UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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URS CORPORATION
WASHINGTON GROUP INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
URS Corporation and Washington Group International, Inc.
have agreed to a merger that combines URS and Washington Group,
subject to approval of both companies stockholders. If the
proposed merger is completed, each outstanding share of
Washington Group common stock (other than those shares held by
URS, any subsidiary of URS, Elk Merger Corporation or Bear
Merger Sub and other than treasury shares and shares as to which
a Washington Group stockholder has validly demanded and
perfected appraisal rights under Delaware law) will be converted
into the right to receive 0.772 of a share of URS common stock
and $43.80 in cash, without interest. In the merger, URS expects
to pay approximately $1.4 billion in cash and issue
approximately 24.9 million shares of URS common stock,
based on Washington Groups shares of common stock and
equity awards outstanding as of September 21, 2007.
Washington Group stockholders are expected to own approximately
32% of the shares of URS common stock outstanding after the
merger. The exchange ratio is fixed and will not be adjusted for
changes in the stock prices of either company before the merger
is consummated. URS stockholders will continue to own their
existing shares of URS common stock, which generally should not
be affected by the merger, other than by the dilution resulting
from the issuance of URS common stock in the merger. URS common
stock is traded on the New York Stock Exchange under the trading
symbol URS. On September 21, 2007, URS common
stock closed at $58.00 per share as reported on the New
York Stock Exchange Composite Transaction Tape.
The merger cannot be completed unless URS stockholders approve
the issuance of shares of URS common stock in the merger and
Washington Group stockholders adopt the merger agreement and
approve the merger. The boards of directors of URS and
Washington Group unanimously recommend that their respective
stockholders vote FOR these proposals.
The proposals are being presented to the respective stockholders
of each company at their special meetings. The dates, times and
places of the meetings are as follows:
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For URS stockholders:
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For Washington Group stockholders:
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October 30, 2007,
10:00 a.m., local time, at the offices of Cooley Godward
Kronish LLP, located at
101 California Street, 5th Floor
San Francisco, California 94111-5800
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October 30, 2007,
11:00 a.m., local time, at Washington Groups offices
located at
720 Park Boulevard, Boise, Idaho 83712
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This joint proxy statement/prospectus contains important
information about URS, Washington Group, the merger agreement,
the proposed merger and the special meetings of the respective
stockholders of URS and Washington Group.
We encourage you to
read carefully this joint proxy statement/prospectus before
voting, including the section entitled Risk Factors
beginning on page 19.
Your vote is very important.
Whether or not you plan
to attend your companys special meeting, please take the
time to vote by completing and mailing to us the enclosed proxy
card or, if the option is available to you, by granting your
proxy electronically over the Internet or by telephone.
Sincerely,
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Martin M. Koffel
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Stephen G. Hanks
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Chairman of the Board of Directors
and
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President and Chief Executive
Officer
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Chief Executive Officer
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Washington Group International,
Inc.
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URS Corporation
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Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved of the
transactions described in this joint proxy statement/prospectus
or the securities to be issued pursuant to the merger or
determined if the information contained in this joint proxy
statement/prospectus is accurate or adequate. Any representation
to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated
September 28, 2007, and is being mailed to stockholders of
URS and Washington Group on or about October 1, 2007.
URS
CORPORATION
600 Montgomery Street,
26
th
Floor
San Francisco, California
94111-2728
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON OCTOBER 30,
2007
To the Stockholders of URS Corporation:
We will hold a special meeting of stockholders of URS at the
offices of Cooley Godward Kronish LLP, located at 101 California
Street, 5th Floor, San Francisco, California 94111-5800 , on
October 30, 2007, at 10:00 a.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the
issuance of shares of URS common stock pursuant to the Agreement
and Plan of Merger, dated as of May 27, 2007, by and among
URS, Elk Merger Corporation, a wholly owned subsidiary of URS,
Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group International, Inc., pursuant to which Elk
Merger Corporation will merge with and into Washington Group,
and each outstanding share of Washington Group common stock,
other than those shares held by URS, any subsidiary of URS, Elk
Merger Corporation or Bear Merger Sub and other than treasury
shares and shares as to which a Washington Group stockholder has
validly demanded and perfected appraisal rights under Delaware
law, will be converted into the right to receive 0.772 of a
share of URS common stock and $43.80 in cash, without interest.
2. To consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn or postpone the special meeting,
in their sole discretion, to solicit additional proxies if there
are not sufficient votes in favor of the foregoing.
3. To transact any other business as may properly come
before the special meeting or any adjournments or postponements
of the special meeting.
These items of business are described in the attached joint
proxy statement/prospectus. Only URS stockholders of record at
the close of business on September 21, 2007, the record
date for the special meeting, are entitled to notice of and to
vote at the special meeting and any adjournments or
postponements of the special meeting.
The URS board of directors unanimously recommends that you
vote FOR the proposal to approve the issuance of
shares of URS common stock pursuant to the merger agreement and
FOR the proposal to authorize the adjournment or
postponement of the URS special meeting.
A list of stockholders eligible to vote at the URS special
meeting will be available for inspection at the special meeting,
and at the executive offices of URS during regular business
hours for a period of no less than ten days prior to the special
meeting.
Your vote is very important.
It is important that
your shares be represented and voted whether or not you plan to
attend the special meeting in person. Instructions regarding the
different methods for voting your shares are provided under the
section entitled Questions And Answers About the Special
Meetings of Stockholders of URS and Washington Group on
page iv.
By Order of the Board of Directors,
Martin M. Koffel
Chairman of the Board of Directors and
Chief Executive Officer
URS Corporation
September 28, 2007
WASHINGTON
GROUP INTERNATIONAL, INC.
720 Park Boulevard,
P.O. Box 73
Boise, Idaho 83729
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON OCTOBER 30,
2007
To the Stockholders of Washington Group International, Inc.:
We will hold a special meeting of stockholders of Washington
Group at Washington Groups offices located at
720 Park Boulevard, Boise, Idaho 83712, on October 30,
2007, at 11:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of May 27, 2007, by
and among URS, Elk Merger Corporation, a wholly owned subsidiary
of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS,
and Washington Group, pursuant to which Elk Merger Corporation
will merge with and into Washington Group, and each outstanding
share of Washington Group common stock, other than those shares
held by URS, any subsidiary of URS, Elk Merger Corporation or
Bear Merger Sub and other than treasury shares and shares as to
which a Washington Group stockholder has validly demanded and
perfected appraisal rights under Delaware law, will be converted
into the right to receive 0.772 of a share of URS common stock
and $43.80 in cash, without interest, and approve such merger.
2. To consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn or postpone the special meeting,
in their sole discretion, to solicit additional proxies if there
are not sufficient votes in favor of the foregoing.
3. To transact any other business as may properly come
before the special meeting or any adjournments or postponements
of the special meeting.
These items of business are described in the attached joint
proxy statement/prospectus. Only Washington Group stockholders
of record at the close of business on September 21, 2007,
the record date for the special meeting, are entitled to notice
of and to vote at the special meeting and any adjournments or
postponements of the special meeting.
The Washington Group board of directors has approved the
merger agreement and the transactions contemplated by the merger
agreement, including the merger, and unanimously recommends that
you vote FOR the proposal to adopt the merger
agreement and approve the merger and FOR the
proposal to authorize the adjournment or postponement of the
Washington Group special meeting.
A list of stockholders eligible to vote at the Washington Group
special meeting will be available for inspection at the special
meeting, and at the executive offices of Washington Group during
regular business hours for a period of no less than ten days
prior to the special meeting.
Your vote is very important.
It is important that
your shares be represented and voted whether or not you plan to
attend the special meeting in person. Instructions regarding the
different methods for voting your shares are provided under the
section entitled Questions And Answers About the Special
Meetings of Stockholders of URS and Washington Group on
page iv.
By Order of the Board of Directors,
Stephen G. Hanks
President and Chief Executive Officer
Washington Group International, Inc.
September 28, 2007
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates by reference
important business and financial information about URS and
Washington Group from documents that are not included in or
delivered with this joint proxy statement/prospectus. For a more
detailed description of the information incorporated by
reference into this joint proxy statement/prospectus and how you
may obtain it, see Additional Information
Where You Can Find More Information on page 146.
You can obtain any of the documents incorporated by reference
into this joint proxy statement/prospectus from URS or
Washington Group, as applicable, or from the Securities and
Exchange Commission, which is referred to as the SEC, through
the SECs website at
http://www.sec.gov.
Documents incorporated by reference are available from URS and
Washington Group without charge, excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this joint proxy
statement/prospectus. URS stockholders and Washington Group
stockholders may request a copy of such documents in writing or
by telephone by contacting the applicable department at:
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URS Corporation
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Washington Group International,
Inc.
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600 Montgomery Street,
26
th
Floor
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720 Park Boulevard,
P.O. Box 73
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San Francisco, California
94111-2728
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Boise, Idaho 83729
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Attn: Investor Relations
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Attn: Investor Relations
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(877)
877-8970
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(866) 964-4636
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In addition, you may obtain copies of the information relating
to URS, without charge, by sending an
e-mail
to
investor_relations@urscorp.com. You may obtain copies of some of
this information by making a request through the URS investor
relations website at http://www.urscorp.com/investor.
You may also obtain copies of the information relating to
Washington Group, without charge, by sending an
e-mail
to
investor.relations@wgint.com. You may obtain copies of some of
this information by making a request through the Washington
Group investor relations website at http://investor.wgint.com.
We are not incorporating the contents of the websites of the
SEC, URS, Washington Group or any other person into this joint
proxy statement/prospectus. We are providing the information
about how you can obtain certain documents that are incorporated
by reference into this joint proxy statement/prospectus at these
websites only for your convenience.
In order for you to receive timely delivery of the documents
in advance of the respective URS and Washington Group special
meetings, URS or Washington Group, as applicable, must receive
your request no later than October 22, 2007
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For information about where to obtain copies of documents, see
Additional Information Where You Can Find More
Information on page 146.
TABLE OF
CONTENTS
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Page
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iii
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETINGS OF STOCKHOLDERS
OF URS AND WASHINGTON GROUP
The following are some questions that you, as a stockholder
of URS or Washington Group, may have regarding the respective
special meetings of stockholders of URS and Washington Group and
brief answers to those questions. For more detailed information
about the matters discussed in these questions and answers, see
The URS Special Meeting, beginning on page 43
and The Washington Group Special Meeting, beginning
on page 47. URS and Washington Group urge you to read
carefully the remainder of this joint proxy statement/prospectus
because the information in this section does not provide all the
information that might be important to you with respect to the
merger and the other matters being considered at the respective
special meetings of stockholders. Additional important
information is also contained in the Annexes to and the
documents incorporated by reference in this joint proxy
statement/prospectus.
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Q:
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When and where will the special meetings of stockholders be
held?
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A:
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The URS special meeting will take place at the offices of Cooley
Godward Kronish LLP, located at 101 California Street, 5th
Floor, San Francisco, California 94111-5800, on October 30,
2007, at 10:00 a.m., local time. The Washington Group
special meeting will take place at Washington Groups
offices located at 720 Park Boulevard, Boise Idaho 83712,
on October 30, 2007, at 11:00 a.m., local time.
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Q:
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Who can attend and vote at the special meetings?
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A:
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Only holders of record of URS common stock at the close of
business on September 21, 2007, which is referred to as the
URS record date, are entitled to notice of and to vote at the
URS special meeting. As of the URS record date, there were
53,374,314 shares of URS common stock outstanding and
entitled to vote at the special meeting, held by approximately
3,400 holders of record. Each holder of URS common stock is
entitled to one vote for each share of URS common stock owned as
of the URS record date.
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Only holders of record of Washington Group common stock at the
close of business on September 21, 2007, which is referred
to as the Washington Group record date, are entitled to notice
of and to vote at the Washington Group special meeting. As of
the Washington Group record date, there were
29,308,392 shares of Washington Group common stock
outstanding and entitled to vote at the special meeting, held by
approximately 11,000 holders of record. Each holder of
Washington Group common stock is entitled to one vote for each
share of Washington Group common stock owned as of the
Washington Group record date.
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Q:
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What are URS stockholders voting to approve and why is this
approval necessary?
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A:
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URS stockholders are voting on a proposal to approve the
issuance of shares of URS common stock pursuant to the merger
agreement. The approval of this proposal by URS stockholders is
required by the listing requirements of the NYSE and is a
condition to the consummation of the merger. URS stockholders
are also voting on a proposal to grant authority to the
proxyholders to vote to adjourn or postpone the meeting, if
necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the URS special meeting
in favor of the share issuance proposal.
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Q:
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What are Washington Group stockholders voting to approve and
why is this approval necessary?
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A:
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Washington Group stockholders are voting on a proposal to adopt
the merger agreement and approve the merger. The approval of
this proposal by Washington Group stockholders is required by
Delaware law and is a condition to the consummation of the
merger. Washington Group stockholders are also voting on a
proposal to grant authority to the proxyholders to vote to
adjourn or postpone the meeting, if necessary, to permit further
solicitation of proxies if there are not sufficient votes at the
time of the Washington Group special meeting in favor of the
merger proposal.
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Q:
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What vote of URS stockholders is required to approve the
issuance of shares of URS common stock in the merger?
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A:
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In accordance with NYSE listing requirements and the merger
agreement, the approval by URS stockholders of the issuance of
shares of URS common stock pursuant to the merger agreement
requires a majority of the votes cast on the proposal, provided
that the total votes cast on such proposal represent over 50% of
the outstanding shares of URS common stock entitled to vote on
such proposal. The approval of the proposal to grant authority
to the proxyholders to vote to adjourn the special meeting
requires the affirmative vote of the holders of a majority of
the shares of URS common stock present in person or represented
by proxy at the special meeting and entitled to vote thereon,
whether or not a quorum is present.
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Q:
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What vote of Washington Group stockholders is required to
adopt the merger agreement and approve the merger?
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A:
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Under Delaware law and the merger agreement, approval of the
proposal to adopt the merger agreement and approve the merger
requires the affirmative vote of the holders of a majority of
the outstanding shares of Washington Group common stock entitled
to vote at the special meeting. The approval of the proposal to
grant authority to the proxyholders to vote to adjourn the
special meeting requires the affirmative vote of the holders of
a majority of the shares of Washington Group common stock
present in person or represented by proxy at the special meeting
and entitled to vote thereon.
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Q:
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How does the board of directors of URS recommend that URS
stockholders vote?
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A:
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The URS board of directors believes that the merger is advisable
for, fair to and in the best interest of, URS and its
stockholders and has declared the merger to be advisable to its
stockholders, and unanimously recommends that URS stockholders
vote
FOR
approval of the issuance of shares
of URS common stock to Washington Group stockholders pursuant to
the merger agreement. In addition, the URS board of directors
unanimously recommends that URS stockholders vote
FOR
the proposal to authorize the
adjournment or postponement of the URS special meeting, if
necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the URS special meeting
in favor of the foregoing.
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Q:
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How does the board of directors of Washington Group recommend
that Washington Group stockholders vote?
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A:
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The Washington Group board of directors has determined that the
merger agreement and the transactions contemplated by the merger
agreement, including the merger, are advisable for, fair to and
in the best interests of Washington Group and its stockholders.
Accordingly, the Washington Group board of directors has
approved the merger agreement and the transactions contemplated
by the merger agreement, including the merger. The Washington
Group board of directors unanimously recommends that Washington
Group stockholders vote
FOR
the proposal to
adopt the merger agreement and approve the merger and
FOR
the proposal to authorize the adjournment
or postponement of the Washington Group special meeting, if
necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the Washington Group
special meeting in favor of the foregoing.
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Q:
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What should URS and Washington Group stockholders do now in
order to vote on the proposals being considered at their
companys special meeting?
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A:
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Stockholders of record of URS as of the record date for the URS
special meeting and stockholders of record of Washington Group
as of the record date for the Washington Group special meeting
may vote now by proxy by completing, signing, dating and
returning the enclosed proxy card in the accompanying
pre-addressed postage paid envelope or by submitting a proxy
over the Internet or by telephone by following the instructions
on the enclosed proxy card. If you hold URS shares or Washington
Group shares in street name, which means your shares
are held of record by a broker, bank or nominee, you must
provide the record holder of your shares with instructions on
how to vote your shares. Please refer to the voting instruction
card used by your broker, bank or nominee to see if you may
submit voting instructions using the Internet or telephone.
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Additionally, you may also vote in person by attending your
companys special meeting of stockholders. If you plan to
attend your companys special meeting and wish to vote in
person, you will be given a ballot at the special meeting.
Please note, however, that if your shares are held in
street name, and you wish to vote in person at your
companys special meeting, you must bring a proxy from the
record holder of the shares authorizing you to vote at the
special meeting. Whether or not you plan to attend your
companys special meeting, you are encouraged to grant your
proxy as described in this joint proxy statement/prospectus.
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Q:
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What will happen if I abstain from voting or fail to vote?
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A:
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For purposes of approving the issuance of shares of URS common
stock, an abstention, which occurs when a stockholder attends a
meeting, either in person or by proxy, but abstains from voting,
will have the same effect as voting against the issuance of
shares of URS common stock under the merger agreement and the
approval of the adjournment proposal. The failure of a URS
stockholder to vote or to instruct his or her broker to vote if
his or her shares are held in street name may have a
negative effect on URS ability to obtain the number of
votes cast necessary for approval of the issuance of shares of
URS common stock under the merger agreement in accordance with
the listing requirements of the New York Stock Exchange, which
is referred to as the NYSE. For purposes of adopting the merger
agreement and approving the merger, an abstention or the failure
of a Washington Group stockholder to vote or to instruct your
broker, bank or nominee to vote if your shares are held in
street name will have the same effect as voting
against the proposal to adopt the merger agreement and approve
the merger.
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Q:
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Can I change my vote after I have delivered my proxy?
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A:
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Yes. If you are a holder of record, you can change your vote at
any time before your proxy is voted at the special meeting by:
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delivering a signed written notice of revocation to
the corporate secretary of your company at:
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URS Corporation
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Washington Group International,
Inc.
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600 Montgomery Street
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720 Park Boulevard
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26
th
Floor
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P.O. Box 73
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San Francisco, California
94111-2728
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Boise, Idaho 83729
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Attn: Corporate Secretary
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Attn: Corporate Secretary
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signing and delivering a new, valid proxy bearing a
later date, and if it is a written proxy, it must be signed and
delivered to the attention of your companys corporate
secretary;
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submitting another proxy by telephone or on the
Internet (your latest telephone or Internet voting instructions
are followed); or
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attending the special meeting and voting in person,
although your attendance alone will not revoke your proxy.
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If your shares are held in a street name account,
you must contact your broker, bank or other nominee to change
your vote.
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Q:
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What should URS stockholders or Washington Group stockholders
do if they receive more than one set of voting materials?
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A:
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You may receive more than one set of voting materials, including
multiple copies of this joint proxy statement/prospectus and
multiple proxy cards or voting instruction cards. For example,
if you hold your shares in more than one brokerage account, you
will receive a separate voting instruction card for each
brokerage account in which you hold shares. If you are a holder
of record and your shares are registered in more than one name,
you will receive more than one proxy card. In addition, if you
are a stockholder of both URS and Washington Group, you will
receive one or more separate proxy cards or voting instruction
cards for each company. Please complete, sign, date and return
each proxy card and voting instruction card that you receive.
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Q:
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Should Washington Group stockholders send in their Washington
Group stock certificates now?
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A:
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No. After the merger is completed, Washington Group
stockholders will be sent written instructions for exchanging
their stock certificates for the merger consideration.
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Q:
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Who can help answer my questions?
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A:
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If you have any questions about the merger or how to submit your
proxy, or if you need additional copies of this joint proxy
statement/prospectus, the enclosed proxy card or voting
instructions, you should contact:
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if you are a URS stockholder:
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or
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URS Corporation
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D.F. King & Co., Inc.
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600 Montgomery Street
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48 Wall Street,
22
nd
Floor
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26
th
Floor
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New York, New York 10005
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San Francisco, California
94111-2728
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(800) 829-6551
(toll-free)
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Attn: Investor Relations
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(212) 269-5550
(collect)
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(877) 877-8970
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urs@dfking.com
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if you are a Washington Group stockholder:
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or
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Washington Group International,
Inc.
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MacKenzie Partners, Inc.
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720 Park Boulevard,
P.O. Box 73
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105 Madison Avenue
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Boise, Idaho 83729
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New York, New York 10016
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Attn: Investor Relations
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(800) 322-2885 (toll-free)
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(866) 964-4636
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(212) 929-5500 (collect)
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proxy@mackenziepartners.com
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vii
The following is a summary that highlights information
contained in this joint proxy statement/prospectus. This summary
may not contain all of the information that may be important to
you. For a more complete description of the merger agreement and
the transactions contemplated by the merger agreement, including
the merger and the share issuance, we encourage you to read
carefully this entire joint proxy statement/prospectus,
including the attached Annexes. In addition, we encourage you to
read the information incorporated by reference into this joint
proxy statement/prospectus, which includes important business
and financial information about URS and Washington Group that
has been filed with the SEC. You may obtain the information
incorporated by reference into this joint proxy
statement/prospectus without charge by following the
instructions in the section entitled Additional
Information Where You Can Find More
Information beginning on page 146.
URS Corporation
600 Montgomery Street, 26th Floor
San Francisco, California
94111-2728
(415) 774-2700
URS is one of the largest engineering design services firms
worldwide and a major U.S. federal government contractor
for systems engineering and technical assistance and operations
and maintenance services. URS business focuses primarily
on providing fee-based professional and technical services in
the engineering and construction services and defense markets.
URS operates through two divisions: the URS Division and the
EG&G Division. The URS Division provides a
comprehensive range of professional planning and design, program
management, construction management, and operations and
maintenance services to various government agencies and
departments in the United States and internationally, as well as
to private industry clients. URS EG&G Division
provides planning, systems engineering and technical assistance,
operations and maintenance, and program management services to
various U.S. federal government agencies, primarily the
Departments of Defense and Homeland Security.
URS was originally incorporated in California on May 1,
1957 under the former name of Broadview Research Corporation. On
May 18, 1976, URS was re-incorporated in Delaware. On
March 28, 1974, URS changed its name to
URS Corporation. Since then, URS has implemented several
name changes as a result of mergers and acquisitions. On
February 21, 1990, URS changed its name back to
URS Corporation. URS common stock is traded on the NYSE
under the symbol URS.
Washington Group International, Inc.
720 Park Boulevard, P.O. Box 73
Boise, Idaho 83729
(208) 386-5000
Washington Group is an international provider of a broad range
of design, engineering, construction, construction management,
facilities and operations management, environmental remediation
and mining services. Washington Group offers its various
services separately or as part of an integrated package
throughout the life cycle of a customers project.
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In providing design and engineering services, Washington Group
participates in the conceptualization and planning stages of
projects that are part of Washington Groups
customers overall capital programs. Washington Group
develops the physical designs and determines the technical
specifications. Washington Group also devises project
configurations to maximize both construction and operating
efficiency.
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As a contractor, Washington Group is responsible for the
construction and completion of each contract in accordance with
its specifications and contracting terms (primarily schedule and
total cost). In this capacity, Washington Group often manages
the procurement of materials, subcontractors and craft labor.
Depending on the project, Washington Group may function as the
primary contractor or as a subcontractor to another firm.
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On some projects, Washington Group functions as a construction
manager, engaged by the customer to oversee other
contractors compliance with design specifications and
contracting terms.
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Under operations and maintenance contracts, Washington Group
provides staffing, technical support, repair, renovation,
predictive and preventive services to customer facilities
globally. Washington Group also offers other facility services,
such as general building maintenance and asset management. In
addition, Washington Group provides inventory and product
logistics for manufacturing plants, information technology
support, equipment servicing and tooling changeover.
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Washington Group was originally incorporated in Delaware on
April 28, 1993 under the name Kasler Holding Company. In
April 1996, Washington Group changed its name to Washington
Construction Group, Inc. On September 11, 1996, Washington
Group purchased Morrison Knudsen Corporation and changed its
name to Morrison Knudsen Corporation. On September 15,
2000, following several additional acquisitions, Washington
Group changed its name to Washington Group International, Inc.
Washington Group common stock is traded on the NYSE under the
symbol WNG.
URS and Washington Group have agreed to the acquisition of
Washington Group by URS under the terms of the merger agreement
that is described in this joint proxy statement/prospectus.
Pursuant to the merger agreement, a wholly owned subsidiary of
URS will merge with and into Washington Group, with Washington
Group continuing as the surviving corporation and a wholly owned
subsidiary of URS. Immediately following this merger, URS will
cause Washington Group to merge with and into another wholly
owned subsidiary of URS with this subsidiary continuing as the
surviving corporation and a wholly owned subsidiary of URS. We
have attached the merger agreement as Annex A to this joint
proxy statement/prospectus. We encourage you to carefully read
the merger agreement in its entirety.
Merger
Consideration
If you are a Washington Group stockholder, other than a
Washington Group stockholder that has validly demanded and
perfected appraisal rights under Delaware law, upon completion
of the merger, each of your shares of Washington Group common
stock will be converted into the right to receive 0.772 of a
share of URS common stock and $43.80 in cash, without interest.
We refer to the share and cash consideration to be paid to the
Washington Group stockholders by URS as the merger
consideration. URS stockholders will continue to own their
existing shares of URS common stock, which will not be affected
by the merger, except that, because URS will be issuing new
shares of URS common stock to Washington Group stockholders in
the merger, each outstanding share of URS common stock
immediately prior to the merger will, after the merger,
represent a smaller percentage ownership interest in URS.
Fractional
Shares
URS will not issue fractional shares of URS common stock in the
merger. As a result, a Washington Group stockholder will receive
cash for any fractional share of URS common stock that they
would otherwise be entitled to receive in the merger. For a full
description of the treatment of fractional shares, see The
Merger Agreement Fractional Shares on
page 102.
Washington
Group Equity Awards
Stock
Options
Immediately following the completion of the merger, each
outstanding option to acquire shares of Washington Group common
stock, whether or not vested, that remains outstanding as of the
closing of the merger will be cancelled and converted into the
right to receive a combination of cash and URS common stock
determined as follows: the option consideration will
equal the product of (1) the number of shares of Washington
Group common stock subject to the option and (2) the
excess, if any, of $80.00 over the exercise price per share of
Washington Group common stock subject to the option. Of the
option consideration, 54.75% will be paid in cash
2
and the remaining 45.25%, which is referred to as the
share-settled amount, will be settled in a number of shares of
URS common stock equal to the quotient of the share-settled
amount divided by $46.89. The cash and shares payable pursuant
to the preceding sentence will be subject to any applicable
withholding taxes. Immediately after the merger is completed,
any cancelled option will no longer be exercisable by its former
holder, but will only entitle the holder to the payment of the
option consideration.
Restricted
Shares
Each award of restricted Washington Group common stock will vest
in full immediately prior to the closing of the merger and will
be converted into the right to receive the merger consideration.
Deferred
Shares
Upon the completion of the merger, each deferred share of
Washington Group will be converted into the right to receive
$80.00 in cash, payable on a deferred basis at the time that the
underlying deferred shares would have been settled under their
terms as in effect immediately prior to the effective time of
the merger, plus earnings thereon as described in the merger
agreement.
Performance
Units
Upon the completion of the merger, all performance units will be
settled and paid in cash based on the greater of the par value
of such performance unit and the value of such performance unit
determined based upon Washington Groups actual results
during the applicable performance period through the effective
time of the merger.
For a full description of the treatment of Washington Group
equity-based incentive awards, see The Merger
Agreement Washington Group Incentive-Based Equity
Awards and Employee Benefit Plans Washington Group
Incentive-Based Equity Awards beginning on page 113.
Share
Ownership of Directors and Executive Officers
At the close of business on the URS record date, directors and
executive officers of URS and their affiliates owned and were
entitled to vote approximately 1,675,806 shares of URS common
stock, collectively representing approximately 3.1% of the
shares of URS common stock outstanding on that date.
At the close of business on the Washington Group record date,
directors and executive officers of Washington Group and their
affiliates owned and were entitled to vote approximately
136,126 shares of Washington Group common stock,
collectively representing 0.5% of the shares of Washington Group
common stock outstanding on that date.
Opinions
of Financial Advisors (see pages 71 and 81)
URS
On May 27, 2007, Morgan Stanley & Co.
Incorporated, which is referred to as Morgan Stanley, financial
advisor to URS, delivered to the URS board of directors its oral
opinion, which was subsequently confirmed in writing that, as of
that date, and based upon and subject to the considerations
described in its opinion and based upon such other matters as
Morgan Stanley considered relevant, the merger consideration to
be paid by URS pursuant to the merger agreement was fair from a
financial point of view to URS.
The full text of Morgan Stanleys written opinion is
attached to this joint proxy statement/prospectus as
Annex B. We encourage you to read this opinion carefully in
its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the
review undertaken. Morgan Stanleys opinion is directed to
the URS board of directors and does not constitute a
recommendation to any stockholder as to how to vote or any other
matters relating to the merger. Pursuant to an engagement letter
between URS and Morgan Stanley, URS has agreed to pay Morgan
Stanley a transaction fee based on the aggregate consideration
for the transaction, a substantial portion of which fee is
contingent upon consummation of the transaction. URS also has
3
entered into a financing commitment letter with an affiliate of
Morgan Stanley to provide 50% of a senior secured debt financing
in connection with the merger, for which the affiliate will
receive a substantial fee, which is also contingent upon the
consummation of a transaction.
Washington
Group
At the meeting of Washington Groups board of directors on
May 27, 2007, Goldman, Sachs & Co., which is referred
to as Goldman Sachs, financial advisor to Washington Group,
delivered its oral opinion, which opinion was later confirmed in
writing, that as of that date, and based upon and subject to the
factors and assumptions set forth therein, the consideration to
be received by holders of shares of Washington Group common
stock, taken in the aggregate, pursuant to the merger agreement
was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
May 27, 2007, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Annex C. Goldman Sachs provided its opinion for the
information and assistance of the board of directors of
Washington Group in connection with its consideration of the
transaction. The Goldman Sachs opinion is not a recommendation
as to how any holder of shares of Washington Group common stock
should vote with respect to the transaction. Pursuant to an
engagement letter between Washington Group and Goldman Sachs,
Washington Group has agreed to pay Goldman Sachs a transaction
fee based on the aggregate consideration for the transaction, a
substantial portion of which is contingent upon consummation of
the transaction.
Ownership
of URS After the Merger
In the merger, URS expects to issue approximately
24.9 million shares of URS common stock, based on
Washington Groups shares of common stock and equity awards
outstanding as of September 21, 2007, and assuming that all
of the stock options outstanding as of such date remain
outstanding as of the effective time of the merger. Washington
Group stockholders are expected to own approximately 32% of the
shares of URS common stock outstanding after the merger. URS
stockholders will continue to own their existing shares of URS
common stock, which will not be affected by the merger, other
than by the dilution resulting from the issuance of URS common
stock in the merger.
Interests
of URS Directors and Executive Officers in the Merger (see
page 95)
None of the executive officers and directors of URS has
interests in the merger that differ from, or are in addition to,
the interests of URS stockholders.
Interests
of Washington Groups Directors and Executive Officers in
the Merger (see page 95)
In considering the recommendation of the Washington Group board
of directors, Washington Group stockholders should be aware that
Washington Groups directors and executive officers have
interests in the merger and have arrangements that are different
from, or in addition to, those of Washington Groups
stockholders generally. These interests and arrangements may
create potential conflicts of interest.
These interests and arrangements include:
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vesting of all unvested Washington Group equity awards,
including those held by Washington Groups executive
officers;
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vesting and cash out of all unvested Washington Group
performance units, including those performance units held by
Washington Groups current executive officers;
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change-in-control
severance agreements with Washington Groups current
executive officers that provide for payment of incentive
compensation accrued as of the
change-in-control
date, as well as severance benefits in the event of certain
qualifying terminations of employment in connection with or
following the merger; and
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continued indemnification and insurance coverage as required
under the merger agreement.
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4
Management
of URS and Washington Group After the Merger
It is currently expected that each of the current members of the
URS board of directors will continue to serve on the URS board
of directors following the closing of the merger. At the
effective time of the merger, one director of Washington Group
who was a director of Washington Group on May 27, 2007 will
be chosen by URS to serve as a director of URS after the merger
is consummated. Martin M. Koffel will continue to serve as
Chairman of the URS board of directors.
It is currently expected that, following the merger,
Mr. Koffel will remain as Chief Executive Officer of URS
and that Mr. Hanks will become the head of URS
Washington Division. URS also currently expects that all
executive officers of URS will remain with URS following the
merger and that all executive officers of Washington Group will
remain with the Washington Division following the merger,
although two Washington Group executive officers have informed
URS that they may not remain for a long period. URS has not
entered into any new employment agreements with any of these
executives.
Listing
of URS Common Stock (see page 91) and Delisting and
Deregistration of Washington Group Common Stock (see
page 94)
Application will be made to have the shares of URS common stock
to be issued in the merger approved for listing on the NYSE,
where URS common stock currently is traded under the symbol
URS. If the merger is completed, Washington Group
common stock will no longer be listed on the NYSE and will be
deregistered under the Securities Exchange Act of 1934, as
amended, which is referred to as the Exchange Act, and
Washington Group will no longer file periodic reports with the
SEC.
Appraisal
Rights (see page 91)
URS
Under Delaware law, holders of URS common stock are not entitled
to appraisal rights in connection with the issuance of URS
common stock in the merger with respect to their URS shares.
Washington
Group
Holders of Washington Group common stock who do not wish to
accept the consideration payable pursuant to the merger may
seek, under Section 262 of the DGCL judicial appraisal of
the fair value of their shares by the Delaware Court of
Chancery. This value could be more than, less than or the same
as the merger consideration for the Washington Group common
stock. Failure to strictly comply with all the procedures
required by Section 262 of the DGCL, including, without
limitation, with requirement that stockholders who wish to seek
appraisal rights not vote for the proposal to adopt the merger
agreement and approve the merger, will result in a loss of the
right of appraisal.
Merely not voting for the merger will not preserve the right of
Washington Group stockholders to appraisal of their shares of
Washington Group common stock under Delaware law. Also, because
a submitted proxy not marked against or
abstain will be voted FOR the proposal
to adopt the merger agreement and approve the merger and
FOR the proposal to authorize the adjournment or
postponement of the Washington Group special meeting, if
necessary, the submission of a proxy not marked
against or abstain will result in the
waiver of appraisal rights. Washington Group stockholders who
hold shares in the name of a broker or other nominee must
instruct their nominees to take the steps necessary to enable
them to demand appraisal for their shares.
Annex D to this joint proxy statement/prospectus contains
the full text of Section 262 of the DGCL, which describes
the rights of appraisal and related requirements. We encourage
you to read these provisions carefully and in their entirety.
Any holder of Washington Group common stock who wishes to
exercise appraisal rights or who wishes to preserve such
holders right to do so, should review the discussion under
the caption The Merger Appraisal Rights
on page 91 and Annex D carefully because failure to
timely and properly comply with the procedures specified will
result in the loss of appraisal rights. Moreover, due to the
complexity of the procedures for exercising the right to seek
appraisal, Washington Group stockholders who are considering
exercising such rights are encouraged to seek the advice of
legal counsel.
5
Conditions
to Completion of the Merger (see page 103)
A number of conditions to each partys obligation to close
must be satisfied before the merger will be completed. These
include among others:
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the approval of the merger and adoption of the merger agreement
by Washington Group stockholders and the approval of the
issuance of shares of URS common stock in the merger by URS
stockholders;
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the expiration or termination of the applicable waiting period
and any extension of the waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which, together
with the rules and regulations promulgated thereunder, is
referred to as the HSR Act;
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the absence of any legal prohibition having the effect of
preventing or prohibiting completion of the merger which
prohibition continues to be in effect;
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the effectiveness, under the Securities Act of 1933, as amended,
which is referred to as the Securities Act, of the registration
statement of which this joint proxy statement/prospectus is a
part and the absence of any pending or threatened proceeding
related to the registration statement;
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the approval for listing on the NYSE of the shares of URS common
stock to be issued in the merger, subject to official notice of
issuance;
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the accuracy and correctness of representations and warranties
of the other party, subject to certain qualifications described
in the merger agreement;
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the other partys having performed and complied with its
covenants in the merger agreement in all material respects prior
to the effective time of the merger, and the receipt of a
certificate from the officers of the other party to that effect;
and
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the receipt by each party of an opinion from the partys
counsel that the merger and the second merger, taken together,
will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
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Each of URS, Elk Merger Corporation and Washington Group may
waive the conditions to the performance of its obligations under
the merger agreement and complete the merger even though one or
more of these conditions has not been met. Neither URS nor
Washington Group can give any assurance that all of the
conditions to the merger will be either satisfied or waived or
that the merger will occur.
Regulatory
Approvals (see page 88)
The notifications required under the HSR Act to the United
States Federal Trade Commission, which is referred to as the
FTC, and the Antitrust Division of the United States Department
of Justice, which is referred to as the DOJ, were filed on
June 8, 2007 by both URS and Washington Group, and the
statutory waiting period under the HSR Act expired on
July 9, 2007. No further regulatory approvals are required
for the completion of the merger.
Financing
Commitments (see page 98)
URS has entered into a Senior Credit Facilities Commitment
Letter, which is referred to as the financing commitment letter,
with Morgan Stanley Senior Funding, Inc., which is referred to
as MSSF, and Wells Fargo Bank, National Association, which is
referred to as Wells Fargo. Subject to the terms and conditions
of the letter, MSSF and Wells Fargo have each committed to
provide 50% of a senior secured financing to URS up to an
aggregate of $2.1 billion, consisting of $1.4 billion
in term loans and a $700.0 million senior secured revolving
credit facility. The term loans will refinance URS
existing senior credit facilities, refinance any amounts
outstanding under the credit facilities of Washington Group and
fund the merger. Up to $50.0 million of the
$700.0 million revolving credit facility may be used to
consummate the merger on the closing date. After the closing,
the full amount of the revolving credit facility may be used for
working capital and other corporate purposes. The financing
commitment letter also includes customary conditions to funding,
including, without limitation, satisfaction of the conditions to
closing of the merger as set forth in the merger agreement, the
absence of any material adverse effect on Washington Group or
its subsidiaries, taken as a whole, obtaining credit ratings, a
maximum ratio of pro forma combined total
6
debt to combined pro forma EBITDA of 3.50 to 1.00 on the closing
date, the accuracy of certain representations and warranties of
the parties, customary legal documentation, and repayment of
Washington Groups credit facilities.
No
Solicitation by URS or Washington Group (see
page 105)
Subject to exceptions, the merger agreement precludes URS and
Washington Group from soliciting or engaging in discussions or
negotiations with a third party with respect to a proposal to
acquire a significant interest in URS or Washington
Groups equity or assets. Notwithstanding such
restrictions, the merger agreement provides that, under
specified circumstances and prior to the applicable approval by
their respective stockholders, if URS or Washington Group
receives an unsolicited proposal from a third party to acquire a
significant interest in it that its board of directors
determines in good faith is reasonably likely to lead to a
proposal that is superior to the merger, URS or Washington
Group, as applicable, may furnish nonpublic information to that
third party and engage in negotiations regarding an acquisition
proposal with that third party.
Termination
of the Merger Agreement (see page 115)
URS and Washington Group may mutually agree in writing by action
of their respective boards of directors, at any time before the
effective time of the merger, to abandon the merger and
terminate the merger agreement. Also, either URS or Washington
Group may terminate the merger agreement in a number of
circumstances, including if:
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the merger is not consummated by December 27, 2007, unless
that date is extended to May 27, 2008 on the terms provided
in the merger agreement, and we refer to the December 27,
2007 date, as it may be extended, as the outside date;
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Washington Group stockholders fail to adopt the merger agreement
and approve the merger at the Washington Group special meeting;
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URS stockholders fail to approve the issuance of shares of URS
common stock in the merger at the URS special meeting; or
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any governmental entity prohibits the merger and that
prohibition has become final and nonappealable, except that the
party seeking to terminate the merger agreement must have used
its reasonable best efforts to remove the prohibition.
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URS also may terminate the merger agreement if:
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Washington Group breaches any representation, warranty, covenant
or agreement made by Washington Group in the merger agreement or
any representation and warranty made by Washington Group has
become untrue or incorrect after the execution of the merger
agreement, in each case, such that the conditions to the
completion of the merger would not be satisfied and such breach
or failure to be true is not cured within 30 days of notice
by URS;
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prior to the URS stockholder meeting, URS receives an
unsolicited bona fide written acquisition proposal (other than
the merger agreement and the transaction) in compliance with the
applicable provisions of the merger agreement that is a superior
proposal and URS has complied with its obligations set forth in
the merger agreement with respect to acquisition
proposals; or
|
|
|
|
prior to the Washington Group stockholder meeting, the
Washington Group board of directors withdraws, qualifies,
modifies its approval of the merger agreement or its
recommendation to the stockholders of Washington Group, in each
case, in a manner adverse to URS, or approves or recommends any
acquisition proposal (other than the merger agreement and the
transaction).
|
Washington Group also may terminate the merger agreement if:
|
|
|
|
|
URS breaches any representation, warranty, covenant or agreement
made by URS in the merger agreement or any representation and
warranty made by URS has become untrue or incorrect after the
execution of the merger agreement, in each case, such that the
conditions to the completion of the merger would not be
satisfied and such breach or failure to be true is not cured
within 30 days of notice by Washington Group;
|
7
|
|
|
|
|
prior to the Washington Group stockholder meeting, Washington
Group receives an unsolicited bona fide written acquisition
proposal (other than the merger agreement and the transaction)
in compliance with the applicable provisions of the merger
agreement that is a superior proposal and Washington Group has
complied with its obligations set forth in the merger agreement
with respect to acquisition proposals;
|
|
|
|
prior to the URS stockholder meeting, the URS board of directors
withdraws, qualifies, modifies its approval of the merger
agreement or its recommendation to the stockholders of URS, in
each case, in a manner adverse to Washington Group, or approves
or recommends any acquisition proposal (other than the merger
agreement and the transaction); or
|
|
|
|
URS does not effect the closing of the merger within five
business days after notice by Washington Group to URS that the
mutual conditions to each partys obligation to consummate
the merger and the conditions to URS obligations to
consummate the merger are satisfied and all such conditions
have, in fact, been satisfied (or, upon an immediate closing of
the merger, would be satisfied as of such closing). (Note that
the Merger Agreement refers to Washington Groups (rather
than URS) obligations to consummate the merger, and the
parties have agreed that this was a drafting error).
|
Termination
Fee (see page 116)
If the merger agreement is terminated, Washington Group may be
required in specified circumstances to pay a termination fee of
$70.0 million to URS, and URS may be required in specified
circumstances to pay a termination fee of $50.0 million or
$70.0 million to Washington Group.
Material
United States Federal Income Tax Consequences (see
page 88)
URS has received an opinion of Latham & Watkins LLP,
which is referred to as Latham & Watkins, and
Washington Group has received an opinion of Wachtell, Lipton,
Rosen & Katz, which is referred to as Wachtell Lipton,
to the effect that, for United States federal income tax
purposes, the merger and the second merger, taken together, will
constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Such opinions
are based on the assumptions, representations, warranties and
covenants set forth or referred to in such opinions. The
consummation of the merger is conditioned on the receipt by each
of URS and Washington Group of further opinions from their
respective counsel, dated as of the closing date of the merger,
to the effect that the merger and the second merger, taken
together, will so qualify. Based on the opinions of
Latham & Watkins and Wachtell Lipton that URS and
Washington Group, respectively, have received to the effect
that, for United States federal income tax purposes, the merger
and the second merger, taken together, will constitute a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, a Washington
Group stockholder:
|
|
|
|
|
will recognize gain (but not loss) with respect to its
Washington Group common stock in an amount equal to the lesser
of (i) any gain realized with respect to that stock or
(ii) the amount of cash received with respect to that stock
(other than any cash received instead of a fractional share of
URS common stock); and
|
|
|
|
will recognize gain (or loss) to the extent any cash received
instead of a fractional share of URS common stock exceeds (or is
less than) the basis of the fractional share.
|
Accounting
Treatment (see page 91)
URS will account for the merger using the purchase method of
accounting for business combinations under United States
generally accepted accounting principles, which is referred to
as GAAP.
Risk
Factors (see page 19)
In evaluating the merger, the merger agreement or the issuance
of shares of URS common stock in the merger, you should
carefully read this joint proxy statement/prospectus and
especially consider the factors discussed in the section
entitled Risk Factors on page 19, including the
risk that URS may not realize all of the anticipated benefits of
the merger, the risk that URS may not be able to retain and
motivate key employees, and the risk that the increase in
URS indebtedness resulting from the merger could adversely
affect URS cash flows and business.
8
URS
The holders of URS common stock receive dividends if and when
declared by the URS board of directors. URS has not paid cash
dividends since 1986, and at the present time, URS does not
anticipate paying dividends on its common stock in the near
future. URS existing senior credit facilities have
specified restrictions on dividend payments. URS has agreed that
it will not make, declare or pay any dividend or distribution on
any shares of URS capital stock or that of its
subsidiaries or any securities or obligations convertible into
or exchangeable for any shares of URS capital stock or
that of its subsidiaries prior to the closing of the merger. In
addition, URS new senior secured credit facilities will
also have specified restrictions on dividend payments similar to
those provided for in URS existing senior credit
facilities.
Washington
Group
The holders of Washington Group common stock receive dividends
if and when declared by the Washington Group board of directors.
Washington Group has not paid a cash dividend since the first
quarter of fiscal 1994 and does not intend to pay cash dividends
in the near term. Washington Groups existing credit
facility has specified restrictions on dividend payments.
Washington Group has agreed that it will not make, declare or
pay any dividend or distribution on any shares of Washington
Groups capital stock or that of its subsidiaries or any
securities or obligations convertible into or exchangeable for
any shares of Washington Groups capital stock or that of
its subsidiaries prior to the closing of the merger.
Comparison
of Stockholder Rights and Corporate Governance Matters (see
page 135)
Washington Group stockholders receiving merger consideration
will have different rights once they become URS stockholders due
to differences between the governing documents of URS and
Washington Group. These differences are described in detail
under Comparison of Stockholder Rights and Corporate
Governance Matters beginning on page 135.
Fees
and Expenses (see page 117)
Generally, all fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger
agreement will be paid by the party incurring those expenses,
subject to the specific exceptions discussed in this joint proxy
statement/prospectus.
9
Summary
Selected Historical Financial Data
URS
Corporation
The following selected financial data as of and for the fiscal
years ended December 29, 2006 and December 30, 2005,
the two months ended December 31, 2004, the two months
ended December 31, 2003 (unaudited), and the fiscal years
ended October 31, 2004, 2003, and 2002 is derived from
URS audited consolidated financial statements and reflects
URS August 2002 acquisition of Carlyle-EG&G Services,
Inc., which was accounted for under the purchase method of
accounting. Effective January 1, 2005, URS adopted a
52/53-week fiscal year ending on the Friday closest to
December 31st, with interim quarters ending on the Fridays
closest to March 31st, June 30th, and
September 30th. URS filed a transition report on
Form 10-Q
with the SEC for the two months ended December 31, 2004.
URS 2005 fiscal year began on January 1, 2005 and
ended on December 30, 2005. The financial data as of and
for the six months ended June 29, 2007 and June 30,
2006 is derived from URS unaudited condensed consolidated
financial statements. The unaudited results reflect all the
adjustments (consisting only of normal recurring adjustments)
that URS management considers necessary for a fair statement of
operating results.
The information is only a summary and should be read in
conjunction with URS consolidated financial statements,
accompanying notes and managements discussion and analysis
of results of operations and financial condition, all of which
can be found in publicly available documents, including those
incorporated by reference into this joint proxy
statement/prospectus. See Additional
Information Where You Can Find More
Information on page 146.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
|
|
|
Six
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Two Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29,
|
|
|
June 30,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
Years Ended October 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
2003(1)
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Income Statement
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,382,393
|
|
|
$
|
2,068,140
|
|
|
$
|
4,240,150
|
|
|
$
|
3,917,565
|
|
|
$
|
566,997
|
|
|
$
|
489,665
|
|
|
$
|
3,381,963
|
|
|
$
|
3,186,714
|
|
|
$
|
2,427,827
|
|
Direct operating expenses
|
|
|
1,576,831
|
|
|
|
1,322,235
|
|
|
|
2,737,828
|
|
|
|
2,555,538
|
|
|
|
369,527
|
|
|
|
314,485
|
|
|
|
2,140,890
|
|
|
|
2,005,339
|
|
|
|
1,489,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
805,562
|
|
|
|
745,905
|
|
|
|
1,502,322
|
|
|
|
1,362,027
|
|
|
|
197,470
|
|
|
|
175,180
|
|
|
|
1,241,073
|
|
|
|
1,181,375
|
|
|
|
938,441
|
|
Indirect, general and
administrative expenses(2,4)
|
|
|
679,414
|
|
|
|
636,045
|
|
|
|
1,283,533
|
|
|
|
1,187,605
|
|
|
|
188,400
|
|
|
|
153,609
|
|
|
|
1,079,088
|
|
|
|
999,977
|
|
|
|
790,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
126,148
|
|
|
|
109,860
|
|
|
|
218,789
|
|
|
|
174,422
|
|
|
|
9,070
|
|
|
|
21,571
|
|
|
|
161,985
|
|
|
|
181,398
|
|
|
|
148,342
|
|
Interest expense
|
|
|
7,991
|
|
|
|
10,985
|
|
|
|
19,740
|
|
|
|
31,587
|
|
|
|
6,787
|
|
|
|
12,493
|
|
|
|
60,741
|
|
|
|
84,564
|
|
|
|
57,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and
minority interest
|
|
|
118,157
|
|
|
|
98,875
|
|
|
|
199,049
|
|
|
|
142,835
|
|
|
|
2,283
|
|
|
|
9,078
|
|
|
|
101,244
|
|
|
|
96,834
|
|
|
|
91,111
|
|
Income tax expense
|
|
|
49,032
|
|
|
|
41,592
|
|
|
|
84,793
|
|
|
|
60,360
|
|
|
|
1,120
|
|
|
|
3,630
|
|
|
|
39,540
|
|
|
|
38,730
|
|
|
|
35,940
|
|
Minority interest in income of
consolidated subsidiaries, net of tax
|
|
|
1,962
|
|
|
|
457
|
|
|
|
1,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
67,163
|
|
|
|
56,826
|
|
|
|
113,012
|
|
|
|
82,475
|
|
|
|
1,163
|
|
|
|
5,448
|
|
|
|
61,704
|
|
|
|
58,104
|
|
|
|
55,171
|
|
Preferred stock dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income after preferred stock
dividend
|
|
|
67,163
|
|
|
|
56,826
|
|
|
|
113,012
|
|
|
|
82,475
|
|
|
|
1,163
|
|
|
|
5,448
|
|
|
|
61,704
|
|
|
|
58,104
|
|
|
|
49,232
|
|
Less: net income allocated to
convertible participating preferred stockholders under the
two-class method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
894
|
|
|
|
907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common
stockholders
|
|
$
|
67,163
|
|
|
$
|
56,826
|
|
|
$
|
113,012
|
|
|
$
|
82,475
|
|
|
$
|
1,163
|
|
|
$
|
5,448
|
|
|
$
|
61,704
|
|
|
$
|
57,210
|
|
|
$
|
48,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.31
|
|
|
$
|
1.13
|
|
|
$
|
2.23
|
|
|
$
|
1.76
|
|
|
$
|
.03
|
|
|
$
|
.16
|
|
|
$
|
1.58
|
|
|
$
|
1.78
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.28
|
|
|
$
|
1.11
|
|
|
$
|
2.19
|
|
|
$
|
1.72
|
|
|
$
|
.03
|
|
|
$
|
.16
|
|
|
$
|
1.53
|
|
|
$
|
1.76
|
|
|
$
|
2.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
October 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
2003(1)
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,634,929
|
|
|
$
|
2,581,029
|
|
|
$
|
2,469,448
|
|
|
$
|
2,307,748
|
|
|
$
|
2,219,319
|
|
|
$
|
2,275,045
|
|
|
$
|
2,193,723
|
|
|
$
|
2,251,905
|
|
Total long-term debt
|
|
$
|
116,004
|
|
|
$
|
149,494
|
|
|
$
|
297,913
|
|
|
$
|
508,584
|
|
|
$
|
801,460
|
|
|
$
|
502,118
|
|
|
$
|
788,708
|
|
|
$
|
925,265
|
|
Preferred stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
46,733
|
|
Stockholders equity(3)
|
|
$
|
1,598,564
|
|
|
$
|
1,506,687
|
|
|
$
|
1,344,504
|
|
|
$
|
1,082,121
|
|
|
$
|
771,941
|
|
|
$
|
1,067,224
|
|
|
$
|
765,073
|
|
|
$
|
633,852
|
|
|
|
|
(1)
|
|
Effective January 1, 2005, URS adopted a 52/53-week fiscal
year ending on the Friday closest to
December 31
st
,
with interim quarters ending on the Fridays closest to
March 31
st
,
June 30
th
,
and
September 30
th
.
URS filed a transition report on
Form 10-Q
with the SEC for the two months ended December 31, 2004.
URS 2005 fiscal year began on January 1, 2005 and
ended on December 30, 2005.
|
|
(2)
|
|
Indirect, general and administrative expenses for the 2006
fiscal year included stock-based compensation expense of
$6.6 million recorded in accordance with Statement of
Financial Accounting Standards No. 123(R),
Share-Based Payment.
There was no stock-based
compensation expense related to employee stock options and
employee stock purchases under Statement of Financial Accounting
Standards No. 123,
Accounting for Stock-Based
Compensation
which is referred to as SFAS 123,
prior to fiscal year 2006 because URS did not adopt the
recognition provisions of SFAS 123.
|
|
(3)
|
|
Stockholders equity for fiscal year 2006 included the
incremental effect of applying and the effects of adopting
Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans an amendment of FASB
Statements No. 87, 88, 106 and 132(R)
which is
referred to as SFAS 158. During fiscal year 2006, URS
adopted SFAS 158 and recognized additional pension
liabilities of approximately $4.4 million. URS also reduced
its stockholders equity by approximately $4.4 million
on an after-tax basis.
|
|
(4)
|
|
Indirect, general and administrative expenses included charges
of $0.2 million, $33.1 million and $28.2 million
for costs incurred to extinguish URS debt during the years
ended December 29, 2006, December 30, 2005, and
October 31, 2004, respectively.
|
11
Washington
Group International, Inc.
The following selected financial data as of and for the fiscal
years ended December 29, 2006, December 30, 2005,
December 31, 2004, and January 2, 2004 and the eleven
months ended January 3, 2003 and the predecessor company
month ended February 1, 2002 is derived from Washington
Groups audited consolidated financial statements. As of
February 1, 2002, in connection with Washington
Groups emergence from bankruptcy protection, Washington
Group adopted fresh-start reporting pursuant to the guidance
provided by the American Institute of Certified Public
Accountants Statement of Position
90-7,
Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code
. In connection with the adoption of
fresh-start reporting, Washington Group created a new entity for
financial reporting purposes. The effective date of Washington
Groups emergence from bankruptcy is considered to be the
close of business on February 1, 2002 for financial
reporting purposes. In the tables below, the month ended
February 1, 2002 has been designated Predecessor
Company.
On August 25, 2004, Washington Group agreed to acquire BNFL
Nuclear Services, Inc.s interest in the government and
environmental services businesses previously jointly acquired
from CBS Corporation (now Viacom, Inc.) and effective
December 30, 2005, Washington Group settled all remaining
acquisition payments resulting in the termination of BNFL
Nuclear Services, Inc.s interest in such businesses. The
financial data as of and for the six months ended June 29,
2007 and June 30, 2006 is derived from Washington
Groups unaudited condensed consolidated financial
statements. The unaudited results reflect all adjustments
(consisting only of normal recurring adjustments) that
Washington Groups management considers necessary for a
fair statement of operating results.
There were no cash dividends declared during any period
presented.
The information is only a summary and should be read in
conjunction with Washington Groups consolidated financial
statements, accompanying notes and managements discussion
and analysis of results of operations and financial condition,
all of which can be found in publicly available documents,
including those incorporated by reference into this joint proxy
statement/prospectus. See Additional
Information Where You Can Find More
Information on page 146.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eleven Months
|
|
|
Company Month
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
June 30,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 2,
|
|
|
January 3,
|
|
|
February 1,
|
|
Income Statement Data:
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue
|
|
$
|
1,789,253
|
|
|
$
|
1,718,399
|
|
|
$
|
3,398,082
|
|
|
$
|
3,188,454
|
|
|
$
|
2,915,382
|
|
|
$
|
2,501,151
|
|
|
$
|
3,311,614
|
|
|
$
|
349,912
|
|
Gross profit
|
|
|
78,033
|
|
|
|
100,396
|
|
|
|
155,792
|
|
|
|
126,354
|
|
|
|
147,155
|
|
|
|
173,703
|
|
|
|
144,251
|
|
|
|
11,120
|
|
Equity in income of unconsolidated
affiliates
|
|
|
12,934
|
|
|
|
16,816
|
|
|
|
35,816
|
|
|
|
29,596
|
|
|
|
26,917
|
|
|
|
25,519
|
|
|
|
27,342
|
|
|
|
3,109
|
|
Operating income
|
|
|
53,269
|
|
|
|
82,205
|
|
|
|
115,896
|
|
|
|
92,127
|
|
|
|
112,141
|
|
|
|
137,620
|
|
|
|
105,772
|
|
|
|
9,424
|
|
Extraordinary item gain
on debt discharge(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
567,193
|
|
Net income
|
|
$
|
23,731
|
|
|
$
|
47,660
|
|
|
$
|
80,846
|
|
|
$
|
53,860
|
|
|
$
|
47,573
|
|
|
$
|
34,157
|
|
|
$
|
21,917
|
|
|
$
|
522,150
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.83
|
|
|
$
|
1.67
|
|
|
$
|
2.83
|
|
|
$
|
2.07
|
|
|
$
|
1.88
|
|
|
$
|
1.37
|
|
|
$
|
.88
|
|
|
$
|
|
(2)
|
Diluted
|
|
$
|
.77
|
|
|
$
|
1.55
|
|
|
$
|
2.64
|
|
|
$
|
1.77
|
|
|
$
|
1.71
|
|
|
$
|
1.35
|
|
|
$
|
.88
|
|
|
$
|
|
(2)
|
Shares used to compute income per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,742
|
|
|
|
28,575
|
|
|
|
28,605
|
|
|
|
26,037
|
|
|
|
25,281
|
|
|
|
25,007
|
|
|
|
25,000
|
|
|
|
|
(2)
|
Diluted
|
|
|
30,740
|
|
|
|
30,667
|
|
|
|
30,608
|
|
|
|
30,408
|
|
|
|
27,890
|
|
|
|
25,352
|
|
|
|
25,000
|
|
|
|
|
(2)
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 2,
|
|
|
January 3,
|
|
|
February 1,
|
|
Balance Sheet Data:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
136,490
|
|
|
$
|
232,096
|
|
|
$
|
237,706
|
|
|
$
|
224,529
|
|
|
$
|
118,263
|
|
|
$
|
80,401
|
|
|
$
|
40,707
|
|
Current assets
|
|
|
1,032,968
|
|
|
|
1,125,160
|
|
|
|
1,027,620
|
|
|
|
949,272
|
|
|
|
789,011
|
|
|
|
731,094
|
|
|
|
1,072,410
|
|
Total assets
|
|
|
1,725,178
|
|
|
|
1,732,324
|
|
|
|
1,664,979
|
|
|
|
1,604,305
|
|
|
|
1,425,489
|
|
|
|
1,425,468
|
|
|
|
1,783,372
|
|
Current liabilities
|
|
|
654,288
|
|
|
|
718,024
|
|
|
|
704,366
|
|
|
|
620,253
|
|
|
|
540,095
|
|
|
|
605,356
|
|
|
|
972,588
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
Minority interests
|
|
|
11,629
|
|
|
|
9,947
|
|
|
|
5,578
|
|
|
|
47,920
|
|
|
|
48,469
|
|
|
|
56,115
|
|
|
|
78,021
|
|
Stockholders equity
|
|
|
846,928
|
|
|
|
798,249
|
|
|
|
757,091
|
|
|
|
749,020
|
|
|
|
675,850
|
|
|
|
606,854
|
|
|
|
550,000
|
|
|
|
|
(1)
|
|
Extraordinary item consists of a gain on debt discharge of
$1,460,732, less the value of common stock and warrants issued
of $550,000, net of income tax of $343,539, upon emergence from
bankruptcy.
|
|
(2)
|
|
Income per share is not presented for this period, as it is not
meaningful because of the revised capital structure of the
successor company.
|
13
Selected
Unaudited Pro Forma Condensed Combined Financial
Information
The merger will be accounted for using the purchase method of
accounting in accordance with GAAP. The tangible and intangible
assets and liabilities of Washington Group will be recorded as
of the closing date of the merger, at their respective fair
values, and assumed by and added to those of URS. For a detailed
description of the purchase accounting method, see The
Merger Accounting Treatment on
page 91.
The following selected unaudited pro forma condensed combined
balance sheet information as of June 29, 2007 and the
selected unaudited pro forma condensed combined statements of
operations information for the year ended December 29, 2006
and the six months ended June 29, 2007 are based on the
separate historical consolidated financial statements of URS and
Washington Group, and reflect the merger and related events and
apply the assumptions and adjustments described in the notes to
the unaudited pro forma condensed combined financial
statements. The pro forma adjustments are more fully described
in the notes to the unaudited pro forma condensed combined
financial statements found on page 120 of this joint proxy
statement/prospectus. The selected unaudited pro forma condensed
combined balance sheet as of June 29, 2007 reflects the
merger and related events as if they had been consummated on
June 29, 2007. The selected unaudited pro forma condensed
combined statements of operations for the year ended
December 29, 2006 and the six months ended June 29,
2007 reflect the merger and related events as if they had been
consummated on December 31, 2005, the beginning of
URS 2006 fiscal year.
The pro forma adjustments are based upon available information
and assumptions that the managements of URS and Washington Group
believe reasonably reflect the merger. The selected unaudited
pro forma condensed combined financial statements do not include
the effects of the costs associated with any restructuring or
integration activities resulting from the transaction. In
addition, the selected unaudited pro forma condensed combined
financial statements do not include the potential realization of
any cost savings from operating efficiencies or synergies
resulting from the transaction, nor do they include any
potential incremental revenues and earnings that may be achieved
with the combined capabilities of the companies. The final
purchase price allocation, which will be determined subsequent
to the closing of the merger, and its effect on results of
operations, may differ significantly from the pro forma amounts
included in the selected unaudited pro forma condensed combined
financial statements. These amounts represent the
managements best estimate as of the date of this joint
proxy statement/prospectus.
We present the unaudited pro forma condensed combined financial
statements for informational purposes only. The selected pro
forma condensed combined financial statements are not
necessarily indicative of what our financial position or results
of operations actually would have been had we completed the
merger as of the dates indicated. In addition, the selected
unaudited pro forma condensed combined financial statements do
not purport to project the future financial position or
operating results of the combined company.
14
The following selected unaudited pro forma condensed combined
financial information (a) has been derived from, and should
be read in conjunction with, the unaudited pro forma condensed
combined financial statements and the accompanying notes
included in this joint proxy statement/prospectus beginning on
page 120 and (b) should be read in conjunction with
the consolidated financial statements of URS and Washington
Group and other information filed by URS and Washington Group
with the SEC and incorporated by reference into this joint proxy
statement/prospectus. See Additional
Information Where You Can Find More
Information on page 146.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
Ended
|
|
|
Year Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
|
Statements of Income
Data:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,183,154
|
|
|
$
|
7,629,723
|
|
Operating income
|
|
|
186,708
|
|
|
|
312,617
|
|
Net income
|
|
|
65,965
|
|
|
|
119,850
|
|
Net income per share of common
stock:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.87
|
|
|
$
|
1.59
|
|
Diluted
|
|
$
|
0.85
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
June 29,
|
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
63,511
|
|
Total assets
|
|
|
6,138,909
|
|
Long-term debt
|
|
|
1,370,201
|
|
Stockholders equity
|
|
|
2,808,300
|
|
15
Unaudited
Comparative Per Share Information
The following table summarizes unaudited per share information
for URS and Washington Group on a historical basis, on an
unaudited pro forma combined basis for URS, taking into account
the pro forma effects of the merger, and an equivalent pro forma
combined basis for Washington Group. It has been assumed for
purposes of the pro forma financial information provided below
that the merger and related events had been consummated on
December 31, 2005 for income statement purposes, and on
June 29, 2007 for balance sheet purposes.
The following information should be read together with the
audited consolidated financial statements of URS and Washington
Group as of and for the fiscal year ended December 29,
2006, which are incorporated by reference into this joint proxy
statement/prospectus, and the unaudited consolidated financial
statements of URS and Washington Group as of and for the
six-month period ended June 29, 2007, which are also
incorporated by reference into this joint proxy
statement/prospectus, and the unaudited pro forma condensed
combined financial information as of and for the fiscal year
ended December 29, 2006 and as of and for the six-month
period ended June 29, 2007 set forth in the section
entitled Unaudited Pro Forma Condensed Combined Financial
Statements beginning on page 120. The pro forma
information below is presented for illustrative purposes only
and is not necessarily indicative of the operating results or
financial position that would have occurred if the acquisition
had been completed on December 31, 2005 for statement of
operations purposes and on June 29, 2007 for balance sheet
purposes, nor is it necessarily indicative of the future
operating results or financial position of the combined company.
The historical book value per share is computed by dividing
total stockholders equity by the number of shares of
common stock outstanding at the end of the period. The pro forma
per share income of the combined company is computed by dividing
the pro forma total income of the combined company by the pro
forma weighted-average number of shares of common stock of the
combined company outstanding over the period. The pro forma
combined book value per share is computed by dividing total pro
forma stockholders equity of the combined company by the
pro forma number of shares of common stock of the combined
company outstanding at the end of the period. Washington Group
equivalent pro forma combined per share amounts are calculated
by multiplying the pro forma combined per share amounts by
0.772, the fraction of a share of URS common stock that would be
exchanged for each share of Washington Group common stock in the
acquisition. The Washington Group equivalent per share amounts
do not include the benefits of the cash portion of the
acquisition consideration. There were no cash dividends declared
on URS common stock or Washington Group common stock during any
period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
|
|
|
Washington Group
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Pro Forma Combined
|
|
|
Equivalents(1)
|
|
|
Year Ended December 29,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.23
|
|
|
$
|
2.83
|
|
|
$
|
1.59
|
|
|
$
|
1.22
|
|
Diluted
|
|
$
|
2.19
|
|
|
$
|
2.64
|
|
|
$
|
1.57
|
|
|
$
|
1.21
|
|
Six Months Ended June 29,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.31
|
|
|
$
|
.83
|
|
|
$
|
0.87
|
|
|
$
|
0.67
|
|
Diluted
|
|
$
|
1.28
|
|
|
$
|
.77
|
|
|
$
|
0.85
|
|
|
$
|
0.66
|
|
As of June 29,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
30.13
|
|
|
$
|
28.93
|
|
|
$
|
36.04
|
|
|
$
|
27.82
|
|
|
|
|
(1)
|
|
Washington Group equivalent per share amounts are calculated by
multiplying pro forma per share amounts by the exchange ratio of
0.772, the portion of the acquisition consideration to be paid
in shares of URS common stock.
|
16
Comparative
Per Share Market Price Data
URS common stock trades on the NYSE under the symbol
URS. From March 6, 2003 to March 27, 2007,
Washington Group common stock traded on the NASDAQ Global Select
Market
®
(or its predecessor) under the ticker symbol WGII.
Since March 27, 2007, Washington Group common stock has
traded on the NYSE under the symbol WNG. The table
below sets forth, for the periods indicated, dividends and the
range of high and low per share closing sales prices for URS
common stock as reported on the NYSE and Washington Group common
stock as reported on the NASDAQ Global Select
Market
®
(or its predecessor) and the NYSE. For current price
information, you should consult publicly available sources. For
more information on URS and Washington Group payment of
dividends, see Dividend Policies on
page 9.
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URS Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends Paid
|
|
|
Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
31.53
|
|
|
$
|
27.21
|
|
|
|
|
|
Second quarter
|
|
$
|
37.73
|
|
|
$
|
28.15
|
|
|
|
|
|
Third quarter
|
|
$
|
40.39
|
|
|
$
|
36.45
|
|
|
|
|
|
Fourth quarter
|
|
$
|
43.29
|
|
|
$
|
37.06
|
|
|
|
|
|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
44.75
|
|
|
$
|
38.26
|
|
|
|
|
|
Second quarter
|
|
$
|
48.87
|
|
|
$
|
37.78
|
|
|
|
|
|
Third quarter
|
|
$
|
41.99
|
|
|
$
|
36.79
|
|
|
|
|
|
Fourth quarter
|
|
$
|
44.25
|
|
|
$
|
38.14
|
|
|
|
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
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|
First quarter
|
|
$
|
45.98
|
|
|
$
|
40.83
|
|
|
|
|
|
Second quarter
|
|
$
|
50.50
|
|
|
$
|
42.15
|
|
|
|
|
|
Third quarter (through September
21, 2007)
|
|
$
|
58.25
|
|
|
$
|
46.06
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|
|
|
|
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|
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|
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Washington Group Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends Paid
|
|
|
Fiscal Year 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
46.70
|
|
|
$
|
38.21
|
|
|
|
|
|
Second quarter
|
|
$
|
52.14
|
|
|
$
|
41.23
|
|
|
|
|
|
Third quarter
|
|
$
|
54.16
|
|
|
$
|
49.28
|
|
|
|
|
|
Fourth quarter
|
|
$
|
53.99
|
|
|
$
|
48.04
|
|
|
|
|
|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
59.35
|
|
|
$
|
53.13
|
|
|
|
|
|
Second quarter
|
|
$
|
61.21
|
|
|
$
|
48.02
|
|
|
|
|
|
Third quarter
|
|
$
|
59.80
|
|
|
$
|
50.93
|
|
|
|
|
|
Fourth quarter
|
|
$
|
61.79
|
|
|
$
|
54.47
|
|
|
|
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
66.42
|
|
|
$
|
56.40
|
|
|
|
|
|
Second quarter
|
|
$
|
85.04
|
|
|
$
|
64.74
|
|
|
|
|
|
Third quarter (through September
21, 2007)
|
|
$
|
88.34
|
|
|
$
|
77.75
|
|
|
|
|
|
The following table presents:
|
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|
the last reported sale price of a share of URS common stock, as
reported on the NYSE; and
|
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|
the last reported sale price of a share of Washington Group
common stock, as reported on the NYSE;
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17
in each case, on May 25, 2007, the last full trading day
prior to the public announcement of the proposed merger, and on
September 27, 2007, the last practicable trading day prior
to the date of this joint proxy statement/prospectus.
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URS
|
|
|
Washington Group
|
|
Date
|
|
Common Stock
|
|
|
Common Stock
|
|
|
May 25, 2007
|
|
$
|
46.89
|
|
|
$
|
69.97
|
|
September 27, 2007
|
|
$
|
56.80
|
|
|
$
|
87.68
|
|
The market value of the shares of URS common stock to be issued
in exchange for shares of Washington Group common stock upon the
completion of the merger will not be known at the time
Washington Group stockholders vote on the proposal to adopt the
merger agreement and approve the merger or at the time URS
stockholders vote on the proposal to approve the issuance of
shares of URS common stock in the merger because the merger will
not be completed by the time of the respective stockholder
votes. The exchange ratio is fixed and will not be adjusted for
changes in the stock prices of either company before the merger
is consummated.
The above tables show only historical comparisons. Because the
market prices of URS common stock and Washington Group common
stock will likely fluctuate prior to the merger, these
comparisons may not provide meaningful information to URS
stockholders in determining whether to approve the issuance of
shares of URS common stock in the merger or to Washington Group
stockholders in determining whether to adopt the merger
agreement and approve the merger. URS and Washington Group
stockholders are encouraged to obtain current market quotations
for URS and Washington Group common stock and to review
carefully the other information contained in this joint proxy
statement/prospectus or incorporated by reference into this
joint proxy statement/prospectus in considering whether to
approve the respective proposals before them. See the section
entitled Additional Information Where You Can
Find More Information on page 146.
18
The merger involves risks for URS and Washington Group
stockholders. Washington Group stockholders will be choosing to
invest in URS common stock by voting in favor of the merger and
URS stockholders will be choosing to permit significant dilution
of their percentage ownership in URS by voting in favor of the
issuance of stock in the merger. In addition to the other
information included in this joint proxy statement/prospectus,
including the matters addressed in Cautionary Statement
Concerning Forward-Looking Statements on page 41, you
should carefully consider the following risks before deciding
whether to vote for adoption of the merger agreement and
approval of the merger in the case of Washington Group
stockholders, or for approval of the issuance of shares of URS
common stock pursuant to the merger agreement, in the case of
URS stockholders. In addition, you should read and consider the
risks associated with each of the businesses of URS and
Washington Group because these risks will also affect the
combined company. These risks can be found below under
Risk Factors Risks Related to URS and
Risk Factors Risks Related to Washington
Group beginning on pages 25 and 33, respectively, as
well as in the URS Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006, the URS
Quarterly Report on
Form 10-Q
for the quarter ended June 29, 2007, the Washington Group
Annual Report on
Form 10-K,
as amended on February 27, 2007, for the fiscal year ended
December 29, 2006 and the Washington Group Quarterly Report
on
Form 10-Q
for the quarter ended June 29, 2007, which are filed with
the SEC and incorporated by reference into this joint proxy
statement/prospectus. You should also read and consider the
other information in this joint proxy statement/prospectus and
the other documents incorporated by reference in this joint
proxy statement/prospectus. See Additional
Information Where You Can Find More
Information beginning on page 146.
Risks
Relating to the Merger
URS
may not realize all of the anticipated benefits of the
transaction.
The combined companys ability to realize the anticipated
benefits of the merger will depend, in part, on the ability of
URS to integrate the businesses of Washington Group with URS.
The combination of two independent companies is a complex,
costly and time-consuming process. As a result, the combined
company will be required to devote significant management
attention and resources to integrating the diverse business
practices and operations of URS and Washington Group. The
integration process may disrupt the business of either or both
of the companies and, if implemented ineffectively, preclude
realization of the full benefits expected by URS and Washington
Group. URS has not previously completed a merger or acquisition
comparable in size or scope to the transaction. The failure of
the combined company to meet the challenges involved in
integrating successfully the operations of URS and
Washington Group or otherwise to realize any of the anticipated
benefits of the transaction could cause an interruption of, or a
loss of momentum in, the activities of the combined company and
could seriously harm its results of operations. In addition, the
overall integration of the two companies may result in
unanticipated problems, expenses, liabilities, competitive
responses, loss of customer relationships, and diversion of
managements attention, and may cause the combined
companys stock price to decline. The difficulties of
combining the operations of the companies include, among others:
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coordinating bid and marketing functions;
|
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|
unanticipated issues in integrating information, communications
and other systems;
|
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|
unanticipated incompatibility of logistics, marketing and
administration methods;
|
|
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|
maintaining employee morale and retaining key employees;
|
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|
|
integrating the business cultures of both companies;
|
|
|
|
preserving important strategic and customer relationships;
|
|
|
|
consolidating corporate and administrative infrastructures and
eliminating duplicative operations;
|
|
|
|
the diversion of managements attention from ongoing
business concerns; and
|
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coordinating geographically separate organizations.
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19
In addition, even if the operations of URS and Washington Group
are integrated successfully, the combined company may not
realize the full benefits of the transaction, including the
synergies, cost savings, or sales or growth opportunities that
we expect. These benefits may not be achieved within the
anticipated time frame, or at all. Further, because the
businesses of URS and Washington Group differ, the results of
operations of the combined company and the market price of URS
common stock may be affected after the transaction by factors
different from those affecting the shares of URS and Washington
Group currently, and may suffer as a result of the transaction.
As a result, URS and Washington Group cannot assure you that the
combination of Washington Group with URS will result in the
realization of the full benefits anticipated from the
transaction.
To be
successful, the combined company must retain and motivate key
employees, and failure to do so could seriously harm the
combined company.
To be successful, the combined company must retain and motivate
executives and other key employees. As a professional and
technical services company, the combined company will be labor
intensive and, therefore, its ability to retain qualified senior
management and professional, business development and technical
staff will be particularly important to its future success.
Employees of URS and Washington Group may experience uncertainty
about their future roles with the combined company until or
after strategies for the combined company are announced or
executed. These circumstances may adversely affect the combined
companys ability to retain key personnel. The combined
company also must continue to motivate employees and keep them
focused on the strategies and goals of the combined company,
which effort may be adversely affected as a result of the
uncertainty and difficulties with integrating URS and Washington
Group. If the combined company is unable to retain executives
and other key employees, the roles and responsibilities of such
executive officers and employees will need to be filled either
by existing or new URS officers and employees, which may require
the combined company to devote time and resources to
identifying, hiring and integrating replacements for the
departed executives of URS that could otherwise be used to
integrate the businesses of URS and Washington Group or
otherwise pursue business opportunities.
URS
will have more indebtedness after the merger, which could
adversely affect its cash flows and business.
In order to complete the merger, URS has obtained a commitment
for the funding of approximately $2.1 billion of new term
and revolving debt financing, with the option of adding up to
$500.0 million in synthetic letter of credit financing and
up to $300.0 million in additional term loans. Proceeds
from the initial financing will be used, in part, to fund the
cash portion of the consideration paid to Washington Group
stockholders. URS debt outstanding as of June 29,
2007 was approximately $132.5 million, but immediately
after the merger, the combined companys debt is
anticipated to be approximately $1.4 billion. As of
June 29, 2007, URS debt service obligations,
comprised of principal and interest (excluding capital leases
and equipment notes), during the next twelve months would,
in the absence of the merger, have been approximately
$3.5 million. On a pro forma basis and based on assumed
interest rates, leverage ratios and credit ratings, after
incurring the debt financing to effect the merger, URS
debt service obligations, comprised of principal and interest
(excluding capital leases and equipment notes), during the
twelve months following the merger will be approximately
$161.2 million. If our credit ratings are lower, or our
leverage ratio is higher, than assumed, our interest expenses,
unused revolving line of credit fees and up-front fees may be
greater. Based on then anticipated outstanding indebtedness of
approximately $1.4 billion under the arranged credit
facility, if market rates of interest were to average 1% higher
or lower during that same
twelve-month
period, URS
net-of-tax
interest expense would increase or decrease by approximately
$8.1 million. As a result of this increase in debt, demands
on URS cash resources will increase after the completion
of the merger. The increased levels of debt could, among other
things:
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|
|
require URS to dedicate a substantial portion of its cash flow
from operations to the servicing and repayment of its debt,
thereby reducing funds available for working capital, capital
expenditures, dividends, acquisitions and other purposes;
|
|
|
|
increase URS vulnerability to, and limit flexibility in
planning for, adverse economic and industry conditions;
|
20
|
|
|
|
|
adversely affect URS credit rating, with the result that
the cost of servicing URS indebtedness might increase and
its ability to obtain surety bonds could be impaired;
|
|
|
|
limit URS ability to obtain additional financing to fund
future working capital, capital expenditures, additional
acquisitions and other general corporate requirements;
|
|
|
|
create competitive disadvantages compared to other companies
with less indebtedness;
|
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|
adversely affect URS stock price; and
|
|
|
|
limit URS ability to apply proceeds from an offering or
asset sale to purposes other than the servicing and repayment of
debt.
|
If URS
is unable to finance the merger through existing cash balances
and debt financings, the completion of the merger will be
jeopardized.
URS intends to finance the merger primarily with debt financing,
existing cash balances and cash flow from operations. Although
URS has entered into a financing commitment letter with MSSF and
Wells Fargo, the financing commitment letter includes customary
conditions to funding, including, without limitation,
satisfaction of the conditions to closing of the merger as set
forth in the merger agreement, the absence of any material
adverse effect on Washington Group or its subsidiaries, taken as
a whole, obtaining credit ratings, a maximum ratio of pro forma
combined total debt to combined pro forma EBITDA of 3.50 to 1.00
on the closing date, the accuracy of certain representations and
warranties of the parties, customary legal documentation, and
repayment of Washington Groups credit facilities. In the
event that these conditions are not satisfied and URS is unable
to finance the merger, but is still obligated to complete the
merger, URS will have to adopt one or more alternatives, such as
selling assets or restructuring debt, which may adversely affect
URS business, financial condition and results of
operations. Additionally, other financing may not be available
on acceptable terms, in a timely manner or at all. If other
financing becomes necessary and URS is unable to secure such
additional financing, the completion of the merger will be
jeopardized and URS could be in breach of the merger agreement.
If the
combined company is unable to manage its growth, its business
and financial results could suffer.
The combined companys future financial results will depend
in part on its ability to profitably manage its core businesses,
including any growth that the combined company may be able to
achieve. Over the past several years, each of URS and Washington
Group has engaged in the identification of, and competition for,
growth and expansion opportunities. In order to achieve those
initiatives, the combined company will need to maintain existing
customers and attract new customers, recruit, train, retain and
effectively manage employees, as well as expand operations,
customer support and financial control systems. If the combined
company is unable to manage its businesses effectively and
profitably, any growth that the combined company may be able to
achieve, its business and financial results could suffer.
The
issuance of shares of URS common stock to Washington Group
stockholders in the merger will substantially reduce the
percentage ownership interests of URS
stockholders.
If the transaction is completed, URS and Washington Group expect
that, based on Washington Groups shares of common stock
and equity awards outstanding as of September 21, 2007, URS
will pay approximately $1.4 billion in cash and issue
approximately 24.9 million shares of URS common stock in
the merger. Washington Group stockholders are expected to own
approximately 32% of the shares of URS common stock outstanding
after the merger. URS stockholders will continue to own their
existing shares of URS common stock, which will not be affected
by the merger, other than by the dilution resulting from the
issuance of URS common stock in the merger. The issuance of
approximately 24.9 million shares of URS common stock to
Washington Group stockholders and holders of equity-based
incentive awards will cause a significant reduction in the
relative percentage interests of current URS stockholders in
earnings, voting, liquidation value and book and market value.
21
The
price of URS common stock might decline prior to the completion
of the merger, which would decrease the value of the stock
portion of the merger consideration to be received by Washington
Group stockholders in the merger. Further, at the Washington
Group special meeting, Washington Group stockholders will not
know the exact value of URS common stock that will be issued in
the merger.
The market price of URS common stock at the time of completion
of the merger may vary significantly from the price on the date
of the merger agreement or from the price on the dates of the
URS and Washington Group stockholder meetings. URS common stock
has historically experienced volatility. On May 25, 2007,
the last full trading day prior to the public announcement of
the proposed merger, URS common stock closed at $46.89 per share
as reported on the New York Stock Exchange Composite Transaction
Tape. From May 29, 2007, through September 27, 2007,
the trading price of URS common stock ranged from a closing high
of $58.25 per share to a closing low of $46.06 per share.
Under the merger agreement, each outstanding share of Washington
Group common stock will be converted into the right to receive,
upon completion of the merger and in addition to the cash
consideration, stock consideration equal to 0.772 of a share of
URS common stock (other than those shares held by URS, any
subsidiary of URS, Elk Merger Corporation or Bear Merger Sub,
Inc. and other than shares as to which a Washington Group
stockholder has validly demanded and perfected appraisal rights
under Delaware law). The exchange ratio is fixed and will not be
adjusted for changes in the stock prices of either company
before the merger is consummated. As a result, any changes in
the market price of URS common stock will have a corresponding
effect on the value of the consideration that URS pays to
Washington Group stockholders in the merger. Neither party,
however, has a right to terminate the merger agreement based
solely upon changes in the market price of URS or Washington
Group common stock.
URS and Washington Group are working to complete the transaction
as quickly as possible. However, the time period between the
stockholder votes taken at the special meetings and the
completion of the transaction will depend upon, among other
things, the timing of receipt of financing proceeds, which must
be obtained prior to the completion of the transaction. There is
no way to predict how long it will take to obtain the required
financing. Because the date when the transaction is completed
may be later than the date of the special meetings, URS and
Washington Group stockholders may not know the exact value of
the URS common stock that will be issued in the merger at the
time they vote on the merger proposals. As a result, if the
market price of URS common stock at the completion of the merger
is lower than the market price on the date of the Washington
Group special meeting, the value of the merger consideration
received by Washington Group stockholders in the merger will be
lower than the value of the merger consideration at the time of
vote by the Washington Group stockholders. Moreover, during this
interim period, events, conditions or circumstances could arise
that could have a material impact or effect on URS, Washington
Group or their respective industries.
The
pro forma financial statements are presented for illustrative
purposes only and may not be an indication of the combined
companys financial condition or results of operations
following the transaction.
The pro forma financial statements contained in this joint proxy
statement/prospectus are presented for illustrative purposes
only and may not be an indication of the combined companys
financial condition or results of operations following the
merger for several reasons. The pro forma financial statements
have been derived from the historical financial statements of
URS and Washington Group and adjustments and assumptions have
been made regarding the combined company after giving effect to
the transaction. The information upon which these adjustments
and assumptions have been made is preliminary, and these kinds
of adjustments and assumptions are difficult to make with
accuracy. Moreover, the pro forma financial statements do not
reflect all costs that are expected to be incurred by the
combined company in connection with the transaction. For
example, the impact of any incremental costs incurred in
integrating the two companies is not reflected in the pro forma
financial statements. As a result, the actual financial
condition and results of operations of the combined company
following the merger may not be consistent with, or evident
from, these pro forma financial statements.
The assumptions used in preparing the pro forma financial
information may not prove to be accurate, and other factors may
affect the combined companys financial condition or
results of operations following the transaction.
22
Any decline or potential decline in the combined companys
financial condition or results of operations may cause
significant variations in the stock price of the combined
company. See Unaudited Pro Forma Condensed Combined
Financial Statements beginning on page 120.
The
financial forecasts involve risks, uncertainties and
assumptions, many of which are beyond the control of URS and
Washington Group. As a result, they may not prove to be accurate
and are not necessarily indicative of current values or future
performance.
The financial forecasts of URS and Washington Group contained in
this joint proxy statement/prospectus involve risks,
uncertainties and assumptions and are not a guarantee of
performance. The future financial results of URS, Washington
Group and, if the merger is completed, the combined company, may
materially differ from those expressed in the financial
forecasts due to factors that are beyond URS
and/or
Washington Groups ability to control or predict. Neither
URS nor Washington Group can provide any assurance that their
respective financial forecasts will be realized or that their
respective future financial results will not materially vary
from the financial forecasts. Since the financial forecasts
cover multiple years, the information by its nature becomes less
reliable with each successive year. The financial forecasts do
not take into account any circumstances or events occurring
after the date they were prepared.
More specifically, the financial forecasts:
|
|
|
|
|
necessarily make numerous assumptions, many of which are beyond
the control of URS and Washington Group and may not prove to
have been, or may no longer be, accurate;
|
|
|
|
do not necessarily reflect revised prospects for URS and
Washington Groups businesses, changes in general business
or economic conditions, or any other transaction or event that
has occurred or that may occur and that was not anticipated at
the time the forecasts were prepared;
|
|
|
|
are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than is reflected in the forecasts; and
|
|
|
|
should not be regarded as a representation that the financial
forecasts will be achieved.
|
The financial forecasts were not prepared with a view toward
public disclosure or compliance with published guidelines of the
SEC or the American Institute of Certified Public Accountants
for preparation and presentation of prospective financial
information or GAAP and do not reflect the effect of any
proposed or other changes in GAAP that may be made in the
future. In addition, the financial forecasts were developed from
historical financial statements, do not give effect to any
changes or expenses as a result of the merger or any other
effects of the merger.
Some
of the conditions to the merger may be waived by URS or
Washington Group without resoliciting stockholder approval of
the merger agreement.
Some of the conditions set forth in the merger agreement may be
waived by URS or Washington Group, subject to the agreement of
the other party in specific cases. See The Merger
Agreement Conditions to Completion of the
Merger on page 103. If any conditions are waived, URS
and Washington Group will evaluate whether amendment of this
joint proxy statement/prospectus and resolicitation of proxies
is warranted. In the event that the board of directors of URS or
Washington Group determines that resolicitation of stockholders
is not warranted, the applicable company will have the
discretion to complete the transaction without seeking further
stockholder approval.
Provisions
of the merger agreement may deter alternative business
combinations and could negatively impact the stock prices of URS
and Washington Group if the merger agreement is terminated in
certain circumstances.
Restrictions in the merger agreement on solicitation generally
prohibit URS and Washington Group from soliciting any
acquisition proposal or offer for a merger or business
combination with any other party, including a proposal that
might be advantageous to the stockholders of URS or Washington
Group when compared to the terms and conditions of the merger
described in this joint proxy statement/prospectus. In addition,
if the merger agreement
23
is terminated, Washington Group may be required in specified
circumstances to pay a termination fee of $70.0 million to
URS, and URS may be required in specified circumstances to pay a
termination fee of $70.0 million to Washington Group. These
provisions may deter third parties from proposing or pursuing
alternative business combinations that might result in greater
value to URS or Washington Group stockholders than the
transaction. In the event the merger is terminated by URS or
Washington Group in circumstances that obligate either party to
pay the termination fee to the other party, including where
either party terminates the merger agreement because the other
partys board of directors withdraws its support of the
merger, the trading price of URS
and/or
Washington Groups stock may decline.
Directors
and executive officers of Washington Group have interests in the
transaction that may be different from, or in addition to, the
interests of Washington Group stockholders.
In considering the recommendation of the Washington Group board
of directors, Washington Group stockholders should be aware that
Washington Groups directors and executive officers have
interests in the merger and have arrangements that are different
from, or in addition to, those of Washington Groups
stockholders generally. These interests and arrangements may
create potential conflicts of interest.
