As filed with the Securities and Exchange Commission on October 9, 1997
Registration No. 333-37531
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
AMENDMENT NO. 1 to
FORM S-4/A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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URS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1381538
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
8711/8712
(Primary Standard Industrial Classification
Code Number)
100 California Street, Suite 500
San Francisco, California 94111-4529
Telephone: (415) 774-2700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------
Kent P. Ainsworth
Executive Vice President, Chief Financial Officer and Secretary
URS Corporation
100 California Street, Suite 500
San Francisco, California 94111-4529
Telephone: (415) 774-2700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Samuel M. Livermore, Esq. Paul J. Sanner, Esq.
Cooley Godward LLP Bronson, Bronson & McKinnon LLP
One Maritime Plaza, 20th Floor 505 Montgomery Street
San Francisco, California 94111 San Francisco, CA 94111-2514
(415) 693-2000 (415) 986-4200
Fax (415) 951-3699 Fax (415) 982-1397
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Approximate date of commencement of proposed sale to the public:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger of Woodward-Clyde Group,
Inc. with and into the Registrant as described in the Agreement and Plan of
Merger dated as of August 18, 1997, attached as Appendix A to the
Prospectus/Proxy Statement forming a part of this Registration Statement.
-----------
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
-----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
<TABLE>
URS CORPORATION
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<CAPTION>
Cross-Reference Sheet Showing Location in Prospectus
Of Information Required by Items of Form S-4
<S> <C>
Form S-4 Registration Statement Item and Heading Location in Prospectus
(Information about the Transaction)
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus Available Information; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................. Summary; Risk Factors; The Merger;
Pro Forma Financial Information
4. Terms of the Transaction.......................... Summary; The Merger; Comparison of
Rights of Stockholders of URS and WC
5. Pro Forma Financial Information................... Summary; Pro Forma Financial
Information
6. Material Contacts with the Company Being Acquired. The Merger
7. Additional Information Required For Reoffering By
Persons and Parties Deemed to be Underwriters..... *
8. Interests of Named Experts and Counsel............ The Merger
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... *
(Information about the Registrant)
10. Information with Respect to S-3 Registrants....... *
11. Information of Certain Information by Reference... *
12. Information with Respect to S-2 or S-3 Registrants Available Information; Summary; Pro
Forma Financial Information; Selected
Financial Information; Information
Concerning URS; URS Financial
Statements
13. Incorporation of Certain Information by Reference. *
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ *
(Information about the Company being Acquired)
15. Information with Respect to S-3 Companies........ *
16. Information with Respect to S-2 or S-3 Companies. *
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................. Available Information; Summary; Pro
Forma Financial Information; Selected
Financial Information; Information
Concerning WC; WC Financial
Statements
<PAGE>
(Voting and Management Information)
18. Information if Proxies, Consents or Authorizations Front Cover Page; Summary; The URS
are to be Solicited.............................. Meeting; The WC Meeting; The
Merger; URS Management; Principal
URS Stockholders; Principal WC
Stockholders
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer.. *
<FN>
- ----------
* Not Applicable.
</FN>
</TABLE>
<PAGE>
Part I
URS CORPORATION LETTERHEAD
October 15, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(the "URS Meeting") of URS Corporation, a Delaware corporation ("URS"), on
Thursday, November 13, 1997, beginning at 11:00 A.M., local time, at the offices
of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco, California
94111.
At the URS Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of August 18,
1997 (the "Merger Agreement"), among URS and Woodward-Clyde Group, Inc., a
Delaware corporation ("WC"). The Merger Agreement provides for the merger of WC
with and into a wholly-owned subsidiary of URS (the "Merger"). As a result of
the Merger, the stockholders of WC will exchange their WC stock for aggregate
consideration of $100 million, consisting of $35 million in cash and shares of
URS Common Stock with a value at the closing of $65 million (subject to
adjustment in certain circumstances as noted in the Prospectus/Joint Proxy
Statement accompanying this letter).
After careful consideration, your Board of Directors has unanimously
approved the Merger Agreement and the transactions it contemplates and has
concluded that they are in the best interests of URS and its stockholders. Your
Board of Directors unanimously recommends that the stockholders of URS approve
the Merger.
In the material accompanying this letter, you will find a Notice of
Special Meeting of Stockholders, a Prospectus/Joint Proxy Statement relating to
the actions to be taken by URS stockholders at the URS Meeting (as well as the
actions to be taken by the WC stockholders at their special meeting) and a
proxy. The Prospectus/Joint Proxy Statement more fully describes the proposed
Merger and includes information about URS and WC.
