof and, subject to earlier termination pursuant to Section 7.2 hereof, the term of this Marketing Agreement shall be ten (10) years, whereupon it shall lapse and terminate without formality unless it has been extended by mutual written agreement. 17 7.2 If at any time during the ten year period referred to in Section 7.1 hereof, Fluor Daniel shall cease to own at least twenty percent (20%) of the then issued and outstanding common shares of GTI or any successor to GTI, then either Fluor Daniel, provided that Fluor Daniel is not in breach of its obligations pursuant to Section 6.3(d) of the Investment Agreement, or GTI may , elect to terminate this Agreement. For such termination to be effective Fluor Daniel or GTI, as the case may be, must give the other Party written notice of its election to so terminate within 90 days after Fluor Daniel first ceased to maintain such level of ownership. Upon the giving of such notice, the termination shall be effective 30 days after the receipt of such notice. 8. ASSIGNMENT, SUBCONTRACTING -------------------------- 8.1 Neither Party shall sell, assign or in any manner transfer, convey or alienate its interest or part thereof in this Marketing Agreement without first obtaining the written consent of the other Party. 8.2 This Marketing Agreement shall inure to the benefit of and be binding upon the Parties, their successors, trustees, permitted assigns, receivers and legal representatives, but shall not inure to the benefit of any other person or entity. 18 9. AMENDMENTS ---------- No amendment of this Marketing Agreement or its Exhibits or Schedules shall be of any force or effect unless reduced to writing and executed in the same manner as the present agreement. 10. NOTICES ------- All notices under this Marketing Agreement shall be given in writing and shall be delivered by (i) certified or registered mail, postage prepaid, return receipt requested, or (ii) reputable overnight commercial courier or delivery service, or (iii) by facsimile transmission confirmed by certified or registered mail or commercial courier or delivery service as follows: a) To: FLUOR DANIEL, INC. 3333 Michelson Drive Irvine, California 92730 Attention: David L. Myers Facsimile number: 714-975-5545 b) To: GROUNDWATER TECHNOLOGY, INC. 100 River Ridge Drive Norwood, MA 02062 Attention: Walter C. Barber Facsimile number: 617-769-7992 19 or to such other address of which either Party shall have notified the other. All notices shall be effective only upon receipt by the receiving Party. 11. GOVERNING LAW ------------- 11.1 This Marketing Agreement shall be governed by the laws of the State of Delaware without regard to conflict of law rules, whose courts, state or federal, shall have sole and exclusive jurisdiction. 12. FORCE MAJEURE ------------- A Party shall not be liable for non-performance or delay in performance caused by any event reasonably beyond the control of such Party including, but not limited to, hostilities, revolutions, riots, civil commotion, national emergency, strikes, work stoppages, slowdowns, labor disputes, lockouts, unavailability of supplies, epidemics, fire, flood, earthquake, force of nature, explosion, embargo, or any other Act of God, or any law, proclamation, regulation, ordinance, or other act or order of any court, government, or governmental agency; provided, however, that this Article shall not affect the liability of any Party for its failure to pay any sum of money required by this Marketing Agreement. 13. SEVERABILITY ------------ In the event that any of the provisions of this Marketing Agreement are held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall 20 not affect any other provision thereof and this Marketing Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein and the Parties shall to the fullest extent possible modify any such provision to the extent required to carry out the general intention of this Marketing Agreement and to impart validity thereto. 14. EFFECT OF WAIVERS ----------------- No forbearance, indulgence, or relaxation or inaction by any Party at any time to require performance of any provisions of this Marketing Agreement shall in any way affect, diminish or prejudice the right of a Party to require performance of that provision and any waiver or acquiescence by either Party in any breach of any provision of this Marketing Agreement shall not be construed as a waiver or acquiescence in any continuing or succeeding breach of such provision, a waiver or an amendment of the provision itself or a waiver of any right under or arising out of this Marketing Agreement or acquiescence in or recognition of rights and/or positions other than as expressly stipulated in this Marketing Agreement. 15. COUNTERPARTS ------------ This Marketing Agreement may be executed in any number of counterparts each of which shall be deemed to be an original and all of which shall constitute one and the same Marketing Agreement. 21 IN WITNESS WHEREOF the Parties have signed this Marketing Agreement effective on the date first above written. GROUNDWATER TECHNOLOGY, INC. FLUOR DANIEL, INC. By _______________________ By _______________________ Title _______________________ Title _______________________ 22 -----END PRIVACY-ENHANCED MESSAGE-----