These interests and arrangements include:
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vesting of all unvested Washington Group equity awards,
including those held by Washington Groups executive
officers;
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vesting and cash out of all unvested Washington Group
performance units, including those performance units held by
Washington Groups current executive officers;
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change-in-control
severance agreements with Washington Groups current
executive officers that provide for payment of incentive
compensation accrued as of the
change-in-control
date, as well as severance benefits in the event of qualifying
terminations of employment in connection with or following the
merger; and
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continued indemnification and insurance coverage as required
under the merger agreement.
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As a result of these interests, directors and officers of
Washington Group could be more likely to vote, and, in the case
of directors, recommend to stockholders that they vote, to adopt
the merger agreement and approve the merger than if they did not
hold these interests, and may have reasons for doing so that are
not the same as the interests of other Washington Group
stockholders. For a full description of the interests of
directors and executive officers of Washington Group in the
merger, see The Merger Interests of Washington
Groups Directors and Executive Officers in the
Merger on page 95.
The
merger will result in substantial goodwill for the combined
company. If the combined companys goodwill or intangible
assets become impaired, then the profits of the combined company
may be significantly reduced or eliminated.
Because URS has grown through acquisitions, goodwill and other
intangible assets represent a substantial portion of its assets.
URS goodwill and net purchased intangible assets were
$1.0 billion as of June 29, 2007 and the amount of the
combined companys goodwill and other net purchased
intangible assets are expected to increase substantially as a
result of the merger. On a pro forma basis, after giving effect
to the merger and related events and applying the assumptions
set forth in the unaudited pro forma condensed combined
financial statements, the combined companys pro forma
goodwill as of June 29, 2007 is estimated to be
approximately $2.6 billion, and the combined companys
pro forma net purchased intangible assets, which will be
amortized over a period ranging from approximately four months
to fifteen years, is estimated to be approximately
$517.9 million. If any of the combined companys
goodwill or intangible assets were to become impaired, the
combined company would be required to write off the impaired
amount, which may significantly reduce or eliminate its profits.
24
Demand
for URS services is cyclical and vulnerable to economic
downturns. If the economy weakens, then URS revenues,
profits and financial condition may deteriorate.
Demand for URS services in its infrastructure and defense
markets is cyclical and vulnerable to sudden economic downturns,
which may result in clients delaying, curtailing or canceling
proposed and existing projects. For example, there was a
decrease in the URS Division revenues of $77.9 million, or
3.4%, in fiscal year 2002 compared to fiscal year 2001 as a
result of the general economic decline. URS clients may
demand better pricing terms and their ability to pay URS
invoices may be affected by a weakening economy. URS
government clients may face budget deficits that prohibit them
from funding proposed and existing projects. URS business
traditionally lags the overall recovery in the economy;
therefore, its business may not recover immediately when the
economy improves. If the economy weakens, then URS
revenues, net income and overall financial condition may
deteriorate.
URS
may not realize the full amount of revenues reflected in its
book of business, which could harm its operations and
significantly reduce its future revenues.
URS accounts for all contract awards that may eventually be
recognized as revenues as its book of business,
which includes backlog, designations, option years and
indefinite delivery contracts, which are referred to as IDCs.
URS backlog consists of the amount billable at a
particular point in time, including task orders issued under
IDCs. As of June 29, 2007, its backlog was approximately
$5.7 billion. Its designations consist of projects that
clients have awarded URS, but for which URS does not yet have
signed contracts. URS option year contracts are multi-year
contracts with base periods, plus option years that are
exercisable by its clients without the need for URS to go
through another competitive bidding process. URS IDCs are
signed contracts under which it performs work only when its
clients issue specific task orders. URS book of business
estimates may not result in actual revenues in any particular
period because clients may modify or terminate projects and
contracts and may decide not to exercise contract options or
issue task orders. If URS does not realize a substantial amount
of its book of business, its operations could be harmed and its
future revenues could be significantly reduced.
As a
government contractor, URS is subject to a number of procurement
laws, regulations and government audits; a violation of any such
laws and regulations could result in sanctions, contract
termination, forfeiture of profit, harm to URS reputation
or loss of URS status as an eligible government
contractor.
URS is affected by and must comply with federal, state, local
and foreign laws and regulations relating to the formation,
administration and performance of government contracts. For
example, URS must comply with the Federal Acquisition
Regulation, which is referred to as the FAR, the Truth in
Negotiations Act, the Cost Accounting Standards, which are
referred to as the CAS, the Services Contract Act and the
U.S. Department of Defense security regulations, as well as
many other laws and regulations. These laws and regulations
affect how URS transacts business with its clients and in some
instances, impose additional costs on URS business
operations. Even though URS takes precautions to prevent and
deter fraud, misconduct and non-compliance, URS faces the risk
that its employees or outside partners may engage in misconduct,
fraud or other improper activities. Government agencies, such as
the U.S. Defense Contract Audit Agency, which is referred
to as the DCAA, routinely audit and investigate government
contractors. These government agencies review and audit a
government contractors performance under its contracts,
direct and indirect cost structure, and compliance with
applicable laws, regulations and standards. For example, during
the course of its audits, the DCAA may question URS
incurred project costs, and if the DCAA believes URS has
accounted for such costs in a manner inconsistent with the
requirements for the FAR or CAS, the DCAA auditor may recommend
to URS U.S. government corporate administrative
contracting officer to disallow such costs. Historically, URS
has not experienced significant disallowed costs as a result of
government audits. However, URS can provide no assurance that
the DCAA or other government audits will not result in material
disallowances for incurred costs in the future. Government
contract violations could result in the imposition of civil and
criminal penalties or sanctions, contract termination,
forfeiture of profit,
and/or
suspension of payment, any of which could make URS lose its
status as an eligible government contractor. URS could also
suffer serious harm to its reputation.
25
Because
URS depends on federal, state and local governments for a
significant portion of its revenue, URS inability to win
or renew government contracts during regulated procurement
processes could harm its operations and significantly reduce or
eliminate its profits.
Revenues from federal government contracts and state and local
government contracts represented approximately 41% and 22%,
respectively, of URS total revenues for the six months
ended June 29, 2007. Government contracts are awarded
through a regulated procurement process. The federal government
has increasingly relied upon multi-year contracts with
pre-established terms and conditions, such as IDCs, that
generally require those contractors who have previously been
awarded the IDC to engage in an additional competitive bidding
process before a task order is issued. The increased
competition, in turn, may require URS to make sustained efforts
to reduce costs in order to realize revenues and profits under
government contracts. If URS is not successful in reducing the
amount of costs URS incurs, its profitability on government
contracts will be negatively impacted. Moreover, even if URS is
qualified to work on a government contract, URS may not be
awarded the contract because of existing government policies
designed to protect small businesses and underrepresented
minority contractors. URS inability to win or renew
government contracts during regulated procurement processes
could harm its operations and significantly reduce or eliminate
its profits.
Each
year some government contracts may be dependent on the
legislative appropriations process. If legislative
appropriations are not made in subsequent years of a
multiple-year government contract, then URS may not realize all
of its potential revenues and profits from that
contract.
Each year the funding for some of URS government contracts
may be dependent on the legislative appropriations process. For
example, the passage of the SAFETEA-LU highway and transit bill
in August of 2005 has provided additional funding for state
transportation projects in which URS provides services.
Legislatures may appropriate funds for a given project on a
year-by-year
basis, even though the project may take more than one year to
perform. As a result, at the beginning of a project, the related
contract may only be partially funded, and additional funding is
committed only as appropriations are made in each subsequent
year. These appropriations, and the timing of payment of
appropriated amounts, may be influenced by, among other things,
the state of the economy, competing political priorities,
curtailments in the U.S. of government contracting firms,
rise in raw material costs, delays associated with a lack of a
sufficient number of government staff to oversee contracts,
budget constraints, the timing and amount of tax receipts and
the overall level of government expenditures. If appropriations
are not made in subsequent years of a multiple-year contract,
URS may not realize all of its potential revenues and profits
from that contract.
URS
government contracts may give the government the right to
modify, delay, curtail or terminate URS contracts at their
convenience at any time prior to their completion and, if URS
does not replace these contracts, then URS may suffer a decline
in revenues.
Government projects in which URS participates as a contractor or
subcontractor may extend for several years. Generally,
government contracts include the right for the government to
modify, delay, curtail or terminate contracts and subcontracts
at their convenience any time prior to their completion. Any
decision by a government client to modify, delay, curtail or
terminate URS contracts at their convenience may result in
a decline in revenues.
If URS
is unable to accurately estimate and control its contract costs,
then URS may incur losses on its contracts, which could decrease
its operating margins and significantly reduce or eliminate its
profits.
It is important for URS to control its contract costs so that it
can maintain positive operating margins. URS generally enters
into three principal types of contracts with its clients:
cost-plus, fixed-price and
time-and-materials.
Under cost-plus contracts, which may be subject to contract
ceiling amounts, URS is reimbursed for allowable costs and fees,
which may be fixed or performance-based. If its costs exceed the
contract ceiling or are not allowable under the provisions of
the contract or any applicable regulations, URS may not be
reimbursed for all of the costs it incurs. Under fixed-price
contracts, URS receives a fixed price regardless of what its
actual costs will be. Consequently, URS realizes a profit on
fixed-price contracts only if it controls its costs and prevents
cost over-runs on the contracts. Under
time-and-materials
contracts, URS is paid for labor at negotiated hourly billing
rates and for other expenses. Profitability on URS
contracts is driven by billable headcount and its ability to
manage costs.
26
Under each type of contract, if URS is unable to control costs,
URS may incur losses on its contracts, which could decrease its
operating margins and significantly reduce or eliminate its
profits.
URS
actual results could differ from the estimates and assumptions
that it uses to prepare its financial statements, which may
significantly reduce or eliminate its profits.
To prepare financial statements in conformity with GAAP,
management is required to make estimates and assumptions as of
the date of the financial statements, which affect the reported
values of assets and liabilities and revenues and expenses and
disclosures of contingent assets and liabilities. Areas
requiring significant estimates by URS management include:
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the application of the percentage-of-completion
method of accounting, and revenue recognition on contracts,
change orders, and contract claims;
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provisions for uncollectible receivables and customer claims and
recoveries of costs from subcontractors, vendors and others;
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provisions for income taxes and related valuation allowances;
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value of goodwill and recoverability of other intangible assets;
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valuation of assets acquired and liabilities assumed in
connection with purchase business combinations;
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valuation of defined benefit pension plans and other employee
benefit plans;
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valuation of stock-based compensation expense; and
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accruals for estimated liabilities, including litigation and
insurance reserves.
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URS actual results could differ from those estimates,
which may significantly reduce or eliminate its profits.
URS
use of the percentage-of-completion method of
accounting could result in reduction or reversal of previously
recorded revenues and profits.
A substantial portion of URS revenues and profits are
measured and recognized using the
percentage-of-completion method of accounting.
URS use of this accounting method results in recognition
of revenues and profits ratably over the life of a contract,
based generally on the proportion of costs incurred to date to
total costs expected to be incurred for the entire project. The
effects of revisions to revenues and estimated costs are
recorded when the amounts are known or can be reasonably
estimated. Such revisions could occur in any period and their
effects could be material. URS estimates the extent of progress
towards completion of long-term engineering, program management,
construction management or construction contracts in process,
but due to uncertainties inherent in the estimating process, it
is possible for actual costs to vary materially from estimates,
including reductions or reversals of previously recorded
revenues and profits.
URS
failure to successfully bid on new contracts and renew existing
contracts with private and public sector clients could adversely
reduce or eliminate its profitability.
URS business depends on its ability to successfully bid on
new contracts and renew existing contracts with private and
public sector clients. Contract proposals and negotiations are
complex and frequently involve a lengthy bidding and selection
process, which are affected by a number of factors, such as
market conditions, financing arrangements and required
governmental approvals. For example, a client may require URS to
provide a bond or letter of credit to protect the client should
URS fail to perform under the terms of the contract. If negative
market conditions arise, or if URS fails to secure adequate
financial arrangements or the required governmental approval, it
may not be able to pursue particular projects, which could
adversely reduce or eliminate its profitability.
27
If URS
fails to timely complete, miss a required performance standard
or otherwise fail to adequately perform on a project, then URS
may incur a loss on that project, which may reduce or eliminate
its overall profitability.
URS may commit to a client that it will complete a project by a
scheduled date. URS may also commit that a project, when
completed, will achieve specified performance standards. If the
project is not completed by the scheduled date or fails to meet
required performance standards, URS may either incur significant
additional costs or be held responsible for the costs incurred
by the client to rectify damages due to late completion or
failure to achieve the required performance standards. The
uncertainty of the timing of a project can present difficulties
in planning the amount of personnel needed for the project. If
the project is delayed or canceled, URS may bear the cost of an
underutilized workforce that was dedicated to fulfilling the
project. In addition, performance of projects can be affected by
a number of factors beyond URS control, including
unavoidable delays from weather conditions, unavailability of
vendor materials, changes in the project scope of services
requested by clients or labor disruptions. In some cases, should
URS fail to meet required performance standards, it may also be
subject to
agreed-upon
financial damages, which are determined by the contract. To the
extent that these events occur, the total costs of the project
could exceed URS estimates and URS could experience
reduced profits or, in some cases, incur a loss on a project,
which may reduce or eliminate its overall profitability.
If
URS partners fail to perform their contractual obligations
on a project, URS could be exposed to liability, loss of
reputation or reduced or eliminated profits.
URS sometimes enters into subcontracts, joint ventures and other
contractual arrangements with outside partners to jointly bid on
and execute a particular project. The success of these joint
projects depends upon, among other things, the satisfactory
performance of the contractual obligations of URS
partners. If any of URS partners fails to satisfactorily
perform its contractual obligations, URS may be required to make
additional expenditures and provide additional services to
complete the project. If URS is unable to adequately address its
partners performance issues, then its client could
terminate the joint project, exposing URS to liability, loss of
reputation or reduced or eliminated profits.
URS
may be subject to substantial liabilities under environmental
laws and regulations.
A portion of URS environmental business involves the
planning, design, program management, construction management
and operation and maintenance of pollution control facilities,
hazardous waste or Superfund sites and military bases. In
addition, URS has contracts with U.S. governmental entities
to destroy hazardous materials, including chemical agents and
weapons stockpiles. These activities may require URS to manage,
handle, remove, treat, transport and dispose of toxic or
hazardous substances. URS must comply with a number of
governmental laws that strictly regulate the handling, removal,
treatment, transportation and disposal of toxic and hazardous
substances. Under the Comprehensive Environmental Response,
Compensation, and Liability Act, which is referred to as CERCLA,
and comparable state laws, URS may be required to investigate
and remediate regulated hazardous materials. CERCLA and
comparable state laws typically impose strict, joint and several
liabilities without regard to whether a company knew of or
caused the release of hazardous substances. The liability for
the entire cost of clean up can be imposed upon any responsible
party. Other principal federal environmental, health and safety
laws affecting URS include, but are not limited to, the Resource
Conservation and Recovery Act, the National Environmental Policy
Act, the Clean Air Act, the Clean Air Interstate Rule, the Clean
Air Mercury Rule, the Occupational Safety and Health Act, the
Toxic Substances Control Act and the Superfund Amendments and
Reauthorization Act. URS business operations may also be
subject to similar state and international laws relating to
environmental protection. Liabilities related to environmental
contamination or human exposure to hazardous substances, or a
failure to comply with applicable regulations could result in
substantial costs to URS, including
clean-up
costs, fines and civil or criminal sanctions, third party claims
for property damage or personal injury or cessation of
remediation activities. URS continuing work in the areas
governed by these laws and regulations exposes URS to the risk
of substantial liability; however, URS is currently not subject
to any material claims under environmental laws and regulations.
28
URS
may become subject to civil or criminal legal actions that may
adversely affect its operations; liabilities resulting from such
actions may exceed URS insurance coverage.
In performing its services, URS may be exposed to criminal or
civil proceedings in connection with personal injury claims,
property damage, cost overruns, labor shortages or disputes,
weather problems and foreseen or unforeseen engineering,
architectural, environmental and geological problems. URS
services frequently require URS to make judgments and
recommendations about environmental, structural, geotechnical
and other physical conditions at project sites. If URS
performance, judgments and recommendations are later found to be
incomplete or incorrect, then URS may be liable for the
resulting damages. Various legal proceedings are pending against
URS in connection with the performance of its professional
services and other actions by URS. For example, federal and
state investigators are reviewing URS engineering analysis
of the Interstate 35W bridge in Minneapolis that URS was
performing at the time of the bridges collapse in August
2007 and URS construction management services relating to
the demolition of the Deutsche Bank building located at the
World Trade Center where a fire that resulted in accidental
fatalities occurred in August 2007. The resolution of these
investigations, and any outstanding claims, is subject to
inherent uncertainty, and it is reasonably possible that any
resolution could have an adverse effect on URS operations.
URS does not know the extent of any claims that may be made
regarding these matters. It is not possible to provide an
estimate of any potential loss.
In certain cases, parties may seek damages (or liabilities may
be found) that may exceed URS insurance coverage.
Currently, URS has limits of $125.0 million per loss and
$125.0 million in the aggregate for general liability,
professional errors and omissions liability and
contractors pollution liability insurance (in addition to
other policies for some specific projects). The general
liability policy includes a self-insured claim retention of
$4.0 million (or $10.0 million in some circumstances).
The professional errors and omissions liability and
contractors pollution liability insurance policies include
a self-insured claim retention amount of $10.0 million for
each covered claim. If URS sustains damages that exceed its
insurance coverage or for which it is not insured, URS
results of operations and financial condition could be
materially adversely impacted.
Changes
in environmental laws, regulations and programs could reduce
demand for URS environmental services, which could in turn
negatively impact its revenues.
URS environmental services business is driven by federal,
state, local and foreign laws, regulations and programs related
to pollution and environmental protection. On the other hand, a
relaxation or repeal of these laws and regulations, or changes
in governmental policies regarding the funding, implementation
or enforcement of these programs, could result in a decline in
demand for environmental services, which could in turn
negatively impact URS revenues.
A
decline in U.S. defense spending or a change in budgetary
priorities could harm URS operations and significantly
reduce its future revenues.
Revenues under contracts with the U.S. Department of
Defense and other defense-related clients represented
approximately 36% and 33% of URS total revenues for the
fiscal year ended December 29, 2006 and six months ended
June 29, 2007, respectively. While spending authorization
for defense-related programs has increased significantly in
recent years due to greater homeland security and foreign
military commitments, as well as the trend to outsource federal
government jobs to the private sector, these spending levels may
not be sustainable. For example, the U.S. Department of
Defense budget declined in the late 1980s and the early 1990s,
resulting in U.S. Department of Defense program delays and
cancellations. Future levels of expenditures and authorizations
for defense-related programs, including foreign military
commitments, may decrease, remain constant or shift to programs
in areas where URS does not currently provide services. As a
result, a general decline in U.S. defense spending or a
change in budgetary priorities could harm URS operations
and significantly reduce URS future revenues.
URS
overall revenues will decline if it is unable to compete
successfully in its industry.
URS industry is highly fragmented and intensely
competitive. According to the publication Engineering
News-Record, based on information voluntarily reported by 500
design firms, the top ten engineering design firms
29
only accounted for approximately 32% of the total design firm
revenues in 2005. URS competitors are numerous, ranging
from small private firms to multi-billion dollar companies. In
addition, the technical and professional aspects of URS
services generally do not require large upfront capital
expenditures and provide limited barriers against new
competitors.
Some of URS competitors have achieved greater penetration
in some of the markets in which URS competes and have
substantially more financial resources
and/or
financial flexibility than URS does. As a result of the number
of competitors in the industry, URS clients may select one
of its competitors on a project due to competitive pricing or a
specific skill set. If URS is unable to maintain its
competitiveness, its revenues will decline. These competitive
forces could have a material adverse effect on its business,
financial condition and results of operations by reducing
URS relative share in the markets it serves.
URS
failure to attract and retain key employees could impair its
ability to provide services to its clients and otherwise conduct
its business effectively.
As a professional and technical services company, URS is labor
intensive, and therefore its ability to attract, retain and
expand its senior management and its professional and technical
staff is an important factor in determining its future success.
From time to time, it may be difficult to attract and retain
qualified individuals with the expertise and in the timeframe
demanded by URS clients. For example, some of URS
government contracts may require URS to employ only individuals
who have particular government security clearance levels. In
addition, URS relies heavily upon the expertise and leadership
of its senior management. The failure to attract and retain key
individuals could impair URS ability to provide services
to its clients and conduct its business effectively.
Employee,
agent, or partner misconduct or URS failure to comply with
laws or regulations could weaken URS ability to win
contracts with government clients, which could result in
decreasing revenues.
As a federal, state and local government contractor, misconduct,
fraud, non-compliance with applicable laws and regulations, or
other improper activities by one of URS employees, agents,
or partners could have a significant negative impact on
URS business and reputation. Such misconduct could include
the failure to comply with government procurement regulations,
regulations regarding the protection of classified information,
laws regarding the pricing of labor and other costs in
government contracts, regulations on lobbying or similar
activities, environmental laws and any other applicable laws or
regulations. For example, URS regularly provides services that
may be highly sensitive or that relate to critical national
security matters; if a security breach were to occur, URS
ability to procure future government contracts could be severely
limited. Other examples of potential misconduct include time
card fraud and violations of the Anti-Kickback Act. The
precautions URS takes to prevent and detect these activities may
not be effective, and URS could face unknown risks or losses.
URS failure to comply with applicable laws or regulations
or acts of misconduct could subject URS to fines and penalties,
loss of security clearance and suspension or debarment from
contracting, which could weaken URS ability to win future
contract with government clients.
Recent
changes in accounting for equity-related compensation have
impacted URS financial statements and could negatively
impact its ability to attract and retain key
employees.
URS adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment on
December 31, 2005. At that time, URS evaluated its current
stock-based compensation plans and employee stock purchase
plans. In order to minimize the volatility of its stock-based
compensation expense, URS is currently issuing restricted stock
awards and units to selected employees rather than granting
stock options. URS also revised its employee stock purchase plan
from a 15% discount on its stock price at the beginning or the
end of the six-month offering period, whichever is lower, to a
5% discount on its stock price at the end of the six-month
offering period. These changes to URS equity-related
compensation may negatively impact its ability to attract and
retain key employees.
30
Because
URS is a holding company, URS may not be able to service its
debt if URS subsidiaries do not make sufficient
distributions to URS.
URS has no direct operations and no significant assets other
than investments in the stock of its subsidiaries. Because URS
conducts its business operations through its operating
subsidiaries, URS depends on those entities for payments and
dividends to generate the funds necessary to meet its financial
obligations. Legal restrictions, including local regulations and
contractual obligations associated with secured loans, such as
equipment financings, could restrict its subsidiaries
ability to pay dividends or make loans or other distributions to
URS. The earnings from, or other available assets of, these
operating subsidiaries may not be sufficient to make
distributions to enable URS to pay interest on its debt
obligations when due or to pay the principal of such debt at
maturity. As of June 29, 2007, URS debt service
obligations, comprised of principal and interest (excluding
capital leases and equipment notes), during the next twelve
months would, in the absence of the merger, have been
approximately $3.5 million. On a pro forma basis and based
on assumed interest rates, leverage ratios and credit ratings,
after incurring the debt financing to effect the merger,
URS debt service obligations, comprised of principal and
interest (excluding capital leases and equipment notes), during
the twelve months following the merger will be approximately
$161.2 million. If our credit ratings are lower, or our
leverage ratios are higher, than assumed, our interest expenses,
unused revolving line of credit fees and up-front fees may be
greater. Based on then anticipated outstanding indebtedness of
approximately $1.4 billion under the arranged credit
facility, if market rates were to average 1% higher or lower
during that same twelve-month period, URS net of tax
interest expense would increase or decrease by approximately
$8.1 million.
URS
international operations are subject to a number of risks that
could harm its operations and significantly reduce its future
revenues.
As a multinational company, URS has operations in over 20
countries and it derived 10% and 9% of its revenues from
international operations for the six months ended June 29,
2007 and June 30, 2006, respectively. International
business is subject to a variety of risks, including:
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lack of developed legal systems to enforce contractual rights;
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greater risk of uncollectible accounts and longer collection
cycles;
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currency fluctuations;
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logistical and communication challenges;
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potentially adverse changes in laws and regulatory practices,
including export license requirements, trade barriers, tariffs
and tax laws;
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changes in labor conditions;
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exposure to liability under the Foreign Corrupt Practices Act
and export control and anti-boycott laws; and
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general economic and political conditions in foreign markets.
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These and other risks associated with international operations
could harm URS overall operations and significantly reduce
its future revenues. In addition, services billed through
foreign subsidiaries are attributed to the international
category of URS business, regardless of where the services
are performed and conversely, services billed through domestic
operating subsidiaries are attributed to a domestic category of
clients, regardless of where the services are performed. As a
result, URS international risk exposure may be more or
less than the percentage of revenues attributed to its
international operations.
URS
business activities may require its employees to travel to and
work in high security risk countries, which may result in
employee death or injury, repatriation costs or other unforeseen
costs.
As a multinational company, URS employees often travel to
and work in high security risk countries around the world that
are undergoing political, social and economic upheavals
resulting in war, civil unrest, criminal activity or acts of
terrorism. For example, URS has employees working in high
security risk countries located in the Middle East and Southwest
Asia. As a result, URS may be subject to costs related to
employee death or injury, repatriation or other unforeseen
circumstances.
31
URS
relies on third-party software to run its critical accounting,
project management, and financial information systems, and as a
result, any sudden loss, disruption or unexpected costs to
maintain such systems could significantly increase URS
operational expense as well as disrupt the management of its
business operations.
URS relies on third-party software to run its critical
accounting, project management and financial information
systems. For example, URS relied on one software vendors
products to process approximately 68% of its total revenues as
of June 29, 2007. URS also depends on its third party
software vendors to provide long-term software maintenance
support for its information systems. Software vendors may decide
to discontinue further development, integration or long-term
software maintenance support for its information systems, in
which case URS may need to abandon one or more of its current
information systems and migrate some or all of its accounting,
project management and financial information to other systems,
thus increasing its operational expense as well as disrupting
the management of URS business operations.
Force
majeure events, including natural disasters and terrorists
actions have negatively impacted and could further negatively
impact the economies in which URS operates, which may affect its
financial condition, results of operations or cash
flows.
Force majeure events, including natural disasters, such as
Hurricane Katrina that affected the Gulf Coast in August 2005
and terrorist attacks, such as those that occurred in New York
and Washington, D.C. on September 11, 2001, could
negatively impact the economies in which URS operates. For
example, Hurricane Katrina caused several of URS Gulf
Coast offices to close, interrupted a number of active client
projects and forced the relocation of URS employees in
that region from their homes. In addition, during the
September 11, 2001 terrorist attacks, several of URS
offices were shut down due to terrorist attack warnings.
URS typically remains obligated to perform its services after a
terrorist action or natural disaster unless the contract
contains a force majeure clause relieving URS of its contractual
obligations in such an extraordinary event. If URS is not able
to react quickly to force majeure, URS operations may be
affected significantly, which would have a negative impact on
its financial condition, results of operations or cash flows.
Negotiations
with labor unions and possible work actions could divert
management attention and disrupt operations. In addition, new
collective bargaining agreements or amendments to agreements
could increase URS labor costs and operating
expenses.
As of June 29, 2007, approximately 8% of URS
employees were covered by collective bargaining agreements. The
outcome of any future negotiations relating to union
representation or collective bargaining agreements may not be
favorable to URS. URS may reach agreements in collective
bargaining that increase its operating expenses and lower its
net income as a result of higher wages or benefits expenses. In
addition, negotiations with unions could divert management
attention and disrupt operations, which may adversely affect
URS results of operations. If URS is unable to negotiate
acceptable collective bargaining agreements, URS may have to
address the threat of union-initiated work actions, including
strikes. Depending on the nature of the threat or the type and
duration of any work action, these actions could disrupt
URS operations and adversely affect its operating results.
URS
has only a limited ability to protect its intellectual property
rights, which are important to its success. URS failure to
protect its intellectual property rights could adversely affect
its competitive position.
URS success depends, in part, upon URS ability to
protect its proprietary information and other intellectual
property. URS relies principally on trade secrets to protect
much of its intellectual property where URS does not believe
that patent or copyright protection is appropriate or
obtainable. However, trade secrets are difficult to protect.
Although URS employees are subject to confidentiality
obligations, this protection may be inadequate to deter or
prevent misappropriation of its confidential information. In
addition, URS may be unable to detect unauthorized use of its
intellectual property or otherwise take appropriate steps to
enforce its rights. Failure to obtain or maintain trade secret
protection would adversely affect URS competitive business
position. In addition, if
32
URS is unable to prevent third parties from infringing or
misappropriating URS trademarks or other proprietary
information, URS competitive position could be adversely
affected.
Delaware
law and URS charter documents may impede or discourage a
merger, takeover or other business combination even if the
business combination would have been in the best interests of
URS current stockholders
URS is a Delaware corporation and the anti-takeover provisions
of Delaware law impose various impediments to the ability of a
third party to acquire control of URS, even if a
change-in-control
would be beneficial to its existing stockholders. In addition,
URS board of directors has the power, without stockholder
approval, to designate the terms of one or more series of
preferred stock and issue shares of preferred stock, which could
be used defensively if a takeover is threatened. URS
incorporation under Delaware law, the ability of URS board
of directors to create and issue a new series of preferred stock
and provisions in URS certificate of incorporation and
bylaws could impede a merger, takeover or other business
combination involving URS or discourage a potential acquirer
from making a tender offer for shares of URS common stock, even
if the business combination would have been in the best
interests of URS current stockholders.
Risks
Relating to Washington Group
Economic
downturns and reductions in government funding could have a
negative impact on Washington Groups
businesses.
Demand for the services offered by Washington Group has been,
and is expected to continue to be, subject to significant
fluctuations due to a variety of factors beyond Washington
Groups control, including economic conditions. During
economic downturns, the ability of both private and governmental
entities to make expenditures may decline significantly.
Washington Group cannot be certain that economic or political
conditions will be generally favorable or that there will not be
significant fluctuations adversely affecting Washington
Groups industry as a whole or key markets targeted by
Washington Group. In addition, Washington Groups
operations are, in part, dependent upon government funding.
Significant changes in the level of government funding could
have an unfavorable impact on Washington Groups business,
financial position, results of operations and cash flows.
Washington
Groups success depends on attracting and retaining
qualified personnel in a competitive environment.
Washington Group is dependent upon its ability to attract and
retain highly qualified managerial, technical and business
development personnel. Competition for key personnel is intense.
Washington Group cannot be certain that it will retain its key
managerial, technical and business development personnel or that
Washington Group will attract or assimilate key personnel in the
future. Failure to retain or attract such personnel could
adversely affect Washington Groups businesses, financial
position, results of operations and cash flows.
Washington
Group is engaged in highly competitive businesses and must bid
against competitors to obtain engineering, construction and
service contracts.
Washington Group is engaged in highly competitive businesses in
which customer contracts are awarded through competitive bidding
processes. Washington Group competes with other general and
specialty contractors, both foreign and domestic, including
large international contractors and small local contractors.
Some competitors have greater financial and other resources than
Washington Group does, which, in some instances, could give them
a competitive advantage over Washington Group.
Washington
Groups fixed-price contracts subject it to the risk of
increased project costs.
Washington Groups fixed-price contracts involve risks
relating to its inability to receive additional compensation in
the event the costs of performing those contracts prove to be
greater than anticipated. Washington Groups cost of
performing the contracts may be greater than anticipated due to
uncertainties inherent in estimating contract completion costs,
contract modifications by customers resulting in claims, failure
of subcontractors and joint venture partners to perform and
other unforeseen events and conditions. As of June 29,
2007, approximately
33
16%, or $1.0 billion, of Washington Groups backlog
represented fixed-price and
fixed-unit-price
contracts. Any one or more of these risks could result in
reduced profits or increased losses on a particular contract or
contracts.
Washington
Group has seen an increase in its claims against project owners
for payment and Washington Groups failure to recover
adequately on these and future claims could have a material
effect on it.
Washington Group has over the past few years seen an increase in
the volume and the amount of claims brought by Washington Group
against project owners for additional costs exceeding the
contract price or for amounts not included in the original
contract price. These types of claims occur due to matters such
as owner-caused delays or changes from the initial project
scope, both of which may result in additional costs, both direct
and indirect. Often, these claims can be the subject of lengthy
arbitration or litigation proceedings, and it is difficult to
accurately predict when these claims will be fully resolved.
When these types of events occur and unresolved claims are
pending, Washington Group has used significant working capital
in projects to cover cost overruns pending the resolution of the
relevant claims. A failure to promptly recover on these types of
claims could have a negative impact on Washington Groups
liquidity and financial condition.
The
U.S. government can audit and disallow costs reimbursed under
Washington Groups government contracts and can terminate
those contracts without cause.
Government contracts, primarily with the U.S. Departments
of Energy and Defense, are, and are expected to continue to be,
a significant part of Washington Groups business.
Washington Group derived approximately 51% of its consolidated
revenue in 2006 from contracts funded by the
U.S. government. Allowable costs under government contracts
are subject to audit by the U.S. government. To the extent
that these audits result in determinations that costs claimed as
reimbursable are not allowable costs or were not allocated in
accordance with federal government regulations, Washington Group
could be required to reimburse the U.S. government for
amounts previously received. In addition, if Washington Group
were to lose and not replace its revenue generated by one or
more of the U.S. government contracts, Washington
Groups businesses, financial condition, results of
operations and cash flows could be adversely affected.
Washington Group has a number of contracts and subcontracts with
agencies of the U.S. government, principally for
environmental remediation, threat reduction, restoration and
operations work, which extend beyond one year and for which
government funding has not yet been approved. Washington Group
cannot be certain that funding will be approved. All contracts
with agencies of the U.S. government and some commercial
and foreign contracts are subject to unilateral termination at
the convenience of the customer. In the event of a termination,
Washington Group would not receive projected revenue or profits
associated with the terminated portion of those contracts.
In addition, government contracts are subject to specific
procurement regulations, contract provisions and a variety of
other socioeconomic requirements relating to the formation,
administration, performance and accounting for these contracts.
Many of these contracts include express or implied
certifications of compliance with applicable laws and contract
provisions. As a result of Washington Groups government
contracting, claims for civil or criminal fraud may be brought
by the government for violations of these regulations,
requirements or statutes. Washington Group may also be subject
to
qui tam
litigation brought by private individuals on
behalf of the government under the Federal Civil False Claims
Act, which could include claims for up to treble damages.
Further, if Washington Group fails to comply with any of these
regulations, requirements or statutes, its existing government
contracts could be terminated, Washington Group could be
suspended from government contracting or subcontracting,
including federally funded projects at the state level, and
Washington Groups ability to participate in foreign
projects funded by the U.S. government could be adversely
affected. If one or more of Washington Groups government
contracts are terminated for any reason, or if Washington Group
is suspended from government work, Washington Group could suffer
a significant reduction in expected revenue and earnings.
Washington
Groups dependence on one or a few customers could
adversely affect it.
One or a few clients have in the past and may in the future
contribute a significant portion of Washington Groups
consolidated revenue in any one year or over a period of several
consecutive years. In 2006, approximately
34
27% of Washington Groups revenue was from the
U.S. Department of Defense and approximately 23% of
Washington Groups revenue was from the
U.S. Department of Energy. As Washington Groups
backlog frequently reflects multiple projects for individual
clients, one major customer may comprise a significant
percentage of Washington Groups backlog at any point in
time. For example, the U.S. Department of Defense, with
which Washington Group has 77 contracts, represented an
aggregate of 18% of Washington Groups backlog at
June 29, 2007, and the U.S. Department of Energy, with
which Washington Group has 175 contracts, represented an
aggregate of 15% of Washington Groups backlog at
June 29, 2007.
Because these significant customers generally contract with
Washington Group for specific projects, Washington Group may
lose these customers from year to year as their projects with it
are completed. If Washington Group does not replace them with
other customers or other projects, Washington Groups
business could be materially adversely affected.
Additionally, Washington Group has long-standing relationships
with many of its significant customers. Washington Groups
contracts with these customers, however, are on a
project-by-project
basis, and the customers may unilaterally reduce or discontinue
their purchases at any time. The loss of business from any one
of such customers could have a material adverse effect on
Washington Groups business or results of operations.
Changes
in environmental laws, regulations and programs, could reduce
demand for Washington Groups environmental services, which
could negatively impact its revenue.
Washington Groups environmental business is driven by
federal, state, local and foreign laws, regulations and programs
related to pollution and environmental protection. Accordingly,
a relaxation or repeal of these laws and regulations, or changes
in governmental policies regarding the funding, implementation
or enforcement of these programs, could result in a decline in
demand for environmental services that could negatively impact
Washington Groups revenue.
Washington
Groups backlog is subject to unexpected adjustments and
cancellations and is, therefore, an uncertain indicator of its
future earnings.
As of June 29, 2007, Washington Groups backlog was
approximately $6.2 billion. Washington Group cannot assure
that the revenue projected in its backlog will be realized or,
if realized, will result in profits. Projects may remain in
Washington Groups backlog for an extended period of time
prior to project execution and, once project execution begins,
Washington Group may occur unevenly over the current and
multiple future periods. Although Washington Group has not
experienced any significant cancellations, project terminations,
suspensions or reductions in scope, these could occur from time
to time with respect to contracts reflected in Washington
Groups backlog. Such backlog reductions would adversely
affect the revenue and profit Washington Group actually receives
from contracts reflected in its backlog.
Washington
Groups businesses involve many project-related and
contract-related risks.
Washington Groups businesses are subject to a variety of
project-related risks, including changes in political and other
circumstances, particularly since contracts for major projects
are performed over extended periods of time. These risks include
the failure of applicable governing authorities to take
necessary actions, opposition by third parties to particular
projects and the failure by customers to obtain adequate
financing for particular projects. Due to these factors, losses
on a particular contract or contracts could occur, and
Washington Group could experience significant changes in
operating results on a quarterly or annual basis.
Washington Group may also be adversely affected by various risks
and hazards, including industrial accidents, labor disputes,
geological conditions, environmental hazards, acts of terrorism
or war, weather and other natural phenomena such as earthquakes
and floods.
Washington
Group could be subject to liabilities as a result of its
performance.
The nature of Washington Groups engineering and
construction businesses exposes it to potential liability claims
and contract disputes that may reduce its profits.
35
Washington Group engages in engineering and construction
activities for large industrial facilities where design,
construction or systems failures can result in substantial
injury or damage to third parties. Currently, Washington Group
has limits of $500 million per loss and $500 million
in the aggregate for general liability insurance and
contractors pollution liability insurance and a sublimit
of $225 million for its professional errors and omissions
liability insurance (in addition to other policies for certain
projects). Washington Groups general liability,
professional errors and omissions liability, and
contractors pollution liability insurance policies include
a self-insured claim retention amount of $2.0 million per
claim. Any liability in excess of Washington Groups
insurance limits at locations designed or constructed by it,
where Washington Groups products are installed or where
its services are performed, could result in significant
liability claims against Washington Group, which claims may
reduce its earnings. In addition, if a customer disputes its
performance of project services, the customer may decide to
delay or withhold payment to Washington Group. If Washington
Group were ultimately unable to collect on these payments, its
profits would be reduced.
Washington
Groups dependence on subcontractors and equipment
manufacturers could adversely affect it.
Washington Group relies on third-party subcontractors as well as
third-party equipment manufacturers to complete its projects. To
the extent that Washington Group cannot engage subcontractors or
acquire equipment or materials, its ability to complete a
project in a timely fashion or at a profit may be impaired. If
the amount Washington Group is required to pay for these goods
and services exceeds the amount it has estimated in bidding for
fixed-price,
fixed-unit-price
or target-price contracts, Washington Group could experience
reduced profit or losses in the performance of these contracts.
In addition, if a subcontractor or a manufacturer is unable to
deliver its services, equipment or materials according to the
negotiated terms for any reason, including the deterioration of
its financial condition, Washington Group may be required to
purchase the services, equipment or materials from another
source at a higher price. This may reduce the profit to be
realized or result in a loss on a project for which the
services, equipment or materials were needed.
Strikes,
work stoppages and other similar events, as well as resulting
increases in operating costs, would have a negative impact on
Washington Groups operations and financial
results.
Washington Group is a party to several regional labor agreements
that expire between June 2007 and June 2010, as well as
project-specific labor agreements that commit Washington Group
to use union building trades on certain projects. If Washington
Group were unable to negotiate with any of the unions, it could
result in strikes, work stoppages or increased operating costs
as a result of higher than anticipated wages or benefits. If the
unionized workers engage in a strike or other work stoppage, or
other employees become unionized, Washington Group could
experience a disruption of its operations and higher ongoing
labor costs, which could adversely affect portions of its
business, and its financial position, results of operations and
cash flows.
If
Washington Group guarantees to a customer the timely completion
or performance standards of a project, Washington Group could
incur additional costs to meet its guarantee
obligations.
In certain instances, including in some of Washington
Groups fixed-price contracts, Washington Group guarantees
a customer that it will complete a project by a scheduled date.
Washington Group sometimes also provides that the project, when
completed, will achieve certain performance standards. If
Washington Group subsequently fails to complete the project as
scheduled, or if the project subsequently fails to meet the
guaranteed performance standards, Washington Group may be held
responsible for cost impacts to the client resulting from any
delay or the costs incurred by the project to achieve the
performance standards. In most cases where Washington Group
fails to meet contract-defined performance standards, Washington
Group may be subject to
agreed-upon
liquidated damages. To the extent that these events occur, the
total costs for the project would exceed Washington Groups
original estimates and it could experience reduced profits or in
some cases a loss for that project.
The
success of Washington Groups joint ventures is dependent
on the performance of its joint venture partners of their
contractual obligations.
Washington Group enters into various joint ventures as part of
its engineering and construction business and project-specific
joint ventures. Success of these joint ventures depends largely
on the satisfactory performance by
36
Washington Groups partners of their contractual
obligations. If Washington Groups joint venture partners
fail to perform their contractual obligations as a result of
financial or other difficulties, Washington Group may be
required to make additional investments and provide additional
services to ensure the adequate performance and delivery of the
contracted services. These additional obligations could result
in reduced profits or in losses for Washington Group.
Washington
Groups international operations involve special
risks.
Washington Group pursues project opportunities internationally
through foreign and domestic subsidiaries as well as through
agreements with domestic and foreign joint venture partners.
Washington Groups international operations accounted for
approximately 21% of its revenue in 2006, including 10% from
work performed in Iraq. Washington Groups foreign
operations are subject to special risks, including:
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unstable political, economic, financial and market conditions;
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potential incompatibility with foreign joint venture partners;
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foreign currency fluctuations;
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trade restrictions and governmental regulations;
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restrictions on repatriating foreign profits back to the U.S.;
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increases in taxes;
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civil disturbances and acts of terrorism, violence or war in the
U.S. or elsewhere; and
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changes in labor conditions, labor strikes and difficulties in
staffing and managing international operations.
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Events outside of Washington Groups control may limit or
disrupt operations, restrict the movement of funds, result in
the deprivation of contract rights, increase foreign taxes or
limit repatriation of earnings. In addition, in some cases,
applicable law and joint venture or other agreements may provide
that each joint venture partner is jointly and severally liable
for all liabilities of the venture.
Washington
Groups international operations may require its employees
or subcontractors to travel to high security risk countries,
which may result in employee injury, repatriation costs or other
unforeseen costs.
As a global provider of engineering, construction and management
services, Washington Group dispatches employees and
subcontractors to various countries around the world. A country
may represent a high security risk because of its political,
social or economic upheaval such as war, civil unrest or ongoing
acts of terrorism. Senior level employees and other key
employees and subcontractors have been, and may continue to be,
deployed to provide services in high security risk countries. As
a result, it is possible that Washington Groups employees
or subcontractors may suffer injury or death, repatriation
problems or other unforeseen costs and risks in the course of
their international responsibilities, which could negatively
impact its operations.
Actual
results could differ from the estimates and assumptions used to
prepare Washington Groups financial
statements.
In order to prepare financial statements in conformity with
GAAP, Washington Groups management is required to make
estimates and assumptions as of the date of the financial
statements. These estimates and assumptions affect the reported
values of assets, liabilities, revenue and expenses and
disclosure of contingent assets and liabilities. Areas requiring
significant estimates by Washington Groups management
include:
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determination of new work awards and backlog;
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recognition of contract revenue, costs, profit or losses in
applying the principles of percentage-of-completion accounting;
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recognition of recoveries under contract change orders or claims;
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37
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collectibility of billed and unbilled accounts receivable and
the need and amount of any allowance for doubtful accounts;
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the amount of reserves necessary for self-insured risks;
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the determination of liabilities under pension and other
post-retirement benefit programs;
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estimated amounts for expected project losses, reclamation
costs, warranty costs or other contract close-out costs;
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recoverability of goodwill and other intangible assets;
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provisions for income taxes and realizability of deferred tax
assets; and
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accruals for other estimated liabilities, including litigation
reserves.
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Washington
Groups use of percentage-of-completion accounting could
result in a reduction or elimination of previously reported
profits.
Approximately 40% of Washington Groups revenue during
fiscal year 2006 was recognized using the
percentage-of-completion method of accounting. Generally, the
percentage-of-completion accounting practices Washington Group
utilizes result in Washington Group recognizing contract
revenues and earnings ratably, based on the proportion of costs
incurred to total estimated contract costs or on the proportion
of labor hours or labor costs incurred to total estimated labor
hours or labor costs. For some long-term contracts, completion
is measured on estimated physical completion or units of
production.
The cumulative effect of revisions to contract revenue and
estimated completion costs, including incentive awards,
penalties, change orders, claims and anticipated losses, is
recorded in the accounting period in which the amounts become
known and can be reasonably estimated. Such revisions could
occur at any time and the effects could be material. A change
order is included in total estimated contract revenue when it is
probable that the change order will result in a bona fide
addition to contract value and can be reliably estimated.
Estimated contract revenue associated with change orders may
include amounts in excess of costs (profit) when appropriate.
Claims are included in total estimated contract revenue, only to
the extent that contract costs related to the claim have been
incurred, when it is probable that the claim will result in a
bona fide addition to contract value and can be reliably
estimated, which generally occurs when amounts have been
received or awarded.
Washington Group estimates the extent of progress towards
completion of contract revenue and of contract completion costs
on Washington Groups long-term engineering and
construction contracts, but due to uncertainties inherent in the
estimation process it is possible that actual completion costs
may vary from estimates, and it is possible that such variances
could be material to Washington Groups operating results.
If
Washington Group has to write off a significant amount of
intangible assets, its earnings will be negatively
impacted.
Goodwill and other intangible assets totaling
$118.4 million are included in Washington Groups
consolidated balance sheet as of June 29, 2007. Washington
Group must evaluate its goodwill and other intangible assets for
impairment at least annually. If Washington Groups
goodwill and other intangible assets were to become impaired,
Washington Group would be required to write-off the impaired
amount. The write-off would negatively impact Washington
Groups earnings; however, it would not impact its cash
flows. As of June 29, 2007, all of Washington Groups
goodwill and other intangible assets relate to its Defense and
Energy & Environment business units, which are almost
entirely dependent on continued spending by the
U.S. government.
The
significant demands on Washington Groups cash resources
could affect its ability to achieve its business
plan.
Washington Group has substantial demands on its cash resources
in addition to operating expenses, principally capital
expenditures. Washington Groups ability to fund working
capital requirements will depend upon its future operating
performance, which, in turn, will be affected by prevailing
economic conditions and financial, business
38
and other factors, many of which are beyond its control. If
Washington Group is unable to fund its businesses, Washington
Group will be forced to adopt an alternative strategy that may
include:
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reducing or delaying capital expenditures;
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limiting its growth;
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seeking additional debt financing or equity capital; or
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selling assets.
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Washington Group cannot provide assurances that any of these
strategies could be affected on favorable terms or at all.
If
Washington Group experiences delays and/or defaults in customer
payments, Washington Group could suffer liquidity problems or it
could be unable to recover all expenditures.
Because of the nature of its contracts, at times Washington
Group commits resources to projects prior to receiving payments
from the customer in amounts sufficient to cover expenditures on
client projects as they are incurred. Delays in customer
payments may require Washington Group to make a working capital
investment. If a customer defaults in making its payments on a
project in which Washington Group has devoted significant
resources, it could have an adverse effect on its financial
position, results of operations and cash flows.
Washington
Group could be subject to liability under environmental laws and
regulations.
Washington Group is subject to a variety of environmental,
health and safety laws and regulations governing, among other
things, discharges to air and water, the handling, storage and
disposal of hazardous or solid waste materials and the
remediation of contamination associated with releases of
hazardous substances. These laws and regulations and the risk of
attendant litigation can cause significant delays to a project
and add significantly to its cost. Violations of these
environmental, health and safety laws and regulations could
subject Washington Group and its management to civil and
criminal penalties and other liabilities. These laws and
regulations may become more stringent, or be more stringently
enforced, in the future.
Various federal, state and local environmental laws and
regulations, as well as common law, may impose liability for
property damage and costs of investigation and cleanup of
hazardous or toxic substances on property currently or
previously owned by Washington Group or arising out of its waste
management or environmental remediation activities. These laws
may impose responsibility and liability without regard to
knowledge of or causation of the presence of contaminants. The
liability under these laws is joint and several. Washington
Group has potential liabilities associated with its past waste
management and contract mining activities and with its current
and prior ownership of various properties.
Adequate
bonding is necessary for Washington Group to successfully win
new work awards on some types of contracts.
In line with industry practice, Washington Group is often
required, primarily in its Infrastructure business unit, to
provide performance and surety bonds to customers under
fixed-price contracts. These bonds indemnify the customer should
Washington Group fail to perform its obligations under the
contract. If a bond is required for a particular project and
Washington Group is unable to obtain an appropriate bond,
Washington Group cannot pursue that project. Washington Group
has bonding capacity but, as is typically the case, the issuance
of a bond is at the suretys sole discretion. Moreover, due
to events that affect the insurance and bonding markets
generally, bonding may be more difficult to obtain in the future
or may only be available at significant additional cost. There
can be no assurance that bonds will continue to be available to
Washington Group on reasonable terms. Washington Groups
inability to obtain adequate bonding and, as a result, to bid on
new work could have a material adverse effect on Washington
Groups businesses, financial condition, results of
operations and cash flows. Of $4.2 billion of new work
awarded during 2006, 2% required bonding.
39
Unavailability
of insurance coverage could have a negative impact on Washington
Groups operations and results.
Washington Group maintains insurance coverage as part of its
overall risk management strategy and due to requirements to
maintain specific coverage in its financing agreements and in
most of its construction contracts. Although Washington Group
has been able to obtain insurance coverage to meet its
requirements in the past, there is no assurance that such
insurance coverage will be available in the future.
40
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Statements contained in this joint proxy statement/prospectus
that are not historical facts may constitute forward-looking
statements, including statements relating to timing of and
satisfaction of conditions to the merger, whether any of the
anticipated benefits of the merger will be realized, future
revenues, future net income, future cash flows, financial
forecasts, future competitive positioning and business
synergies, future acquisition cost savings, future expectations
that the merger will be accretive to GAAP and cash earnings per
share, future market demand, future benefits to stockholders,
future debt payments and future economic and industry
conditions. Words such as expect,
estimate, project, budget,
forecast, anticipate,
intend, expect, plan,
may, will, could,
should, believe, predict,
potential, continue and similar
expressions are also intended to identify forward-looking
statements. URS and Washington Group believe that their
expectations are reasonable and are based on reasonable
assumptions. However, such forward-looking statements by their
nature involve risks and uncertainties that could cause actual
results to differ materially from the results predicted or
implied by the forward-looking statement. The potential risks
and uncertainties include, but are not limited to:
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potential difficulties that may be encountered in integrating
the merged businesses;
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potential uncertainties regarding market acceptance of the
combined company;
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uncertainties as to the timing of the merger;
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approval of the transaction by the stockholders of the companies
and the satisfaction of other closing conditions to the
transaction;
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competitive responses to the merger;
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an economic downturn;
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changes in URS and Washington Groups book of
business;
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URS and Washington Groups compliance with government
contract procurement regulations;
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URS and Washington Groups ability to procure
government contracts;
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URS and Washington Groups reliance on government
appropriations;
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the ability of the government to unilaterally terminate
URS and Washington Groups contracts;
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URS and Washington Groups ability to make accurate
estimates and control costs;
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URS and Washington Groups ability to win or renew
contracts;
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URS and Washington Groups and their respective
partners ability to bid on, win, perform and renew
contracts and projects;
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environmental issues and liabilities;
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liabilities for pending and future litigation;
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the impact of changes in laws and regulations;
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a decline in defense spending;
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industry competition;
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URS and Washington Groups ability to attract and
retain key individuals;
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employee, agent or partner misconduct;
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risks associated with changes in equity-based compensation
requirements;
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URS and Washington Groups leveraged position and
ability to service its debt;
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risks associated with international operations;
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business activities in high security risk countries;
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third-party software risks;
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terrorist and natural disaster risks;
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URS and Washington Groups relationships with its
labor unions;
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URS and Washington Groups ability to protect its
intellectual property rights; and
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anti-takeover risks and other factors.
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You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of
this joint proxy statement/prospectus or, in the case of
documents incorporated by reference, as of the date of those
documents. URS and Washington Group disclaim any intent or
obligation to update any forward-looking statements contained
herein.
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This joint proxy statement/prospectus is being provided to URS
stockholders as part of a solicitation of proxies by the URS
board of directors for use at a special meeting of URS
stockholders. This joint proxy statement/prospectus provides URS
stockholders with the information they need to know to be able
to vote, or instruct their brokers or other nominees to vote, at
the special meeting of URS stockholders.
Date,
Time, Place and Purpose of the URS Special Meeting
The special meeting of URS stockholders will be held on
October 30, 2007, at 10:00 a.m., local time, at the
offices of Cooley Godward Kronish LLP, located at 101 California
Street, 5th Floor, San Francisco, California 94111-5800.
The URS special meeting is being held for the following purposes:
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to consider and vote upon a proposal to approve the issuance of
shares of URS common stock pursuant to the Agreement and Plan of
Merger, dated as of May 27, 2007, by and among URS, Elk
Merger Corporation, a wholly owned subsidiary of URS, Bear
Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group;
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to consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn or postpone the special meeting,
in their sole discretion, to solicit additional proxies if there
are not sufficient votes in favor of the foregoing; and
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to transact any other business as may properly come before the
special meeting or any adjournments or postponements of the
special meeting.
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Recommendation
of the URS Board of Directors
The URS board of directors unanimously recommends that you vote
FOR the proposal to approve the issuance of shares
of URS common stock pursuant to the merger agreement and
FOR the proposal to authorize the adjournment or
postponement of the URS special meeting, if necessary, to permit
further solicitation of proxies if there are not sufficient
votes at the time of the URS special meeting in favor of the
foregoing. See The Merger Recommendation of
the URS Board of Directors and Its Reasons for the Merger
on page 65.
Record
Date; Outstanding Shares; Shares Entitled to Vote
Only holders of record of URS common stock at the close of
business on the record date, September 21, 2007, are
entitled to notice of and to vote at the URS special meeting. As
of the URS record date, there were 53,374,314 shares of URS
common stock outstanding and entitled to vote at the special
meeting, held by approximately 3,400 holders of record.
Each holder of URS common stock is entitled to one vote for each
share of URS common stock owned as of the URS record date.
A complete list of URS stockholders will be available for review
at the special meeting and at the executive offices of URS
during regular business hours for a period of ten days before
the special meeting.
A majority of the shares of URS common stock issued and
outstanding and entitled to vote as of the record date must be
present in person or represented by proxy at the URS special
meeting to constitute a quorum. A quorum must be present before
a vote can be taken on the proposal to approve the issuance of
shares of URS common stock pursuant to the merger agreement or
any other matter except adjournment or postponement of the
meeting due to the absence of a quorum. Abstentions and broker
non-votes, if any, which are described below, will be counted
for purposes of determining the presence of a quorum at the URS
special meeting. If a quorum is not present, URS expects that
the special meeting will be adjourned or postponed to solicit
additional proxies. At any subsequent reconvening of the special
meeting, all proxies will be voted in the same manner as the
proxies would have been
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voted at the original convening of the special meeting, except
for any proxies that have been effectively revoked or withdrawn
prior to the subsequent meeting.
In accordance with NYSE listing requirements, the approval by
URS stockholders of the issuance of shares of URS common stock
pursuant to the merger agreement requires the approval of a
majority of the votes cast on the proposal, provided that the
total votes cast on such proposal represent over 50% of the
outstanding shares of URS common stock entitled to vote on such
proposal. Votes for, votes against and
abstentions count as votes cast, while broker non-votes do not
count as votes cast for this purpose. All outstanding shares of
URS common stock, including broker non-votes, count as shares
entitled to vote. Thus the total sum of votes for,
plus votes against, plus abstentions, which is
referred to as the NYSE Votes Cast, must be greater
than 50% of the total outstanding shares of URS common stock.
Once that threshold has been achieved, the number of votes
for the proposal must be greater than 50% of the
NYSE Votes Cast.
In accordance with the DGCL and URS bylaws, approval of
the proposal to authorize the adjournment or postponement of the
URS special meeting, if necessary, to permit further
solicitation of proxies requires the affirmative vote of the
holders of a majority of the shares of URS common stock present
in person or represented by proxy at the special meeting and
entitled to vote thereon.
Voting
by URS Directors and Executive Officers
As of the URS record date for the special meeting, the directors
and executive officers of URS as a group owned and were entitled
to vote approximately 1,675,806 shares of URS common stock,
or approximately 3.1% of the outstanding shares of URS on that
date.
Voting;
Proxies; Revocation
You may vote by proxy or in person at the URS special meeting.
Votes cast by proxy or in person at the URS special meeting will
be tabulated and certified by URS transfer agent.
Voting
in Person
If you plan to attend the URS special meeting and wish to vote
in person, you will be given a ballot at the special meeting.
Please note, however, that if your shares are held in
street name, which means your shares are held of
record by a broker, bank or other nominee, and you wish to vote
in person at the URS special meeting, you must bring to the
special meeting a proxy from the record holder of the shares
authorizing you to vote at the URS special meeting.
Voting
by Proxy
Your vote is very important. Accordingly, please complete, sign
and return the enclosed proxy card whether or not you plan to
attend the URS special meeting in person. You should vote your
proxy even if you plan to attend the URS special meeting. You
can always change your vote at the special meeting. Voting
instructions are included on your proxy card. If you properly
give your proxy and submit it to URS in time to vote, one of the
individuals named as your proxy will vote your shares as you
have directed. A proxy card is enclosed for your use.
The method of voting by proxy differs for shares held as a
record holder and shares held in street name. If you
hold your shares of URS common stock as a record holder, you may
vote by completing, dating and signing the enclosed proxy card
and promptly returning it in the enclosed, pre-addressed,
postage-paid envelope or otherwise mailing it to URS, or by
submitting a proxy over the Internet or by telephone by
following the instructions on the enclosed proxy card. If you
hold your shares of URS common stock in street name, which means
your shares are held of record by a broker, bank or nominee, you
will receive instructions from your broker, bank or other
nominee that you must follow in order to vote your shares. Your
broker, bank or nominee may allow you to deliver your voting
instructions over the Internet or by telephone. Please see the
voting instructions from your broker, bank or nominee that
accompany this joint proxy statement/prospectus.
All properly signed proxies that are received prior to the
special meeting and that are not revoked will be voted at the
special meeting according to the instructions indicated on the
proxies or, if no direction is indicated, they will
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be voted
FOR
approval of the issuance of
shares of URS common stock pursuant to the merger agreement and
FOR
the proposal to authorize the adjournment
or postponement of the URS special meeting, if necessary, to
permit further solicitation of proxies if there are not
sufficient votes at the time of the URS special meeting in favor
of the foregoing.
Revocation
of Proxy
You may revoke your proxy at any time before your proxy is voted
at the URS special meeting by taking any of the following
actions:
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delivering to the corporate secretary of URS a signed written
notice of revocation, bearing a date later than the date of the
proxy, stating that the proxy is revoked;
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signing and delivering a new proxy, relating to the same shares
and bearing a later date;
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submitting another proxy by telephone or on the Internet (your
latest telephone or Internet voting instructions are
followed); or
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attending the URS special meeting and voting in person, although
attendance at the special meeting will not, by itself, revoke a
proxy.
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If your shares are held in street name, you may
change your vote by submitting new voting instructions to your
broker, bank or other nominee. You must contact your broker,
bank or other nominee to find out how to do so.
Written notices of revocation and other communications with
respect to the revocation of URS proxies should be addressed to:
URS Corporation
600 Montgomery Street,
26
th
Floor
San Francisco, California
94111-2728
Attn: Corporate Secretary
Abstentions
and Broker Non-Votes
For purposes of both of the proposals, abstentions will have the
same effect as voting against the proposals.
Under the listing requirements of the NYSE, brokers who hold
shares of URS common stock in street name for a
beneficial owner of those shares typically have the authority to
vote in their discretion on routine proposals when
they have not received instructions from beneficial owners.
However, brokers are not allowed to exercise their voting
discretion with respect to the approval of matters that the NYSE
determines to be non-routine, such as approval of
the issuance of shares of URS common stock pursuant to the
merger agreement, without specific instructions from the
beneficial owner. Broker non-votes are shares held by a broker
or other nominee that are represented at the meeting, but with
respect to which the broker or nominee is not instructed by the
beneficial owner of such shares to vote on the particular
proposal and the broker does not have discretionary voting power
on such proposal. If your broker holds your URS common stock in
street name, your broker will vote your shares only
if you provide instructions on how to vote by filling out the
voter instruction form sent to you by your broker with this
joint proxy statement/prospectus. Because it is expected that
brokers and other nominees will not have discretionary authority
to vote on either proposal, URS anticipates that there will not
be any broker non-votes cast in connection with either proposal.
URS is soliciting proxies for the URS special meeting from URS
stockholders. URS will bear the entire cost of soliciting
proxies from URS stockholders, except that URS and Washington
Group have each agreed to share equally all expenses incurred in
connection with the printing of this joint proxy
statement/prospectus and related proxy materials. In addition to
the solicitation of proxies by mail, URS will request that
brokers, banks and other nominees send proxies and proxy
materials to the beneficial owners of URS common stock held by
them and secure their voting instructions, if necessary. URS
will reimburse those record holders for their reasonable
expenses. URS
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has also made arrangements with D.F. King & Co., Inc.
to assist it in soliciting proxies, and has agreed to pay D.F.
King & Co., Inc.s reasonable and customary
charges for such services, currently estimated not to exceed
$150,000, plus expenses. URS also may use several of its regular
employees, who will not be specially compensated, to solicit
proxies from URS stockholders, either personally or by
telephone, Internet, telegram, facsimile or special delivery
letter.
Other
Business; Adjournments
URS does not expect that any matter other than the proposals
presented in this joint proxy statement/prospectus will be
brought before the URS special meeting. However, if other
matters incident to the conduct of the special meeting are
properly presented at the special meeting or any adjournment or
postponement of the special meeting, the persons named as
proxies will vote in accordance with their best judgment with
respect to those matters.
An adjournment may be made from time to time by approval of the
holders of shares representing a majority of the votes present
in person or by proxy at the special meeting, whether or not a
quorum exists, without further notice other than by an
announcement made at the special meeting.
If you need assistance in completing your proxy card or have
questions regarding the URS special meeting, please contact
D.F. King & Co., Inc., which is assisting URS
with the solicitation of proxies, at
(800) 829-6551
(toll-free) or
(212) 269-5550
(collect) or via e-mail to urs@dfking.com. Alternatively, you
may contact URS Investor Relations at
(877) 877-8790
or investor_relations@urscorp.com or write to
URS Corporation, 600 Montgomery Street,
26
th
Floor,
San Francisco, California
94111-2728,
Attn: Investor Relations.
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THE
WASHINGTON GROUP SPECIAL MEETING
This joint proxy statement/prospectus is being provided to
Washington Group stockholders as part of a solicitation of
proxies by the Washington Group board of directors for use at a
special meeting of Washington Group stockholders. This joint
proxy statement/prospectus provides Washington Group
stockholders with the information they need to know to be able
to vote, or instruct their brokers or other nominees to vote, at
the special meeting of Washington Group stockholders.
Date,
Time, Place and Purpose of the Washington Group Special
Meeting
The special meeting of Washington Group stockholders will be
held on October 30, 2007, at 11:00 a.m., local time,
at Washington Groups offices located at 720 Park
Boulevard, Boise, Idaho 83712.
The Washington Group special meeting is being held for the
following purposes:
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to consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of May 27, 2007, by and among URS,
Elk Merger Corporation, a wholly owned subsidiary of URS, Bear
Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group, pursuant to which Elk Merger Corporation will
merge with and into Washington Group, and each outstanding share
of Washington Group common stock, other than those shares held
by URS, any subsidiary of URS, Elk Merger Corporation or Bear
Merger Sub and other than shares as to which a Washington Group
stockholder has validly demanded and perfected appraisal rights
under Delaware law, will be converted into the right to receive
0.772 of a share of URS common stock and $43.80 in cash, without
interest, and approve the merger;
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to consider and vote upon a proposal to authorize the
proxyholders to vote to adjourn or postpone the special meeting,
in their sole discretion, to solicit additional proxies if there
are not sufficient votes in favor of the foregoing; and
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to transact any other business as may properly come before the
special meeting or any adjournments or postponements of the
special meeting.
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Recommendation
of the Washington Group Board of Directors
The Washington Group board of directors has approved the merger
agreement and the transactions contemplated by the merger
agreement, including the merger, and unanimously recommends that
you vote FOR the proposal to adopt the merger
agreement and approve the merger and FOR the
proposal to authorize the adjournment or postponement of the
Washington Group special meeting, if necessary, to permit
further solicitation of proxies if there are not sufficient
votes at the time of the Washington Group special meeting in
favor of the foregoing. See The Merger
Recommendation of the Washington Group Board of Directors and
Its Reasons for the Merger on page 68.
Record
Date; Outstanding Shares; Shares Entitled to Vote
Only holders of record of Washington Group common stock at the
close of business on the record date, September 21, 2007,
are entitled to notice of and to vote at the Washington Group
special meeting. As of the Washington Group record date, there
were 29,308,392 shares of Washington Group common stock
outstanding and entitled to vote at the special meeting, held by
approximately 11,000 holders of record. Each holder of
Washington Group common stock is entitled to one vote for each
share of Washington Group common stock owned as of the
Washington Group record date.
A complete list of Washington Group stockholders will be
available for review at the special meeting and at the executive
offices of Washington Group during regular business hours for a
period of ten days before the special meeting.
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A majority of the shares of Washington Group common stock issued
and outstanding and entitled to vote as of the record date must
be present in person or represented by proxy, at the Washington
Group special meeting to constitute a quorum. A quorum must be
present before a vote can be taken on the adoption of the merger
agreement and the approval of the merger or any other matter
except adjournment or postponement of the meeting due to the
absence of a quorum. Abstentions and broker non-votes, if any,
which are described below, will be counted for purposes of
determining the presence of a quorum at the Washington Group
special meeting. If a quorum is not present, Washington Group
expects that the special meeting will be adjourned or postponed
to solicit additional proxies. At any subsequent reconvening of
the special meeting, all proxies will be voted in the same
manner as the proxies would have been voted at the original
convening of the special meeting, except for any proxies that
have been effectively revoked or withdrawn prior to the
subsequent meeting.
For the merger agreement to be adopted and the merger approved
the holders of at least a majority of the outstanding shares of
Washington Group common stock entitled to vote on the proposal
at the Washington Group special meeting must vote in favor of
adoption of the merger agreement and approval of the merger.
In accordance with the DGCL and Washington Groups bylaws,
approval of the proposal to authorize the adjournment or
postponement of the Washington Group special meeting, if
necessary, to permit further solicitation of proxies requires
the affirmative vote of the holders of a majority of the shares
of Washington Group common stock present in person or
represented by proxy at the special meeting and entitled to vote
thereon.
Voting
by Washington Group Directors and Executive Officers
As of the Washington Group record date for the special meeting,
the directors and executive officers of Washington Group as a
group owned and were entitled to vote approximately
136,126 shares of Washington Group common stock, or
approximately 0.5% of the outstanding shares of Washington Group
on that date.
Voting;
Proxies; Revocation
You may vote by proxy or in person at the Washington Group
special meeting. Votes cast by proxy or in person at the
Washington Group special meeting will be tabulated and certified
by Washington Group transfer agent.
Voting
in Person
If you plan to attend the Washington Group special meeting and
wish to vote in person, you will be given a ballot at the
special meeting. Please note, however, that if your shares are
held in street name, which means your shares are
held of record by a broker, bank or other nominee, and you wish
to vote in person at the Washington Group special meeting, you
must bring to the special meeting a proxy from the record holder
of the shares authorizing you to vote at the Washington Group
special meeting.
Voting
by Proxy
Your vote is very important. Accordingly, please complete, sign
and return the enclosed proxy card whether or not you plan to
attend the Washington Group special meeting in person. You
should vote your proxy even if you plan to attend the Washington
Group special meeting. You can always change your vote at the
special meeting. Voting instructions are included on your proxy
card. If you properly give your proxy and submit it to
Washington Group in time to vote, one of the individuals named
as your proxy will vote your shares as you have directed. A
proxy card is enclosed for your use.
The method of voting by proxy differs for shares held as a
record holder and shares held in street name. If you
hold your shares of Washington Group common stock as a record
holder, you may vote by completing, dating and signing the
enclosed proxy card and promptly returning it in the enclosed,
pre-addressed, postage-paid envelope or otherwise mailing it to
Washington Group, or by submitting a proxy over the Internet or
by telephone by following the instructions on the enclosed proxy
card. If you hold your shares of Washington Group common stock
in street name, which means your shares are held of record by a
broker, bank or nominee, you will receive instructions from
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your broker, bank or other nominee that you must follow in order
to vote your shares. Your broker, bank or nominee may allow you
to deliver your voting instructions over the Internet or by
telephone. Please see the voting instructions from your broker,
bank or nominee that accompany this joint proxy
statement/prospectus.
All properly signed proxies that are received prior to the
special meeting and that are not revoked will be voted at the
special meeting according to the instructions indicated on the
proxies or, if no direction is indicated, they will be voted
FOR
the proposal to adopt the merger
agreement and approve the merger and
FOR
the
proposal to authorize the adjournment or postponement of the
Washington Group special meeting, if necessary, to permit
further solicitation of proxies if there are not sufficient
votes at the time of the Washington Group special meeting in
favor of the foregoing.
Revocation
of Proxy
You may revoke your proxy at any time before your proxy is voted
at the Washington Group special meeting by taking any of the
following actions:
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delivering to the corporate secretary of Washington Group a
signed written notice of revocation, bearing a date later than
the date of the proxy, stating that the proxy is revoked;
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signing and delivering a new proxy, relating to the same shares
and bearing a later date;
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submitting another proxy by telephone or on the Internet (your
latest telephone or Internet voting instructions are
followed); or
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attending the Washington Group special meeting and voting in
person, although attendance at the special meeting will not, by
itself, revoke a proxy.
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If your shares are held in street name, you may
change your vote by submitting new voting instructions to your
broker, bank or other nominee. You must contact your broker,
bank or other nominee to find out how to do so.
Written notices of revocation and other communications with
respect to the revocation of Washington Group proxies should be
addressed to:
Washington Group International, Inc.
720 Park Boulevard, P.O. Box 73
Boise, Idaho 83729
Attn: Corporate Secretary
Abstentions
and Broker Non-Votes
For purposes of both of the proposals to adopt the merger
agreement and approve the merger, abstentions will have the same
effect as voting against the proposals.
Under the listing requirements of the NYSE, brokers who hold
shares of Washington Group common stock in street
name for a beneficial owner of those shares typically have
the authority to vote in their discretion on routine
proposals when they have not received instructions from
beneficial owners. However, brokers are not allowed to exercise
their voting discretion with respect to the approval of matters
that the NYSE determines to be non-routine, such as
adoption of the merger agreement and approval of the merger,
without specific instructions from the beneficial owner. Broker
non-votes are shares held by a broker or other nominee that are
represented at the meeting, but with respect to which the broker
or nominee is not instructed by the beneficial owner of such
shares to vote on the particular proposal and the broker does
not have discretionary voting power on such proposal. If your
broker holds your Washington Group common stock in street
name, your broker will vote your shares only if you
provide instructions on how to vote by filling out the voter
instruction form sent to you by your broker with this joint
proxy statement/prospectus. Because it is expected that brokers
and other nominees will not have discretionary authority to vote
on either proposal, Washington Group anticipates that there will
not be any broker non-votes cast in connection with either
proposal.
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For purposes of the proposal to authorize the adjournment or
postponement of the special meeting, abstentions will have the
same effect as voting against the proposal. It is expected that
brokers and other nominees will not have discretionary voting
authority on this proposal. Thus, broker non-votes should not
result from this proposal.
Washington Group is soliciting proxies for the Washington Group
special meeting from Washington Group stockholders. Washington
Group will bear the entire cost of soliciting proxies from
Washington Group stockholders, except that URS and Washington
Group have each agreed to share equally all expenses incurred in
connection with the printing of this joint proxy
statement/prospectus and related proxy materials. In addition to
the solicitation of proxies by mail, Washington Group will
request that brokers, banks and other nominees send proxies and
proxy materials to the beneficial owners of Washington Group
common stock held by them and secure their voting instructions,
if necessary. Washington Group will reimburse those record
holders for their reasonable expenses. Washington Group has also
made arrangements with Mackenzie Partners, Inc. to assist it in
soliciting proxies, and has agreed to pay a fee of approximately
$50,000 plus expenses for those services. Washington Group also
may use several of its regular employees, who will not be
specially compensated, to solicit proxies from Washington Group
stockholders, either personally or by telephone, Internet,
telegram, facsimile or special delivery letter.
Other
Business; Adjournments
Washington Group does not expect that any matter other than the
proposals presented in this joint proxy statement/prospectus
will be brought before the Washington Group special meeting.
However, if other matters incident to the conduct of the special
meeting are properly presented at the special meeting or any
adjournment or postponement of the special meeting, the persons
named as proxies will vote in accordance with their best
judgment with respect to those matters.
An adjournment may be made from time to time by approval of the
holders of shares representing a majority of the votes present
in person or by proxy at the special meeting, whether or not a
quorum exists, without further notice other than by an
announcement made at the special meeting.
If you need assistance in completing your proxy card or have
questions regarding the URS special meeting, please contact
MacKenzie Partners, Inc., which is assisting Washington Group
with the solicitation of proxies, at (800) 322-2885 (toll-free)
or (212) 929-5500 (collect) or via e-mail to
proxy@mackenziepartners.com. Alternatively, you may contact
Washington Group Investor Relations at
(866) 964-4636
or investor.relations@wgint.com or write to Washington Group
International, Inc., 720 Park Boulevard, P.O. Box 73,
Boise, Idaho 83729, Attn: Investor Relations.
50
The following is a description of the material aspects of the
merger. While we believe that the following description covers
the material terms of the merger, the description may not
contain all of the information that is important to you. We
encourage you to read carefully this entire joint proxy
statement/prospectus, including the merger agreement attached to
this joint proxy statement/prospectus as Annex A, for a
more complete understanding of the merger.
Each of the URS and Washington Group board of directors has
unanimously approved the merger agreement and the transactions
contemplated by the merger agreement, including the merger. At
the effective time of the merger, a wholly owned subsidiary of
URS will merge with and into Washington Group, with Washington
Group continuing as the surviving corporation and a wholly owned
subsidiary of URS. Immediately following the merger, URS will
cause Washington Group to merge with and into another wholly
owned subsidiary of URS, with this subsidiary continuing as the
surviving corporation and a wholly owned subsidiary of URS,
which subsidiary will be renamed Washington Group
International, Inc. Each share of Washington Group common
stock, other than those shares held by URS, any subsidiary of
URS, Elk Merger Corporation or Bear Merger Sub and other than
shares as to which a Washington Group stockholder has validly
demanded and perfected appraisal rights under Delaware law, will
be converted into the right to receive 0.772 of a share of URS
common stock and $43.80 in cash, without interest, upon the
terms and subject to adjustment as provided in the merger
agreement and as further described below under The Merger
Agreement Merger Consideration on
page 100.
The management of Washington Group has from time to time
explored and evaluated, and has discussed with the Washington
Group board of directors, various strategic options potentially
available to Washington Group, including potential strategic
business combination transactions. These strategic discussions
have focused on, among other things, the business conditions
facing engineering and construction firms generally and
Washington Group in particular and the potential for further
consolidation within the engineering and construction industry.
From time to time, the Washington Group board of directors has
evaluated a number of these opportunities and through
Mr. Stephen G. Hanks, its President and Chief Executive
Officer, Mr. Dennis Washington, its Chairman
and/or
Mr. William H. Mallender, its lead independent director,
participated in strategic discussions with certain third parties.
URS management and board of directors also regularly
review the engineering and construction industry environment,
and discuss ways in which to enhance URS competitive
position and diversification strategy. In recent years,
URS senior management began to recognize that URS
existing and prospective customers were increasingly demanding a
single source vendor that could offer a full
lifecycle of planning, engineering, construction and operations
and maintenance services, and that URS lacked substantial
procurement and construction capabilities as part of the range
of services it offered. URS began periodically to analyze
whether partnering relationships with, or acquisitions of, other
companies in the engineering and construction industry would
enhance URS scale and service offerings and thereby
position URS to offer the integrated services necessary to meet
the requirements of its customers. URS was aware of Washington
Groups reputation as a leading integrated engineering,
construction and management services company and recognized that
a combination of the two companies would enhance URS
ability to compete for larger and more complex contracts.
URS management first began considering the possibility of
acquiring Washington Group in late 2006 and sought the
assistance of Morgan Stanley, which had provided strategic
advice as a financial advisor to URS from time to time, to
analyze the merits of a possible combination of the two
companies. This possibility also was discussed on a preliminary
basis with individual URS directors and was included among the
range of alternatives considered as part of URS strategic
reviews.
On May 8, 2006, the chief executive officer of a leading
engineering and construction firm, which is referred to as
Company A, contacted Mr. Hanks by telephone to discuss the
merits of a possible strategic transaction between their
companies. Later the same day, Company As chief executive
officer sent a letter to Mr. Hanks confirming
51
Company As views of the benefits that would result from a
combination of the two companies. Shortly thereafter,
Mr. Hanks convened a telephonic meeting of the Washington
Group board of directors to report on his discussions with the
chief executive officer of Company A. After consideration and
deliberation in which representatives of Jones Day, Washington
Groups legal advisor, participated, the Washington Group
board of directors reached a consensus that it would not be in
the best interests of Washington Group or its stockholders to
pursue discussion of a possible strategic transaction with
Company A at that time. Mr. Hanks then sent a letter to
Company A explaining the boards determination. On
May 16, 2006, Company A delivered an indication of interest
to the Washington Group board of directors proposing a merger
transaction in which each outstanding share of Washington Group
common stock would be exchanged for a number of shares of
Company A common stock, or a potential combination of cash and
Company A common stock, having an aggregate value of $71.25,
subject to confirmatory due diligence by Company A and the
negotiation of definitive documentation.
On May 18 and 19, 2006, Washington Groups board of
directors convened in person for a regularly scheduled quarterly
meeting, which was attended by representatives of Jones Day and
Washington Groups management. Among the other matters
discussed, the Washington Group board considered Company
As May 16 proposal. Washington Groups management
updated the board of directors on its discussions with Company
A, and the directors further discussed the potential strategic
fit and benefits of potentially pursuing a business combination
with Company A as well as the risks of failure to obtain the
regulatory approvals necessary to consummate the transaction.
After consideration and deliberation in which representatives of
Jones Day participated, the Washington Group board of directors
determined that it should engage Goldman Sachs to serve as
Washington Groups financial advisor in connection with
managements and the boards consideration of a
potential transaction with Company A as well as consideration of
alternatives to such a transaction. Goldman Sachs was engaged by
Washington Group later that day.
On May 30, 2006, Washington Groups board of directors
met in person, together with representatives of Jones Day,
Goldman Sachs and Washington Groups management, to
consider Company As May 16 proposal. Washington
Groups management updated the board of directors on its
discussions with Company A, and representatives of Goldman Sachs
reviewed with the board of directors their preliminary financial
analysis of the transaction proposed by Company A. After
consideration and deliberation in which Jones Day and Goldman
Sachs participated, the Washington Group board of directors
authorized Washington Group management to request further
information from Company A in response to its May 16 letter, and
requested that Goldman Sachs continue its financial analysis of
the transaction proposed by Company A.
On June 20, 2006, Company A delivered a letter to the
Washington Group board of directors reiterating its belief in
the strategic merits of a transaction with Washington Group. The
letter also contained a proposal in which each outstanding share
of Washington Group common stock would be exchanged for a number
of shares of Company A common stock, or a potential combination
of cash and Company A common stock, having an aggregate value of
$71.50.
Discussions between Washington Group and Company A continued
from late June through early August 2006. During this period,
Washington Groups board of directors met telephonically
several times, together with representatives of Jones Day,
Goldman Sachs and Washington Groups management, to
discuss, among other matters, the status of Washington
Groups discussions with Company A. At a meeting on
July 26, Washington Groups board of directors
authorized the execution of a mutual confidentiality agreement
with Company A (which included a standstill that has since
expired) in order to facilitate due diligence between the two
companies, and such an agreement was executed on August 4,
2006. Among other matters of concern to the Washington Group
board of directors regarding a potential transaction with
Company A was the potential for regulatory delays or other
potential regulatory issues that could delay or prevent a
transaction. In order to better understand this concern, the
Washington Group board of directors directed the Washington
Group management and legal and financial advisors to further
explore this issue.
In early August 2006, the chief executive officer of an
environmental remediation firm, which is referred to as Company
B, contacted Mr. Hanks to discuss the merits of a possible
strategic transaction between their companies. On August 9,
2006, Mr. Hanks convened a telephonic meeting of the
Washington Group board of directors to report on the contact
with Company B and to update the board on the status of
Washington Groups discussions with
52
Company A as well as the status of Washington Groups and
Company As mutual due diligence investigations. The
directors requested that Goldman Sachs analyze a potential
transaction with Company B. The directors also considered and
deliberated, with the assistance of Jones Day and Goldman Sachs,
among other matters, the scope of information that should be
provided to Company A.
On August 17 and 18, 2006, Washington Groups board of
directors convened in person for a regularly scheduled quarterly
meeting, which was attended by representatives of Jones Day,
Goldman Sachs and Washington Groups management. At the
meeting, Washington Group management updated the directors on
the status of their discussions with, and due diligence
investigation of, Company A. Representatives of Goldman Sachs
updated their financial analysis of Company A and a possible
transaction with Company A. In addition, representatives of
Goldman Sachs analyzed Company B on a financial basis and also
analyzed the potential business combination with Company B.
Previously, Washington Group management had reported to the
board of directors that, on July 13, 2006, a representative
of an asset management fund that had a significant investment in
Washington Group, which is referred to as Investment
Fund A, had contacted management to express their view that
Washington Group should consider undertaking a leveraged stock
repurchase program. At the board of directors request,
representatives of Goldman Sachs presented an analysis of
Investment Fund As suggestions from a financial and
strategic perspective. Representatives of Goldman Sachs also
analyzed other financial alternatives available to Washington
Group, including a share repurchase, a sponsored
recapitalization and alternative strategic combinations with
engineering and construction companies. After consideration and
deliberation in which representatives of Jones Day and Goldman
Sachs participated, the Washington Group board of directors
reached a consensus that the financial measures suggested by
Investment Fund A did not have the potential to provide
Washington Group or its stockholders the advantages of the
transactions being considered at that time and were not
consistent with the execution of Washington Groups
existing business model, and therefore should not be further
pursued at that time. The directors also reached a consensus
that, since it was not certain that a transaction with Company A
on acceptable terms would materialize, Washington Group
management, with the assistance of Goldman Sachs, should
continue to evaluate other potential transactions, including a
potential transaction with Company B.
Discussions between Washington Group and Company A continued
throughout August and early September 2006. Washington Group
management also continued to evaluate the strategic merits of a
combination with Company B. During this period, Washington
Groups board of directors had several telephonic meetings,
together with representatives of Jones Day, Goldman Sachs and
Washington Groups management, to discuss, among other
matters, the status of Washington Groups discussions with
Company A and Company B as well as other potential strategic
transactions and alternatives to enhance stockholder value.
On September 11 and 12, 2006, Washington Group convened in
person for a regularly scheduled strategic planning meeting of
its board of directors that was attended by representatives of
Jones Day (who attended by telephone for a portion of the
meeting), Goldman Sachs and Washington Groups management.
At that meeting, there was extensive discussion of the various
strategic opportunities potentially available to Washington
Group at that time. Washington Groups management presented
to the board various possible strategic opportunities that might
be considered by Washington Group, including possible
acquisitions of, or business combinations with, certain firms in
the engineering and construction industry, including Company A
and Company B. Washington Group management then updated the
board on the status of Washington Groups discussions with
Company A. The board then discussed various aspects of a
potential transaction with Company A, including, with the
assistance of representatives of Jones Day, the likelihood that
the process for receiving regulatory approvals for a transaction
with Company A would be protracted and might not be successful.
After consideration and deliberation in which representatives of
Jones Day, Goldman Sachs and Washington Groups management
participated, the directors authorized Washington Groups
management to continue discussions with Company A, but only
if Company A agreed to conditions to the transaction related to
assumption of regulatory approval risk. The directors also
reached a consensus that a transaction with Company B did not
have the potential to provide Washington Group or its
stockholders the advantages of either the transaction being
considered with Company A at that time or continuation of
Washington Groups existing business on a standalone basis,
and therefore should not be further pursued. Company B was
orally informed of this conclusion by Mr. Hanks in
mid-September 2006, and no further discussions between
Washington Group and Company B were held.
53
Between September 12 and September 19, 2006, Washington
Group and its advisors continued due diligence and discussions
with Company A, including discussions of the conditions to the
transaction related to assumption by Company A of the regulatory
approval risk requested by the Washington Group board of
directors. Specifically, Washington Group requested that Company
A agree to assume the regulatory approval risk as well as agree
to pay Washington Group a reverse
break-up
fee
if Company A were unable to obtain the necessary regulatory
approvals within a reasonable period of time. On
September 19, 2006, discussions between Company A and
Washington Group were terminated. At that time, Company A had
indicated its unwillingness to agree to the conditions to the
transaction related to regulatory approval risk required by
Washington Groups board of directors, specifically
rejecting the concept of paying any reverse
break-up
fee. In addition, Company As stock price had significantly
declined.
On November 16 and 17, 2006, Washington Groups board of
directors convened in person for a regularly scheduled quarterly
meeting, which was attended by representatives of Goldman Sachs
and Washington Groups management. Among other matters, the
Washington Group board of directors discussed Washington
Groups strategic plan, including its acquisition strategy,
and reviewed Washington Groups 2007 business plan. At the
meeting, a representative of Goldman Sachs analyzed the impact
of an increased stock repurchase program that was under
consideration by the Washington Group board of directors. After
consideration and deliberation in which representatives of
Goldman Sachs participated, the directors authorized Washington
Group to repurchase an additional $100.0 million of
Washington Group stock, bringing Washington Groups total
buyback authorization to $275.0 million. Thereafter,
representatives of Goldman Sachs evaluated the engineering and
construction industry for the board of directors and discussed
potential strategic transactions for the boards
consideration.
In late November 2006, in a discussion with the Chairman of
Washington Groups board of directors, the chief executive
officer of Company A conveyed his interest in resuming
discussions regarding a potential transaction between Company A
and Washington Group. Thereafter, there were a series of
discussions between Mr. Mallender and the chief executive
officer of Company A. On December 11, 2006, Washington
Groups board of directors held a telephonic meeting,
together with representatives of Washington Groups
management, to discuss Company As renewed interest in
pursuing a business combination with Washington Group. After
consideration and deliberation in which representatives of
Goldman Sachs and Washington Groups management
participated, the directors reached a consensus that Washington
Group should resume discussions with Company A. Thereafter, the
board determined to retain Wachtell Lipton to serve as the board
of directors legal advisor.
Discussions with Company A continued through December 2006 as
Washington Group provided Company A with additional information
responsive to Company As due diligence requests. In
addition, the chief executive officer of Company A requested a
meeting with the board of directors of Washington Group.
Mr. Mallender responded that the Washington Group board of
directors was not willing to meet with the chief executive
officer of Company A unless Company A indicated its willingness
to assume the regulatory approval risk of any transaction and
agree to pay Washington Group a reverse
break-up
fee
if Company A were unable to obtain the necessary regulatory
approvals within a reasonable period of time. During this
period, Washington Groups board of directors met several
times telephonically, together with representatives of Wachtell
Lipton, Goldman Sachs and Washington Groups management, to
discuss, among other matters, the status of Washington
Groups discussions with Company A. In early January 2007,
however, discussions were again terminated, as Company A
remained unwilling to agree to the conditions to a transaction
required by the Washington Group board of directors, including
refusing to agree to pay Washington Group a reverse
break-up
fee
if Company A were unable to obtain the necessary regulatory
approvals within a reasonable period of time.
On January 12, 2007, Mr. Martin Koffel, Chairman and
Chief Executive Officer of URS, and Mr. Hanks met
informally at Washington Groups offices and discussed,
among other matters, industry trends and the strategic
challenges and opportunities facing engineering and construction
firms generally and their two companies in particular. During
this meeting, Mr. Koffel expressed interest in a possible
strategic combination of URS and Washington Group, discussed his
views concerning the potential strategic benefits of combining,
and indicated that URS would be willing to pursue such a
combination only if it were the acquiror. No specific terms of a
potential combination were discussed during that meeting.
Nevertheless, Mr. Koffel told Mr. Hanks that URS had
already received informal indications of interest from potential
financing sources in financing an acquisition of Washington
Group, which would enable URS to move quickly toward a
transaction if Washington Group desired. Following this
54
initial meeting, Mr. Hanks alerted the members of the
Washington Group board of directors of his discussion with
Mr. Koffel and reported that he was scheduled to meet with
Mr. Koffel again on January 29, 2007. At the request
of Washington Groups management, public information
regarding URS was circulated to the Washington Group board of
directors, and Goldman Sachs undertook an analysis of a
potential transaction involving Washington Group and URS.
The following chart sets forth the closing share prices of URS
and Washington Group common stock relevant to key dates during
the time of the URS and Washington Group discussions.
|
|
|
|
|
|
|
|
|
|
|
Per Share Closing Prices
|
|
Date
|
|
URS
|
|
|
Washington Group
|
|
January 12, 2007
|
|
$
|
41.50
|
|
|
$
|
58.60
|
|
January 29, 2007
|
|
$
|
42.96
|
|
|
$
|
57.65
|
|
March 21, 2007
|
|
$
|
43.15
|
|
|
$
|
63.01
|
|
March 27, 2007
|
|
$
|
43.14
|
|
|
$
|
65.00
|
|
May 15, 2007
|
|
$
|
46.43
|
|
|
$
|
67.76
|
|
May 18, 2007
|
|
$
|
47.18
|
|
|
$
|
70.17
|
|
May 25, 2007
|
|
$
|
46.89
|
|
|
$
|
69.97
|
|
Following his initial meeting with Mr. Hanks,
Mr. Koffel also had telephonic discussions with several
members of the URS board of directors during which he again
raised the possibility of combining URS and Washington Group and
discussed his preliminary views with respect to the strategic
benefits that such a combination would offer, the value that
could be generated for the stockholders of both companies, and
the ability of URS to obtain and support the financing for such
a transaction.
A second in-person meeting between Mr. Koffel and
Mr. Hanks was held on January 29, 2007. At that
meeting, Mr. Koffel and Mr. Hanks further discussed a
potential business combination of their respective companies and
the benefits for each company that could result from such a
transaction. Mr. Koffel then presented to Mr. Hanks a
letter proposing a merger transaction in which URS would acquire
Washington Group and the holders of each outstanding share of
Washington Group common stock would receive cash and URS common
stock, in approximately equal amounts, with an aggregate value
of $68.00 per share. The letter emphasized the perceived
strategic benefits of such a combination for both companies, the
benefits to the Washington Group stockholders of the cash and
equity consideration being proposed, and the growth
opportunities that the combination would present to the
employees of both companies. Mr. Koffel reiterated that,
given URS track record of repaying acquisition-related
debt after making strategic acquisitions and its current balance
sheet, URS should have no difficulty in obtaining sufficient
financing commitments to complete the transaction.
Mr. Koffel further requested that Washington Group and URS
enter into a confidentiality and standstill agreement, a form of
which Mr. Koffel presented to Mr. Hanks, that provided
for a three-month exclusivity period during which neither
Washington Group nor URS would solicit or encourage any
alternative transaction proposals, or enter into any
discussions, negotiations, or agreements relating to an
alternative transaction.
On January 31, 2007, Washington Groups board of
directors met telephonically, together with representatives of
Wachtell Lipton, Goldman Sachs and Washington Groups
management, to consider URS January 29 proposal. At the
meeting, Mr. Hanks reviewed his discussions with
Mr. Koffel, and representatives of Goldman Sachs provided
their preliminary financial analysis of URS, the proposed
transaction and alternative strategic combinations. The board of
directors then considered and discussed the potential strategic
fit and benefits of a business combination with URS, as well as
alternatives to such a transaction, including either continuing
to pursue Washington Groups existing business on a
standalone basis or pursuing other strategic transactions. The
Washington Group board of directors also considered the views
and opinions of Washington Groups management regarding the
potential advantages and disadvantages of Washington
Groups continuing its current strategy, the expected pace
of consolidation within the engineering and construction
industry, as well as their views and opinions on a transaction
with URS. After consideration and deliberation in which
representatives of Wachtell Lipton and Goldman Sachs
participated, the directors reached a consensus that
representatives of Wachtell Lipton and Goldman Sachs should
discuss URS January 29 proposal with URS financial
and legal advisors in order to
55
gain more information about, and a better understanding of, the
proposal, and that it was premature at that time to execute a
confidentiality agreement or grant URS an exclusivity period.
On February 1, 2007, representatives of Morgan Stanley and
Goldman Sachs met in New York, New York to discuss URS
January 29 proposal, and the potential process and timeline of a
transaction with URS.
On February 5, 2007, Mr. Koffel and Mr. Hanks
further discussed a possible combination of their companies.
Mr. Koffel reiterated his view of the potential strategic
fit of the two companies and the benefits of a business
combination to both companies and their respective stockholders
and employees. Mr. Koffel also emphasized the strength of
URS balance sheet and resulting ability to borrow
substantial amounts needed to fund the cash portion of the
purchase price. Mr. Hanks indicated that if Washington
Group were seriously to consider a combination with URS, URS
would need to offer the Washington Group stockholders compelling
value and would need to provide appropriate assurances regarding
certainty of consummation of the combination, including agreeing
to pay a reverse
break-up
fee
if regulatory approvals were not received within a reasonable
period of time.
On February 6, 2007, Washington Groups board of
directors met telephonically, together with representatives of
Wachtell Lipton, Goldman Sachs and Washington Groups
management, to further consider URS January 29 proposal.
Representatives of Goldman Sachs reviewed the details of the
January 29 proposal and provided an updated financial analysis
of the proposed transaction and alternative strategic
combinations. Representatives of Wachtell Lipton and Goldman
Sachs then discussed possible terms for the transaction,
including possible
break-up
fees, reverse
break-up
fees, exclusivity agreements and fiduciary-based termination
rights. After consideration and deliberation in which
representatives of Wachtell Lipton, Goldman Sachs and Washington
Groups management participated, the directors authorized
Washington Groups management to continue discussions with
URS and further authorized Washington Group to execute a
confidentiality agreement with URS to facilitate due diligence
between the two companies. The Washington Group board, however,
concluded that it was not willing at that time to grant URS an
exclusivity period.
On February 8, 2007, URS management met with
representatives of, and decided to retain, Latham &
Watkins to serve as special counsel to URS and its board of
directors in connection with its consideration of a possible
acquisition of Washington Group.
Wachtell Lipton, on behalf of Washington Group, and
Latham & Watkins, on behalf of URS, then negotiated
the terms of the confidentiality agreement between the two
companies. Representatives of Morgan Stanley and Goldman Sachs
continued discussions and negotiations concerning the manner in
which URS and Washington Group would coordinate and conduct
preliminary business due diligence regarding each other and
whether Washington Group would agree to continue discussions on
an exclusive basis.
On February 14, 2007, Washington Group and URS executed a
mutual confidentiality and standstill agreement which, despite
URS repeated requests, did not include an exclusivity
agreement. Thereafter, representatives of URS and Washington
Group began conducting mutual due diligence involving senior
executives from both companies, as well as their outside legal
and financial advisors. This due diligence included a
two-day
in-person meeting on February 16 and 17, 2007 attended by senior
management of URS and Washington Group, Mr. Mallender, and
representatives of Morgan Stanley and Goldman Sachs. Portions of
this meeting also were attended by William D. Walsh, URS
lead independent director. During the diligence meeting, members
of the senior management of each of URS and Washington Group
made presentations about their respective businesses and
discussed how the companies might operate together. In
connection with these discussions, Washington Groups
management provided URS with financial forecasts of Washington
Groups future operating performance for 2007 and 2008 and,
sometime thereafter, URS management provided financial
forecasts of URS future operating performance for 2007,
2008 and 2009 to Washington Group. See Financial
Forecasts elsewhere in this proxy statement/prospectus
beginning on page 133.
Following the initial in-person due diligence meeting, URS
management and its outside advisors commenced more in-depth
business and legal due diligence, with particular focus on
accounting and tax issues, contractual change-of-control
analyses and assessments of contractual and environmental
liabilities that could impact Washington Groups business.
URS management also sought assistance from Cooley Godward
Kronish LLP, which is
56
referred to as Cooley Godward, to evaluate antitrust regulatory
risks associated with the proposed combination, and to initiate
legal work in connection with the debt financing for the
acquisition and the combined enterprise.
On February 22, 2007, Washington Groups board of
directors met telephonically, together with representatives of
Wachtell Lipton, Goldman Sachs and Washington Groups
management, to further consider, among other matters, URS
January 29 proposal. At the meeting, Washington Group management
updated the Washington Group board of directors on the status of
their discussions with URS and reported on the due diligence
being conducted by both companies, including the recent
in-person due diligence meeting. After consideration and
deliberation in which representatives of Wachtell Lipton,
Goldman Sachs and Washington Groups management
participated, the directors indicated that Washington
Groups management and legal and financial advisors should
proceed further with their discussions with URS, although the
directors took notice of the effect of the recent increase in
Washington Groups stock price relative to the value of the
merger consideration being offered by URS at that time.
On February 27, 2007, following a series of telephone calls
during which Mr. Koffel briefed the URS directors
individually regarding the status of the discussions and due
diligence efforts between the parties, Mr. Koffel left a
voicemail message for Mr. Mallender requesting him to
convey to Washington Groups board of directors that the
URS board of directors was fully supportive of URS
managements desire to move forward with the process
leading to a possible transaction between the companies.
The Washington Group board of directors convened in person for a
regularly scheduled quarterly meeting on March 1 and 2, 2007,
which was attended by representatives of Wachtell Lipton,
Goldman Sachs and Washington Groups management. In
addition to conducting general business, Washington Groups
board further considered URS January 29 proposal. At the
meeting, management updated the Washington Group board of
directors on its discussions with URS and reported on the due
diligence being conducted by both companies. Representatives of
Goldman Sachs also presented Goldman Sachss updated
financial analysis of URS and the proposed transaction to the
board of directors. The presentation also included an updated
analysis of potential strategic combinations with companies
other than URS. In addition, the representatives of Goldman
Sachs discussed with the directors the possibility of further
increasing Washington Groups share repurchase program,
which had been suspended since mid-2006, as an alternative to a
transaction with either URS or another party. After
consideration and deliberation in which representatives of
Wachtell Lipton, Goldman Sachs and Washington Groups
management participated, the directors reached a consensus that,
although the strategic rationale of a transaction with URS
appeared to have merit, the merger consideration and other terms
proposed by URS January 29 proposal were insufficient. The
directors therefore instructed Goldman Sachs to convey to Morgan
Stanley the boards conclusions, and Mr. Mallender
contacted Mr. Koffel on March 2, 2007 to reiterate the
boards conclusions. Mr. Mallender specifically
communicated that Washington Groups board would require a
purchase price that was meaningfully more than $68.00 per share
and would prefer the merger consideration to be comprised of a
greater proportion of cash relative to stock, with a collar on
the exchange ratio applicable to the stock portion of the
consideration.
Throughout early March 2007, representatives of Goldman Sachs
and Morgan Stanley and representatives of Wachtell Lipton,
Latham & Watkins and Cooley Godward discussed the
merger consideration and other terms proposed by URS and
Washington Group, including the desire of Washington Group that
the stock portion of the merger consideration be received by
Washington Group stockholders on a tax-free basis and Washington
Groups insistence that URS agree to pay a reverse
break-up
fee
if the merger were not consummated due to failure to obtain
necessary antitrust regulatory approvals. With the benefit of
these conversations, on March 21, 2007, URS sent a letter
to Mr. Hanks, Mr. Mallender and Washington Group
proposing a revised merger transaction in which each outstanding
share of Washington Group common stock would receive per share
consideration of either $71.00 in cash or 1.645 shares of
URS common stock, at the election of the holder, subject to
proration and election procedures that would ensure that 58% of
the Washington Group shares outstanding would be exchanged for
cash and 42% of the Washington Group shares outstanding would be
exchanged for shares of URS common stock. The transaction
structure proposed by URS contemplated that Washington Group
stockholders would receive the stock portion of the
consideration on a tax-free basis. Assuming that all Washington
Group stockholders made the same election for either cash or URS
shares, each Washington Group share would be exchanged, on
average, for $41.18 in cash and 0.691 of a share of URS common
stock, representing an aggregate value of $71.00 per share based
on the closing price of URS common stock on March 21, 2007.
This revised merger consideration was approximately 4%
57
higher than URS initial proposal of $68.00 per share.
URS letter also proposed that URS would add to its board
of directors one person who then served as a director or officer
of Washington Group. Finally, URS again requested that
Washington Group agree to a thirty-day exclusivity period during
which neither Washington Group nor URS would solicit any
alternative transaction with any third party.
On March 23, 2007, URS board of directors convened in
person for a regularly scheduled meeting, together with
representatives of Latham & Watkins, Cooley Godward,
Morgan Stanley and URS management. At the meeting,
Mr. H. Thomas Hicks, URS Chief Financial Officer,
provided a report to the board on the progress to date of
managements discussions with representatives of Washington
Group concerning a possible transaction. Mr. Hicks reviewed
the terms of the March 21 revised proposal that management had
made to Washington Group. Mr. Hicks also discussed
Washington Groups continued insistence that any proposal
include a reverse
break-up
fee
payable in the event of failure to obtain antitrust regulatory
approvals, which would have the effect of shifting to URS the
risk that antitrust regulators might block the proposed
combination or condition approval of the combination on
divestitures or other restrictions applicable to URS, Washington
Group or the combined business. A representative of Morgan
Stanley then presented to the board a preliminary financial
analysis of Washington Group and the proposed transaction.
Mr. Koffel discussed with the board the approach he
proposed URS take in evaluating the proposed combination and
conducting extensive diligence on Washington Group before
submitting any transaction to the board for approval. The
directors then met in an executive session without URS
management present to discuss the procedures the board would
follow if the overture to Washington Group received a
sufficiently positive response to warrant further consideration
of a possible transaction. The directors also discussed their
initial views regarding the strategic rationale for the proposed
combination, and identified a series of questions for management
to address regarding the financial impact of the acquisition and
its financing, the risk profile of the combined enterprise, the
challenges of integrating the businesses and management teams of
the two companies, the new business lines that the combination
would bring to URS, and integration of the accounting and
control systems of the two companies.
On March 26, 2007, Washington Groups board of
directors met in person, with some directors participating by
telephone, together with representatives of Wachtell Lipton,
Goldman Sachs and Washington Groups management, to
consider URS March 21 revised proposal. At the meeting,
representatives of Goldman Sachs described the transaction terms
set forth in URS March 21 revised proposal and updated the
board on the status of Washington Groups discussions with
URS, including the preliminary results of URS and
Washington Groups due diligence efforts. The
representatives of Goldman Sachs then updated their financial
analysis of the proposed transaction and alternative strategic
combinations. After consideration and deliberation in which
representatives of Wachtell Lipton, Goldman Sachs and Washington
Groups management participated, the directors reached a
consensus that the merger consideration and other terms proposed
by URS were still insufficient and instructed Goldman Sachs to
convey to Morgan Stanley the boards conclusions.
Specifically, Goldman Sachs was instructed to convey that
Washington Groups board would not accept a purchase price
below $73.00, that the merger consideration should be comprised
of 60% cash and 40% stock, and that Washington Group should have
the right to terminate an acquisition agreement if the value of
URS stock fell more than 12% prior to closing. Goldman Sachs
also was instructed to convey that Washington Groups board
should have the ability, subject to payment of a break-up fee
equal to 2% of the merger consideration, to terminate the merger
agreement to accept a superior proposal, and that URS should
have to agree to pay a reverse break-up fee if the merger did
not close due to a failure to obtain antitrust regulatory
approvals. Washington Groups board of directors also
directed Goldman Sachs to convey to Morgan Stanley its view that
Washington Groups representation on the combined
companys board of directors should be proportional to the
percentage of the outstanding stock of the combined company that
would be held by Washington Group stockholders following
completion of the proposed transaction, rather than a single
board seat as URS had proposed. In discussions between
Mr. Koffel and Mr. Hanks during the pendency of the
negotiations, Mr. Koffel reiterated that URS would not
agree to add more than one board seat to be filled by a director
or executive officer of Washington Group. Messrs. Koffel
and Hanks discussed which of the current members of the
Washington Groups board might be suitable to join the URS
board at the closing of the merger. Mr. Koffel indicated
that he regarded all current Washington Group directors,
including Mr. Hanks as possible candidates; in this
connection, Mr. Koffel indicated that he personally would
be most comfortable with Mr. Hanks joining the combined
companys board. However, it was recognized that any
invitation to join the URS board of directors could be extended
only by the Board Affairs Committee of the URS board, of which
Mr. Koffel was not a member, and that any election to the
58
URS board of directors could be made only by the URS board.
Mr. Hanks responded that it would be an honor to serve on
the URS board of directors if ultimately offered the opportunity
at an appropriate time. No commitment regarding these matters
was made by either Mr. Koffel or Mr. Hanks during
these discussions.
On March 26, 2007, the Washington Group board also
indicated willingness to consider agreeing to a three-week
exclusivity period with URS if Washington Group had the right to
terminate such exclusivity if it received an unsolicited
superior offer from a third party during the exclusivity period.
On March 27, 2007, a representative of Goldman Sachs
conveyed to a representative of Morgan Stanley the terms on
which the Washington Group board of directors would be willing
to support a combination with URS and the possibility of
Washington Groups entering into an exclusivity agreement.
On March 27, 2007, following deliberation among URS
senior management and representatives of Morgan Stanley and
Latham & Watkins, URS directed a representative of
Morgan Stanley to convey to a representative of Goldman Sachs
that URS was now willing to offer Washington Groups
stockholders aggregate consideration of $73.00 per share,
comprised of 60% cash consideration and 40% stock consideration,
equivalent to $43.80 in cash and $29.20 in URS common stock.
This revised merger consideration was approximately 7% higher
than URS initial proposal of $68.00 per share. The terms
proposed by URS contemplated a fixed exchange ratio for the
stock portion of the proposed consideration and no right for
Washington Group to terminate an acquisition agreement based on
subsequent changes in the value of URS common stock.
Representatives of Morgan Stanley and Goldman Sachs discussed
granting a termination right to Washington Group if the value of
URS stock fell more than 12% prior to closing, but in such
event, URS would have the right to preclude termination by
increasing the exchange ratio to maintain the value of the stock
portion of the consideration to at least equal the value at
signing, less 12%. This approach ultimately was rejected by the
parties as being incompatible with ensuring that Washington
Group stockholders could receive the stock portion of the
purchase price on a tax-free basis, and Washington Group
ultimately dropped its insistence on a termination right tied to
a decrease in the value of URS common stock.
On April 1, 2007, URS board of directors convened by
telephone, together with representatives of Latham &
Watkins, Cooley Godward, Morgan Stanley and URS
management, to further consider the proposed acquisition of
Washington Group. Messrs. Koffel and Hicks presented an
overview of the proposed transaction and its strategic benefits
to URS. Representatives of Morgan Stanley presented an overview
of discussions between URS and Washington Group concerning the
proposed acquisition (including the arguments made for and
against various proposed deal terms), various financial analyses
of the price and other terms proposed by URS on March 27 and a
possible timetable for completing the acquisition.
Mr. Hicks led the URS board of directors through a
discussion of the strategic rationale and benefits of the
proposed transaction, noting in particular the opportunity
provided by the transaction to substantially strengthen
URS competitive position by significantly expanding its
service offering, as well as the opportunities to achieve
operating efficiencies and synergies. Mr. Hicks also
presented to the board an overview of Washington Groups
business and key areas of risk affecting its business and an
analysis of the likely financing structure for the cash portion
of the proposed purchase price. The board also discussed the
risks and opportunities regarding the new lines of business that
Washington Group would bring to the combined enterprise, the
ability of URS management to effectively integrate the
operations of Washington Group in light of URS history of
effectively integrating business organizations and systems
following prior acquisitions, and the ability of URS to manage
the debt that would be incurred in the acquisition given
URS record of rapidly deleveraging its balance sheet
following prior acquisitions. After consideration and
deliberation in which representatives of Latham &
Watkins, Cooley Godward and Morgan Stanley participated, the
directors reached a consensus that URS management should
continue negotiations with Washington Group and the development
of the possible transaction.
On April 5, 2007, Washington Groups board of
directors convened by telephone, together with representatives
of Wachtell Lipton, Goldman Sachs and Washington Groups
management, to consider URS March 27 proposal. After
consideration and deliberation in which Wachtell Lipton and
Goldman Sachs participated, the directors reached a consensus
that, although there were significant open issues in respect of
URS proposal, entering into a limited exclusivity
agreement with URS might help facilitate URS agreeing to
terms more favorable to Washington Group and its stockholders.
As a result, the directors instructed Goldman Sachs to report to
URS that, although there were significant open issues in respect
of URS proposal, Washington Group was now willing to enter
into a limited exclusivity agreement with URS and to continue
with due diligence and negotiation of more definitive terms for
a possible combination. A representative of Goldman Sachs
conveyed this message by telephone to a representative
59
of Morgan Stanley on April 6, 2007, and shortly thereafter,
Latham & Watkins and Wachtell Lipton commenced
negotiations of the terms of an exclusivity agreement. Cooley
Godward and Wachtell Lipton also began jointly assessing risks
associated with obtaining approvals from antitrust regulatory
authorities for the proposed combination, which included
discussions concerning possible tactics for minimizing such
risks. Wachtell Lipton conveyed the view of the Washington Group
board that URS should assume all such antitrust regulatory risks
by agreeing to pay a reverse break-up fee if approvals could not
be obtained.
On April 13, 2007, Washington Group and URS executed an
exclusivity agreement providing that, for a period of
21 days commencing on the achievement of diligence
benchmarks, and subject to applicable law, neither party would,
so long as the other party was diligently pursuing the potential
transaction, initiate, solicit or knowingly encourage (including
by way of furnishing information or assistance) an alternative
transaction proposal from a third party, or enter into any
negotiations, discussions, agreements or arrangements with a
third party providing for the acquisition of all or any
significant portion of such party by a third party.
Beginning in mid-April 2007, representatives of Wachtell Lipton
and Latham & Watkins began to negotiate a draft merger
agreement, and representatives of Washington Group, URS,
Wachtell Lipton, Jones Day, Latham & Watkins and
Cooley Godward prepared disclosure schedules and continued their
due diligence. The financial and legal advisors continued to
have regular discussions during this period concerning various
significant open issues in the merger agreement, including a
reverse
break-up
fee
tied to antitrust regulatory approvals, the size of that fee and
of a more traditional
break-up
fee
to be paid in certain circumstances if a third party were to
make a superior offer to acquire Washington Group, whether and
under what circumstances Washington Group would have the right
to terminate an acquisition agreement if the value of URS common
stock declined after signing, and the number of URS directors
that might be filled by Washington Group representatives.
On April 20, 2007, Latham & Watkins delivered an
initial draft merger agreement to Wachtell Lipton and, on
April 27, 2007, Wachtell Lipton delivered suggested
revisions, which included, among other things, provision for a
reverse break-up fee tied to failing to obtain antitrust
regulatory approvals. The proposed reverse break-up fee would be
payable by URS in an amount equal to the traditional break-up
fee payable in certain circumstances when a third party makes a
superior offer. During this time, discussions between the
managements of URS and Washington Group continued, and both
companies continued their due diligence efforts. During his
discussions with URS, Mr. Hanks reiterated that, although
they were supportive of the strategic rationale of a combination
of Washington Group and URS, Washington Groups board of
directors believed that the merger consideration and other terms
proposed by URS were insufficient. Through their respective
financial advisors, Washington Group conveyed to URS that
Washington Groups board of directors now would not accept
a purchase price less than $76.00 per share, which news followed
shortly after URS learned from Washington Group that it soon
would publicly announce quarterly financial results for its
first quarter that were below publicly available estimates. URS
was not prepared to offer additional merger consideration at
that time, which it communicated to Washington Group through
their respective financial advisors on April 30, 2007.
On May 2, 2007, Mr. Koffel sent a letter to
Mr. Mallender and Mr. Hanks explaining that, although
discussions between URS and Washington Group had terminated, URS
continued to believe that a combination of the two companies was
strategically desirable for both companies and would create
considerable value for each companys stockholders.
Mr. Koffel explained that URS remained prepared to pay
$73.00 per share for each outstanding share of Washington Group
common stock, had substantially completed its due diligence
review, and was prepared to move forward and pursue a
transaction if Washington Group was willing to do so. No further
discussions took place, as Washington Group was not then
prepared to reengage.
On May 15, 2007, Mr. Koffel contacted Mr. Hanks
by telephone and indicated that, in light of recent increases in
the URS stock price, URS might be willing to offer as much as
$75.50 per share in merger consideration. The following day, a
representative from Morgan Stanley, in a telephone conversation
with a representative of Goldman Sachs, formalized
Mr. Koffels proposal, explaining that URS would be
willing to offer Washington Group stockholders per share
consideration of $43.80 in cash and 0.687 of a share of URS
common stock, representing an aggregate value of $75.50 per
share based on the closing price of URS common stock on
May 15, 2007. This revised merger consideration was
approximately 11% higher than URS initial proposal of
$68.00 per share, but represented the same amount of cash
consideration and approximately the same stock exchange ratio as
had
60
been offered by URS on March 27, 2007. The Morgan Stanley
representative also conveyed to his counterpart at Goldman Sachs
that URS was prepared to accept inclusion of a reverse
break-up
fee
tied to failure to receive antitrust regulatory approvals (but
did not agree on the size of such reverse break-up fee), and
would accept structuring the transaction either to be fully
taxable to Washington Group stockholders with Washington Group
having the right to terminate if the value of URS stock declined
by more than 12% prior to closing and with URS having the right
to increase the stock exchange ratio to prevent such
termination, or to be tax-free (as to the stock portion of the
purchase price) with no similar termination or
top-up
rights.
The Washington Group board of directors convened in person a
regularly scheduled quarterly meeting on May 17 and 18, 2007,
which was attended by representatives of Wachtell Lipton,
Goldman Sachs and Washington Groups management. In
addition to conducting general business, the board discussed
URS May 15 proposal. At the meeting, Goldman Sachs
presented to the board of directors a financial analysis of the
May 15 proposal as well as alternative strategic combinations.
During an adjournment of the Washington Group board meeting on
May 17, Mr. Hanks contacted Mr. Koffel to ask him
to increase the exchange ratio for the stock portion of the
proposed merger consideration from 0.687 of a share of URS
common stock to 0.700 of a share of URS common stock, which
Mr. Koffel agreed to present to the URS board. As part of
this discussion, Mr. Hanks invited Mr. Koffel to
address the Washington Group board of directors the following
morning to present his view of the proposed transaction and to
answer questions that the Washington Group directors had with
respect to the proposed transaction.
At the invitation of the Washington Group board of directors,
Mr. Koffel (together with Mr. Hicks) addressed the
board of directors on May 18, explaining
Mr. Koffels views on the strategic benefits of
combining URS and Washington Group and answering questions
regarding the proposed transaction. Representatives of URS and
Washington Groups legal advisors were also present in
person or by telephone for Mr. Koffels presentation.
On May 18, 2007, Washington Group held its annual meeting
of stockholders. At the meeting, all of Washington Groups
directors were reelected for additional one-year terms.
Between May 18 and May 23, 2007, Cooley Godward,
Latham & Watkins and Wachtell Lipton continued
discussions concerning various deal terms, including the size
and terms of the proposed reverse break-up fee that would be
payable by URS if the merger did not close due to a failure to
obtain antitrust regulatory approvals. Cooley Godward and
Latham & Watkins, on behalf of URS, proposed a reverse
break-up fee of $35 million (half of the proposed
$70 million traditional break-up fee), while Wachtell
Lipton, on behalf of Washington Group, proposed a reverse
break-up fee of $70 million. The parties legal
counsel also discussed other terms related to the extent of
commitments the parties would make, and the potential
divestitures and restrictions the parties would be compelled to
accept, in connection with seeking such approvals. URS and
Washington Group ultimately agreed on a $50 million reverse
break-up fee tied to failing to obtain antitrust approvals, and
a $70 million traditional break-up fee.
On May 23, 2007, URS board of directors convened in
person (with one director participating by telephone) to further
consider the proposed acquisition of Washington Group. Portions
of the meeting were also attended by representatives of
Latham & Watkins, Morgan Stanley, URS
management, Cooley Godward and Ernst & Youngs
Transactional Advisory Services, as well as other professional
advisors who assisted management in evaluating Washington Group
and various aspects of the proposed transaction. At the meeting,
URS management provided an extensive review of the terms
and diligence work performed in contemplation of the proposed
acquisition, the strategic rationale for the transaction, risks
associated with Washington Group, regulatory risks that could
arise from the transaction, anticipated market reaction and
intended financing structures. Mr. Koffel also discussed
with the board the possibility that Washington Group might again
ask to raise the purchase price above the price then currently
contemplated and obtained feedback from board members concerning
whether further increases could be justified. Representatives of
Latham & Watkins reviewed the material terms of the
transaction and discussed other legal matters pertaining to the
proposed transaction and the boards role in approving such
a transaction. Representatives of Morgan Stanley then presented
its preliminary financial analysis regarding the merger
consideration to be paid to Washington Groups stockholders
as then proposed. The board and the advisors also discussed
again the risks and opportunities regarding the new lines of
business that Washington Group would bring to the combined
enterprise, the challenges of integrating the two companies
post-closing, the ability of URS management to effectively
integrate the operations of Washington Group in light of
URS history of effectively
61
integrating business organizations and systems following prior
acquisitions, the potential impact of the additional levels of
debt that the company would incur to complete the acquisition,
the ability of URS to manage the debt that would be incurred
given URS record of rapidly deleveraging its balance sheet
following prior acquisitions. At the conclusion of this meeting,
URS board members expressed unanimous support for URS
managements continuing to pursue the proposed transaction.
On May 24, 2007, all of the members of Washington
Groups board of directors met by telephone, together with
representatives of Wachtell Lipton, Goldman Sachs and Washington
Groups management, to further consider the proposed
transaction. At the meeting, representatives of Wachtell Lipton
summarized the terms of the proposed merger agreement, and
representatives of Goldman Sachs presented an updated financial
analysis of the proposed transaction and alternative strategic
combinations. After consideration and deliberation in which
representatives of Wachtell Lipton, Goldman Sachs and Washington
Groups management participated, the directors continued
their consideration of the proposed transaction, reaching a
consensus that the revised consideration and other terms
proposed by URS on May 15 remained insufficient, in part due to
the then-current market price of Washington Groups common
stock, and the directors instructed Mr. Hanks to convey
this conclusion to Mr. Koffel.
On May 24, 2007, Latham & Watkins, on behalf of
URS, delivered a revised draft merger agreement to Wachtell
Lipton. This draft contemplated a deal structure in which
Washington Group stockholders would receive a fixed amount of
cash and, on a tax-free basis, a fixed number of shares of URS
common stock and did not provide to Washington Group a
termination right tied to a decrease in value of URS stock or a
corresponding top-up right to URS. In addition, on May 24,
2007, on behalf of Washington Group, Wachtell Lipton and Jones
Day furnished initial drafts of Washington Groups
disclosure schedules to Latham & Watkins. Initial
drafts of URS disclosure schedules were furnished to
Wachtell Lipton and Jones Day on May 25, 2007.
On May 24, 2007, URS held its annual meeting of
stockholders. At the meeting, all of URS directors
nominated were reelected for additional one-year terms.
Following the close of the financial markets on May 25,
2007, Mr. Hanks spoke with Mr. Koffel by telephone to
convey the Washington Group boards conclusion that it
would not support a transaction with URS on the terms and
conditions proposed by URS, including its proposed merger
consideration, in part due to recent increases in the market
price of Washington Groups common stock. Representatives
of Wachtell Lipton, Goldman Sachs and Washington Groups
management and Mr. Mallender, as well as representatives of
Latham & Watkins, Morgan Stanley and URS
management were also present on the call. At the request of
Mr. Hanks, a representative of Wachtell Lipton explained
the Washington Group boards important remaining issues
with the terms of the merger agreement proposed by URS,
including the proposed termination fees, fiduciary-based
termination rights, interim operating covenants and provisions
related to regulatory approvals and treatment of stock options.
In addition, at the direction of Washington Groups board
of directors, a representative of Goldman Sachs explained that
the board was unlikely to approve a transaction that did not
offer Washington Groups stockholders at least $80.00 per
share in total consideration, which represented an approximately
14% premium based on that days closing price. Washington
Groups board of directors believed, after consultation
with its legal and financial advisors, that indicating a price
of at least $80.00 per share was appropriate given the
circumstances then existing, including the recent performance of
Washington Groups and URS stock price and the
negotiations that had occurred between the parties up until that
time. Mr. Koffel and the representatives of
Latham & Watkins, Morgan Stanley and URS
management then asked questions regarding the proposed terms and
conditions outlined by Mr. Hanks, Wachtell Lipton and
Goldman Sachs. Following the conclusion of the call, Wachtell
Lipton sent a revised version of the merger agreement to
Latham & Watkins reflecting Washington Groups
proposed resolution of the terms and conditions discussed on the
call.
Mr. Koffel and Mr. Hanks spoke again by telephone
later that evening and again during the early afternoon of
May 26, 2007. During these discussions, Mr. Koffel
questioned the inflexibility, from URS perspective, of
Washington Groups proposed terms and conditions, and
Mr. Hanks reiterated the firmness of Washington
Groups position.
Following Mr. Koffels and Mr. Hanks
discussions on May 26, 2007, a representative of Morgan
Stanley, on behalf of URS, contacted a representative of Goldman
Sachs. The representative of Morgan Stanley requested that
Washington Groups Chairman of the Board, Dennis
Washington, agree to exercise his options prior to the record
62
date for the stockholder vote on the merger and agree to vote
his shares in favor of the proposed transaction with URS. The
representative of Morgan Stanley also suggested that URS would
not be willing to propose $80.00 per share in total
consideration. The representative of Goldman Sachs responded
that Washington Group could not cause Mr. Washington to
exercise his options and that it was unlikely that Washington
Groups board would agree to condition the transaction on
Mr. Washingtons willingness to do so. The
representative of Goldman Sachs also reiterated that the
Washington Group board was unlikely to approve a transaction
that did not offer Washington Groups stockholders at least
$80.00 per share in total consideration. The representative of
Morgan Stanley confirmed that URS would be willing to assume the
level of regulatory approval risk requested by Washington Group
and would agree to pay a reverse
break-up
fee
if the required regulatory approvals were not received in a
reasonable time period following announcement of the proposed
transaction.
On the evening of May 26, 2007, a call was held between
Mr. Koffel and Mr. Hanks. Representatives of Wachtell
Lipton and Goldman Sachs as well as representatives of
Latham & Watkins, Morgan Stanley and URS
management were also present on the call. On the call,
Mr. Koffel explained that URS was not willing to offer
Washington Groups stockholders $80.00 per share in total
consideration, but would be willing to offer, for each
outstanding share of Washington Group stock, $43.80 in cash and
0.74 of a share of URS common stock, or approximately $78.50 per
share in total consideration. In response, Mr. Hanks
indicated that he would be willing to present the proposed
merger consideration to Washington Groups board, although
he believed that the board was unlikely to approve a transaction
on such terms.
Later that evening, Mr. Koffel called Mr. Hanks and
explained that URS would be willing to offer Washington
Groups stockholders $80.00 per share in total
consideration, comprised of $43.80 in cash and 0.772 of a share
of URS common stock. This revised merger consideration was
approximately 18% higher than URS initial proposal of
$68.00 per share (but included the same amount of cash as had
been offered by URS on March 27, 2007 with much of the
increase in value attributable to recent increases in the market
price of URS stock).
On May 26 and 27, 2007, representatives of Washington Group
management, Wachtell Lipton, Jones Day, URS management,
Latham & Watkins and Cooley Godward worked together to
finalize the terms of the merger agreement and the schedules and
exhibits, including URS debt financing commitment papers.
On May 26, Latham & Watkins also provided
Wachtell Lipton a proposed form of agreement whereby
Mr. Washington would agree to exercise his options prior to
the record date for the stockholder vote on the merger, agree to
hold the shares issued upon exercise of the options through the
completion of the transaction and agree to vote his shares in
favor of the proposed transaction with URS. Latham &
Watkins asked Wachtell Lipton to share the draft with
Mr. Washington and his counsel, but confirmed that
execution of such an agreement would not be a condition to the
transaction. Although Mr. Washington did not agree to
execute the agreement, he confirmed prior to the execution of
the merger agreement that he strongly supported the proposed
transaction as being beneficial to Washington Groups
stockholders, employees, customers and other constituencies, and
that under appropriate circumstances he would be willing to
exercise his options and vote in favor of the transaction with
URS to support approval of the transaction by Washington
Groups stockholders.
In the evening of May 27, 2007, Washington Groups
board of directors met by telephone, together with
representatives of Wachtell Lipton, Goldman Sachs and Washington
Groups management, to further consider the proposed
transaction. At the meeting, Wachtell Lipton described the terms
of the proposed merger agreement, discussed considerations
relating to URS proposed financing commitments for the
transaction and discussed various other issues related to the
proposed transaction. Representatives of Goldman Sachs also
presented an updated financial analysis of the proposed
transaction, and delivered Goldman Sachss oral opinion,
which was subsequently confirmed in writing, to the effect that,
as of such date and based upon and subject to the factors and
assumptions explained in their presentation and set forth in
their written opinion, the $43.80 in cash and 0.772 of a share
of URS common stock to be issued in exchange for each share of
Washington Group common stock, taken in the aggregate, pursuant
to the merger agreement was fair from a financial point of view
to Washington Groups stockholders. During the meeting of
the Washington Group board of directors, a representative of
Wachtell Lipton contacted a representative of Latham &
Watkins and resolved certain outstanding matters with respect to
the draft merger agreement, which were then reported to the
Washington Group directors during the meeting.
63
After consideration and deliberation in which representatives of
Wachtell Lipton and Goldman Sachs participated, and taking into
consideration the factors described under
Recommendation of the Washington Group Board of Directors and
Its Reasons for the Merger, the Washington Group board of
directors voted unanimously to declare it advisable for, fair to
and in the best interests of Washington Group and its
stockholders for Washington Group to enter into the proposed
merger agreement, approved and adopted the proposed merger
agreement and determined to recommend the approval of the merger
and adoption of the proposed merger agreement by Washington
Groups stockholders. Mr. Hanks then contacted
Mr. Koffel to inform him of the outcome of the Washington
Group board meeting, and a representative of Wachtell Lipton
contacted a representative of Latham & Watkins to
confirm the actions that the Washington Group board of directors
had taken.
Near the end of the Washington Groups board meeting,
URS board convened to consider the proposed transaction.
At the meeting, Latham & Watkins summarized changes to
the terms of the proposed merger agreement since the
boards last review of the terms at its May 23 meeting and
answered questions about various other issues related to the
proposed transaction. Representatives of Morgan Stanley also
presented an updated financial analysis of the proposed
transaction and delivered Morgan Stanleys oral opinion,
subsequently confirmed in writing, to the effect that, as of
such date and based on and subject to the factors and
assumptions explained in their presentation and set forth in
their written opinion, the $43.80 in cash and 0.772 of a share
of URS common stock to be issued in exchange for each share of
Washington Group common stock pursuant to the merger agreement
was fair from a financial point of view to URS. After
consideration and deliberation in which Latham &
Watkins, Cooley Godward and Morgan Stanley participated, and
taking into consideration the factors described under
Recommendation of the URS Board of Directors and
Its Reasons for the Merger on page 65, the URS board voted
unanimously to declare it advisable and in the best interests of
URS and its stockholders for URS to enter into the proposed
merger agreement, approved and adopted the proposed merger
agreement and the financing commitments with MSSF and Wells
Fargo, and determined to recommend to URS stockholders
that they vote to approve the issuance of shares of URS common
stock in the proposed merger.
Following the completion of the two board meetings,
representatives of Wachtell Lipton and Latham &
Watkins negotiated the final terms of the definitive merger
agreement, and members of the management of URS and Washington
Group met to complete final due diligence matters.
On the evening of May 27, 2007, URS and Washington Group
each executed the definitive merger agreement. They issued a
joint press release announcing the proposed transaction on
May 28, 2007.
In late August 2007, at the request of Washington Groups
board of directors, representatives of Goldman Sachs met with
representatives of Greenlight Capital, Inc., which is referred
to as Greenlight Capital, to discuss Greenlight Capitals
views concerning the proposed transaction with URS, which views
Greenlight Capital had previously communicated in a letter sent
to Washington Groups board and filed with the SEC as an
amendment to Greenlight Capitals Schedule 13D.
Greenlight Capital was informed that Washington Groups
board had considered their views regarding the proposed
transaction, as the board values the opinions of all of
Washington Groups stockholders, but disagreed with a
number of points in the Greenlight Capital letter and continued
to believe that the merger is in the best interests of
Washington Group and its stockholders. Goldman Sachs discussed
with Greenlight Capital a number of factors supporting the
boards determination, including the factors set forth in
Recommendation of the Washington Group Board
of Directors and Its Reasons for the Merger on
page 68 and the additional factors summarized below:
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As of the announcement date (and as of the date of the meeting
with Greenlight Capital), the merger consideration represented
the second highest EBITDA multiple paid in any significant
public acquisition transaction in the engineering and
construction sector.
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The view of Washington Groups management that Greenlight
Capitals valuation of Washington Group was based on
aggressive financial forecasts that Washington Groups
management believes are very unlikely to be achieved.
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Washington Groups capital structure is in line with its
engineering and construction sector peers, and Washington Group
management believes that undertaking additional leverage is
inconsistent with Washington Groups business model and
growth assumptions.
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The merger consideration is comprised of stock and cash, and the
stock portion provides Washington Groups stockholders with
the opportunity to share in the future growth and expected
synergies of the combined company, including the benefits of the
increased scale, diversity and resources of the combined company.
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Recommendation
of the URS Board of Directors and Its Reasons for the
Merger
The URS board of directors believes that the acquisition of
Washington Group will expand the capabilities of both URS and
Washington Group, offer their customers a single
source vendor that could offer a full lifecycle of
planning, engineering, construction and operations and
maintenance services and capitalize on their positions in
important high growth sectors, including power, infrastructure
and environmental management. The URS board of directors has
unanimously:
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determined that the merger is advisable for, fair to and in the
best interests of URS and its stockholders;
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approved the merger agreement and the transactions contemplated
by the merger agreement, including the merger;
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directed that approval of the issuance of URS common stock
pursuant to the merger agreement be submitted for consideration
by URS stockholders at a URS special meeting; and
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resolved to recommend that the URS stockholders vote
FOR the proposal to approve the issuance of shares
of URS common stock pursuant to the merger agreement.
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In reaching its decision to approve the merger agreement, the
URS board of directors consulted with senior members of
URS management team and consultants regarding the
strategic and operational aspects of combining URS and
Washington Group and the results of the due diligence efforts
undertaken by management and URS advisors. In addition,
the URS board of directors held discussions with representatives
of Morgan Stanley and URS other advisors regarding the
past and current business operations, financial condition and
future prospects of Washington Group. The URS board of directors
also consulted with Morgan Stanley as to the fairness, from a
financial point of view, to URS of the merger consideration to
be paid by URS. The URS board of directors also consulted with
representatives of Latham & Watkins and Cooley Godward
regarding legal due diligence matters and the terms of the
merger agreement and related agreements. URS management and the
URS board of directors also retained other firms to provide
consulting services to URS in connection with the merger. In
reaching its decision to approve the merger agreement, the URS
board of directors considered a variety of factors, a number of
which are summarized below:
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Strengthened Strategic Position.
The URS board
of directors considered that the merger would expand the
capabilities of both URS and Washington Group, offer their
customers a single source vendor that could offer a
full lifecycle of planning, engineering, construction and
operations and maintenance services and allow the companies to
capitalize on their positions in important high growth sectors,
including power, infrastructure and environmental management.
Further, the URS board of directors considered that, through the
merger, URS and Washington Group would be in a better position
to capture growth from favorable trends across the engineering
and construction sectors, including the increased investment in
infrastructure projects, the focus on emissions reduction and
energy independence in the power sector, and the increased use
of outsourced construction services by federal agencies, such as
the U.S. Departments of Defense and Energy. The URS board
of directors noted that the combined company would be expected
to be a major contractor to the federal government, including a
top five provider of technical services to the
U.S. Department of Defense and a top provider of
engineering, management and environmental services to the
U.S. Department of Energy (though no assurances can be
given that such relationship with such agencies will continue at
the same level enjoyed historically). As a combined entity, URS
and Washington Group would have more substantial resources to
meet increasing client demand for a single firm that can provide
the full range of engineering and construction services required
for large, complex projects in high-growth markets in the United
States and abroad.
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Operating Efficiencies and Synergies.
The URS
board of directors reviewed the potential strategic and other
benefits of the merger, including the complementary nature of
the businesses of Washington Group and
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URS and the opportunity for cost savings. The URS board of
directors noted that, although no assurances can be given that
any particular level of synergies will be achieved, URS
management anticipated cost synergies of approximately
$52.5 million in 2008. URS ability to achieve these
goals is subject to various factors, a number of which will be
beyond its control, including economic conditions and
unanticipated changes in business conditions, and, therefore,
there can be no assurance that these results will be achieved.
See Cautionary Statement Concerning Forward-Looking
Statements on page 41.
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Positioned for Long-Term Growth.
The URS board
of directors considered that the acquisition of Washington Group
had the potential to accelerate URS future revenue and
earnings growth, which would add stockholder value. In addition,
the URS board of directors considered that the acquisition of
Washington Group would enhance the valuation of URS and provide
URS with access to additional capital and management depth,
along with the ability to pursue additional strategic
combinations. The URS board of directors concluded that the
acquisition of Washington Group would create a larger company
with improved prospects for long-term growth.
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Strategic Alternatives.
The URS board of
directors considered that URS management had reviewed other
possible acquisition candidates and determined that the
acquisition of Washington Group was a better strategic fit than
the other alternatives considered and presented a unique
opportunity to enhance and expand URS business, service
offerings and position for future growth.
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Integration of Washington Group.
The URS board
of directors considered the fact that the combination of the
businesses of URS and Washington Group would be challenging.
However, after consultation with URS management and its advisors
and taking into account URS past experience in integrating
acquired companies, the URS board of directors determined that,
if URS effectively implemented its integration processes, the
operations of Washington Group could be integrated with those of
URS in an efficient manner.
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Opinion of Financial Advisor.
The URS board of
directors considered the opinion of Morgan Stanley that, as of
the date of the opinion, and based upon and subject to the
considerations described in the opinion and based on such other
matters as Morgan Stanley considered relevant, the merger
consideration to be paid by URS pursuant to the merger agreement
was fair from a financial point of view to URS. See
Opinion of URS Financial Advisor
on page 71.
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Terms of the Merger Agreement.
The URS board
of directors, with the assistance of counsel, considered the
general terms of the merger agreement, including:
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Fixed Exchange Ratio.
The URS board of
directors considered the fact that the fixed exchange ratio
provides certainty as to the amount of cash and number of shares
of URS common stock to be delivered to Washington Group
stockholders and the percentage of the total shares of URS
common stock that current Washington Group stockholders will own
after the merger. The URS board of directors also considered the
premium over the historical trading prices of Washington Group
common stock implied by the value of the merger consideration.
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No Solicitation; Termination Fee.
The URS
board of directors reviewed the provisions of the merger
agreement that limit the ability of URS and Washington Group to
solicit other acquisition offers and require each party to pay a
termination fee to the other party under specified
circumstances. The URS board of directors believed that these
provisions were reasonable under the circumstances.
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Conditions to Consummation.
The URS board of
directors reviewed with counsel the conditions to consummation
of the merger, in particular the likelihood of obtaining the
necessary regulatory approvals and stockholder approvals, and
the likelihood that the merger would be completed. While the URS
board of directors believes that these approvals will be
obtained in a timely fashion, the URS board of directors also
noted that URS may be required, under certain circumstances, to
agree to divestitures or other restrictions on the operation of
the business of the combined company.
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Tax Treatment.
The URS board of directors also
considered the expected qualification of the merger and the
second merger, taken together, as a reorganization within the
meaning of Section 368(a) of the Internal
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Revenue Code, resulting in the common stock portion of the
merger consideration being received by Washington Group
stockholders free of federal income tax.
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Financing.
The URS board of directors reviewed
with management and its advisors the ability of URS to obtain,
and the expected terms of, the financing necessary to pay the
cash portion of the merger consideration and refinance the
balance sheet of the combined company.
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In addition, the URS board of directors also identified and
considered a variety of potentially negative factors in its
deliberations concerning the merger, including:
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the possibility that the incremental debt associated with the
merger could cause URS to have reduced financial flexibility and
adversely affect its competitive position, ability to secure
surety bonds and stock price, which risk was considered by the
URS board in light of URS historical success in paying off
acquisition-related debt after making significant acquisitions;
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the ability of URS to obtain the necessary financing to pay the
cash portion of the merger consideration, and the terms on which
financing could be obtained, which was addressed by obtaining
from MSSF and Wells Fargo commitment letters to provide debt
financing, subject to the risk that the financing conditions
would not be satisfied and that certain terms may ultimately be
less favorable than anticipated;
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the risk that the potential benefits sought in the merger might
not be fully realized, which was evaluated in light of URS
history related to integrating prior significant acquisitions,
and after consideration of potential issues that could arise;
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the possibility that the merger might not be completed due to
difficulties in attracting sufficient stockholder approval,
obtaining regulatory clearance or the occurrence of a material
adverse change in either companys business, or that
completion might be unduly delayed by regulatory
authorities withholding consent or seeking to block the
merger;
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the effect of public announcement of the merger on URS
stock price if URS stockholders perceived that URS was paying
too high a price for Washington Group or if stockholders were
concerned about the amount of debt being incurred by URS or
other concerns that the URS board had not considered;
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the projected dilution of URS earnings per share as a
result of issuing a significant number of shares in the merger,
and the estimated time period before the merger was expected to
be accretive to URS earnings per share;
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the fact that the merger agreement did not contain a financing
condition, which might expose URS to significant liability if it
were obligated to close the merger but were unable to obtain the
financing despite having written commitments from MSSF and Wells
Fargo;
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the risk that managements efforts to integrate Washington
Group would disrupt URS operations and distract
managements attention, which might adversely affect
Washington Groups performance and cause the acquisition to
appear much less attractive in hindsight;
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the risk that governmental entities may require that URS
and/or
Washington Group divest certain assets in order to obtain
approval for the merger, which URS management explained
was likely to occur, if at all, only with respect to a small
portion of URS and Washington Groups combined
business, and would likely not be required, given URS
managements belief that the principal customer for that
portion of the business probably would be supportive of the
acquisition;
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the substantial charges to be incurred in connection with the
merger, including costs of integrating the businesses of URS and
Washington Group and transaction expenses arising from the
merger, which were taken into consideration by URS
management in deriving pro forma financial information presented
to the board;
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the risks associated with Washington Groups status as a
defendant in lawsuits relating to the levee failures in New
Orleans, Louisiana on August 29, 2005, which lawsuit
involved a claim for significant damages that had been an
important focus of URS managements diligence review of
Washington Groups business;
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the risks related to potential exposure to losses arising out of
Washington Groups fixed price contracts if project costs
increased, which also had been the subject of financial
diligence performed by URS management and reported to the board;
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the potential loss of customer relationships and contracts that
might result from certain customers reacting negatively to
announcement of the merger or their desire to allocate work
among competing businesses and for which URS and Washington
Group may previously have competed;
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the risk that, despite the efforts of the combined company, key
management and other key personnel might not remain employed by
URS, which risk was viewed in light of URS managements
historical success in retaining key management and personnel
from acquired companies;
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the restrictions on the conduct of URS business during the
period between the signing of the merger agreement and the
completion of the merger, which was not identified as a
significant concern given the nature of the
restrictions; and
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other risks associated with Washington Groups business
generally that were raised during diligence presentations made
by URS management to the board, many of which were described as
being similar to risks inherent in URS business.
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The URS board of directors concluded that these factors could be
managed or mitigated by URS or were unlikely to have a material
impact on the merger or URS, and that, overall, the potentially
negative factors associated with the merger were outweighed by
the potential benefits of the merger.
It was not practical to, and thus the URS board of directors did
not, quantify, rank or otherwise assign relative weights to the
wide variety of factors it considered in evaluating the merger
and the merger agreement, nor did the board determine that any
one factor was of particular importance in deciding that the
merger agreement and associated transactions were in the best
interests of URS and its stockholders. This discussion of
information and material factors considered by the URS board of
directors is intended to be a summary rather than an exhaustive
list. In considering these factors, individual members of the
board may have given different weight to different factors. The
board conducted an overall analysis of the factors described
above, and considered as a whole the factors to support its
decision in favor of the merger and the merger agreement. The
decision of each member of the URS board of directors was based
upon his own judgment, in light of all of the information
presented, regarding the overall effect of the merger agreement
and associated transactions on URS stockholders as
compared to any potential alternative courses of action. After
considering this information, all members of the URS board of
directors unanimously approved the merger agreement and the
transactions contemplated by the merger agreement, including the
merger, and recommended that URS stockholders approve the
issuance of shares of URS common stock pursuant to the merger
agreement.
Recommendation
of the Washington Group Board of Directors and Its Reasons for
the Merger
By unanimous vote, the Washington Group board of directors, at a
meeting held on May 27, 2007, determined that the merger
agreement and the transactions contemplated by the merger
agreement were advisable for, fair to and in the best interests
of Washington Group and its stockholders, and approved and
adopted the merger agreement and the transactions contemplated
by the merger agreement.
The Washington Group board of
directors unanimously recommends that Washington Groups
stockholders vote FOR adoption of the merger agreement and
approval of the merger at the Washington Group special
meeting.
In reaching this decision, the Washington Group board of
directors consulted with Washington Groups management and
its legal and financial advisors and considered a variety of
factors, including the following material factors, among others:
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its belief that the merger would further enhance Washington
Groups role as an engineering and construction leader,
with the benefits of the increased scale, diversity and
resources of the combined company, including URS
significant design resources, and would further support
Washington Groups ability to compete for new opportunities
in high growth sectors, including power, infrastructure and
environmental management;
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the potential strategic and other benefits of the merger
identified by Washington Groups management and URS
management, including the highly complementary nature of the
businesses of Washington Group and URS and the opportunity for
cost savings as a combined company;
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the expectation that Washington Groups existing management
team would continue with the combined company after the merger
and manage Washington Group as a separate business segment of
URS headquartered in Boise, and that the impact on customers and
employees would therefore be minimized;
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the presentations by Washington Groups management
concerning the operations, financial condition and prospects of
Washington Group and the presentations by Goldman Sachs, its
financial advisor, concerning URS, and the expected financial
impact of the merger, and the Washington Group board of
directors belief, based in part on such presentations,
that a merger with URS would likely accelerate Washington
Groups future revenue and earnings growth, which would
create additional stockholder value, and improve Washington
Groups prospects for long-term growth;
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the potential for further consolidation in the engineering and
construction industry, and its belief that a combination with
URS would likely improve Washington Groups ability to
perform in an increasingly competitive industry;
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its review of other potential strategic transactions, including
its discussions with Company A and Company B, and its belief as
a result of such review that URS was a strategic fit and that
the transaction presented a unique opportunity to combine with
URS highly complementary business, which was expected to
enhance and expand Washington Groups present business and
future growth;
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the agreement that one current member of the Washington Group
board of directors would join the board of directors of URS;
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its assessment of the likelihood that the merger would be
completed in a timely manner and that the management team of the
combined company would be able to successfully integrate and
operate the businesses of the combined company after the merger;
the financial analyses presented by Goldman Sachs to the
Washington Group board of directors, and the opinion of Goldman
Sachs dated as of May 27, 2007 to the effect that, as of
that date, and subject to and based upon the factors and
assumptions set forth in such opinion, the consideration to be
received by holders of shares of Washington Group common stock,
taken in the aggregate, pursuant to the merger agreement was
fair from a financial point of view to such holders;
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the financial terms of the merger, including that the right of
Washington Group stockholders to receive, for each share of
Washington Group common stock held by them, $43.80 in cash and
0.772 of a share of URS common stock, which represented $80.00
per share in total consideration and a premium of approximately
14% based on the closing prices on the NYSE of Washington Group
and URS common stock on May 25, 2007 (the last trading day
prior to the execution and announcement of the merger agreement);
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the belief that the fixed exchange ratio provides certainty as
to the number of shares of URS common stock to be issued to
Washington Group stockholders and the percentage of the total
shares of URS common stock that current Washington Group
stockholders will own after the merger;
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the expectation that Washington Group stockholders will own
approximately 31% of the outstanding common stock of the
combined company immediately after closing and will have the
opportunity to share in the future growth and expected synergies
of the combined company, while retaining the flexibility of
selling all or a portion of those shares for cash into a very
liquid market at any time;
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the fact that Washington Group and their legal and financial
representatives had extensive, arms-length negotiations
with URS over several months, which, among other things,
resulted in an increase in the merger consideration from the
initial offer price of $68.00 to $80.00 per share, an
approximately 18% increase, and that the per share cash portion
of the merger consideration of $43.80 is approximately 29%
higher than the initially offered cash consideration of $34.00
per share;
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its view, based in part on the advice of Wachtell Lipton and
Goldman Sachs, that the terms of the merger agreement, including
the low termination fee (equivalent to approximately $2.19 per
share of Washington
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Group), would not preclude a proposal for an alternative
transaction involving Washington Group (see The Merger
Agreement Termination Fee on page 116);
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the requirement that URS pay a termination fee of
$50.0 million to $70.0 million to Washington Group
under certain circumstances (see The Merger
Agreement Termination Fee on page 116);
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the agreement by URS to assume certain regulatory approval risks
for the proposed merger;
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the delivery by URS of financing commitments from reputable and
financially sound lenders that, together with the equity
commitments received, are sufficient to pay the merger
consideration, and that such financing commitments were subject
to acceptable conditions to the obligations of such institutions
to fund such commitments, each as described under the caption
The Merger Financing Commitments on
page 98;
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the fact that the stock portion of the merger consideration is
intended to be tax free to Washington Groups stockholders;
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the regulatory and other approvals required in connection with
the merger and the likelihood such approvals would be received
in a timely manner and without unacceptable conditions;
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the fact that holders of Washington Group common stock that do
not vote in favor of the adoption of the merger agreement and
approval of the merger or otherwise waive their appraisal rights
will have the opportunity to demand appraisal of the fair value
of their shares under Delaware law; and
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the fact that the transaction will be subject to the approval of
Washington Groups stockholders.
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The Washington Group board of directors was also aware of and
considered the following adverse factors associated with the
proposed merger, among others:
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the fact that Washington Group did not undertake an affirmative
auction prior to entering into the merger agreement, although
Washington Group had conducted discussions with Company A
and Company B, and the Washington Group board of directors
was satisfied that the merger agreement provides the board with
an adequate opportunity to consider unsolicited proposals and to
terminate the merger agreement and accept a superior proposal
prior to Washington Group stockholder adoption of the merger
agreement and approval of the merger, subject to payment of a
lower than customary
break-up
fee;
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the risk that the expected synergies and other benefits of the
merger might not be fully achieved or may not be achieved within
the time frames expected;
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the possibility that regulatory or governmental authorities
might seek to impose conditions on or otherwise prevent or delay
the merger (and that the merger may not be completed as a result
of conditions imposed by regulatory authorities or otherwise)
balanced by the fact that URS had agreed to assume certain
regulatory approval risks for the proposed transaction,
including payment of a reverse
break-up
fee
if the required regulatory approvals were not received in a
reasonable period of time;
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the requirement that Washington Group pay a termination fee of
$70.0 million to URS under certain circumstances (see
The Merger Agreement Termination Fee on
page 116);
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the fact that some of Washington Groups directors and
executive officers may have interests in the merger and
arrangements that are different from, or in addition to, those
of Washington Group stockholders generally, including as a
result of employment and compensation arrangements with
Washington Group and the manner in which they would be affected
by the merger (see Interests of Washington
Groups Executive Officers and Directors in the
Merger on page 95);
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the risk and costs that the merger might not be completed, the
potential impact of the restrictions under the merger agreement
on Washington Groups ability to take certain actions
during the period prior to the consummation of the merger (which
may delay or prevent Washington Group from undertaking business
opportunities that may arise pending completion of the merger),
the potential for diversion of management and employee attention
and for increased employee attrition during that period and the
potential effect of these on Washington Groups business
and relations with customers and service providers;
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that URS would have more indebtedness after the merger, which
could adversely affect its cash flows and business and thereby
decrease the value of the stock portion of the merger
consideration to be received by Washington Group stockholders in
the merger; and
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that the price of URS common stock might decline prior to the
completion of the merger, which would decrease the value of the
stock portion of the merger consideration to be received by
Washington Group stockholders in the merger.
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The foregoing discussion of the factors considered by the
Washington Group board of directors is not intended to be
exhaustive, but, rather, includes the material factors
considered by the Washington Group board of directors. In
reaching its decision to approve the merger agreement, the
merger and the other transactions contemplated by the merger
agreement, the Washington Group board of directors did not
quantify or assign any relative weights to the factors
considered, and individual directors may have given different
weights to different factors. The Washington Group board of
directors considered all these factors as a whole, including
discussions with, and questioning of, Washington Group
management and Washington Groups financial and legal
advisors, and overall considered the factors to be favorable to,
and to support, its determination. The Washington Group board of
directors also considered the experience of Goldman Sachs, its
financial advisor, for analyses of the financial terms of the
merger and for their opinion as to the fairness of the
consideration in the merger to Washington Groups
stockholders.
For the reasons set forth above, the Washington Group board
of directors unanimously determined that the merger, the merger
agreement and the transactions contemplated by the merger
agreement are advisable for
,
fair to and in the best
interests of Washington Group and its stockholders, and approved
and adopted the merger agreement and the transactions
contemplated by the merger agreement. The Washington Group board
of directors unanimously recommends that Washington Groups
stockholders vote FOR adoption of the merger agreement and
approval of the merger at the Washington Group special
meeting.
Opinion
of URS Financial Advisor
Morgan
Stanley & Co. Incorporated
On March 23, 2007, the URS board of directors retained
Morgan Stanley to act as its exclusive financial advisor and
provide a financial opinion letter in connection with a possible
acquisition of or business combination with Washington Group.
The URS board of directors selected Morgan Stanley to provide
financial advice and assistance in connection with the merger
based on Morgan Stanleys qualifications, expertise,
reputation, and experience in transactions similar to the
merger. At a telephonic meeting of the URS board of directors
held on May 27, 2007, Morgan Stanley delivered its oral
opinion, subsequently confirmed in writing that, as of that date
and based upon and subject to the various assumptions,
qualifications and limitations set forth in the opinion, the
merger consideration to be paid by URS pursuant to the merger
agreement was fair from a financial point of view to URS.
The full text of Morgan Stanleys opinion, dated
May 28, 2007, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and
qualifications and limitations on the scope of the review
undertaken by Morgan Stanley in rendering its opinion, is
included as Annex B to this joint proxy
statement/prospectus. The summary of Morgan Stanleys
fairness opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference
to the full text of the opinion. URS stockholders should read
this opinion carefully and in its entirety. Morgan
Stanleys opinion is directed to the Board and only
addresses the fairness from a financial point of view of the
merger consideration to URS. Morgan Stanleys opinion did
not address any other aspect of the merger. Morgan Stanley
expressed no opinion or recommendation as to how the URS
stockholders or Washington Group stockholders should vote at the
stockholder meetings to be held in connection with the
merger.
In connection with rendering its opinion, Morgan Stanley, among
other things:
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reviewed certain publicly available financial statements and
other business and financial information of Washington Group and
URS, respectively;
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reviewed certain internal financial statements and other
financial and operating data, including certain financial
forecasts, concerning Washington Group prepared by the
management of Washington Group;
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reviewed certain financial forecasts concerning Washington Group
prepared by the management of Washington Group and reviewed by
the management of URS;
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reviewed certain internal financial statements and other
financial and operating data, including certain financial
forecasts, concerning URS prepared by the management of URS;
|
|
|
|
reviewed information relating to certain strategic, financial
and operational benefits anticipated from the merger, prepared
by the management of URS;
|
|
|
|
discussed the past and current operations and financial
condition and the prospects of URS and Washington Group,
including information relating to certain strategic, financial
and operational benefits anticipated from the merger, with
senior executives of URS;
|
|
|
|
reviewed the pro forma impact of the merger on URS
earnings per share, cash flow, capitalization and financial
ratios;
|
|
|
|
reviewed the reported prices and trading activity for the
Washington Group common stock and the URS common stock,
respectively;
|
|
|
|
compared the financial performance of Washington Group and URS
and the prices and trading activity of Washington Group common
stock and URS common stock with that of other publicly-traded
companies that are comparable with Washington Group and URS,
respectively, and their respective securities;
|
|
|
|
reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
|
|
|
|
participated in discussions and negotiations among
representatives of Washington Group and URS and their financial
and legal advisors;
|
|
|
|
reviewed the merger agreement, draft debt commitment letters of
URS substantially in the form of the drafts dated May 27,
2007, which are referred to as the Commitment Letters, and
certain related documents; and
|
|
|
|
performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate.
|
In arriving at its opinion, Morgan Stanley assumed and relied
upon without independent verification the accuracy and
completeness of the information supplied or otherwise made
available to it by Washington Group and URS for the purposes of
its opinion. With respect to the financial forecasts prepared by
the management of URS, including information relating to certain
strategic, financial and operational benefits anticipated from
the merger, Morgan Stanley assumed that they had been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of
Washington Group and URS.
In addition, Morgan Stanley assumed that the merger will be
consummated in accordance with the terms set forth in the merger
agreement without any material waiver, amendment or delay of any
terms or conditions, including, among other things, that the
second merger will be consummated promptly following the merger,
that the merger and the second merger will be treated as a
single integrated transaction and that the merger will be
treated as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of URS or Washington
Group nor was it furnished with any such appraisals. In
addition, Morgan Stanley assumed that URS will obtain financing
in connection with the merger on terms consistent with the
Commitment Letters and as discussed with the senior management
of URS. Morgan Stanley assumed that, in connection with the
receipt of all the necessary governmental, regulatory or other
approvals and consents required for the merger, no delays,
limitations, conditions or restrictions will be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived in the merger. Morgan Stanley
relied upon, without independent verification, the assessment by
the management of URS of: (i) the strategic, financial and
other benefits expected to result from the merger; (ii) the
timing and risks associated with the integration of Washington
Group and URS; (iii) the strategic rationale for the merger
and (iv) the validity of, and risks associated with,
Washington Groups and URS existing and future
services, technologies, intellectual property, products and
business models. Morgan Stanley is not a legal, tax or
regulatory advisor and has relied upon, without independent
verification, the assessment of URS and its legal, tax or
regulatory advisors with respect to legal, tax and regulatory
matters. Morgan Stanleys opinion was necessarily based on
financial, economic, market and other conditions as in effect
on, and the information made available to it
72
as of, May 28, 2007. Events occurring after the date of the
opinion may affect the opinion and the assumptions used in
preparing it, and Morgan Stanley did not assume any obligations
to update, revise, or reaffirm this opinion.
The opinion was for the information of the URS board of
directors in connection with the merger. In addition, Morgan
Stanleys opinion did not in any manner address the prices
at which the URS common stock will trade following consummation
of the merger and expressed no opinion or recommendation as to
how the URS stockholders and the Washington Group stockholders
should vote at the stockholder meetings to be held in connection
with the merger.
Valuation
Methods and Analyses
The following is a summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion letter dated
May 28, 2007. The various analyses summarized below were
based on closing prices for the common stock of URS and
Washington Group as of May 25, 2007, the last full trading
day preceding the day of the special meeting of the URS board of
directors to consider and approve, adopt and authorize the
merger agreement. As of that date, the value of the merger
consideration was $80.00. Although each analysis was provided to
the URS board of directors, in connection with arriving at its
opinion, Morgan Stanley considered all of its analyses as a
whole and did not attribute any particular weight to any
analysis described below. Some of these summaries of financial
analyses include information presented in tabular format. In
order to fully understand the financial analyses used by Morgan
Stanley, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete
description of the financial analyses used by Morgan Stanley.
Washington
Group
Trading
History
Morgan Stanley reviewed the historical trading prices for
Washington Group common stock for the four-month period from
January 26, 2007 (the last trading day prior to the
delivery of the initial offer) to May 25, 2007 (one trading
day prior to the announcement of the merger agreement) and for
the twelve-month period prior to the announcement of the merger
agreement. Morgan Stanley observed that the twelve-month range
of trading prices was $47-$74 and the range of trading prices
since January 26, 2007 was $56-$74. Morgan Stanley noted
that as of May 25, 2007, the closing price of Washington
Group common stock was $69.97 per share. Morgan Stanley also
noted that based on closing prices for the common stock of URS
and Washington Group as of May 25, 2007, the implied
transaction value per share of Washington Group common stock was
$80.00.
Comparable
Company Analysis
Using publicly available information, Morgan Stanley reviewed
the market values and trading multiples of Washington Group and
the following seven publicly held companies in the engineering
and construction industry that Morgan Stanley deemed comparable
to Washington Group:
|
|
|
Engineering and Construction Comparables
|
|
|
|
Fluor Corporation
|
|
|
Foster Wheeler Ltd.
|
|
|
Jacobs Engineering Group Inc.
|
|
|
The Shaw Group Inc.
|
|
|
EMCOR Group, Inc.
|
|
|
VT Group plc
|
|
|
Tetra Tech, Inc.
|
|
|
All multiples were based on closing stock prices on May 25,
2007. Estimated financial data for the selected companies were
based on public filings and publicly available equity research
analysts estimates, as aggregated by the Institutional
Brokers Estimate System, which is referred to as the IBES.
Estimated financial data for Washington Group were based on
public filings, publicly announced earnings guidance, URS
managements estimates, D.A. Davidson research estimates
(5/11/07)
and publicly available equity research analysts estimates
as aggregated by IBES.
73
For each of the comparable companies, Morgan Stanley calculated
the following:
|
|
|
|
|
Aggregate Value, which is defined as market value of common
equity plus debt and preferred stock, less cash.
|
|
|
|
Aggregate Value/2007E EBITDA, which is defined as Aggregate
Value as a multiple of calendar year 2007 estimated earnings
before interest, taxes, depreciation and amortization, or
EBITDA, based upon publicly available information, including
reports of equity research analysts and using the mean of the
analysts calendar year 2007 estimates.
|
|
|
|
Aggregate Value/2008E EBITDA, which is defined as Aggregate
Value as a multiple of calendar year 2008 EBITDA, based upon
publicly available information, including reports of equity
research analysts and using the mean of the analysts
calendar year 2008 estimates.
|
|
|
|
Price/2007E Earnings, which is defined as stock price as a
multiple of estimated earnings per share, based upon publicly
available information, including reports of equity research
analysts and using the mean of the analysts calendar year
2007 estimates.
|
|
|
|
Price/2008E Earnings, which is defined as stock price as a
multiple of estimated earnings per share, based upon publicly
available information, including reports of equity research
analysts and using the mean of the analysts calendar year
2008 estimates.
|
A summary of the reference range of market trading multiples is
set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and Construction Comparables
|
|
Mean
|
|
|
Median
|
|
|
High
|
|
|
Low
|
|
|
Aggregate Value/2007E EBITDA
|
|
|
12.7
|
x
|
|
|
12.5
|
x
|
|
|
18.5
|
x
|
|
|
10.5
|
x
|
Aggregate Value/2008E EBITDA
|
|
|
10.5
|
x
|
|
|
10.2
|
x
|
|
|
13.6
|
x
|
|
|
8.8
|
x
|
Price/2007E Earnings
|
|
|
23.6
|
x
|
|
|
23.8
|
x
|
|
|
30.2
|
x
|
|
|
18.0
|
x
|
Price/2008E Earnings
|
|
|
18.7
|
x
|
|
|
19.0
|
x
|
|
|
20.8
|
x
|
|
|
16.1
|
x
|
Morgan Stanley calculated an implied valuation range by applying
multiple ranges to the applicable operating statistics based on
publicly available equity research analyst estimates, and other
publicly available data. Based upon and subject to the
foregoing, Morgan Stanley calculated implied valuation ranges
for the Washington Group common stock of $68 to $78 per share
based on Aggregate Value/2007E EBITDA and $67 to $75 based on
Price/2007E
Earnings. Morgan Stanley noted that based on closing prices for
the common stock of URS and Washington Group as of May 25,
2007, the implied transaction value per share of Washington
Group common stock was $80.00.
Although the foregoing companies were compared to Washington
Group for purposes of this analysis, Morgan Stanley noted that
no company used in the comparable company analysis is identical
to Washington Group because of differences between the business
mix, markets served, operations, and other characteristics of
Washington Group and the comparable companies. In evaluating the
comparable companies, Morgan Stanley relied on publicly
available equity research analyst estimates, which estimates are
based in part on judgments and assumptions with regard to
industry performance, general business, economic, market and
financial conditions, and other matters, many of which are
beyond the control of Washington Group, such as the impact of
competition on the business of Washington Group, as well as on
the industry generally, industry growth, and the absence of any
adverse material change in the financial condition and prospects
of Washington Group or the industry or in the markets generally.
Mathematical analysis, such as determining the mean or median,
is not in itself a meaningful method of using comparable company
data.
Securities
Research Analysts Price Targets
Morgan Stanley reviewed and analyzed future public market
trading price targets for Washington Group common stock prepared
and published by equity research analysts. These targets reflect
each analysts estimate of the future public market trading
price of Washington Group common stock. Morgan Stanley
discounted the price targets at Washington Groups
estimated average cost of equity capital of 9.6%. The range of
discounted analyst price targets for Washington Group was $64 to
$66. Morgan Stanley noted that based on closing prices for the
74
common stock of URS and Washington Group as of May 25,
2007, the implied transaction value per share of Washington
Group common stock was $80.00.
The public market trading price targets published by the
securities research analysts do not necessarily reflect current
market trading prices for Washington Group common stock and
these estimates are subject to uncertainties, including the
future financial performance of Washington Group and future
financial market conditions.
Discounted
Equity Value Analysis
Morgan Stanley performed an analysis of the implied present
value per share of the Washington Group common stock on a
standalone basis based on Washington Groups projected
future equity value using calendar year 2009 estimates based on
URS management forecasts.
To calculate the discounted equity value, Morgan Stanley
multiplied the applicable earnings estimate by the current
calendar year multiple range used in the comparable company
analysis described above, and discounted the implied nominal
equity values of Washington Group to a present value at an
illustrative discount rate of 9.6%, which reflected Washington
Groups estimated average cost of equity capital. Based on
these forecasts and assumptions, Morgan Stanley derived an
implied valuation range for the Washington Group common stock of
$82 to $93. Morgan Stanley noted that based on closing
prices for the common stock of URS and Washington Group as of
May 25, 2007, the implied transaction value per share of
Washington Group common stock was $80.00.
Precedent
Transactions Analysis
Morgan Stanley also performed a precedent transaction analysis,
which is designed to imply a value of a company based on
publicly available premiums of selected transactions that share
some characteristics with the merger. The precedent transactions
analysis was presented to the URS board of directors to provide
the URS board of directors with background information and
perspective in connection with its consideration of the merger
agreement. In connection with its analysis, Morgan Stanley
analyzed the consideration to be received by holders of
Washington Group common stock in the merger in relation to the
historical market price of the Washington Group common stock.
The following table lists the percentage premium of the implied
transaction value per share for a share of Washington Group
common stock of $80.00 as compared to the Washington Group
common stock closing prices one day, one week and four weeks
prior to the initial announcement of the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium to Price Prior to Announcement
|
|
|
|
(March 17, 2006)
|
|
Implied Transaction Value
|
|
1 Day
|
|
|
1 Week
|
|
|
4 Weeks
|
|
|
$80.00
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
17
|
%
|
Morgan Stanley reviewed publicly available information with
respect to acquisitions of United States based publicly-traded
target companies with transaction values in excess of
$1 billion announced between January 1, 2007 and
May 14, 2007. For each transaction, Morgan Stanley
analyzed, based on the final offer, the premium offered by the
acquiror to the price of the targets shares one day, one
week and four weeks prior to the initial announcement of the
transaction.
These transactions (listed by month and year of announcement and
target / acquirer) included:
|
|
|
Date
|
|
Target / Acquiror
|
|
1/2/2007
|
|
EGL Inc. / Investor Group
|
1/8/2007
|
|
United Surgical Partners Intl /
UNCN Acquisition Corp.
|
1/16/2007
|
|
Genesis HealthCare Corp. / FC-GEN
Acquisition Inc.
|
1/18/2007
|
|
ION Media Networks Inc. / Investor
Group
|
1/28/2007
|
|
Laureate Education Inc. / Investor
Group
|
2/5/2007
|
|
Longview Fibre Co. / Brookfield
Asset Mgmt Inc
|
2/5/2007
|
|
Mills Corp. / Investor Group
|
2/5/2007
|
|
Investors Financial Services Corp.
/ State Street Corp.
|
75
|
|
|
Date
|
|
Target / Acquiror
|
|
2/5/2007
|
|
Lear Corp. / American Re Partners
LP
|
2/5/2007
|
|
Hanover Compressor Co. / Universal
Compression Holdings
|
2/6/2007
|
|
Radian Group Inc. / MGIC
Investment Corp.
|
2/9/2007
|
|
Laidlaw International Inc. /
FirstGroup PLC
|
2/10/2007
|
|
Novelis Inc / AV Aluminum Inc.
|
2/12/2007
|
|
Hydril Company LP / Tenaris SA
|
2/20/2007
|
|
New River Pharmaceuticals Inc. /
Shire PLC
|
2/25/2007
|
|
TXU Corp. / Investor Group
|
2/27/2007
|
|
New Plan Excel Realty Trust, Inc.
/ Centro Retail Group
|
2/28/2007
|
|
Hyperion Solutions Corp. / Oracle
Corp.
|
3/5/2007
|
|
K&F Industries Holdings Inc.
/ Meggitt PLC
|
3/12/2007
|
|
Sierra Health Services Inc. /
UnitedHealth Group Inc.
|
3/12/2007
|
|
Spirit Finance Corp. / Investor
Group
|
3/13/2007
|
|
WCI Communities Inc. / Investor
Group
|
3/15/2007
|
|
PHH Corp. / Investor Group
|
3/15/2007
|
|
CBOT Holdings Inc. /
IntercontinentalExchange Inc
|
3/15/2007
|
|
WebEx Communications Inc. / Cisco
Systems Inc.
|
3/18/2007
|
|
InfraSource Services Inc. / Quanta
Services Inc
|
3/18/2007
|
|
ServiceMaster Company / Investor
Group
|
3/19/2007
|
|
EGL Inc. / Apollo Management LP
|
3/19/2007
|
|
Triad Hospitals Inc. / Community
Health Systems Inc.
|
3/20/2007
|
|
Affiliated Computer Services Inc.
/ Investor Group
|
3/20/2007
|
|
Claires Stores Inc. / Apollo
Management LP
|
3/22/2007
|
|
Kronos Inc. / Hellman &
Friedman Capital
|
3/22/2007
|
|
Paxar Corporation / Avery Dennison
Corp.
|
3/24/2007
|
|
Biosite Inc. / Beckman Coulter Inc.
|
3/29/2007
|
|
Lone Star Technologies Inc. /
United States Steel Corp
|
4/2/2007
|
|
First Data Corp. / Kohlberg Kravis
Roberts & Co.
|
4/2/2007
|
|
Global Imaging Systems Inc. /
Xerox Corporation
|
4/4/2007
|
|
Biosite Inc. / Inverness Medical
Innovations Inc.
|
4/16/2007
|
|
SLM Corp. / Investor Group
|
4/16/2007
|
|
Innkeepers USA Trust / Apollo
Investment Corp.
|
4/17/2007
|
|
Catalina Marketing Corp. / Hellman
& Friedman Capital
|
4/17/2007
|
|
OMI Corp. / Investor Group
|
4/20/2007
|
|
Genesco Inc. / Foot Locker Inc
|
4/23/2007
|
|
MedImmune Inc. / AstraZeneca PLC
|
4/24/2007
|
|
Highland Hospitality Corp. / JER
Partners Acquisitions IV
|
4/24/2007
|
|
Myers Industries Inc./ GS Capital
Partners LP
|
4/25/2007
|
|
Covansys Corp. / Computer Sciences
Corp.
|
4/25/2007
|
|
Genesis HealthCare Corp. /
Fillmore Capital Partners LLC
|
4/26/2007
|
|
Harman International Industries
Inc. / Investor Group
|
4/30/2007
|
|
International Securities Exchange
Holdings, Inc. / Eurex AG
|
5/1/2007
|
|
MAF Bancorp / National City
Corporation
|
5/2/2007
|
|
BISYS Group Inc. / Investor Group
|
76
|
|
|
Date
|
|
Target / Acquiror
|
|
5/3/2007
|
|
IPSCO Inc. / SSAB Svenskt
Stål AB
|
5/4/2007
|
|
Greater Bay Bancorp / Wells Fargo
& Co.
|
5/7/2007
|
|
Ohio Casualty Corp. / Liberty
Mutual Group Inc.
|
5/7/2007
|
|
Armor Holdings Inc. / BAE Systems
Inc
|
5/8/2007
|
|
Florida East Coast Industries Inc.
/ Fortress Investment Group LLC
|
A summary of the reference range of precedent premiums in these
transactions is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium Prior to Announcement
|
|
|
|
1 Day
|
|
|
1 Week
|
|
|
4 Weeks
|
|
|
25
th
Percentile
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
12
|
%
|
75
th
Percentile
|
|
|
28
|
%
|
|
|
31
|
%
|
|
|
37
|
%
|
Implied Transaction Value
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
17
|
%
|
Based upon and subject to the foregoing, Morgan Stanley
calculated implied valuation ranges for the Washington Group
common stock of $76 to $90 per share based on
1-day
prior
premium, $77 to $92 per share based on 1-week prior premium and
$77 to $94 per share based on 4-weeks prior premium. Morgan
Stanley noted that based on closing prices for the common stock
of URS and Washington Group as of May 25, 2007, the implied
transaction value per share of Washington Group common stock was
$80.00.
No company or transaction utilized in the analysis of selected
precedent premiums or precedent transactions is identical to
Washington Group or this transaction. Accordingly, an analysis
of the results of such a comparison is not purely mathematical
but instead involves complex considerations and judgments
concerning differences in historical and projected financial and
operating characteristics of the companies involved and other
factors that could affect the merger or the selected
transactions to which it is being compared.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows of Washington Group for
calendar years 2007 through 2011, based on the forecasts
prepared by the management of URS. Morgan Stanley calculated
implied equity values per share of Washington Group common stock
by using estimated discount rates ranging from 8.5% to 9.5% and
multiples of estimated 2012 EBITDA ranging from 8.5x to 10.5x.
Based on selected ranges of multiples and discount rates, this
analysis indicated a range of equity values per share of $71 to
$86. Morgan Stanley noted that based on closing prices for the
common stock of URS and Washington Group as of May 25,
2007, the implied transaction value per share of Washington
Group common stock was $80.00.
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows for calendar years 2007
through 2011, based on an extrapolation from the operating
forecasts for 2007 and 2008 in D.A. Davidsons research
dated May 11, 2007. Morgan Stanley calculated implied
equity values per share of Washington Group common stock by
using estimated discount rates ranging from 8.5% to 9.5% and
multiples of estimated 2012 EBITDA ranging from 8.5x to 10.5x.
Based on selected ranges of multiples and discount rates, this
analysis indicated a range of equity values per share of $73 to
$87. Morgan Stanley noted that based on closing prices for the
common stock of URS and Washington Group as of May 25,
2007, the implied transaction value per share of Washington
Group common stock was $80.00.
The valuation stated above is not necessarily indicative of
Washington Groups respective actual, present or future
value or results, which may be more or less favorable than
suggested by this type of analysis.
77
URS
Trading
History
Morgan Stanley reviewed the historical trading prices for URS
common stock for the twelve-month period prior to the
announcement of the merger agreement. Morgan Stanley observed
that the twelve-month range of trading prices was $36 - $49.
Morgan Stanley noted that as of May 25, 2007, the closing
price of URS common stock was $46.89 per share.
Comparable
Company Analysis
Using publicly available information, Morgan Stanley reviewed
the market values and trading multiples of URS and the following
twelve publicly held companies in the engineering and
construction and government services industries that Morgan
Stanley deemed comparable to URS:
|
|
|
Engineering and Construction Comparables
|
|
Government Services
|
|
Fluor Corporation
|
|
SAIC, Inc.
|
Foster Wheeler Ltd.
|
|
CACI International Inc
|
Jacobs Engineering Group Inc.
|
|
SRA International, Inc.
|
The Shaw Group Inc.
|
|
ManTech International Corporation
|
EMCOR Group, Inc.
|
|
DynCorp International Inc.
|
VT Group plc
|
|
|
Tetra Tech, Inc.
|
|
|
All multiples were based on closing stock prices on May 25,
2007. Estimated financial data for the selected companies were
based on public filings and publicly available equity research
analysts estimates as aggregated by IBES. Estimated
financial data for URS were based on public filings, publicly
announced earnings guidance, URS managements estimates,
and publicly available equity research analysts estimates
as aggregated by IBES.
For each of the comparable companies, Morgan Stanley calculated
the following, each as previously defined:
|
|
|
|
|
Aggregate Value
|
|
|
|
Aggregate Value/2007E EBITDA
|
|
|
|
Aggregate Value/2008E EBITDA
|
|
|
|
Price/2007E Earnings
|
|
|
|
Price/2008E Earnings
|
A summary of the reference range of market trading multiples is
set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and Construction Comparables
|
|
Mean
|
|
|
Median
|
|
|
High
|
|
|
Low
|
|
|
Aggregate Value/2007E EBITDA
|
|
|
12.7
|
x
|
|
|
12.5
|
x
|
|
|
18.5
|
x
|
|
|
10.5
|
x
|
Aggregate Value/2008E EBITDA
|
|
|
10.5
|
x
|
|
|
10.2
|
x
|
|
|
13.6
|
x
|
|
|
8.8
|
x
|
Price/2007E Earnings
|
|
|
23.6
|
x
|
|
|
23.8
|
x
|
|
|
30.2
|
x
|
|
|
18.0
|
x
|
Price/2008E Earnings
|
|
|
18.7
|
x
|
|
|
19.0
|
x
|
|
|
20.8
|
x
|
|
|
16.1
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Services Comparables
|
|
Mean
|
|
|
Median
|
|
|
High
|
|
|
Low
|
|
|
Aggregate Value/2007E EBITDA
|
|
|
9.6
|
x
|
|
|
9.7
|
x
|
|
|
11.3
|
x
|
|
|
8.4
|
x
|
Aggregate Value/2008E EBITDA
|
|
|
8.5
|
x
|
|
|
8.4
|
x
|
|
|
10.3
|
x
|
|
|
7.3
|
x
|
Price/2007E Earnings
|
|
|
20.2
|
x
|
|
|
19.4
|
x
|
|
|
22.5
|
x
|
|
|
17.8
|
x
|
Price/2008E Earnings
|
|
|
17.5
|
x
|
|
|
17.4
|
x
|
|
|
20.2
|
x
|
|
|
14.0
|
x
|
Morgan Stanley calculated an implied valuation range by applying
multiple ranges to the applicable operating statistics based on
publicly available equity research analyst estimates, and other
publicly available data. Based
78
upon and subject to the foregoing, Morgan Stanley calculated
implied valuation ranges for the URS common stock of $45 to $55
per share based on Aggregate Value/2007E EBITDA and $47 to $57
based on Price/2007E Earnings.
Although the foregoing companies were compared to URS for
purposes of this analysis, Morgan Stanley noted that no company
used in the comparable company analysis is identical to URS
because of differences between the business mix, markets served,
operations, and other characteristics of URS and the comparable
companies. In evaluating the comparable companies, Morgan
Stanley relied on publicly available equity research analyst
estimates, which estimates are based in part on judgments and
assumptions with regard to industry performance, general
business, economic, market and financial conditions, and other
matters, many of which are beyond the control of URS, such as
the impact of competition on the business of URS, as well as on
the industry generally, industry growth, and the absence of any
adverse material change in the financial condition and prospects
of URS or the industry or in the markets generally. Mathematical
analysis, such as determining the mean or median, is not in
itself a meaningful method of using comparable company data.
Securities
Research Analysts Price Targets
Morgan Stanley reviewed and analyzed future public market
trading price targets for URS common stock prepared and
published by equity research analysts. These targets reflect
each analysts estimate of the future public market trading
price of URS common stock. Morgan Stanley discounted the price
targets at URS estimated average cost of equity capital of
9.8%. The range of discounted analyst price targets for URS was
$43 to $49.
The public market trading price targets published by the
securities research analysts do not necessarily reflect current
market trading prices for URS common stock and these estimates
are subject to uncertainties, including the future financial
performance of URS and future financial market conditions.
Discounted
Equity Value Analysis
Morgan Stanley performed an analysis of the implied present
value per share of the URS common stock on a standalone basis
based on URS projected future equity value using calendar
year 2009 estimates based on URS management forecasts.
To calculate the discounted equity value, Morgan Stanley
multiplied the applicable earnings estimate by the current
calendar year multiple range used in the comparable company
analysis described above, and discounted the implied nominal
equity values of URS to a present value at an illustrative
discount rate of 9.8%, which reflected URS estimated
average cost of equity capital. Based on the aforementioned
forecasts and assumptions, Morgan Stanley derived an
implied valuation range for the URS common stock of $51 to $62.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis of the
projected unlevered free cash flows of URS for calendar years
2007 through 2011, based on the forecasts prepared by the
management of URS. Morgan Stanley calculated implied equity
values per share of URS common stock by using estimated discount
rates ranging from 8.5% to 9.5% and multiples of estimated 2012
EBITDA ranging from 7.5x to 9.5x. Based on selected ranges of
multiples and discount rates, this analysis indicated a range of
equity values per share of $48 to $61.
The valuation stated above is not necessarily indicative of
URS respective actual, present or future value or results,
which may be more or less favorable than suggested by this type
of analysis.
Pro Forma
Merger Analysis
Morgan Stanley analyzed the potential pro forma impact of the
transaction on URS earnings per share and cash earnings
per share for calendar years 2008 through and 2011. Morgan
Stanley calculated such pro forma earnings per share and cash
earnings per share on the basis of the transaction exchange
ratio provided for by the merger agreement, URS estimates
of earnings per share for URS and synergies resulting from the
merger estimated by URS management. Morgan Stanley calculated
that estimated pro forma GAAP earnings per share would exceed
estimated GAAP earnings per share by 0%, 6%, 10% and 14% in
2008, 2009, 2010 and 2011, respectively, and estimated pro forma
cash earnings per share would exceed estimated cash earnings per
share by 6%, 11%, 14% and
79
18% in 2008, 2009, 2010 and 2011, respectively, not including
the impact of revenue synergies expected to be achieved through
the combination.
General
The summary set forth above does not purport to be a complete
description of all the analyses performed by Morgan Stanley. The
preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and
relevant methods of financial analyses and the application of
these methods to the particular circumstances and is not
necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of the analyses as a whole and did
not attribute any particular weight to any particular analysis
or factor considered by it. The summary provided and the
analyses described above must be considered as a whole, and
selecting any portion of Morgan Stanleys analyses, without
considering all analyses, would create an incomplete view of the
process underlying Morgan Stanleys opinion. In addition,
Morgan Stanley may have given various factors more or less
weight than other factors and may have deemed various
assumptions more or less probable than other assumptions, so
that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan
Stanleys view of the actual value of Washington Group or
URS.
In performing its analysis, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Washington Group or URS. Any
estimates contained in the analyses performed by Morgan Stanley
are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such
estimates. The analyses performed were prepared solely as part
of Morgan Stanleys analysis of the fairness from a
financial point of view to URS of the merger consideration to be
paid by URS pursuant to the merger agreement and were conducted
in connection with the delivery by Morgan Stanley of its
opinion, dated May 28, 2007, to the URS board of directors.
These analyses do not purport to be appraisals or to reflect the
prices at which shares of common shares of URS or Washington
Group might naturally trade.
The merger consideration pursuant to the merger agreement was
determined through arms-length negotiations between URS
and Washington Group and was approved by the URS board of
directors. Morgan Stanley provided advice to URS during these
negotiations. Morgan Stanley did not, however, recommend any
specific merger consideration to URS or the URS board of
directors or that any specific merger consideration constituted
the only appropriate consideration for the transaction. Morgan
Stanleys opinion to the URS board of directors was one of
many factors taken into consideration by the URS board of
directors in deciding to approve the transaction. Morgan Stanley
did not advise the URS board of directors that any specific
consideration constituted the only appropriate consideration for
the transaction.
Consequently, the analyses as described above should not be
viewed as determinative of the opinion of the URS board of
directors with respect to the merger consideration or of whether
the URS board of directors would have been willing to agree to
different consideration. The foregoing summary describes the
material analyses performed by Morgan Stanley but does not
purport to be a complete description of the analyses performed
by Morgan Stanley.
Morgan Stanley is an internationally recognized investment
banking and advisory firm. Morgan Stanley, as part of its
investment banking business, is continuously engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate,
estate and other purposes. In the ordinary course of its
business, Morgan Stanley and its affiliates may from time to
time trade in the securities or the indebtedness of URS and its
affiliates for its own account, the accounts of investment funds
and other clients under the management of Morgan Stanley and for
the accounts of its customers and accordingly, may at any time
hold a long or short position in such securities or indebtedness
for any such account.
Under the terms of its engagement letter, Morgan Stanley
provided URS financial advisory services and a financial opinion
in connection with the merger. Pursuant to the terms of this
engagement letter, URS has agreed to pay Morgan Stanley and its
affiliates advisory and financing fees currently estimated at
$30 million, of which $2 million was paid upon the
announcement of the transaction, and the remainder of which is
80
contingent upon closing of the transaction. URS has also
entered into a financing commitment letter with an affiliate of
Morgan Stanley to provide 50% of a senior secured debt financing
in connection with the transaction, for which the affiliate will
receive the financing portion of the aforementioned fees upon
the closing of the transaction. URS has also agreed to reimburse
Morgan Stanley for its fees and expenses incurred in performing
its services. In addition, URS has agreed to indemnify Morgan
Stanley and any of its affiliates, their respective directors,
officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws relating to or arising out of
its engagement and any related transactions. In the past, Morgan
Stanley and its affiliates have provided financial advisory and
financing services for URS and have received fees for the
rendering of these services. Other than the fees disclosed
above, since August 15, 2005, Morgan Stanley has not
received any investment banking fees from URS or its
affiliates.
Opinion
of Washington Groups Financial Advisor
Goldman,
Sachs & Co.
At the meeting of Washington Groups board of directors on
May 27, 2007, Goldman Sachs delivered its oral opinion,
which opinion was later confirmed in writing, that, as of
May 27, 2007 and based upon and subject to the factors and
assumptions set forth in such opinion, the consideration to be
received by holders of Washington Group common stock, taken in
the aggregate, pursuant to the merger agreement is fair from a
financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
May 27, 2007, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Annex C. Goldman Sachs provided its opinion for the
information and assistance of Washington Groups board of
directors in connection with its consideration of the
transaction. The Goldman Sachs opinion is not a recommendation
as to how any holder of Washington Group common stock should
vote with respect to the transaction.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
|
|
|
|
|
the merger agreement;
|
|
|
|
the annual reports to stockholders and Annual Reports on
Form 10-K
of Washington Group and URS for the five fiscal years ended
December 29, 2006;
|
|
|
|
certain interim reports to stockholders and Quarterly Reports on
Form
10-Q
of
Washington Group and URS;
|
|
|
|
certain other communications from Washington Group and URS to
their respective stockholders; and
|
|
|
|
certain internal financial analyses and forecasts for Washington
Group and URS prepared by their respective managements,
including certain cost savings and operating synergies projected
by the managements of Washington Group and URS.
|
Goldman Sachs also held discussions with members of the senior
managements of Washington Group and URS regarding their
assessment of the strategic rationale for, and the potential
benefits of, the transaction and the past and current business
operations, financial condition, and future prospects of their
respective companies. In addition, Goldman Sachs reviewed the
reported price and trading activity for shares of Washington
Group common stock and URS common stock, compared certain
financial and stock market information for Washington Group and
URS with similar financial and stock market information for
certain other companies the securities of which are publicly
traded, and reviewed the financial terms of certain recent
business combinations in the engineering and construction
industry specifically and in other industries generally and
performed such other studies and analyses, and considered such
other factors, as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all
of the financial, legal, accounting, tax and other information
discussed with or reviewed by it and assumed such accuracy and
completeness for purposes of rendering the opinion described
above. In that regard, Goldman Sachs assumed that the internal
financial analyses
81
and forecasts, including certain cost savings and operating
synergies, were reasonably prepared on a basis reflecting the
best then available estimates and judgments of the managements
of Washington Group and URS, as the case may be. In addition,
Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of Washington Group and URS or any of their
respective subsidiaries, nor was any evaluation or appraisal of
the assets or liabilities of Washington Group and URS or any of
their respective subsidiaries furnished to Goldman Sachs.
Goldman Sachs opinion does not address the underlying
business decision of Washington Group to engage in the
transaction or the relative merits of the transaction as
compared to any alternative business strategies or transactions
that might be available to Washington Group. In addition,
Goldman Sachs opinion does not express any opinion as to
the prices at which the common stock of URS will trade at any
time.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors of
Washington Group in connection with rendering the opinion
described above. The following summary, however, does not
purport to be a complete description of the financial analyses
performed by Goldman Sachs, nor does the order of analyses
described represent relative importance or weight given to those
analyses by Goldman Sachs. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of Goldman
Sachs financial analyses. Except as otherwise noted, the
following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before May 27, 2007 and is not necessarily indicative of
current market conditions.
Illustrative Analysis at Various
Prices.
Goldman Sachs performed certain analyses,
based on historical information, SEC filings, estimates supplied
by the IBES and forecasts provided by management of Washington
Group, at the most recent market price of $69.97 per share and
at the implied transaction price of $80.00 per share, consisting
of $43.80 in cash and 0.772 shares of URS common stock for
each share of Washington Group common stock. Using these share
prices, Goldman Sachs calculated an implied equity value for
Washington Group. Goldman Sachs added to this implied equity
value the net debt to be incurred as part of the transaction to
derive an implied enterprise value of Washington Group. Based on
these calculations, Goldman Sachs calculated the multiples
described below:
|
|
|
|
|
Washington Groups implied enterprise value as a multiple
of its earnings before interest, taxes, depreciation and
amortization, or EBITDA, for the latest twelve months, as a
multiple of Washington Groups managements estimates
of its EBITDA for the 2007 fiscal year and as a multiple of the
estimates of Washington Groups EBITDA for the 2007 fiscal
year based on estimates supplied by IBES; and
|
|
|
|
Washington Groups implied price as a multiple of
Washington Groups managements estimates of its
earnings per share, which is referred to as EPS, for the 2007
and 2008 fiscal years and as a multiple of the estimates of
Washington Groups EPS for the 2007 and 2008 fiscal years
based on estimates supplied by IBES.
|
82
The following table presents the results of Goldman Sachs
analysis (dollar amounts in millions, except for purchase price
per share):
|
|
|
|
|
|
|
|
|
|
|
Based on
|
|
|
|
|
|
|
Washington
|
|
|
Based on an
|
|
|
|
Group Closing
|
|
|
Implied Total
|
|
|
|
Stock Price of
|
|
|
per Share
|
|
|
|
$69.97 on May 25,
|
|
|
Consideration
|
|
|
|
2007
|
|
|
of $80
|
|
|
Price (as a % of 52-Week High)
|
|
|
96%
|
|
|
|
110%
|
|
Implied Equity Value
|
|
$
|
2,232
|
|
|
$
|
2,577
|
|
Implied Enterprise Value
|
|
$
|
2,058
|
|
|
$
|
2,403
|
|
Implied Enterprise Value/EBITDA
|
|
|
|
|
|
|
|
|
LTM (as of March 30, 2007)
|
|
|
13.6x
|
|
|
|
15.9x
|
|
FY 2007E IBES
|
|
|
11.9x
|
|
|
|
13.9x
|
|
FY 2007E Management
|
|
|
10.8x
|
|
|
|
12.6x
|
|
Price/EPS
|
|
|
|
|
|
|
|
|
FY 2007E IBES
|
|
|
24.4x
|
|
|
|
27.9x
|
|
FY 2007E Management
|
|
|
23.8x
|
|
|
|
27.2x
|
|
FY 2008E IBES
|
|
|
20.2x
|
|
|
|
23.1x
|
|
FY 2008E Management
|
|
|
19.4x
|
|
|
|
22.1x
|
|
Comparison of Selected Companies.
Goldman
Sachs reviewed and compared certain financial information for
Washington Group and URS to corresponding financial information,
ratios and public market multiples for the following publicly
traded corporations in the engineering and construction industry:
|
|
|
|
|
Fluor Corporation;
|
|
|
|
Jacobs Engineering Group Inc.;
|
|
|
|
The Shaw Group Inc.;
|
|
|
|
Chicago Bridge & Iron Company, N.V.;
|
|
|
|
EMCOR Group, Inc.;
|
|
|
|
Granite Construction Inc.;
|
|
|
|
McDermott International, Inc.; and
|
|
|
|
Foster Wheeler Ltd.
|
Although none of the selected companies is directly comparable
to Washington Group or URS, the companies included were chosen
because they are publicly traded companies with operations that
for purposes of analysis may be considered similar to certain
operations of Washington Group and URS.
Goldman Sachs also calculated and compared various financial
multiples and ratios based on financial data as of May 25,
2007, information it obtained from SEC filings and IBES
estimates. The multiples and ratios of Washington Group were
calculated using Washington Groups closing price on
May 25, 2007 and the multiples and ratios of URS were
calculated using the URS closing price on May 25, 2007. The
multiples and ratios of Washington Group, URS and each of the
selected companies were based on company reports, public filings
and IBES estimates as of May 25, 2007. With respect to the
selected companies, Goldman Sachs calculated, on a fully diluted
basis:
|
|
|
|
|
Enterprise value as a multiple of estimated calendar year 2007
earnings before interest, taxes, depreciation and amortization,
or EBITDA; and
|
|
|
|
Price per share of Washington Group common stock as a multiple
of estimated 2008 EPS.
|
83
The results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington
|
|
|
Washington
|
|
|
|
|
|
|
|
|
|
|
|
|
Group, as of
|
|
|
Group, at
|
|
|
|
|
|
|
Selected Companies
|
|
|
May 25,
|
|
|
$80.00 per
|
|
|
|
|
Trading Multiple
|
|
Range
|
|
|
Median
|
|
|
2007
|
|
|
Share
|
|
|
URS
|
|
|
Enterprise Value/2007E EBITDA
|
|
|
10.1x 13.3x
|
|
|
|
11.7x
|
|
|
|
11.9x
|
|
|
|
13.9
|
x
|
|
|
9.4x
|
|
Price/2008E EPS
|
|
|
15.7x 21.0x
|
|
|
|
19.0x
|
|
|
|
20.2x
|
|
|
|
23.1
|
x
|
|
|
16.7x
|
|
Illustrative Analysis of Future Stock
Price.
Goldman Sachs analyzed the standalone
present value of potential future trading prices of Washington
Group common stock by applying selected ranges of multiples to
estimates of EPS of Washington Group based on management
forecasts of Washington Group provided by the management of
Washington Group and estimates provided by IBES. Goldman Sachs
applied multiples ranging from 18x to 21x to Washington
Groups estimated EPS for fiscal years 2008 and 2009. Based
on the implied future share prices derived from the range of
multiples noted above as well as the EPS estimates for
Washington Group, Goldman Sachs calculated the present values of
the resulting implied per share equity values using a discount
rate of 9.5%. The results of this analysis are summarized below:
|
|
|
|
|
|
|
Implied Present
|
|
|
|
Value to Washington
|
|
|
|
Group Stockholders
|
|
|
Implied Present Value to
Washington Group Stockholders
|
|
|
|
|
Based on 2008E EPS
|
|
$
|
62.46 - $75.86
|
|
Based on 2009E EPS at a 9.5%
Discount Rate
|
|
$
|
61.64 - $81.07
|
|
Discounted Cash Flow Analysis.
Goldman Sachs
performed a discounted cash flow analysis on Washington Group
using Washington Groups management forecasts to determine
indications of implied total equity values per share of
Washington Group common stock based on the present value as of
June 30, 2007 of the stand-alone, unlevered, after-tax
estimated future free cash flows of Washington Group and net
operating losses for United States federal income tax purposes,
which are referred to as NOLs, available to Washington Group. In
performing the discounted cash flow analysis, Goldman Sachs
calculated illustrative terminal values based upon free cash
flow perpetuity growth rates ranging from 2.5% to 4.0%, and
discounted all free cash flows to June 30, 2007 using
discount rates ranging from 9.0% to 10.0%, reflecting estimates
of the weighted average cost of capital for Washington Group.
This analysis resulted in a range of implied present values of
the total equity value per share of Washington Group common
stock of $65.10 to $87.41.
Premium Analysis at Implied Offer
Price.
Goldman Sachs calculated the implied
premium for Washington Group common stock represented by the
implied consideration of $80.00 per share of Washington Group
common stock, consisting of $43.80 cash and 0.772 shares of
URS common stock for each share of Washington Group common
stock, and based on the volume-weighted average closing prices
of Washington Group common stock and URS common stock on
May 25, 2007 and during the one-month, three-month,
six-month, twelve-month and three-year periods ended
May 25, 2007.
The results of Goldman Sachs calculations are reflected
below:
|
|
|
|
|
|
|
|
|
|
|
Volume-
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Implied
|
|
Day/Period:
|
|
Price
|
|
|
Premium
|
|
|
May 25, 2007
|
|
$
|
69.97
|
|
|
|
14.3
|
%
|
One-Month Average
|
|
$
|
69.42
|
|
|
|
15.2
|
%
|
Three-Month Average
|
|
$
|
65.57
|
|
|
|
22.0
|
%
|
Six-Month Average
|
|
$
|
62.80
|
|
|
|
27.4
|
%
|
Twelve-Month Average
|
|
$
|
59.64
|
|
|
|
34.1
|
%
|
Three-Year Average
|
|
$
|
51.50
|
|
|
|
55.3
|
%
|
Precedent Premiums Analysis.
Goldman Sachs
also analyzed the premiums for selected precedent transactions
involving U.S. targets acquired for between $1 billion
and $5 billion in transaction value over the last two
84
years in which the consideration included a cash component.
Goldman Sachs analyzed such premiums as of one day, one week and
four weeks prior to the announcement of the transaction. The
results of Goldman Sachs analysis are reflected below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of U.S. Targets from $1 Billion to $5 billion in
Transaction Value for the Past Two Years, based on Premium to
Price Prior to announcement:
|
|
% Premium
|
|
One Day
|
|
|
One Week
|
|
|
Four Weeks
|
|
|
£
0%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
0-10%
|
|
|
24
|
%
|
|
|
19
|
%
|
|
|
12
|
%
|
10-25%
|
|
|
37
|
%
|
|
|
36
|
%
|
|
|
37
|
%
|
25-50%
|
|
|
31
|
%
|
|
|
35
|
%
|
|
|
40
|
%
|
> 50%
|
|
|
7
|
%
|
|
|
8
|
%
|
|
|
9
|
%
|
Selected Precedent Transactions
Analysis.
Goldman Sachs analyzed certain
information relating to the following selected transactions in
the engineering and construction industry since May 1999:
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Acquisition of Infrasource Services, Inc. by Quanta Services,
Inc., announced on March 19, 2007;
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Acquisition of Colt Engineering Corporation by WorleyParsons
Limited, announced on February 8, 2007;
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Acquisition of AMEC SPIE, SA by PAI Partners, announced on
May 22, 2006;
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Acquisition of DynCorp by The Veritas Capital Fund II,
L.P., announced on December 12, 2004;
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Acquisition of Parsons E&C Corporation by Worley Group
Limited, announced on October 7, 2004;
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Acquisition of Corsan-Corviam, SA by Isolux-Wat, SA, announced
on May 1, 2004;
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Acquisition of Consolidated Engineering Services, Inc. by EMCOR
Group, Inc., announced on December 19, 2002;
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Acquisition of SPIE, SA (Remaining 54%) by AMEC, plc, announced
on December 5, 2002;
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Acquisition of Carlyle-EG&G Services, Inc. by URS Corp.,
announced on July 17, 2002;
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Acquisition of Bouygues Offshore, SA by Saipem S.p.A, announced
on May 8, 2002;
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Acquisition of Coflexip, SA by Technip, SA, announced on
July 3, 2001;
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Acquisition of Howe-Baker International, Inc. by Chicago
Bridge & Iron NV, announced on July 31, 2000;
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Acquisition of Stone & Webster, Inc. by Shaw Group,
Inc., announced on July 14, 2000;
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Acquisition of GTM Group, SA by Vinci, SA, announced on
July 13, 2000;
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Acquisition of Raytheon Engineers & Constructors
International, Inc. by Morrison Knudsen Corp., announced on
April 17, 2000;
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Acquisition of AGRA, Inc. by AMEC, plc, announced on
February 16, 2000;
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Acquisition of MYR Group, Inc. by GPU, Inc., announced on
December 22, 1999;
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Acquisition of Nichols Research Corp. by Computer Sciences
Corp., announced on September 20, 1999; and
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Acquisition of Dames & Moore Group by URS Corp.,
announced on May 5, 1999.
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For each of the selected transactions, Goldman Sachs calculated
and compared, based on company reports, public filings, press
releases, Wall Street research estimates and other public
sources, the transaction value as a multiple of EBITDA for the
latest twelve months and compared it against the multiples
implied for the proposed transaction.
85
The following table presents the results of this analysis:
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Proposed
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Selected Transactions
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Transaction
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Mean
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Median
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High
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Low
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Implied Transaction Value as a
Multiple of LTM EBITDA
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15.9x
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8.6x
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8.7x
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17.1x
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4.0x
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Illustrative Pro Forma Merger
Analysis.
Goldman Sachs analyzed the potential
pro forma impact of the transaction on URS GAAP earnings
per share and cash earnings per share for the calendar years
2007 through 2009 based on URS management forecasts provided by
the management of URS, Washington Group management forecasts
provided by the management of Washington Group and estimates of
synergies resulting from the merger provided by the managements
of URS and Washington Group.
Based on the closing prices per share of URS and Washington
Group common stock as of May 25, 2007, the 0.772 of a share
of URS common stock and $43.80 in cash to be received for each
share of Washington Group common stock pursuant to the merger
agreement, the number of shares and options to purchase shares
of URS common stock outstanding as of May 27, 2007 and the
number of shares and options to purchase shares of Washington
Group common stock outstanding as of May 27, 2007, this
analysis indicated that the transaction would be 5% dilutive to
URS GAAP EPS and 2% dilutive to URS cash EPS in
2007, 1% dilutive to URS GAAP EPS and 8% accretive to
URS cash EPS in 2008, and 6% accretive to URS
GAAP EPS and 13% accretive to URS cash EPS in 2009.
Illustrative Pro Forma Future Stock
Price.
Goldman Sachs compared the illustrative
standalone future stock price analysis to the present value of
the implied consideration to Washington Group stockholders based
on potential future trading prices of URS common stock,
incorporating the potential pro forma impact of the transaction,
by applying selected ranges of multiples to pro forma estimates
of EPS of URS based on management forecasts of Washington Group
provided by the management of Washington Group and management
forecasts of URS provided by the management of URS. Goldman
Sachs applied multiples ranging from 18x to 21x to the pro forma
estimates of URS EPS for fiscal years 2008 and 2009. Based on
the implied future share prices derived from the range of
multiples noted above as well as the pro forma EPS estimates for
URS, Goldman Sachs calculated the present values of the
resulting implied per share consideration to Washington Group
stockholders using discount rates of 9.0% and 9.5%. The results
of this analysis are summarized below:
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Implied Present
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Value to Washington
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Group Stockholders
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Implied Present Value to
Washington Group Stockholders
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Based on 2008E EPS
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$
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84.13 - $90.86
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Based on 2009E EPS at a 9.0% -
9.5% Discount Rate
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$
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87.29 - $94.77
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The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Washington Group or URS or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to Washington Groups
board of directors as to the fairness from a financial point of
view of the consideration to be received by holders of shares of
Washington Group common stock, taken in the aggregate, pursuant
to the merger agreement. These analyses do not purport to be
appraisals nor do they necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or
less favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control
86
of the parties or their respective advisors, none of Washington
Group, URS, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
The consideration to be received by holders of shares of
Washington Group common stock pursuant to the merger agreement
was determined through arms-length negotiations between
Washington Group and URS and was approved by Washington
Groups board of directors. Goldman Sachs provided advice
to Washington Group during these negotiations. Goldman Sachs did
not, however, recommend any specific exchange ratio or amount of
consideration to Washington Group or its board of directors or
that any specific exchange ratio or amount of consideration
constituted the only appropriate exchange ratio or consideration
for the transaction.
As described above, Goldman Sachs opinion to Washington
Groups board of directors was one of many factors taken
into consideration by Washington Groups board of directors
in making its determination to approve the merger agreement. The
foregoing summary describes the material analyses underlying
Goldman Sachs fairness opinion, but does not purport to be
a complete description of the analyses performed by Goldman
Sachs in connection with the fairness opinion and is qualified
in its entirety by reference to the written opinion of Goldman
Sachs attached as Annex C.
Goldman Sachs and its affiliates, as part of their investment
banking business, are continually engaged in performing
financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. Goldman Sachs has acted as
financial advisor to Washington Group in connection with, and
has participated in certain of the negotiations leading to, the
transaction contemplated by the merger agreement. In addition,
Goldman Sachs has provided certain investment banking services
to Washington Group from time to time. Goldman Sachs also may
provide investment banking services to Washington Group and URS
in the future. In connection with the above-described investment
banking services Goldman Sachs has received, and may receive in
the future, compensation. Except for this transaction, the
investment banking business of Goldman Sachs has not had any
material engagements with Washington Group or any of its
affiliates within the past two years for which it has received
or will receive fees for its services.
Goldman Sachs is a full service securities firm engaged, either
directly or through its affiliates, in securities trading,
investment management, financial planning and benefits
counseling, risk management, hedging, financing and brokerage
activities for both companies and individuals. In the ordinary
course of these activities, Goldman Sachs and its affiliates may
provide such service to Washington Group, URS and their
respective affiliates, may actively trade the debt and equity
securities of Washington Group and URS (or related derivative
securities) for their own account and for the accounts of their
customers and may at any time hold long and short positions of
such securities.
The board of directors of Washington Group selected Goldman
Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial
experience in transactions similar to the transaction. Pursuant
to a letter agreement dated May 18, 2006, Washington Group
engaged Goldman Sachs to act as its financial advisor in
connection with the evaluation of potential strategic
transactions. Pursuant to the terms of this engagement letter,
Washington Group has agreed to pay Goldman Sachs a financial
advisory fee of $1.0 million that has become due and
payable (but will be credited against the payment of any
transaction fee), and a transaction fee, calculated based on the
aggregate consideration for the transaction, of approximately
$19.1 million, $5.4 million of which became payable
upon the public announcement of the transaction and the balance
of which is contingent upon consummation of the transaction. If
Goldman Sachs failed to deliver to Washington Groups board
of directors an opinion stating that the consideration to be
received by Washington Groups stockholders in the merger
was fair from a financial point of view to such stockholders, it
is unlikely that the board would have approved the merger,
preventing Goldman Sachss transaction fee from becoming
payable. In addition, Washington Group has agreed to reimburse
Goldman Sachs for its expenses, including attorneys fees
and disbursements, and to indemnify Goldman Sachs and related
persons against various liabilities, including certain
liabilities under the federal securities laws.
87
The merger was subject to review by the DOJ and the FTC under
the HSR Act. Under the HSR Act, URS and Washington Group were
required to make pre-merger notification filings and to await
the expiration or early termination of the statutory waiting
period prior to completing the merger. The notifications
required under the HSR Act to the FTC and the DOJ were filed on
June 8, 2007 by both URS and Washington Group, and the
statutory waiting period under the HSR Act expired on
July 9, 2007. No further regulatory approvals are required
for the completion of the merger.
At any time before or after completion of the merger, either the
DOJ, the FTC or any state attorneys general could challenge,
seek to block or block the merger under the antitrust laws, as
it deems necessary or desirable in the public interest. Other
competition agencies (including foreign governmental
authorities) could also initiate action to challenge or block
the merger. In addition, in some jurisdictions, a private party
could initiate legal action under the antitrust laws challenging
or seeking to enjoin the merger, before or after it is
completed. URS and Washington Group cannot be sure that a
challenge to the merger will not be made or that, if a challenge
is made, URS and Washington Group will prevail.
Material
United States Federal Income Tax Consequences
The following is a discussion of the material United States
federal income tax consequences of the merger and the second
merger, taken together, to United States holders of Washington
Group common stock. The discussion constitutes the opinion of
Latham & Watkins and Wachtell Lipton, respectively,
insofar as it sets forth United States federal income tax
consequences of the merger and the second merger, taken together.
For purposes of this discussion, the term merger
transaction means the merger and the second merger, taken
together. This discussion is based on the Internal Revenue Code,
its legislative history, applicable United States Treasury
regulations, judicial authority and administrative rulings and
practice, all as of the date of this joint proxy
statement/prospectus, all of which are subject to change,
possibly with retroactive effect. This discussion does not
purport to be a complete discussion of all United States federal
income tax consequences of the merger transaction. The
discussion below does not address any state, local or foreign
tax consequences of the merger, the second merger or the merger
transaction and does not address the tax consequences of the
merger, the second merger or the merger transaction under United
States federal tax law other than income tax law. This
discussion may not apply, in whole or in part, to particular
stockholders in light of their individual circumstances or to
stockholders who are subject to special rules, such as:
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individuals who hold options or other stock-based rights in
respect of Washington Group common stock or who have acquired
Washington Group common stock under a compensatory or other
employment-related arrangement;
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banks, insurance companies or other financial institutions;
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broker-dealers;
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tax-exempt organizations;
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expatriates;
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persons that have a functional currency other than the United
States dollar;
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non-United
States holders (as defined below);
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traders in securities that elect to mark-to-market;
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holders who own 5% or more of the total outstanding vote or
value of Washington Group capital stock;
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holders of Washington Group common stock who also own, directly
or constructively for United States federal income tax purposes,
any stock of URS (apart from any URS common stock that such
holders receive in the merger in exchange for Washington Group
common stock);
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S-corporations, partnerships or other pass-through entities or
persons who hold Washington Group common stock through such
entities;
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88
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persons who are subject to the alternative minimum tax
provisions of the Internal Revenue Code; and
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persons who hold Washington Group common stock as part of a
hedge, straddle or conversion transaction.
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The following discussion assumes that Washington Group common
stock is held as a capital asset at the effective time of the
merger and the second merger and that the URS common stock
received in the merger will be held as a capital asset. For
purposes of this discussion, the term United States
holder means:
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a citizen or resident of the United States;
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a corporation or other entity treated as a corporation created
or organized under the laws of the United States or any of its
political subdivisions;
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a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more United
States persons or (ii) has validly elected under United
States Treasury regulations to be treated as a United States
person; or
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an estate that is subject to United States federal income tax on
its income regardless of its source.
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The term
non-United
States holder means a holder other than a United States
holder.
Washington Group stockholders are encouraged to consult their
tax advisors as to the particular tax consequences of the
merger, the second merger and the merger transaction to them,
including the applicability and effect of any United States
federal, state, local or foreign laws, and the effect of
possible changes in applicable tax laws.
URS has received an opinion of Latham & Watkins,
special counsel to URS, and Washington Group has received an
opinion of Wachtell Lipton, special counsel to Washington Group
and its board of directors, to the effect that, for United
States federal income tax purposes, the merger transaction will
constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. These opinions
are attached as Exhibits 8.1 and 8.2, respectively, to the
registration statement on
Form S-4
of which this joint proxy statement/prospectus forms a part.
Washington Group stockholders should read these opinions in
their entirety.
It is a condition to closing of the merger that URS receive an
additional opinion of Latham & Watkins and that
Washington Group receive an additional opinion of Wachtell
Lipton, in each case, dated as of the date of the merger, to the
effect that, for United States federal income tax purposes, the
merger transaction will constitute a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code. Each of Latham & Watkins and Wachtell
Lipton presently intend to deliver such opinion to URS and
Washington Group, respectively, on the closing date of the
merger. If the conditions relating to the receipt of these
opinions are waived, this joint proxy statement/prospectus will
be amended and recirculated and stockholder approval will be
resolicited to the extent required by applicable law.
All the above-described opinions of counsel, including the
opinions set forth in this discussion, rely or will rely upon
assumptions, representations, warranties and covenants,
including those contained in representation letters provided by
URS and Washington Group. In addition, the tax opinions are or
will be based on the law in effect on the date of the opinions.
If any of these assumptions, representations, warranties or
covenants is inaccurate, the tax consequences of the merger
transaction could differ from those described here. These
opinions of counsel represent the best legal judgment of counsel
to URS and counsel to Washington Group and are not binding on
the Internal Revenue Service or the courts. Neither URS nor
Washington Group has requested nor will request a ruling from
the Internal Revenue Service as to the tax consequences of the
merger, the second merger or the merger transaction and there
can be no assurance that the Internal Revenue Service will agree
with the conclusions in the above-described opinions or in the
discussion below.
Based on and subject to the foregoing, the material United
States federal income tax consequences of the merger transaction
to holders of Washington Group common stock will be as follows:
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a Washington Group stockholder will recognize gain (but not
loss) with respect to its shares of Washington Group common
stock in an amount equal to the lesser of (i) any gain
realized with respect to such stock or (ii) the amount of
cash received with respect to such stock (other than any cash
received instead of a fractional share of URS common stock). A
holders gain realized will equal the difference between
the fair market value of the URS common stock and cash received
and such holders tax basis in the Washington Group common
stock surrendered. Any such gain recognized will be a capital
gain;
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89
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a Washington Group stockholders aggregate tax basis for
the shares of URS common stock received in the merger (including
any fractional share interest for which cash is received) will
equal the stockholders aggregate tax basis in the shares
of Washington Group common stock surrendered upon completion of
the merger, increased by any gain recognized by such holder in
the merger (other than gain resulting from the receipt of cash
instead of a fractional share of URS common stock) and reduced
by the amount of any cash received in the merger (other than any
cash received instead of a fractional share of URS common stock);
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a Washington Group stockholders holding period for the
shares of URS common stock received in the merger (including any
fractional share interest for which cash is received) will
include the period during which the shares of Washington Group
common stock surrendered in the merger were held; and
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a Washington Group stockholder who receives cash instead of a
fractional share of URS common stock in the merger will
recognize capital gain or loss in an amount equal to the
difference between the amount of cash received instead of a
fractional share and the stockholders adjusted tax basis
allocable to such fractional share.
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A Washington Group stockholder who holds different blocks of
Washington Group common stock (generally, shares of Washington
Group common stock purchased or acquired on different dates or
at different prices) should consult such stockholders tax
advisor to determine how the above rules apply to such
stockholder.
Capital gains or losses recognized in the merger as described
above will constitute long-term capital gain or loss if the
Washington Group stockholders holding period in the
Washington Group common stock surrendered in the merger is more
than one year as of the date of the merger. The deductibility of
capital losses is subject to limitations.
If the merger transaction does not qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code, then a holder of Washington Group common stock
that receives cash and URS common stock in the merger would
recognize capital gain or loss equal to the difference between
the fair market value of the URS common stock and cash received
and such holders tax basis in the Washington Group common
stock surrendered. Shareholders that recognize a loss should
consult their tax advisors regarding allowance of this loss.
Holders
of Washington Group Common Stock Exercising Appraisal
Rights
Holders of Washington Group common stock who exercise appraisal
rights under Delaware law and receive cash in exchange for their
common stock will recognize capital gain or loss equal to the
difference between the cash received (other than any cash
received that is treated as actual or imputed interest, which
will be taxable as ordinary income) and such holders tax
basis in the Washington Group common stock exchanged therefor.
Capital gains are subject to tax in the manner set forth above.
Backup
Withholding
A Washington Group stockholder may be subject to backup
withholding for United States federal income tax purposes
on any cash received in the merger, including cash received
instead of a fractional share of URS common stock, unless
certain requirements are met. Payments will not be subject to
backup withholding if the stockholder (1) is a corporation
or comes within certain other exempt categories and, when
required, demonstrates this fact, or (2) provides URS or
the third-party paying agent, as appropriate, with the
holders correct taxpayer identification number and
completes a form in which the holder certifies that the holder
is not subject to backup withholding. The taxpayer
identification number of an individual is his or her Social
Security number. Any amount paid as backup withholding will be
credited against the holders U.S. federal income tax
liability provided the holder furnishes the required information
to the Internal Revenue Service.
Tax matters are very complicated, and the tax consequences of
the merger transaction to a particular Washington Group
stockholder will depend on that stockholders own tax
situation. Washington Group stockholders are encouraged to
consult their tax advisors regarding the specific tax
consequences of the merger transaction, including tax return
reporting requirements, the applicability of federal, state,
local and foreign tax laws and the effect of any proposed change
in the tax laws.
90
In accordance with GAAP, URS will account for the merger as a
purchase business combination. Upon the completion of the
merger, URS will record the cash consideration, the market value
of its common stock issued (based on an average of the closing
prices of URS common stock for a range of trading days from two
days before and three days after May 27, 2007, the
announcement date) in the merger and the amount of direct
transaction costs associated with the merger, as the estimated
purchase price of acquiring Washington Group. URS will allocate
the estimated purchase price to the tangible and identifiable
intangible assets acquired and liabilities assumed based on
their respective fair values at the effective time of the
merger. Any excess of the estimated purchase price over the fair
value of net assets acquired will be accounted for as goodwill.
In accordance with the Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets, which is referred to as SFAS 142, goodwill
resulting from the purchase business combination will not be
amortized but instead will be tested for impairment at least
annually (more frequently if certain indicators are present). In
the event that URS management determines that the value of
goodwill has become impaired, the combined company will incur an
accounting charge for the amount of impairment during the fiscal
quarter in which the determination is made.
Listing
of URS Common Stock
URS will use all reasonable best efforts to cause the shares of
URS common stock to be issued in connection with the merger to
be approved for listing on the NYSE upon the completion of the
merger.
Under Delaware law, holders of URS common stock are not entitled
to appraisal rights in connection with the issuance of URS
common stock in the merger.
Holders of shares of Washington Group common stock who do not
vote in favor of adopting the merger agreement and approving the
merger and properly demand appraisal of their shares will be
entitled to appraisal rights pursuant to the merger agreement
under Section 262 of the DGCL.
The following discussion is a complete discussion of the
material provisions of the law pertaining to appraisal rights
under Section 262 of the DGCL but is qualified in its
entirety by the full text of Section 262 of the DGCL, which
is attached to this joint proxy statement/prospectus as
Annex D. The following summary does not constitute any
legal or other advice, nor does it constitute a recommendation
that Washington Group stockholders exercise their right to seek
appraisal under Section 262 of the DGCL of the DGCL. All
references in Section 262 of the DGCL and in this summary
to a stockholder are to the record holder of the
shares of Washington Group common stock as to which appraisal
rights are asserted. A person having a beneficial interest in
shares of Washington Group common stock held of record in the
name of another person, such as a broker, fiduciary, depositary
or other nominee, must act promptly to cause the record holder
to follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
Under Section 262 of the DGCL, persons who hold shares of
Washington Group common stock who do not vote in favor of
adopting the merger agreement and approving the merger, and who
otherwise follow the procedures set forth in Section 262 of
the DGCL will be entitled to have their shares appraised by the
Delaware Court of Chancery and to receive payment of the
fair value of the shares, exclusive of any element
of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, as
determined by the court.
Under Section 262 of the DGCL, where a merger is to be
submitted for approval at a meeting of stockholders, as in the
case of adopting the merger agreement and approving the merger
by Washington Group stockholders, the corporation, not less than
20 days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that appraisal rights
are available and include in the notice a copy of
Section 262 of the DGCL. This joint proxy
statement/prospectus constitutes the notice, and the full text
of Section 262 of the DGCL is attached to this joint proxy
statement/prospectus as Annex D. Any holder of Washington
Group common stock who wishes to exercise appraisal rights or
who wishes to preserve such holders right to do so, should
review the following discussion and Annex D carefully
because failure to timely and properly comply with the
procedures specified will
91
result in the loss of appraisal rights. Moreover, due to the
complexity of the procedures for exercising the right to seek
appraisal, Washington Group stockholders who are considering
exercising such rights are encouraged to seek the advice of
legal counsel.
Any Washington Group stockholder wishing to exercise appraisal
rights under Section 262 of the DGCL must:
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deliver to Washington Group, before the vote on the adoption of
the merger agreement and approval of the merger at the
Washington Group special meeting, a written demand for the
appraisal of the stockholders shares;
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not vote its shares of common stock in favor of adoption of the
merger agreement and approval of the merger; and
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hold of record the shares of Washington Group common stock on
the date the written demand for appraisal is made and continue
to hold the shares of record through the effective time of the
merger.
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The holder seeking appraisal must not vote in favor of the
approval and adoption of the merger agreement and approval of
the merger. A proxy that is signed and does not contain voting
instructions will, unless revoked, be voted in favor of the
approval and adoption of the merger agreement and approval of
the transaction, and it will constitute a waiver of the
stockholders right of appraisal and will nullify any
previously delivered written demand for appraisal. Therefore, a
stockholder who votes by proxy and who wishes to exercise
appraisal rights must vote against the approval and adoption of
the merger agreement and approval of the merger or abstain from
voting on the merger agreement. Neither voting against the
approval and adoption of the merger agreement and approval of
the merger (in person or by proxy), nor abstaining from voting
or failing to vote on the proposal to adopt the merger agreement
and approve the merger will in and of itself constitute a
written demand for appraisal satisfying the requirements of
Section 262 of the DGCL.
The written demand for appraisal must be in addition to and
separate from any proxy or vote. The demand must reasonably
inform Washington Group of the identity of the holder as well as
the intention of the holder to demand an appraisal of the
fair value of the shares held by the holder. A
stockholders failure to make the written demand prior to
the taking of the vote on the adoption of the merger agreement
and approval of the merger at the Washington Group special
meeting will constitute a waiver of appraisal rights.
Only a holder of record of shares of Washington Group common
stock on the record date for the Washington Group special
meeting is entitled to assert appraisal rights for the shares
registered in that holders name. A demand for appraisal in
respect of shares of Washington Group common stock should be
executed by or on behalf of the holder of record, fully and
correctly, as the holders name appears on the
holders stock certificates, and must state that the person
intends to demand appraisal of the holders shares pursuant
to the merger agreement. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity. If the
shares are owned of record by more than one person, as in a
joint tenancy and tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized
agent, including an agent for two or more joint owners, may
execute a demand for appraisal on behalf of a holder of record.
However, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the
agent is acting as agent for the record owner or owners. A
record holder such as a broker who holds shares as nominee for
several beneficial owners may exercise appraisal rights with
respect to the shares held for one or more beneficial owners
while not exercising the rights with respect to the shares held
for other beneficial owners. In such case, however, the written
demand should set forth the number of shares as to which
appraisal is sought. If no number of shares is expressly
mentioned, the demand will be presumed to cover all shares of
Washington Group common stock held in the name of the record
owner. Stockholders who hold their shares in brokerage accounts
or other nominee forms and who wish to exercise appraisal rights
are encouraged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal
by such a nominee.
All written demands for appraisal pursuant to Section 262
of the DGCL should be sent or delivered to Washington Group
Corporation, 720 Park Boulevard, P.O. Box 73, Boise,
Idaho 83729, Attention: Corporate Secretary.
92
Within ten days after the effective time of the merger,
Washington Group, or its successor in interest, which we refer
to generally as the surviving corporation, must notify each
holder of Washington Group common stock who has complied with
Section 262 of the DGCL and who has not voted in favor of
the adoption of the merger agreement and approval of the merger
that the merger has become effective. Within 120 days after
the effective time of the merger, but not thereafter, the
surviving corporation or any holder of Washington Group common
stock who has complied with Section 262 of the DGCL and is
entitled to appraisal rights under Section 262 of the DGCL
may file a petition in the Delaware Court of Chancery demanding
a determination of the fair value of the shares held by all
stockholders entitled to appraisal. The surviving corporation is
under no obligation to and has no present intention to file a
petition. Accordingly, it is the obligation of the holders of
Washington Group common stock to initiate all necessary action
to perfect their appraisal rights in respect of shares of
Washington Group common stock within the time prescribed in
Section 262 of the DGCL.
Within 120 days after the effective time of the merger, any
holder of Washington Group common stock who has complied with
the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the surviving
corporation a statement setting forth the aggregate number of
shares of Washington Group common stock not voted in favor of
the adoption of the merger agreement and approval of the merger
and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. The
statement must be mailed within ten days after a written request
has been received by the surviving corporation or within ten
days after the expiration of the period for delivery of demands
for appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of
shares of Washington Group common stock and a copy is served
upon the surviving corporation, the surviving corporation will
then be obligated within 20 days to file with the Delaware
Register in Chancery a duly verified list containing the names
and addresses of all stockholders who have demanded an appraisal
of their shares and with whom agreements as to the value of
their shares have not been reached. After notice to the
stockholders as required by the Court, the Delaware Court of
Chancery is empowered to conduct a hearing on the petition to
determine those stockholders who have complied with
Section 262 of the DGCL and who have become entitled to
appraisal rights thereunder. The Delaware Court of Chancery may
require the stockholders who demanded payment for their shares
to submit their stock certificates to the Register in Chancery
for notation on the certificates of the pending appraisal
proceeding. If any stockholder fails to comply with the
direction, the Delaware Court of Chancery may dismiss the
proceedings as to that stockholder.
After determining the holders of Washington Group common stock
entitled to appraisal, the Delaware Court of Chancery will
appraise the fair value of their shares, exclusive
of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be
the fair value. Stockholders considering seeking appraisal
should be aware that the fair value of their shares as so
determined could be more than, the same as or less than the
consideration they would receive pursuant to the merger if they
did not seek appraisal of their shares and that an investment
banking opinion as to fairness from a financial point of view is
not necessarily an opinion as to fair value under
Section 262 of the DGCL. You should not expect the
surviving corporation to offer more than the applicable merger
consideration to any stockholder exercising appraisal rights,
and URS reserves the right to assert, in any appraisal
proceeding, that for purposes of Section 262 of the DGCL,
the fair value of a share of Washington Group common
stock is less than the applicable merger consideration.
Although Washington Group believes that the merger consideration
is fair, no representation is made as to the outcome of the
appraisal of fair value as determined by the Delaware Court of
Chancery. Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may
not be a dissenters exclusive remedy. The Delaware Court
of Chancery will determine the amount of interest, if any, to be
paid upon the amounts to be received by persons whose shares of
common stock of Washington Group have been appraised. If a
petition for appraisal is not timely filed, then the right to an
appraisal will cease.
In determining fair value and, if applicable, a fair rate of
interest, the Delaware Court of Chancery is to take into account
all relevant factors. In
Weinberger v. UOP, Inc.
,
the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding,
stating that proof of value by any techniques or methods
which are generally considered acceptable in the financial
community and otherwise
93
admissible in court should be considered, and that
fair price obviously requires consideration of all
relevant factors involving the value of a company. The
Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset
value, dividends, earnings prospects, the nature of the
enterprise, and any other facts that could be ascertained as of
the date of the merger that throw any light on future prospects
of the merged corporation. Section 262 of the DGCL provides
that fair value is to be exclusive of any element of value
arising from the accomplishment or expectation of the
merger. In
Cede & Co. v. Technicolor,
Inc.
the Delaware Supreme Court stated that such exclusion
is a narrow exclusion [that] does not encompass known
elements of value, but which rather applies only to the
speculative elements of value arising from such accomplishment
or expectation. In
Weinberger
, the Delaware Supreme Court
construed Section 262 of the DGCL to mean that
elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be
considered.
The costs of the action may be determined by the Court and
levied upon the parties as the Court deems equitable. The Court
may also order that all or a portion of the expenses incurred by
any stockholder in connection with an appraisal, including,
without limitation, reasonable attorneys fees and the fees
and expenses of experts utilized in the appraisal proceeding, be
charged pro rata against the value of all the shares entitled to
be appraised.
Any holder of shares of Washington Group common stock who has
demanded an appraisal in compliance with Section 262 of the
DGCL will not, after the effective time of the merger, be
entitled to vote the shares subject to the demand for any
purpose or be entitled to the payment of dividends or other
distributions on those shares, except dividends or other
distributions payable to holders of record of Washington Group
common stock as of a record date prior to the effective time of
the merger.
Any Washington Group stockholder may withdraw its demand for
appraisal and accept the consideration offered pursuant to the
merger agreement by delivering to the surviving corporation a
written withdrawal of the demand for appraisal. However, any
such attempt to withdraw the demand made more than 60 days
after the effective date of the merger will require written
approval of the surviving corporation. No appraisal proceeding
in the Delaware Court of Chancery will be dismissed without the
approval of the Delaware Court of Chancery, and such approval
may be conditioned upon such terms as the Court deems just. If
the surviving corporation does not approve a request to withdraw
a demand for appraisal when that approval is required, or if the
Delaware Court of Chancery does not approve the dismissal of an
appraisal proceeding, the stockholder will be entitled to
receive only the appraised value determined in any such
appraisal proceeding, which value could be less than, equal to
or more than the consideration being offered pursuant to the
merger agreement.
If any stockholder who demands appraisal of shares of Washington
Group common stock under Section 262 of the DGCL fails to
perfect, or effectively withdraws or loses, such holders
right to appraisal, the stockholders shares of Washington
Group common stock will be deemed to have been converted at the
effective time of the merger into the right to receive the
merger consideration. A stockholder will fail to perfect, or
effectively lose or withdraw, the stockholders right to
appraisal if no petition for appraisal is filed within
120 days after the effective time of the merger, or if the
stockholder delivers to the surviving corporation a written
withdrawal of the holders demand for appraisal and an
acceptance of the merger consideration, except that any attempt
to withdraw made more than 60 days after the effective time
of the merger will require the written approval of the surviving
corporation and, once a petition for appraisal is filed, the
appraisal proceeding may not be dismissed as to any holder
absent court approval.
Failure to follow the steps required by Section 262 of the
DGCL for perfecting appraisal rights may result in the loss of
these rights. Consequently, any stockholder wishing to exercise
appraisal rights is encouraged to consult with legal counsel
prior to attempting to exercise such rights.
Delisting
and Deregistration of Washington Group Common Stock
If the merger is completed, Washington Group common stock will
be delisted from the NYSE and deregistered under the Exchange
Act and Washington Group will no longer file periodic reports
with the SEC.
94
Restrictions
on Sales of Shares of URS Common Stock Received in the
Merger
The shares of URS common stock to be issued in connection with
the merger will be registered under the Securities Act and will
be freely transferable, except for shares of URS common stock
issued to any person who is deemed to be an
affiliate of Washington Group under the Securities
Act prior to the merger. Persons who may be deemed to be
affiliates of Washington Group prior to the merger
include individuals or entities that control, are controlled by,
or are under common control with, Washington Group prior to the
merger, and may include officers and directors, as well as
significant stockholders of Washington Group prior to the
merger. Affiliates of Washington Group prior to the merger may
not sell any of the shares of URS common stock received by them
in connection with the merger except pursuant to:
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an effective registration statement under the Securities Act
covering the resale of those shares;
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an exemption under paragraph (d) of Rule 145 under the
Securities Act; or
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any other applicable exemption under the Securities Act.
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URS registration statement on
Form S-4,
of which this joint proxy statement/prospectus is a part, does
not cover the resale of shares of URS common stock to be
received by affiliates of Washington Group in the merger.
Interests
of URS Directors and Executive Officers in the
Merger
None of the executive officers and directors of URS has
interests in the merger that differ from, or are in addition to,
the interests of URS stockholders.
Interests
of Washington Groups Directors and Executive Officers in
the Merger
In considering the recommendation of the Washington Group board
of directors with respect to the merger agreement, Washington
Group stockholders should be aware that some of the Washington
Group directors and executive officers have interests in the
merger and have arrangements that are different from, or in
addition to, those of Washington Group stockholders generally.
These interests and arrangements may create potential conflicts
of interest. The Washington Group board of directors was aware
of these potential conflicts of interest and considered them,
among other matters, in reaching its decisions to approve and
adopt the merger agreement and to recommend that Washington
Group stockholders vote in favor of adopting the merger
agreement.
Stock
Options, Restricted Stock, Deferred Shares and Performance
Units
Stock
Options
Immediately following the completion of the merger, each
outstanding option to acquire shares of Washington Group common
stock, whether or not vested, that remains outstanding as of the
closing of the merger will be cancelled and converted into the
right to receive a combination of cash and URS common stock
determined as follows: the option consideration will
equal the product of (1) the number of shares of Washington
Group common stock subject to the option and (2) the
excess, if any, of $80.00 over the exercise price per share of
Washington Group common stock subject to the option. Of the
option consideration, 54.75% will be paid in cash and the
remaining 45.25% will be the share-settled amount, which will be
settled in a number of shares of URS common stock equal to the
quotient of the share-settled amount divided by $46.89. The cash
and shares payable pursuant to the preceding sentence will be
subject to any applicable withholding taxes. Immediately after
the merger is completed, any cancelled option will no longer be
exercisable by its former holder, but will only entitle the
holder to the payment of the option consideration.
Restricted
Stock
Under the merger agreement, each award of restricted Washington
Group common stock will vest in full immediately prior to the
closing of the merger and be converted into the right to receive
the merger consideration.
95
Deferred
Shares
Upon the completion of the merger, each deferred share of
Washington Group will be converted into the right to receive
$80.00 in cash, payable on a deferred basis at the time that the
underlying deferred shares would have been settled under their
terms as in effect immediately prior to the effective time of
the merger, plus earnings thereon as described in the merger
agreement.
Performance
Units
Upon the completion of the merger, all performance units will be
settled and paid in cash based on the greater of the par value
of such performance unit and the value of such performance unit
determined based upon Washington Groups actual results
during the applicable performance period through the effective
time of the merger.
Change-in-Control
Severance Arrangements
Washington Group has
change-in-control
severance agreements with its named executive officers, as well
as with two other executive officers (Larry Myers, Senior Vice
President of Human Resources, and Rich Parry, Senior Vice
President and General Counsel). Four other executive officers
(Jerry Lemon, Vice President and Controller, Frank Finlayson,
Senior Vice President of Project Development and Treasurer,
Cynthia Stinger, Vice President of Government Affairs, and Craig
Taylor, Vice President, Associate General Counsel and Corporate
Secretary) participate in Washington Groups Executive
Severance Pay Plan, which together with the change-in-control
severance agreements are referred to as the change-in-control
severance arrangements. The
change-in-control
severance arrangements provide for cash payment of the pro rata
portion of the officers incentive bonus, payable within
five days following the change in control and based on the
greater of target and actual performance. The
change-in-control
severance arrangements also provide for cash severance and other
benefits in the event of a qualifying termination of employment
following a change in control. Consummation of the merger will
constitute a change in control for purposes of the
change-in-control
severance arrangements.
Executives receive the benefits under the
change-in-control
severance arrangements only if there is a change in control of
Washington Group such as the merger. The severance benefits
under the arrangements become payable only if, in connection
with, or within two years after, the change in control,
Washington Group terminates the executives employment
without cause or the executive resigns because of a reduction in
job responsibilities, a decrease in compensation, a requirement
to relocate or for other good reason.
The compensation and benefits payable under the
change-in-control
severance arrangement include the following:
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a severance payment of twice (one time with respect to the four
executive officers participating in Washington Groups
Executive Severance Pay Plan) the sum of the executives
annual base salary plus short-term incentive target;
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a pro rata portion of the officers incentive compensation
for the current performance period based on the greater of
target and actual performance, payable within five days
following the change in control;
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a lump sum payment of $25,000 in lieu of continued medical and
dental coverage for a period of 18 months; and
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for those who are eligible, a cash payment of $50,000 in lieu of
financial counseling for two years.
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Mr. Hanks agreement contains a covenant not to
compete with Washington Group for a period of at least twelve
months following a qualifying termination. In consideration of
this covenant, Mr. Hanks is entitled to receive an
additional amount equal to the sum of his base salary and target
short-term incentive.
96
Indemnification
of Directors and Officers; Directors and Officers
Insurance
In addition, the Washington Group directors and officers are
entitled under the merger agreement to continued indemnification
and insurance coverage (see The Merger
Agreement Washington Group Incentive-Based Equity
Awards and Employee Benefit Plans Washington Group
Benefit Plans, on page 114).
Consideration
to be Received by Directors and Executive Officers
The following table reflects the amounts described above under
Stock Options, Restricted Stock, Deferred Shares and
Performance Units and Change-in-Control Severance
Arrangements with respect to each of Washington
Groups directors and executive officers as a result of the
merger.
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Value of
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WGI Restricted Stock
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Consideration in
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that Will Vest and
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Cash Proceeds in
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Cash Proceeds in
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respect of WGI
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Receive Merger
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respect of WGI
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respect of WGI
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Cost of Cash
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Unvested Options
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Consideration
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Deferred Shares
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Performance Units
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Severance Benefits
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$(1)
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#
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$
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$
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$(2)
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Stephen G. Hanks
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2,459,911
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52,400
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5,000,000
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7,110,575
(3
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George H. Juetten
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639,707
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14,100
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620,800
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2,206,000
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2,711,904
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Stephen M. Johnson
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838,717
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18,350
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2,800,000
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2,978,014
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Thomas H. Zarges
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737,193
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16,100
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505,920
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2,471,000
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2,978,014
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Louis E. Pardi
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411,129
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9,275
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1,472,500
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2,058,726
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Larry L. Myers
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217,619
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4,763
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227,120
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741,500
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1,720,041
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Richard D. Parry
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190,246
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4,100
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173,680
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624,000
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1,647,466
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Frank S. Finlayson
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190,355
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4,250
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666,500
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635,400
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Cynthia Stinger
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131,554
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2,850
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427,500
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522,012
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Jerry K. Lemon
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127,045
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2,763
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424,000
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468,725
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Craig G. Taylor
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67,324
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1,450
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232,000
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420,119
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John R. Alm
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219,280
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David H. Batchelder
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460,480
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Michael L. DAppolonia
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460,480
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Scott Greer
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460,480
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Gail E. Hamilton
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310,880
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William H. Mallender
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460,480
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Michael P. Monaco
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460,480
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Cordell Reed
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460,480
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Dennis R. Washington
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Dennis K. Williams
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460,480
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(1)
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Based on the number of unvested options to acquire Washington
Group common stock that will vest in the merger and the weighted
average exercise price of each option.
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(2)
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Assumes the merger is completed on November 2, 2007 and
that thereafter each executive officers employment is
terminated on that date by Washington Group without cause or
voluntarily terminated on that date by the executive officer for
good reason.
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(3)
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Includes a payment of $2,035,000 in respect of Mr. Hanks
covenant not to compete with Washington Group for a period of at
least twelve months following a qualifying termination of
employment.
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97
Senior
Credit Facilities Commitment Letter with Morgan Stanley Senior
Funding, Inc. and Wells Fargo Bank, National
Association
In connection with the proposed merger, on May 27, 2007,
URS entered into the financing commitment letter with MSSF and
Wells Fargo. Subject to the terms and conditions of the letter,
MSSF and Wells Fargo have each committed to provide to URS 50%
of a senior secured financing of up to an aggregate of
$2.1 billion. The financing will consist of: (a) a
$700.0 million senior secured revolving credit facility,
with a $700.0 million letter of credit sublimit; and
(b) two tranches of term loans aggregating
$1.4 billion. The allocation of debt between Tranche A
and Tranche B term loans will be determined in the debt
syndication process. After closing, URS will have an option to
increase Tranche B by up to $300.0 million in
additional loans, and URS separately will have an option to add
a synthetic letter of credit facility of up to
$500.0 million. The term loans will refinance URS
existing senior credit facilities, refinance any amounts
outstanding under the credit facilities of Washington Group, and
fund URS payment of the cash portion of the merger
consideration. At the closing date, up to $50.0 million of
the revolving credit facility may be used to consummate the
merger. After closing, the full amount of the revolving credit
facility may be used for working capital and other corporate
purposes.
The Tranche A term loans will have a final maturity date of
five years after the closing date. Quarterly principal payments,
commencing with the first full fiscal quarter following the
closing date, will be required in aggregate annual amounts
expressed as a percentage of the original principal amount of
the Tranche A term loans as follows:
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Year
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Percentage
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1
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5
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%
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2
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5
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%
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10
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%
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4
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10
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%
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5
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70
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%
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It is anticipated that the Tranche B term loans will have a
final maturity date of five and one-half years after the closing
date. Commencing with the first full quarter following the
closing date, quarterly payments will be required of .25%, or 1%
in aggregate on an annual basis, of the original aggregate
principal amount of the Tranche B term loans. Over the four
quarters prior to maturity, the remaining principal balance of
the Tranche B term loans will be payable in equal quarterly
amounts.
The financing commitment letter provides that amounts
outstanding under the senior credit facilities and fees payable
for unused portions of the revolving line of credit will bear
interest, at URS option, at the base rate or at the LIBOR
rate plus, in each case, an applicable per annum margin. The
applicable margin, with respect to the Tranche A term loans
and the revolving loans, and fees payable for unused portions of
the revolving line of credit will be determined in accordance
with an agreed upon grid. The applicable margin with respect to
the Tranche B term loans will be established as of the
closing date of the merger. The terms base rate and
LIBOR rate will have meanings customary and
appropriate for financings of this type.
Subject to exceptions to be agreed upon, the senior credit
facilities will be required to be prepaid by an amount equal to:
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100% of the net cash proceeds of all asset dispositions of URS
and is subsidiaries (subject to reinvestment rights and other
exceptions);
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100% of the net cash proceeds from the issuance of debt by URS
and its subsidiaries, except that such percentage will be
reduced to 50% in the event that the leverage ratio is less than
2.50:1.00;
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50% of the net cash proceeds from the issuance of equity by URS
and its subsidiaries (other than equity issuances to finance a
permitted acquisition or to directors and employees of URS and
its subsidiaries pursuant to employee benefit plans), except
that such percentage will be reduced to 0% in the event that the
leverage ratio is less than 2.50:1.00; and
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commencing with fiscal year 2008, 50% of excess cash flow for
each fiscal year, except that such percentage will be reduced to
0% for any fiscal year in which the leverage ratio is less than
2.50:1.00.
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All such required prepayments will be applied first to the
prepayment of the term loan tranches and thereafter to the
prepayment of the revolving credit facility, but without
reduction of the commitments thereunder. All such mandatory
prepayments of the term loan tranches will be applied ratably
between the term loan tranches and will be applied to the
remaining scheduled installments thereof on a pro rata basis.
The senior credit facilities may, at URS option, be
prepaid in whole or in part without premium or penalty (subject
to breakage costs for LIBOR rate loans) and the commitments
related thereto may be reduced or terminated upon such notice
and in such amounts as may be agreed upon. Voluntary prepayments
of the term loan tranches will be applied ratably between the
term loan tranches and will be applied to the remaining
scheduled installments thereof in forward chronological order.
The senior credit facilities will be guaranteed by (i) all
existing and future domestic subsidiaries of URS with gross
revenues of more than $10.0 million for any fiscal year
(with exceptions), (ii) any existing or future subsidiary
holding the capital stock of any such subsidiary referred to in
clause (i) above, and (iii) any other existing or future
subsidiary of URS required to execute a guaranty in order to
ensure that the gross revenues of URS and all such guarantors
are equal at all times to at least 90% of the aggregate gross
revenues of URS and its domestic subsidiaries. The senior credit
facilities will also be secured by all assets and stock owned by
URS and the subsidiary guarantors, but will not be secured by
more than 66% of the equity interests in
non-U.S. subsidiaries
and will not be secured by the pledge of equity interests in
joint ventures and non-first-tier
non-U.S. subsidiaries.
The senior credit facilities will include financial covenants,
including a maximum leverage ratio and minimum interest coverage
ratio. The senior credit facilities will also have customary
affirmative covenants which will include covenants regarding
delivery of financial statements and other reports, default
notices under certain surety arrangements, corporate existence,
payment of taxes and claims, tax consolidation, maintenance of
properties, insurance, inspection rights and lender meetings,
compliance with laws, execution of subsidiary guaranty and real
and personal property collateral documents by additional
subsidiaries, maintenance of credit ratings, application of net
insurance and condemnation proceeds and grant of security in
after-acquired property required to be pledged. The senior
credit facilities will also have customary negative covenants,
which will include covenants regarding indebtedness, liens,
investments, contingent obligations, restricted junior payments,
asset sales, fundamental changes, transactions with affiliates,
conduct of business, changes in fiscal year, retirement
liabilities, and amendments to the merger documents.
The financing commitment letter also includes customary
conditions to funding, including, without limitation,
satisfaction of the conditions to closing of the merger as set
forth in the merger agreement, the absence of any material
adverse effect on Washington Group or its subsidiaries, taken as
a whole, obtaining credit ratings, a maximum ratio of pro forma
combined total debt to combined pro forma EBITDA of 3.50 to 1.00
on the closing date, the accuracy of certain representations and
warranties of the parties, customary legal documentation, and
repayment of Washington Groups and URS credit
facilities.
The description of the financing commitment letter contained
above is based upon the terms set forth in such letter which
terms are subject to modification within agreed limits by MSSF
and Wells Fargo, and further subject to negotiation and
execution of the definitive credit agreement satisfactory to
them, the syndicate of financial institutions arranged by them
and URS. As a result, the final terms of the definitive credit
agreement may vary from those described above, particularly in
light of the current volatility of the debt markets. The
financing commitment letter expires at the earlier of
(i) the outside date set forth in the merger agreement, or
(ii) the date on which the merger agreement is terminated
for any reason prior to consummation of the merger. MSSF and
Wells Fargo will receive compensation in connection with the
financing commitment letter and related financing.
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The following summary describes the material provisions of the
merger agreement, which is included in this joint proxy
statement/prospectus as Annex A and is incorporated by
reference into this joint proxy statement/prospectus. This
summary may not contain all of the information about the merger
agreement that is important to you. You are encouraged to read
the merger agreement carefully in its entirety.
The merger agreement is included in this joint proxy
statement/prospectus in order to provide you with information
regarding its terms. It is not in any way intended to provide
you with factual information about the current state of affairs
of either URS or Washington Group. Such information can be found
elsewhere in this joint proxy statement/prospectus (including
the attached annexes) and in the other public filings that URS
and Washington Group make with the SEC, which are available
without charge at
http://www.sec.gov.
The merger agreement contains representations, warranties,
covenants and other agreements, each as of specific dates. These
representations, warranties, covenants and other agreements are
qualified by information contained in confidential disclosure
schedules that the parties exchanged in connection with the
execution of the merger agreement. The disclosure schedules
contain information that modifies, qualifies and creates
exceptions to the representations, warranties, covenants and
other agreements set forth in the merger agreement. Since some
of the information contained in the disclosure schedules may be
non-public, URS and Washington Group do not believe that this
information is required to be publicly disclosed under the
federal securities laws (although any specific material facts
that qualify the representations and warranties in the merger
agreement have been disclosed in this joint proxy
statement/prospectus). Moreover, some of these representations,
warranties, covenants
and/or
other
agreements may not be accurate or complete as of a specific date
because they are subject to a contractual standard of
materiality that may be different from the standard generally
applied under the federal securities laws
and/or
were
used for the purpose of allocating risk between URS and
Washington Group rather than establishing matters as facts.
Finally, information concerning the subject matter of these
representations, warranties, covenants and other agreements may
have changed since the date of the merger agreement, which may
or may not be fully reflected in URS and Washington
Groups public disclosures. Accordingly, you should not
rely on these representations, warranties, covenants and other
agreements as statements of fact.
The merger agreement provides for the merger of Elk Merger
Corporation, a wholly owned subsidiary of URS, with and into
Washington Group. Immediately following this merger, Washington
Group will merge with and into Bear Merger Sub, Inc., a wholly
owned subsidiary of URS. As a result of these transactions,
Washington Group will cease to exist and Bear Merger Sub, Inc.
will continue as a wholly owned subsidiary of URS, which
subsidiary will be renamed Washington Group International,
Inc.
Completion
and Effectiveness of the Merger
The closing of the merger will occur as soon as possible but no
later than the second business day after the date upon which all
of the conditions to completion of the merger contained in the
merger agreement (other than those conditions that are waived or
by their nature are to be satisfied at the closing of the
merger) are satisfied or at such other date as URS and
Washington Group may agree (see Conditions to
Completion of the Merger on page 103). The merger
will become effective upon the filing of the certificate of
merger with the Secretary of State of the State of Delaware or
at such later time as may be agreed upon by URS and Washington
Group and specified in such certificate of merger.
The proposed transaction is currently targeted to close in the
second half of 2007; however, because completion of the merger
is subject to customary conditions, we cannot predict the actual
timing.
General
Upon completion of the merger, each share of Washington Group
common stock outstanding immediately prior to the effective time
of the merger, other than those shares held by URS, any
subsidiary of URS, Elk Merger
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Corporation or Bear Merger Sub and other than shares as to which
a Washington Group stockholder has validly demanded and
perfected appraisal rights under Delaware law, will be cancelled
and extinguished and converted into the right to receive 0.772
of a share of URS common stock and $43.80 in cash, without
interest, upon surrender of the certificate representing the
share of Washington Group common stock in the manner provided in
the merger agreement. Shares held by Washington Group
stockholders who validly demand and perfect their appraisal
rights will be subject to appraisal in accordance with Delaware
law as described further under The Merger
Appraisal Rights.
Upon completion of the merger, each share of Washington Group
common stock owned directly by URS or Elk Merger Corporation
immediately prior to the effective time of the merger or held in
treasury of Washington Group (in each case, other than any such
shares of Washington Group common stock held on behalf of third
parties) will be automatically cancelled and retired, and none
of URS, Elk Merger Corporation or Washington Group will receive
any securities of URS or other consideration in exchange for
those shares.
Appraisal
Rights
Shares of Washington Group common stock held by any Washington
Group stockholder that properly demands payment for its shares
and perfects such demand in compliance with the appraisal rights
under Section 262 of the DGCL, will not be converted into
the right to receive the merger consideration. Washington Group
stockholders properly exercising and perfecting appraisal rights
will be entitled to payment as further described above under
The Merger Appraisal Rights. However, if
any Washington Group stockholder fails to perfect or otherwise
waives, withdraws or loses the right to receive payment under
Section 262 of the DGCL, then that Washington Group
stockholder will not be paid in accordance with Section 262
of the DGCL and the shares of Washington Group common stock held
by that Washington Group stockholder will be exchangeable solely
for the merger consideration.
Exchange
of Washington Group Stock Certificates for URS Stock
Certificates
URS has retained The Bank of New York Mellon Corporation as the
exchange agent for the merger to handle the exchange of shares
of Washington Group common stock for the merger consideration,
including the payment of the cash portion of the merger
consideration and the payment of cash for fractional shares.
Only those holders of Washington Group common stock who properly
surrender their Washington Group stock certificates in
accordance with the exchange agents instructions will
receive:
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a statement indicating book-entry ownership of URS common stock
or, if requested, a certificate representing URS common stock;
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the cash consideration;
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cash in lieu of any fractional share of URS common
stock; and
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dividends or other distributions, if any, on URS common stock to
which they are entitled under the terms of the merger agreement.
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After the effective time of the merger, each certificate
representing shares of Washington Group common stock that has
not been surrendered will represent only the right to receive
upon surrender of that certificate each of the items listed in
the preceding sentence. Following completion of the merger,
Washington Group will not register any transfers of Washington
Group common stock outstanding on its stock transfer books prior
to the merger.
To effect the exchange of shares of Washington Group common
stock, the exchange agent will take the actions described below.
Washington
Group Common Stock General
As soon as reasonably practicable after the effective time of
the merger, and in any event not later than the second business
day following the effective time of the merger, the exchange
agent will mail to each record holder of shares of Washington
Group common stock, a letter of transmittal (which will specify
that the delivery will be
101
effected, and risk of loss and title will pass, only upon proper
delivery of such holders certificates representing shares
of Washington Group common stock) and instructions for
surrendering the certificates representing shares of Washington
Group common stock (or effective affidavits of loss in lieu
thereof) or book-entry shares in exchange for the merger
consideration. Upon surrender of certificates representing
shares of Washington Group common stock (or effective affidavits
of loss in lieu thereof) or book-entry shares, together with an
executed letter of transmittal, to the exchange agent, the
holder of those certificates will be entitled to receive the
merger consideration. The surrendered certificates representing
Washington Group common stock will be cancelled.
URS will not issue fractional shares of URS common stock in the
merger. Instead, each holder of shares of Washington Group
common stock who would otherwise be entitled to receive
fractional shares of URS common stock in the merger will be
entitled to an amount of cash, without interest, in lieu of such
fractional shares of URS common stock representing such
holders proportionate interest, if any, in the proceeds
from the sale by the exchange agent in one or more transactions
of shares of URS common stock equal to the excess of
(a) the number of shares of URS common stock to be
delivered to the exchange agent by URS pursuant to the terms and
conditions of the merger agreement over (b) the aggregate
number of whole shares of URS common stock to be distributed to
the holders of certificates representing shares of Washington
Group common stock. The exchange agent will sell such excess
number of shares of URS common stock, which sale will be
executed on the New York Stock Exchange at then-prevailing
market prices and in round lots to the extent practicable. The
exchange agent will hold the proceeds of any such sale of URS
common stock in trust for the holders of shares of Washington
Group common stock and will determine the pro rata portion of
such trust to which each such holder will be entitled.
Termination
of Exchange Fund
Eighteen months after the effective time of the merger, URS may
require the exchange agent to deliver to URS all cash and shares
of URS common stock remaining in the exchange fund. Thereafter,
Washington Group stockholders must look only to URS for payment
of the merger consideration on their shares of Washington Group
common stock. Any cash or shares of URS common stock remaining
unclaimed by holders of shares of Washington Group common stock
immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental authority
will, to the extent permitted by applicable law, become the
property of URS free and clear of any claims or interest of any
person previously entitled to such cash or shares of URS common
stock.
None of URS, Washington Group or Elk Merger Corporation will be
liable to any holder of a certificate representing shares of
Washington Group common stock for any merger consideration
delivered to a public official pursuant to any abandoned
property laws.
Distributions
with Respect to Unexchanged Shares
Holders of Washington Group common stock are not entitled to
receive any dividends or other distributions on URS common stock
until the merger is completed. After the merger is completed,
holders of Washington Group common stock certificates will be
entitled to (a) all dividends and other distributions
payable in respect of such shares of URS common stock with a
record date after the effective time of the merger and a payment
date on or prior to the date of such surrender and not
previously paid and (b) at the appropriate payment date, an
amount equal to the dividends or other distributions payable
with respect to such shares of URS common stock with a record
date after the effective time of the merger but with a payment
date subsequent to such surrender.
Transfers
of Ownership and Lost Stock Certificates
URS will issue the cash consideration to a person other than the
person in whose name the applicable surrendered certificate
representing shares of Washington Group common stock is
registered only if such person requesting such payment pays any
transfer taxes required by reason of the making of such cash
payment to a person
102
other than the registered holder of such certificate or such
person establishes to the satisfaction of the exchange agent
that any such tax has been paid or is not payable. URS will
issue shares of URS common stock to be registered in the name of
a person other than the person in whose name the applicable
certificate representing shares of Washington Group common stock
is registered only if such surrendered certificate is properly
endorsed or otherwise in proper form for transfer and the person
requesting delivery of shares of URS common stock pays to the
exchange agent any transfer taxes required as a result of such
registration in the name of a person other than the registered
holder or establishes to the satisfaction of the exchange agent
that such tax has been paid or is not payable.
If any certificate representing shares of Washington Group have
been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the holder claiming such certificate to be lost,
stolen or destroyed and, if required by URS or Washington Group,
the posting by such person of a bond, in such reasonable amount
as Washington Group may direct, as indemnity against any claim
that may be made against it with respect to such certificate,
the exchange agent will issue in exchange for such lost, stolen
or destroyed certificate the merger consideration to be paid in
respect of the shares of Washington Group common stock
represented by such certificate.
Conditions
to Completion of the Merger
The obligations of URS and Washington Group to complete the
merger are subject to the satisfaction or waiver, if legally
permissible, of the following conditions:
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the approval and adoption of the merger agreement by Washington
Group stockholders and the approval of the issuance of shares of
URS common stock in the merger by URS stockholders;
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the expiration or termination of the applicable waiting period
and any extension of the waiting period under the HSR Act;
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the absence of any legal prohibition having the effect of
preventing or prohibiting completion of the merger which
prohibition continues to be in effect;
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the effectiveness under the Securities Act of the registration
statement of which this joint proxy statement/prospectus is a
part and the absence of any pending or threatened proceeding
related to the registration statement;
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the approval for listing on the NYSE of the shares of URS common
stock to be issued in the merger, subject to official notice of
issuance;
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(a) the accuracy and correctness, in all respects as so
qualified at and as of the date of the merger agreement and at
and as of the closing date of the merger as though made at and
as of the closing date of the merger, of the representations and
warranties of the other party, subject to certain exceptions,
which are qualified by a Material Adverse Effect
qualification, (b) the accuracy and correctness, at and as
of the date of the merger agreement and at and as of the closing
date of the merger as though made at and as of the closing date
of the merger, except for such failures to be true and correct
as would not have, in the aggregate, a Material Adverse Effect
on such party, of the representations and warranties of the
other party, subject to exceptions which are not qualified by a
Material Adverse Effect qualification, (c) the
accuracy and correctness, in all material respects on the date
of the merger agreement and on the closing date of the merger as
if made on and as of such dates, of the representations and
warranties relating to the capital structure of such party,
other than with respect to any issuances permitted pursuant to
the merger agreement, and (d) the accuracy and correctness,
in all respects on the closing date of the merger as if made on
and as of such date (except with respect to the foregoing to the
extent that any representation and warranty is made as of a
particular date or period) of the representation relating to
absence of certain changes after the date of the merger
agreement, and the receipt of a certificate from the officers of
the other party to that effect;
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the other partys having performed and complied with its
covenants in the merger agreement in all material respects prior
to the effective time of the merger, and the receipt of a
certificate from the officers of the other party to that
effect; and
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the receipt by each party of an opinion from the partys
counsel that the merger and the second merger, taken together,
will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code.
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Material Adverse Effect, when used in reference to
URS or Washington Group, means such facts, circumstances, events
or changes that are materially adverse to the business or
financial condition of the URS or Washington Group, as the case
may be, and its subsidiaries, taken as a whole. However, such
facts, circumstances, events or changes will not be deemed to
have a Material Adverse Effect if they:
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generally affect any of the industries in which such party
operates generally in the United States or the economy or the
financial or securities markets in the United States or
elsewhere in the world, including regulatory and political
conditions or developments (including any outbreak or escalation
of hostilities or acts of war or terrorism) or changes in
interest rates, in each case to the extent not having a
materially disproportionate impact on such party and its
subsidiaries, taken as a whole, as compared to other persons in
such industries; or
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result from:
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the announcement or the existence of, or compliance with, the
merger agreement or the announcement of the transaction or any
of the other transactions contemplated by the merger agreement;
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any litigation arising from allegations of a breach of fiduciary
duty or other violation of applicable law relating to the merger
agreement or the transactions contemplated by the merger
agreement;
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changes in applicable law, GAAP or accounting standards;
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changes in the market price or trading volume of URS common
stock or Washington Group common stock, as the case may be;
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changes in any analysts recommendations, any financial
strength rating or any other recommendations or ratings as to
URS or Washington Group, as the case may be, or its subsidiaries
(including, in and of itself, any failure to meet analyst
projections); or
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the failure, in and of itself, of URS or Washington Group, as
the case may be, to meet any expected or projected financial or
operating performance target publicly announced prior to the
date of the merger agreement, as well as any change, in and of
itself, by URS or Washington Group, as the case may be, in any
expected or projected financial or operating performance target
as compared with any target publicly announced prior to the date
of the merger agreement.
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Representations
and Warranties
The merger agreement contains customary representations and
warranties of URS and Washington Group, which are subject to
materiality and knowledge qualifications in many respects, and
expire at the effective time of the merger. The representations
and warranties contained in the merger agreement relate to,
among other things:
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organization and standing;
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corporate power and authority;
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capital structure;
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conflicts, consents and approvals;
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SEC filings;
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compliance with law;
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undisclosed liabilities;
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disclosure documents;
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litigation;
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taxes;
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absence of certain changes or events;
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intellectual property;
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employee benefits plans;
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contracts and indebtedness;
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labor matters;
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environmental matters;
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opinion of such partys financial advisor;
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board recommendation and required stockholder vote;
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customer and supplier relationships;
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transactions with affiliates;
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foreign corrupt practices and international trade sanctions;
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brokerage and finders fees and expenses;
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reorganization; and
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backlog.
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The merger agreement also contains additional representations
and warranties of Washington Group related to its subsidiaries,
insurance, Section 203 of the DGCL and government contracts.
The merger agreement also contains additional representations
and warranties of URS relating to the capital structure of Bear
Merger Sub, Inc. and Elk Merger Corporation, available funds,
absence of ownership of shares of Washington Group common stock
and financing.
URS
and Washington Group Prohibited from Soliciting Other
Offers
The merger agreement provides that neither URS nor Washington
Group may, and each of URS and Washington Group must use its
reasonable best efforts to cause its subsidiaries and its
subsidiaries employees, agents and representatives not to,
directly or indirectly:
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initiate, solicit or knowingly encourage any inquiries with
respect to or the making of any acquisition proposal;
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engage in any negotiations concerning, or provide any
confidential information or data to any person relating to an
acquisition proposal;
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approve or recommend or propose publicly to approve or
recommend, any acquisition proposal; or
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approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement or other
similar agreement relating to any acquisition proposal or
propose publicly or agree to do any of the foregoing relating to
an acquisition proposal.
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Each of URS and Washington Group may, however, before the
earlier of, in the case of URS, the URS stockholders
approval of the issuance of shares of URS common stock pursuant
to the merger agreement or the termination date of the merger
agreement in accordance with its terms or, in the case of
Washington Group, the Washington Group stockholders
approval and adoption of the merger agreement and the
transaction and the termination date of the merger agreement in
accordance with its terms, in response to an acquisition
proposal which constitutes a superior proposal or which its
board of directors determines, in good faith, could reasonably
be expected to result in a superior proposal (i) furnish
nonpublic information to the third party making such acquisition
proposal, if, and only if, prior to so furnishing such
information, it receives from such third party an executed
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confidentiality agreement with confidentiality provisions no
less favorable to it than the confidentiality agreement entered
into by URS and Washington Group and (ii) engage in
discussions or negotiations with such third party with respect
to the acquisition proposal.
Nothing in the merger agreement prevents URS, Washington Group
or their respective boards of directors from complying with its
disclosure requirements in compliance with
Sections 14d-9
and
14e-2
of
the Exchange Act.
An acquisition proposal means any proposal or offer
with respect to:
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a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, dissolution, liquidation
or similar transaction involving URS or Washington Group, as
applicable;
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any purchase of an equity interest (including by means of a
tender or exchange offer) representing an amount equal to or
greater than a 15% voting or economic interest in URS or
Washington Group, as applicable; or
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any purchase of assets, securities or ownership interests
representing an amount equal to or greater than 15% of the
consolidated assets of URS or Washington Group, as applicable,
and their respective subsidiaries taken as a whole (including
stock of the subsidiaries of URS or Washington Group, as
applicable), consolidated net revenues or earnings before
interest, taxes, depreciation and amortization.
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A superior proposal means with respect to URS or
Washington Group, as applicable, a bona fide written acquisition
proposal (except that references in the definition of
acquisition proposal to 15% being replaced by 50%)
made by any person other than the parties to the merger
agreement on terms that the board of directors of URS or
Washington Group, as applicable, determines in good faith, after
consultation with their respective financial and legal advisors,
as applicable, and considering such factors as the board of
directors of URS or Washington Group, as applicable, considers
to be appropriate (including the timing and likelihood of
consummation of such proposal), are more favorable to URS or
Washington Group, as applicable, and their respective
stockholders than the transactions contemplated by the merger
agreement.
Each of URS and Washington Group are required to promptly orally
notify the other party of any request for information or any
inquiries, proposals or offers relating to an acquisition
proposal indicating, in connection with such notice, the name of
such person making such request, inquiry, proposal or offer and
the material terms and conditions of any proposals or offers and
it must provide to the other party written notice of any such
inquiry, proposal or offer within forty-eight hours of such
event and copies of any written or electronic correspondence to
or from any person making an acquisition proposal. Each of URS
and Washington Group are required to keep the other party
informed orally on a current basis of the status of any
acquisition proposal, including with respect to the status and
terms of any such proposal or offer and whether any such
proposal or offer has been withdrawn or rejected and such party
is required to provide to the other party written notice of any
such developments (including copies of any written proposals or
requests for information) within forty-eight hours. Each of URS
and Washington Group is required to also provide any information
to the other party (not previously provided to the other party)
that it is providing to another person pursuant to the
obligations described in this paragraph at substantially the
same time it provides such information to such other person.
The URS board of directors has agreed to recommend to its
stockholders the approval of the issuance of the shares of URS
common stock in the merger, and to take all lawful action to
solicit such approval. The Washington Group board of directors
has agreed to recommend to its stockholders the approval and
adoption of the merger agreement and the transaction, and to
take all lawful action to solicit such approval.
In addition, the merger agreement provides that, at any time
prior to, but not after, in the case of URS, the URS
stockholders approval of the issuance of shares of URS
common stock pursuant to the merger agreement, or, in the case
of Washington Group, the Washington Group stockholders
approval and adoption of the merger agreement and the
transaction, each of URS or Washington Group, as applicable, or
its respective board of directors may recommend an unsolicited
bona fide written acquisition proposal to its stockholders, if:
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its board of directors determines in good faith, after
consultation with its outside legal counsel, that failing to do
so could reasonably be expected to constitute a breach of its
fiduciary duties under applicable law;
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its board of directors determines in good faith that such
acquisition proposal constitutes a superior proposal; and
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the other party received written notice of its intention to take
such action at least four business days prior to the taking of
such action and it has complied with its other applicable
obligations described in the merger agreement.
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Such acquisition proposal must be in the form, other than
immaterial changes, that was the subject of such notice.
However, the board of directors of URS or Washington Group, as
applicable, must continue to believe, after taking into account
any modifications to the terms of the transaction contemplated
by the merger agreement that are proposed by URS or Washington
Group, as applicable, after its receipt of the superior proposal
notice that such acquisition proposal constitutes a superior
proposal.
URS or Washington Groups board of directors, as
applicable, may withdraw, modify or qualify its recommendation
to the URS stockholders or the Washington Group stockholders, as
applicable, in the event that it determines in good faith after
consultation with outside counsel that failing to do so could
reasonably be expected to constitute a breach of its fiduciary
duties under applicable law. Such board of directors may not
recommend any acquisition proposal (other than the merger
agreement and the transactions contemplated by the merger
agreement, including the transaction), except as specifically
contemplated by, and in accordance with the restrictions and
obligations described above under URS and
Washington Group Prohibited from Soliciting Other Offers
on page 105. In addition, unless the merger agreement is validly
terminated in accordance with its terms, each of URS and
Washington Group, as applicable, is required to submit the
merger agreement to its stockholders for adoption at its
stockholder meeting.
Conduct
of Business Before Completion of the Merger
Restrictions
on URS Interim Operations
URS has agreed that, prior to the completion of the merger,
except as may be required by applicable law, agreed to in
writing by Washington Group, which consent will not be
unreasonably withheld, delayed or conditioned, as may be
expressly required or permitted by the merger agreement, it will:
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and will cause each of its subsidiaries to conduct its business
and operate its properties only in the ordinary course
consistent with past practice; and
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will cause each of its subsidiaries to use its reasonable best
efforts to preserve intact its business organization and
relationships with third parties and keep available the services
of its present key officers and directors; and
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not:
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adjust, split, combine or reclassify its capital stock or that
of its subsidiaries;
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except for dividends or distributions among it and its direct or
indirect wholly owned subsidiaries or among its direct or
indirect wholly owned subsidiaries, make, declare or pay any
dividend or distribution on, or, directly or indirectly, redeem,
purchase or otherwise acquire, any shares of its capital stock
or that of its subsidiaries or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock or that of its subsidiaries;
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issue, deliver, sell, pledge or encumber or agree to issue,
deliver, sell, pledge or encumber any shares of its capital
stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock
or such securities or the capital stock or such securities of
its subsidiaries, other than (a) grants of rights or
options for its capital stock for equity compensation purposes
in the ordinary course of business, (b) issuances of shares
of its capital stock in the ordinary course of business pursuant
to employee stock purchase plans in existence on the date of the
merger agreement, (c) issuances of shares of its capital
stock in respect of any exercise of options to purchase its
capital stock and settlement of any of its other stock-based
awards outstanding on the date of the merger agreement or as may
be granted after the date of the merger agreement as permitted
in this covenant, (d) issuances of shares of its capital
stock
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in an aggregate amount not to exceed $250,000,000 and
(e) the sale of shares of its capital stock pursuant to the
exercise of options to purchase its capital stock if necessary
to effectuate an optionee direction upon exercise or for
withholding of taxes;
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enter into any agreement, understanding or arrangement with
respect to the sale, voting, registration or repurchase of its
capital stock or that of its subsidiaries;
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make or propose any material changes in its certificate of
incorporation or bylaws in a manner that adversely affects the
rights of holders of its capital stock;
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merge or consolidate with any person or adopt a plan of complete
or partial liquidation, dissolution, recapitalization or other
reorganization;
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except for transactions with or among its wholly owned
subsidiaries and except in the ordinary course of business
consistent with past practice, acquire assets or capital stock
of any other person, other than acquisitions at or below fair
market value for consideration in excess of $250,000,000 in the
aggregate;
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except for transactions with or among its subsidiaries, sell,
pledge, assign, dispose of, transfer, lease, or encumber any
property or assets (including stock or other ownership interests
of its subsidiaries) other than (a) in the ordinary course
of business and (b) such transactions having an aggregate
fair market value of $250,000,000 or less;
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incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise become liable for the obligations of any other person
or entity (other than in the ordinary course of businesses
consistent with past practice and except for (a) any
indebtedness with or among its subsidiaries,
(b) indebtedness incurred to replace, renew, extend,
refinance or refund any existing indebtedness,
(c) guarantees for borrowed money in compliance with this
clause, (d) indebtedness pursuant to agreements in effect
prior to the date of the merger agreement, and
(e) indebtedness in excess of $300,000,000 outstanding at
any time and incurred by it or its subsidiaries other than in
accordance with this clause);
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make any capital expenditures in excess of $100,000,000 in the
aggregate;
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take any action that would reasonably be expected to result in
any of its or Elk Merger Corporations representations or
warranties set forth in the merger agreement to become not true;
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take, or knowingly omit to take, any action (including, but not
limited to, any acquisition or entering into any business
combination) which is intended to or which could reasonably be
expected to adversely affect the ability of any of the parties
to the merger agreement to perform its covenants and agreements
under the merger agreement or otherwise prohibit or materially
delay consummation of the transaction or other transactions
contemplated by the merger agreement; or
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authorize any of its subsidiaries or agree itself to take any of
the foregoing actions.
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Restrictions
on Washington Groups Interim Operations
In addition, Washington Group has agreed that, prior to the
completion of the merger, except as may be required by
applicable law, agreed to in writing by URS, which consent will
not be unreasonably withheld, delayed or conditioned, as may be
expressly required or permitted by the merger agreement, it will:
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and will cause each of its subsidiaries to conduct its business
and operate its properties only in the ordinary course
consistent with past practice;
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will cause each of its subsidiaries to use its reasonable best
efforts to preserve intact its business organization and
relationships with third parties and keep available the services
of its present key officers and directors; and
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not:
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adjust, split, combine or reclassify its capital stock or that
of its subsidiaries;
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except for dividends or distributions among it and its direct or
indirect wholly owned subsidiaries or among its direct or
indirect wholly owned subsidiaries, make, declare or pay any
dividend or distribution on, or, directly or indirectly, redeem,
purchase or otherwise acquire, any shares of its capital stock
or that of its subsidiaries or any securities or obligations
convertible into or exchangeable for any shares of its capital
stock or that of its subsidiaries;
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grant any person any right or option to acquire any shares of
its capital stock or that of its subsidiaries or any other
equity-based compensation award based on shares of its capital
stock or that of its subsidiaries, other than the grant of up to
an aggregate of 25,000 options to purchase shares of its capital
stock and the grant of up to an aggregate of 10,000 restricted
shares of its capital stock in the ordinary course of business
consistent with past practice in accordance with its customary
schedule, including customary new hire and promotion grants;
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issue, deliver, sell, pledge or encumber or agree to issue,
deliver, sell, pledge or encumber any shares of its capital
stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock
or such securities or the capital stock or such securities of
its subsidiaries, other than (a) as contemplated by the
immediately preceding bullet, (b) issuances of shares of
its capital stock in the ordinary course of business pursuant to
employee stock purchase plans in existence on the date of the
merger agreement, (c) issuances of shares of its capital
stock in respect of any exercise of options to purchase shares
of its capital stock and settlement of any of its other
stock-based award outstanding on the date of the merger
agreement or as may be granted after the date of the merger
agreement as permitted by the merger agreement and (d) the
sale of shares of its capital stock pursuant to the exercise of
options to purchase shares of its capital stock if necessary to
effectuate an optionee direction upon exercise or for
withholding of taxes;
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enter into any agreement, understanding or arrangement with
respect to the sale, voting, registration or repurchase of its
capital stock or that of its subsidiaries;
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make or propose any material changes in its certificate of
incorporation or bylaws or the organization documents of any of
its subsidiaries;
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merge or consolidate with any person or adopt a plan of complete
or partial liquidation, dissolution, recapitalization or other
reorganization;
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except for transactions with or among its wholly owned
subsidiaries and except in the ordinary course of business
consistent with past practice, acquire assets or capital stock
of any other person, other than acquisitions at or below fair
market value for consideration in excess of $10,000,000
individually or $50,000,000 in the aggregate;
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except for transactions with or among its subsidiaries, sell,
pledge, assign, dispose of, transfer, lease, or encumber any
property or assets (including stock or other ownership interests
of its subsidiaries and including transfers of project
equipment) other than (a) in the ordinary course of
business and (b) such transactions not greater than
$10,000,000 individually and $20,000,000 in the aggregate;
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incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise become liable for the obligations of any other person
or entity (other than in the ordinary course of businesses
consistent with past practice and except for (a) any
performance guarantees by it of the obligations of its
subsidiaries or joint ventures, (b) any indebtedness with
or among its subsidiaries, (c) indebtedness incurred to
refinance or refund any existing indebtedness,
(d) guarantees for borrowed money in compliance with this
clause, (e) indebtedness pursuant to agreements in effect
prior to the merger agreement, and (f) indebtedness in
excess of $25,000,000 individually or $50,000,000 in the
aggregate outstanding at any time and incurred by it or its
subsidiaries other than in accordance with this clause);
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except for transactions in the ordinary course of business
consistent with past practice, with or among its wholly owned
subsidiaries, create any subsidiaries or alter through merger,
liquidation, reorganization,
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restructuring or in any other fashion the corporate structure or
ownership of any of its existing subsidiaries;
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(a) establish, or increase compensation or benefits
provided under, any stay bonus, incentive, insurance, severance,
termination,
change-in-control,
deferred compensation, pension, retirement, profit sharing,
stock option (including, without limitation, the granting or
repricing of stock options, stock appreciation rights,
performance awards, restricted stock awards or similar
instruments), stock purchase or other employee benefit plan
policy, or agreement, except (1) for increases to base
salary in the ordinary course of business consistent with past
practices for employees who are not officers of Washington
Group, (2) severance agreements entered into in the
ordinary course of business in connection with terminations of
employment with employees who are not executive officers and
(3) the issuance of up to 75,000 performance units in the
ordinary course of business consistent with past practice,
(b) otherwise increase or accelerate the vesting or payment
of the compensation or benefits payable, (c) (1) enter into
any new or amend any existing employment or consulting agreement
with any executive officer or director or (2) enter into
any new or amend any existing employment or consulting agreement
with any director, officer, employee, consultant or service
provider or hire or retain the services of any such director,
officer, employee, consultant or service provider if the
compensation of such newly hired or retained person exceeds
$375,000 per year in the case of any director, officer, employee
or service provider or $500,000 per year in the case of any
consultant, (d) establish, adopt, amend or enter into any
collective bargaining agreement, (e) provide any funding
for any rabbi trust or similar arrangement or (f) except as
may be required by GAAP, materially change any actuarial
assumptions with respect to any pension plan, except in the case
of each of clauses (a), (b), (d), and (e) as may be
required to comply with applicable law, any benefit plans or
foreign plans or existing contractual arrangements;
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enter into, adopt or amend in any manner which would increase
costs or benefits thereunder, any benefit plan, except as is
required by applicable laws or existing contractual arrangements;
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take any action outside of the ordinary course of business
consistent with past practice that could give rise to severance
benefits as a result of consummation of the merger payable to
(a) any material group of employees or (b) any of
Washington Groups officers, directors or employees that
earn in excess of $375,000 per year;
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change any method or principle of financial accounting, except
to the extent required by applicable law, SEC rule or policy, or
by GAAP as advised by the its regular independent accountants;
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except as in the ordinary course consistent with past practice,
enter into any new noncompete, exclusivity or similar agreement
that would restrict or limit, in any material respect, the
operations of it or its subsidiaries, or, after the consummation
of the merger, URS or its subsidiaries;
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settle or compromise any material actions pending as of the date
of the merger agreement or later made or brought, or waive,
release or assign any material rights or claims in an amount
greater than $25,000,000 individually or $50,000,000 in the
aggregate;
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(a) enter into any fixed-price contract expected to
generate revenues in excess of $50,000,000 over the life of the
contract or (b) modify, amend or terminate, or waive,
release or assign any material rights or claims with respect to,
any material contract or contracts listed in its disclosure
schedule to the merger agreement;
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renew, enter into, amend or waive any material right under any
contract with or loan to any of its affiliates (other than its
subsidiaries);
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make any corporate capital expenditures in excess of $10,000,000
individually or $20,000,000 in the aggregate;
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except, in each case, as would not result in an increase of
$25,000,000 individually or $50,000,000 in the aggregate of its
taxes (plus any amount reserved therefor) make, revoke or amend
any tax election (except as is in the ordinary course of
business or consistent with past practice), enter into any
closing agreement, settle or compromise any claim or assessment
with respect to taxes, file an amended tax return, surrender a
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claim for a refund of taxes or (except as is in the ordinary
course of business or consistent with past practice) consent to
any extension or waiver of the statute of limitations period
applicable to any tax claim or assessment;
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take, or knowingly omit to take, any action (including but not
limited to any acquisition or entering into any business
combination) which is intended to or which could reasonably be
expected to adversely affect the ability of any of the parties
hereto to perform its covenants and agreements under the merger
agreement or otherwise prohibit or materially delay consummation
of the transaction or other transactions contemplated by the
merger agreement; or
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authorize any of its subsidiaries or agree itself to take any of
the foregoing actions.
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Access
to Information; Confidentiality
Until the earliest of the effective time of the merger and the
termination date of the merger agreement, and subject to
applicable law and confidentiality and joint defense agreements
between URS and Washington Group, URS and Washington Group are
required to (a) give the other party, its counsel,
financial advisors, auditors and other authorized
representatives reasonable access during normal business hours,
to the offices, properties, books and records of such granting
party and its subsidiaries (including, without limitation, tax
returns and work papers of independent auditors),
(b) furnish to the other party, its counsel, financial
advisors, auditors and other authorized representatives such
financial and operating data and other information as such
persons may reasonably request (including furnishing to the
other party such granting partys financial results in
advance of filing any of Washington Groups filings with
the SEC containing such financial results) and (c) instruct
the employees, counsel, financial advisors, auditors and other
authorized representatives of the granting party and its
subsidiaries to cooperate with the other party in its
investigation of the granting party and its subsidiaries. Any
investigation must be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the
granting party and its subsidiaries. In addition, no information
or knowledge obtained by any party in any investigation pursuant
to this covenant affects or may be deemed to modify any
representation or warranty made by the other party hereunder.
However, neither URS nor Washington Group is required to afford
such access if it would unreasonably disrupt the operations of
Washington Group or any of its subsidiaries or of URS or any of
its subsidiaries, would cause a violation of any agreement to
which any of such parties is a party, would cause a risk, in the
reasonable judgment of the disclosing party, of a loss of
privilege to the disclosing party, or any of their subsidiaries
or would constitute a violation of any applicable law. Neither
URS nor Washington Group or any of their respective
representatives are permitted to perform any invasive onsite
environmental procedure with respect to any of their or their
subsidiaries respective properties.
URS and Elk Merger Corporation, on the one hand, and Washington
Group, on the other hand, have agreed to:
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cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or
other inquiry, including any proceeding initiated by a private
party;
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subject to applicable laws, permit the other party to review in
advance any proposed written communication or submission between
it and any governmental authority, except that that the parties
may redact any information regarding the merger consideration
and alternative mergers or acquisitions considered, including
any rationale for the transaction or any such alternative
mergers or acquisitions related to valuation or pricing;
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promptly inform each other of and supply to such other party any
communication (or other correspondence or memoranda) received by
such party from, or given by such party to, the DOJ or FTC or
any other governmental authority and of any material
communication received or given in connection with any
proceeding by a private party, in each case regarding any of the
transactions contemplated hereby, subject to any actions
consistent with a joint defense agreement; and
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consult with each other in advance to the extent practicable of
any meeting or conference (whether in person or by telephone)
with the DOJ, the FTC or any other governmental authority or, in
connection with any proceeding by a private party, with any
other person, and to the extent practicable and permitted by the
DOJ, the FTC or such other applicable governmental authority or
other person, give the other party the opportunity to attend and
participate in such meetings and conferences.
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In addition, if any objections are asserted with respect to the
transactions contemplated hereby under any applicable law or if
any suit is instituted (or threatened to be instituted) by the
FTC, the DOJ or any other governmental authority or any private
party challenging any of the transactions contemplated hereby as
violative of any applicable law or which would otherwise
prevent, materially impede or materially delay the consummation
of the transactions contemplated hereby, URS and Elk Merger
Corporation, on the one hand, and Washington Group, on the other
hand, are required to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective the
transactions contemplated by the merger agreement, including
taking reasonable best efforts to resolve such objections, if
any, as the FTC, the DOJ, state antitrust enforcement
authorities or competition authorities of any other nation or
other jurisdiction may require under any applicable law with
respect to the transactions contemplated hereby, and to avoid or
eliminate each and every impediment under any applicable law
that may be asserted by any governmental authority with respect
to the transaction so as to enable the closing of the merger to
occur as soon as reasonably practicable (and in any event no
later than the outside date), including, without limitation,
(a) proposing, negotiating, committing to and effecting, by
consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of any assets or businesses of URS or
its subsidiaries or affiliates or of Washington Group or its
subsidiaries and (b) otherwise taking or committing to take
any actions that after the closing date of the merger would
limit the freedom of URS or its subsidiaries or
affiliates freedom of action with respect to, or its
ability to retain, one or more of its or its subsidiaries
or affiliates businesses, product lines or assets, in each
case as may be required in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining
order or other order in any suit or proceeding which would
otherwise have the effect of preventing the closing of the
merger or delaying the closing of the merger beyond the outside
date.
However, URS is not be required to (and Washington Group will
not) become subject to, or consent or agree to or otherwise take
any action with respect to, any requirement, condition,
understanding, agreement or order of a governmental authority to
sell, to hold separate or otherwise dispose of, or to conduct,
restrict, operate, invest or otherwise change assets or
businesses of URS, Washington Group or any of their subsidiaries
other than projects and contracts for the destruction of
chemical weapons in the United States through the
U.S. Chemical Weapons Demilitarization Program managed by
the U.S. Armys Chemical Materials Agency, and outside
the United States through the Department of Defenses
Threat Reduction Agency and its Cooperative Threat Reduction
Integrating Contracts program and assets related to the
performance of such projects and contracts to the extent they
are essential to support such projects and contracts. In
addition, neither Washington Group nor any of its subsidiaries
is required to become subject to, or consent or agree to or
otherwise take any action with respect to, any requirement,
condition, understanding, agreement or order of a governmental
authority to sell, to hold separate or otherwise dispose of, or
to conduct, restrict, operate, invest or otherwise change the
assets or business of Washington Group or any of its
subsidiaries, unless such requirement, condition, understanding,
agreement or order is binding on Washington Group only in the
event that the closing of the merger occurs.
If any legal proceeding, including any legal proceeding by a
private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by the merger
agreement, or if any statute, rule, regulation, executive order,
decree, injunction or administrative order is enacted, entered,
promulgated or enforced by a governmental authority which would
make the transaction or the other transactions contemplated by
the merger agreement illegal or would otherwise prohibit or
materially impair or delay the consummation of the transaction
or the other transactions contemplated hereby, each of URS,
Washington Group and Elk Merger Corporation have agreed to
cooperate in all respects with each other and use its respective
reasonable best efforts, to contest and resist any such legal
proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transaction
or the other transactions contemplated by the merger agreement
and to have such
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statute, rule, regulation, executive order, decree, injunction
or administrative order repealed, rescinded or made inapplicable
so as to permit consummation of the transactions contemplated by
the merger agreement.
Washington Group and URS have agreed to promptly advise the
other party of:
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any occurrence that has caused:
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any representation or warranty of such party contained in the
merger agreement to be materially untrue or inaccurate;
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any condition to the obligations of such party to effect the
merger to be incapable of being satisfied; or
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such partys disclosure schedule to the merger agreement to
be inaccurate or incomplete in any material respect;
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any notice from any person alleging that the consent of such
person is or may be required in connection with the transactions
contemplated by the merger agreement;
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any material notice from any governmental authority in
connection with the transactions contemplated by the merger
agreement; or
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any legal actions commenced or threatened against URS or
Washington Group or any of their respective subsidiaries that
relate to the consummation of the transactions contemplated by
the merger agreement.
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Washington
Group Incentive-Based Equity Awards and Employee Benefit
Plans
Washington
Group Incentive-Based Equity Awards
Stock
Options
Immediately following the completion of the merger, each
outstanding option to acquire shares of Washington Group common
stock, whether or not vested, that remains outstanding as of the
closing of the merger will be cancelled and converted into the
right to receive a combination of cash and URS common stock
determined as follows: the option consideration will
equal the product of (1) the number of shares of Washington
Group common stock subject to the option and (2) the
excess, if any, of $80.00 over the exercise price per share of
Washington Group common stock subject to the option. Of the
option consideration, 54.75% will be paid in cash and the
remaining 45.25% will be the share-settled amount, which will be
settled in a number of shares of URS common stock equal to the
quotient of the share-settled amount divided by $46.89. The cash
and shares payable pursuant to the preceding sentence will be
subject to any applicable withholding taxes. Immediately after
the merger is completed, any cancelled option will no longer be
exercisable by its former holder, but will only entitle the
holder to the payment of the option consideration.
Restricted
Shares
Each award of restricted Washington Group common stock will vest
in full immediately prior to the closing of the merger and will
be converted into the right to receive the merger consideration.
Deferred
Shares
Upon the completion of the merger, each deferred share of
Washington Group will be converted into the right to receive
$80.00 in cash, payable on a deferred basis at the time that the
underlying deferred shares would have been settled under their
terms as in effect immediately prior to the effective time of
the merger, plus earnings thereon as described in the merger
agreement.
Performance
Units
Upon the completion of the merger, all performance units will be
settled and paid in cash based on the greater of the par value
of such performance unit and the value of such performance unit
determined based upon
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Washington Groups actual results during the applicable
performance period through the effective time of the merger.
Washington
Group Benefit Plans
From and after the effective time of the merger, URS is required
to cause Washington Group to honor the obligations of Washington
Group as of the effective time of the merger, including the
terms of all Washington Group benefit plans. However, each such
benefit plan may be amended, suspended or terminated to the
extent permitted by its terms. Until December 31, 2008, URS
must provide each Washington Group employee with compensation
and benefits that are, in the aggregate, substantially similar
to the compensation and benefits provided to the employee prior
to the merger.
At such time as any Washington Group employee participates in
URS employee benefit plans, URS is required to:
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use its reasonable best efforts to waive all pre-existing
condition exclusions, active at-work requirements and waiting
periods with respect to participation and coverage, except to
the extent such conditions would have been recognized under the
corresponding Washington Group plan;
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recognize service credit, other than (1) for purposes of
benefit accrual under any defined benefit or pension plan,
(2) to the extent such credited service would result in a
duplication of benefits or (3) under any newly established
URS plan for which similarly situated URS employees are not
provided with service credit; and
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provide credit for deductibles, co-payments or other
out-of-pocket expenses incurred by a Washington Group employee
or his or her covered dependents.
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For a period of two years following the merger, URS is required
to continue Washington Groups retiree welfare programs for
qualified retirees on terms and conditions no less favorable
than those in effect as of closing of the merger; provided,
however, that URS is not required to incur costs in excess of
the accrued benefit cost with respect to such Washington Group
retiree welfare programs reflected in Note 8 to Washington
Groups Consolidated Financial Statements included in its
Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006.
URS has agreed to pay, no later than March 15, 2008, each
Washington Group employee who is employed as of the effective
time of the merger and on December 31, 2007 (and any
Washington Group employee who is involuntarily terminated other
than for cause, dies, becomes disabled or retires after the
effective time of the merger and prior to December 31,
2007), an annual incentive payment equal to the greater of
(a) the pro rata annual incentive based on Washington
Groups actual performance through the completion of the
merger and (b) the employees full-year annual
incentive payment. If any Washington Group plan provides for a
greater or earlier payment than the payments contemplated above,
then the plan will govern the applicable payment.
URS has agreed, to the fullest extent permitted by law, to cause
Bear Merger Sub to honor all of Washington Groups
obligations to indemnify the current or former directors or
officers of Washington Group for acts or omissions by such
directors and officers occurring prior to the effective time of
the merger. For a period of six years following the effective
time of the merger, URS and Bear Merger Sub are required to
maintain in effect provisions no less favorable with respect to
indemnification and exculpation of present and former directors
and officers of Washington Group than are presently set forth in
Washington Groups certificate of incorporation and bylaws
or any indemnification agreements of Washington Group or its
subsidiaries with any of their directors, officers or employees
in effect immediately prior to the consummation of the merger.
Bear Merger Sub has agreed to indemnify each current and former
director or officer of Washington Group or any of its
subsidiaries and any other person who served as a director,
officer, member, trustee or fiduciary of another entity at the
request of Washington Group against any costs or expenses
related to the defense or settlement of any proceeding arising
out of any action or omission occurring or alleged to have
occurred before or after consummation of the merger.
For six years from the effective time of the merger, URS and
Bear Merger Sub have agreed to maintain the current policies of
directors and officers liability and fiduciary
liability insurance maintained by Washington
114
Group with respect to claims arising from or related to facts or
events which occurred at or before the effective time of the
merger, although URS may substitute policies with reputable and
financially sound carriers of at least the same coverage and
amounts containing terms and conditions which are no less
advantageous. If the annual premium payments for this insurance
exceed 250% of the annual premiums paid as of the date of the
merger agreement by Washington Group for the insurance, URS and
its subsidiaries are required to provide only such coverage as
is available at annual premium equal to 250% of such rate.
URS must use its reasonable best efforts to obtain the financing
required for the transactions contemplated by the merger
agreement on the terms and conditions described in the financing
commitment letter that URS entered into with MSSF and Wells
Fargo. In connection with the financing, URS has agreed to:
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not permit amendments to the financing commitment letter if such
amendment reduces the aggregate amount of the contemplated
financing (other than immaterial reductions), amends the
conditions to the drawdown of the financing in an adverse manner
or is otherwise adverse to the interests of Washington Group;
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keep Washington Group informed of the status of the contemplated
financing;
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notify Washington Group upon becoming aware of any material
breach by any party to the financing commitment letter or any
termination of the financing commitments; and
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if URS becomes aware of any event or circumstance that makes
procurement of any portion of the contemplated financing
unlikely to occur in the manner contemplated in the financing
commitment letter, immediately notify Washington Group and use
its reasonable best efforts to arrange any such portion from
alternative sources.
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Washington Group has agreed to use its reasonable best efforts
to provide cooperation, subject to restrictions, in connection
with the arrangement of any financing, including reasonable
participation in meetings and road shows, the provision of
information reasonably requested by URS and reasonable
assistance in the preparation of any confidential information
memorandum to be used in syndicating any financing.
Termination
of the Merger Agreement
URS and Washington Group may mutually agree in writing by action
of their respective boards of directors, at any time before the
effective time of the merger, to abandon the merger and
terminate the merger agreement. Also, either URS or Washington
Group may terminate the merger agreement in a number of
circumstances, including if:
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the merger is not consummated by December 27, 2007, unless
that date is extended to May 27, 2008 on the terms provided
in the merger agreement;
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Washington Group stockholders fail to adopt the merger agreement
and approve the merger at the Washington Group special meeting;
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URS stockholders fail to approve the issuance of shares of URS
common stock in the merger at the URS special meeting; or
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any governmental entity prohibits the merger and that
prohibition has become final and nonappealable, except that the
party seeking to terminate the merger agreement must have used
its reasonable best efforts to remove the prohibition.
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URS also may terminate the merger agreement if:
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Washington Group breaches any representation, warranty, covenant
or agreement made by Washington Group in the merger agreement or
any representation and warranty made by Washington Group has
become untrue or incorrect after the execution of the merger
agreement, in each case, such that the conditions to the
completion of the merger would not be satisfied and such breach
or failure to be true is not cured within 30 days of notice
by URS;
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115
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prior to the URS stockholder meeting, URS receives an
unsolicited bona fide written acquisition proposal (other than
the merger agreement and the transaction) in compliance with the
applicable provisions of the merger agreement that is a superior
proposal and URS has complied with its obligations set forth in
the merger agreement with respect to acquisition
proposals; or
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prior to the Washington Group stockholder meeting, the
Washington Group board of directors withdraws, qualifies,
modifies its approval of the merger agreement or its
recommendation to the stockholders of Washington Group, in each
case, in a manner adverse to URS, or approves or recommends any
acquisition proposal (other than the merger agreement and the
transaction).
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Washington Group also may terminate the merger agreement if:
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URS breaches any representation, warranty, covenant or agreement
made by URS in the merger agreement or any representation and
warranty made by URS has become untrue or incorrect after the
execution of the merger agreement, in each case, such that the
conditions to the completion of the merger would not be
satisfied and such breach or failure to be true is not cured
within 30 days of notice by Washington Group;
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prior to the Washington Group stockholder meeting, Washington
Group receives an unsolicited bona fide written acquisition
proposal (other than the merger agreement and the transaction)
in compliance with the applicable provisions of the merger
agreement that is a superior proposal and Washington Group has
complied with its obligations set forth in the merger agreement
with respect to acquisition proposals;
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prior to the URS stockholder meeting, the URS board of directors
withdraws, qualifies, modifies its approval of the merger
agreement or its recommendation to the stockholders of URS, in
each case, in a manner adverse to Washington Group, or approves
or recommends any acquisition proposal (other than the merger
agreement and the transaction); or
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URS does not effect the closing of the merger within five
business days after notice by Washington Group to URS that the
mutual conditions to each partys obligation to consummate
the merger and the conditions to URS obligations to
consummate the merger are satisfied and all such conditions have
in fact been satisfied (or, upon an immediate closing of the
merger, would be satisfied as of such closing). (Note that the
Merger Agreement refers to Washington Groups (rather than
URS) obligations to consummate the merger, and the parties
have agreed that this was a drafting error).
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Washington Group has agreed to pay URS a fee of
$70.0 million if (i) the merger agreement is
terminated by URS or Washington Group because Washington
Groups stockholders do not approve and adopt the merger
agreement and the merger at the Washington Group stockholder
meeting, (ii) prior to the Washington Group stockholder
meeting, Washington Group receives an acquisition proposal
(substituting 50% for the 15% threshold set forth in the
definition of acquisition proposal above, being referred to as a
covered proposal) that is outstanding at the time of the
meeting, and (iii) within twelve months of the
termination date, Washington Group consummates any covered
proposal.
Washington Group has also agreed to pay URS a fee of
$70.0 million if the merger agreement is terminated by
(i) URS because the Washington Group board of directors,
prior to Washington Groups stockholder meeting, withdraws,
qualifies or adversely modifies its approval of the merger
agreement or its recommendation to Washington Groups
stockholders for the approval of the merger and the adoption of
the merger agreement, or (ii) Washington Group prior to
Washington Groups stockholder meeting because Washington
Group receives an unsolicited bona fide written superior
proposal.
URS has agreed to pay Washington Group a fee of
$70.0 million if (i) the merger agreement is
terminated by Washington Group or URS because URS
stockholders do not approve the issuance of URS common stock to
Washington Group stockholders at the URS stockholder meeting,
(ii) prior to the URS stockholder meeting, URS receives a
covered proposal that is outstanding at the time of the meeting,
and (iii) within twelve months of the termination date, URS
consummates any covered proposal.
116
URS has also agreed to pay Washington Group a fee of
$50.0 million if the merger agreement is terminated by
Washington Group or URS because the merger is not completed by
the outside date or any governmental authority of competent
jurisdiction has issued an order, decree, injunction or ruling
or taken any other action permanently enjoining, restraining or
otherwise prohibition the consummation of the transaction, which
order, decree, injunction, ruling or other action has become
final and nonappealable and, at the termination date, the
expiration or termination of the applicable waiting period and
any extension of the waiting period under the HSR Act have not
occurred, but the other conditions of the parties set forth in
the merger agreement have been or are capable of being satisfied
as of the termination date.
URS has also agreed to pay Washington Group a fee of
$70.0 million if the merger agreement is terminated by
(i) Washington Group because the URS board of directors,
prior to URS stockholder meeting, withdraws, qualifies or
adversely modifies its approval of the merger agreement or its
recommendation to URS stockholders for the approval of the
issuance of shares of URS common stock to Washington Group
stockholders, or (ii) URS prior to URS stockholder
meeting because URS receives an unsolicited bona fide written
superior proposal.
In the event of termination of the merger agreement by either
URS or Washington Group in accordance with the terms of the
merger agreement, the merger agreement will immediately become
void and have no effect with no liability to any party. However,
no termination will relieve any party to the merger agreement of
any liability or damages resulting from any willful or
intentional breach of the merger agreement.
Except as provided under Termination Fee
on page 116, all fees and expenses incurred in connection with
the merger will be paid by the party incurring the fees or
expenses, whether or not the merger is consummated, other than
expenses incurred in connection with the printing of this joint
proxy statement/prospectus or other printing costs related to
the transactions and the actions contemplated by the merger
agreement, which will be shared equally by URS and Washington
Group and other than expenses incurred in connection with filing
fees incurred in connection with the SEC and regulatory filings
related to the transaction and the transactions contemplated by
the merger agreement (including required filings under the HSR
Act), which will be borne by URS.
URS and Washington Group have agreed to consult with each other
before issuing, and provide each other reasonable opportunity to
review and comment upon, any press release or other public
statements with respect to the merger and the other transactions
contemplated by the merger agreement and have also agreed not to
issue any such press release or make any public statement prior
to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any
national securities exchange.
URS has agreed to use its reasonable best efforts to cause the
shares of URS common stock to be issued in the merger to be
approved for listing on the NYSE, subject to official notice of
issuance, prior to the closing of the merger.
URS and Washington Group have agreed to cause, prior to the
closing of the merger, any dispositions of Washington Group
common stock or acquisitions of URS common stock resulting from
the merger by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with
respect to Washington Group to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
117
URS and Washington Group intend the merger and the second
merger, taken together, to qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
Each party and its respective subsidiaries have agreed to use
their reasonable best efforts to cause the merger and the second
merger, taken together, to qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
URS, Washington Group and their respective subsidiaries have
agreed not to take any action that would prevent or impede the
merger and the second merger, taken together, from qualifying as
a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. For a description of certain tax
consequences of the merger, see The Merger
Material United States Federal Income Tax Consequences on
page 88.
URS and Washington Group have agreed to use their reasonable
best efforts in order for URS to obtain from Latham &
Watkins, and for Washington Group to obtain from Wachtell
Lipton, opinions dated as of the closing date of the merger that
the merger and the second merger, taken together, will
constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. If these
opinions are not rendered, URS and Washington Group may not
complete the merger unless both URS and Washington Group waive
this condition to closing of the merger. If the condition is
waived, the joint proxy statement/prospectus will be amended and
recirculated and stockholder approval will be resolicited to the
extent required by applicable law.
URS and Washington Group are required to each, as promptly as
practicable after this
Form S-4
is declared effective under the Securities Act, duly call, give
notice of, convene and hold URS and Washington Group stockholder
meetings.
In addition, URS and Washington Group have also agreed to
otherwise coordinate and cooperate with each other with respect
to the timing of their respective stockholder meetings and
otherwise comply with all legal requirements applicable to each
such stockholder meeting.
Management
of URS and Washington Group After the Merger
URS has agreed to take such action as may be necessary to cause
the number of directors comprising its board of directors at the
effective time of the merger to be sufficient to permit one
director of Washington Group, who was a director of Washington
Group on May 27, 2007, to serve as a director of URS. The
candidate will be chosen by URS in its sole discretion prior to
the effective time of the merger and considered, qualified and
approved in accordance with the current procedures of URS
nominating committee or other applicable governing standards of
URS board of directors.
It is currently expected that, following the merger,
Mr. Koffel will remain as Chief Executive Officer of URS
and that Mr. Hanks will become the head of URS
Washington Division. URS also currently expects that all
executive officers of URS will remain with URS following the
merger and that all executive officers of Washington Group will
remain with the Washington Division following the merger,
although two Washington Group executive officers have informed
URS that they may not remain for a long period. URS has not
entered into any new employment agreements with any of these
executives.
Third-Party
Standstill Agreements
During the period from the date of merger agreement until the
earlier of the effective time of the merger and the date of
termination of the merger agreement: (i) URS and Washington
Group have agreed not to terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to
which they or any of their subsidiaries is a party (other than
any involving the URS or Washington Group or their subsidiaries
and confidentiality agreements pertaining solely to ordinary
course commercial matters), and (ii) URS and Washington
Group have agreed to enforce the provisions of any such
agreements.
118
Amendments,
Extensions and Waivers
Amendments
The merger agreement may be amended by the parties at any time
prior to the approval of the merger by Washington Groups
stockholders by an instrument in writing signed on behalf of
each of the parties. However, after the approval of the merger
agreement at the special meeting of Washington Group
stockholders, there can be no amendment made that by law
requires further approval by the stockholders of Washington
Group without the further approval of the stockholders of
Washington Group.
Extensions
and Waivers
At any time prior to the effective time of the merger, any party
to the merger agreement may:
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extend the time for the performance of any of the obligations or
other acts of the other parties;
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waive any inaccuracies in the representations and warranties of
the other parties contained in the merger agreement or in any
document delivered pursuant to the merger agreement; or
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waive compliance by the other parties with any of the agreements
or conditions contained in the merger agreement
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Any agreement on the part of either party to any extension or
waiver is valid only if it is set forth in an instrument in
writing signed by that party. The failure of any party to the
merger agreement to assert any of its rights under the merger
agreement or otherwise does not constitute a waiver of those
rights.
119
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined balance sheet as of
June 29, 2007 and the unaudited pro forma condensed
combined statements of operations for the year ended
December 29, 2006 and the six months ended June 29,
2007 are based on the separate historical consolidated financial
statements of URS and Washington Group. These unaudited pro
forma condensed combined financial statements reflect the merger
and related events using the purchase method of accounting and
apply the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma condensed combined
financial statements. The unaudited pro forma condensed combined
balance sheet as of June 29, 2007 reflects the merger and
related events as if they had been consummated on June 29,
2007. The unaudited pro forma condensed combined statements of
operations for the year ended December 29, 2006 and the six
months ended June 29, 2007 reflect the merger and related
events as if they had been consummated on December 31,
2005, the beginning of URS 2006 fiscal year.
The pro forma adjustments are based upon available information
and assumptions that the managements of URS and Washington Group
believe reasonably reflect the merger. We present the unaudited
pro forma condensed combined financial statements for
informational purposes only. The pro forma condensed combined
financial statements are not necessarily indicative of what our
financial position or results of operations actually would have
been had we completed the merger as of the dates indicated. In
addition, the unaudited pro forma condensed combined financial
statements do not purport to project the future financial
position or operating results of the combined company. You
should read this information together with the following:
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the accompanying notes to the unaudited pro forma condensed
combined financial statements;
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the separate historical unaudited financial statements of URS as
of and for the six months ended June 29, 2007 included in
URS Quarterly Report on
Form 10-Q
for the quarterly period ended June 29, 2007, which is
incorporated by reference into this joint proxy
statement/prospectus;
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the separate historical audited financial statements of URS as
of and for the fiscal year ended December 29, 2006 included
in URS Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006, which is
incorporated by reference into this joint proxy
statement/prospectus;
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the separate historical unaudited financial statements of
Washington Group as of and for the six months ended
June 29, 2007 included in Washington Groups Quarterly
Report on
Form 10-Q
for the quarterly period ended June 29, 2007, which is
incorporated by reference into this joint proxy
statement/prospectus; and
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the separate historical audited financial statements of
Washington Group as of and for the fiscal year ended
December 29, 2006 included in Washington Groups
Annual Report on
Form 10-K
for the fiscal year ended December 29, 2006, as amended,
which is incorporated by reference into this joint proxy
statement/prospectus.
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The financial statements identified above are incorporated by
reference into this joint proxy statement/prospectus. For a more
detailed description of the information incorporated by
reference into this joint proxy statement/prospectus, and how
you may obtain it, see Additional Information
Where You Can Find More Information on page 146.
We prepared the unaudited pro forma condensed combined financial
statements using the purchase method of accounting, with URS as
the acquirer. Accordingly, the total estimated purchase price,
calculated as described in Note 1 to the unaudited pro
forma condensed combined financial statements, is allocated to
the net tangible and identifiable intangible assets of
Washington Group acquired in connection with the merger, based
on their respective fair values. The allocation is dependent
upon valuations and other studies that have not progressed to a
stage where there is sufficient information to make a definitive
allocation. Accordingly, the purchase price allocation pro forma
adjustments are preliminary and have been made solely for the
purpose of providing unaudited pro forma condensed combined
financial statements. The final purchase price allocation, which
will be determined subsequent to the closing of the merger, and
its effect on results of operations may differ significantly
from the pro forma amounts included in the unaudited pro forma
condensed combined financial statements. These amounts represent
the managements best estimate as of the date of this joint
proxy statement/prospectus.
120
In connection with the plan to integrate the operations of URS
and Washington Group, we anticipate that non-recurring charges,
such as costs associated with systems implementation, relocation
expenses, severance and other costs associated with exit or
disposal activities, will be incurred. We are not able to
determine the timing, nature and amount of these charges as of
the date of this joint proxy statement/prospectus. However,
these charges could affect the combined results of operations of
URS and Washington Group, as well as those of the combined
company following the merger, in the period in which they are
recorded. The unaudited pro forma condensed combined financial
statements do not include the effects of the costs associated
with any restructuring or integration activities resulting from
the transaction, as they are non-recurring in nature and not
factually supportable at the time that the unaudited pro forma
condensed combined financial statements were prepared. In
addition, the unaudited pro forma condensed combined financial
statements do not include the realization of any cost savings
from operating efficiencies or synergies resulting from the
transaction, nor do they include any potential incremental
revenues and earnings that may be achieved with the combined
capabilities of the companies.
121
Unaudited
Pro Forma Condensed Combined Balance Sheet
As of June 29, 2007
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Historical
|
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|
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URS
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Washington Group
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Pro Forma
|
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Pro Forma
|
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Corporation
|
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International, Inc.
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Adjustments
|
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Combined
|
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(In thousands)
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ASSETS
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Current assets:
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|
|
|
|
|
|
|
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|
|
|
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Cash and cash equivalents
|
|
$
|
63,511
|
|
|
$
|
136,490
|
|
|
$
|
(136,490
|
)(a)
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|
$
|
63,511
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Accounts receivable, net
|
|
|
665,913
|
|
|
|
287,436
|
|
|
|
|
|
|
|
953,349
|
|
Costs and accrued earnings in
excess of billings on contracts in process, net
|
|
|
565,493
|
|
|
|
345,244
|
|
|
|
|
|
|
|
910,737
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|
Deferred tax assets
|
|
|
40,725
|
|
|
|
93,189
|
|
|
|
1,443
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(f)
|
|
|
135,357
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Prepaid expenses and other current
assets
|
|
|
86,243
|
|
|
|
170,609
|
|
|
|
5,342
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(b)
|
|
|
270,375
|
|
|
|
|
|
|
|
|
|
|
|
|
8,181
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,421,885
|
|
|
|
1,032,968
|
|
|
|
(121,524
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)
|
|
|
2,333,329
|
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Property and equipment at cost, net
|
|
|
170,011
|
|
|
|
203,629
|
|
|
|
|
|
|
|
373,640
|
|
Goodwill
|
|
|
1,006,832
|
|
|
|
97,076
|
|
|
|
1,599,198
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(d)
|
|
|
2,606,030
|
|
|
|
|
|
|
|
|
|
|
|
|
(97,076
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)(d)
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|
|
|
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Purchased intangible assets, net
|
|
|
3,339
|
|
|
|
21,353
|
|
|
|
514,528
|
(e)
|
|
|
517,867
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,353
|
)(e)
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|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
237,328
|
|
|
|
(165,446
|
)(f)
|
|
|
71,882
|
|
Other assets
|
|
|
32,862
|
|
|
|
132,824
|
|
|
|
20,475
|
(b)
|
|
|
236,161
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,634,929
|
|
|
$
|
1,725,178
|
|
|
$
|
1,778,802
|
|
|
$
|
6,138,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft.
|
|
$
|
819
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
819
|
|
Current portion of long-term debt
|
|
|
16,487
|
|
|
|
|
|
|
|
57,911
|
(h)
|
|
|
74,398
|
|
Accounts payable
|
|
|
307,463
|
|
|
|
299,778
|
|
|
|
|
|
|
|
607,241
|
|
Accrued salaries and wages
|
|
|
234,371
|
|
|
|
183,922
|
|
|
|
42,026
|
(j)
|
|
|
460,319
|
|
Accrued expenses and other current
liabilities
|
|
|
79,157
|
|
|
|
38,068
|
|
|
|
52,294
|
(i)
|
|
|
190,114
|
|
|
|
|
|
|
|
|
|
|
|
|
924
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,671
|
(m)
|
|
|
|
|
Billings in excess of costs and
accrued earnings on contracts in process
|
|
|
128,956
|
|
|
|
132,520
|
|
|
|
|
|
|
|
261,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
767,253
|
|
|
|
654,288
|
|
|
|
172,826
|
|
|
|
1,594,367
|
|
Long-term debt
|
|
|
116,004
|
|
|
|
|
|
|
|
1,254,197
|
(h)
|
|
|
1,370,201
|
|
Deferred tax liabilities
|
|
|
17,453
|
|
|
|
|
|
|
|
(17,453
|
)(f)
|
|
|
|
|
Other long-term liabilities
|
|
|
128,887
|
|
|
|
212,333
|
|
|
|
11,619
|
(m)
|
|
|
347,644
|
|
|
|
|
|
|
|
|
|
|
|
|
4,620
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,815
|
)(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,029,597
|
|
|
|
866,621
|
|
|
|
1,415,994
|
|
|
|
3,312,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
6,768
|
|
|
|
11,629
|
|
|
|
|
|
|
|
18,397
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
531
|
|
|
|
304
|
|
|
|
(304
|
)(l)
|
|
|
780
|
|
|
|
|
|
|
|
|
|
|
|
|
249
|
(l)
|
|
|
|
|
Treasury stock
|
|
|
(287
|
)
|
|
|
(67,474
|
)
|
|
|
67,474
|
(l)
|
|
|
(287
|
)
|
Additional paid-in capital
|
|
|
999,711
|
|
|
|
685,024
|
|
|
|
(685,024
|
)(l)
|
|
|
2,212,216
|
|
|
|
|
|
|
|
|
|
|
|
|
1,212,505
|
(l)
|
|
|
|
|
Accumulated other comprehensive
income (loss)
|
|
|
(462
|
)
|
|
|
21,851
|
|
|
|
(21,851
|
)(l)
|
|
|
(462
|
)
|
Retained earnings
|
|
|
599,071
|
|
|
|
207,223
|
|
|
|
(207,223
|
)(l)
|
|
|
596,053
|
|
|
|
|
|
|
|
|
|
|
|
|
(876
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,142
|
)(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,598,564
|
|
|
|
846,928
|
|
|
|
362,808
|
|
|
|
2,808,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
2,634,929
|
|
|
$
|
1,725,178
|
|
|
$
|
1,778,802
|
|
|
$
|
6,138,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
122
Unaudited
Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Note 3)
|
|
|
Pro Forma
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Corporation
|
|
|
International, Inc.
|
|
|
(Note 4)
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
2,375,636
|
|
|
$
|
1,789,253
|
|
|
$
|
18,265
|
(n)
|
|
$
|
4,183,154
|
|
Direct operating expenses
|
|
|
(1,576,831
|
)
|
|
|
(1,333,545
|
)
|
|
|
2,186
|
(o)
|
|
|
(2,919,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(11,623
|
)(p)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
798,805
|
|
|
|
455,708
|
|
|
|
8,828
|
|
|
|
1,263,341
|
|
Equity in income of unconsolidated
subsidiaries
|
|
|
6,757
|
|
|
|
12,934
|
|
|
|
|
|
|
|
19,691
|
|
Indirect, general and
administrative expenses
|
|
|
(679,414
|
)
|
|
|
(417,666
|
)
|
|
|
(5,894
|
)(p)
|
|
|
(1,096,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
6,650
|
(q)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
126,148
|
|
|
|
50,976
|
|
|
|
9,584
|
|
|
|
186,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(7,991
|
)
|
|
|
(2,981
|
)
|
|
|
(51,481
|
)(r)
|
|
|
(62,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes and minority
interests
|
|
|
118,157
|
|
|
|
47,995
|
|
|
|
(41,897
|
)
|
|
|
124,255
|
|
Income tax expense
|
|
|
(49,032
|
)
|
|
|
(21,462
|
)
|
|
|
16,968
|
(s)
|
|
|
(53,526
|
)
|
Minority interests, net of tax
|
|
|
(1,962
|
)
|
|
|
(2,802
|
)
|
|
|
|
|
|
|
(4,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
67,163
|
|
|
$
|
23,731
|
|
|
$
|
(24,929
|
)
|
|
$
|
65,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.31
|
|
|
$
|
0.83
|
|
|
|
|
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.28
|
|
|
$
|
0.77
|
|
|
|
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,367
|
|
|
|
28,742
|
|
|
|
|
|
|
|
76,244
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
52,444
|
|
|
|
30,740
|
|
|
|
|
|
|
|
77,321
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
123
Unaudited
Pro Forma Condensed Combined Statement of Operations
Fiscal Year Ended December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Note 3)
|
|
|
Pro Forma
|
|
|
|
|
|
|
URS
|
|
|
Washington Group
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Corporation
|
|
|
International, Inc.
|
|
|
(Note 4)
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
4,222,836
|
|
|
$
|
3,398,082
|
|
|
$
|
8,805
|
(n)
|
|
$
|
7,629,723
|
|
Direct operating expenses
|
|
|
(2,737,828
|
)
|
|
|
(2,560,888
|
)
|
|
|
(19,700
|
)(n)
|
|
|
(5,327,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
13,862
|
(o)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,245
|
)(p)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,485,008
|
|
|
|
837,194
|
|
|
|
(20,278
|
)
|
|
|
2,301,924
|
|
Equity in income of unconsolidated
subsidiaries
|
|
|
17,314
|
|
|
|
35,816
|
|
|
|
|
|
|
|
53,130
|
|
Indirect, general and
administrative expenses
|
|
|
(1,283,533
|
)
|
|
|
(747,103
|
)
|
|
|
(11,801
|
)(p)
|
|
|
(2,042,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
218,789
|
|
|
|
125,907
|
|
|
|
(32,079
|
)
|
|
|
312,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(19,740
|
)
|
|
|
(11,279
|
)
|
|
|
(92,304
|
)(r)
|
|
|
(123,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes and minority
interests
|
|
|
199,049
|
|
|
|
114,628
|
|
|
|
(124,383
|
)
|
|
|
189,294
|
|
Income tax expense
|
|
|
(84,793
|
)
|
|
|
(30,590
|
)
|
|
|
50,375
|
(s)
|
|
|
(65,008
|
)
|
Minority interests, net of tax
|
|
|
(1,244
|
)
|
|
|
(3,192
|
)
|
|
|
|
|
|
|
(4,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
113,012
|
|
|
$
|
80,846
|
|
|
$
|
(74,008
|
)
|
|
$
|
119,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.23
|
|
|
$
|
2.83
|
|
|
|
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.19
|
|
|
$
|
2.64
|
|
|
|
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,705
|
|
|
|
28,605
|
|
|
|
|
|
|
|
75,582
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
51,652
|
|
|
|
30,608
|
|
|
|
|
|
|
|
76,529
|
(t)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
124
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
|
|
1.
|
Basis of
Pro Forma Presentation
|
On May 27, 2007, URS and Washington Group entered into a
merger agreement, pursuant to which a wholly owned subsidiary
of URS will merge with and into Washington Group, with
Washington Group continuing as the surviving corporation and a
wholly owned subsidiary of URS. Immediately following this
merger, URS will cause Washington Group to merge with and into
another wholly owned subsidiary of URS with this subsidiary
continuing as the surviving corporation and a wholly owned
subsidiary of URS. The transaction is to be accounted for using
the purchase method of accounting. For purposes of these
unaudited pro forma condensed combined financial statements, URS
has assumed the total preliminary purchase consideration in the
merger to be approximately $2.7 billion, consisting of
$1.4 billion in cash, shares of URS common stock valued at
$1.2 billion, and approximately $29.9 million in
transaction costs, excluding financing costs, to be paid by URS.
Under the terms of the merger agreement, each Washington Group
stockholder will receive $43.80 per share in cash and 0.772 of a
share of URS common stock in exchange for each share of
Washington Group common stock that he or she owned immediately
prior to the completion of the merger. URS will not issue
fractional shares of URS common stock in the merger. Instead,
each Washington Group common stockholder will receive cash in
lieu of fractional shares of URS common stock to which any
Washington Group common stockholder is entitled. In addition,
Washington Group stock option holders will receive option
consideration (at 54.75% in cash and 45.25% in shares of URS
common stock) for the in-the-money value of stock options. In
the merger, URS expects to issue approximately 24.9 million
shares of URS common stock based on Washington Groups
shares of common stock and stock options outstanding as of
September 7, 2007 and assuming that all of the stock
options outstanding as of September 7, 2007 remain
outstanding as of the effective time of the merger. For more
information on the merger consideration, please see The
Merger Agreement Merger Consideration on
page 100.
The unaudited pro forma condensed combined balance sheet
contains a preliminary estimate of the purchase price
allocation, assuming a per share value of URS common stock of
$48.75, which represents an average of the closing market prices
of URS common stock for the period beginning two trading days
before and ending three trading days after May 28, 2007,
the day the merger was announced.
The preliminary unaudited pro forma condensed combined financial
statements have been prepared assuming that the merger is
accounted for using the purchase method of accounting, which is
referred to as purchase accounting, with URS as the acquiring
entity. Accordingly, under purchase accounting, the assets,
liabilities and commitments of Washington Group are adjusted to
their fair values. For purposes of these preliminary unaudited
pro forma condensed combined financial statements, consideration
has also been given to the impact of conforming Washington
Groups accounting policies to those of URS. Additionally,
amounts in the historical consolidated financial statements of
Washington Group have been reclassified, where necessary, to
conform to the URS financial statement presentation. The
preliminary unaudited pro forma condensed combined financial
statements do not reflect the impact of possible revenue
enhancements, cost and expense efficiencies, synergies or asset
dispositions. The preliminary unaudited pro forma condensed
combined financial statements do not reflect possible
adjustments related to restructuring charges that have yet to be
determined or charges or credits that are not expected to have a
continuing impact after twelve months succeeding the merger.
The preliminary unaudited pro forma adjustments represent each
managements estimates based on information available as of
the time this joint proxy statement/prospectus was prepared and
are subject to revision as additional information becomes
available and as additional analyses are performed.
The final allocation of the purchase price will be determined
after the merger is consummated and after completion of a
thorough analysis to determine the fair values of Washington
Groups tangible and identifiable intangible assets and
liabilities. Accordingly, the final purchase accounting
adjustments, including conforming Washington Groups
accounting policies to those of URS, could be materially
different from the preliminary unaudited pro forma adjustments
presented herein. Any increase or decrease in the fair values of
Washington Groups assets, liabilities, contracts and other
items, as compared to the information shown herein, will change
the portion of the purchase price allocable to goodwill and will
impact the combined income statement due to adjustments in
amortization or accretion related to the adjusted assets or
liabilities.
125
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Based on Washington Groups shares of common stock and
equity awards outstanding as of September 7, 2007 and
assuming that all of the equity awards outstanding as of
September 7, 2007 remain outstanding as of the effective
time of the merger, the total preliminary estimated purchase
price is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amounts
|
|
|
|
(In thousands)
|
|
|
Cash
consideration
|
|
|
|
|
|
|
|
|
Cash consideration for Washington
Group common stock outstanding at $43.80 per share
|
|
|
29,308
|
|
|
$
|
1,283,690
|
|
Cash consideration for Washington
Group deferred stock outstanding at $80.00 per share
|
|
|
70
|
|
|
|
5,600
|
|
Cash consideration for Washington
Group stock options outstanding based on 54.75 percent of
the excess of $80.00 over the respective exercise prices per
share
|
|
|
|
|
|
|
127,808
|
|
|
|
|
|
|
|
|
|
|
Total cash consideration
|
|
|
|
|
|
|
1,417,098
|
|
|
|
|
|
|
|
|
|
|
Stock
consideration
|
|
|
|
|
|
|
|
|
Shares of URS common stock to be
issued for Washington Group common stock outstanding at the
0.772 exchange ratio based on the average share price of shares
of URS common stock of $48.75 for the period of two trading days
before and three trading days after the merger announcement
|
|
|
22,625
|
|
|
|
1,102,969
|
|
Shares of URS common stock to be
issued for Washington Group stock options outstanding based on
45.25 percent of the excess of $80.00 over the respective
exercise prices per share with shares of URS common stock being
valued at $48.75 per share
|
|
|
2,252
|
|
|
|
109,785
|
|
|
|
|
|
|
|
|
|
|
Total URS shares to be issued and
value of equity consideration
|
|
|
24,877
|
|
|
|
1,212,754
|
|
|
|
|
|
|
|
|
|
|
Total gross consideration
|
|
|
|
|
|
|
2,629,852
|
|
Estimated transaction costs,
excluding financing costs, to be paid by URS
|
|
|
|
|
|
|
29,944
|
|
|
|
|
|
|
|
|
|
|
Total preliminary estimated
purchase price
|
|
|
|
|
|
$
|
2,659,796
|
|
|
|
|
|
|
|
|
|
|
Under the purchase method of accounting, the total preliminary
estimated purchase price as shown in the table above is
allocated to Washington Groups tangible and intangible
assets and liabilities based on their estimated fair values as
of the date of completion of the merger. The total preliminary
estimated purchase price is allocated herein as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
(In thousands)
|
|
|
Net tangible assets as of
June 29, 2007 at estimated fair value
|
|
|
|
|
|
$
|
362,103
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
Favorable leases
|
|
$
|
15,856
|
|
|
|
|
|
Trade name
|
|
|
150,000
|
|
|
|
|
|
Customer relationships and other
|
|
|
348,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount allocated to
identifiable intangible assets
|
|
|
|
|
|
|
514,528
|
|
Net deferred tax assets
|
|
|
|
|
|
|
183,967
|
|
Amount allocated to goodwill
|
|
|
|
|
|
|
1,599,198
|
|
|
|
|
|
|
|
|
|
|
Total preliminary estimated
purchase price
|
|
|
|
|
|
$
|
2,659,796
|
|
|
|
|
|
|
|
|
|
|
126
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
A preliminary estimate of $362.1 million has been allocated
to net tangible assets acquired, excluding deferred tax assets,
and $514.5 million has been allocated to amortizable
intangible assets acquired. The depreciation and amortization
related to the fair value adjustment to net tangible assets and
the amortization related to the amortizable intangible assets
are reflected as pro forma adjustments to the unaudited pro
forma condensed combined statements of operations.
Identifiable intangible assets.
Of the total
estimated purchase price, $514.5 million has been allocated
to favorable leases, trade name, customer relationships, and
other. This adjustment is preliminary and based on
managements estimate. The amount that will ultimately be
allocated to identifiable intangible assets may differ
materially from this preliminary allocation. Favorable leases
are amortized over the terms of the leases. Trade name is
amortized using the straight-line method over an estimated
useful life of fifteen years and customer relationships and
other are amortized over a weighted average useful life of
fifteen years.
Net deferred tax assets.
The net deferred tax
assets reflect the excess of pre-existing deferred tax assets
over the estimated net deferred tax liabilities associated with
purchase accounting. Such deferred tax liabilities are primarily
associated with the
step-up
to
fair value of identifiable intangible assets. This determination
is preliminary and subject to change based upon the final
determination of the fair values of identifiable intangible
assets acquired.
Goodwill.
Goodwill represents the excess of
the purchase price over the fair value of the underlying net
tangible and intangible assets. In accordance with Statement of
Financial Accounting Standards No. 142,
Goodwill
and Other Intangible Assets,
goodwill will not be
amortized, but instead will be tested for impairment at least
annually and whenever events or circumstances have occurred that
may indicate a possible impairment. In the event the combined
management determines that the value of goodwill has become
impaired, the combined company will incur an accounting charge
for the amount of the impairment during the period in which the
determination is made.
|
|
2.
|
Financing
Considerations
|
The unaudited pro forma condensed combined financial statements
reflect the managements current estimate of the amount of
financing required to complete the merger. The actual amount of
financing will not be determined until shortly before the
closing date of the merger. The unaudited pro forma condensed
combined financial statements included in this joint proxy
statement/prospectus assume that URS will issue approximately
24.9 million shares of URS common stock, based on
Washington Groups shares of common stock and stock options
outstanding as of September 7, 2007 and assuming that all
of the stock options outstanding as of September 7, 2007
remain outstanding as of the effective time of the merger, and
pay approximately $1.4 billion in cash to holders of
Washington Groups common stock, deferred and restricted
stock, and stock options in this merger. In addition, we will
pay approximately $58.9 million in cash to the holders of
Washington Groups performance units.
The pro forma condensed combined financial statements reflect
the managements current estimate that the cash portion of
the purchase price will be funded by a combination of cash, the
issuance of a $1.1 billion Tranche A term loan at an
interest rate of 7.25% (LIBOR rate plus an additional margin of
2.00%), the issuance of a $0.3 billion Tranche B term loan
at an interest rate of 8.00% (LIBOR rate plus an additional
margin of 2.75%) and the remainder in a revolving line of credit
at an interest rate of 7.25% (LIBOR rate plus an additional
margin of 2.00%). Our pro forma interest expense also reflects a
commitment fee payable on the unused portion of the revolving
line of credit of 0.375%.
The initial actual interest rates charged on the new senior
secured credit facility, the initial level of our commitment fee
applicable to the unused portion of the revolving line of credit
and the level of our up-front financing fee will ultimately all
be based on our credit ratings as of the closing date. The
foregoing pro forma amounts assume credit ratings based on
initial indications of our possible ratings from
Standard & Poors and from Moodys. Our actual
credit ratings at either one or both of the credit rating
agencies as of the closing date may be higher or lower. In
addition, the allocation of debt between the Tranche A term
loan and the Tranche B term loan reflect the
managements current expectations, but the actual
allocation of debt between the Tranche A term loan
127
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
and the Tranche B term loan will depend on the results of
the term loan syndication process. Finally, in connection with
the syndication process and in order to achieve a successful
syndication of the new senior secured credit facility, MSSF and
Wells Fargo are permitted to make certain limited changes to the
terms of the new senior secured credit facility.
The following reclassifications have been made to conform
URS and Washington Groups historical reported
financial statements to the basis of presentation in the
unaudited pro forma condensed combined balance sheet as of
June 29, 2007, and the unaudited pro forma condensed
combined statements of operations for the six months ended
June 29, 2007 and the year ended December 29, 2006.
These reclassifications have no effect on previously reported
total assets, total liabilities, stockholders equity, and
net income.
URS
reclassifications
|
|
|
|
|
Condense $18.7 million and $19.6 million of receivable
allowances as of June 29, 2007 to accounts receivable, net
and accrued earnings in excess of billings on contracts in
process, net, respectively; and
|
|
|
|
Reclassify $6.8 million and $17.3 million of equity in
income of unconsolidated subsidiaries for the six months ended
June 29, 2007 and the year ended December 29, 2006,
respectively, from revenues to equity in income of
unconsolidated subsidiaries.
|
Washington
Group reclassifications
|
|
|
|
|
Reclassify $63.8 million of restricted cash and
$59.9 million of investments in and advances to
construction joint ventures as of June 29, 2007 to prepaid
expenses and other current assets;
|
|
|
|
Reclassify $21.4 million of intangible assets as of
June 29, 2007 from other assets to purchased intangible
assets;
|
|
|
|
Condense $117.9 million of investments in unconsolidated
affiliates as of June 29, 2007 to other assets;
|
|
|
|
Condense $74.2 million of self-insurance reserves and
$86.3 million of pension and post-retirement benefit
obligations as of June 29, 2007 to other long-term
liabilities;
|
|
|
|
Reclassify $377.7 million and $681.4 million of
Washington Groups employee benefits, insurance and other
overhead expenses for the six months ended June 29, 2007
and the year ended December 29, 2006, respectively, from
direct operating expenses to indirect, general and
administrative expenses. Washington Group has historically
classified direct expenses, an allocation of indirect expenses,
and overhead expenses associated with its business units as cost
of revenue in the determination of gross profit. URS
historical classification of expenses includes the deduction of
direct expenses to determine gross profit and indirect expenses
are combined with general and administrative expenses to
determine operating income. Accordingly, Washington Groups
expenses have been reclassified to be consistent with URS
presentation;
|
|
|
|
Reclassify $4.8 million of interest income and
$0.4 million of other non-operating expense for the six
months ended June 29, 2007 to indirect, general and
administrative expenses. For the year ended December 29,
2006, $16,000 of other operating income, $10.5 million of
interest income, and $0.5 million of other non-operating
expense were reclassified to indirect, general and
administrative expenses;
|
|
|
|
Reclassify $6.7 million of merger-related costs for the six
months ended June 29, 2007 to indirect, general and
administrative expenses; and
|
|
|
|
Reclassify $5.1 million write-off of deferred financing
fees for the year ended December 29, 2006 to interest
expense.
|
128
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Adjustments included in the column under the heading Pro
Forma Adjustments in the unaudited pro forma condensed
combined financial statements correspond to the following
descriptions:
Pro
Forma Adjustments to Condensed Combined Balance
Sheet
(a) Reflect the utilization of Washington Groups cash
to fund a portion of the total purchase price.
(b) Write off current and long-term capitalized debt
issuance costs related to URS term loans and Washington
Groups existing capitalized credit facility fees and
record the new current and long-term capitalized debt issuance
costs required under the new credit facility, resulting in a net
short-term increase of $5.3 million and a net long-term
increase of $20.5 million in debt issuance costs.
(c) Adjust Washington Groups property held for sale
to fair value.
(d) Eliminate Washington Groups historical goodwill
and record preliminary goodwill resulting from the merger. See
Note 1 for a more detailed discussion.
(e) Eliminate Washington Groups historical intangible
assets and record the preliminary estimated identifiable
intangible assets, which include favorable operating leases,
trade name, customer relationships and other. See Note 1
for a more detailed discussion.
(f) Adjust deferred income taxes, which are primarily
associated with the estimated identifiable intangible assets and
pro forma adjustments attributable to the merger.
(g) Record Washington Groups investment in an
incorporated mining venture, MIBRAG mbH, a company that operates
lignite coal mines and power plants in Germany, to fair value.
Washington Group has been accounting for this investment using
the equity method and therefore the recorded value of the
investment has been adjusted to the estimated fair value based
on discounted future cash flows.
(h) Record borrowings under the new credit facility used to
finance the merger and record payment of amounts currently
outstanding under URS existing credit facility. The actual
debt borrowings under the new credit facility will be determined
at the time of closing, and it will differ from this pro forma
adjustment as the adjustment is determined as if the merger and
related events had been consummated on June 29, 2007.
|
|
|
|
|
|
|
|
|
|
|
Short Term
|
|
|
Long Term
|
|
|
|
(In thousands)
|
|
|
New credit facility
|
|
$
|
57,911
|
|
|
$
|
1,333,197
|
|
Payoff of URS existing
credit facility
|
|
|
|
|
|
|
(79,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,911
|
|
|
$
|
1,254,197
|
|
|
|
|
|
|
|
|
|
|
(i) Accrue estimated incremental direct and external
transaction costs of $52.3 million, comprised of investment
banking fees, legal fees, accounting fees, due diligence
expenses, and filing and printing costs related to the merger.
The estimated transaction costs, excluding financing costs, are
expected to be paid from the combined companys cash after
the closing of the merger. URS portion of the estimated
transaction cost in the merger is approximately
$29.9 million. Of the total estimated transaction costs
related to the merger, excluding financing costs, approximately
$29.9 million is expected to be accrued by URS prior to the
effective time of the merger and an additional
$22.4 million is expected to be accrued by Washington Group
prior to the effective time of the merger.
Washington Groups total estimated merger related costs
will be approximately $30.0 million, $7.6 million of
which was accrued in the unaudited historical balance sheet as
of June 29, 2007.
(j) Accrue estimated incremental amount of
$32.2 million in payments that will vest under long-term
incentive compensation arrangements upon the change in control
of Washington Group and reclassify the non-current portion of
$9.8 million to current. As of June 29, 2007,
Washington Group had accrued $26.7 million of
129
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
long-term incentive compensation associated with performance
units which, together with the $32.2 million additional
accrual, will result in $58.9 million as
change-in-control
payments shortly after closing. These unpaid amounts are
expected to be paid from the combined companys cash after
the closing of the merger.
(k) Accrue estimated incremental amount of
$5.5 million for Washington Group directors and
officers insurance liability that URS is expected to
maintain for six years from the effective date pursuant to the
merger agreement.
(l) Eliminate Washington Groups historical equity
balances and record shares of URS common stock issued as a
result of the merger.
(m) Record a net normal profit fair value adjustment as of
June 29, 2007 related to Washington Group in-process
customer contracts that have terms that are either more or less
favorable than the terms that could be realized in a current
market transaction. A normal profit liability or asset is
recognized in connection with purchase accounting such that the
rate of return reflected in the post-acquisition financial
statements of the acquirer is equal to a market return for the
acquirers remaining performance effort under the contract.
Above- or below-market rates of return can occur for a variety
of reasons, including: proposing and securing a contract at
above or below market profitability levels; cost over- or
under-runs on fixed price, lump-sum contracts, fixed unit price
contracts, target price contracts or cost over-runs on cost
reimbursable contracts that contain cost ceilings; changed
conditions that cannot be resolved through change orders or
claims; and shifts in market prices resulting in higher or lower
margins occurring after a particular contract was established.
The net normal profit fair value adjustment was determined by
reviewing significant customer contracts to be acquired and
comparing the estimated profit margin to be realized under the
contract to the current market rate of return at June 29,
2007 for similar contracts negotiated in a competitive bidding
environment. The net normal profit fair value adjustment
primarily relates to fixed-price construction projects and fixed
unit price mining contracts that have experienced cost over-runs
due to higher material, labor and equipment operating costs than
anticipated during the period between contract consummation and
the date of the acquisition.
The following table summarizes the net normal profit fair value
adjustment as of June 29, 2007.
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Accrued expenses and other current
liabilities
|
|
$
|
19,671
|
|
Other long-term liabilities
|
|
|
11,619
|
|
|
|
|
|
|
|
|
$
|
31,290
|
|
|
|
|
|
|
Assuming the merger and related transactions were consummated on
June 29, 2007, the net normal profit fair value adjustment
of $31.3 million would be amortized as an increase to
revenue as summarized in the table below. The amortization is
based on the expected progress towards completion to be made on
each contract over the remaining contract term.
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Remainder of fiscal 2007
|
|
$
|
12,301
|
|
2008
|
|
|
11,982
|
|
2009
|
|
|
2,735
|
|
2010
|
|
|
2,513
|
|
2011
|
|
|
1,067
|
|
Thereafter
|
|
|
692
|
|
|
|
|
|
|
Total
|
|
$
|
31,290
|
|
|
|
|
|
|
130
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
Pro Forma Adjustments to Condensed Combined Statements
of Operations
(n) Record amortization of the acquired Washington Group
normal profit asset and liability that would have been recorded
as of December 31, 2005 under the assumption that the
merger and related transactions would have been consummated as
of that date, the beginning of URS 2006 fiscal year.
Acquired contracts were reviewed as described in note
(m) above to determine the amount of the normal profit
asset and liability required for the return reflected in the
post-acquisition financial statements to be equal to the then
current market returns. The normal profit asset relates to a
management services contract with the Department of Energy that
included performance incentive fees based on the achievement of
specific milestones. Significant progress was made towards the
achievement of the milestones prior to December 31, 2005;
however, the related performance incentive fees were not
recognized in the historical financial statements until fiscal
year 2006. Accordingly, the normal profit asset represents the
estimated performance incentive fees recognized in fiscal year
2006 related to work performed prior to December 31, 2005.
The contract terminated at the end of fiscal year 2006;
therefore, there is no amortization for the six months ended
June 29, 2007.
The following table summarizes the amortization of the
December 31, 2005 normal profit fair value adjustment,
based on the expected progress towards completion to be made on
each contract over the remaining contract term.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amortization of normal profit
liability (increase to revenues) related to contracts yielding
below market profit margins
|
|
$
|
18,265
|
|
|
$
|
8,805
|
|
Amortization of normal profit
asset (increase to direct operating expenses) related to
contract yielding an above market profit margin
|
|
|
|
|
|
|
19,700
|
|
(o) Reverse the amortization of Washington Groups
historical intangible assets.
(p) Record the amortization of the purchased intangible
assets resulting from the merger. The purchased intangible
assets consist of the estimated fair market value of the
acquired trade name, favorable leases and customer
relationships. (See Note 1)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amortization of purchased
intangible assets:
|
|
|
|
|
|
|
|
|
Trade name
|
|
$
|
5,000
|
|
|
$
|
10,000
|
|
Favorable leases
|
|
|
894
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,894
|
|
|
$
|
11,801
|
|
|
|
|
|
|
|
|
|
|
Customer relationships and other
intangible assets
|
|
$
|
11,623
|
|
|
$
|
23,245
|
|
|
|
|
|
|
|
|
|
|
(q) Reverse the reclassified merger-related costs recorded
by Washington Group during the six months ended June 29,
2007.
(r) Record estimated incremental interest expense and
incremental amortization of financing fees associated with debt
expected to be incurred in connection with the merger. (See
Note 2)
131
NOTES TO
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 29,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Interest expense calculated based
on current rate as of September 14, 2007
|
|
$
|
56,594
|
|
|
$
|
117,708
|
|
Less: Reversal of URS
historical interest expense
|
|
|
(3,657
|
)
|
|
|
(16,049
|
)
|
Less: Reversal of URS
historical debt issuance cost amortization related to the
existing credit facility
|
|
|
(383
|
)
|
|
|
(767
|
)
|
Less: Reversal of Washington
Groups historical credit facility interest, and write off
and amortization of deferred finance fees
|
|
|
(1,073
|
)
|
|
|
(8,588
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
51,481
|
|
|
$
|
92,304
|
|
|
|
|
|
|
|
|
|
|
A
1
/
8
%
increase in the estimated LIBOR rate would increase interest
expense to $57,482 for the six months ended June 29, 2007
and to $119,559 for the fiscal year ended December 29,
2006. A
1
/
8
%
decrease in the estimated LIBOR rate would decrease interest
expense to $55,708 for the six months ended June 29, 2007
and to $115,857 for the fiscal year ended December 29, 2006.
The Tranche A term loans will have a final maturity date of
five years after the closing date. Quarterly principal payments,
commencing with the first full fiscal quarter following the
closing date, will be required in aggregate annual amounts
expressed as a percentage of the original principal amount of
the Tranche A term loans as follows: (i) 5% in years
one and two, (ii) 10% in years three and four and
(iii) 70% in year five. It is anticipated that the
Tranche B term loans will have a final maturity date of
five and one-half years after the closing date. Commencing with
the first full quarter following the closing date, quarterly
payments will be required of .25%, or 1% in aggregate on an
annual basis, of the original aggregate principal amount of the
Tranche B term loans. Over the four quarters prior to maturity,
the remaining principal balance of the Tranche B term loans will
be payable in equal quarterly amounts.
For the fiscal year ended
December 29, 2006, estimated pro forma interest expense
under the new credit facility is calculated based on the
estimated average outstanding borrowings of $1.5 billion,
after giving effect to the merger and related events, as if the
merger had been consummated on December 31, 2005. For the
six months ended June 29, 2007, estimated pro forma
interest expense under the new credit facility is calculated
based on the estimated average outstanding borrowings of
$1.4 billion assuming that estimated annual debt payments
were made at the end of fiscal year 2006.
(s) Record the tax effect of pro forma adjustments at an
assumed blended statutory tax rate of 40.5%.
(t) The pro forma basic and diluted net income per share is
based on the historical weighted-average number of shares of URS
common stock used in computing basic and diluted net income per
share, plus 24.9 million shares of URS common stock assumed
to be issued in connection with the merger based on the
Washington Groups shares of common stock and stock options
outstanding as of September 7, 2007 and assuming that all
of the stock options outstanding as of September 7, 2007
remain outstanding as of the effective time of the merger.
132
URS and Washington Group are including in this joint proxy
statement/prospectus certain financial forecasts concerning
their revenue, net income and earnings before interest and
taxes, which is referred to as EBIT, which they shared with one
another in the course of their mutual due diligence. These
financial forecasts were developed from historical financial
statements and do not give effect to any changes or expenses as
a result of the merger or any other effects of the merger.
Furthermore, the financial forecasts were not prepared with a
view toward public disclosure or compliance with published
guidelines of the SEC or the American Institute of Certified
Public Accountants for preparation and presentation of
prospective financial information or GAAP.
The financial forecasts of URS and Washington Group included in
this joint proxy statement/prospectus were prepared by, and are
the responsibility of, URS management and Washington Group
management, respectively. Neither URS nor Washington
Groups independent auditors, nor any other independent
auditors, have compiled, examined or performed any procedures
with respect to the prospective financial information contained
in the financial forecasts, nor have they expressed any opinion
or given any form of assurance on the financial forecasts or
their achievability. The auditors reports incorporated by
reference in this joint proxy statement/prospectus relate to URS
and Washington Groups historical financial information.
The auditors reports do not extend to prospective
financial information and should not be read to do so. In
addition, Morgan Stanley and Goldman Sachs did not assist in the
preparation of the financial forecasts, have no responsibility
for the financial forecasts, and may have varied some of the
assumptions underlying the financial forecasts for purposes of
their respective analyses. Furthermore, the financial forecasts:
|
|
|
|
|
necessarily make numerous assumptions, many of which are beyond
the control of URS and Washington Group and may not prove to
have been, or may no longer be, accurate;
|
|
|
|
do not necessarily reflect revised prospects for URS and
Washington Groups businesses, changes in general business
or economic conditions, or any other transaction or event that
has occurred or that may occur and that was not anticipated at
the time the forecasts were prepared;
|
|
|
|
are not necessarily indicative of current values or future
performance, which may be significantly more favorable or less
favorable than as set forth below; and
|
|
|
|
should not be regarded as a representation that the financial
forecasts will be achieved.
|
URS and Washington Group believe that the assumptions that their
respective managements used as a basis for the financial
forecasts were reasonable at the time the financial forecasts
were prepared, given the information their respective
managements had at the time.
These financial forecasts are not a guarantee of performance.
Financial forecasts involve risks, uncertainties and
assumptions. The future financial results of URS, Washington
Group and, if the merger is completed, the combined company, may
materially differ from those expressed in the financial
forecasts due to factors that are beyond URS
and/or
Washington Groups ability to control or predict. Neither
URS nor Washington Group can assure you that their respective
financial forecasts will be realized or that their respective
future financial results will not materially vary from the
financial forecasts. Since the financial forecasts cover
multiple years, such information by its nature becomes less
reliable with each successive year. The financial forecasts do
not take into account any circumstances or events occurring
after the date they were prepared. URS and Washington Group do
not intend to update or revise the financial forecasts.
The financial forecasts are forward-looking statements. For more
information on factors which may cause URS and Washington
Groups future financial results to materially vary, see
Cautionary Statement Concerning Forward-Looking
Statements on page 41 and Risk Factors on
page 19. URS and Washington Groups management
have prepared their respective financial forecasts using
accounting policies consistent with their respective annual and
interim financial statements, as well as any changes to those
policies known to be effective in future periods. The financial
forecasts do not reflect the effect of any proposed or other
changes in GAAP that may be made in the future. Any such changes
could have a material impact to the information shown below.
EBIT is not a measure of performance under GAAP, and should not
be considered as an alternative to net income as a measure of
operating performance or cash flows or as a measure of liquidity.
133
URS
Financial
Forecasts
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Fiscal Year Ending December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Revenue
|
|
$
|
4,650
|
|
|
$
|
5,208
|
|
|
$
|
5,852
|
|
Net Income
|
|
$
|
128
|
|
|
$
|
157
|
|
|
$
|
176
|
|
EBIT
|
|
$
|
233
|
|
|
$
|
274
|
|
|
$
|
307
|
|
Washington
Group Financial
Forecasts
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Fiscal Year Ending December 31,
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Revenue
|
|
$
|
4,002
|
|
|
$
|
4,645
|
|
|
|
|
|
Net Income
|
|
$
|
88
|
|
|
$
|
104
|
|
|
|
|
|
EBIT
|
|
$
|
153
|
|
|
$
|
187
|
|
|
|
|
|
|
|
|
(1)
|
|
These financial forecasts, which
URS and Washington Group shared with one another in the course
of our mutual due diligence process, were prepared during
May 2007. These financial forecasts have not been updated
for changes in URS and Washington Groups businesses
since the due diligence process.
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134
COMPARISON
OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS
Both Washington Group and URS are incorporated under the laws of
the State of Delaware and, accordingly, the rights of the
stockholders of each are currently governed by the DGCL. Upon
completion of the merger, all outstanding shares of Washington
Group common stock will be converted into the right to receive
URS common stock and cash, without interest, other than shares
as to which a Washington Group stockholder has validly demanded
and perfected appraisal rights under Delaware law. Accordingly,
upon completion of the merger, the rights of Washington Group
stockholders who become stockholders of URS in the merger will
be governed by the DGCL, the certificate of incorporation of
URS, as amended, and the bylaws of URS, as amended.
The following discussion is a summary of material differences
between the current rights of URS stockholders and the current
rights of Washington Group stockholders. While this summary
covers the material differences between the two, this summary
may not contain all of the information that is important to you.
We urge you to carefully read this entire joint proxy
statement/prospectus, the relevant provisions of the DGCL and
the other governing documents to which we refer in this joint
proxy statement/prospectus for a more complete understanding of
the differences between being a stockholder of URS and being a
stockholder of Washington Group. URS and Washington Group have
filed with the SEC their respective governing documents
referenced in this summary of stockholder rights and will send
copies of these documents to you, without charge, upon your
request. See the section entitled Additional
Information Where You Can Find More
Information on page 146.
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|
|
URS
|
|
Washington Group
|
|
Authorized Capital
Stock
|
|
|
|
The authorized capital stock of
URS consists of (i) 100,000,000 shares of common stock, par
value $0.01 per share and (ii) 3,000,000 shares of
preferred stock, par value $0.01 per share.
|
|
The authorized capital stock of
Washington Group consists of (i) 100,000,000 shares of
common stock, par value $0.01 per share and
(ii) 10,000,000 shares of preferred stock, par value
$0.01 per share.
|
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Preferred Stock
Designation
|
|
|
|
URS certificate of
incorporation provides that its board is authorized to fix or
alter the dividend rights, dividend rate, conversion rights,
voting rights, rights and terms of redemption, the redemption
price or prices and the liquidation preferences of any wholly
unissued series of preferred stock, and the number of shares
constituting any such series and the designation thereof.
However, no designation of preferred stock has been adopted by
URS board of directors.
|
|
Washington Groups
certificate of incorporation provides that its board of
directors may authorize the issuance and designate the rights,
preferences and privileges of one or more series of preferred
stock, which terms can include: (a) the number of shares of
any series and the designation to distinguish the shares of such
series from the shares of all other series; (b) the voting
powers, if any, and whether such voting powers are full or
limited in such series; (c) the redemption provisions, if
any, applicable to such series, including, without limitation,
the redemption price or prices to be paid; (d) whether
dividends, if any, will be cumulative or noncumulative, the
dividend rate of such series, and the dates and preferences of
dividends on such series; (e) the rights of such series
upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, Washington Group; (f) the
provisions, if any, pursuant to which the shares of such series
are convertible into, or exchangeable for, shares of any other
class or classes or of any other series of the same or any other
class or classes of stock, or any other security, of Washington
Group or any other corporation or other entity, and the price or
prices or the rates of exchange applicable thereto; (g) the
right, if any, to subscribe for or to
|
135
|
|
|
URS
|
|
Washington Group
|
|
|
|
|
|
|
purchase any securities of
Washington Group or any other corporation or other entity;
(h) the provisions, if any, of a sinking fund applicable to
such series; and (i) any other relative, participating,
optional, or other special powers, preferences, rights,
qualifications, limitations, or restrictions thereof; all as may
be determined from time to time by the board of directors and
stated in the resolution or resolutions providing for the
issuance of such preferred stock.
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|
Election of
Directors
|
|
|
|
URS bylaws provide that
except as otherwise permitted, directors must be elected at an
annual meeting of the URS stockholders and each director
to be elected by URS stockholders must be elected by the
vote of the holders of a majority of the votes cast for the
election of directors at any meeting at which a quorum is
present. If the number of nominees exceeds the number of
directors to be elected, the directors must be elected by the
vote of the holders of a plurality of the votes cast. If an
incumbent director nominated for reelection at a stockholder
meeting is not elected by the required vote, that director must
tender his or her irrevocable resignation to the board of
directors, which resignation may be either accepted or rejected
by the board of directors. A majority of the votes cast means
the number of votes cast for a director must exceed
the number of votes cast against that director.
Timely notice of nominations must be provided to the secretary
of URS.
|
|
Washington Groups bylaws
provide that nomination of persons for election as directors of
Washington Group may be made only at an annual meeting of the
Washington Groups stockholders by or at the direction of
Washington Groups board of directors or a committee
thereof or by any stockholder that is a stockholder of record at
the time of giving of notice provided for in such bylaws, who is
entitled to vote for the election of directors at such meeting
and who complies with the procedures set forth in such bylaws.
At such annual meeting, the directors will be elected for a
one-year term expiring at the next annual meeting. Each director
to be elected by Washington Group stockholders must be elected
by the vote of a majority of the votes cast by stockholders at a
meeting for the election of directors at which a quorum is
present, except that if, as of a date that is 14 days in
advance of the date that Washington Group first files its
definitive proxy statement with the SEC, the number of nominees
exceeds the number of directors to be elected, directors must be
elected by the vote of a plurality of the shares represented in
person or by proxy at any such meeting. Only persons who comply
with the director resignation provisions of the Washington Group
Corporate Governance Guidelines shall be eligible for election
as directors. The Corporate Governance Guidelines require each
director nominated for reelection to submit a conditional letter
of resignation that will take effect if the director does not
receive a majority of votes cast in an uncontested election. A
majority of votes cast shall mean that the number of shares
voted for a directors election exceeds 50% of
the number of votes cast with respect to that directors
election. Votes cast includes votes for that
directors election plus votes to withhold authority with
respect to that directors election and excludes
abstentions and broker non-votes with respect to that
directors election. Timely notice of nominations must be
provided to the secretary of Washington Group.
|
136
|
|
|
URS
|
|
Washington Group
|
|
|
Number of
Directors
|
|
|
|
URS bylaws provide that the
URS board of directors shall consist of not less than five nor
more than fifteen directors, the exact number of directors to be
determined from time to time by the URS board of directors.
There are currently ten positions authorized, and ten directors
serving, on the URS board of directors.
|
|
Washington Groups
certificate of incorporation provides that, subject to the
rights of the holders of any series of preferred stock to elect
additional directors specified in a preferred stock designation,
the number of directors of Washington Group shall consist of not
less than three or more than eleven, and will be fixed from time
to time as described in the bylaws.
Washington Groups bylaws provide that the authorized
number of Washington Group directors shall be eleven, and that
such number of authorized directors may be determined from time
to time only by a vote of a majority of the Washington Group
board of directors or by the affirmative vote of the holders of
at least two-thirds of the shares entitled to vote. The
Washington Group board of directors currently consists of eleven
directors.
|
|
Removal of
Directors
|
|
|
|
URS certificate of
incorporation and bylaws do not address the removal of
directors. Section 141(k) of the DGCL provides that, any URS
director or URS entire board of directors may be removed
for cause from the board of directors at any meeting of
stockholders by the affirmative vote of a majority in voting
power of the outstanding stock entitled to vote in an election
of directors.
|
|
Washington Groups
certificate of incorporation provides that, subject to the
rights of the holders of any series of preferred stock to elect
additional directors under circumstances specified in a
preferred stock designation, any director may be removed from
office by the stockholders only for cause and only at any annual
meeting or special meeting of the stockholders, the notice of
which states that the removal of a director or directors is
among the purposes of the meeting, by the affirmative vote of
the holders of at least two-thirds of the shares entitled to
vote.
|
|
Vacancies on the Board of
Directors
|
|
|
|
URS bylaws provide that any
vacancy and newly created directorships that results from an
increase in the number of directors may be filled by a majority
of the directors then in office, even if less than a quorum, or
by a sole remaining director. If there are no directors in
office, then an election of directors may be held in the manner
provided by the DGCL. If, at the time of filling any vacancy or
any newly created directorship, the directors then in office
represent less than a majority of the whole board of directors
(as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon the application by
stockholders holding at least 10% of the total
|
|
Washington Groups
certificate of incorporation and bylaws provide that, subject to
the rights of the holders of any series of preferred stock to
elect additional directors under circumstances specified in a
preferred stock designation, newly created directorships
resulting from any increase in the number of directors and any
vacancies on the board of directors resulting from death,
resignation, disqualification, removal, or other cause may be
filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a
quorum of the board of directors, or by a sole remaining
director.
|
137
|
|
|
URS
|
|
Washington Group
|
|
|
|
|
outstanding shares having the
right to vote for such directors, order an election to be held
to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office.
|
|
|
|
Stockholder Action by Written
Consent
|
|
|
|
URS bylaws provide that any
action required to be, or which may be, taken at a meeting of
stockholders, may be taken without a meeting, without prior
notice, and without a vote if a consent or consents in writing,
setting forth the action so taken, may be signed and dated by
the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent may be given to
those stockholders who have not consented in writing.
|
|
Washington Groups
certificate of incorporation provides that, subject to the
rights of the holders of any series of preferred stock, any
action required or permitted to be taken by stockholders must be
effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing
of such stockholders, other than any such action taken for any
purpose prescribed by the Internal Revenue Code and the
regulations thereunder or by Item 201(d) of
Regulation S-K
of the Exchange Act, which may be effected by such a consent in
writing.
|
|
Amendment to Certificate of
Incorporation
|
|
|
|
URS certificate of
incorporation provides that URS reserves the right to amend,
alter, change or repeal any provision contained in its
certificate of incorporation, in any manner now or hereafter
prescribed by statute, and all rights conferred upon
stockholders are granted subject to this reservation.
|
|
Washington Groups
certificate of incorporation provides that the affirmative vote
of the holders of at least two-thirds of shares entitled to vote
is required to amend or repeal, or to adopt any provisions
inconsistent with its: (i) Article V, which regulates
the creation, amendment or repeal of any bylaws of Washington
Group, (ii) Article VI, which regulates actions effected at
a duly called meeting of stockholders and action by written
consent or (iii) Article VII, which addresses the
number, election and terms of directors, nomination of director
candidates, newly created directorships and vacancies, and
removal of directors.
|
|
Amendment of
Bylaws
|
|
|
|
URS bylaws provide that the
bylaws may be altered, amended or repealed or new bylaws may be
adopted by stockholders holding more than 50% of the stock
entitled to vote, or by the board of directors, when such power
is conferred upon the board of directors by the certificate of
incorporation, at any regular or special meeting of the
stockholders or of the board of directors if notice of such
alteration, amendment, repeal or adoption of new bylaws be
contained in the notice of such special meeting.
URS certificate of incorporation provides that the board
|
|
Washington Groups bylaws
provide that the bylaws may be amended in any respect or
repealed at any time, either (i) at any meeting of
stockholders, provided that any amendment or supplement proposed
to be acted upon at any such meeting has been described or
referred to in the notice of such meeting, or (ii) at any
meeting of the board of directors of Washington Group provided
that no amendment adopted by the board of directors may vary or
conflict with any amendment adopted by the stockholders in
accordance with the certificate of incorporation and the
bylaws.
|
138
|
|
|
URS
|
|
Washington Group
|
|
|
|
|
of directors is expressly
authorized to make, adopt, amend or repeal the bylaws by
resolution passed by a majority of the whole board of directors.
|
|
Washington Groups
certificate of incorporation provides that the board of
directors may make, amend, and repeal the bylaws. Any bylaw made
by the board of directors may be amended or repealed by the
board of directors (except as specified in any such bylaw) or by
the stockholders in the manner provided in the bylaws.
Washington Groups certificate of incorporation and bylaws
each provide that Bylaws 1 (Stockholders
Meetings Time and Place of Meetings), 3
(Stockholders Meetings Special Meetings), 8
(Stockholders Meetings Order of Business), 10
(Directors Number, Election and Terms), 11
(Directors - Vacancies and Newly Created Directorships), 12
(Directors Removal), 13 (Directors
Nomination of Directors; Election), and 36 (General
Amendments) may not be amended or repealed by the stockholders,
and no provision inconsistent therewith may be adopted by the
stockholders, without the affirmative vote of the holders of at
least two-thirds of the shares entitled to vote.
|
|
Special Meeting of
Stockholders
|
|
|
|
URS bylaws provide that
special meetings of the stockholders may be called by the
president and may be called by the president or secretary at the
request in writing of (i) a majority of the board of directors,
or (ii) stockholders owning 20% total shares outstanding and
entitled to vote. Such written request may specify the purpose
of the proposed meeting. Such meeting should be held at such
place, either within or without the State of Delaware, as is
stated in the notice or in a duly executed waiver of notice
thereof.
|
|
Washington Groups
certificate of incorporation and bylaws provide that special
meetings of stockholders may be called only by(i) the
chairman of the board of directors, (ii) the president,
(iii) the secretary within ten (10) calendar days
after receipt of the written request of a majority of the total
directors that the board of directors would have if there were
no vacancies, which we refer to as the whole board,
or (iv) the holders of a majority of the shares entitled to
vote.
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|
Notice of Stockholder
Meetings
|
|
|
|
URS bylaws provide that
written notice of the annual meeting of stockholders, stating
the date, time and place of the meeting should be given to each
stockholder entitled to vote at such meeting not less than ten
nor more than 50 days prior to such meeting unless such
stockholder waives notice of the meeting.
Written notice of a special meeting of the stockholders should
specify the place, date and hour of the meeting and the purpose
of the meeting and should be given not less than ten nor more
than 50 days prior to such meeting to each stockholder
entitled to vote at such meeting.
|
|
Washington Groups bylaws
provide that written notice of every stockholder meeting,
stating the place, date, time, and means of remote
communications, if any, by which stockholders and proxy holders
may be deemed to be present in person and vote at such meeting,
and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, will be given not less than ten
nor more than 60 calendar days before the date of the meeting to
each stockholder of record entitled to vote at such meeting,
except as otherwise provided in such bylaws or by law.
|
139
|
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|
URS
|
|
Washington Group
|
|
|
|
|
Any stockholder may execute a
waiver of notice, in person or by proxy, either before or after
any meeting, and should be deemed to have waived notice if he or
she is present at such meeting in person or by proxy.
When a meeting is adjourned for more than 30 days, or if
after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting must be
given to each URS stockholder of record entitled to vote at the
meeting.
|
|
When a meeting is adjourned to
another place, date, or time, written notice need not be given
of the adjourned meeting if the place, date, time, and means of
remote communications, if any, by which stockholders and proxy
holders may be deemed to be present in person and vote at such
adjourned meeting, are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment
is for more than 30 calendar days, or, if after the adjournment,
a new record date is fixed for the adjourned meeting, written
notice of the place, date, time, and means of remote
communications, if any, by which stockholders and proxy holders
may be deemed to be present in person and vote at such adjourned
meeting, must be given in conformity with such bylaws.
A waiver in writing, signed by the persons entitled to notice,
or a waiver by electronic transmission by the person entitled to
notice, whether before or after the meeting for which notice is
to be given, will be deemed equivalent to such notice.
Attendance of a person at a meeting constitutes a waiver of
notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
|
|
Delivery and Notice
Requirements of Stockholder Nominations and
Proposals
|
|
|
|
URS bylaws provide that any
business to be conducted at any meeting of stockholders must be
brought before the meeting (i) by or at the direction of the
board of directors; or (ii) by any stockholder who is entitled
to vote and complies with advance notice procedures set forth in
the bylaws.
URS bylaws also provide that a stockholder intending to
nominate a candidate for election to the board of directors or
to bring any other business before an annual meeting must give
timely written notice thereof to the secretary of URS.
In order for a stockholders written nomination of a
candidate for election to the board of directors to be timely,
the stockholders notice must be delivered to or mailed and
received at the principal executive offices of URS, not less
than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders.
In order for a stockholders notice of a proposal to
bring
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Washington Groups bylaws
provide that at an annual meeting of the stockholders, only such
business that is (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the
board of directors in accordance with the bylaws,
(ii) otherwise properly brought before the meeting by the
presiding officer or by or at the direction of a majority of the
whole board, or (iii) otherwise properly requested to be
brought before the meeting by a stockholder of Washington Group
in accordance with the following paragraph.
For business to be properly requested by a stockholder to be
brought before an annual meeting, (i) the stockholder must
be a stockholder of record at the time of notice for suc h
annual meeting provided for in the bylaws, (ii) the
stockholder must be entitled to vote at such meeting,
(iii) the stockholder must have given timely notice thereof
in writing to the secretary, and (iv) if the stockholder,
or the beneficial owner on whose behalf any business is brought
before the meeting, has provided Washington Group with a
proposal solicitation notice, as that term is defined below,
such stockholder or
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URS
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Washington Group
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any other business before an
annual meeting to be timely, the stockholders notice must
be delivered to or mailed and received at the principal
executive offices of URS, not less than 90 days nor more
than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
however, that if no annual meeting was held in the previous year
or the date of the annual meeting has changed by more than
30 days from the date contemplated in the previous
years proxy statement, notice must be so received no
earlier than 90 days prior to such annual meeting and no
later than 60 days prior to such annual meeting, or, if the
public announcement of the date of such annual meeting is first
made by URS fewer than 70 days prior to such annual
meeting, then notice must be received no later than ten days
following the date of such public announcement.
A stockholders notice to the secretary must set forth as
to each matter the stockholder wishes to bring before the annual
meeting:
a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting
such business;
the name and address, as they appear on the
URS books, of the stockholder proposing such business;
the class and number of shares of URS which are
beneficially owned by the stockholder;
any material interest of the stockholder in such
business; and
any other information that is required to be
provided by the stockholder pursuant to Regulation 14A under the
Exchange Act in his capacity as a proponent to a stockholder
proposal.
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beneficial owner must have
delivered a proxy statement and form of proxy to the holders of
at least the percentage of shares entitled to vote required to
approve such business that the stockholder proposes.
To be timely, a stockholders notice must be delivered to
or mailed and received at the principal executive offices of
Washington Group not less than 60 nor more than 90 calendar days
prior to the first anniversary of the date on which Washington
Group first mailed its proxy materials for the preceding
years annual meeting of stockholders; provided, however,
that if there was no annual meeting held during the preceding
year or if the date of the annual meeting is advanced more than
30 calendar days prior to or delayed by more than 30 calendar
days after the anniversary of the preceding years annual
meeting, notice by the stockholder to be timely must be so
delivered not later than the close of business on the later of
the 90th calendar day prior to such annual meeting or the
tenth calendar day following the day on which such public
announcement of the date of such meeting is first made. In no
event does the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a
stockholders notice as described above.
A stockholders notice to the secretary must set forth as
to each matter the stockholder proposes to bring before the
annual meeting:
a description in reasonable detail of the business
desired to brought before the annual meeting and the reasons for
conducting such business at the annual meeting;
the name and address, as they appear on Washington
Groups books, of the stockholder proposing such business
and the beneficial owner, if any, on whose behalf the proposal
is made;
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the class and number
of shares of Washington Group that are owned beneficially and of
record by the stockholder proposing such business and by the
beneficial owner, if any, on whose behalf the proposal is
made;
any material interest of such stockholder proposing
such business and the beneficial owner, if any, on whose behalf
the proposal is made in such business; and
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URS
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Washington Group
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whether either such
stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of at least the
percentage of shares entitled to vote required to approve the
proposal, which, such statement of intent, we refer to as a
proposal solicitation notice.
A stockholder must also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder.
For purposes of the bylaws, public announcement
means disclosure in a press release reported by the Dow Jones
News Service, Associated Press, or comparable national news
service or in a document publicly filed by Washington Group with
the SEC pursuant to Section 13, 14, or 15(d) of the
Exchange Act or furnished to stockholders.
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Proxy
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URS bylaws provide that a
stockholder may vote either in person or by proxy should decide
any question brought before such meeting, unless the question is
one upon which a different vote is required by express provision
of applicable statutes or of the certificate of incorporation,
in which case such express provision should govern and control
the decision of such question. No proxy will be valid after
three years from the date of its execution unless a longer
period is expressly provided in the proxy.
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Washington Groups bylaws
provide that, a stockholder may vote each share of stock having
voting power standing in the name of such stockholder on the
books of Washington Group on the record date for such meeting
either in person or by proxy executed in a form permitted by
Section 212 of the DGCL. Without affecting any vote
previously taken, a stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person, by
revoking the proxy by giving notice to the secretary, or by a
later appointment of a proxy.
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Preemptive
Rights
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URS certificate of
incorporation does not grant any preemptive rights.
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Washington Groups
certificate of incorporation does not grant any preemptive
rights.
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Limitation of Personal
Liability of Directors
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URS certificate of
incorporation provides that a director of URS shall not be
personally liable to URS or its stockholders for monetary
damages for breach of fiduciary duty as a director, with
specified exceptions. In addition, if, after the date of
original inclusion of this provision in the URS certificate of
incorporation, the DGCL is amended to permit further limitations
on director liability, then, in addition to the limitation on
personal liability described above, the liability of URS
directors will be limited to the fullest extent permitted by the
amended DGCL. Any repeal or modification of
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Washington Groups
certificate of incorporation provides that, to the fullest
extent permitted by the DGCL or any other applicable law in
effect, no director will be personally liable to Washington
Group or its stockholders for or with respect to any acts or
omissions in the performance of his or her duties as a director
of Washington Group.
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URS
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Washington Group
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this provision will be
prospective only and will not adversely affect any limitation on
personal liability existing at the time of such repeal or
modification.
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Indemnification of Officers and
Directors
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URS bylaws provide that:
(1) URS will indemnify any officer, director or employee
who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of URS) by reason of the fact
that he is or was a director, officer or employee of URS, or is
or was serving at the request of URS as a director, officer or
employee of another corporation or partnership, joint venture,
trust or other enterprise. Such indemnification covers expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in
good faith and in a manner he reasonable believed to be in, or
not opposed to, the best interests of URS and, with respect to
any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(2) URS will indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of URS to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer or employee of URS, or is or was serving at
the request of URS as a director, officer or employee of URS, or
is or was serving at the request of URS as a director, officer
or employee of another corporation, partnership, joint venture,
trust or other enterprise. Subject to exceptions, such
indemnification covers expenses (including attorneys fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, if he acted in
good faith in any manner he reasonably believed to be in or not
opposed to the best interests of URS. However, no
indemnification will be made if a person is adjudged to have
been liable for negligence or misconduct in the performance of
his duties to the corporation, unless the court in which such
action or suit was brought determines
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Washington Groups
certificate of incorporation provides that, subject to
exceptions, each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, which we collectively refer to
as a proceeding, by reason of the fact that he or
she is or was a director or an officer of Washington Group or is
or was serving at the request of Washington Group as a director,
officer, employee, or agent of another company or of a
partnership, joint venture, trust, or other enterprise,
including, without limitation, service with respect to an
employee benefit plan, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer,
employee, or agent or in any other capacity while serving as a
director, officer, employee, or agent, will be indemnified and
held harmless by Washington Group to the fullest extent
permitted or required by the DGCL, as the same exists or may
hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits broader
indemnification rights than such law permitted prior to such
amendment), against all expense, liability, and loss (including,
without limitation, attorneys fees, judgments, fines,
ERISA excise taxes or penalties, and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
with a proceeding.
Washington Groups certificate of incorporation also
provides for the reimbursement or advancement of fees and
expenses in specified circumstances.
The rights to indemnification and to the advancement of
expenses are not exclusive of any other right which any person
may have or hereafter acquire under any statute, the certificate
of incorporation, the bylaws, any agreement, any vote of
stockholders or disinterested directors, or otherwise.
Washington Group may maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent of
Washington Group or another corporation, partnership, joint
venture, trust, or other enterprise against any expense,
liability, or loss, whether
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URS
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Washington Group
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that, despite the adjudication of
liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the court deems proper.
URS bylaws also provide for the reimbursement of fees and
expenses in specified circumstances.
URS bylaws provide that indemnification provided in
Article VI are not exclusive of any rights to which such
potential indemnitees may be entitled under any other bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise both as to action in his official capacity and to
action in another capacity while holding such office, and such
indemnification will continue as to a person who has ceased to
be a director, officer or employee, and it inures to the benefit
of such persons heirs, executors and administrators.
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or not Washington Group would
have the power to indemnify such person against such expense,
liability, or loss under the DGCL.
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URS
URS held its 2007 annual meeting on May 24, 2007. URS plans
to hold an annual meeting in 2008. The deadline for submitting a
stockholder proposal to URS for inclusion in the URS proxy
statement and form of proxy pursuant to
Rule 14a-8
under the Exchange Act for the URS 2008 annual meeting of
stockholders is December 19, 2007. Proposals of URS
stockholders submitted pursuant to
Rule 14a-8
under the Exchange Act and intended to be presented at the URS
2008 annual meeting of stockholders must have been received by
URS at its principal executive offices no later than
February 23, 2008. In addition, URS bylaws provide
that a stockholder who desires to nominate a person for election
to the board of directors at the 2008 annual meeting must have
given written notice to URS no sooner than 120 days and no
later than 90 days prior to the first anniversary of the
preceding years annual meeting. Any such nomination must
have provided the information required by URS bylaws and
comply with any applicable laws and regulations.
URS bylaws limit the business that may be transacted at a
special meeting of stockholders to matters relating to the
purposes of the special meeting stated in the notice of the
meeting. Accordingly, URS stockholders may not submit
other proposals for consideration at the special meeting.
All submissions should be made to the corporate secretary at
URS principal offices at 600 Montgomery Street,
26
th
Floor,
San Francisco, California
94111-2728.
Washington
Group
Washington Group held its 2007 annual meeting on May 18,
2007. Washington Group plans to hold an annual meeting in 2008
only if the merger is not completed. Proposals of Washington
Group stockholders submitted pursuant to
Rule 14a-8
under the Exchange Act and intended to be presented at the 2008
annual meeting of stockholders must be received by Washington
Group at its principal executive offices no later than
December 18, 2007 in order to be considered for inclusion
in Washington Groups proxy materials for that meeting. In
addition, Washington Groups bylaws provide that a
stockholder who desires to nominate a person for election to the
board of directors at the 2008 annual meeting must have given
written notice to Washington Group at its principal executive
offices not less than 60 days nor more than 90 days
prior to the first anniversary of the date on which Washington
Group first mailed its proxy materials for the preceding
years annual meeting of stockholders. Any such nomination
must provide the information required by Washington Groups
bylaws and comply with any applicable laws and regulations.
Washington Groups bylaws limit the business that may be
transacted at a special meeting of stockholders to matters
properly brought before the meeting. To be properly brought
before a special meeting, business must be specified in the
notice of the meeting or otherwise properly brought before the
meeting by the presiding officer or by or at the direction of
the whole board of Washington Group. Accordingly, Washington
Groups stockholders may not submit other proposals for
consideration at the special meeting.
All submissions should be made to the corporate secretary at
Washington Groups principal offices at 720 Park Boulevard,
P.O. Box 73, Boise, Idaho 83729.
Federal and state investigators are reviewing URS
engineering analysis of the Interstate 35W bridge in Minneapolis
that URS was performing at the time of the bridges
collapse in August 2007 and URS construction management
services relating to the demolition of the Deutsche Bank
building located at the World Trade Center where a fire that
resulted in accidental fatalities occurred in August 2007. The
resolution of these investigations, and any outstanding claims,
is subject to inherent uncertainty, and it is reasonably
possible that any resolution could have an adverse effect on
URS operations. URS does not know the extent of any claims
that may be made regarding these matters. It is not possible to
provide an estimate of any potential loss.
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The legality of URS common stock offered by this joint proxy
statement/prospectus are being passed upon for URS by
Latham & Watkins LLP, Los Angeles, California. Certain
United States federal income tax consequences of the merger are
being passed upon for URS by Latham & Watkins LLP, Los
Angeles, and for Washington Group by Wachtell, Lipton,
Rosen & Katz, New York, New York.
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Annual Report on Internal Control over Financial Reporting)
incorporated in this joint proxy statement/prospectus by
reference to URS Annual Report on
Form 10-K
for the year ended December 29, 2006 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
The financial statements, the related financial statement
schedule, and managements report on the effectiveness of
internal control over financial reporting incorporated in this
prospectus by reference from the Washington Group Annual Report
on Form 10-K for the fiscal year ended December 29,
2006 have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in
their reports (which reports (1) express an unqualified
opinion on the financial statements and financial statement
schedule and include an explanatory paragraph relating to
changes in methods of accounting for mining stripping costs and
pension and postretirement benefits, (2) express an
unqualified opinion on managements assessment regarding
the effectiveness of internal control over financial reporting,
and (3) express an unqualified opinion on the effectiveness
of internal control over financial reporting), which are
incorporated herein by reference, and have been so incorporated
in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
Where
You Can Find More Information
URS and Washington Group file annual, quarterly and current
reports, proxy statements and other information with the SEC.
You may read and copy these reports, statements or other
information filed by either URS or Washington Group at the
SECs Public Reference Room at 100 F Street,
N.E., N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. The SEC
filings of URS and Washington Group are also available to the
public from commercial document retrieval services and at the
website maintained by the SEC at
http://www.sec.gov.
URS has filed a registration statement on
Form S-4
to register with the SEC the URS common stock to be issued to
Washington Group stockholders in the merger. This joint proxy
statement/prospectus is a part of that registration statement
and constitutes a prospectus of URS, in addition to being a
proxy statement of URS and Washington Group for their respective
special meetings. The registration statement, including the
attached annexes, exhibits and schedules, contains additional
relevant information about URS, URS common stock and Washington
Group. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all the information you
can find in the registration statement or the exhibits to the
registration statement.
The SEC allows URS and Washington Group to incorporate by
reference information into this joint proxy
statement/prospectus. This means that URS and Washington Group
can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this
joint proxy statement/prospectus, except for any information
that is superseded by information that is included directly in
this joint proxy statement/prospectus or incorporated by
reference subsequent to the date of this joint proxy
statement/prospectus. Neither URS nor Washington Group is
incorporating the contents of the websites of the SEC, URS,
Washington Group or any other person into this joint proxy
statement/prospectus. URS and Washington Group are providing
information about how you can obtain documents that are
incorporated by reference into this joint proxy
statement/prospectus at these websites only for your convenience.
146
This joint proxy statement/prospectus incorporates by reference
the documents listed below that URS and Washington Group have
previously filed with the SEC. They contain important
information about URS and Washington Group and their financial
conditions. The following documents, which were filed by URS
with the SEC, are incorporated by reference into this joint
proxy statement/prospectus:
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annual report of URS on
Form 10-K
(File No. 001-07567) for the fiscal year ended December 29,
2006, filed with the SEC on February 27, 2007;
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proxy statement of URS on Schedule 14A (File No.
001-07567), dated April 18, 2007, filed with the SEC on
April 18, 2007;
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quarterly report of URS on
Form 10-Q
(File No. 001-07567) for the quarterly period ended
March 30, 2007, filed with the SEC on May 8, 2007;
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quarterly report of URS on
Form 10-Q
(File
No. 001-07567)
for the quarterly period ended June 29, 2007, filed with
the SEC on August 8, 2007;
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current report of URS on
Form 8-K
(File No. 001-07567), dated March 22, 2007, filed with
the SEC on March 27, 2007;
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current report of URS on
Form 8-K
(File No. 001-07567), dated May 28, 2007, filed with
the SEC on May 29, 2007;
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current report of URS on
Form 8-K
(File
No. 001-07567),
dated August 1, 2007, filed with the SEC on August 1,
2007;
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current report of URS on
Form 8-K
(File No. 001-07567), dated August 8, 2007, filed with
the SEC on August 8, 2007; and
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the description of URS common stock contained in its
registration statement on
Form 8-A
filed under the Exchange Act on March 11, 1983, including
any amendment or report filed for the purpose of updating such
description.
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The following documents, which were filed by Washington Group
with the SEC, are incorporated by reference into this joint
proxy statement/prospectus:
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annual report of Washington Group on
Form 10-K
(File No. 001-12054) for the fiscal year ended
December 29, 2006, filed with the SEC on February 26,
2007;
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amendment to the annual report of Washington Group on
Form 10-K/A
(File No. 001-12054) for the fiscal year ended
December 29, 2006, filed with the SEC on February 28,
2007;
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proxy statement of Washington Group on Schedule 14A (File
No. 001-12054), dated April 17, 2007, filed with the
SEC on April 17, 2007;
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revised proxy statement of Washington Group on Schedule 14A
(File No. 001-12054), dated April 17, 2007, filed with
the SEC on April 18, 2007;
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quarterly report of Washington Group on
Form 10-Q
(File No. 001-12054) for the quarterly period ended
March 30, 2007, filed with the SEC on May 9, 2007;
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quarterly report of Washington Group on
Form 10-Q
(File No.
001-12054)
for the quarterly period ended June 29, 2007, filed with
the SEC on August 6, 2007;
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current report of Washington Group on
Form 8-K
(File No. 001-12054), dated March 1, 2007, filed with
the SEC on March 7, 2007;
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current report of Washington Group on
Form 8-K
(File No. 001-12054), dated May 18, 2007, filed with
the SEC on May 24, 2007;
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current report of Washington Group on
Form 8-K
(File No. 001-12054), dated May 27, 2007, filed with
the SEC on May 29, 2007;
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current report of Washington Group on
Form 8-K/A
(File No. 001-12054), dated July 16, 2007, filed with
the SEC on July 17, 2007;
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current report of Washington Group on
Form 8-K
(File No. 001-12054), dated August 6, 2007, filed with
the SEC on August 7, 2007; and
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description of the Washington Group common stock is incorporated
herein by reference to Washington Groups registration
statement on
Form S-4
(File
No. 33-63862),
filed with the SEC on June 3, 1993, and all amendments and
reports filed for the purpose of updating that description.
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In addition, URS and Washington Group incorporate by reference
additional documents that either may file with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act between the date of this joint proxy
statement/prospectus and the date of the URS and Washington
Group special meetings, respectively. These documents include
periodic reports, such as annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
excluding any information furnished pursuant to Items 2.02
and 7.01 of any current report on
Form 8-K
solely for purposes of satisfying the requirements of
Regulation FD or Regulation G under the Exchange Act,
as well as proxy statements.
URS and Washington Group also incorporate by reference the
merger agreement attached to this joint proxy
statement/prospectus as Annex A.
URS has supplied all information contained in or incorporated by
reference into this joint proxy statement/prospectus relating to
URS, and Washington Group has supplied all information contained
in or incorporated by reference into this joint proxy
statement/prospectus relating to Washington Group.
You can obtain any of the documents incorporated by reference
into this joint proxy statement/prospectus from URS or
Washington Group, as applicable, or from the Securities and
Exchange Commission, which is referred to as the SEC, through
the SECs website at
http://www.sec.gov.
Documents incorporated by reference are available from URS and
Washington Group without charge, excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference as an exhibit in this joint proxy
statement/prospectus. URS stockholders and Washington Group
stockholders may request a copy of such documents in writing or
by telephone by contacting the applicable department at:
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URS Corporation
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Washington Group International,
Inc.
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600 Montgomery Street,
26
th
Floor
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720 Park Boulevard,
P.O. Box 73
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San Francisco, California
94111-2728
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Boise, Idaho 83729
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Attn: Investor Relations
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Attn: Investor Relations
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(877)
877-8970
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(866) 964-4636
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In addition, you may obtain copies of the information relating
to URS, without charge, by sending an
e-mail
to
investor_relations@urscorp.com. You may obtain copies of some of
this information by making a request through the URS investor
relations website at http://www.urscorp.com/investor.
You may obtain copies of the information relating to Washington
Group, without charge, by sending an
e-mail
to
investor.relations@wgint.com. You may obtain copies of some of
this information by making a request through the Washington
Group investor relations website at http://investor.wgint.com.
IN ORDER FOR YOU TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS
IN ADVANCE OF THE URS AND WASHINGTON GROUP SPECIAL MEETINGS, URS
OR WASHINGTON GROUP, AS APPLICABLE, SHOULD RECEIVE YOUR REQUEST
NO LATER THAN OCTOBER 22, 2007
.
We have not authorized anyone to give any information or make
any representation about the merger or our companies that is
different from, or in addition to, that contained in this joint
proxy statement/prospectus or in any of the materials that we
have incorporated into this joint proxy statement/prospectus.
Therefore, if anyone does give you information of this kind, you
should not rely on it. If you are in a jurisdiction where offers
to exchange or sell, or solicitations of offers to exchange or
purchase, the securities offered by this joint proxy
statement/prospectus or the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these
types of activities, then the offer presented in this joint
proxy statement/prospectus does not extend to you. The
information contained in this joint proxy statement/prospectus
is accurate only as of the date of this joint proxy
statement/prospectus unless the information specifically
indicates that another date applies.
148
EXECUTION
COPY
AGREEMENT
AND PLAN OF MERGER
by and among
URS CORPORATION,
ELK MERGER CORPORATION,
a wholly owned subsidiary of URS Corporation,
BEAR MERGER SUB, INC.,
a wholly owned subsidiary of URS Corporation,
and
WASHINGTON GROUP INTERNATIONAL, INC.
May 27, 2007
TABLE OF
CONTENTS
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Page
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ARTICLE I THE TRANSACTION
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A-1
|
|
|
1.1.
|
|
|
The First Merger
|
|
|
A-1
|
|
|
1.2.
|
|
|
Closing; Effective
Time
|
|
|
A-1
|
|
|
1.3.
|
|
|
Effects of the First
Merger
|
|
|
A-2
|
|
|
1.4.
|
|
|
Certificate of Incorporation
and Bylaws
|
|
|
A-2
|
|
|
1.5.
|
|
|
Directors and Officers of the
First Surviving Corporation
|
|
|
A-2
|
|
|
1.6.
|
|
|
Additional Actions
|
|
|
A-2
|
|
|
1.7.
|
|
|
The Second Merger
|
|
|
A-2
|
|
|
|
|
|
|
ARTICLE II CONVERSION OF
SECURITIES
|
|
|
A-3
|
|
|
2.1.
|
|
|
Effect on Capital
Stock
|
|
|
A-3
|
|
|
2.2.
|
|
|
Surrender and Payment
|
|
|
A-4
|
|
|
2.3.
|
|
|
Fractional Shares
|
|
|
A-5
|
|
|
2.4.
|
|
|
Lost Certificates
|
|
|
A-6
|
|
|
2.5.
|
|
|
Withholding Rights
|
|
|
A-6
|
|
|
2.6.
|
|
|
Treatment of Stock Options and
Other Incentive Based Awards
|
|
|
A-6
|
|
|
2.7.
|
|
|
Dissenting Shares
|
|
|
A-8
|
|
|
2.8.
|
|
|
The Second Merger
|
|
|
A-8
|
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS
AND WARRANTIES OF PARENT, MERGER SUB AND SECOND MERGER SUB
|
|
|
A-8
|
|
|
3.1.
|
|
|
Organization and
Standing
|
|
|
A-8
|
|
|
3.2.
|
|
|
Corporate Power and
Authority
|
|
|
A-9
|
|
|
3.3.
|
|
|
Capitalization of
Parent
|
|
|
A-9
|
|
|
3.4.
|
|
|
Capitalization of Merger Sub
and Second Merger Sub
|
|
|
A-9
|
|
|
3.5.
|
|
|
Conflicts; Consents and
Approvals
|
|
|
A-10
|
|
|
3.6.
|
|
|
Parent SEC Documents
|
|
|
A-10
|
|
|
3.7.
|
|
|
Compliance with Law
|
|
|
A-11
|
|
|
3.8.
|
|
|
Undisclosed
Liabilities
|
|
|
A-11
|
|
|
3.9.
|
|
|
Disclosure Documents
|
|
|
A-11
|
|
|
3.10.
|
|
|
Litigation
|
|
|
A-12
|
|
|
3.11.
|
|
|
Taxes
|
|
|
A-12
|
|
|
3.12.
|
|
|
Absence of Certain Changes or
Events
|
|
|
A-14
|
|
|
3.13.
|
|
|
Intellectual Property
|
|
|
A-14
|
|
|
3.14.
|
|
|
Employee Benefit
Plans
|
|
|
A-14
|
|
|
3.15.
|
|
|
Contracts;
Indebtedness
|
|
|
A-16
|
|
|
3.16.
|
|
|
Labor Matters
|
|
|
A-17
|
|
|
3.17.
|
|
|
Environmental Matters
|
|
|
A-17
|
|
|
3.18.
|
|
|
Opinion of Financial
Advisor
|
|
|
A-18
|
|
|
3.19.
|
|
|
Board Recommendation; Required
Vote
|
|
|
A-18
|
|
|
3.20.
|
|
|
Customer/Supplier
Relationships
|
|
|
A-18
|
|
|
3.21.
|
|
|
Transactions with
Affiliates
|
|
|
A-18
|
|
|
3.22.
|
|
|
Foreign Corrupt Practices and
International Trade Sanctions
|
|
|
A-18
|
|
|
3.23.
|
|
|
Brokerage and Finders
Fees; Expenses
|
|
|
A-19
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
3.24.
|
|
|
Reorganization
|
|
|
A-19
|
|
|
3.25.
|
|
|
Available Funds
|
|
|
A-19
|
|
|
3.26.
|
|
|
Lack of Ownership of Company
Common Stock
|
|
|
A-19
|
|
|
3.27.
|
|
|
Financing
|
|
|
A-19
|
|
|
3.28.
|
|
|
Backlog
|
|
|
A-19
|
|
|
3.29.
|
|
|
No Additional
Representations
|
|
|
A-20
|
|
|
|
|
|
|
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
|
A-20
|
|
|
4.1.
|
|
|
Organization and
Standing
|
|
|
A-20
|
|
|
4.2.
|
|
|
Subsidiaries
|
|
|
A-20
|
|
|
4.3.
|
|
|
Corporate Power and
Authority
|
|
|
A-21
|
|
|
4.4.
|
|
|
Capitalization of the
Company
|
|
|
A-21
|
|
|
4.5.
|
|
|
Conflicts; Consents and
Approvals
|
|
|
A-22
|
|
|
4.6.
|
|
|
Company SEC Documents
|
|
|
A-22
|
|
|
4.7.
|
|
|
Compliance with Law
|
|
|
A-23
|
|
|
4.8.
|
|
|
Undisclosed
Liabilities
|
|
|
A-23
|
|
|
4.9.
|
|
|
Disclosure Documents
|
|
|
A-23
|
|
|
4.10.
|
|
|
Litigation
|
|
|
A-24
|
|
|
4.11.
|
|
|
Taxes
|
|
|
A-24
|
|
|
4.12.
|
|
|
Absence of Certain Changes or
Events
|
|
|
A-25
|
|
|
4.13.
|
|
|
Intellectual Property
|
|
|
A-25
|
|
|
4.14.
|
|
|
Employee Benefit
Plans
|
|
|
A-25
|
|
|
4.15.
|
|
|
Contracts;
Indebtedness
|
|
|
A-28
|
|
|
4.16.
|
|
|
Labor Matters
|
|
|
A-28
|
|
|
4.17.
|
|
|
Real Property
|
|
|
A-29
|
|
|
4.18.
|
|
|
Environmental Matters
|
|
|
A-29
|
|
|
4.19.
|
|
|
Insurance
|
|
|
A-29
|
|
|
4.20.
|
|
|
Opinion of Financial
Advisor
|
|
|
A-30
|
|
|
4.21.
|
|
|
Board Recommendation; Required
Vote
|
|
|
A-30
|
|
|
4.22.
|
|
|
Section 203 of the
DGCL
|
|
|
A-30
|
|
|
4.23.
|
|
|
Customer/Supplier
Relationships
|
|
|
A-30
|
|
|
4.24.
|
|
|
Backlog
|
|
|
A-30
|
|
|
4.25.
|
|
|
Government Contracts
|
|
|
A-30
|
|
|
4.26.
|
|
|
Transactions with
Affiliates
|
|
|
A-31
|
|
|
4.27.
|
|
|
Foreign Corrupt Practices and
International Trade Sanctions
|
|
|
A-31
|
|
|
4.28.
|
|
|
Brokerage and Finders
Fees; Expenses
|
|
|
A-32
|
|
|
4.29.
|
|
|
Reorganization
|
|
|
A-32
|
|
|
4.30.
|
|
|
No Additional
Representations
|
|
|
A-32
|
|
|
|
|
|
|
ARTICLE V COVENANTS OF THE
PARTIES
|
|
|
A-32
|
|
|
5.1.
|
|
|
Mutual Covenants
|
|
|
A-32
|
|
|
5.2.
|
|
|
Covenants of Parent
|
|
|
A-37
|
|
|
5.3.
|
|
|
Covenants of the
Company
|
|
|
A-44
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE VI CONDITIONS TO THE
FIRST MERGER
|
|
|
A-50
|
|
|
6.1.
|
|
|
Conditions to the Obligations
of Each Party
|
|
|
A-50
|
|
|
6.2.
|
|
|
Conditions to Obligations of
Parent and Merger Sub
|
|
|
A-51
|
|
|
6.3.
|
|
|
Conditions to Obligation of the
Company
|
|
|
A-51
|
|
|
6.4.
|
|
|
Frustration of Closing
Conditions
|
|
|
A-52
|
|
|
|
|
|
|
ARTICLE VII TERMINATION; FEES
AND EXPENSES
|
|
|
A-52
|
|
|
7.1.
|
|
|
Termination by Mutual
Consent
|
|
|
A-52
|
|
|
7.2.
|
|
|
Termination by Either Parent or
the Company
|
|
|
A-52
|
|
|
7.3.
|
|
|
Termination by the
Company
|
|
|
A-52
|
|
|
7.4.
|
|
|
Termination by Parent
|
|
|
A-53
|
|
|
7.5.
|
|
|
Effect of Termination and
Abandonment
|
|
|
A-53
|
|
|
7.6.
|
|
|
Fees and Expenses
|
|
|
A-54
|
|
|
|
|
|
|
ARTICLE VIII MISCELLANEOUS
|
|
|
A-55
|
|
|
8.1.
|
|
|
Non-Survival of Representations
and Warranties
|
|
|
A-55
|
|
|
8.2.
|
|
|
Notices
|
|
|
A-55
|
|
|
8.3.
|
|
|
Interpretation
|
|
|
A-55
|
|
|
8.4.
|
|
|
Counterparts
|
|
|
A-56
|
|
|
8.5.
|
|
|
Entire Agreement
|
|
|
A-57
|
|
|
8.6.
|
|
|
Third-Party
Beneficiaries
|
|
|
A-57
|
|
|
8.7.
|
|
|
Governing Law
|
|
|
A-57
|
|
|
8.8.
|
|
|
Consent to Jurisdiction;
Specific Performance; Venue
|
|
|
A-57
|
|
|
8.9.
|
|
|
WAIVER OF JURY TRIAL
|
|
|
A-57
|
|
|
8.10.
|
|
|
Assignment
|
|
|
A-57
|
|
|
8.11.
|
|
|
Amendment
|
|
|
A-58
|
|
|
8.12.
|
|
|
Extension; Waiver
|
|
|
A-58
|
|
|
8.13.
|
|
|
Severability
|
|
|
A-58
|
|
Exhibit A:
Certificate of Incorporation of First Surviving Corporation
Exhibit B: Form of Rule 145 Affiliate Letter
A-iii
INDEX
OF DEFINED TERMS
|
|
|
Term
|
|
Page
|
|
Action
|
|
A-17
|
affiliates
|
|
A-78
|
Agreement
|
|
A-1
|
Applicable Laws
|
|
A-15
|
Board
|
|
A-1
|
Book-Entry Shares
|
|
A-5
|
business day
|
|
A-79
|
Cancelled Shares
|
|
A-5
|
Certificate
|
|
A-4
|
Certificate of Merger
|
|
A-2
|
Closing
|
|
A-2
|
Closing Date
|
|
A-2
|
Code
|
|
A-1
|
Commission
|
|
A-14
|
Common Stock Trust
|
|
A-8
|
Company
|
|
A-1
|
Company Acquisition Proposal
|
|
A-69
|
Company Benefit Plans
|
|
A-36
|
Company Board Recommendation
|
|
A-42
|
Company Change of Recommendation
|
|
A-67
|
Company Common Stock
|
|
A-4
|
Company Disclosure Schedule
|
|
A-28
|
Company Employees
|
|
A-59
|
Company Financial Advisor
|
|
A-45
|
Company Foreign Plan
|
|
A-36
|
Company Incentive Plan
|
|
A-9
|
Company Intellectual Property Right
|
|
A-35
|
Company Material Contract
|
|
A-39
|
Company Option
|
|
A-9
|
Company Permits
|
|
A-32
|
Company Preferred Stock
|
|
A-29
|
Company Retiree Welfare Programs
|
|
A-59
|
Company SEC Documents
|
|
A-31
|
Company Stockholder Approval
|
|
A-42
|
Company Stockholder Meeting
|
|
A-16
|
Company Superior Proposal
|
|
A-69
|
Company Superior
Proposal Notice
|
|
A-68
|
Company Transfers
|
|
A-64
|
Companys Bylaws
|
|
A-28
|
Companys Certificate
|
|
A-28
|
Companys Stockholders
|
|
A-16
|
Confidentiality Agreement
|
|
A-50
|
control
|
|
A-79
|
A-iv
|
|
|
Term
|
|
Page
|
|
Controlled Group Liability
|
|
A-20
|
Covered Company Proposal
|
|
A-75
|
Covered Parent Proposal
|
|
A-75
|
Defaulting Party
|
|
A-76
|
Deferred Share Consideration
|
|
A-10
|
Delaware Secretary of State
|
|
A-2
|
DGCL
|
|
A-1
|
Dissenting Share
|
|
A-11
|
DOJ
|
|
A-47
|
Effective Time
|
|
A-2
|
Environmental Laws
|
|
A-25
|
Environmental Permits
|
|
A-25
|
ERISA
|
|
A-20
|
ERISA Affiliate
|
|
A-20
|
Excess Shares
|
|
A-8
|
Exchange Act
|
|
A-14
|
Exchange Agent
|
|
A-5
|
Exchange Fund
|
|
A-5
|
Exchange Ratio
|
|
A-4
|
Extended End Date
|
|
A-73
|
Financing
|
|
A-27
|
Financing Commitments
|
|
A-27
|
First Merger
|
|
A-1
|
First Surviving Corporation
|
|
A-2
|
Foreign Antitrust Laws
|
|
A-14
|
Form S-4
|
|
A-16
|
FTC
|
|
A-47
|
GAAP
|
|
A-15
|
Government Contracts
|
|
A-43
|
Governmental Authority
|
|
A-14
|
Hazardous Materials
|
|
A-25
|
herein
|
|
A-78
|
hereof
|
|
A-78
|
hereunder
|
|
A-78
|
HSR Act
|
|
A-14
|
Incentive Plan
|
|
A-60
|
include
|
|
A-78
|
includes
|
|
A-78
|
including
|
|
A-78
|
Indemnified Party
|
|
A-55
|
Intellectual Property Right
|
|
A-19
|
Joint Defense Agreement
|
|
A-47
|
Joint Proxy Statement/Prospectus
|
|
A-16
|
knowledge
|
|
A-79
|
A-v
|
|
|
Term
|
|
Page
|
|
Material Adverse Effect
|
|
A-78
|
Merger Consideration
|
|
A-4
|
Merger Consideration Value
|
|
A-9
|
Merger Sub
|
|
A-1
|
Multiemployer Company Benefit Plan
|
|
A-37
|
Multiemployer Parent Benefit Plan
|
|
A-21
|
Multiple Employer Company Benefit
Plan
|
|
A-37
|
Multiple Employer Parent Benefit
Plan
|
|
A-21
|
New Plans
|
|
A-59
|
NYSE
|
|
A-8
|
Option Consideration
|
|
A-9
|
Parent
|
|
A-1
|
Parent Acquisition Proposal
|
|
A-58
|
Parent Benefit Plans
|
|
A-20
|
Parent Board Recommendation
|
|
A-25
|
Parent Change of Recommendation
|
|
A-61
|
Parent Common Stock
|
|
A-4
|
Parent Disclosure Schedule
|
|
A-11
|
Parent Foreign Plan
|
|
A-21
|
Parent Intellectual Property Right
|
|
A-19
|
Parent Material Contract
|
|
A-23
|
Parent Permits
|
|
A-15
|
Parent Preferred Stock
|
|
A-12
|
Parent SEC Document
|
|
A-14
|
Parent Stockholder Approval
|
|
A-25
|
Parent Stockholder Meeting
|
|
A-16
|
Parent Superior Proposal
|
|
A-58
|
Parent Superior
Proposal Notice
|
|
A-57
|
Parents Bylaws
|
|
A-12
|
Parents Certificate
|
|
A-12
|
Parents Stockholders
|
|
A-16
|
PBGC
|
|
A-22
|
Per Share Cash Amount
|
|
A-4
|
Performance Unit
|
|
A-10
|
Permitted Liens
|
|
A-41
|
Person
|
|
A-6
|
Qualified Company Benefit Plan
|
|
A-37
|
Representatives
|
|
A-56
|
Required Approvals
|
|
A-46
|
Restricted Shares
|
|
A-9
|
Sarbanes-Oxley Act
|
|
A-15
|
Second Certificate of Merger
|
|
A-3
|
Second Effective Time
|
|
A-3
|
Second Merger
|
|
A-1
|
A-vi
|
|
|
Term
|
|
Page
|
|
Second Merger Sub
|
|
A-1
|
Securities Act
|
|
A-14
|
Stock Issuance
|
|
A-7
|
subsidiary
|
|
A-78
|
Surviving Corporation
|
|
A-3
|
Tax
|
|
A-17
|
Tax Returns
|
|
A-17
|
Taxes
|
|
A-17
|
Termination Date
|
|
A-73
|
Termination Fee
|
|
A-75
|
Transaction
|
|
A-1
|
Transfers
|
|
A-53
|
without limitation
|
|
A-78
|
A-vii
AGREEMENT
AND PLAN OF MERGER
This Agreement and Plan of Merger (this
Agreement
) is made and entered into as of the
27th day of May, 2007, by and among URS Corporation, a
Delaware corporation (
Parent
), Elk Merger
Corporation, a Delaware corporation and wholly owned subsidiary
of Parent (
Merger Sub
), Bear Merger Sub,
Inc., a Delaware corporation and wholly owned subsidiary of
Parent (
Second Merger Sub
), and Washington
Group International, Inc., a Delaware corporation (the
Company
).
RECITALS
WHEREAS, Parent and the Company desire that Parent combine its
businesses with the businesses operated by the Company through
(i) the merger of Merger Sub with and into the Company,
with the Company as the surviving corporation (the
First Merger
), as more fully provided in this
Agreement and in accordance with the General Corporation Law of
the State of Delaware (the
DGCL
) and
(ii) immediately following the First Merger, the merger of
the Company with and into Second Merger Sub, with Second Merger
Sub as the surviving corporation (the
Second
Merger
), as more fully provided in this Agreement and
in accordance with the DGCL;
WHEREAS, the board of directors (the
Board
)
of each of Parent, Merger Sub, Second Merger Sub and the Company
has determined that the First Merger and the Second Merger,
taken together, upon the terms and subject to the conditions set
forth in this Agreement, are advisable, fair to and in the best
interests of their respective stockholders;
WHEREAS, for Federal income tax purposes, it is intended that
the First Merger and the Second Merger shall be treated as a
single integrated transaction (collectively, the
Transaction
) and shall qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the
Code
), and the regulations
promulgated thereunder, and that this Agreement will be, and is,
adopted as a plan of reorganization; and
WHEREAS, Parent, Merger Sub, Second Merger Sub and the Company
desire to make those representations, warranties, covenants and
agreements specified in this Agreement in connection with this
Agreement and the Transaction.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
in this Agreement, Parent, Merger Sub, Second Merger Sub and the
Company agree as follows:
ARTICLE I
THE
TRANSACTION
1.1.
The First Merger.
Upon the
terms and subject to the conditions of this Agreement, and in
accordance with the provisions of the DGCL, Merger Sub shall be
merged with and into the Company at the Effective Time. As a
result of the First Merger, the separate corporate existence of
Merger Sub shall cease and the Company, subject to
Section 1.7
, shall continue its existence as a
wholly owned subsidiary of Parent under the laws of the State of
Delaware. The Company, in its capacity as the corporation
surviving the First Merger, is sometimes referred to in this
Agreement as the
First Surviving Corporation
.
1.2.
Closing; Effective Time.
A
closing (the
Closing
) shall be held at the
offices of Latham & Watkins LLP, 633 West Fifth
Street, Suite 4000, Los Angeles, California 90071, or such
other place as the parties hereto may agree, as soon as
practicable but no later than the second business day following
the date upon which all conditions set forth in
Article VI
(other than those conditions that by
their nature are to be satisfied or waived at the Closing, but
subject to the satisfaction or waiver of those conditions) are
satisfied or waived, or at such other date as Parent and the
Company may agree (such date being referred to as, the
Closing Date
). As promptly as possible on the
Closing Date, the parties hereto shall cause the First Merger to
be consummated by filing with the Secretary of State of the
State of Delaware (the
Delaware Secretary of
State
) a certificate of merger (the
Certificate of Merger
) in such form as is
required by and executed in accordance with Section 251 of
the DGCL. The First Merger shall become effective when the
Certificate of Merger has been filed with the Delaware Secretary
of State or at such later
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time as shall be agreed upon by Parent and the Company and
specified in the Certificate of Merger (the
Effective
Time
).
1.3.
Effects of the First
Merger.
From and after the Effective Time, the
First Merger shall have the effects set forth in
Section 259 of the DGCL. Without limiting the generality of
the foregoing, at the Effective Time, except as otherwise
provided in this Agreement, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub
shall vest in the First Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall
become the debts, liabilities and duties of the First Surviving
Corporation.
1.4.
Certificate of Incorporation and
Bylaws.
At the Effective Time, (a) the
Certificate of Incorporation of the Company shall be amended and
restated as set forth in Exhibit A hereto and, as so
amended and restated, shall be the Certificate of Incorporation
of the First Surviving Corporation and (b) the Bylaws of
Merger Sub in effect immediately prior to the Effective Time
shall be the Bylaws of the First Surviving Corporation, in each
case, until thereafter amended in accordance with the DGCL and
this Agreement and as provided in such Certificate of
Incorporation or Bylaws and until the Second Merger becomes
effective;
provided
,
however
, that at the
Effective Time, the provisions contained in such Bylaws
specifying the corporate name shall be amended to read as
follows: The name of the Corporation is Washington Group
International, Inc..
1.5.
Directors and Officers of the First Surviving
Corporation.
From and after the Effective Time,
the officers of the Company shall be the officers of the First
Surviving Corporation and the directors of Merger Sub shall be
the directors of the First Surviving Corporation, in each case,
until their respective successors are duly elected and qualified
in accordance with the Certificate of Incorporation and Bylaws
of the Surviving Corporation and until the Second Merger becomes
effective. On or prior to the Closing Date, the Company shall
deliver to Parent evidence satisfactory to Parent of the
resignations of the directors of the Company, such resignations
to be effective as of the Effective Time.
1.6.
Additional Actions.
If, at any
time after the Effective Time, the First Surviving Corporation
shall consider or be advised that any further deeds, assignments
or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or
otherwise, in the First Surviving Corporation its right, title
or interest in, to or under any of the property, rights,
privileges, powers and franchises of the Company or
(b) otherwise carry out the provisions of this Agreement,
the Company and its officers and directors shall be deemed to
have granted to the First Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds,
assignments or assurances in law and to take all acts necessary,
proper or desirable to vest, perfect or confirm title to and
possession of such property, rights, privileges, powers and
franchises in the First Surviving Corporation and otherwise to
carry out the provisions of this Agreement, and the officers and
directors of the First Surviving Corporation are authorized in
the name of the Company or otherwise to take any and all such
action.
1.7.
The Second Merger.
Immediately
following the First Merger, Parent shall cause the First
Surviving Corporation to merge into the Second Merger Sub, the
separate corporate existence of the First Surviving Corporation
shall cease and the Second Merger Sub shall continue as the
surviving corporation. Second Merger Sub, in its capacity as the
corporation surviving the Second Merger, is sometimes referred
to in this Agreement as the
Surviving
Corporation
. There shall be no conditions to the
completion of the Second Merger other than the completion of the
First Merger. Parent shall cause the Second Merger to be
consummated by filing with the Delaware Secretary of State a
certificate of merger (the
Second Certificate of
Merger
) in such form as is required by and executed in
accordance with Section 251 of the DGCL. The Second Merger
shall become effective when the Second Certificate of Merger has
been filed with the Delaware Secretary of State which shall be
filed immediately after the Effective Time (the
Second
Effective Time
). From and after the Second Effective
Time, the Second Merger shall have the effects set forth in
Section 259 of the DGCL. Without limiting the generality of
the foregoing, at the Second Effective Time, except as otherwise
provided in this Agreement, all the property, rights,
privileges, powers and franchises of the First Surviving
Corporation and Second Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the First
Surviving Corporation and Second Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation. At
the Second Effective Time, (a) the Certificate of
Incorporation of Second Merger Sub in effect immediately prior
to the Second Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation and (b) the
Bylaws of Second Merger Sub in effect immediately prior to the
Second Effective Time shall be the Bylaws of the Surviving
Corporation, in each case, until
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thereafter amended in accordance with the DGCL and this
Agreement and as provided in such Certificate of Incorporation
or Bylaws and in each case the Certificate of Incorporation and
the Bylaws of the Surviving Corporation shall include the
provisions required by
Section 5.2(b).
From and
after the Second Effective Time, the officers and the directors
of the First Surviving Corporation shall be the officers and the
directors of the Surviving Corporation, in each case, until
their respective successors are duly elected and qualified in
accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation. If, at any time after the Second
Effective Time, the Surviving Corporation shall consider or be
advised that any further deeds, assignments or assurances in law
or any other acts are necessary or desirable to (x) vest,
perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of
the property, rights, privileges, powers and franchises of the
First Surviving Corporation or the Company or (y) otherwise
carry out the provisions of this Agreement, the First Surviving
Corporation and its officers and directors shall be deemed to
have granted to the Surviving Corporation an irrevocable power
of attorney to execute and deliver all such deeds, assignments
or assurances in law and to take all acts necessary, proper or
desirable to vest, perfect or confirm title to and possession of
such property, rights, privileges, powers and franchises in the
Surviving Corporation and otherwise to carry out the provisions
of this Agreement, and the officers and directors of the
Surviving Corporation are authorized in the name of the First
Surviving Corporation or otherwise to take any and all such
action.
ARTICLE II
CONVERSION
OF SECURITIES
2.1.
Effect on Capital Stock.
At
the Effective Time, by virtue of the First Merger and without
any action on the part of Parent, Merger Sub or the Company or
their respective stockholders:
(a) Subject to this
Article II
, each share of
common stock, par value $0.01 per share, of the Company
(
Company Common Stock
) issued and outstanding
immediately prior to the Effective Time (other than the
Cancelled Shares and except for any Dissenting Shares) shall, by
virtue of this Agreement and without any action on the part of
the holder thereof, be converted into and shall thereafter
represent the right to receive (i) 0.772 (the
Exchange Ratio
) of a share of common stock,
par value $0.01 per share, of Parent (
Parent
Common Stock
) and (ii) an amount equal to $43.80
in cash without interest (the
Per Share Cash
Amount
and, together with the consideration referred
to in subclause (i) of this
Section 2.1(a)
, the
Merger Consideration
).
(b) From and after the Effective Time, all of the shares of
Company Common Stock converted into the Merger Consideration
pursuant to this
Article II
shall no longer be
outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate (each a
Certificate
) previously representing any such
shares of Company Common Stock shall thereafter cease to have
any rights with respect to such securities, except the right to
receive (i) the Merger Consideration, (ii) any
dividends and other distributions in accordance with
Section 2.2(f)
, and (iii) any cash to be paid
in lieu of any fractional share of Parent Common Stock in
accordance with
Section 2.3.
(c) If at any time during the period between the date of
this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent or the Company
shall occur by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares,
or any stock dividend thereon with a record date during such
period, the Merger Consideration and any number or amount
contained in this Agreement which is based on the price of
Parent Common Stock or Company Common Stock or the number of
shares of Parent Common Stock or Company Common Stock, as the
case may be, shall be equitably adjusted to reflect such
reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, or stock dividend thereon.
(d) At the Effective Time, all shares of Company Common
Stock that are owned directly by Parent or Merger Sub
immediately prior to the Effective Time or held in treasury of
the Company (in each case, other than any such Company Common
Stock held on behalf of third parties) (the
Cancelled
Shares
) shall, by virtue of the First Merger, and
without any action on the part of the holder thereof, be
cancelled and retired without any conversion thereof and shall
cease to exist and no payment shall be made in respect thereof.
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(e) At the Effective Time, by virtue of the First Merger
and without any action on the part of the holder thereof, each
issued and outstanding share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the First Surviving
Corporation.
2.2.
Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a
bank or trust company designated by Parent and reasonably
acceptable to the Company (the
Exchange
Agent
) and shall cause to be deposited with the
Exchange Agent, in trust for the benefit of the holders of
Company Common Stock and the Performance Units, certificates
representing the shares of Parent Common Stock and an amount of
cash in U.S. dollars sufficient to be issued and paid
pursuant to
Sections 2.1
,
2.3
and
2.6(d)
, payable upon due surrender of the Certificates
(or effective affidavits of loss in lieu thereof) or
non-certificated Company Common Stock represented by book-entry
(
Book-Entry Shares
) pursuant to the
provisions of this
Article II.
Following the
Effective Time, Parent agrees to make available to the Exchange
Agent, from time to time as needed, cash in U.S. dollars
sufficient to pay any dividends and other distributions pursuant
to
Section 2.2(f).
Any cash and certificates
representing Parent Common Stock deposited with the Exchange
Agent (including the amount of any dividends or other
distributions payable with respect thereto and such cash in lieu
of fractional shares to be paid pursuant to
Section 2.3
) shall be referred to in this Agreement
as the
Exchange Fund.
The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Merger
Consideration contemplated to be issued pursuant to
Section 2.1
out of the Exchange Fund. Except as
contemplated by
Section 2.3
, the Exchange Fund shall
not be used for any other purpose. As soon as reasonably
practicable after the Effective Time and in any event not later
than the second business day following the Effective Time,
Parent will cause the Exchange Agent to send to each holder of
record of shares of Company Common Stock, whose Company Common
Stock was converted into the Merger Consideration pursuant to
Section 2.1
, (i) a letter of transmittal for
use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates (or effective
affidavits of loss in lieu thereof) or Book-Entry Shares to the
Exchange Agent) in such form as Parent and the Company may
reasonably agree, for use in effecting delivery of shares of
Company Common Stock to the Exchange Agent, and
(ii) instructions for use in effecting the surrender of
Certificates (or effective affidavits of loss in lieu thereof)
or Book-Entry Shares in exchange for the Merger Consideration.
Exchange of any Book-Entry Shares shall be effected in
accordance with Parents customary procedures with respect
to securities represented by book entry.
(b) Each holder of shares of Company Common Stock that have
been converted into a right to receive the Merger Consideration,
upon surrender to the Exchange Agent of a Certificate (or
effective affidavits of loss in lieu thereof) or Book-Entry
Shares to the Exchange Agent, together with a properly completed
letter of transmittal, duly executed and completed in accordance
with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, will be entitled
to receive in exchange therefor (i) one or more shares of
Parent Common Stock (which shall be in non-certificated
book-entry form unless a physical certificate is requested)
representing, in the aggregate, the whole number of shares of
Parent Common Stock, if any, that such holder has the right to
receive pursuant to
Section 2.1
(after taking into
account all shares of Company Common Stock then held by such
holder) and (ii) a check in the amount equal to the cash
portion of the Merger Consideration that such holder has the
right to receive pursuant to
Section 2.1
and this
Article II
, including cash payable in lieu of
fractional shares pursuant to
Section 2.3
and
dividends and other distributions pursuant to
Section 2.2(f)
(less any required Tax withholding).
No interest shall be paid or accrued on any Merger
Consideration, cash in lieu of fractional shares or on any
unpaid dividends and distributions payable to holders of
Certificates. Until so surrendered, each such Certificate shall,
after the Effective Time, represent for all purposes only the
right to receive such Merger Consideration.
(c) If any cash payment is to be made to a Person other
than the Person in whose name the applicable surrendered
Certificate is registered, it shall be a condition of such
payment that the Person requesting such payment shall pay any
transfer Taxes required by reason of the making of such cash
payment to a Person other than the registered holder of the
surrendered Certificate or shall establish to the satisfaction
of the Exchange Agent that such Tax has been paid or is not
payable. If any portion of the Merger Consideration is to be
registered in the name of a Person other than the Person in
whose name the applicable surrendered Certificate is registered,
it shall be a condition to the registration thereof that the
surrendered Certificate shall be properly endorsed or otherwise
be in
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proper form for transfer and that the Person requesting such
delivery of the Merger Consideration shall pay to the Exchange
Agent any transfer Taxes required as a result of such
registration in the name of a Person other than the registered
holder of such Certificate or establish to the satisfaction of
the Exchange Agent that such Tax has been paid or is not
payable. For purposes of this Agreement,
Person
means an individual, a corporation, a
limited liability company, a partnership, an association, a
trust or any other entity, group (as such term is used in
Section 13 of the Exchange Act) or organization, including
a Governmental Authority, and any permitted successors and
assigns of such Person.
(d) After the Effective Time, there shall be no further
registration of Transfers of shares of Company Common Stock.
From and after the Effective Time, the holders of Certificates
representing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Common Stock
except as otherwise provided in this Agreement or by Applicable
Law. If, after the Effective Time, Certificates are presented to
the Exchange Agent, the First Surviving Corporation or Parent,
they shall be cancelled and exchanged for the consideration
provided for, and in accordance with the procedures set forth,
in this
Article II.
(e) Any portion of the Exchange Fund that remains unclaimed
by the holders of shares of Company Common Stock eighteen
(18) months after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged
his shares of Company Common Stock for the Merger Consideration
in accordance with this
Section 2.2
prior to that
time shall thereafter look only to Parent for delivery of the
Merger Consideration in respect of such holders shares.
Notwithstanding the foregoing, neither Parent, Merger Sub, the
Company nor the First Surviving Corporation shall be liable to
any holder of shares for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property laws.
Any Merger Consideration remaining unclaimed by holders of
shares of Company Common Stock immediately prior to such time as
such amounts would otherwise escheat to or become property of
any Governmental Authority shall, to the extent permitted by
Applicable Law, become property of Parent free and clear of any
claims or interest of any Person previously entitled thereto.
(f) No dividends or other distributions with respect to
shares of Parent Common Stock issued in the First Merger shall
be paid to the holder of any unsurrendered Certificates or
Book-Entry Shares until such Certificates or Book-Entry Shares
are surrendered as provided in this
Section 2.2.
Following such surrender, subject to the effect of escheat, Tax
or other Applicable Law, there shall be paid, without interest,
to the record holder of the shares of Parent Common Stock issued
in exchange therefor (i) at the time of such surrender, an
amount equal to all dividends and other distributions payable in
respect of such shares of Parent Common Stock with a record date
after the Effective Time and a payment date on or prior to the
date of such surrender and not previously paid and (ii) at
the appropriate payment date, an amount equal to the dividends
or other distributions payable with respect to such shares of
Parent Common Stock with a record date after the Effective Time
but with a payment date subsequent to such surrender. For
purposes of dividends or other distributions in respect of
shares of Parent Common Stock, all shares of Parent Common Stock
to be issued pursuant to the First Merger (the
Stock
Issuance
) shall be entitled to dividends pursuant to
the immediately preceding sentence as if issued and outstanding
as of the Effective Time.
(g) Any portion of the Merger Consideration deposited with
the Exchange Agent pursuant to this
Section 2.2
to
pay for shares for which appraisal rights shall have been
perfected shall be returned to Parent, upon demand.
(h) All Merger Consideration issued and paid upon
conversion of the Company Common Stock in accordance with the
terms of this Agreement (including any cash paid pursuant to
Section 2.3
) shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to such
Company Common Stock.
2.3.
Fractional Shares.
(a) No fractional shares of Parent Common Stock shall be
issued in the First Merger, but in lieu thereof each holder of
shares of Company Common Stock otherwise entitled to a
fractional share of Parent Common Stock will be entitled to
receive, from the Exchange Agent in accordance with the
provisions of this
Section 2.3
, a cash payment in
lieu of such fractional shares of Parent Common Stock
representing such holders proportionate interest, if any,
in the proceeds from the sale by the Exchange Agent (reduced by
any fees of the Exchange Agent attributable to such sale) in one
or more transactions of shares of Parent Common Stock equal to
the excess of (i) the aggregate number of shares of Parent
Common Stock to be delivered to the Exchange Agent by Parent
pursuant to
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Section 2.2(a)
over (ii) the aggregate number
of whole shares of Parent Common Stock to be distributed to the
holders of Certificates pursuant to
Section 2.2(b)
(such excess being, the
Excess Shares
). The
parties acknowledge that payment of the cash consideration in
lieu of issuing fractional shares was not separately
bargained-for consideration but merely represents a mechanical
rounding off for purposes of avoiding the expense and
inconvenience to Parent that would otherwise be caused by the
issuance of fractional shares. As soon as practicable after the
Effective Time, the Exchange Agent, as agent for the holders of
the Certificates representing shares of Parent Common Stock,
shall sell the Excess Shares at then prevailing prices on the
New York Stock Exchange (
NYSE
) in the manner
provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange Agent, as
agent for the holders that would otherwise receive fractional
shares, shall be executed on the NYSE at then-prevailing market
prices and shall be executed in round lots to the extent
practicable. Until the proceeds of such sale or sales have been
distributed to the holders of shares of Company Common Stock,
the Exchange Agent shall hold such proceeds in trust for the
holders of shares of Company Common Stock (the
Common
Stock Trust
). The Exchange Agent shall determine the
portion of the Common Stock Trust to which each holder of shares
of Company Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate proceeds comprising the
Common Stock Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such holder of
shares of Company Common Stock would otherwise be entitled and
the denominator of which is the aggregate amount of fractional
share interests to which all holders of shares of Company Common
Stock would otherwise be entitled.
(c) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of shares of
Company Common Stock in lieu of any fractional shares of Parent
Common Stock, the Exchange Agent shall make available such
amounts to such holders of shares of Company Common Stock
without interest, subject to and in accordance with
Section 2.2.
2.4.
Lost Certificates.
If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, the posting by such Person
of a bond, in such reasonable amount as the Surviving
Corporation may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration to be paid in
respect of the shares of Company Common Stock represented by
such Certificate as contemplated by this
Article II.
2.5.
Withholding Rights.
Each of
Parent, Merger Sub and the Surviving Corporation shall be
entitled to deduct and withhold, or cause the Exchange Agent to
deduct and withhold, from the consideration otherwise payable to
any Person pursuant to this Agreement such amounts as it is
required to deduct and withhold with respect to the making of
such payment pursuant to the Code or under any provision of
federal, state, local or foreign Tax law. To the extent that
amounts are so deducted or withheld by Parent, Merger Sub, the
Surviving Corporation, or the Exchange Agent, as the case may
be, and paid over to the applicable Governmental Authority, such
deducted or withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent, Merger Sub, the
Surviving Corporation or the Exchange Agent, as the case may be.
2.6.
Treatment of Stock Options and Other
Incentive Based Awards.
(a) Immediately prior to the Effective Time, each option to
purchase shares of Company Common Stock (a
Company
Option
) granted under the employee and director equity
and performance incentive plans of the Company (
Company
Incentive Plans
) or under any individual consultant,
employee or director agreement or otherwise issued by the
Company, whether vested or unvested, that is outstanding
immediately prior to the Effective Time shall become fully
exercisable and vested. Immediately following the Effective
Time, each such Company Option shall be cancelled and, in
exchange therefor, each former holder of any such cancelled
Company Option shall be entitled to receive, in consideration of
the cancellation of such Company Option and in settlement
therefor, a payment of the Merger Consideration (comprised of
Parent Common Stock and cash) equal to the product of
(i) the number of shares of Company Common Stock subject to
such Company Option immediately prior to the Effective Time and
(ii) the excess, if any, of the Merger Consideration Value
over the exercise price per share of Company Common Stock
previously subject to such Company Option (such amounts payable
hereunder being referred to as
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the
Option Consideration
).
Merger
Consideration Value
shall mean the sum of (x) the
Per Share Cash Amount and (y) the product of the Exchange
Ratio and $46.89. Immediately after the Effective Time, any such
cancelled Company Option shall no longer be exercisable by the
former holder thereof, but shall only entitle such holder to the
payment of the Option Consideration as described below. As soon
as reasonably practicable after the Effective Time, but in any
event within three (3) business days following the
Effective Time, Parent shall or shall cause the Surviving
Corporation to deliver in exchange for each Company Option which
is canceled pursuant to this
Section 2.6(a)
(A) an amount in cash equal to the product of (1) the
Option Consideration and (2) a fraction the numerator of
which is the Per Share Cash Amount and the denominator of which
is the Merger Consideration Value, plus (B) a number of
shares of Parent Common Stock equal to (1) the Option
Consideration less the cash payable pursuant to the preceding
clause (A), divided by (2) $46.89. The cash and shares
payable pursuant to the preceding sentence shall be subject to
any applicable withholding or other Taxes required by Applicable
Law to be withheld, provided that Parent shall at its expense
assist each former holder of a cancelled Company Option who
received such Company Option in his or her capacity as a Company
Employee in selling shares of Parent Common Stock delivered in
payment of the cancelled Stock Option in order to satisfy such
Taxes with respect to the Option Consideration (whether such
assistance applies with respect to this
Section 2.6(a)
or with respect to
Section 2.6(b)
, the
Assisted Sales
Process
) and Parent agrees that any applicable
withholding or other Taxes required by Applicable Law to be
withheld in respect of the Option Consideration shall first be
satisfied from the sale of shares of Parent Common Stock
pursuant to the Assisted Sales Process and Parent shall only
withhold or cause the withholding of cash from the cash portion
of an individuals Option Consideration if and to the
extent that the sale of shares of Parent Common Stock pursuant
to the Assisted Sales Process does not yield cash adequate to
satisfy such tax obligation with respect to such individual.
Prior to the execution of this Agreement, the Company has
requested that a certain specified Company Option holder of the
Company identified by Parent enter into an Option
Exercise and Transaction Support Agreement with the Company
and Parent in the form that counsel to Parent previously
provided to counsel to the Company.
(b) Immediately prior to the Effective Time, each award of
restricted Company Common Stock (the
Restricted
Shares
) shall vest in full and then be subject to the
provisions of
Section 2.1(a).
At the request of any
holder of Restricted Shares, any applicable withholding or other
Taxes required by Applicable Law to be withheld as a result of
the operation of this
Section 2.6(b)
shall be
satisfied by selling, pursuant to the Assisted Sales Process,
such number of shares of Parent Common Stock as is necessary to
satisfy any such obligation.
(c) Immediately following the Effective Time, all Deferred
Shares (as defined in the applicable Company Incentive Plan)
shall be converted into a vested obligation to pay cash with a
value equal to the product of (i) the Merger Consideration
Value and (ii) the number of Deferred Shares (such amount,
the
Deferred Share Consideration
), payable on
a deferred basis at the time that the underlying Deferred Shares
would have been settled under their terms as in effect
immediately prior to the Effective Time, plus earnings thereon
(as described below) (less any required Tax withholding). From
and after the Effective Time until the applicable payment date,
the Deferred Share Consideration shall earn interest at a rate
equal to 120% of the long-term Applicable Federal Rate as
prescribed under Section 1274(d) of the Code.
(d) The value of each performance unit granted under a
Company Incentive Plan (each, a
Performance
Unit
) shall become payable at the Effective Time and
shall be paid in cash as soon as practicable following the
Effective Time, but in any event within three (3) business
days following the Closing Date, in an amount equal to the
greater of (1) Par Value (as defined in the applicable
Company Incentive Plan and any related agreement) and
(2) the value determined based upon the Companys
actual results for the applicable performance period through the
Effective Time, with the amount of such payments determined in
accordance with the applicable Company Incentive Plan and any
related agreement.
(e) The Compensation Committee of the Board of the Company
shall pass such resolutions as are reasonably necessary with
respect to the Company Options, the Restricted Shares, the
Deferred Stock and the Performance Units to implement the
foregoing provisions of this
Section 2.6
. Such
resolutions shall be subject to the review and approval of
Parent, which approval shall not be unreasonably withheld,
delayed or conditioned. Prior to the Effective Time, Parent and
the Company shall take all necessary action for the adjustment
of Company Options, Deferred Shares, Restricted Shares and
Performance Units under this
Section 2.6
.
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(f) It is the intention of Parent and Merger Sub that the
rights of holders of Company Options, Deferred Shares and
Performance Units to receive cash payments accrue in and be
allocable to the portion of the day following the Effective
Time, and that cash payments be deductible as reasonable
compensation under Section 162 of the Code by the Surviving
Corporation.
2.7.
Dissenting
Shares
. Notwithstanding anything in this
Agreement to the contrary, with respect to each share of Company
Common Stock as to which the holder thereof shall have
(i) not voted in favor of the First Merger nor consented
thereto in writing, (ii) properly complied with the
provisions of Section 262 of the DGCL as to appraisal
rights, or (iii) not effectively withdrawn or lost its
rights to appraisal (each, a
Dissenting
Share
), if any, such holder shall be entitled to
payment, solely from the Surviving Corporation, of the appraisal
value of the Dissenting Shares to the extent permitted by and in
accordance with the provisions of Section 262 of the DGCL;
provided
,
however
, that (x) if any holder of
Dissenting Shares, under the circumstances permitted by and in
accordance with the DGCL, effectively withdraws or loses
(through failure to perfect or otherwise) the right to dissent
or its right for appraisal of such Dissenting Shares,
(y) if any holder of Dissenting Shares fails to establish
his entitlement to appraisal rights as provided in the DGCL or
(z) if any holder of Dissenting Shares takes or fails to
take any action the consequence of which is that such holder is
not entitled to payment for his shares under the DGCL, such
holder or holders (as the case may be) shall forfeit the right
to appraisal of such shares of Company Common Stock and such
shares of Company Common Stock shall thereupon cease to
constitute Dissenting Shares and such shares of Company Common
Stock shall be deemed converted as of the Effective Time into
the right to receive the Merger Consideration as provided in
this
Article II
. The Company shall give Parent
prompt notice of any demands received by the Company for
appraisal of shares of Company Common Stock, and Parent shall
have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not,
except with the prior written consent of Parent (which shall not
be unreasonably withheld or delayed), (A) voluntarily make
any payment with respect to any demands for appraisal for
Dissenting Shares, (B) offer to settle any such demands,
(C) waive any failure to timely deliver a written demand
for appraisal in accordance with the DGCL, or (D) agree to
do any of the foregoing.
2.8.
The Second Merger
. At the
Second Effective Time, by virtue of the Second Merger and
without any action on the part of the holder thereof, each
issued and outstanding share of common stock, par value
$0.01 per share, of the First Surviving Corporation issued
and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the
Surviving Corporation.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF PARENT, MERGER SUB AND SECOND MERGER SUB
Except as disclosed in the disclosure schedule delivered by
Parent to the Company immediately prior to the execution of this
Agreement (the
Parent Disclosure Schedule
),
Parent, Merger Sub and Second Merger Sub represent and warrant
to the Company as follows:
3.1.
Organization and
Standing.
Parent is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to
own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and
conducted. Each of Parents subsidiaries is an organization
duly incorporated, validly existing, and in good standing under
the laws of its jurisdiction of incorporation, with all
requisite corporate or similar power and authority to own,
lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and
conducted. Each of Parent and its subsidiaries is duly qualified
to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the property
it owns, leases or operates requires it to so qualify, except
where the failure to be so qualified or in good standing in such
jurisdiction would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Parent is not in default in
the performance, observance or fulfillment of any provision of
Parents Certificate of Incorporation
(
Parents Certificate
), or Parents
Bylaws (
Parents Bylaws
). No subsidiary
of Parent is in default in the performance, observance or
fulfillment of any provision of such subsidiarys
certificate of incorporation, bylaws or similar organizational
documents, except as would not, individually or in the
aggregate, have a
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Material Adverse Effect on Parent. Parent has heretofore
furnished or made available to the Company complete and correct
copies of Parents Certificate and Parents Bylaws.
3.2.
Corporate Power and
Authority.
Each of Parent, Merger Sub and Second
Merger Sub has all requisite corporate power and authority to
enter into and deliver this Agreement, to perform its
obligations under this Agreement, and, subject to (a) the
Parent Stockholder Approval and (b) the approval of Parent
in its capacity as the sole stockholder of each of Merger Sub,
the First Surviving Corporation and Second Merger Sub (which, in
the case of this clause (b), Parent shall obtain reasonably
promptly), to consummate the transactions contemplated by this
Agreement. The execution, performance and delivery of this
Agreement by Parent, Merger Sub and Second Merger Sub have been
duly authorized by all necessary corporate action on the part of
each of Parent, Merger Sub and Second Merger Sub, subject to
(i) the Parent Stockholder Approval, (ii) the filing
of the Certificate of Merger with the Delaware Secretary of
State and (iii) the filing of the Second Certificate of
Merger with the Delaware Secretary of State, and no other
corporate proceedings on the part of Parent, Merger Sub or
Second Merger Sub are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by each of Parent, Merger Sub and Second Merger Sub, and,
assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of
each of Parent, Merger Sub and Second Merger Sub enforceable
against each of them in accordance with its terms, except that
such enforceability (a) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors rights generally
and (b) is subject to general principles of equity.
3.3.
Capitalization of Parent.
As
of the date of this Agreement, the authorized capital stock of
Parent consists of 100,000,000 shares of Parent Common
Stock and 3,000,000 shares of Preferred Stock, par value
$0.01 per share (
Parent Preferred
Stock
). At the close of business on March 30,
2007, (a) 53,003,966 shares of Parent Common Stock
were issued and outstanding, (b) no shares of Parent
Preferred Stock were issued and outstanding and
(c) 52,000 shares of Parent Common Stock and no shares
of Parent Preferred Stock were held in treasury by Parent or by
subsidiaries of Parent. All of the outstanding shares of capital
stock of Parent have been duly authorized and validly issued and
are fully paid and nonassessable. As of the close of business on
March 30, 2007, other than (i) options to purchase
2,186,753 shares of Parent Common Stock issued pursuant to
Parent Benefit Plans, (ii) 1,628,774 restricted shares of
Parent Common Stock, and (iii) 119,778 shares of
Parent Common Stock issuable in respect of restricted stock
units and director deferred stock awards, (x) there are no
options, warrants, rights, puts, calls, commitments or other
contracts, arrangements or understandings issued by or binding
upon Parent or any subsidiary of Parent requiring or providing
for, and (y) there are no outstanding debt or equity
securities of Parent or any subsidiary of Parent which upon the
conversion, exchange or exercise thereof would require or
provide for the issuance by Parent or any subsidiary of Parent
of any new or additional shares of Parent Common Stock (or any
other securities of Parent or any subsidiary of Parent) which,
with or without notice, lapse of time
and/or
payment of monies, are or would be convertible into or
exercisable or exchangeable for Parent Common Stock (or any
other securities of Parent or any subsidiary of Parent). Except
as set forth on
Section 3.3
of the Parent Disclosure
Schedule, since March 30, 2007 through the date of this
Agreement, neither Parent has nor any subsidiary of Parent
thereof has issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its
capital stock or pursuant to the exercise or vesting of
incentive equity grants or conversion of the securities
described in clauses (i)-(iii) of the immediately preceding
sentence. The shares of Parent Common Stock to be issued in the
First Merger will, upon issuance, be validly issued, fully paid,
nonassessable, not subject to any preemptive rights, and free
and clear of all security interests, liens, claims, pledges or
other encumbrances of any nature whatsoever (in each case to
which Parent is a party).
3.4.
Capitalization of Merger Sub and Second
Merger Sub.
(a) As of the date of this Agreement, the authorized
capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which
shares are validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective
Time and the Second Effective Time will be, owned directly by
Parent. Merger Sub has not conducted any business prior to the
date of this Agreement and has no, and prior to the Effective
Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant
to this Agreement.
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(b) As of the date of this Agreement, the authorized
capital stock of Second Merger Sub consists of 1,000 shares
of common stock, par value $0.01 per share, all of which
shares are validly issued and outstanding. All of the issued and
outstanding capital stock of Second Merger Sub is, and at the
Effective Time and the Second Effective Time will be, owned
directly by Parent. Second Merger Sub has not conducted any
business prior to the date of this Agreement and has no, and
prior to the Second Effective Time will have no, assets,
liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement.
3.5.
Conflicts; Consents and
Approvals.
Except as set forth on
Section 3.5
of the Parent Disclosure Schedule,
neither the execution and delivery of this Agreement by Parent
or Merger Sub nor the consummation of the transactions
contemplated by this Agreement will:
(a) conflict with, or result in a breach of any provision
of Parents Certificate or Parents Bylaws, Merger
Subs Certificate of Incorporation or Merger Subs
Bylaws or Second Merger Subs Certificate of Incorporation
or Second Merger Subs Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any individual or entity
(with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or
any of its subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which Parent or any of its
subsidiaries is a party;
(c) violate, or conflict with, any Applicable Law; or
(d) require any action or consent or approval of, or review
by, or registration or filing by Parent or any of its
subsidiaries with, any third party or any local, domestic,
foreign or multinational government, court, arbitral tribunal,
administrative agency or commission or other governmental or
regulatory body, agency, entity, instrumentality, department,
board, or authority (each of the foregoing, a
Governmental Authority
), other than
(i) actions required by the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (together
with the rules and regulations promulgated thereunder, the
HSR Act
) and Applicable Laws, rules and
regulations in foreign jurisdictions governing antitrust or
merger control matters (
Foreign Antitrust
Laws
), (ii) compliance with any United States
federal and state securities laws and any other applicable
takeover laws, (iii) the filing with the Delaware Secretary
of State of the Certificate of Merger, and (iv) the
appropriate filings and approvals under the NYSE rules;
except in the case of clauses (b), (c) and
(d) above for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent or Merger Sub.
3.6.
Parent SEC Documents.
(a) Parent and its subsidiaries have timely filed with the
Securities and Exchange Commission (the
Commission
) all registration statements,
prospectuses, forms, reports, schedules, statements and other
documents (as supplemented and amended since the time of filing,
collectively, the
Parent SEC Documents
)
required to be filed by them since December 31, 2005 under
the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the
Exchange Act
), or the Securities Act of 1933,
as amended (together with the rules and regulations promulgated
thereunder, the
Securities Act
). The Parent
SEC Documents, including any financial statements or schedules
included in the Parent SEC Documents, at the time filed (and, in
the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively,
and, in the case of any Parent SEC Document amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such amending or superseding filing) (i) did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and
(ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the
case may be. The consolidated financial statements of Parent and
its subsidiaries included in the Parent SEC Documents fairly
present (subject, in the case of unaudited statements, to
normal, recurring audit adjustments) in all material respects
the consolidated financial position of Parent and its
consolidated subsidiaries as at the dates thereof and the
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consolidated results of their operations and cash flows (and
changes in financial position, if any) for the periods then
ended in conformity with United States generally accepted
accounting principles (
GAAP
). None of
Parents subsidiaries is subject to the periodic reporting
requirements of the Exchange Act or required to file any form,
report or other document with the Commission, the NYSE, any
other stock exchange or any other comparable Governmental
Authority.
(b) Parent has established and maintains disclosure
controls and procedures (as such terms are defined in
paragraphs (e) and (f) in
Rule 13a-14
under the Exchange Act); such disclosure controls and procedures
are reasonably designed to ensure that material information
required to be disclosed by Parent in its reports that it files
or furnishes under the Exchange Act is recorded, processed,
summarized and reported within the time period specified in the
rules and forms of the Commission, and that all such material
information is accumulated and communicated to Parents
management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications required
pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002 (the
Sarbanes-Oxley Act
).
Parents management has completed assessment of the
effectiveness of Parents internal control over financial
reporting in material compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act for the year ended
December 29, 2006, and such assessment concluded that such
controls were effective. There are no outstanding loans made by
Parent or any of its subsidiaries to any executive officer (as
defined in
Rule 3b-7
under the Exchange Act) or director of Parent. Since the
enactment of the Sarbanes-Oxley Act, neither Parent nor any of
its subsidiaries has made any loans to any executive officer (as
defined in
Rule 3b-7
under the Exchange Act) or director of Parent or any of its
subsidiaries.
3.7.
Compliance with Law.
(a) Parent and its subsidiaries hold all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders of all
Governmental Authorities necessary for the lawful conduct of
their respective businesses (the
Parent
Permits
), except for failures to hold such Parent
Permits that would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. The businesses of Parent and
its subsidiaries are not being conducted in violation of any
laws, statutes, ordinances, orders, rules, regulations, notice
requirements, policies, agency guidelines, principals of laws or
guidelines promulgated, or judgments, decisions or orders
entered, by any Governmental Authority, in each case, to the
extent applicable (collectively,
Applicable
Laws
), except for violations that would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent. Notwithstanding anything contained in this
Section 3.7(a)
, no representation or warranty shall
be deemed to be made in this
Section 3.7(a)
in
respect of the matters referenced in
Sections 3.6
,
3.9
and
3.22
, or in respect of environmental, Tax,
employee benefits or labor law matters.
(b) Except as set forth on
Section 3.7(a)
of
the Parent Disclosure Schedule, no investigation or review by
any Governmental Authority with respect to Parent or any of its
subsidiaries is pending or, to the knowledge of Parent,
threatened, nor has any Governmental Authority indicated in
writing an intention to conduct any such investigation or
review, other than, in each case, those the outcome of which
would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
3.8.
Undisclosed
Liabilities.
Except (a) as and to the extent
disclosed or reserved against on the balance sheet of Parent as
of March 30, 2007 included in the Parent SEC Documents,
(b) as incurred after December 29, 2006 in the
ordinary course of business consistent with past practice and
not prohibited by this Agreement, (c) as expressly
permitted or contemplated by this Agreement, (d) as set
forth on
Section 3.8
of the Parent Disclosure
Schedule and (e) liabilities or obligations which have been
discharged or paid in full in the ordinary course of business,
as of the date of this Agreement, neither Parent nor any of its
subsidiaries has any material liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, that would be
required by GAAP to be reflected on a consolidated balance sheet
of Parent and its subsidiaries (or disclosed in the notes
thereto).
3.9.
Disclosure Documents.
(a) The Registration Statement on
Form S-4
of Parent (the
Form S-4
)
to be filed under the Securities Act relating to the issuance of
shares of Parent Common Stock in the First Merger, and any
amendments or supplements
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thereto, will, when filed, subject to the last sentence of
Section 3.9(b)
, comply as to form in all material
respects with the applicable requirements of the Securities Act
and the Exchange Act.
(b) Neither the
Form S-4
nor any amendment or supplement thereto will, at the time it
becomes effective under the Securities Act or at the Effective
Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading. Notwithstanding
the foregoing, no representation or warranty is made by Parent
in this
Section 3.9
with respect to statements made
or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by
reference in the
Form S-4.
(c) None of the information supplied or to be supplied by
Parent for inclusion or incorporation by reference in the Joint
Proxy Statement/Prospectus or any amendment or supplement
thereto will, at the date the Joint Proxy Statement/Prospectus
or any amendment or supplement thereto is first mailed to
stockholders of the Company (the
Companys
Stockholders
) and the stockholders of Parent
(
Parents Stockholders
) or at the time
the Companys Stockholders vote on the adoption and
approval of this Agreement and the transactions contemplated
hereby or Parents Stockholders vote on the issuance
of shares of Parent Common Stock in the First Merger, contain
any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. For purposes of this Agreement,
Joint Proxy
Statement/Prospectus
means the Companys proxy
statement relating to the meeting of the Companys
Stockholders to consider and vote upon approval of this
Agreement and the First Merger (the
Company Stockholder
Meeting
), together with Parents proxy statement
relating to the meeting of Parents Stockholders to
consider and vote on the issuance of shares of Parent Common
Stock in the First Merger (the
Parent Stockholder
Meeting
), to be filed with the Commission, as such
document may be amended from time to time.
3.10.
Litigation.
Except as
disclosed in Parents annual report on
Form 10-K
for the year ended December 29, 2006, (a) there is no
action, complaint, inquiry, assessment, inspection, claim, suit,
hearing, notice of violation, demand letter, litigation,
proceeding, dispute, arbitral action, governmental audit,
inquiry criminal prosecution, civil or criminal investigation of
any nature whatsoever (an
Action
) pending,
or, to the knowledge of Parent, threatened, against Parent or
any of its subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect on Parent and
(b) neither Parent nor any of its subsidiaries is subject
to any outstanding order, writ, injunction or decree that would,
individually or in the aggregate, insofar as can be reasonably
foreseen, have a Material Adverse Effect on Parent.
3.11.
Taxes.
(a) For purposes of this Agreement, the following terms
have the definitions given below:
(i)
Tax Returns
means any and all
returns, reports and forms (including elections, declarations,
disclosures, schedules, estimates and information returns and
any related or supporting information) required to be filed with
respect to any Tax (including any attachments thereto or
amendments thereof).
(ii)
Tax
and
Taxes
means any and all taxes, charges, levies, or other assessments,
however denominated (whether United States federal, state or
local or foreign), including net income, gains, gross receipts,
profits, sales, use, goods and services, stamp, custom duties,
estimated, excise, employer health, withholding, property,
severance, disability, occupation, value added,
ad
valorem
, transfer, franchise, withholding, payroll,
employment, excise, or property taxes, together with any
interest, penalties, fines, additions to tax, or additional
amounts imposed with respect thereto, imposed by any taxing
authority whether disputed or not.
(b) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, (i) Parent
and each of its subsidiaries have timely filed with the
appropriate Governmental Authority all Tax Returns required to
be filed, (ii) all such Tax Returns are complete and
accurate, (iii) all Taxes due and owing by Parent and each
of its subsidiaries (whether or not shown on any Tax Returns)
have been paid, (iv) except as set forth on
Section 3.11(b)
of the Parent Disclosure Schedule,
neither Parent nor any of its subsidiaries is currently the
beneficiary of any extension of time within which to file any
Tax Return, and (v) no claim has ever been made by an
authority in a
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jurisdiction where Parent or any of its subsidiaries does not
file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(c) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, (i) no
deficiencies for Taxes of Parent or any of its subsidiaries have
been claimed, proposed or assessed, in each case, in writing by
any Governmental Authority, (ii) except as set forth on
Section 3.11(c)
of the Parent Disclosure Schedule,
there are no pending or, to the knowledge of Parent, threatened
(in writing) audits, assessments or other Actions for or
relating to any liability in respect of Taxes of Parent or any
of its subsidiaries, and (iii) except as set forth on
Section 3.7(b)
of the Parent Disclosure Schedule,
Parent and its subsidiaries have not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency, nor has any
request been made in writing for any such extension or waiver.
(d) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, (i) the
unpaid Taxes of Parent and its subsidiaries did not, as of the
dates of the financial statements contained in the most recent
Parent SEC Documents, exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the
face of the balance sheets (rather than in any notes thereto)
contained in such financial statements and (ii) since the
date of the financial statements in the most recent Parent SEC
Documents, neither the Parent nor any subsidiary has incurred
any liability for Taxes outside the ordinary course of business
or otherwise inconsistent with past custom and practice.
(e) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, Parent has
withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party.
(f) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, Parent has not
constituted either a distributing corporation or a
controlled corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock intended to qualify for Tax-free treatment under
Section 355 of the Code in the two years prior to the date
of this Agreement (or will constitute such a corporation in the
two years prior to this Agreement).
(g) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, neither Parent
nor any of its subsidiaries has participated in any transaction
that is or is substantially similar to a listed
transaction, under Section 6011 of the Code and the
regulations thereunder, or any other transaction requiring
disclosure under analogous provisions of foreign, state or local
Tax law.
(h) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, with respect to
the past four taxable years, neither Parent nor any of its
subsidiaries (i) has been a member of a group filing
consolidated returns for federal income Tax purposes (except for
the group of which Parent is the common parent) or (ii) has
any liability for the Taxes of any Person (other than Parent and
its subsidiaries) (A) under Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law),
(B) as a transferee or successor or (C) by contract.
(i) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, there are no
Tax-sharing agreements or similar arrangements (including
indemnity arrangements) with respect to or involving Parent or
any of its subsidiaries (other than agreements or arrangements
solely among Parent and its subsidiaries or among subsidiaries
of Parent), and, after the Closing Date, neither Parent nor any
of its subsidiaries shall be bound by any such Tax-sharing
agreements or similar arrangements or have any liability
thereunder for amounts due in respect of periods prior to the
Closing Date.
(j) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on Parent, none of the
subsidiaries of Parent incorporated or otherwise formed outside
the United States is a surrogate foreign corporation
within the meaning of Section 7874(a)(2)(B) of the Code or
is treated as a United States corporation under
Section 7874(b) of the Code.
(k) It is agreed and understood that no representation or
warranty by Parent is made in respect of Taxes in any Section of
this Agreement other than this
Section 3.11
and
Section 3.14
.
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3.12.
Absence of Certain Changes or Events.
(a) From December 29, 2006, through the date of this
Agreement, the businesses of Parent and its subsidiaries have
been conducted, in all material respects, in the ordinary course
of business consistent with past practice and there has not been
any event, development or state of circumstances that has had,
individually or in the aggregate, a Material Adverse Effect on
Parent.
(b) Since the date of this Agreement, there has not been
any Material Adverse Effect on Parent or any event, change,
effect or development that would, individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.13.
Intellectual Property.
(a) For purposes of this Agreement,
(i)
Intellectual Property Right
means
any trademark, service mark, trade name, mask work, invention,
patent, trade secret, copyright, know-how or proprietary
information contained on any website, processes, formulae,
products, technologies, discoveries, apparatus, Internet domain
names, trade dress and general intangibles of like nature
(together with goodwill), customer lists, confidential
information, licenses, software, databases and compilations
including any and all collections of data and all documentation
thereof (including any registrations or applications for
registration of any of the foregoing) or any other similar type
of proprietary intellectual property right, and
(ii)
Parent Intellectual Property Right
means all Intellectual Property Rights owned or licensed by
Parent or any of its subsidiaries that are used or held for use
by Parent or any of its subsidiaries.
(b) Parent and its subsidiaries own, or are validly
licensed or otherwise have the right to use, all Intellectual
Property Rights used in the conduct of their businesses, except
where the failure to own or possess valid rights to such
Intellectual Property Rights would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. No Parent
Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the
use thereof by Parent or any of its subsidiaries or restricting
the licensing thereof by Parent or any of its subsidiaries to
any Person, except for any judgment, injunction, order, decree
or agreement which would not, individually or in the aggregate,
have a Material Adverse Effect on Parent. Neither Parent nor any
of its subsidiaries is infringing on any other Persons
Intellectual Property Rights and to the knowledge of Parent no
Person is infringing on any Parent Intellectual Property Rights,
except, in either case, as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Except for
such matters as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, (i) neither
Parent nor any of its subsidiaries is a defendant in any Action
relating to, or otherwise was notified of, any claim alleging
infringement by Parent or any of its subsidiaries of any
Intellectual Property Right and (ii) Parent and its
subsidiaries have no outstanding claim or suit for any
continuing infringement by any other Person of any Parent
Intellectual Property Rights.
3.14.
Employee Benefit Plans.
(a) For purposes of this Agreement, the following terms
have the definitions given below:
(i)
Controlled Group Liability
means any
and all liabilities, contingent or otherwise (A) under
Title IV of ERISA, (B) under Section 302 of
ERISA, (C) under Sections 412 and 4971 of the Code,
(D) resulting from a violation of the continuation coverage
requirements of Section 601
et seq.
of ERISA and
Section 4980B of the Code or the group health plan
requirements of Sections 601
et seq.
of the Code and
Section 601
et seq.
of ERISA, and (E) under
corresponding or similar provisions of foreign laws or
regulations, in each case, other than pursuant to the Parent
Benefit Plans and Parent Foreign Plans in the case of Parent and
Company Benefit Plans and Company Foreign Plans in the case of
the Company.
(ii)
ERISA
means the Employee Retirement
Income Security Act of 1974, as amended, together with the rules
and regulations thereunder.
(iii)
ERISA Affiliate
means, with
respect to any entity, trade or business, any other entity,
trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity,
trade or business, or that is a member of the same
controlled group as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
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(iv)
Parent Benefit Plans
means all
employee benefit plans, programs, policies, agreements, and
other arrangements providing compensation or benefits to any
current or former employee, consultant or director in respect of
services provided to Parent or any of its subsidiaries or to any
beneficiary or dependent thereof, and whether covering one
individual or more than one individual, sponsored or maintained
by Parent or any of its subsidiaries, as the case may be, or to
which Parent or any of its subsidiaries contributes or is
obligated to contribute or could have any liability or is party;
provided
,
however
, that Parent Benefit Plans shall
not include any Parent Foreign Plan or any multiemployer
plan within the meaning of Section 4001(a)(3) of
ERISA or any other plan, program or arrangement maintained by an
entity other than Parent or any of its subsidiaries pursuant to
any collective bargaining agreements. Without limiting the
generality of the foregoing, the term Parent Benefit
Plans includes any defined benefit or defined contribution
pension plan, profit sharing plan, stock ownership plan,
deferred compensation agreement or arrangement, vacation pay,
health, sickness, life, disability or death benefit plan
(whether provided through insurance, on a funded or unfunded
basis or otherwise), employee stock option or stock purchase
plan, bonus or incentive plan or program, severance pay plan,
agreement, arrangement or policy (including statutory severance
and termination indemnity plans), practice or agreement,
employment agreement, retiree medical benefits plan and each
other employee benefit plan, program or arrangement, including
each employee benefit plan (within the meaning of
Section 3(3) of ERISA). For purposes of this Agreement, the
term
Parent Foreign Plan
shall refer to each
material plan, program or contract that is subject to or
governed by the laws of any jurisdiction other than the United
States, and which would have been treated as a Parent Benefit
Plan had it been a United States plan, program or contract.
Section 3.14(a)
to the Parent Disclosure Schedule
lists all Parent Benefit Plans and Parent Foreign Plans.
(b) The Internal Revenue Service has issued a favorable
determination letter with respect to each Parent Benefit Plan
that is intended to be a qualified plan (within the
meaning of Section 401(a) of the Code). To the knowledge of
Parent, there are no existing circumstances nor any events that
have occurred that could reasonably be expected to adversely
affect the qualified status of any Qualified Parent Benefit Plan
or the related trust.
(c) All material contributions required to be made by
Parent or any of its subsidiaries to any Parent Benefit Plan by
Applicable Laws or by any plan document or other contractual
undertaking, and all material premiums due or payable with
respect to insurance policies funding any Parent Benefit Plan,
for any period through the date of this Agreement have been
timely made or paid in full and through the Closing Date will be
timely made or paid in full.
(d) Except as set forth on
Section 3.14(d)
of
the Parent Disclosure Schedule, Parent and its subsidiaries have
complied in all material respects, and are now in compliance, in
all material respects, with all provisions of ERISA, the Code
and all laws and regulations (including any local Applicable
Laws) applicable to the Parent Benefit Plans. Each Parent
Benefit Plan has been operated in compliance with its terms in
all material respects. There is not now, and there are no
existing circumstances that would reasonably be expected to give
rise to, any requirement for the posting of security with
respect to a Parent Benefit Plan or the imposition of any
pledge, lien, security interest or encumbrance on the assets of
Parent or any of its subsidiaries under ERISA or the Code,
except for any such security, pledge, lien, security interest or
encumbrances as would not result in any material liability to
Parent and its subsidiaries taken as a whole.
(e) Except as set forth on
Section 3.14(e)
of
the Parent Disclosure Schedule, no employee benefit plan of
Parent, its subsidiaries or any of their respective ERISA
Affiliates is a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) (a
Multiemployer Parent Benefit Plan
) or a plan
that has two or more contributing sponsors at least two of whom
are not under common control (within the meaning of
Section 4063 of ERISA) (a
Multiple Employer Parent
Benefit Plan
), nor has Parent or any of its
subsidiaries or any of their respective ERISA Affiliates, at any
time within six years before the date of this Agreement,
contributed to or been obligated to contribute to any
Multiemployer Parent Benefit Plan or Multiple Employer Parent
Benefit Plan. With respect to each Parent Benefit Plan that is
subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, except as would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent: (i) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived; (ii) the
fair market value of the assets of such Parent Benefit Plan
equals or exceeds the actuarial present value of all accrued
benefits under such Parent Benefit Plan (whether or not vested);
(iii) no reportable event within the meaning of
Section 4043(c) of ERISA for which the
30-day
notice requirement has not
A-15
been waived has occurred, and the consummation of the
transactions contemplated by this Agreement will not result in
the occurrence of any such reportable event; (iv) all
premiums to the Pension Benefit Guaranty Corporation (the
PBGC
) have been timely paid in full;
(v) no liability (other than for premiums to the PBGC)
under Title IV of ERISA has been or is expected to be
incurred by Parent or any of its subsidiaries; and (vi) the
PBGC has not instituted proceedings to terminate any such Parent
Benefit Plan and, to Parents knowledge, no condition
exists that presents a risk that such proceedings will be
instituted or which would constitute grounds under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Parent Benefit
Plan.
(f) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, there does not now
exist, and there are no existing circumstances that could
reasonably be expected to result in, any Controlled Group
Liability that would be a liability of Parent or any of its
subsidiaries following the Closing.
(g) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by this
Agreement will result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or
benefit to any current or former employee, officer, director or
consultant of Parent or any of its subsidiaries (either alone or
in conjunction with any other event) under any Parent Benefit
Plan or Parent Foreign Plan.
(h) All Parent Foreign Plans (i) have been maintained
in all material respects in accordance with all applicable
requirements, (ii) if they are intended to qualify for
special Tax treatment meet all material requirements for such
treatment, (iii) if they are required to be funded
and/or
book-reserved are funded
and/or
book-reserved, as appropriate, based upon reasonable actuarial
assumptions and in accordance with Applicable Law and
(iv) to the knowledge of the Parent, there are no existing
circumstances that have occurred that could reasonably be
expected to adversely affect the qualified or registered status
of any Parent Foreign Plan or related trust.
(i) Since December 29, 2006, there has been no
material amendment to or material modification of any material
Parent Benefit Plan or Parent Foreign Plan, except as required
by Applicable Law, or any broad-based announcement or other
broad-based communication of the intention to effect any of the
actions described in this
Section 3.14(i)
.
(j) All options to purchase shares of Parent Common Stock
granted under the Parent Benefit Plans have been granted in
compliance with the terms of Applicable Law and the applicable
Parent Benefit Plan and have (or with respect to such options
which have been exercised as of the date of this Agreement, had)
a per share exercise price that is (or with respect to such
options which have been exercised as of the date of this
Agreement, was) at least equal to the fair market value of a
share of Parent Common Stock as of the date the option was
granted.
(k) It is agreed and understood that no representation or
warranty by Parent is made in respect of employee benefits
matters in any Section of this Agreement other than this
Section 3.14
.
3.15.
Contracts; Indebtedness.
(a) Except as set forth on
Section 3.15(a)
of
the Parent Disclosure Schedule, the Parent Benefit Plans or as
filed with the Commission, neither Parent nor any of its
subsidiaries is a party to, and none of their respective
properties or assets are bound by any contract which (i) is
a material contract (as such term is defined in
Item 601(b)(10) of
Regulation S-K
of the Commission), (ii) has been entered into since
December 29, 2006 and contains earn-out or
other contingent payment obligations with remaining payment
obligations in excess of $10,000,000, or (iii) has been
entered into since December 29, 2006 and relates to the
acquisition or sale of any business of the Parent either
(A) for more than $50,000,000 or (B) that has not yet
been consummated or in respect of which the Parent or any of its
subsidiaries has any remaining material obligations. Each of the
contracts of the type described in this
Section 3.15(a)
, whether or not set forth on
Section 3.15(a)
of Parent Disclosure Schedule, is
referred to in this Agreement as a
Parent Material
Contract
. To the knowledge of senior management of
Parent, neither Parent nor any of its subsidiaries is a party to
any contract (i) pertaining to the acquisition of any
business or asset by Parent or any of its subsidiaries that
contains earn-out or other contingent payment
obligations with remaining payment obligations in excess of
$10,000,000 or (ii) containing covenants purporting to
limit in any material respect the freedom of Parent or any of
its subsidiaries or employees to compete in any line of business
or sell, supply or distribute any service or products, in each
case in one or more countries.
A-16
(b) Each Parent Material Contract is a valid, binding and
enforceable obligation of Parent or its subsidiaries and, to
Parents knowledge, of the other party or parties thereto,
in accordance with its terms, and in full force and effect, and,
upon consummation of the transactions contemplated by this
Agreement shall be in full force and effect without penalty or
other adverse consequence, except where the failure to be valid,
binding, enforceable and in full force and effect would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent and to the extent as may be limited by applicable
bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors rights generally or by general
principles of equity. Parent has not received any written notice
from any other party to any Parent Material Contract, and
otherwise has no knowledge that such third party intends to
terminate, or not renew any Parent Material Contract, or is
seeking the renegotiation thereof in any material respect or
substitute performance thereunder in any material respect. As of
the date of this Agreement, true and correct copies of all
Parent Material Contracts are either publicly filed with the
Commission and available via EDGAR or Parent has made available
to the Company true and correct copies of such contracts.
Neither Parent nor any of its subsidiaries, and, to the
knowledge of Parent, no other party thereto, is in violation of
or in default under any Parent Material Contract (nor does there
exist any condition which upon the passage of time or the giving
of notice or both would cause such a violation of or default
thereunder by Parent or any of its subsidiaries or, to
Parents knowledge, by any third party), except for
violations or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.16.
Labor Matters.
(a) There is no material labor strike, dispute or stoppage
pending, or, to the knowledge of Parent, threatened, against
Parent or any of its subsidiaries, and neither Parent nor any of
its subsidiaries has experienced any material labor strike,
dispute or stoppage or other material labor difficulty involving
its employees since January 1, 2006. To the knowledge of
Parent, since January 1, 2006, no material campaign or
other material attempt for recognition has been made by any
labor organization with respect to employees of Parent or any of
its subsidiaries. Since January 1, 2006, no material unfair
labor practice charge or claim has been filed against Parent or
any of its subsidiaries with the National Labor Relations Board
or other Governmental Authority. Parent and its subsidiaries are
in compliance, and at all times since January 1, 2006 have
been in compliance, in all material respects, with Applicable
Laws with respect to labor and employment matters. It is agreed
and understood that no representation or warranty by Parent is
made in respect of labor matters in any Section of this
Agreement other than this
Section 3.16
.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, neither Parent nor any
of its subsidiaries is a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices. Except as would
not, individually or in the aggregate, have a Material Adverse
Effect on Parent, none of Parent, any of its subsidiaries or any
of their executive officers has received within the past five
years any notice of intent by any Governmental Authority
responsible for the enforcement of labor or employment laws to
conduct an investigation or audit relating to Parent or any of
its subsidiaries and, to the knowledge of Parent, no such
investigation or audit is in progress.
3.17.
Environmental Matters.
Except
for such matters as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent: (a) the
properties, operations and activities of Parent and its
subsidiaries are in compliance with all applicable Environmental
Laws and Environmental Permits and all past noncompliance of
Parent or any of its subsidiaries with any Environmental Laws or
Environmental Permits has been resolved without any pending,
ongoing or future obligation, cost or liability; (b) Parent
and its subsidiaries and the properties and operations of Parent
and its subsidiaries are not subject to any existing, pending,
or, to the knowledge of Parent, threatened, Action by or before
any Governmental Authority under any Environmental Laws;
(c) to the knowledge of Parent, there has been no release
or threatened release of any Hazardous Material into the
environment by Parent or its subsidiaries or in connection with
their current or former properties or operations and there is no
presence of any released Hazardous Material on properties
currently occupied by Parent or its subsidiaries; and
(d) to the knowledge of Parent, there has been no exposure
of any Hazardous Material, pollutant or contaminant in
connection with the current or former properties, operations and
activities of Parent and its subsidiaries. Except for such
matters as would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, neither Parent nor its
subsidiaries has knowledge of or has received notice of any
past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans which may
interfere with or prevent compliance or continued compliance by
Parent or its subsidiaries with any Environmental Laws. It is
agreed and understood that no
A-17
representation or warranty by Parent in this Agreement is made
in respect of environmental matters in any Section of this
Agreement other than this
Section 3.17
.
Environmental Laws
means all United States
federal, state or local or foreign laws relating to pollution or
protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants,
contaminants, nuclear materials, asbestos, or industrial, toxic
or hazardous substances or wastes (collectively,
Hazardous Materials
) into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments,
licenses, notices, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
Environmental Permit
means any permit,
approval, grant, consent, exemption, certificate order,
easement, variance, franchise, license or other authorization
required under or issued pursuant to any applicable
Environmental Laws.
3.18.
Opinion of Financial
Advisor.
Parents Board has received the
written opinion of Morgan Stanley & Co. Incorporated,
dated as of the date of this Agreement, substantially to the
effect that, as of the date of this Agreement, the Merger
Consideration to be paid by Parent pursuant to this Agreement is
fair to Parent from a financial point of view. Parent shall
provide a complete and correct signed copy of such opinion to
the Company as soon as practicable after the date of this
Agreement for information purposes only and Parent has received
the consent of Morgan Stanley & Co. Incorporated to
include such written opinion in the Joint Proxy
Statement/Prospectus.
3.19.
Board Recommendation; Required
Vote.
Parents Board, at a meeting duly
called and held, has, by unanimous vote of those directors
present (who constituted 100% of the directors then in office),
(a) determined that this Agreement and the transactions
contemplated hereby, including the Transaction, are advisable,
fair to and in the best interests of Parents Stockholders;
(b) declared advisable and in all respects approved and
adopted this Agreement, and the transactions contemplated by
this Agreement, including the Transaction; and (c) resolved
to recommend that Parents Stockholders approve the Stock
Issuance (the
Parent Board Recommendation
).
The affirmative vote of a majority of the votes cast on a
proposal approving the Stock Issuance at the Parent Stockholder
Meeting by holders of Parent Common Stock on the record date for
the Parent Stockholder Meeting is the only vote of the holders
of any class or series of capital stock of Parent necessary for
approval of this Agreement and the Transactions, including the
Stock Issuance (the
Parent Stockholder
Approval
),
provided
that the total votes cast
on such proposal represents over 50% of the outstanding shares
of Parent Common Stock on the record date for the Parent
Stockholder Meeting.
3.20.
Customer/Supplier Relationships.
(a) Except as set forth on
Section 3.20(a)
of
the Parent Disclosure Schedule and except as would not have,
individually or in the aggregate, a Material Adverse Effect on
Parent, since January 1, 2007, no material customer of
Parent or any of its subsidiaries has indicated in writing that
it will stop or materially decrease purchasing services,
materials or products from Parent or such subsidiary, and no
material supplier or service provider of Parent or any of its
subsidiaries has indicated in writing that it will stop or
materially decrease the supply of materials, products or
services to Parent or such subsidiary, or, in each case, is
otherwise involved in, or is threatening, a material dispute
with Parent or such subsidiaries.
(b) Except as set forth on
Section 3.20(b)
of
the Parent Disclosure Schedule, since January 1, 2007, no
Parent Material Contracts between Parent or any of its
subsidiaries and any customer or supplier have been terminated
for cause or for convenience.
3.21.
Transactions with
Affiliates.
Except as set forth on Parents
last proxy statement filed with the Commission prior to the date
of this Agreement, since the date of such proxy statement, no
event has occurred as of the date of this Agreement that would
be required to be reported by Parent pursuant to Item 404
of
Regulation S-K
promulgated by the Commission.
3.22.
Foreign Corrupt Practices and International
Trade Sanctions.
Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent, neither Parent, nor any
subsidiary of Parent, nor any of their respective directors,
officers, agents, employees or any other Persons acting on
A-18
their behalf has (a) violated the Foreign Corrupt Practices
Act, 15 U.S.C. § 78dd-1
et seq
., as
amended, or any other similar applicable foreign, federal, or
state legal requirement, (b) made or provided, or caused to
be made or provided, directly or indirectly, any payment or
thing of value to a foreign official, foreign political party,
candidate for office or any other Person knowing that the Person
will pay or offer to pay the foreign official, party or
candidate, for the purpose of influencing a decision, inducing
an official to violate their lawful duty, securing any improper
advantage, or inducing a foreign official to use their influence
to affect a governmental decision, (c) paid, accepted or
received any unlawful contributions, payments, expenditures or
gifts, or (d) violated or operated in noncompliance with
any export restrictions, money laundering law, anti-terrorism
law or regulation, anti-boycott regulations or embargo
regulations.
3.23.
Brokerage and Finders Fees;
Expenses.
Except for Parents obligations to
Morgan Stanley & Co. Incorporated and UBS Investment
Bank, neither Parent nor any subsidiary of Parent has incurred
or will incur on behalf of Parent or its subsidiaries, any
brokerage, finders, advisory or similar fee in connection
with the transactions contemplated by this Agreement.
3.24.
Reorganization.
Neither
Parent nor any of its subsidiaries has taken or agreed to take
any action or knows of any fact that is reasonably likely to
prevent or impede the Transaction from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code.
3.25.
Available Funds.
Parent will
have available at the Effective Time (including through the
Company) all funds necessary for the payment of the Merger
Consideration and the amounts to be paid pursuant to
Section 2.6
and sufficient for the satisfaction of
all of Parents and Merger Subs obligations under
this Agreement.
3.26.
Lack of Ownership of Company Common
Stock.
Neither Parent nor any of its subsidiaries
beneficially owns, directly or indirectly, any shares of Company
Common Stock or other securities convertible into, exchangeable
into or exercisable for shares of Company Common Stock. There
are no voting trusts or other agreements, arrangements or
understandings to which Parent or any of its subsidiaries is a
party with respect to the voting of the capital stock or other
equity interest of the Company or any of its subsidiaries nor
are there any agreements, arrangements or understandings to
which Parent or any of its subsidiaries is a party with respect
to the acquisition, divestiture, retention, purchase, sale or
tendering of the capital stock or other equity interest of the
Company or any of its subsidiaries.
3.27.
Financing.
Section 3.27
of the Parent Disclosure Schedule sets forth true, accurate and
complete copies of executed debt commitment letters and related
term sheets (the
Financing Commitments
)
pursuant to which, and subject to the terms and conditions
thereof, certain lenders have committed to provide Parent with
loans in the amounts described therein, the proceeds of which
may be used to consummate the First Merger and the other
transactions contemplated hereby (the
Financing
). The Financing Commitments are in
full force and effect and have not been withdrawn or terminated
or otherwise amended or modified in any respect and Parent is
not in breach of any of the terms or conditions set forth
therein and no event has occurred which, with or without notice,
lapse of time or both, could reasonably be expected to
constitute a breach or failure to satisfy a condition precedent
set forth therein. The proceeds from the Financing, when
combined with cash and marketable securities available to Parent
at or prior to the Effective Time, constitute all of the
financing required for the consummation of the transactions
contemplated hereby, and are sufficient for the satisfaction of
all of Parents and Merger Subs obligations under
this Agreement, including the payment of the Merger
Consideration and the amounts to be paid pursuant to
Section 2.6
(and any fees and expenses of or payable
by Parent, Merger Sub or the First Surviving Corporation). The
Financing Commitments contain all of the conditions precedent to
the obligations of the lenders thereunder to make the Financing
available to Parent on the terms therein.
3.28.
Backlog.
The backlog of
Parent and of its subsidiaries as of March 30, 2007 as
reported in Parents Quarterly Report on
Form 10-Q
for the quarter ended March 30, 2007 was prepared by senior
management of Parent in all material respect on a basis
consistent with its past practice of preparing and tracking the
backlog of Parent and its subsidiaries.
A-19
3.29.
No Additional Representations.
(a) Parent acknowledges that it and its Representatives
have received access to the books and records, facilities,
equipment, contracts and other assets of the Company, and that
it and its Representatives have had the opportunity to meet with
the management of the Company and to discuss the business and
assets of the Company.
(b) Parent acknowledges that none of the Company nor any
Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information
regarding the Company furnished or made available to Parent and
its Representatives except as expressly set forth in
Article IV
(which includes the Company Disclosure
Schedule), and none of the Company or any other Person shall be
subject to any liability to Parent or any other Person resulting
from the Companys making available to Parent or
Parents use of such information or any information,
documents or material made available to Parent in the due
diligence materials provided to Parent, including in the
data room, other management presentations (formal or
informal) or in any other form in connection with the
transactions contemplated by this Agreement. Without limiting
the foregoing, Parent makes no representation or warranty to the
Company with respect to any financial projection or forecast
relating to Parent or any of its subsidiaries, whether or not
included in any management presentation.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure schedule delivered by the
Company to Parent immediately prior to the execution of this
Agreement (the
Company Disclosure Schedule
),
the Company represents and warrants to Parent and Merger Sub as
follows:
4.1.
Organization and Standing.
The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of the Companys
subsidiaries is an organization duly incorporated, validly
existing, and in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate or
similar power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of the Company and
its subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to
be so qualified or in good standing in such jurisdiction would
not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company is not in default in the
performance, observance or fulfillment of any provision of the
Amended and Restated Certificate of Incorporation of the Company
(the
Companys Certificate
) or the
Companys Amended and Restated Bylaws (the
Companys Bylaws
). No subsidiary of the
Company is in default in the performance, observance or
fulfillment of any provision of such subsidiarys
certificate of incorporation, bylaws or similar organizational
documents, except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The
Company has heretofore furnished to Parent complete and correct
copies of the Companys Certificate and the Companys
Bylaws.
4.2.
Subsidiaries.
The Company does
not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, limited liability
company, joint venture or other entity or enterprise, except for
the subsidiaries set forth on
Section 4.2
to the
Company Disclosure Schedule. Except as set forth on
Section 4.2
of the Company Disclosure Schedule, the
Company is not subject to any obligation or requirement to
provide material funds to or make any material investment (in
the form of a loan, capital contribution or otherwise) in any
such entity or any other Person. Except as set forth on
Section 4.2
of the Company Disclosure Schedule, the
Company owns, directly or indirectly, each of the outstanding
shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to
such subsidiary) of each of its subsidiaries. Each of the
outstanding shares of capital stock of each of the
Companys subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or
indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances. The following
information for each of the Companys subsidiaries is set
forth on
Section 4.2
to the Company Disclosure
Schedule,
A-20
as applicable: (a) its name and jurisdiction of
incorporation or organization; (b) its authorized capital
stock or share capital; and (c) the number of issued and
outstanding shares of capital stock or share capital and the
record owner(s) thereof. Other than as set forth on
Section 4.2
to the Company Disclosure Schedule,
there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer
of any securities of any of the Companys subsidiaries, nor
are there outstanding any securities that are convertible into
or exchangeable for any shares of capital stock or other voting
securities or ownership interests of any of the Companys
subsidiaries.
4.3.
Corporate Power and
Authority.
The Company has all requisite
corporate power and authority to enter into and deliver this
Agreement, to perform its obligations under this Agreement, and,
subject to Company Stockholder Approval, to consummate the
transactions contemplated by this Agreement. The execution,
performance and delivery of this Agreement by the Company have
been duly authorized by all necessary corporate action on the
part of the Company, subject to (i) the Company
Stockholders Approval, (ii) the filing of the Certificate
of Merger with the Delaware Secretary of State, and no other
corporate proceedings on the part of the Company are necessary
to authorize or approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company, and, assuming
the due authorization, execution and delivery by Parent and
Merger Sub, constitutes the legal, valid and binding obligation
of the Company enforceable against it in accordance with its
terms except that such enforceability (a) may be limited by
bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors
rights generally and (b) is subject to general principals
of equity.
4.4.
Capitalization of the Company.
(a) As of the date of this Agreement, the authorized
capital stock of the Company consists of 100,000,000 shares
of Company Common Stock and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (
Company
Preferred Stock
). As of the close of business on
May 25, 2007, (i) 28,898,100 shares of Company
Common Stock were issued and outstanding and 377,678 shares
of restricted stock were issued and outstanding, (ii) no
shares of Company Preferred Stock were issued and outstanding,
(iii) 1,162,226 shares of Company Common Stock and no
shares of Company Preferred Stock were held in treasury by the
Company or by subsidiaries of the Company and
5,738,033 shares of Company Common Stock were reserved for
issuance under the Company Incentive Plans. All of the issued
and outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this
Agreement, except as set forth on the first sentence of this
Section 4.4(a)
, the Company does not have and is not
bound by any outstanding subscriptions, options, warrants,
calls, preemptive rights, commitments or agreements of any
character calling for the purchase or issuance of any shares of
Company Common Stock or any other equity securities of the
Company or any securities representing the right to purchase or
otherwise receive any shares of Company Common Stock. Since the
close of business on May 25, 2007 through the date of this
Agreement, the Company has not issued any shares of its capital
stock or any securities convertible into or exercisable for any
shares of its capital stock, other than pursuant to the exercise
of stock options granted pursuant to the Company Incentive Plans
prior to such date.
Section 4.4(a)
of the Company
Disclosure Schedule sets forth a list of Company Options as of
the close of business on April 8, 2007, including the date
as of which each Company Option was granted, the number of
shares subject to each such Company Option at April 8, 2007
(
i.e.
, the original amount less exercises and any
cancellations), the expiration date of each such Company Option
and the price at which each such Company Option may be exercised.
(b) None of the Companys subsidiaries owns any
capital stock of the Company. Each outstanding share of the
Company capital stock is, and each share of the Company capital
stock that may be issued will be, when issued, duly authorized
and validly issued, fully paid and nonassessable, and not
subject to any preemptive or similar rights. The issuance and
sale of all of the shares of capital stock described in this
Section 4.4
have been in material compliance with
United States federal and state securities laws. Except as set
forth on
Section 4.4(b)
to the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has
agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to
any individual or entity; complete and correct copies of any
such agreements have previously been provided to Parent.
A-21
4.5.
Conflicts; Consents and
Approvals.
Except as set forth on
Section 4.5
of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement
will:
(a) conflict with, or result in a breach of any provision
of, the Companys Certificate or the Companys Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any Person (with the
giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result
in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company
or any of its subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which the Company or any of its
subsidiaries is a party;
(c) violate, or conflict with, any Applicable Law; or
(d) require any action or consent or approval of, or review
by, or registration or filing by the Company or any of its
affiliates with, any third party or any Governmental Authority,
other than (i) the Company Stockholder Approval,
(ii) actions required by the HSR Act and Foreign Antitrust
Laws, (iii) registrations or other actions required under
United States federal and state securities laws, and
(iv) the filing with the Delaware Secretary of State of the
Certificate of Merger;
except in the case of clauses (b), (c) and
(d) above for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company.
4.6.
Company SEC Documents.
(a) The Company and its subsidiaries have timely filed with
the Commission all registration statements, prospectuses, forms,
reports, schedules, statements and other documents (as
supplemented and amended since the time of filing, collectively,
the
Company SEC Documents
) required to be
filed by them since December 31, 2005 under the Exchange
Act or the Securities Act. The Company SEC Documents, including
any financial statements or schedules included in the Company
SEC Documents, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively, and, in
the case of any Company SEC Document amended or superseded by a
filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) (i) did not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and
(ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the
case may be. The consolidated financial statements of the
Company included in the Company SEC Documents fairly present
(subject, in the case of unaudited statements, to normal,
recurring audit adjustments) in all material respects the
consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows (and
changes in financial position, if any) for the periods then
ended in conformity with GAAP (except, in the case of the
unaudited statements, as permitted by the Commission) applied on
a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto). None of the
Companys subsidiaries is subject to the periodic reporting
requirements of the Exchange Act or required to file any form,
report or other document with the Commission, the NYSE, any
other stock exchange or any other comparable Governmental
Authority.
(b) The Company has established and maintains disclosure
controls and procedures (as such terms are defined in
paragraphs (e) and (f) in
Rule 13a-14
under the Exchange Act); such disclosure controls and procedures
are reasonably designed to ensure that material information
required to be disclosed by the Company in its reports that it
files or furnishes under the Exchange Act is recorded,
processed, summarized and reported within the time period
specified in the rules and forms of the Commission, and that all
such material information is accumulated and communicated to the
Companys management as appropriate to allow timely
decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of
the Sarbanes-Oxley Act. The Companys management has
completed assessment of the effectiveness of the Companys
internal control
A-22
over financial reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act for the year ended
December 29, 2006, and such assessment concluded that such
controls were effective. There are no outstanding loans made by
the Company or any of its subsidiaries to any executive officer
(as defined in
Rule 3b-7
under the Exchange Act) or director of the Company. Since the
enactment of the Sarbanes-Oxley Act, neither the Company nor any
of its subsidiaries has made any loans to any executive officer
(as defined in
Rule 3b-7
under the Exchange Act) or director of the Company or any of its
subsidiaries.
4.7.
Compliance with Law.
(a) The Company and its subsidiaries hold all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders of all
Governmental Authorities necessary for the lawful conduct of
their respective businesses (the
Company
Permits
), except for failures to hold such Company
Permits that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company and its
subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. The businesses of the Company and its
subsidiaries are not being conducted in violation of any
Applicable Law, except for violations that would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. Notwithstanding anything contained in this
Section 4.7(a)
, no representation or warranty shall
be deemed to be made in this
Section 4.7(a)
in
respect of the matters referenced in
Sections 4.6
,
4.9
,
4.18
and
4.27
, or in respect of
environmental, Tax, employee benefits or labor law matters.
(b) No investigation or review by any Governmental
Authority with respect to the Company or any of its subsidiaries
is pending or, to the knowledge of the Company, threatened, nor
has any Governmental Authority indicated in writing an intention
to conduct any such investigation or review, other than, in each
case, those the outcome of which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
4.8.
Undisclosed
Liabilities.
Except (a) as and to the extent
disclosed or reserved against on the balance sheet of the
Company as of March 30, 2007 included in the Company SEC
Documents, (b) as incurred after December 29, 2006 in
the ordinary course of business consistent with past practice
and not prohibited by this Agreement, (c) as expressly
permitted or contemplated by this Agreement, (d) as set
forth on
Section 4.8
to the Company Disclosure
Schedule and (e) liabilities or obligations which have been
discharged or paid in full in the ordinary course of business,
as of the date of this Agreement, neither the Company nor any of
its subsidiaries has any material liabilities or obligations of
any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, that
would be required by GAAP to be reflected on a consolidated
balance sheet of the Company and its subsidiaries (or disclosed
in the notes thereto).
4.9.
Disclosure Documents.
(a) Neither the Joint Proxy Statement/Prospectus, nor any
amendment or supplement thereto, will, at the date of the Joint
Proxy Statement/Prospectus or any such amendment or supplement
is first mailed to the Companys Stockholders or
Parents Stockholders, or at the time the Companys
Stockholders vote on the adoption and approval of this Agreement
and the transactions contemplated hereby or Parent Stockholder
Approval, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Joint Proxy
Statement/Prospectus, including all amendments or supplements
thereto, will, when filed, comply as to form in all material
respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, no representation or warranty is
made by the Company in this
Section 4.9(a)
with
respect to statements made or incorporated by reference therein
based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference in Joint Proxy
Statement/Prospectus.
(b) None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the
Form S-4
or any amendment or supplement thereto will, at the time the
Form S-4
or any such amendment or supplement becomes effective under the
Securities Act or at the Effective Time, as the case may be,
contain any untrue statement of a material fact or omit to state
a material fact required to be included in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
A-23
4.10.
Litigation.
Except as set
forth on the Companys annual report on
Form 10-K,
as amended on February 27, 2007, for the year ended
December 29, 2006, (a) there is no Action pending, or,
to the knowledge of the Company, threatened, against the Company
or any of its subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect on the Company and
(b) neither the Company nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree
that would, individually or in the aggregate, insofar as can be
reasonably foreseen, have a Material Adverse Effect on the
Company.
4.11.
Taxes.
(a) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company,
(i) the Company and each of its subsidiaries have timely
filed with the appropriate Governmental Authority all Tax
Returns required to be filed, (ii) all such Tax Returns are
complete and accurate, (iii) all Taxes due and owing by the
Company and each of its subsidiaries (whether or not shown on
any Tax Returns) have been paid, (iv) neither the Company
nor any of its subsidiaries is currently the beneficiary of any
extension of time within which to file any Tax Return, and
(v) no claim has ever been made by an authority in a
jurisdiction where the Company or any of its subsidiaries does
not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(b) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, (i) no
deficiencies for Taxes of the Company or any of its subsidiaries
have been claimed, proposed or assessed, in each case, in
writing by any Governmental Authority, (ii) there are no
pending or, to the knowledge of the Company, threatened (in
writing) audits, assessments or other Actions for or relating to
any liability in respect of Taxes of the Company or any of its
subsidiaries, and (iii) the Company and its subsidiaries
have not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax
assessment or deficiency, nor has any request been made in
writing for any such extension or waiver.
(c) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company,
(i) the unpaid Taxes of the Company and its subsidiaries
did not, as of the dates of the financial statements contained
in the most recent Company SEC Documents, exceed the reserve for
Tax liability (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheets (rather than
in any notes thereto) contained in such financial statements and
(ii) since the date of the financial statements in the most
recent Company SEC Documents, neither the Company nor any
subsidiary has incurred any liability for Taxes outside the
ordinary course of business or otherwise inconsistent with past
custom and practice.
(d) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, the Company
has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other
third party.
(e) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, the Company
has not constituted either a distributing
corporation or a controlled corporation
(within the meaning of Section 355(a)(1)(A) of the Code) in
a distribution of stock intended to qualify for Tax-free
treatment under Section 355 of the Code in the two years
prior to the date of this Agreement (or will constitute such a
corporation in the two years prior to this Agreement).
(f) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, neither the
Company nor any of its subsidiaries has participated in any
transaction that is or is substantially similar to a
listed transaction, under Section 6011 of the
Code and the regulations thereunder, or any other transaction
requiring disclosure under analogous provisions of foreign,
state or local Tax law.
(g) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, with
respect to the past four taxable years, neither the Company nor
any of its subsidiaries (i) has been a member of a group
filing consolidated returns for federal income Tax purposes
(except for the group of which the Company is the common parent)
or (ii) has any liability for the Taxes of any Person
(other than the Company and its subsidiaries) (A) under
Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law),
(B) as a transferee or successor or (C) by contract.
A-24
(h) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, there are
no Tax-sharing agreements or similar arrangements (including
indemnity arrangements) with respect to or involving the Company
or any of its subsidiaries (other than agreements or
arrangements solely among the Company and its subsidiaries or
among subsidiaries of the Company), and, after the Closing Date,
neither the Company nor any of its subsidiaries shall be bound
by any such Tax-sharing agreements or similar arrangements or
have any liability thereunder for amounts due in respect of
periods prior to the Closing Date.
(i) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, none of the
subsidiaries of the Company incorporated or otherwise formed
outside the United States is a surrogate foreign
corporation within the meaning of
Section 7874(a)(2)(B) of the Code or is treated as a United
States corporation under Section 7874(b) of the Code.
(j) It is agreed and understood that no representation or
warranty by the Company is made in respect of Taxes in any
Section of this Agreement other than this
Section 4.11
and
Section 4.14.
4.12.
Absence of Certain Changes or Events.
(a) From December 29, 2006 through the date of this
Agreement, the businesses of the Company and its subsidiaries
have been conducted, in all material respects, in the ordinary
course of business consistent with past practice and there has
not been any event, development or state of circumstances that
has had, individually or in the aggregate, a Material Adverse
Effect on the Company.
(b) Since the date of this Agreement, there has not been
any Material Adverse Effect on the Company or any event, change,
effect or development that would, individually or in the
aggregate, have a Material Adverse Effect on the Company.
4.13.
Intellectual Property.
(a) For purposes of this Agreement,
Company
Intellectual Property Right
means all Intellectual
Property Rights owned or licensed by the Company or any of its
subsidiaries that are used or held for use by the Company or any
of its subsidiaries.
(b) The Company and its subsidiaries own, or are validly
licensed or otherwise have the right to use, all Intellectual
Property Rights used in the conduct of their businesses, except
where the failure to own or possess valid rights to such
Intellectual Property Rights would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. No
Company Intellectual Property Right is subject to any
outstanding judgment, injunction, order, decree or agreement
restricting the use thereof by the Company or any of its
subsidiaries or restricting the licensing thereof by the Company
or any of its subsidiaries to any Person, except for any
judgment, injunction, order, decree or agreement which would
not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its
subsidiaries is infringing on any other Persons
Intellectual Property Rights and to the knowledge of the Company
no Person is infringing on any Company Intellectual Property
Rights, except, in either case, as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
Except for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company,
(i) neither the Company nor any of its subsidiaries is a
defendant in any Action relating to, or otherwise was notified
of, any claim alleging infringement by the Company or any of its
subsidiaries of any Intellectual Property Right and
(ii) the Company and its subsidiaries have no outstanding
claim or suit for any continuing infringement by any other
Person of any Company Intellectual Property Rights.
(c) Prior to the execution of this Agreement, the Company
has requested confirmation that the owner of the W
mark that is the subject of the Non-Exclusive License Agreement,
dated April 15, 2002, by and between Washington
Corporations and the Company will not object to the
Companys continued use of such mark on a transitional
basis following the Closing.
4.14.
Employee Benefit Plans.
(a)
Company Benefit Plans
means
all employee benefit plans, programs, policies, agreements, and
other arrangements providing compensation or benefits to any
current or former employee, consultant or director in respect of
services provided to the Company or any of its subsidiaries or
to any beneficiary or dependent thereof,
A-25
and whether covering one individual or more than one individual,
sponsored or maintained by the Company or any of its
subsidiaries, as the case may be, or to which the Company or any
of its subsidiaries contributes or is obligated to contribute or
could have any liability or is party;
provided
,
however
, that Company Benefit Plans shall not include any
Company Foreign Plan or any multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA or any
other plan, program or arrangement maintained by an entity other
than the Company or any of its subsidiaries pursuant to any
collective bargaining agreements. Without limiting the
generality of the foregoing, the term Company Benefit
Plans includes any defined benefit or defined contribution
pension plan, profit sharing plan, stock ownership plan,
deferred compensation agreement or arrangement, vacation pay,
health, sickness, life, disability or death benefit plan
(whether provided through insurance, on a funded or unfunded
basis or otherwise), employee stock option or stock purchase
plan, bonus or incentive plan or program, severance pay plan,
agreement, arrangement or policy (including statutory severance
and termination indemnity plans), practice or agreement,
employment agreement, retiree medical benefits plan and each
other employee benefit plan, program or arrangement, including
each employee benefit plan (within the meaning of
Section 3(3) of ERISA). For purposes of this Agreement, the
term
Company Foreign Plan
shall refer to each
material plan, program or contract that is subject to or
governed by the laws of any jurisdiction other than the United
States, and which would have been treated as a Company Benefit
Plan had it been a United States plan, program or contract.
(b)
Section 4.14(b)
to the Company Disclosure
Schedule lists all Company Benefit Plans and Company Foreign
Plans. With respect to each Company Benefit Plan, the Company
has provided to Parent a copy of the following (where
applicable): (i) each writing constituting a part of such
Company Benefit Plan, including all plan documents (including
amendments), benefit schedules, trust agreements, and insurance
contracts and other funding vehicles; (ii) the two most
recent Annual Reports (Form 5500 Series) and accompanying
schedules, in the case of any Company Benefit Plan for which
Forms 5500 are required to be filed; (iii) the current
summary plan description, if any; and any material modifications
thereto (in each case, whether or not required to be furnished
under ERISA); (iv) the most recent annual financial report
for each Company Benefit Plan for which such reporting is
required; (v) the two most recent actuarial valuations for
any defined pension benefit plans; (vi) any material
notices provided either to any participants in any Company
Benefit Plan or to any Governmental Authority (or any material
communications from any Governmental Authority) relative to any
Company Benefit Plan in the past five years; and (vii) the
most recent determination letter from the Internal Revenue
Service, in the case of any Company Benefit Plan that is
intended to be a qualified plan (within the meaning
of Section 401(a) of the Code) (a
Qualified
Company Benefit Plan
). Except as specifically provided
in the foregoing documents provided to Parent, there are no
amendments to any Company Benefit Plan that have been adopted or
approved, nor has the Company or any of its subsidiaries
undertaken to make any such amendments or to adopt or approve
any new Company Benefit Plan.
(c) The Internal Revenue Service has issued a favorable
determination letter with respect to each Qualified Company
Benefit Plan. To the knowledge of the Company, there are no
existing circumstances nor any events that have occurred that
could reasonably be expected to adversely affect the qualified
status of any Qualified Company Benefit Plan or the related
trust.
(d) All material contributions required to be made by the
Company or any of its subsidiaries to any Company Benefit Plan
by Applicable Laws or by any plan document or other contractual
undertaking, and all material premiums due or payable with
respect to insurance policies funding any Company Benefit Plan,
for any period through the date of this Agreement have been
timely made or paid in full and through the Closing Date will be
timely made or paid in full.
(e) The Company and its subsidiaries have complied in all
material respects, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws
and regulations (including any local Applicable Laws) applicable
to the Company Benefit Plans. Each Company Benefit Plan has been
operated in compliance with its terms in all material respects.
There is not now, and there are no existing circumstances that
would reasonably be expected to give rise to, any requirement
for the posting of security with respect to a Company Benefit
Plan or the imposition of any pledge, lien, security interest or
encumbrance on the assets of the Company or any of its
subsidiaries under ERISA or the Code, except for any such
security, pledge, lien, security interest or encumbrances as
would not result in any material liability to the Company and
its subsidiaries taken as a whole.
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(f) Except as set forth on
Section 4.14(f)
of
the Company Disclosure Schedule, no employee benefit plan of the
Company, its subsidiaries, or any of their respective ERISA
Affiliates is a multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) (a
Multiemployer Company Benefit Plan
) or a plan
that has two or more contributing sponsors at least two of whom
are not under common control (within the meaning of
Section 4063 of ERISA) (a
Multiple Employer
Company Benefit Plan
), nor has the Company or any of
its subsidiaries or any of their respective ERISA Affiliates, at
any time within six years before the date of this Agreement,
contributed to or been obligated to contribute to any
Multiemployer Company Benefit Plan or Multiple Employer Company
Benefit Plan. With respect to each Company Benefit Plan that is
subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, except as would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company: (i) there does not exist any accumulated
funding deficiency within the meaning of Section 412 of the
Code or Section 302 of ERISA, whether or not waived;
(ii) the fair market value of the assets of such Company
Benefit Plan equals or exceeds the actuarial present value of
all accrued benefits under such Company Benefit Plan (whether or
not vested); (iii) no reportable event within the meaning
of Section 4043(c) of ERISA for which the
30-day
notice requirement has not been waived has occurred, and the
consummation of the transactions contemplated by this Agreement
will not result in the occurrence of any such reportable event;
(iv) all premiums to the PBGC have been timely paid in
full; (v) no liability (other than for premiums to the
PBGC) under Title IV of ERISA has been or is expected to be
incurred by the Company or any of its subsidiaries; and
(vi) the PBGC has not instituted proceedings to terminate
any such Company Benefit Plan and, to the Companys
knowledge, no condition exists that presents a risk that such
proceedings will be instituted or which would constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Company Benefit
Plan.
(g) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, there does not
now exist, and there are no existing circumstances that could
reasonably be expected to result in, any Controlled Group
Liability that would be a liability of the Company or any of its
subsidiaries following the Closing.
(h) Except for (i) health continuation coverage as
required by Applicable Law and (ii) benefits under any
employee pension plan (as such term is defined in
Section 3(2) of ERISA), neither the Company nor any of its
subsidiaries has any liability for post-employment life, health,
medical or other welfare benefits to current or former employees
or beneficiaries or dependents thereof.
(i) Except as provided in
Sections 2.6
and
5.2(d)
, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
by this Agreement will result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any payment
or benefit to any current or former employee, officer, director
or consultant of the Company or any of its subsidiaries (either
alone or in conjunction with any other event) under any Company
Benefit Plan or Company Foreign Plan.
(j) There are no pending, or, to the knowledge of the
Company, threatened, Actions (other than claims for benefits in
the ordinary course) that have been asserted or instituted
against any Company Benefit Plan, any fiduciaries thereof with
respect to their duties to any Company Benefit Plan or the
assets of any of the trusts under any Company Benefit Plan that
could reasonably be expected to result in any material liability
of the Company and its subsidiaries taken as a whole.
(k) All Company Foreign Plans (i) have been maintained
in all material respects in accordance with all applicable
requirements, (ii) if they are intended to qualify for
special Tax treatment meet all material requirements for such
treatment, (iii) if they are required to be funded
and/or
book-reserved are funded
and/or
book-reserved, as appropriate, based upon reasonable actuarial
assumptions and in accordance with Applicable Law and
(iv) to the knowledge of the Company, there are no existing
circumstances that have occurred that could reasonably be
expected to adversely affect the qualified or registered status
of any Company Foreign Plan or related trust.
(l) Since December 29, 2006, there has been no
material amendment to or material modification of any material
Company Benefit Plan or Company Foreign Plan, except as required
by Applicable Law, or any broad-based announcement or other
broad-based communication of the intention to effect any of the
actions described in this
Section 4.14(l).
(m) All Company Options granted under the Company Benefit
Plans have been granted in compliance with the terms of
Applicable Law and the applicable Company Benefit Plan and have
(or with respect to such options
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which have been exercised as of the date of this Agreement, had)
a per share exercise price that is (or with respect to such
options which have been exercised as of the date of this
Agreement, was) at least equal to the fair market value of a
share of Company Common Stock as of the date the option was
granted.
(n) It is agreed and understood that no representation or
warranty by the Company is made in respect of employee benefits
matters in any Section of this Agreement other than this
Section 4.14.
4.15.
Contracts; Indebtedness.
(a) Except as set forth on
Section 4.15(a)
of
the Company Disclosure Schedule, the Company Benefit Plans or as
filed with the Commission, neither the Company nor any of its
subsidiaries is a party to, and none of their respective
properties or assets are bound by any contract which (i) is
a material contract (as such term is defined in
Item 601(b)(10) of Regulation S K of the Commission),
(ii) has been entered into since December 29, 2006 and
contains earn-out or other contingent payment
obligations with remaining payment obligations in excess of
$10,000,000, or (iii) has been entered into since
December 29, 2006 that relates to the acquisition or sale
of any business of the Company either (A) for more than
$50,000,000 or (B) that has not yet been consummated or in
respect of which the Company or any of its subsidiaries has any
remaining material obligations. Each of the contracts of the
type described in this
Section 4.15(a)
, whether or
not set forth on
Section 4.15(a)
of the Company
Disclosure Schedule, is referred to in this Agreement as a
Company Material Contract.
To the knowledge
of senior management of the Company, neither the Company nor any
of its subsidiaries is a party to any contract
(i) pertaining to the acquisition of any business or asset
by the Company or any of its subsidiaries that contains
earn-out or other contingent payment obligations
with remaining payment obligations in excess of $10,000,000 or
(ii) containing covenants purporting to limit in any
material respect the freedom of the Company or any of its
subsidiaries or employees to compete in any line of business or
sell, supply or distribute any service or products, in each case
in one or more countries
(b) Each Company Material Contract is a valid, binding and
enforceable obligation of the Company or its subsidiaries and,
to the Companys knowledge, of the other party or parties
thereto, in accordance with its terms, and in full force and
effect, and, upon consummation of the transactions contemplated
by this Agreement shall be in full force and effect without
penalty or other adverse consequence, except where the failure
to be valid, binding, enforceable and in full force and effect
would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and to the extent as may be
limited by applicable bankruptcy, insolvency, moratorium or
other laws affecting the enforcement of creditors rights
generally or by general principles of equity. As of the date of
this Agreement, the Company has not received any written notice
from any other party to any Company Material Contract, and
otherwise has no knowledge that such third party intends to
terminate, or not renew any Company Material Contract, or is
seeking the renegotiation thereof in any material respect or
substitute performance thereunder in any material respect. As of
the date of this Agreement, true and correct copies of all
Company Material Contracts are either publicly filed with the
Commission and available via EDGAR or the Company has made
available to Parent true and correct copies of such contracts.
Neither the Company nor any of its subsidiaries, and, to the
knowledge of the Company, no other party thereto, is in
violation of or in default under any Company Material Contract
(nor does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a
violation of or default thereunder by the Company or any of its
subsidiaries or, to the Companys knowledge, by any third
party), except for violations or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company.
(c) Except as set forth on
Section 4.15(c)
of
the Company Disclosure Schedule, none of the Company and its
subsidiaries is a party to any contract relating to a revenue
producing project which is expected by senior management, as of
the date of this Agreement, to result in a loss of more than
$1,000,000 for the Company or any of its subsidiaries (or, after
the Transaction, Parent or any of its subsidiaries).
4.16.
Labor Matters.
(a) Except as set forth on
Section 4.16(a)
to
the Company Disclosure Schedule, neither Company nor any of its
subsidiaries has any labor union contracts or collective
bargaining agreements, or to the knowledge of the Company, trade
union or works council agreements, with any Persons employed by
the Company or any of its subsidiaries. There is no material
labor strike, dispute or stoppage pending, or, to the knowledge
of the Company,
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threatened, against the Company or any of its subsidiaries, and
neither the Company nor any of its subsidiaries has experienced
any material labor strike, dispute or stoppage or other material
labor difficulty involving its employees since January 1,
2006. To the knowledge of the Company, since January 1,
2006, no material campaign or other material attempt for
recognition has been made by any labor organization with respect
to employees of the Company or any of its subsidiaries. Since
January 1, 2006, no material unfair labor practice charge
or claim has been filed against the Company or any of its
subsidiaries with the National Labor Relations Board or other
Governmental Authority. The Company and its subsidiaries are in
compliance, and at all times since January 1, 2006, have
been in compliance, in all material respects, with Applicable
Laws with respect to labor and employment matters. No employee
of the Company has been inappropriately characterized as an
independent contractor. It is agreed and understood that no
representation or warranty by the Company is made in respect of
labor matters in any Section of this Agreement other than this
Section 4.16.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, neither the
Company nor any of its subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment
practices. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, none
of the Company, any of its subsidiaries or any of their
executive officers has received within the past five years any
notice of intent by any Governmental Authority responsible for
the enforcement of labor or employment laws to conduct an
investigation or audit relating to the Company or any of its
subsidiaries and, to the knowledge of the Company, no such
investigation or audit is in progress.
4.17.
Real Property.
Except as
would not have, individually or in the aggregate, a Material
Adverse Effect on the Company, each of the Company and its
subsidiaries has good and valid title to the real property owned
by it, and valid and subsisting leasehold estates in the real
property leased by it, in each case subject to no lien or
encumbrance, except Permitted Liens.
Permitted
Liens
means (a) liens and encumbrances consisting
of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or
irregularities in title thereto that do not materially detract
from the value of, or materially impair the use of, such
property by the Company or any of its subsidiaries in the
operation of their respective business, (b) liens and
encumbrances of carriers, warehousemen, mechanics, suppliers,
materialmen or repairmen arising in the ordinary course of
business or (c) interests of the lessor to any leased
property.
4.18.
Environmental Matters.
Except
for such matters as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company: (a) the
properties, operations and activities of the Company and its
subsidiaries are in compliance with all applicable Environmental
Laws and Environmental Permits and all past noncompliance of the
Company or any of its subsidiaries with any Environmental Laws
or Environmental Permits has been resolved without any pending,
ongoing or future obligation, cost or liability; (b) the
Company and its subsidiaries and the properties and operations
of the Company and its subsidiaries are not subject to any
existing, pending, or, to the knowledge of the Company,
threatened, Action by or before any Governmental Authority under
any Environmental Laws; (c) to the knowledge of the
Company, there has been no release or threatened release of any
Hazardous Material into the environment by the Company or its
subsidiaries or in connection with their current or former
properties or operations and there is no presence of any
released Hazardous Material on properties currently occupied by
the Company or its subsidiaries; and (d) to the knowledge
of the Company, there has been no exposure of any Hazardous
Material, pollutant or contaminant in connection with the
current or former properties, operations and activities of the
Company and its subsidiaries. Except for such matters as would
not, individually or in the aggregate, have a Material Adverse
Effect on the Company, neither the Company nor its subsidiaries
has knowledge of or has received notice of any past, present or
future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent
compliance or continued compliance by the Company or its
subsidiaries with any Environmental Laws. It is agreed and
understood that no representation or warranty by the Company is
made in respect of environmental matters in any Section of this
Agreement other than this
Section 4.18.
4.19.
Insurance.
Section 4.19
of the Company Disclosure Schedule sets forth a list of all
material insurance policies (including information on the
premiums payable in connection therewith and the scope and
amount of the coverage and deductibles provided thereunder)
maintained by the Company or any of its subsidiaries which
policies
A-29
have been issued by insurers, which are reputable and
financially sound and provide coverage for the operations
conducted by the Company and its subsidiaries of a scope and
coverage consistent with customary industry practice.
4.20.
Opinion of Financial
Advisor.
Prior to the execution of this
Agreement, the Companys Board has received the opinion of
the Company Financial Advisor substantially to the effect that,
as of the date of this Agreement, the Merger Consideration to be
received by the Companys Stockholders pursuant to this
Agreement is fair to the Companys Stockholders from a
financial point of view. The Company shall provide a complete
and correct signed written copy of such opinion to Parent as
soon as practicable after the date of this Agreement for
information purposes only.
4.21.
Board Recommendation; Required
Vote.
The Companys Board, at a meeting duly
called and held, has, by unanimous vote of those directors
present (who constituted 100% of the directors then in office),
(a) determined that this Agreement and the transactions
contemplated hereby, including the First Merger, are advisable,
fair to and in the best interests of the Companys
Stockholders; (b) declared advisable and in all respects
approved and adopted this Agreement, and the transactions
contemplated by this Agreement, including the First Merger; and
(c) resolved to recommend that the Companys
Stockholders adopt this Agreement (the
Company Board
Recommendation
). Subject to the accuracy of the
representations and warranties of Parent and Merger Sub in
Section 3.26
, the affirmative vote of holders of a
majority of the outstanding shares of Company Common Stock
entitled to vote on the record date for the Company Stockholder
Meeting is the only vote of the holders of any class or series
of capital stock of the Company necessary to adopt this
Agreement (the
Company Stockholder Approval
).
4.22.
Section 203 of the
DGCL.
Prior to the date of this Agreement, the
Companys Board has taken all action necessary so that the
restrictions on business combinations contained in
Section 203 of the DGCL will not apply with respect to or
as a result of this Agreement or the transactions contemplated
hereby or thereby, including the Transaction, without any
further action on the part of the Companys Stockholders or
the Companys Board.
4.23.
Customer/Supplier Relationships.
(a) Except as set forth on
Section 4.23(a)
to
the Company Disclosure Schedule and except as would not have,
individually or in the aggregate, a Material Adverse Effect on
the Company, since January 1, 2007, no material customer of
the Company or any of its subsidiaries has indicated in writing
that it will stop or materially decrease purchasing services,
materials or products from the Company or such subsidiary, and
no material supplier or service provider of the Company or any
of its subsidiaries has indicated in writing that it will stop
or materially decrease the supply of materials, products or
services to the Company or such subsidiary, or, in each case, is
otherwise involved in, or is threatening, a material dispute
with the Company or such subsidiaries.
(b) Except as set forth on
Section 4.23(b)
of
the Company Disclosure Schedule, since January 1, 2007, no
Material Contracts between the Company or any of its
subsidiaries and any customer or supplier have been terminated
for cause or for convenience.
4.24.
Backlog.
Section 4.24
of the Company Disclosure Schedule sets forth the backlog of the
Company and each of its subsidiaries as of April 27, 2007,
including the estimate as of such date of the total revenues
remaining to be earned. Except as set forth thereon,
Section 4.24
of the Company Disclosure Schedule has
been prepared by senior management of the Company or the
applicable subsidiary of the Company in all material respect on
a basis consistent with its past practice of preparing and
tracking the backlog of the Company and its subsidiaries.
4.25.
Government Contracts.
(a) Since December 29, 2006, and except as would not
have, individually or in the aggregate, a Material Adverse
Effect on the Company, with respect to each prime contract,
subcontract, teaming agreement or arrangement, joint venture,
basic ordering agreement, blanket purchase agreement, letter
agreement, purchase order, delivery order, task order, grant,
cooperative agreement, bid, change order or other commitment or
funding vehicle between the Company or any of its subsidiaries
and (i) a Governmental Authority, (ii) any prime
contractor to a Governmental Authority (a
Government
Prime Contractor
) or (iii) any subcontractor with
respect to any contract described in subclauses (i) or
(ii) (a
Government Subcontractor
; such
contracts, being the
Government Contracts
),
(A) the Company and each of its subsidiaries has complied
with all material terms and conditions of
A-30
such Government Contracts, including all clauses, provisions and
requirements incorporated expressly, by reference or by
operation of law therein, (B) the Company and each of its
subsidiaries has complied with all material requirements of
Applicable Laws pertaining to such Government Contracts,
(C) all representations and certifications executed,
acknowledge or set forth in or pertaining to such Government
Contracts were complied with and correct in all material
respects as of their effective date, and the Company and each of
its subsidiaries has complied in all material respects with all
such representations and certifications, (D) neither the
United States Government nor any Government Prime Contractor or
Government Subcontractor has notified the Company or any of its
subsidiaries in writing that the Company or such subsidiary has
breached or violated any Applicable Law, or any material
certification, representation, clause, provision or requirement
pertaining to such Government Contracts, (E) no termination
for convenience, termination for default, cure notice or show
cause notice has been given (and is currently in effect as of
the date of this Agreement) pertaining to any Government
Contract or claim or request for equitable adjustment by the
Company or any of its subsidiaries against a Governmental
Authority and (F) no Governmental Authority has requested a
contract price adjustment based on a claimed disallowance by the
Defense Contract Audit Agency (or other applicable Governmental
Authority) or claim of defective pricing.
(b) The Companys and each of its subsidiarys
cost accounting and procurement systems with respect to
Government Contracts are in compliance in all material respects
with all applicable governmental regulations and requirements.
(c) Neither the Company nor any of its subsidiaries, nor
any of their respective directors, officers or employees
(i) is (or during the last three years has been) under
administrative, civil or criminal investigation, or indictment
or audit by any Governmental Authority with respect to any
material irregularity, material misstatement or material
omission arising under or relating to any Government Contract
(other than routine Defense Contract Audit Agency audits, in
which no such material irregularities, material misstatements or
material omissions were identified) or (ii) during the last
three years has conducted or initiated any material internal
investigation or made a voluntary disclosure to the United
States Government, with respect to any material irregularity,
misstatement or omission arising under or relating to any
Government Contract.
(d) Except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company, there exist
(i) no outstanding claims against the Company or any of its
subsidiaries, either by the United States Government or by any
Government Prime Contractor or Government Subcontractor arising
under or relating to any Government Contracts and (ii) no
disputes between the Company or any of its subsidiaries and the
United States Government under the Contract Disputes Act or any
other Federal statute or between the Company or any of its
subsidiaries and any Government Prime Contractor or Government
Subcontractor arising under or relating to any Government
Contract.
(e) Neither the Company, any of its subsidiaries nor any of
its or their respective directors, officers, or employees is or
for the last three years has been formally debarred or formally
suspended from participation in the award of contracts with any
Governmental Agency or has been declared ineligible for
contracting with any Governmental Agency.
4.26.
Transactions with
Affiliates.
Except as set forth on the
Companys last proxy statement filed with the Commission
prior to the date of this Agreement, since the date of such
proxy statement, no event has occurred as of the date of this
Agreement that would be required to be reported by the Company
pursuant to Item 404 of
Regulation S-K
promulgated by the Commission.
4.27.
Foreign Corrupt Practices and International
Trade Sanctions.
Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company, neither the Company,
nor any subsidiary of the Company, nor any of their respective
directors, officers, agents, employees or any other Persons
acting on their behalf has (a) violated the Foreign Corrupt
Practices Act, 15 U.S.C. § 78dd-1 et seq., as
amended, or any other similar applicable foreign, federal, or
state legal requirement, (b) made or provided, or caused to
be made or provided, directly or indirectly, any payment or
thing of value to a foreign official, foreign political party,
candidate for office or any other Person knowing that the Person
will pay or offer to pay the foreign official, party or
candidate, for the purpose of influencing a decision, inducing
an official to violate their lawful duty, securing any improper
advantage, or inducing a foreign official to use their influence
to affect a governmental decision, (c) paid, accepted or
received any unlawful contributions, payments, expenditures or
gifts, or (d) violated
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or operated in noncompliance with any export restrictions, money
laundering law, anti-terrorism law or regulation, anti-boycott
regulations or embargo regulations.
4.28.
Brokerage and Finders Fees;
Expenses.
Except for the Companys
obligations to Goldman, Sachs & Co. (the
Company Financial Advisor
), neither the
Company nor any subsidiary of the Company, has incurred or will
incur on behalf of the Company or its subsidiaries any
brokerage, finders, advisory or similar fee in connection
with the transactions contemplated by this Agreement.
4.29.
Reorganization.
Neither the
Company nor any of its subsidiaries has taken or agreed to take
any action or knows of any fact that is reasonably likely to
prevent or impede the Transaction from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code.
4.30.
No Additional Representations.
(a) The Company acknowledges that it and its
Representatives have received access to the books and records,
facilities, equipment, contracts and other assets of Parent and
Merger Sub, and that it and its Representatives have had the
opportunity to meet with the management of Parent and to discuss
the business and assets of Parent and Merger Sub.
(b) The Company acknowledges that none of Parent, Merger
Sub nor any Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any
information regarding Parent or Merger Sub furnished or made
available to the Company and its Representatives except as
expressly set forth in
Article III
(which includes
the Parent Disclosure Schedule), and none of Parent, Merger Sub
or any other Person shall be subject to any liability to the
Company or any other Person resulting from Parents making
available to the Company or the Companys use of such
information or any information, documents or material made
available to the Company in the due diligence materials provided
to the Company, including in the data room, other
management presentations (formal or informal) or in any other
form in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, the Company makes no
representation or warranty to Parent or Merger Sub with respect
to any financial projection or forecast relating to the Company
or any of its subsidiaries, whether or not included in any
management presentation.
ARTICLE V
COVENANTS OF
THE PARTIES
The parties hereto agree that:
5.1.
Mutual Covenants.
(a)
Reasonable Best Efforts.
(i) Subject to the terms and conditions of this Agreement,
each party hereto will use its reasonable best efforts to take,
or cause to be taken, all actions, to file, or cause to be
filed, all documents and do, or cause to be done, all things
necessary, proper or advisable under this Agreement and
Applicable Laws to consummate the Transaction and the other
transactions contemplated by this Agreement as soon as
practicable after the date of this Agreement, including
(A) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices,
petitions, filings, and other documents and to obtain as
promptly as practicable all consents, waivers, licenses, orders,
registrations, approvals, permits, rulings, authorizations and
clearances necessary or advisable to be obtained from any third
party
and/or
any Governmental Authority in order to consummate the
Transaction or any of the other transactions contemplated by
this Agreement (collectively, the
Required
Approvals
) and (B) taking all reasonable best
efforts as may be necessary to obtain all such Required
Approvals. In furtherance and not in limitation of the
foregoing, each of the Company and Parent agrees (1) to
make as promptly as practicable after the date of this Agreement
(and, in any event, within ten (10) business days) an
appropriate filing of a Notification and Report Form pursuant to
the HSR Act with respect to the transactions contemplated
hereby, (2) to make as promptly as practicable after the
date of this Agreement all other necessary filings with other
Governmental Authorities relating to the Transaction under any
Foreign Antitrust Laws, and (3) to supply as promptly as
practicable any additional information or
A-32
documentary material that may be requested pursuant to the HSR
Act or any Foreign Antitrust Laws or by such Governmental
Authorities and to use reasonable best efforts to cause the
expiration or termination of the applicable waiting periods
under the HSR Act and the receipt of Required Approvals under
such Foreign Antitrust Laws or from such Governmental
Authorities as soon as practicable. In furtherance and not in
limitation thereof of the foregoing, Parent and the Company
shall request and shall use reasonable best efforts to obtain
early termination of the applicable waiting period under the HSR
Act.
(ii) Further, and without limiting the generality of the
rest of this
Section 5.1(a)
, Parent and Merger Sub,
on the one hand, and the Company, on the other hand, shall, in
connection with the efforts referenced in
Section 5.1(a)(i)
to obtain all Required Approvals,
(A) cooperate in all respects with each other in connection
with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding
initiated by a private party, (B) subject to Applicable
Laws, permit the other party to review in advance any proposed
written communication or submission between it and any
Governmental Authority;
provided
,
however
, that
the parties may redact any information regarding the Merger
Consideration and alternative mergers or acquisitions
considered, including any rationale for the Transaction or any
such alternative mergers or acquisitions related to valuation or
pricing, (C) promptly inform each other of and supply to
such other party any communication (or other correspondence or
memoranda) received by such party from, or given by such party
to, the United States Department of Justice (the
DOJ
), the Federal Trade Commission (the
FTC
) or any other Governmental Authority and
of any material communication received or given in connection
with any proceeding by a private party, in each case regarding
any of the transactions contemplated hereby, subject to any
actions consistent with the Joint Defense Agreement, dated as of
April 27, 2007, by and among Parent, Cooley Godward Kronish
LLP, as counsel for Parent, the Company and Wachtell, Lipton,
Rosen & Katz, as counsel for the Company (the
Joint Defense Agreement
), and
(D) consult with each other in advance to the extent
practicable of any meeting or conference (whether in person or
by telephone) with the DOJ, the FTC or any other Governmental
Authority or, in connection with any proceeding by a private
party, with any other Person, and to the extent practicable and
permitted by the DOJ, the FTC or such other applicable
Governmental Authority or other Person, give the other party the
opportunity to attend and participate in such meetings and
conferences.
(iii) In furtherance and not in limitation of the covenants
of the parties contained in
Sections 5.1(a)(i)
and
5.1(a)(ii)
, if any objections are asserted with respect
to the transactions contemplated hereby under any Applicable Law
or if any suit is instituted (or threatened to be instituted) by
the FTC, the DOJ or any other Governmental Authority or any
private party challenging any of the transactions contemplated
hereby as violative of any Applicable Law or which would
otherwise prevent, materially impede or materially delay the
consummation of the transactions contemplated hereby, Parent and
Merger Sub, on the one hand, and the Company, on the other hand,
shall take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions
contemplated hereby, including taking reasonable best efforts to
resolve such objections, if any, as the FTC, the DOJ, state
antitrust enforcement authorities or competition authorities of
any other nation or other jurisdiction may require under any
Applicable Law with respect to the transactions contemplated
hereby, and to avoid or eliminate each and every impediment
under any Applicable Law that may be asserted by any
Governmental Authority with respect to the Transaction so as to
enable the Closing to occur as soon as reasonably practicable
(and in any event no later than the Extended End Date),
including, without limitation, (x) proposing, negotiating,
committing to and effecting, by consent decree, hold separate
order or otherwise, the sale, divestiture or disposition of any
assets or businesses of Parent or its subsidiaries or affiliates
or of the Company or its subsidiaries and (y) otherwise
taking or committing to take any actions that after the Closing
Date would limit the freedom of Parent or its subsidiaries
or affiliates freedom of action with respect to, or its
ability to retain, one or more of its or its subsidiaries
or affiliates businesses, product lines or assets, in each
case as may be required in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining
order or other order in any suit or proceeding which would
otherwise have the effect of preventing the Closing or delaying
the Closing beyond the Extended End Date;
provided
that,
notwithstanding anything to the contrary in this Agreement,
Parent shall not be required to (and the Company shall not)
become subject to, or consent or agree to or otherwise take any
action with respect to, any requirement, condition,
understanding, agreement or order of a Governmental Authority to
sell, to hold separate or otherwise dispose of, or to conduct,
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restrict, operate, invest or otherwise change assets or
businesses of the Company, Parent, or any of their subsidiaries
other than projects and contracts for the destruction of
chemical weapons in the United States through the
U.S. Chemical Weapons Demilitarization Program managed by
the U.S. Armys Chemical Materials Agency, and outside
the United States through the Department of Defenses
Threat Reduction Agency and its Cooperative Threat Reduction
Integrating Contracts program and assets related to the
performance of such projects and contracts to the extent they
are essential to support such projects and contracts;
provided further
that neither the Company nor any of its
subsidiaries shall become subject to, or consent or agree to or
otherwise take any action with respect to, any requirement,
condition, understanding, agreement or order of a Governmental
Authority to sell, to hold separate or otherwise dispose of, or
to conduct, restrict, operate, invest or otherwise change the
assets or business of the Company or any of its subsidiaries,
unless such requirement, condition, understanding, agreement or
order is binding on the Company only in the event that the
Closing occurs.
(iv) In furtherance and not in limitation of the covenants
of the parties contained in this
Section 5.1(a)
, if
any Action, including any Action by a private party, is
instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement, or if any statute,
rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or
enforced by a Governmental Authority which would make the
Transaction or the other transactions contemplated hereby
illegal or would otherwise prohibit or materially impair or
delay the consummation of the Transaction or the other
transactions contemplated hereby, each of Parent and Merger Sub
and the Company shall cooperate in all respects with each other
and use its respective reasonable best efforts, to contest and
resist any such Action and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the
Transaction or the other transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive
order, decree, injunction or administrative order repealed,
rescinded or made inapplicable so as to permit consummation of
the transactions contemplated by this Agreement.
(b)
Form S-4;
Joint Proxy Statement/Prospectus.
(i) As
promptly as reasonably practicable following the date of this
Agreement, each of Parent, Merger Sub and the Company shall
cooperate in preparing and cause to be filed with the Commission
the Joint Proxy Statement/Prospectus, and Parent and the Company
shall cooperate in preparing and Parent shall cause to be filed
with the Commission the
Form S-4.
The Joint Proxy Statement/Prospectus will be included in the
S-4
as a
prospectus and will constitute a part of the
Form S-4.
Each of Parent and the Company shall use its reasonable best
efforts to respond to any comments of the Commission, to have
the
Form S-4
declared effective under the Securities Act as long as necessary
to consummate the transactions contemplated hereby as promptly
as practicable after such filing and to cause the Joint Proxy
Statement/Prospectus in definitive form to be mailed to
Parents and the Companys respective stockholders as
promptly as practicable after the
Form S-
4 is declared effective under the Securities Act. Each of the
Company and Parent will notify the other party, as promptly as
practicable of the receipt thereof, of any written comments, and
advise each other of any oral comments, from the Commission or
its staff and of any request by the Commission or its staff or
any other government officials for amendments or supplements to
the
Form S-4
or the Joint Proxy Statement/Prospectus or for additional
information, and will supply the other party with copies of all
correspondence between it or any of its Representatives, on the
one hand, and the Commission, or its staff or any other
government officials, on the other hand, with respect to the
Form S-4,
the Joint Proxy Statement/Prospectus, the Transaction or the
shares of Parent Common Stock issuable in the First Merger.
Parent and the Company shall cooperate and provide each other
with a reasonable opportunity to review and comment on any
amendment or supplement to the Joint Proxy Statement/Prospectus
and the
Form S-4
prior to filing such with the Commission, and each will provide
each other with a copy of all such filings made with the
Commission. No amendment or supplement to the
Form S-4
or Joint Proxy Statement/Prospectus will be made by the Company
or Parent without the prior approval of the other party (not to
be unreasonably withheld or delayed), except as required by
Applicable Laws and then only to the extent necessary, or
without providing the other party the opportunity to review and
comment thereon;
provided
,
however
, that either
the Company, in connection with a Company Change of
Recommendation, or Parent, in connection with a Parent Change of
Recommendation, may amend or supplement the Joint Proxy
Statement/Prospectus or
Form S-4
(including by incorporation by reference) to effect such a
Company Change of Recommendation or Parent Change of
Recommendation, as applicable. Parent shall advise the Company
promptly after it receives notice thereof, of the
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time when the
Form S-4
has been declared effective, the issuance of any stop order, or
the suspension of the qualification of Parent Common Stock
issuable in connection with the First Merger for offering or
sale in any jurisdiction. If, at any time prior to the Effective
Time, any information relating to the Company, Parent or Merger
Sub, or any of their respective affiliates, officers or
directors should be discovered by the Company, Parent or Merger
Sub which should be set forth in an amendment or supplement to
the
Form S-4
or the Joint Proxy Statement/Prospectus so that any of such
documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or an event occurs which is
required to be set forth in an amendment or supplement to the
Form S-4
or the Joint Proxy Statement/Prospectus, the party that
discovers such information shall promptly notify the other party
and an amendment or supplement describing such information shall
be promptly filed with the Commission and, to the extent
required by law, disseminated to the Companys Stockholders
and/or
Parents Stockholders, as applicable.
(ii) The Company and Parent shall cooperate with each other
in order to lift any injunctions or remove any other impediment
to the consummation of the transactions contemplated by this
Agreement.
(c)
Public Announcements.
Parent
and the Company will consult with and provide each other the
reasonable opportunity to review and comment upon any the
issuance of any press release or other public statement or
comment relating to this Agreement or the transactions
contemplated by this Agreement and shall not issue any such
press release or make any public statement or comment prior to
such consultation except as may be required by Applicable Law or
any obligations pursuant to any listing agreement with any
national securities exchange. Parent and the Company agree to
issue a joint press release announcing this Agreement.
(d)
Conveyance Taxes.
The Company
and Parent shall cooperate in the preparation, execution and
filing of all Tax Returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp Taxes, any
transfer, recording, registration and other fees, and any
similar Taxes that become payable in connection with the
transactions contemplated by this Agreement that are required or
permitted to be filed on or before the Effective Time.
(e)
Section 16 Matters.
Prior
to the Effective Time, each of the Company and Parent shall take
all such steps as may be required (to the extent permitted under
Applicable Law) to cause any dispositions of Company Common
Stock or acquisitions of Parent Common Stock (including, in each
case, derivative securities) resulting from the transactions
contemplated hereby by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange Act
with respect to the Company to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
(f)
Affiliates.
The Company shall
use its reasonable efforts to cause affiliates of
the Company to deliver to Parent, as soon as practicable after
the date of this Agreement, and in any event prior to the
Effective Time, a written agreement, in the form of
Exhibit B
hereto.
(g)
Access.
From the date of this
Agreement until the earliest of the Effective Time and the
Termination Date, and subject to Applicable Law, the letter
agreement, dated as of February 14, 2007, between the
Company and Parent (the
Confidentiality
Agreement
), and the Joint Defense Agreement each party
shall (i) give the other party, its counsel, financial
advisors, auditors and other authorized Representatives
reasonable access during normal business hours, to the offices,
properties, books and records of such granting party and its
subsidiaries (including, without limitation, Tax Returns and
work papers of independent auditors), (ii) furnish to the
other party, its counsel, financial advisors, auditors and other
authorized Representatives such financial and operating data and
other information as such Persons may reasonably request
(including furnishing to the other party such granting
partys financial results in advance of filing any of the
Companys SEC Documents containing such financial results)
and (iii) instruct the employees, counsel, financial
advisors, auditors and other authorized Representatives of the
granting party and its subsidiaries to cooperate with the other
party in its investigation of the granting party and its
subsidiaries. Any investigation pursuant to this
Section 5.1(g)
shall be conducted in such manner as
not to interfere unreasonably with the conduct of the business
of the granting party and its subsidiaries. No information or
knowledge obtained by any party in any investigation pursuant to
this
Section 5.1(g)
shall affect or be deemed to
modify any representation or warranty made by the other party
hereunder. Notwithstanding the foregoing, neither the Company
nor Parent shall be required to afford such access if it would
unreasonably disrupt the operations of the
A-35
Company or any of its subsidiaries or of Parent or any of its
subsidiaries, would cause a violation of any agreement to which
the Company or any of its subsidiaries or Parent or any of its
subsidiaries is a party, would cause a risk, in the reasonable
judgment of the disclosing party, of a loss of privilege to the
disclosing party, or any of its subsidiaries or would constitute
a violation of any Applicable Law, nor shall the Company or
Parent or any of their respective Representatives be permitted
to perform any invasive onsite environmental procedure with
respect to any property of the Company or any of its
subsidiaries or Parent or any of its subsidiaries. Parent hereby
agrees that all information provided to it or its
Representatives in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be
deemed to be Evaluation Material, as such term is used in, and
shall be treated in accordance with, the Confidentiality
Agreement.
(h)
Takeover Statute.
If any fair
price, moratorium, control share
acquisition or other form of antitakeover statute or
regulation shall become applicable to the transactions
contemplated hereby, each of the Company and Parent and the
members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so
that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such
statute or regulation on the transactions contemplated hereby.
(i)
Control of Operations.
Nothing
contained in this Agreement shall give Parent, directly or
indirectly, the right to control or direct the Companys
operations prior to the Effective Time. Prior to the Effective
Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision
over its operations.
(j)
Notice of Certain Events.
From and
after the date of this Agreement until the Effective Time, each
party hereto shall reasonably promptly notify the other party
hereto of (i) the occurrence or non occurrence of any event
that, to the knowledge of such party, has caused (A) any
representation or warranty of such party contained in this
Agreement to be materially untrue or inaccurate as of the date
of this Agreement, (B) any condition to the obligations of
such party to effect the Transaction and the other transactions
contemplated by this Agreement to be incapable of being
satisfied on the Closing Date or (C) such partys
disclosure schedule in the form delivered on the date of this
Agreement to be inaccurate or incomplete in any material respect
as of the date of this Agreement, (ii) any notice or other
communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement, (iii) any material notice
or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement
or (iv) any Actions commenced after the date hereof or, to
its knowledge, threatened after the date hereof against,
relating to or involving or otherwise affecting any party or any
of their respective subsidiaries that relate to the consummation
of the transactions contemplated by this Agreement, including
the Transaction;
provided, however
, that the delivery of
any notice pursuant to this
Section 5.1(j)
shall not
cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement,
affect the satisfaction or non-satisfaction of any condition to
the Transaction set forth in this Agreement or otherwise limit
or affect the remedies available hereunder to the party
receiving such notice.
(k)
Tax-Free Qualification.
(i) Each of Parent, Merger Sub, Second Merger Sub and the
Company shall use their respective reasonable best efforts to,
and to cause each of its subsidiaries to, (A) cause the
Transaction to qualify as a reorganization within
the meaning of Section 368(a) of the Code and
(B) obtain the opinions of counsel referred to in
Sections 6.2(d)
and
6.3(d).
Each
of the Company, Parent, Merger Sub and Second Merger Sub shall
use their respective reasonable best efforts not to, and shall
use their reasonable best efforts not to permit any of their
respective subsidiaries to, take any action (including any
action otherwise permitted by this
Section 5.1(k)
)
that would prevent or impede the Transaction from qualifying as
a reorganization within the meaning of
Section 368(a) of the Code. Provided the opinion conditions
contained in
Sections 6.2(d)
and
6.3(d)
have
been satisfied, Parent shall file the opinions described in
Sections 6.2(d)
and
6.3(d)
with the
Commission by a post-effective amendment to the
Form S-4
promptly following the Closing.
(ii) Unless otherwise required pursuant to a
determination within the meaning of
Section 1313(a) of the Code, each of Parent, Merger Sub and
the Company shall report the Transaction for U.S. federal
income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
A-36
(l)
Tax Representation Letters.
The
Company shall use its reasonable best efforts to deliver to
Wachtell, Lipton, Rosen & Katz and Latham &
Watkins LLP a Tax Representation Letter, dated as of
the Closing Date and signed by an officer of the Company,
containing representations of the Company, and Parent shall use
its reasonable best efforts to deliver to Wachtell, Lipton,
Rosen & Katz and Latham & Watkins LLP a
Tax Representation Letter, dated as of the Closing
Date and signed by an officer of Parent, containing
representations of Parent, in each case as shall be reasonably
necessary or appropriate to enable Wachtell, Lipton,
Rosen & Katz to render the opinion described in
Section 6.3(d)
of this Agreement and
Latham & Watkins LLP to render the opinion described
in
Section 6.2(d)
of this Agreement.
5.2.
Covenants of Parent.
(a)
Conduct of Parents
Operations.
From the date of this Agreement until
the earlier of the Effective Time or the Termination Date, and
except (i) as may be required by Applicable Law,
(ii) as may be agreed in writing by the Company (which
consent shall not be unreasonably withheld, delayed or
conditioned), (iii) as may be expressly required or
permitted by this Agreement or (iv) as set forth on
Section 5.2(a)
of the Parent Disclosure Schedule,
Parent shall and shall cause each of its subsidiaries to conduct
its business and operate its properties in the ordinary course
of business consistent with past practice and Parent shall and
shall cause each of its subsidiaries to use its reasonable best
efforts to preserve intact its business organization and
relationships with third parties and to keep available the
services of its present key officers and key employees. Without
limiting the generality of the foregoing, except with the prior
written consent of the Company (which consent shall not be
unreasonably withheld, delayed or conditioned), as contemplated
by this Agreement or as set forth on
Section 5.2(a)
of the Parent Disclosure Schedule, from the date of this
Agreement until the earlier of the Effective Time or the
Termination Date, Parent shall not:
(i) do or effect any of the following actions with respect
to its securities or the securities of its subsidiaries:
(A) adjust, split, combine or reclassify Parents
capital stock or that of its subsidiaries, (B) except for
dividends or distributions among Parent and its direct or
indirect wholly owned subsidiaries or among Parents direct
or indirect wholly owned subsidiaries, make, declare or pay any
dividend or distribution on, or, directly or indirectly, redeem,
purchase or otherwise acquire, any shares of Parents
capital stock or that of its subsidiaries or any securities or
obligations convertible into or exchangeable for any shares of
Parents capital stock or that of its subsidiaries,
(C) issue, deliver, sell, pledge or encumber or agree to
issue, deliver, sell, pledge or encumber any shares of
Parents capital stock or any securities or obligations
convertible into or exchangeable or exercisable for any shares
of Parents capital stock or such securities or the capital
stock or such securities of its subsidiaries, other than
(i) grants of rights or options for Parents capital
stock for equity compensation purposes in the ordinary course of
business, (ii) issuances of shares of Parent Common Stock
in the ordinary course of business pursuant to employee stock
purchase plans in existence on the date of the Agreement,
(iii) issuances of shares of Parent Common Stock in respect
of any exercise of options to purchase Parent Common Stock and
settlement of any other stock-based award of Parent outstanding
on the date of this Agreement or as may be granted after the
date of this Agreement as permitted under this
Section 5.2(a)
, (iv) issuances of shares of
Parent Commons Stock in an aggregate amount not to exceed
$250,000,000 and (v) the sale of shares of Parent Common
Stock pursuant to the exercise of options to purchase Parent
Common Stock if necessary to effectuate an optionee direction
upon exercise or for withholding of Taxes, or (D) enter
into any agreement, understanding or arrangement with respect to
the sale, voting, registration or repurchase of Parents
capital stock or that of its subsidiaries;
(ii) except for transactions among Parent and its wholly
owned subsidiaries or among Parents wholly owned
subsidiaries, directly or indirectly, sell, transfer, lease,
pledge, mortgage, encumber or otherwise dispose of any of its
property or assets (including stock or other ownership interests
of its subsidiaries) (collectively,
Transfers
), other than (A) Transfers in
the ordinary course of business consistent with past practice,
and (B) Transfers of property
and/or
assets at not less than fair market value for consideration not
greater than $100,000,000 in the aggregate;
(iii) make or propose any material changes in Parents
Certificate or Parents Bylaws in a manner that adversely
affects the rights of holders of Parent Common Stock;
A-37
(iv) merge or consolidate with any other Person or adopt a
plan of complete or partial liquidation, dissolution,
recapitalization or other reorganization;
(v) except for transactions among Parent and its wholly
owned subsidiaries or among Parents wholly owned
subsidiaries and except in the ordinary course of business
consistent with past practice, acquire assets or capital stock
of any other Person, other than acquisitions at or below fair
market value for consideration not in excess of $250,000,000 in
the aggregate;
(vi) incur, create, assume or otherwise become liable for
any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise become responsible or liable for the
obligations of any other individual, corporation or other
entity, other than in the ordinary course of business consistent
with past practice and except for (v) any indebtedness for
borrowed money among Parent and its wholly owned subsidiaries or
among Parents wholly owned subsidiaries,
(w) indebtedness for borrowed money incurred to replace,
renew, extend, refinance or refund any existing indebtedness for
borrowed money, (x) guarantees by Parent of indebtedness
for borrowed money of subsidiaries of Parent, which indebtedness
is incurred in compliance with this
Section 5.2(a)(vi)
, (y) indebtedness for
borrowed money incurred pursuant to agreements in effect prior
to the execution of this Agreement (including the Financing
Commitments) and (z) indebtedness for borrowed money in
excess of $300,000,000 in the aggregate principal amount
outstanding at any time incurred by Parent or any of its
subsidiaries other than in accordance with clauses (v)
through (y), inclusive;
(vii) incur or commit to any capital expenditures in excess
of $100,000,000 in the aggregate;
(viii) take any action that would reasonably be expected to
result in any representation or warranty of Parent or Merger Sub
set forth in
Article III
becoming not true;
(ix) take, or knowingly omit to take, any action
(including, but not limited to, any acquisition or entering into
any business combination) which is intended to or which could
reasonably be expected to adversely affect the ability of any of
the parties hereto to perform its covenants and agreements under
this Agreement or otherwise prohibit or materially delay
consummation of the Transaction or other transactions
contemplated by this Agreement;
(x) permit or cause any of its subsidiaries to do any of
the foregoing or agree or commit to do any of the foregoing (it
being understood that (A) for purposes of
clauses (ii), (v), (vi) and (ix) of this
Section 5.2(a)
, the aggregate dollar thresholds
referred to therein shall be aggregate thresholds for conduct by
Parent and its subsidiaries taken as a whole and (B) the
actions referred to in clause (iv) of this
Section 5.2(a)
may be taken by its subsidiaries in
the ordinary course consistent with past practice); or
(xi) agree in writing or otherwise to take any of the
foregoing actions.
(b)
Indemnification; Directors and Officers
Insurance.
(i) Parent and Merger Sub agree that all rights to
exculpation, indemnification and advancement of expenses now
existing in favor of the current or former directors, officers
or employees, as the case may be, of the Company or its
subsidiaries as provided in their respective certificate of
incorporation or bylaws or other organization documents or in
any agreement shall survive the First Merger and the Second
Merger and shall continue in full force and effect. For six
(6) years from and after the Effective Time, to the fullest
extent permitted by Applicable Law, Parent and the Surviving
Corporation shall maintain in effect the exculpation,
indemnification and advancement of expenses provisions of the
Companys and any of its subsidiaries certificates of
incorporation and bylaws or similar organization documents in
effect immediately prior to the Effective Time or in any
indemnification agreements of the Company or its subsidiaries
with any of their respective directors, officers or employees in
effect immediately prior to the Effective Time, and shall not
amend, repeal or otherwise modify any such provisions in any
manner that would adversely affect the rights thereunder of any
individuals who at the Effective Time were current or former
directors, officers or employees of the Company or any of its
subsidiaries;
provided
,
however
, that all rights
to indemnification in respect of any Action pending or asserted
or any claim made within such period shall continue until the
disposition of such Action or resolution of such claim. From and
after the Effective Time, Parent shall assume, be jointly and
severally liable for, and honor, guaranty and stand surety for,
and shall cause the Surviving Corporation and its
A-38
subsidiaries to honor, in accordance with their respective
terms, each of the agreements contained in this
Section 5.2(b)(i)
without limit as to time.
(ii) The Surviving Corporation shall, and Parent shall
cause the Surviving Corporation (including providing funding),
to the fullest extent permitted under Applicable Law, indemnify
and hold harmless (and advance funds in respect of each of the
foregoing) each current and former director or officer of the
Company or any of its subsidiaries and each such Person who
served as a director, officer, member, trustee or fiduciary of
another corporation, partnership, joint venture, trust, pension
or other employee benefit plan or enterprise at the request of
the Company (each, together with such Persons heirs,
executors or administrators, an
Indemnified
Party
) against any costs or expenses (including
advancing attorneys fees and expenses in advance of the
final disposition of any Action to each Indemnified Party to the
fullest extent permitted by law), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened Action, arising out of,
relating to or in connection with any action or omission
occurring or alleged to have occurred whether before or after
the Effective Time related to the fact that such Person was a
director or officer of the Company or any of its subsidiaries or
anything done or not done by such Person in such capacity
(including acts or omissions in connection with such Persons
serving as an officer, director or other fiduciary in any entity
if such service was at the request or for the benefit of the
Company). In the event of any such Action, Parent and the
Surviving Corporation shall cooperate with the Indemnified Party
in the defense of any such Action. Neither Parent nor the
Surviving Corporation shall settle any such Action without the
prior written consent of the Indemnified Party unless the
Surviving Corporation assumes full responsibility for such
settlement, the settlement grants the Indemnified Party a
complete release in respect of the potential liability relating
to the claims underlying such Action and the terms of such
settlement are not in any way detrimental to the Indemnified
Party and such settlement does not contain any admission
detrimental to the Indemnified Party. The Indemnified Party
shall not settle any such Action without the prior written
consent of Parent or the Surviving Corporation (which shall not
be unreasonably withheld, delayed or conditioned) unless such
settlement does not provide for monetary damages, the terms of
such settlement are not in any way detrimental to Parent or the
Surviving Corporation and such settlement does not contain any
admission detrimental to Parent or the Surviving Corporation. In
the event of any payment under this
Section 5.2(b)(ii)
, the Surviving Corporation shall
be subrogated to the extent of such payment to all rights of
recovery of the Indemnified Party with respect to any insurance
covering any such liability (including the insurance set forth
in
Section 5.2(b)(iii)
).
(iii) Parent shall, or shall cause the Surviving
Corporation to obtain and maintain in effect, for a period of
six (6) years after the Effective Time, the existing
policies of directors and officers liability
insurance and fiduciary liability insurance on behalf of the
former officers and directors of the Company currently covered
by the Companys directors and officers
liability insurance policy with respect to acts or omissions
occurring prior to the Effective Time or such policies with
substantially the same coverage and containing substantially
similar terms and conditions as existing policies;
provided,
however
, that if the aggregate annual premiums for such
insurance at any time during such period shall exceed 250% of
the per annum rate of premium paid by the Company and its
subsidiaries as of the date of this Agreement for such
insurance, then Parent shall or shall cause its subsidiaries to,
provide only such coverage as shall then be available at an
annual premium equal to 250% of such rate.
(iv) Parent shall pay all reasonable expenses, including
reasonable attorneys fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other
obligations provided in this
Section 5.2(b).
(v) The rights of each Indemnified Party hereunder shall be
in addition to, and not in limitation of, any other rights such
Indemnified Party may have under the certificate of
incorporation or bylaws or other organization documents of the
Company or any of its subsidiaries or the Surviving Corporation,
any other indemnification arrangement, the DGCL or otherwise.
The provisions of this
Section 5.2(b)
shall survive
the consummation of the Transaction and expressly are intended
to benefit, and are enforceable by, each of the Indemnified
Parties.
(vi) In the event Parent, the Surviving Corporation or any
of their respective successors or assigns (x) consolidates
with or merges into any other Person and shall not be the
continuing or surviving corporation
A-39
or entity in such consolidation or merger or (y) Transfers
all or substantially all of its properties and assets to any
Person, then, and in either such case, proper provision shall be
made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the
obligations set forth in this
Section 5.2(b).
(c)
Parent Acquisition Proposals.
(i) Subject to
Sections 5.2(c)(ii)
through
5.2(c)(v)
, Parent agrees that neither it nor any of its
subsidiaries shall, and that it shall use its reasonable best
efforts to cause its and its subsidiaries employees,
agents and representatives (including any investment banker,
attorney or accountant (
Representatives
)
retained by it or any of its subsidiaries) not to, directly or
indirectly, (A) initiate, solicit or knowingly encourage
any inquiries with respect to, or the making of, a Parent
Acquisition Proposal, (B) engage in any negotiations
concerning, or provide any confidential information or data to
any Person relating to a Parent Acquisition Proposal,
(C) approve or recommend or propose publicly to approve or
recommend, any Parent Acquisition Proposal or (D) approve
or recommend, or propose to approve or recommend, or execute or
enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other
similar agreement relating to any Parent Acquisition Proposal or
propose publicly or agree to do any of the foregoing relating to
any Parent Acquisition Proposal.
(ii) Nothing contained in this Agreement shall prevent
Parent or Parents Board from complying with its disclosure
obligations under
Sections 14d-9
and
14e-2
of
the Exchange Act;
provided, however,
that if such
disclosure has the effect of withdrawing, modifying or
qualifying the approval of this Agreement by Parents Board
or the Parent Board Recommendation in a manner adverse to the
Company or the approval of this Agreement by the Parents
Stockholders, the Company shall have the right to terminate this
Agreement to the extent set forth in
Section 7.3(c).
(iii) Notwithstanding the limitations set forth in
Section 5.2(c)(i)
, until the earlier of receipt of
the Parent Stockholder Approval and the Termination Date, if
Parent receives a Parent Acquisition Proposal which
(A) constitutes a Parent Superior Proposal, or
(B) which the Board of Parent determines in good faith
could reasonably be expected to result in a Parent Superior
Proposal, Parent may take the following actions:
(x) furnish nonpublic information to the third party making
such Parent Acquisition Proposal, if, and only if, prior to so
furnishing such information, Parent receives from the third
party an executed confidentiality agreement with confidentiality
provisions no less favorable to Parent than the letter
agreement, dated as of February 14, 2007, between the
Company and Parent and the letter agreement, dated as of
April 13, 2007, between the Company and Parent and
(y) engage in discussions or negotiations with the third
party with respect to the Parent Acquisition Proposal.
(iv) Notwithstanding anything in this Agreement to the
contrary, nothing contained in this Agreement shall prevent
Parent or Parents Board from, at any time prior, but not
after, the time the Stock Issuance is approved by Parents
Stockholders at the Parent Stockholder Meeting, recommending
such an unsolicited bona fide written Parent Acquisition
Proposal to Parents Stockholders, if and only to the
extent that, (A) the Board of Parent determines in good
faith, after consultation with its outside legal counsel, that
failing to do so could reasonably be expected to constitute a
breach of the Board of the Parents fiduciary duties under
Applicable Law; and (B) Parents Board determines in
good faith that such Parent Acquisition Proposal (in the form,
other than immaterial changes, that was the subject of the
Parent Superior Proposal Notice, as defined below)
constitutes a Parent Superior Proposal and the Company shall
have received written notice (the
Parent Superior
Proposal Notice
) of Parents intention to
take such action at least four business days prior to the taking
of such action by Parent and has complied with its other
obligations under this
Section 5.2(c)(iv)
;
provided
,
however
, that Parents Board
continues to believe, after taking into account any
modifications to the terms of the transaction contemplated by
this Agreement that are proposed by the Company after its
receipt of the Parent Superior Proposal Notice that such
Parent Acquisition Proposal constitutes a Parent Superior
Proposal. If there is a Parent Change of Recommendation as a
result of a Parent Acquisition Proposal that is a Parent
Superior Proposal and Parents Board recommends such an
unsolicited bona fide written Parent Acquisition Proposal
pursuant to this clause (iv), Parent shall be entitled to
terminate this Agreement pursuant to
Section 7.4(b).
A-40
(v) Parent agrees that it will immediately cease and cause
to be terminated any existing activities, discussions or
negotiations with any Person (other than the parties hereto)
conducted heretofore with respect to any Parent Acquisition
Proposal. Parent agrees that it will take the necessary steps to
promptly inform the officers, directors, employees and
Representatives of Parent and its subsidiaries of the
obligations undertaken in this
Section 5.2(c).
(vi) From and after the date of this Agreement, Parent
shall promptly orally notify the Company of any request for
information or any inquiries, proposals or offers relating to a
Parent Acquisition Proposal indicating, in connection with such
notice, the name of such Person making such request, inquiry,
proposal or offer and the material terms and conditions of any
proposals or offers and Parent shall provide to the Company
written notice of any such inquiry, proposal or offer within
forty-eight (48) hours of such event and copies of any
written or electronic correspondence to or from any Person
making a Parent Acquisition Proposal. Parent shall keep the
Company informed orally on a current basis of the status of any
Parent Acquisition Proposal, including with respect to the
status and terms of any such proposal or offer and whether any
such proposal or offer has been withdrawn or rejected and Parent
shall provide to the Company written notice of any such
developments (including copies of any written proposals or
requests for information) within forty-eight (48) hours.
Parent also agrees to provide any information to the Company
(not previously provided to the Company) that it is providing to
another Person pursuant to this
Section 5.2(c)(vii)
at substantially the same time it provides such information to
such other Person.
(vii) For purposes of this Agreement:
(A)
Parent Acquisition Proposal
means any proposal or offer with respect to (1) a merger,
reorganization, share exchange, consolidation, business
combination, recapitalization, dissolution, liquidation or
similar transaction involving Parent, (2) any purchase of
an equity interest (including by means of a tender or exchange
offer) representing an amount equal to or greater than a 15%
voting or economic interest in Parent, or (3) any purchase
of assets, securities or ownership interests representing an
amount equal to or greater than 15% of the consolidated assets
of Parent and its subsidiaries taken as a whole (including stock
of the subsidiaries of Parent), consolidated net revenues or
earnings before interest, Taxes, depreciation and amortization.
(B)
Parent Superior Proposal
means a bona fide written Parent Acquisition Proposal (except
that references in the definition of the Parent
Acquisition Proposal to 15% shall be replaced by 50%) made
by any Person other than a party hereto on terms that the Board
of Parent determines in good faith, after consultation with
Parents financial and legal advisors, and considering such
factors as the Board of Parent considers to be appropriate
(including the timing and likelihood of consummation of such
proposal), are more favorable to Parent and its stockholders
than the transactions contemplated by this Agreement.
(d)
Employees and Employee Benefits.
(i) From and after the Effective Time, Parent will cause
the Surviving Corporation to honor the obligations of the
Company and any of its subsidiaries as of the Effective Time
under the terms of all Company Benefit Plans and Company Foreign
Plans listed on
Section 4.14(b)
of the Company
Disclosure Schedule,
provided
that this provision shall
not prevent the First Surviving Corporation from amending,
suspending or terminating any such Plans to the extent permitted
by the applicable terms of such Company Benefit Plan and Company
Foreign Plan.
(ii) Until December 31, 2008, Parent shall provide or
shall cause to be provided to each Company Employee compensation
and benefits that are, in the aggregate, substantially similar
to the compensation and benefits provided to such Company
Employee as of immediately prior to the Effective Time. For
purposes of this
Section 5.2(d)
, the term
Company Employees
means individuals who are,
as of the Effective Time, employees of the Company and its
subsidiaries not subject to collective bargaining agreements and
who following the Effective Time continue such employment with
the Company, Parent or their respective subsidiaries.
A-41
(iii) For all purposes (including purposes of vesting,
eligibility to participate and level of benefits) under the
employee plans and benefit arrangements of Parent and its
subsidiaries in which any Company Employee participates on or
after the Effective Time (
New Plans
), Parent
shall (A) use reasonable best efforts to waive all
pre-existing condition exclusions, actively at work requirements
and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees and their
covered dependents under any such New Plans, except to the
extent such conditions would have been recognized under the
corresponding Company Benefit Plan or Company Foreign Plan,
(B) recognize service of the Company Employees which was
credited under corresponding Company Benefit Plans or Company
Foreign Plans as of immediately prior to the Effective Time for
purposes of eligibility, vesting and benefit accruals under the
New Plans (but not (1) for purposes of benefit accrual
under any defined benefit or pension plan, (2) to the
extent such credited service would result in a duplication of
benefits with respect to the same period of service or
(3) under any newly established New Plan for which
similarly situated employees of Parent and its subsidiaries are
not provided with credit for past service), and (C) credit
any deductibles, co-payments or other
out-of-pocket
expenses incurred by a Company Employee or his or her covered
dependents during the portion of the plan year of the Company
Benefit Plan or Company Foreign Plan ending on the date such
employees participation in the corresponding New Plan
begins to be recognized under such New Plan for purposes of
satisfying all deductible, coinsurance and maximum
out-of-pocket
requirements applicable to such Company Employee and his or her
covered dependents for the applicable plan year as if such
amounts had been paid in accordance with such New Plan. Nothing
contained in this Agreement shall restrict the ability of Parent
and its affiliates to terminate the employment of any Company
Employee for any reason at any time after the Effective Time.
(iv) For a period of two (2) years following the
Effective Time, Parent agrees to continue or cause the Surviving
Corporation to continue the Companys retiree welfare
programs, including medical prescription drugs and retiree life
insurance program (the
Company Retiree Welfare
Programs
) on terms and conditions no less favorable in
duration, scope, value, participant cost, vesting and otherwise
than those in effect as of the Effective Time with respect to
all Company Employees who (x) as of the time immediately
prior to the Effective Time are receiving benefits under the
Company Retiree Welfare Programs or (y) as of the time
immediately prior to the Effective Time would be eligible to
receive benefits under the Company Retiree Welfare Programs as
of immediately prior to the Effective Time;
provided
,
however
, that in connection with the foregoing
commitment, Parent shall not be required to incur costs in
excess of the accrued benefit cost with respect to such Company
Welfare Programs reflected in Note 8 to the Companys
Consolidated Financial Statements included in the Companys
Form 10-K
for the fiscal year ended December 29, 2006.
(v) Unless earlier required pursuant to any Company Benefit
Plan or Company Foreign Plan (in which case the payment
contemplated hereby shall be made at such earlier time), no
later than March 15, 2008, Parent shall, or shall cause the
Company or the Surviving Corporation, to pay each Company
Employee employed by Parent, the Company or one of their
subsidiaries as of the Effective Time and on December 31,
2007 and participating as of the Effective Time in any Company
Benefit Plan or Company Foreign Plan that is an annual incentive
plan (an
Incentive Plan
) (unless following
the Effective Time and prior to December 31, 2007 such
Company Employee, dies, becomes Disabled (as defined below), is
involuntarily terminated by Parent, the Company or one of their
subsidiaries, other than for cause, or retires after
(x) reaching age 65, (y) reaching age 55
with ten years or more of service, or (z) after
30 years of service, in which case the Company Employee or
his or her estate shall be entitled to the payment provided in
this
Section 5.2(d)(v)
whether or not he or she is
employed by Parent, the Company or one of their subsidiaries as
of December 31, 2007), a payment equal to the greater of
the following amounts: (A) the product of (1) the
Company Employees full-year incentive entitlement under
all such Incentive Plans based on actual performance levels as
of the Effective Date, determined in good faith, consistent with
the Companys past practice and based on applicable metrics
under the Incentive Plans and (2) a fraction, the numerator
of which shall equal the number of days in the calendar year
through the first to occur of the Effective Date and
December 31, 2007 and the denominator of which is 365, and
(B) the Company Employees full-year incentive
entitlement under all such Incentive Plans based on actual
performance levels for the full plan year ending as of
December 31, 2007, determined in good faith, consistent
with the Companys past practice and based on applicable
metrics under the Incentive Plans. Notwithstanding the
foregoing, if any Company Benefit Plan or Company Foreign Plan
provides for a greater
A-42
or earlier payment than the payments contemplated by this
Section 5.2(d)(v)
, then such Company Benefit Plan or
Company Foreign Plan shall govern the applicable payment, rather
than this
Section 5.2(d)(v)
; it being understood
that Parent shall honor and shall cause the Company to honor,
without amendment, the severance arrangements set forth on
Section 5.2(d)(v)
of the Company Disclosure
Schedule. For purposes of this
Section 5.2(d)(v)
, a
Company Employee shall be deemed
Disabled
if
(x) the Company Employee is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous
period of not less than 12 months or (y) the Company
Employee is, by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can
be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a
period of not less than three months under an accident and
health plan covering employees of the Parent, the Company or one
of their subsidiaries. For the avoidance of doubt, nothing
contained in this
Section 5.2(d)(v)
shall result in
the duplication of any Incentive Plan payment with respect to
any Company Employee.
(vi) Notwithstanding the foregoing, nothing contained in
this Agreement, whether express or implied, shall be treated as
an amendment or other modification of any Company Benefit Plan
or Company Foreign Plan, or shall limit the right of the
Surviving Corporation to amend, terminate or otherwise modify
any Company Benefit Plan or Company Foreign Plan in accordance
with its terms following the Closing Date;
provided
,
however
, that this
Section 5.2(d)(vi)
shall
not affect Parents obligations set forth in
Section 5.2(d)(v).
In the event that (A) a
party other than Parent, Merger Sub or the Company or any of
their respective subsidiaries makes a claim or takes other
action to enforce any provision in this Agreement as an
amendment to any Company Benefit Plan or Company Foreign Plan,
and (B) such provision is deemed to be an amendment to such
Company Benefit Plan or Company Foreign Plan even though not
explicitly designated as such in this Agreement, then such
provision shall lapse retroactively and shall have no amendatory
effect.
(vii) Parent, Merger Sub and the Company acknowledge and
agree that all provisions contained in this
Section 5.2(d)
with respect to employees are
included for the sole benefit of Parent, Merger Sub and the
Company, and that nothing in this Agreement, whether express or
implied, shall create any third party beneficiary or other
rights (A) in any other Person, including, without
limitation, any director, officer or employee of the Company,
Parent, the Surviving Corporation or any of their respective
affiliates, any former employees, any participant in any Company
Plan, or any dependent or beneficiary thereof, or (B) to
continued employment with Parent, the Surviving Corporation, or
any of their respective affiliates.
(e)
Form S-4.
Subject
to the terms and conditions of this Agreement, Parent shall
prepare and file with the Commission under the Securities Act
the
Form S-4,
and shall use its reasonable best efforts to cause the
Form S-4
to be declared effective by the Commission a sufficient time
prior to the time of the Company Stockholder Meeting to allow
the Company and Parent to mail the Joint Proxy
Statement/Prospectus to their respective stockholders, as
required by the rules and regulations of the Commission, prior
to the Company Stockholder Meeting and the Parent Stockholder
Meeting, as applicable.
(f)
Stock Exchange Listing.
Parent shall
use its reasonable best efforts to cause the shares of Parent
Common Stock to be issued in connection with the First Merger to
be listed on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
(g)
The Parent Stockholder Meeting; The Parents
Board Recommendation.
Parent shall, as promptly
as practicable after the
Form S-4
is declared effective under the Securities Act, duly call, give
notice of, convene and hold the Parent Stockholder Meeting.
Parents Board shall take all lawful action to solicit the
approval of the issuance of shares of Parent Common Stock in the
First Merger by Parents Stockholders, and Parents
Board shall make the Parent Board Recommendation. Subject to
this
Section 5.2(g)
, the Parent Board Recommendation
shall be included in the Joint Proxy Statement/Prospectus and
Parents Board shall take all lawful action to solicit the
approval of the issuance of shares of Parent Common Stock in the
First Merger by Parents Stockholders. In the event that
subsequent to the date of this Agreement, Parents Board
determines in good faith after consultation with outside counsel
that failing to do so could reasonably be expected to constitute
a breach of Parents Boards fiduciary duties under
Applicable Law, Parents Board may withdraw, modify or
qualify the Parent Board Recommendation (
Parent Change
of Recommendation
);
provided
,
however
,
that Parents Board may not
A-43
recommend any Parent Acquisition Proposal (other than this
Agreement and the transactions contemplated hereby, including
the Transaction), except as specifically contemplated by, and in
accordance with,
Section 5.2(c)(iv)
;
provided
,
further
,
however
, that unless
this Agreement is theretofore validly terminated, Parent shall
nevertheless submit this Agreement to Parents Stockholders
for adoption at the Parent Stockholder Meeting. Parent shall use
its reasonable best efforts to hold the Parent Stockholder
Meeting as soon as practicable after the
Form S-4
becomes effective and to obtain Parent Stockholder Approval.
Parent shall otherwise coordinate and cooperate with the Company
with respect to the timing of the Parent Stockholder Meeting and
will otherwise comply with all legal requirements applicable to
the Parent Stockholder Meeting. Notwithstanding anything to the
contrary contained in this Agreement, Parent may adjourn or
postpone the Parent Stockholder Meeting to the extent necessary
to ensure that any necessary supplement or amendment to the
Joint Proxy Statement/Prospectus is provided to its stockholders
in advance of the vote to be held at the Parent Stockholder
Meeting or, if as of the time for which the Parent Stockholder
Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/ Prospectus) there are insufficient shares of Parent
Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the
Parent Stockholder Meeting.
(h)
Parents Board.
Parent shall
take all such action as may be necessary to cause the number of
directors comprising Parents Board at the Effective Time
to be sufficient to permit one director of the Company, who, as
of the date of this Agreement, is a director of the Company and
who shall be chosen by Parent in its sole discretion prior to
the Effective Time, to serve as a director of Parent;
provided
,
however
, that such candidate shall be
considered, qualified and approved in accordance with the
current procedures of Parents nominating committee or
other applicable governing standards of Parents Board, and
such process shall be completed by Parent prior to the Effective
Time.
(i)
Financing.
Each of Parent and Merger
Sub shall use its reasonable best efforts to obtain the
Financing on the terms and conditions described in the Financing
Commitments, including using its reasonable best efforts
(i) to negotiate definitive agreements with respect thereto
on the terms and conditions contained in the Financing
Commitments, (ii) to satisfy all conditions applicable to
Parent in such definitive agreements, (iii) to comply with
its obligations under the Financing Commitments and (iv) to
enforce its rights under the Financing Commitments. Parent shall
give the Company prompt notice upon becoming aware of any
material breach by any party of the Financing Commitments or any
termination of the Financing Commitments. Parent shall keep the
Company informed on a reasonable basis and in reasonable detail
of the status of its efforts to arrange the Financing and shall
not permit any amendment or modification to be made to, or any
waiver of any material provision or remedy under, the Financing
Commitments if such amendment, modification, waiver or remedy
reduces the aggregate amount of the Financing (other than
immaterial reductions), amends the conditions to the drawdown of
the Financing in an adverse manner or is adverse to the
interests of the Company in any other respect. In the event that
Parent becomes aware of any event or circumstance that makes
procurement of any portion of the Financing unlikely to occur in
the manner or from the sources contemplated in the Financing
Commitments, Parent shall immediately notify the Company and
Parent and Merger Sub shall use their respective reasonable best
efforts to arrange any such portion from alternative sources.
(j)
Third-Party Standstill
Agreements.
During the period from the date of
this Agreement until the earlier of the Effective Time and the
Termination Date: (i) Parent shall not (and shall not agree
to, and shall not permit any of its subsidiaries to or to agree
to) terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of
its subsidiaries is a party (other than any involving the
Company or its subsidiaries and confidentiality agreements
pertaining solely to ordinary course commercial matters); and
(ii) Parent shall enforce, to the fullest extent permitted
under Applicable Law, the provisions of any such agreements,
including obtaining injunctions to prevent any breaches of such
confidentiality or standstill agreements and enforcing
specifically the terms and provisions thereof in any court of
the United States or any state thereof having jurisdiction.
5.3.
Covenants of the Company.
(a)
Conduct of the Companys
Operations.
From the date of this Agreement until
the earlier of the Effective Time or the Termination Date, and
except (i) as may be required by Applicable Law,
(ii) as may be agreed in writing by Parent (which consent
shall not be unreasonably withheld, delayed or conditioned),
(iii) as may be expressly
A-44
required or permitted by this Agreement or (iv) as set
forth on
Section 5.3(a)
of the Company Disclosure
Schedule, the Company shall and shall cause each of its
subsidiaries to conduct its business and operate its properties
in the ordinary course of business consistent with past practice
and the Company shall and shall cause each of its subsidiaries
to use its reasonable best efforts to preserve intact its
business organization and relationships with third parties and
to keep available the services of its present key officers and
key employees. Without limiting the generality of the foregoing,
except with the prior written consent of Parent (which consent
shall not be unreasonably withheld, delayed or conditioned), as
contemplated by this Agreement or as set forth on
Section 5.3(a)
of the Company Disclosure Schedule,
from the date of this Agreement until the earlier of the
Effective Time or the Termination Date, the Company shall not:
(i) do or effect any of the following actions with respect
to its securities or the securities of its subsidiaries:
(A) adjust, split, combine or reclassify the Companys
capital stock or that of its subsidiaries, (B) except for
dividends or distributions among the Company and its direct or
indirect wholly owned subsidiaries or among the Companys
direct or indirect wholly owned subsidiaries, make, declare or
pay any dividend or distribution on, or, directly or indirectly,
redeem, purchase or otherwise acquire, any shares of the
Companys capital stock or that of its subsidiaries or any
securities or obligations convertible into or exchangeable for
any shares of the Companys capital stock or that of its
subsidiaries, (C) grant any Person any right or option to
acquire any shares of the Companys capital stock or that
of its subsidiaries or any other equity-based compensation award
based on shares of the Companys capital stock or that of
its subsidiaries, other than the grant of up to an aggregate of
25,000 Company Options and the grant of up to an aggregate of
10,000 Restricted Shares in the ordinary course of business
consistent with past practice in accordance with the
Companys customary schedule, including customary new hire
and promotion grants, (D) issue, deliver, sell, pledge or
encumber or agree to issue, deliver, sell, pledge or encumber
any shares of the Companys capital stock or any securities
or obligations convertible into or exchangeable or exercisable
for any shares of the Companys capital stock or such
securities or the capital stock or such securities of its
subsidiaries, other than (i) as contemplated by
clause (C), (ii) issuances of shares of Company Common
Stock in the ordinary course of business pursuant to employee
stock purchase plans in existence on the date of the Agreement,
(iii) issuances of shares of Company Common Stock in
respect of any exercise of Company Options and settlement of any
other stock-based award of the Company outstanding on the date
of this Agreement or as may be granted after the date of this
Agreement as permitted under this
Section 5.3(a)
and
(iv) the sale of shares of Company Common Stock pursuant to
the exercise of Company Options if necessary to effectuate an
optionee direction upon exercise or for withholding of Taxes, or
(E) enter into any agreement, understanding or arrangement
with respect to the sale, voting, registration or repurchase of
the Companys capital stock or that of its subsidiaries;
(ii) except for transactions among the Company and its
wholly owned subsidiaries or among the Companys wholly
owned subsidiaries, directly or indirectly, sell, transfer,
lease, pledge, mortgage, encumber or otherwise dispose of any of
its property or assets (including stock or other ownership
interests of its subsidiaries and including transfers of project
equipment) (collectively,
Company Transfers
),
other than (A) Company Transfers in the ordinary course of
business consistent with past practice, and (B) Company
Transfers of property
and/or
assets at not less than fair market value for consideration not
greater than $10,000,000 individually and $20,000,000 in the
aggregate;
(iii) make or propose any material changes in the
Companys Certificate or the Companys Bylaws or the
organizational documents of any subsidiary;
(iv) merge or consolidate with any other Person or adopt a
plan of complete or partial liquidation, dissolution,
recapitalization or other reorganization;
(v) except for transactions among the Company and its
wholly owned subsidiaries or among the Companys wholly
owned subsidiaries and except in the ordinary course of business
consistent with past practice, acquire assets or capital stock
of any other Person, other than acquisitions at or below fair
market value for consideration not in excess of $10,000,000
individually or $50,000,000 in the aggregate;
(vi) incur, create, assume or otherwise become liable for
any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise become responsible or liable for the
obligations of any other individual, corporation or other
entity, other than in the ordinary course of business consistent
with past
A-45
practice and except for (u) any performance guarantees by
the Company of the obligations of the Companys
subsidiaries or joint ventures, (v) any indebtedness for
borrowed money among the Company and its wholly owned
subsidiaries or among the Companys wholly owned
subsidiaries, (w) indebtedness for borrowed money incurred
to replace, renew, extend, refinance or refund any existing
indebtedness for borrowed money, (x) guarantees by the
Company of indebtedness for borrowed money of subsidiaries of
the Company, which indebtedness is incurred in compliance with
this
Section 5.3(a)(vi)
, (y) indebtedness for
borrowed money incurred pursuant to agreements in effect prior
to the execution of this Agreement and (z) indebtedness for
borrowed money in excess of $25,000,000 individually or
$50,000,000 in the aggregate principal amount outstanding at any
time incurred by the Company or any of its subsidiaries other
than in accordance with clauses (v) through (y), inclusive;
(vii) except for transactions in the ordinary course of
business consistent with past practice, among the Company and
its wholly owned subsidiaries or among the Companys wholly
owned subsidiaries, create any subsidiaries or alter through
merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any of its
existing subsidiaries;
(viii) (A) establish, or increase compensation or
benefits provided under, any stay bonus, incentive, insurance,
severance, termination, change of control, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting or repricing of
stock options, stock appreciation rights, performance awards,
restricted stock awards or similar instruments), stock purchase
or other employee benefit plan, program, policy, or agreement or
arrangement, except (1) for increases to base salary at
times, in amounts and otherwise in the ordinary course of
business consistent with past practices for employees of the
Company and its subsidiaries who are not officers of the
Company, (2) severance agreements entered into in the
ordinary course of business in connection with terminations of
employment with employees of the Company and its subsidiaries
who are not executive officers of the Company and (3) the
issuance of up to 75,000 Performance Units in the ordinary
course of business consistent with past practice in accordance
with the Companys customary schedule, including customary
new hire and promotion grants, (B) otherwise increase or
accelerate the vesting or payment of the compensation payable or
the benefits (including equity awards) provided or to become
payable or provided to any of its current or former directors,
officers, employees, consultants or service providers or those
of any of its subsidiaries, or otherwise pay any amounts not
required to be paid to such individual, (C) (1) enter
into any new or amend any existing employment or consulting
agreement with any executive officer or director of the Company
or (2) enter into any new or amend any existing employment
or consulting agreement with any director, officer, employee,
consultant or service provider of the Company or any of its
subsidiaries or hire or retain the services of any such
director, officer, employee, consultant or service provider if
the compensation (base and bonus) of such newly hired or
retained Person shall exceed $375,000 per year in the case
of any director, officer, employee or service provider or
$500,000 per year in the case of any consultant,
(D) establish, adopt, amend or enter into any collective
bargaining agreement, (E) provide any funding for any rabbi
trust or similar arrangement or (F) except as may be
required by GAAP, materially change any actuarial assumptions
with respect to any Company pension plan, except in the case of
each of clauses (A), (B), (D), and (E) as may be
required to comply with Applicable Law, any Company Benefit
Plans or Company Foreign Plans or existing contractual
arrangements;
provided
that the Company may amend its
broad-based severance plans to provide that in the event the
Company terminates the employment of any Company Employee on or
before the first anniversary of the Effective Time because the
Company Employees position has been eliminated as a result
of the Transaction, the Company Employee shall be paid a
severance benefit equal to the greater of (1) two weeks of
base salary for each year of service, up to a maximum of
fifty-two weeks of base salary and (2) six months
base salary and target short-term incentive, with each of the
amounts in (1) and (2) reduced by the amount of any
severance benefits or payments in lieu of notice required to be
paid to the Company Employee pursuant to any Applicable Law, and
conditioned upon the Company Employees delivery and
non-revocation of a general release of the Company;
(ix) enter into, adopt or amend in any manner which would
increase costs or benefits thereunder, any Company Benefit Plan
or Company Foreign Plan (or any new arrangement that would
constitute a Company Benefit Plan or Company Foreign Plan),
except as shall be required by Applicable Laws or existing
contractual arrangements;
A-46
(x) take any action outside of the ordinary course of
business consistent with past practice that could give rise to
severance benefits as a result of consummation of any of the
Transactions payable to (A) any material group of employees
or (B) any officer, director or employee of the Company or
any of its subsidiaries that earns in excess of
$375,000 per year;
provided
,
however
, that
this clause (x) shall not limit the Companys
right to pay severance in accordance with Company Benefit Plans
and Company Foreign Plans;
provided
,
further
,
however
, that nothing contained in this
clause (x) shall permit the Company to amend any
Company Benefit Plan or Company Foreign Plan to increase
severance payments payable thereunder, except as otherwise
permitted pursuant to the terms of this Agreement;
(xi) change any method or principle of financial
accounting, except to the extent required by Applicable Law,
Commission rule or policy, or by GAAP as advised by the
Companys regular independent accountants;
(xii) except as in the ordinary course consistent with past
practice, enter into any new noncompete, exclusivity or similar
agreement that would restrict or limit, in any material respect,
the operations of the Company or its subsidiaries, or, after the
Effective Time, Parent or its subsidiaries;
(xiii) settle or compromise any material Actions (for the
absence of doubt, other than Actions relating to Taxes), whether
now pending or hereafter made or brought, or waive, release or
assign any material rights or claims in an amount greater than
$25,000,000 individually or $50,000,000 in the aggregate;
(xiv) (A) enter into any fixed-price contract expected
to generate revenues in excess of $50,000,000 over the life of
the contract or (B) modify, amend or terminate, or waive,
release or assign any material rights or claims with respect to,
any Company Material Contract or any contract listed on
Section 4.23(a)
or
(b)
of the Company
Disclosure Schedule;
(xv) renew, enter into, amend or waive any material right
under any contract with or loan to any affiliate of the Company
(other than its direct or indirect wholly owned subsidiaries);
(xvi) incur or commit to any corporate capital expenditures
in excess of $10,000,000 individually or $20,000,000 in the
aggregate;
(xvii) take any action that would reasonably be expected to
result in any representation or warranty of the Company set
forth in
Article IV
becoming not true;
(xviii) except, in each case, as would not result in an
increase of $25,000,000 individually or $50,000,000 in the
aggregate of Taxes of the Company (plus any amount reserved
therefor) make, revoke or amend any Tax election (except as
is in the ordinary course of business or consistent with past
practice), enter into any closing agreement, settle or
compromise any claim or assessment with respect to Taxes, file
an amended Tax return, surrender a claim for a refund of Taxes
or (except as is in the ordinary course of business or
consistent with past practice) consent to any extension or
waiver of the statute of limitations period applicable to any
Tax claim or assessment;
(xix) take, or knowingly omit to take, any action
(including but not limited to any acquisition or entering into
any business combination) which is intended to or which could
reasonably be expected to adversely affect the ability of any of
the parties hereto to perform its covenants and agreements under
this Agreement or otherwise prohibit or materially delay
consummation of the Transaction or other transactions
contemplated by this Agreement;
(xx) permit or cause any of its subsidiaries to do any of
the foregoing or agree or commit to do any of the foregoing (it
being understood that for purposes of clauses (ii), (v),
(vi) and (xvi) of this
Section 5.3(a)
, the
aggregate dollar thresholds referred to therein shall be
aggregate thresholds for conduct by the Company and its
subsidiaries taken as a whole); or
(xxi) agree in writing or otherwise to take any of the
foregoing actions.
(b)
The Company Stockholder Meeting; The Companys
Board Recommendation.
The Company shall, as
promptly as practicable after the
Form S-4
is declared effective under the Securities Act, duly call, give
notice of, convene and hold the Company Stockholder Meeting, and
the Companys Board shall make the Company Board
Recommendation. Subject to this
Section 5.3(b)
, the
Company Board Recommendation shall be included in the
A-47
Joint Proxy Statement/Prospectus and the Companys Board
shall take all lawful action to solicit the approval of this
Agreement and the First Merger by the Companys
Stockholders. In the event that subsequent to the date of this
Agreement, the Companys Board determines in good faith
after consultation with outside counsel that failing to do so
could reasonably be expected to constitute a breach of the
Company Boards fiduciary duties under Applicable Law, the
Companys Board may withdraw, modify or qualify the Company
Board Recommendation (
Company Change of
Recommendation
);
provided
,
however
, that
the Companys Board may not recommend any Company
Acquisition Proposal (other than this Agreement and the
transactions contemplated hereby, including the Transaction),
except as specifically contemplated by, and in accordance with,
Section 5.3(c)(iv)
;
provided
,
further
,
however
, that unless this Agreement is theretofore
validly terminated, the Company shall nevertheless submit this
Agreement to the Companys Stockholders for adoption at the
Company Stockholder Meeting. The Company shall use its
reasonable best efforts to hold the Company Stockholder Meeting
as soon as practicable after the
Form S-4
becomes effective and to obtain the Company Stockholder
Approval. The Company shall otherwise coordinate and cooperate
with Parent with respect to the timing of the Company
Stockholder Meeting and will otherwise comply with all legal
requirements applicable to the Company Stockholder Meeting.
Notwithstanding anything to the contrary contained in this
Agreement, the Company may adjourn or postpone the Company
Stockholder Meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Joint Proxy
Statement/Prospectus is provided to its stockholders in advance
of the vote to be held at the Company Stockholder Meeting or, if
as of the time for which the Company Stockholder Meeting is
originally scheduled (as set forth in the Joint Proxy Statement/
Prospectus) there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company
Stockholder Meeting.
(c)
Company Acquisition Proposals.
(i) Subject to
Sections 5.3(c)(ii)
through
5.3(c)(vi)
, the Company agrees that neither it nor any of
its subsidiaries shall, and that it shall use its reasonable
best efforts to cause its and its subsidiaries
Representatives retained by it or any of its subsidiaries) not
to, directly or indirectly, (A) initiate, solicit or
knowingly encourage any inquiries with respect to, or the making
of, a Company Acquisition Proposal, (B) engage in any
negotiations concerning, or provide any confidential information
or data to any Person relating to a Company Acquisition
Proposal, (C) approve or recommend or propose publicly to
approve or recommend, any Company Acquisition Proposal or
(D) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, acquisition agreement,
option agreement or other similar agreement relating to any
Company Acquisition Proposal or propose publicly or agree to do
any of the foregoing relating to any Company Acquisition
Proposal.
(ii) Nothing contained in this Agreement shall prevent the
Company or the Companys Board from complying with its
disclosure obligations under
Sections 14d-9
and
14e-2
of
the Exchange Act;
provided
,
however
, that if such
disclosure has the effect of withdrawing, modifying or
qualifying the approval of this Agreement by the Companys
Board or the Company Board Recommendation in a manner adverse to
Parent or the approval of this Agreement by the Companys
Stockholders, Parent shall have the right to terminate this
Agreement to the extent set forth in
Section 7.4(c).
(iii) Notwithstanding the limitations set forth in
Section 5.3(c)(i)
, until the earlier of the receipt
of the Company Stockholder Approval and the Termination Date, if
the Company receives a Company Acquisition Proposal which
(A) constitutes a Company Superior Proposal, or
(B) which the Board of the Company determines in good faith
could reasonably be expected to result in a Company Superior
Proposal, the Company may take the following actions:
(x) furnish nonpublic information to the third party making
such Company Acquisition Proposal, if, and only if, prior to so
furnishing such information, the Company receives from the third
party an executed confidentiality agreement with confidentiality
provisions no less favorable to the Company than the letter
agreement, dated as of February 14, 2007, between the
Company and Parent and the letter agreement, dated as of
April 13, 2007, between the Company and Parent and
(y) engage in discussions or negotiations with the third
party with respect to the Company Acquisition Proposal.
(iv) Notwithstanding anything in this Agreement to the
contrary, nothing contained in this Agreement shall prevent the
Company or the Companys Board from, at any time prior to,
but not after, the time this Agreement is adopted by the
Companys Stockholders at the Company Stockholder Meeting,
recommending
A-48
such an unsolicited bona fide written Company Acquisition
Proposal to the Companys Stockholders, if and only to the
extent that, (A) the Board of the Company determines in
good faith, after consultation with its outside legal counsel,
that failing to do so could reasonably be expected to constitute
a breach of the Board of the Companys fiduciary duties
under Applicable Law; and (B) the Companys Board
determines in good faith that such Company Acquisition Proposal
(in the form, other than immaterial changes, that was the
subject of the Company Superior Proposal Notice)
constitutes a Company Superior Proposal and Parent shall have
received written notice (the
Company Superior
Proposal Notice
) of the Companys intention
to take such action at least four (4) business days prior
to the taking of such action by the Company and has complied
with its other obligations under this
Section 5.3(c)(iv)
;
provided
,
however
,
that the Companys Board continues to believe, after taking
into account any modifications to the terms of the transaction
contemplated by this Agreement that are proposed by Parent after
its receipt of the Company Superior Proposal Notice that
such Company Acquisition Proposal constitutes a Company Superior
Proposal. If there is a Company Change of Recommendation as a
result of a Company Acquisition Proposal that is a Company
Superior Proposal and the Companys Board recommends such
an unsolicited bona fide written Company Acquisition Proposal
pursuant to this clause (iv), the Company shall be entitled
to terminate this Agreement pursuant to
Section 7.3(b).
(v) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any Person (other than the parties hereto)
conducted heretofore with respect to any Company Acquisition
Proposal. The Company agrees that it will take the necessary
steps to promptly inform the officers, directors, employees and
Representatives of the Company and its subsidiaries of the
obligations undertaken in this
Section 5.3(c).
(vi) From and after the date of this Agreement, the Company
shall promptly orally notify Parent of any request for
information or any inquiries, proposals or offers relating to a
Company Acquisition Proposal indicating, in connection with such
notice, the name of such Person making such request, inquiry,
proposal or offer and the material terms and conditions of any
proposals or offers and the Company shall provide to Parent
written notice of any such inquiry, proposal or offer within
forty-eight (48) hours of such event and copies of any
written or electronic correspondence to or from any Person
making a Company Acquisition Proposal. The Company shall keep
Parent informed orally on a current basis of the status of any
Company Acquisition Proposal, including with respect to the
status and terms of any such proposal or offer and whether any
such proposal or offer has been withdrawn or rejected and the
Company shall provide to Parent written notice of any such
developments (including copies of any written proposals or
requests for information) within forty-eight (48) hours.
The Company also agrees to provide any information to Parent
(not previously provided to Parent) that it is providing to
another Person pursuant to this
Section 5.3(c)(vi)
at substantially the same time it provides such information to
such other Person.
(vii) For purposes of this Agreement:
(A)
Company Acquisition Proposal
means any proposal or offer with respect to (1) a merger,
reorganization, share exchange, consolidation, business
combination, recapitalization, dissolution, liquidation or
similar transaction involving the Company, (2) any purchase
of an equity interest (including by means of a tender or
exchange offer) representing an amount equal to or greater than
a 15% voting or economic interest in the Company, or
(3) any purchase of assets, securities or ownership
interests representing an amount equal to or greater than 15% of
the consolidated assets of the Company and its subsidiaries
taken as a whole (including stock of the subsidiaries of the
Company), consolidated net revenues or earnings before interest,
Taxes, depreciation and amortization.
(B)
Company Superior Proposal
means a bona fide written Company Acquisition Proposal (except
that references in the definition of Company Acquisition
Proposal to 15% shall be replaced by 50%) made by any
Person other than a party hereto that is on terms that the Board
of the Company determines in good faith, after consultation with
the Companys financial and legal advisors, and considering
such factors as the Board of the Company considers to be
appropriate (including the timing and likelihood of consummation
of such proposal), are more favorable to the Company and its
stockholders than the transactions contemplated by this
Agreement, taking into account any change in the transaction
proposed by Parent.
A-49
(d)
Financing.
The Company agrees to
provide, and will use reasonable best efforts to cause its
subsidiaries and Representatives (including legal and
accounting) to provide such cooperation reasonably requested by
Parent and Merger Sub in connection with the Financing or any
alternative financing, including using commercially reasonable
efforts to (i) cause (x) upon reasonable advance
notice by Parent, appropriate officers and employees of the
Company to be available on a customary basis for meetings,
including management presentations and road show
appearances, and the preparation of disclosure documents in
connection with any such financing and (y) its independent
accountants and counsel to provide assistance to Parent and
Merger Sub for fees consistent with the Companys existing
arrangements with such accountants and counsel,
(ii) provide all information reasonably necessary for the
completion of a successful syndication, including any updated
projections for the Company and its subsidiaries to the extent
updated projections are from time to time reasonably requested
by the joint-lead arrangers prior to the completion of a
successful syndication, (iii) provide reasonable assistance
in the preparation of a confidential information memorandum to
be used in connection with the syndication of the Financing,
(iv) provide all information reasonably necessary to obtain
ratings from the rating agencies and (v) use commercially
reasonable efforts to ensure that the syndication of the
Financing benefits materially from the Companys existing
lending and investment banking relationships.
(e)
Third-Party Standstill
Agreements.
During the period from the date of
this Agreement until the earlier of the Effective Time and the
Termination Date: (i) the Company shall not (and shall not
agree to, and shall not permit any of its subsidiaries to or to
agree to) terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of
its subsidiaries is a party (other than any involving Parent or
its subsidiaries and confidentiality agreements pertaining
solely to ordinary course commercial matters); and (ii) the
Company shall enforce, to the fullest extent permitted under
Applicable Law, the provisions of any such agreements, including
obtaining injunctions to prevent any breaches of such
confidentiality or standstill agreements and enforcing
specifically the terms and provisions thereof in any court of
the United States or any state thereof having jurisdiction.
ARTICLE VI
CONDITIONS
TO THE FIRST MERGER
6.1.
Conditions to the Obligations of Each
Party.
The obligations of the Company, Parent and
Merger Sub to consummate the First Merger shall be subject to
the satisfaction or waiver of the following conditions at or
prior to the Closing:
(a) The Company Stockholder Approval shall have been
obtained in accordance with Applicable Law, the Companys
Certificate and the Companys Bylaws.
(b) The Parent Stockholder Approval shall have been
obtained in accordance with Applicable Law, the rules and
regulations of the NYSE, Parents Certificate and
Parents Bylaws.
(c) Any applicable waiting period (and any extension
thereof) under the HSR Act shall have expired or been terminated.
(d) No judgment, temporary restraining order, preliminary
or permanent injunction, order or decree by any court or other
tribunal of competent jurisdiction which prohibits the
consummation of the Transaction shall have been entered and
shall continue to be in effect.
(e) The
Form S-4
shall have been declared effective under the Securities Act and
no stop order suspending the effectiveness of the
Form S-4
shall be in effect and no proceedings for such purpose shall be
pending or threatened before the Commission.
(f) The shares of Parent Common Stock to be issued in the
First Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
A-50
6.2.
Conditions to Obligations of Parent and
Merger Sub.
The obligation of Parent and Merger
Sub to consummate the First Merger shall also be subject to the
satisfaction or waiver of the following conditions by Parent at
or prior to the Closing:
(a) (i) The representations and warranties of the
Company set forth in
Article IV
(other than
Sections 4.12(b)
and
4.4(a)
) which are
qualified by a Material Adverse Effect qualification
shall be true and correct in all respects as so qualified at and
as of the date of this Agreement and at and as of the Closing
Date as though made at and as of the Closing Date and
(ii) the representations and warranties of the Company set
forth in
Article IV
(other than
Sections 4.12(b)
and
4.4(a)
) which are not
qualified by a Material Adverse Effect qualification
shall be true and correct at and as of the date of this
Agreement and at and as of the Closing Date as though made at
and as of the Closing Date, except for such failures to be true
and correct as would not have, in the aggregate, a Material
Adverse Effect on the Company, (iii) the representations
and warranties set forth in
Section 4.4(a)
shall be
true and correct in all material respects on the date hereof and
on the Closing Date as if made on and as of such dates, other
than with respect to any issuances permitted pursuant to this
Agreement, and (iv) the representation set forth in
Section 4.12(b)
shall be true and correct in all
respects on the Closing Date as if made on and as of such date;
provided
,
however
, that, with respect to
clauses (i), (ii), (iii) and (iv) above,
representations and warranties that are made as of a particular
date or period shall be true and correct (in the manner set
forth in clause (i), (ii), (iii) or (iv), as
applicable) only as of such date or period.
(b) The Company shall have performed and complied with all
of its covenants hereunder to be performed or complied with by
it prior to the Effective Time in all material respects through
the Closing.
(c) The Company shall have delivered to Parent a
certificate duly executed by the Companys chief executive
officer and chief financial officer on behalf of the Company to
the effect that each of the conditions specified above in
Sections 6.2(a)
and
6.2(b)
is satisfied in
all respects.
(d) Parent shall have received from Latham &
Watkins LLP, counsel to Parent, a written opinion dated the
Closing Date to the effect that, on the basis of the facts,
representations and assumptions set forth or referred to in such
opinion, for United States federal income tax purposes, the
Transaction will constitute a reorganization within
the meaning of Section 368(a) of the Code. In rendering
such opinion, counsel to Parent shall be entitled to rely upon
assumptions, representations, warranties and covenants,
including those contained in the Tax Representation Letters
described in
Section 5.1(l).
6.3.
Conditions to Obligation of the
Company.
The obligation of the Company to
consummate the First Merger shall also be subject to the
satisfaction or waiver of the following conditions by the
Company at or prior to the Closing:
(a) (i) The representations and warranties of Parent
and Merger Sub set forth in
Article III
(other than
Sections 3.12(b)
and
3.3
) which are qualified
by a Material Adverse Effect qualification shall be
true and correct in all respects as so qualified at and as of
the date of this Agreement and at and as of the Closing Date as
though made at and as of the Closing Date and (ii) the
representations and warranties of Parent and Merger Sub set
forth in
Article III
(other than
Sections 3.12(b)
and
3.3
) which are not
qualified by a Material Adverse Effect qualification
shall be true and correct at and as of the date of this
Agreement and at and as of the Closing Date as though made at
and as of the Closing Date, except for such failures to be true
and correct as would not have, in the aggregate, a Material
Adverse Effect on Parent, (iii) the representations and
warranties set forth in
Section 3.3
shall be true
and correct in all material respects on the date hereof and on
the Closing Date as if made on and as of such dates, other than
with respect to any issuances permitted pursuant to this
Agreement, and (iv) the representation set forth in
Section 3.12(b)
shall be true and correct in all
respects on the Closing Date as if made on and as of such date;
provided
,
however
, that, with respect to
clauses (i), (ii), (iii) and (iv) above,
representations and warranties that are made as of a particular
date or period shall be true and correct (in the manner set
forth in clause (i), (ii), (iii) or (iv), as
applicable) only as of such date or period.
(b) Parent and Merger Sub shall have performed and complied
with all of their respective covenants hereunder to be performed
or complied with by it prior to the Effective Time in all
material respects through the Closing.
A-51
(c) Parent shall have delivered to the Company a
certificate executed by Parents chief executive officer
and chief financial officer on behalf of Parent to the effect
that each of the conditions specified above in
Sections 6.3(a)
and
6.3(b)
is satisfied in
all respects.
(d) The Company shall have received from Wachtell, Lipton,
Rosen & Katz, counsel to the Company, a written
opinion dated the Closing Date to the effect that, on the basis
of the facts, representations and assumptions set forth or
referred to in such opinion, for United States federal income
tax purposes, the Transaction will constitute a
reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion,
counsel to the Company shall be entitled to rely upon
assumptions, representations, warranties and covenants,
including those contained in the Tax Representation Letters
described in
Section 5.1(l)
of this Agreement.
6.4.
Frustration of Closing
Conditions.
None of the Company, Parent or Merger
Sub may rely, either as a basis for not consummating the First
Merger or for terminating this Agreement and abandoning the
First Merger, on the failure of any condition set forth in
Section 6.1
,
6.2
or
6.3
, as the case
may be, to be satisfied if such failure was caused by such
partys breach of any provision of this Agreement or
failure to use its reasonable best efforts to consummate the
First Merger and the other transactions contemplated hereby, as
required by and subject to
Section 5.1(a).
ARTICLE VII
TERMINATION;
FEES AND EXPENSES
7.1.
Termination by Mutual
Consent.
This Agreement may be terminated and the
Transaction may be abandoned at any time prior to the Effective
Time, whether before or after the adoption and approval of this
Agreement by the Companys Stockholders referred to in
Section 6.1(a)
, by mutual written consent of the
Company and Parent by action of their respective Boards. The
date that a termination of this Agreement shall be effective is
referred to as the
Termination Date
.
7.2.
Termination by Either Parent or the
Company.
This Agreement may be terminated and the
Transaction may be abandoned at any time prior to the Effective
Time by action of the Board of either Parent or the Company if
(a) the First Merger shall not have been consummated by the
date that is seven months following the date of this Agreement
(or if the second provision in this
Section 7.2(a)
shall apply, the Extended End Date) (the latest such date, the
End Date
), whether such date is before or
after the date of the adoption and approval of this Agreement
and the First Merger by the Companys Stockholders;
provided
,
however
, that, if, as of the End Date,
all conditions set forth in
Sections 6.1
,
6.2
and
6.3
shall have been satisfied or waived (other than
those that are to be satisfied by action taken at the Closing)
other than the condition set forth in
Section 6.1(c)
, then the Company or Parent may
extend the End Date until the date that is 12 months
following the date of this Agreement (the
Extended End
Date
), by providing written notice to the other party
or before the End Date;
provided
,
further
,
however
, that the right to terminate this Agreement
pursuant to this
Section 7.2(a)
shall not be
available to any party whose breach of any provision of this
Agreement results in the failure of the First Merger to be
consummated by the End Date or the Extended End Date,
(b) the Company Stockholder Approval required by
Section 6.1(a)
shall not have been obtained at the
Company Stockholder Meeting (after giving effect to all
adjournments or postponements thereof), (c) the Parent
Stockholder Approval required by
Section 6.1(b)
shall not have been obtained at the Parent Stockholder Meeting
(after giving effect to all adjournments or postponements
thereof) or (d) any Governmental Authority of competent
jurisdiction shall have issued an order, decree, injunction or
ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the
Transaction and such order, decree or ruling or other action
shall have become final and nonappealable, whether before or
after the adoption and approval of this Agreement by the
Companys Stockholders referred to in
Section 6.1(a)
(
provided
, that the party
seeking to terminate this Agreement pursuant to this
Section 7.2(d)
shall have used its reasonable best
efforts to remove such injunction, restraint or other action in
compliance with
Section 5.1(a)
).
7.3.
Termination by the Company.
(a) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Effective Time,
whether before or after the adoption and approval of this
Agreement by the Company Stockholder
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Approval referred to in
Section 6.1(a)
, by action of
the Companys Board if there has been a breach of any
representation, warranty, covenant or agreement made by Parent,
Merger Sub or Second Merger Sub in this Agreement, or any such
representation and warranty shall have become untrue or
incorrect after the execution of this Agreement, in each case
such that the conditions set forth in
Sections 6.1
and
6.3
would not be satisfied and such breach or failure
to be true and correct is not cured within 30 calendar days
following receipt of written notice from the Company of such
breach or failure.
(b) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Company Stockholder
Meeting by action of the Companys Board if, prior to the
Company Stockholder Meeting, the Company receives an unsolicited
bona fide written Company Acquisition Proposal (other than this
Agreement, the First Merger and the Second Merger) in compliance
with
Section 5.3(c)
that is a Company Superior
Proposal and the Company has complied with its obligations set
forth in
Section 5.3(c)(iv).
(c) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Effective Time by
action of the Companys Board, if, prior to the Parent
Stockholder Meeting, Parents Board shall have withdrawn,
qualified or modified its approval of this Agreement or the
Parent Board Recommendation in each case in a manner adverse to
the Company or approved or recommended any Parent Acquisition
Proposal (other than this Agreement, the First Merger and the
Second Merger).
(d) This Agreement may be terminated and the Transaction
may be abandoned at any time by action of the Companys
Board if Parent does not effect the Closing within five
(5) business days after notice by the Company to Parent
that the conditions set forth in
Sections 6.1
and
6.3
are satisfied and all such conditions have in fact
been satisfied (or, upon an immediate Closing, would be
satisfied as of such Closing).
7.4.
Termination by Parent.
(a) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Effective Time,
whether before or after the Company Stockholder Approval
referred to in
Section 6.1(a)
, by action of
Parents Board if there has been a breach of any
representation, warranty, covenant or agreement made by the
Company in this Agreement, or any such representation and
warranty shall have become untrue or incorrect after the
execution of this Agreement, in each case such that the
conditions set forth in
Section 6.1
or
6.2
would not be satisfied and such breach or failure to be true and
correct is not cured within 30 calendar days following receipt
of written notice from Parent of such breach or failure.
(b) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Parent Stockholder
Meeting by action of Parents Board if, prior to the Parent
Stockholder Meeting, Parent receives an unsolicited bona fide
written Parent Acquisition Proposal (other than this Agreement,
the First Merger and the Second Merger) in compliance with
Section 5.2(c)
that is a Parent Superior Proposal
and Parent has complied with its obligations set forth in
Section 5.2(c)(iv).
(c) This Agreement may be terminated and the Transaction
may be abandoned at any time prior to the Effective Time by
action of Parents Board, if, prior to the Company
Stockholder Meeting, the Companys Board shall have
withdrawn, qualified or modified its approval of this Agreement
or the Company Board Recommendation in each case in a manner
adverse to Parent or approved or recommended any Company
Acquisition Proposal (other than this Agreement, the First
Merger and the Second Merger).
7.5.
Effect of Termination and
Abandonment.
(a) In the event of a
termination of this Agreement and the abandonment of the
Transaction pursuant to this
Article VII
, this
Agreement shall become void and of no effect with no liability
on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or
other Representatives), other than the Confidentiality
Agreement, the provisions of this
Section 7.5
,
Section 7.6
and
Article VIII
;
provided
,
however
, that, except as otherwise
provided in this Agreement, no such termination shall relieve
any party hereto of any liability or damages resulting from any
willful or intentional breach of this Agreement.
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7.6.
Fees and Expenses.
(a) In the event that:
(i) (A) Parent or the Company shall have terminated
this Agreement pursuant to
Section 7.2(b)
,
(B) on or prior to the Company Stockholder Meeting any
Person (other than Parent) shall have publicly proposed or
publicly disclosed prior to (or publicly disclosed its intention
to make) and not publicly withdrawn a Company Acquisition
Proposal (substituting 50% for the 15% threshold set forth in
the definition of Company Acquisition Proposal, a
Covered Company Proposal
) at the time of the
Company Stockholder Meeting, and (C) within twelve
(12) months of such termination of this Agreement, the
Company consummates any Covered Company Proposal, then the
Company shall pay to Parent a termination fee in cash of
$70,000,000 (the
Termination Fee
).
(ii) (A) Parent or the Company shall have terminated
this Agreement pursuant to
Section 7.2(c)
,
(B) on or prior to the Parent Stockholder Meeting any
Person (other than the Company) shall have publicly proposed or
publicly disclosed prior to (or publicly disclosed its intention
to make) and not publicly withdrawn a Parent Acquisition
Proposal (substituting 50% for the 15% threshold set forth in
the definition of Parent Acquisition Proposal, a
Covered Parent Proposal
) at the time of the
Parent Stockholder Meeting, and (C) within twelve
(12) months of such termination of this Agreement, Parent
consummates any Covered Parent Proposal, then Parent shall pay
to the Company the Termination Fee.
(iii) The Company or Parent shall have terminated this
Agreement pursuant to
Section 7.2(a)
or
7.2(d)
and at the date of termination the government
approvals which are the subject of the Closing conditions set
forth in
Section 6.1(c)
has not been received, but
the other conditions set forth in
Sections 6.1
(other than
Sections 6.1(c)
and
6.1(d)
),
6.2(a)
and
6.2(b)
have been or are capable of
being satisfied as of the date of termination, then Parent shall
pay to the Company a termination fee in cash of $50,000,000.
(iv) The Company shall have terminated this Agreement
pursuant to
Section 7.3(b)
or Parent shall have
terminated this Agreement pursuant to
Section 7.4(c)
, then the Company shall pay to Parent
the Termination Fee.
(v) Parent shall have terminated this Agreement pursuant to
Section 7.4(b)
or the Company shall have terminated
this Agreement pursuant to
Section 7.3(c)
, then
Parent shall pay to the Company the Termination Fee.
(vi) Any Termination Fee that becomes payable shall be paid
not later than the second business day after the date that the
Agreement is terminated, in each case payable by wire transfer
of same day funds. Under no circumstances will more than one
Termination Fee be paid under this
Section 7.6.
(b) Parent and the Company acknowledge that the agreements
contained in this
Section 7.6
are an integral part
of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and the Company would not enter
into this Agreement; accordingly, if a party fails to promptly
pay any amount due by such party pursuant to this
Section 7.6
(the
Defaulting
Party
), and, in order to obtain such payment, the
other party commences a suit that results in a judgment against
the Defaulting Party for the fees set forth in this
Section 7.6
or any portion of such fees, the
Defaulting Party shall pay to the other party its costs and
expenses (including attorneys fees) in connection with
such suit, together with interest on the amount of the fees at
the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made from the date such payment was
required to be made through the date of payment.
(c) All costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement
shall be paid by the party hereto incurring such expenses,
except (i) filing fees incurred in connection with
Commission and regulatory filings relating to the Transaction
and the transactions contemplated by this Agreement all of which
shall be borne by Parent and (ii) printing costs related to
the Transaction and the actions contemplated by this Agreement,
all of which shall be borne equally by Parent and the Company.
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ARTICLE VIII
MISCELLANEOUS
8.1.
Non-Survival of Representations and
Warranties.
The representations, warranties,
covenants and agreements in this Agreement shall not survive the
consummation of the Transaction or the termination of this
Agreement. Notwithstanding the foregoing, the agreements and
covenants which by their nature are to be performed following
the Effective Time, shall survive consummation of the
Transaction.
8.2.
Notices.
All notices and other
communications under this Agreement shall be in writing and
shall be deemed given if delivered personally, telecopied (which
is confirmed) (
provided
, that any notice received by
facsimile transmission or otherwise at the addressees
location on any business day after 5:00 p.m.
(addressees local time) shall be deemed to have been
received at 9:00 a.m. (addressees local time) on the
next business day) or delivered by a nationally recognized
overnight courier service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and
first-class postage prepaid) to the parties hereto at the
following addresses (or at such other address for a party hereto
as shall be specified by like notice):
(a) if to Parent, Merger Sub or Second Merger Sub:
URS CORPORATION
600 Montgomery Street, 26th Floor San Francisco, CA
94111
Attention: General Counsel
Telecopy No.:
(415) 398-4525
with a copy to:
Paul D. Tosetti, Esq.
David M. Hernand, Esq.
Latham & Watkins LLP
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Telecopy No.:
(212) 751-4864
(b) if to the Company:
WASHINGTON GROUP INTERNATIONAL, INC.
720 Park Boulevard, Boise, ID 83712
Attention: General Counsel
Telecopy No.:
(208) 386-5220
with a copy to
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telecopy No.:
(212) 403-2000
8.3.
Interpretation.
When a
reference is made in this Agreement to an Article or Section,
such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings, the table of
contents and the index of defined terms contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All
terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered
pursuant thereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such
term. Any agreement, instrument or statute defined or referred
to in this Agreement or in any agreement or instrument that is
referred to in this Agreement means such agreement, instrument
or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of
A-55
statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments
incorporated therein. Each of the parties has participated in
the drafting and negotiation of this Agreement. If an ambiguity
or question of intent or interpretation arises, this Agreement
must be construed as if it is drafted by all the parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any of the
provisions of this Agreement. Whenever the words
include
,
includes
, or
including
are used in this Agreement, they
shall be deemed to be followed by the words
without
limitation.
The words
hereof
,
herein
and
hereunder
and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement. For the purposes of this Agreement,
Material Adverse Effect
with respect to any
party hereto means such facts, circumstances, events or changes
that are materially adverse to the business or financial
condition of the Company or Parent, as the case may be, and its
subsidiaries, taken as a whole, but shall not include facts,
circumstances, events or changes (a) generally affecting
any of the industries in which such party operates generally in
the United States or the economy or the financial or securities
markets in the United States or elsewhere in the world,
including regulatory and political conditions or developments
(including any outbreak or escalation of hostilities or acts of
war or terrorism) or changes in interest rates, in each case to
the extent not having a materially disproportionate impact on
such party and its subsidiaries, taken as a whole, as compared
to other Persons in such industries or (b) resulting from
(i) the announcement or the existence of, or compliance
with, this Agreement or the announcement of the Transaction or
any of the other transactions contemplated by this Agreement,
(ii) any litigation arising from allegations of a breach of
fiduciary duty or other violation of Applicable Law relating to
this Agreement or the transactions contemplated by this
Agreement, (iii) changes in Applicable Law, GAAP or
accounting standards, (iv) changes in the market price or
trading volume of the Company Common Stock or Parent Common
Stock, as the case may be, (v) changes in any
analysts recommendations, any financial strength rating or
any other recommendations or ratings as to the Company or
Parent, as the case may be, or its subsidiaries (including, in
and of itself, any failure to meet analyst projections) or
(vi) the failure, in and of itself, of the Company or
Parent, as the case may be, to meet any expected or projected
financial or operating performance target publicly announced
prior to the date of this Agreement, as well as any change, in
and of itself, by the Company or Parent, as the case may be, in
any expected or projected financial or operating performance
target as compared with any target publicly announced prior to
the date of this Agreement. For purposes of this Agreement, a
subsidiary
, when used with respect to any
party hereto, means any entity of which such party (a) owns
50% or more of the outstanding voting securities or other voting
ownership interests which are on the date of this Agreement
directly or indirectly owned by such party, or (b) through
contract or otherwise possesses power to appoint at least 50% of
the directors of such entity (or Persons performing similar
functions). Information disclosed in one Section of the Company
Disclosure Schedule shall be integrated into another Section of
the Company Disclosure Schedule without the necessity of a
cross-reference to the extent its applicability thereto is
readily apparent. References in this Agreement (except as
specifically otherwise defined) to
affiliates
shall mean, as to any Person, any other Person which, directly
or indirectly, controls, or is controlled by, or is under common
control with, such Person. As used in this Agreement,
control
(including, with its correlative
meanings, controlled by and under common
control with) shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of
management or policies of a Person, whether through the
ownership of securities or partnership or other ownership
interests, by contract or otherwise. As used in this Agreement,
knowledge
means (x) with respect to
Parent, the actual knowledge of the executive officers of Parent
and (y) with respect to the Company, the actual knowledge
of the executive officers of the Company. As used in this
Agreement,
business day
shall mean any day
other than a Saturday, Sunday or a day on which the banks in New
York are authorized by law or executive order to be closed.
References in this Agreement to specific laws or to specific
provisions of laws shall include all rules and regulations
promulgated thereunder. Any statute defined or referred to in
this Agreement or in any agreement or instrument referred to in
this Agreement shall mean such statute as from time to time
amended, modified or supplemented, including by succession of
comparable successor statutes.
8.4.
Counterparts.
This Agreement
may be executed in counterparts, which together shall constitute
one and the same agreement. The parties hereto may execute more
than one copy of this Agreement, each of which shall constitute
an original. Signatures to this Agreement transmitted by
facsimile transmission, by electronic mail in portable
document format (.pdf) form, or by any other
electronic means intended to preserve the original graphic and
pictorial appearance of a document, will have the same effect as
physical delivery of the paper document bearing the original
signature.
A-56
8.5.
Entire Agreement.
This
Agreement (including the exhibits and schedules hereto), the
Confidentiality Agreement and the Joint Defense Agreement
constitute the entire agreement among the parties hereto and
thereto and supersede all prior agreements and understandings,
agreements or representations by or among the parties hereto and
thereto, written and oral, with respect to the subject matter
hereof and thereof. No representation, warranty, inducement,
promise, understanding or condition not set forth in this
Agreement has been made or relied upon by any of the parties
hereto.
8.6.
Third-Party
Beneficiaries.
Except for the agreement set forth
in
Section 2.1(a)
,
2.6
,
5.2(b)
and
5.2(d)(v) nothing in this Agreement, express or implied, is
intended or shall be construed to create any third-party
beneficiaries.
8.7.
Governing Law.
This Agreement
shall be governed and construed in accordance with the laws of
the State of Delaware without regard to any choice of law or
conflicts of law rules of such state (whether of the State of
Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State
of Delaware.
8.8.
Consent to Jurisdiction; Specific
Performance; Venue.
(a) 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 exclusively in the Delaware
Court of Chancery, or in the event (but only in the event) that
such court does not have subject matter jurisdiction over such
Action, in the United States District Court for the District of
Delaware. The parties hereto further agree to waive any
requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other
equitable relief. In addition, each of the parties hereto
irrevocably agrees that any legal Action with respect to this
Agreement and the rights and obligations arising hereunder, or
for recognition and enforcement of any judgment in respect of
this Agreement and the rights and obligations arising hereunder
brought by the other party hereto or its successors or assigns,
shall be brought and determined exclusively in the Delaware
Court of Chancery, or in the event (but only in the event) that
such court does not have subject matter jurisdiction over such
Action, in the United States District Court for the District of
Delaware. Each of the parties hereto hereby irrevocably submits
with regard to any such Action for itself and in respect of its
property, generally and unconditionally, to the personal
jurisdiction of the aforesaid courts and 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 the aforesaid courts. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any Action with
respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts
for any reason other than the failure to serve in accordance
with this
Section 8.8
, (b) any claim that it or
its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution
of judgment or otherwise) and (c) to the fullest extent
permitted by the Applicable Law, any claim that (i) the
Action in such court is brought in an inconvenient forum,
(ii) the venue of such Action is improper or
(iii) this Agreement, or the subject matter of this
Agreement, may not be enforced in or by such courts.
(b) Each of the Company, Parent and Merger Sub hereby
consents to service being made through the notice procedures set
forth in
Section 8.2
and agrees that service of any
process, summons, notice or document by registered mail (return
receipt requested and first-class postage prepaid) to the
respective addresses set forth in
Section 8.2
shall
be effective service of process for any suit or proceeding in
connection with this Agreement or the transactions contemplated
by this Agreement.
8.9.
WAIVER OF JURY TRIAL.
EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
8.10.
Assignment.
Neither this
Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. Subject to the
preceding sentence, this Agreement shall be
A-57
binding upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns.
8.11.
Amendment.
This Agreement may
be amended by the parties hereto at any time before or after
approval of the First Merger by the Companys Stockholders;
provided, however
, that after any such approval, no
amendment shall be made that by law requires further approval by
the Companys Stockholders without such approval having
been obtained. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
8.12.
Extension; Waiver.
At any
time prior to the Effective Time, the parties may
(a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties contained
in this Agreement or in any document delivered pursuant hereto
or (c) subject to the proviso of
Section 8.11
,
waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a
party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights and the single or partial
exercise of any rights of this Agreement shall not preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege.
8.13.
Severability.
Any term or
provision of this Agreement that is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and
provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is
enforceable.
[Signature page follows]
A-58
IN WITNESS WHEREOF, Parent, Merger Sub, Second Merger Sub and
the Company have signed this Agreement as of the date first
written above.
URS CORPORATION
Name: H. Thomas Hicks
|
|
|
|
Title:
|
Vice President and Chief Financial Officer
|
ELK MERGER CORPORATION
Name: H. Thomas Hicks
BEAR MERGER SUB, INC.
Name: H. Thomas Hicks
WASHINGTON GROUP INTERNATIONAL, INC.
Name: Stephen G. Hanks
|
|
|
|
Title:
|
President and Chief Executive Officer
|
A-59
1999 Avenue
of the Stars
Suite 2400
Los Angeles, CA 90067
May 28,
2007
Board of Directors
URS Corporation
600 Montgomery Street, 26th Floor
San Francisco, California 94111
Members of the Board,
We understand that URS Corporation (the Buyer),
Elk Merger Corporation, a wholly owned subsidiary of the Buyer
(Merger Sub), Bear Merger Sub, Inc., a wholly owned
subsidiary of the Buyer (Second Merger Sub), and
Washington Group International, Inc. (Elk or the
Company) propose to enter into an Agreement and Plan
of Merger, substantially in the form of the draft dated
May 27, 2007 (the Merger Agreement), which
provides, among other things, for (i) the merger of Merger
Sub with and into the Company (the First Merger) and
(ii) promptly following the First Merger, the subsequent
merger of the Company with and into Second Merger Sub (the
Second Merger, and together with the First Merger,
the Merger). Pursuant to the Merger, a wholly owned
subsidiary of the Buyer will continue as the surviving entity
and each outstanding share of common stock, par value $0.01 per
share (the Company Common Stock) of the Company,
other than shares held in treasury or held by the Buyer or
Merger Sub, or as to which dissenters rights have been
perfected, will be converted into the right to receive
$43.80 per share in cash without interest and 0.772 of a
share of common stock, par value $0.01 per share, (the
Buyer Common Stock) of the Buyer (together, the
Consideration). The terms and conditions of the
Merger are more fully set forth in the Merger Agreement. You
have asked for our opinion as to whether the Consideration to be
paid by the Buyer pursuant to the Merger Agreement is fair from
a financial point of view to the Buyer.
For purposes of the opinion set forth herein, we have:
i) reviewed certain publicly available financial statements
and other business and financial information of the Company and
the Buyer, respectively;
ii) reviewed certain internal financial statements and
other financial and operating data, including certain financial
projections, concerning the Company prepared by the management
of the Company;
iii) reviewed certain financial projections concerning the
Company prepared by the management of the Company and reviewed
by the management of Buyer;
iv) reviewed certain internal financial statements and
other financial and operating data, including certain financial
projections, concerning the Buyer prepared by the management of
the Buyer;
v) reviewed information relating to certain strategic,
financial and operational benefits anticipated from the Merger,
prepared by the management of the Buyer;
vi) discussed the past and current operations and financial
condition and the prospects of the Buyer and the Company,
including information relating to certain strategic, financial
and operational benefits anticipated from the Merger, with
senior executives of the Buyer;
vii) reviewed the pro forma impact of the Merger on the
Buyers earnings per share, cash flow, capitalization and
financial ratios;
viii) reviewed the reported prices and trading activity for
the Company Common Stock and the Buyer Common Stock,
respectively;
B-1
ix) compared the financial performance of the Company and
the Buyer and the prices and trading activity of the Company
Common Stock and the Buyer Common Stock with that of certain
other publicly-traded companies comparable with the Company and
the Buyer, respectively, and their respective securities;
x) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
xi) participated in discussions and negotiations among
representatives of the Company and the Buyer and their financial
and legal advisors;
xii) reviewed the Merger Agreement, draft debt commitment
letters of the Buyer substantially in the form of the drafts
dated May 27, 2007 (the Commitment Letters),
and certain related documents; and
xiii) performed such other analyses and considered such
other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification
the accuracy and completeness of the information supplied or
otherwise made available to us by the Company and the Buyer for
the purposes of this opinion. With respect to the financial
projections prepared by the management of the Buyer, including
information relating to certain strategic, financial and
operational benefits anticipated from the Merger, we have
assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the future financial performance of the Company and the
Buyer. In addition, we have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger
Agreement without any material waiver, amendment or delay of any
terms or conditions, including, among other things, that the
Second Merger will be consummated promptly following the First
Merger, that the First Merger and the Second Merger will be
treated as a single integrated transaction and that the Merger
will be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company and
Buyer, nor have we been furnished with any such appraisals. In
addition, we have assumed that the Buyer will obtain financing
in connection with the Merger on terms consistent with the
Commitment Letters and as discussed with the senior management
of the Buyer. Morgan Stanley has assumed that, in connection
with the receipt of all the necessary governmental, regulatory
or other approvals and consents required for the Merger, no
delays, limitations, conditions or restrictions will be imposed
that would have a material adverse effect on the contemplated
benefits expected to be derived in the Merger. We have relied
upon, without independent verification, the assessment by the
management of the Buyer of: (i) the strategic, financial
and other benefits expected to result from the Merger;
(ii) the timing and risks associated with the integration
of the Company and the Buyer; (iii) the strategic rationale
for the Merger and (iv) the validity of, and risks
associated with, the Companys and the Buyers
existing and future services, technologies, intellectual
property, products and business models. We are not legal, tax or
regulatory advisors and have relied upon, without independent
verification, the assessment of the Buyer and its legal, tax or
regulatory advisors with respect to legal, tax or regulatory
matters. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Events
occurring after the date hereof may affect this opinion and the
assumptions used in preparing it, and we do not assume any
obligation to update, revise or reaffirm this opinion.
We have acted as financial advisor to the Board of Directors of
the Buyer in connection with this transaction and will receive a
fee for our services, a significant portion of which is
contingent upon the closing of the transaction. In addition, the
Buyer has agreed to offer us the opportunity to provide
financing services in connection with the transaction and we may
receive a fee for such services. In the past, we and our
affiliates have provided financial advisory and financing
services for the Buyer and have received fees for the rendering
of these services. In the ordinary course of our trading,
brokerage, investment management and financing activities, we
and our affiliates may at any time hold long or short positions,
and may trade or otherwise effect transactions, for our own
account or the accounts of customers, in debt or equity
securities or senior loans of the Buyer, the Company or any
other company or any currency or commodity that may be involved
in this transaction.
It is understood that this letter is for the information of the
Board of Directors of the Buyer and may not be used for any
other purpose without our prior written consent, except that a
copy of this opinion may be included in its entirety in any
filing the Buyer is required to make with the Securities and
Exchange Commission in connection
B-2
with this transaction if such inclusion is required by
applicable law. In addition, this opinion does not in any manner
address the prices at which the Buyer Common Stock will trade
following consummation of the Merger and we express no opinion
or recommendation as to how the shareholders of the Buyer and
the Company should vote at the shareholders meetings to be
held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion
on the date hereof that the Consideration to be paid by the
Buyer pursuant to the Merger Agreement is fair from a financial
point of view to the Buyer.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
Jeffrey N. Hogan
Managing Director
B-3
Goldman, Sachs & Co. | 85 Broad Street | New York, New
York 10004
Tel:
212-902-1000
PERSONAL
AND CONFIDENTIAL
May 27, 2007
Board of Directors
Washington Group International, Inc.
720 Park Boulevard
Boise, Idaho 83712
Madam and Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders of the outstanding shares
of common stock, par value $0.01 per share (the
Shares), of Washington Group International, Inc.
(the Company) of the Consideration (as defined
below) to be received by such holders, taken in the aggregate,
pursuant to the Agreement and Plan of Merger, dated as of
May 27, 2007 (the Agreement), by and among the
Company, URS Corporation (Purchaser), Elk
Merger Corporation (Merger Sub), a wholly owned
subsidiary of Purchaser, and Bear Merger Sub, Inc. (Second
Merger Sub), a wholly owned subsidiary of Purchaser. The
Agreement provides that Merger Sub will be merged with and into
the Company and immediately thereafter the Company will be
merged with and into Second Merger Sub and each outstanding
Share will be converted into $43.80 in cash (the Cash
Consideration) and 0.772 shares of common stock, par
value $0.01 per share (Purchaser Common Stock), of
Purchaser (the Stock Consideration; together with
the Cash Consideration, the Consideration).
Goldman, Sachs & Co. and its affiliates, as part of
their investment banking business, are continually engaged in
performing financial analyses with respect to businesses and
their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. We have acted as financial advisor
to the Company in connection with, and have participated in
certain of the negotiations leading to, the transaction
contemplated by the Agreement (the Transaction). We
expect to receive fees for our services in connection with the
Transaction, a substantial portion of which are contingent upon
consummation of the Transaction, and the Company has agreed to
reimburse our expenses and indemnify us against certain
liabilities arising out of our engagement. In addition, we have
provided certain investment banking services to the Company from
time to time. We also may provide investment banking services to
the Company and Purchaser in the future. In connection with the
above-described investment banking services we have received,
and may receive, compensation.
Goldman, Sachs & Co. is a full service securities firm
engaged, either directly or through its affiliates, in
securities trading, investment management, financial planning
and benefits counseling, risk management, hedging, financing and
brokerage activities for both companies and individuals. In the
ordinary course of these activities, Goldman, Sachs &
Co. and its affiliates may provide such services to the Company,
Purchaser and their respective affiliates, may actively trade
the debt and equity securities (or related derivative
securities) of the Company and Purchaser for their own account
and for the accounts of their customers and may at any time hold
long and short positions of such securities.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company and Purchaser for the five fiscal years ended
December 29, 2006; certain interim reports to stockholders
and Quarterly Reports on
Form 10-Q
of the Company
C-1
Board of Directors
Washington Group International, Inc.
May 27, 2007
Page Two
and Purchaser; certain other communications from the Company and
Purchaser to their respective stockholders; and certain internal
financial analyses and forecasts for the Company and Purchaser
prepared by their respective managements (the
Forecasts), including certain cost savings and
operating synergies projected by the managements of the Company
and Purchaser to result from the Transaction (the
Synergies). We also have held discussions with
members of the senior managements of the Company and Purchaser
regarding their assessment of the strategic rationale for, and
the potential benefits of, the Transaction and the past and
current business operations, financial condition and future
prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the Shares
and Purchaser Common Stock, compared certain financial and stock
market information for the Company and Purchaser with similar
information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain
recent business combinations in the engineering and construction
industry specifically and in other industries generally and
performed such other studies and analyses, and considered such
other factors, as we considered appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, accounting, legal, tax and other information
discussed with or reviewed by us. In that regard, we have
assumed with your consent that the Forecasts, including the
Synergies, have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
managements of the Company and Purchaser, as the case may be. In
addition, we have not made an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of the Company or Purchaser or any of their
respective subsidiaries and we have not been furnished with any
such evaluation or appraisal.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction or the relative merits
of the Transaction as compared to any alternative business
strategies or transactions that might be available to the
Company nor are we expressing any opinion as to the prices at
which shares of Purchaser Common Stock will trade at any time.
We have assumed, with your consent, that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Transaction contemplated by the Agreement
will be obtained without the imposition of any delay,
limitation, restriction or condition that would have an adverse
effect on the Company or Purchaser or on the expected benefits
of the Transaction in any way meaningful to our analysis.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. We were not authorized
to solicit, and did not solicit, interest from any party with
respect to a merger or other business combination transaction
involving the Company or any of its assets. Our advisory
services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the
Company in connection with its consideration of the Transaction
and such opinion does not constitute a recommendation as to how
any holder of Shares should vote with respect to the Transaction
or any other matter.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be received by
holders of Shares, taken in the aggregate, pursuant to the
Agreement is fair from a financial point of view to such holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
C-2
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
Section
262.
Appraisal
Rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the
D-1
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation.
D-2
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
D-3
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
There aret hree ways to votey our Proxy
Yourt elephone or Internet
votea uth orizes the NamedP roxies tov ote your shares in the same manner as if you marked, signed
and returned your proxy card.
INTERNET TELEPHONE MAIL https://www.proxypush.c om/wgn
1-866-822-4616
Use theI nternet to vote yourp roxy
Use any to uch-tone te le phonet o
Mark, sign and date your proxy 24 hours a day, 7 days a week, until
OR
votey our proxy 24 hours ad
ay, 7
OR
card . 1 2:00 a.m. on October 29, 2007. days a week, unti l 12:00 a.m. on
Detach
yourp roxy card.
Please have your proxy card ready. October 29, 2007.
Return your pro xy
card n i the
Follow the simple instructions to
Ple aseh avey our pro xy card ready.
postage-paid envelo pe provid ed. obtain your records and create an
Fo
l
ow the sim ple i nstru
ctio ns the electronic ballo t. voice provides you.
HTTPS://WWW.PROXYPUSH.COM/WGN VOTE VIAT HE
INTERNET 1-866-822-4616 IF YOU VOTE BY PHONE OR N I TERNET, PLEASE DO NOT MAIL YOUR PROXY CARD ?
PLEASE DETACH HERE ? Please Sign, Date and Return x the Proxy Card Promptly Using the Enc losed
Envelope. Votes mustb e indicated x ( ) in Black or Blu e ink. FOR AGAI NST ABSTAIN FOR AGAINST
ABSTAI N
1. Adoption of the Agreement and Plan of Merger, dated as of
x x x
2. Adjournment or
postponement of the Washington
x x x
May 27, 2007, by and among URS Corporation, Elk Merger
Group International special meeting, if necessary, Corpo ration, a wh olly owned sub sid iary of
URS, Bear to permit further solicitation of proxies if there are Merger Sub, Inc., a wholly owned
subsidiary of URS, and not sufficient votes at the time of the Washington Washington Group
International, Inc., pursuant to which Elk Gro up Internation al sp ecial meetin g in favor of
Merger Corporation will merge with and into Washington Group International, and each the
foregoing. outstanding share of Washington Group International common stock, other than those
shares held by URS, any subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and other than
treasury shares and shares as to which a Washington Group International stockholder has validly
demanded and perfected appraisal rights under Delaware law, Address Change? Mark Box
x
will be
converted into the right to receive 0.772 of a share of URS common stock and n I dicate changes
below: $43.80 in cash, without interest, and approval of such merger.
THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1 and 2.
S C A N L I N E
Please sign exactly as your name(s) appears on the Pro xy. If hel d in joint
tenancy, al lp ersons should sign. Truste es,a dmin is tra t ors , g uardians, execu tors a nd
attorne ys-in f act, should inclu d et t i e l a nd authorit y. Corporations should provide full
nam e ofc orporation and t t i le ofauthorized off icer signi ng the proxy. Date Share Owner sign
here Co-Owner sign here
|
WASHINGTON GROUP INTERNATIONAL, INC. SPECIAL MEETING OF STOCKHOLDERS
October 30, 2007, 11:00 a.m. MDT This proxy is solicit ed by the Board of Directors of Washington
Group International for use at the Special Meeting ofS tockholderso f Washington Group
International on October 30, 2007.
This proxy when properly executed will be voted as you specify
on th er everse side.
I f n o choice is specified, thep roxy wil l be voted FOR Items1 and 2.
By signing the proxy, you revoke all prior proxies and appoint GeorgeH . Juette n, Stephen G. Hanks
and Craig G.Taylor and each of them with full power of substituti on,t o votey our shares on them
atters shown on the revers e sidea nd any other matters which may come before the Special Meetin ga
nd all adjournments.
S
e
everser forv o ting instr ctions. u
WASHINGTON GROUP INTERNATIONAL
P.O . BOX1 1444 NEW YORK, NY1 0203-0444
Washington Group Internatio nal, In c. 720 ParkB oulevard,
P.O. Box 73 Boise, Idaho 83729
|
VOTE BY INTERNET
WWW.CESVOTE.COM
Use the Internet to transmit your voting instructions up until 3:00 a.m. PDT on
the morning of the Special Meeting. Have your proxy card in hand when you access
URS
Corporation
the website listed above and follow the instructions to create an electronic
voting
c/o Corporate Election Services
instruction form.
PO Box 3230 Pittsburgh, PA
15230 VOTE BY TELEPHONE 1-888-693-8683
Use any touch-tone telephone to
transmit your voting instructions up until
3:00 a.m. PDT on the morning of the
Special Meeting. Have your proxy card in
hand when you call and then follow the
instructions.
VOTE BY MAIL
Please mark, sign and date your proxy
card and return it in the
postage-paid
envelope
we have provided or return it to:
URS Corporation, c/o Corporate Election
Services, P.O. Box 3230, Pittsburgh PA
15230-3230 to ensure that your vote is
received prior to the Special Meeting on
October 30, 2007.
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Mark, sign, date and return
touch-tone telephone: cast your vote: your proxy in the postage-paid
1-888-693-8683 www.cesvote.com
envelope provided.
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. If you vote your proxy by Internet
or by telephone, you do NOT need to mail back your proxy card.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION SPECIAL MEETING OF STOCKHOLDERS
TUESDAY , OCTOBER 30, 2007 AT 10:00
A . M . LOCAL TIME The Board of Directors recommends a vote FOR proposals 1
and 2 below. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
1. Approval of the issuance of shares of URS common stock pursuant to the Agreement and Plan of
Merger,
dated as of May 27, 2007, by and among URS Corporation, Elk Merger Corporation, a wholly
owned subsidiary of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and
Washington Group International, Inc.
2. Adjournment or postponement of the URS Special Meeting, if necessary, to permit further solicitation of proxies
if there are not sufficient votes at the time of the URS Special Meeting in favor of the foregoing.
, 2007
Signature Date
, 2007
Signature (Joint Owner) Date
Please vote, date and sign
and mail this proxy
promptly in the enclosed
envelope. When there is
more than one owner, each
should sign. When signing
as an attorney,
administrator, executor,
guardian or trustee, please
add your title as such. If
executed by a corporation,
the full corporation name
should be given, and this
proxy should be signed by a
duly authorized officer,
showing his or her title.
|
URS CORPORATION
VOTE YOUR SHARES VIA THE INTERNET OR BY TELEPHONE
Dear Stockholder:
Your vote is important. URS Corporation encourages you to submit your proxy electronically
via the Internet or by telephone, both of which are available 24 hours a day, seven days a
week. If you vote your proxy by Internet or by telephone, you do NOT need to mail back your
proxy card.
·
To submit your proxy electronically via the Internet, go to the Website:
http://www.cesvote.com and follow the prompts. You must use the control number
printed in the box by the arrow on the reverse side of this card.
·
To submit your proxy by telephone, use a touch-tone telephone and call
1-888-693-8683. You must use the control number printed in the box by the arrow on
the reverse side of this card.
If you have any questions or need assistance in voting, please call D. F. King & Co., Inc.
toll-free at 1-800-829-6551. Stockholders calling from outside the U.S. and Canada may call
+44 20 7920 9700.
Your vote is important. Thank you for voting.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION SPECIAL MEETING OF STOCKHOLDERS
TUESDAY , OCTOBER 30, 2007 AT 10:00
A. M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF URS CORPORATION for use at the
Special Meeting of Stockholders of URS on October 30, 2007.
This proxy when properly executed will be voted as you specify on the reverse side.
If no choice is specified, the proxy will be voted FOR Items 1 and 2.
By signing the proxy, you revoke all prior proxies and appoint Joseph Masters and H. Thomas Hicks
and each of them with full power of substitution, to vote your shares on the matters shown on the
reverse side and in their discretion on any other matters which may come before the Special Meeting
and all adjournments or postponements thereof.
Please indicate any change of address below:
IMPORTANT This Proxy must be signed and dated on the reverse
side.
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VOTE BY INTERNET
WWW.CESVOTE.COM
|
Use the Internet to transmit your voting instructions up until 5:00 p.m. EDT on
October 25, 2007. Have your voting instruction card in hand when you access the
URS
Corporation
website listed above and follow the instructions to create an electronic voting
c/o Corporate Election Services
instruction form.
PO Box 3230 Pittsburgh, PA 15230
VOTE BY TELEPHONE 1-888-693-8683
Use any touch-tone telephone to
transmit your voting instructions up until
5:00 p.m. EDT on October 25, 2007. Have
your voting instruction card in hand when
you call and then follow the instructions.
VOTE BY MAIL
Please mark, sign and date your voting
instruction card and return it in the
postage-paid envelope
we have provided or
return it to: URS Corporation, c/o
Corporate Election Services, P.O. Box
3230, Pittsburgh PA 15230-3230 to ensure
that your vote is received prior to 5:00
p.m. EDT on October 25, 2007.
Vote by Telephone Vote by Internet Vote by Mail
Call Toll-Free using a Access the Website and Mark, sign, date and return
touch-tone telephone: cast your vote: your voting instruction card in the
1-888-693-8683 www.cesvote.com
postage-paid envelope provided.
Your telephone or Internet vote authorizes the Trustee to vote your shares in the same manner
as if you marked, signed and returned your voting instruction card. If you vote your voting
instruction card by Internet or by telephone, you do NOT need to mail back your voting instruction
card.
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION CONFIDENTIAL VOTING INSTRUCTION
CARD
The Board of Directors recommends a vote FOR proposals 1 and 2 below. THIS VOTING INSTRUCTION
CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW. IF NO DIRECTION IS MADE,
THIS VOTING INSTRUCTION CARD WILL BE VOTED FOR PROPOSALS 1 AND 2.
FOR AGAINST ABSTAIN
1. Approval of the issuance of shares of URS common stock pursuant to the Agreement and Plan of Merger,
dated as of May 27, 2007, by and among URS Corporation, Elk Merger Corporation, a wholly owned subsidiary of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and Washington Group Internat
ional, Inc.
2. Adjournment or postponement of the URS Special Meeting, if necessary, to permit further solicitation of proxies
if there are not sufficient votes at the time of the URS Special Meeting in favor of the foregoing.
, 2007
Signature Date
Please vote, date and
sign
and mail this voting
instruction card promptly
in the enclosed envelope.
|
Your vote is important.
Please provide your voting instructions today.
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED.
D
Please fold and detach card at perforation before
mailing.
D
URS CORPORATION CONFIDENTIAL VOTING INSTRUCTION
CARD
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF URS CORPORATION for
use at the Special Meeting of Stockholders of URS on October 30, 2007.
Pursuant to the Trust Agreement for the URS Corporation 401(k) Retirement Plan (the Plan),
the undersigned, as a participant or beneficiary in the Plan, hereby directs Fidelity Management
Trust Company, as Trustee under the Plan, to vote as indicated on the reverse at the Special
Meeting of Stockholders of URS Corporation to be held on October 30, 2007, and at any
adjournment(s) thereof, all URS Corporation Common Stock allocated to the undersigneds Company
stock accounts under the Plan as of the September 21, 2007 record date for such meeting. Fidelity
Management Trust Company will vote the shares represented by this voting instruction form if it is
properly completed, signed and received by the independent tabulator before 5:00 p.m. EDT on
October 25, 2007. Fidelity Management Trust Company shall not vote shares allocated to a
participants account for which it has not received instructions from the participant.
IMPORTANT This voting instruction card must be signed and dated on the
reverse side.
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