All URS stockholders are cordially invited to attend the URS Meeting in
person. However, whether or not you plan to attend the URS Meeting, please
complete, sign, date and return your proxy in the enclosed envelope. If you
attend the URS Meeting, you may vote in person if you wish, even though you have
previously returned your proxy. It is important that your shares be represented
and voted at the URS Meeting.
We hope you can join us on November 13.
Very truly yours,
<PAGE>
URS CORPORATION
100 California Street, Suite 500
San Francisco, California 94111-4529
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 1997
A Special Meeting of Stockholders of URS Corporation ("URS")
will be held on Thursday, November 13, 1997, at 11:00 A.M., local time, at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California 94111, for the following purposes:
i. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger dated as of August 18, 1997 (the "Merger
Agreement"), among URS, Woodward-Clyde Group, Inc., a Delaware
corporation, and W-C Acquisition Corporation, a Delaware Corporation;
and
ii. To transact such other business as may properly come
before the Special Meeting and any adjournment thereof.
The foregoing items of business are more fully described in
the Prospectus/Joint Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on
September 26, 1997 as the record date for determining the stockholders who will
be entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof. Approval of the Merger Agreement will require the
affirmative vote of a majority of the outstanding shares of URS Common Stock. A
complete list of stockholders entitled to vote will be available at the offices
of URS Corporation, 100 California Street, Suite 500, San Francisco, California
94111-4529, for ten days prior to the Special Meeting.
IF YOU ARE UNABLE TO BE PRESENT AT THE SPECIAL MEETING, YOU ARE
REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE
SO THAT YOUR SHARES WILL BE REPRESENTED.
BY ORDER OF THE BOARD OF DIRECTORS
Kent P. Ainsworth, Secretary
October 15, 1997
<PAGE>
WOODWARD-CLYDE LETTERHEAD
October 15, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders (the "WC Meeting") of Woodward-Clyde Group, Inc., a Delaware
corporation ("WC"), on Thursday, November 13, 1997, beginning at 11:00 A.M.,
local time, at the offices of Bronson, Bronson & McKinnon LLP, 505 Montgomery
Street, 4th Floor, San Francisco, California 94111.
At the WC Meeting, you will be asked to consider and vote upon
a proposal to approve the Agreement and Plan of Merger, dated as of August 18,
1997 (the "Merger Agreement"), among URS Corporation, a Delaware corporation
("URS"), and WC, which provides for the merger of WC with and into a
wholly-owned subsidiary of URS (the "Merger"), and to amend the existing
Shareholders' Agreement between WC and each of the holders of its common stock
to remove all restrictions and requirements which prohibit or would prevent the
transactions contemplated by the Merger Agreement. As a result of the Merger,
the stockholders of WC will exchange their WC stock for aggregate consideration
of $100 million, consisting of $35 million in cash and shares of URS Common
Stock with a value at the closing of $65 million (subject to adjustment in
certain circumstances as noted in the Prospectus/Joint Proxy Statement
accompanying this letter).
After careful consideration, your Board of Directors has
unanimously approved the Merger Agreement and the transactions it contemplates
and has concluded that they are in the best interests of WC and its
stockholders. Your Board of Directors unanimously recommends that the
stockholders of WC approve the Merger.
In the material accompanying this letter, you will find a
Notice of Special Meeting of Stockholders, a Prospectus/Joint Proxy Statement
relating to the actions to be taken by WC stockholders at the WC Meeting (as
well as the actions to be taken by the URS stockholders at their special
meeting) and a proxy. The Prospectus/Joint Proxy Statement more fully describes
the proposed Merger and includes information about URS and WC.
All WC stockholders are cordially invited to attend the WC
Meeting in person. However, whether or not you plan to attend the WC Meeting,
please complete, sign, date and return your proxy in the enclosed envelope. If
you attend the WC Meeting, you may vote in person if you wish, even though you
have previously returned your proxy. It is important that your shares be
represented and voted at the WC Meeting.
We hope you can join us on November 13.
Very truly yours,
<PAGE>
WOODWARD-CLYDE GROUP, INC.
Stanford Place 3, Suite 600
4582 South Ulster Street
Denver, Colorado 80237
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 1997
A Special Meeting of Stockholders of Woodward-Clyde Group,
Inc., a Delaware corporation ("WC"), will be held on Thursday, November 13,
1997, at 11:00 A.M., local time, at the offices of Bronson, Bronson & McKinnon
LLP, 505 Montgomery Street, 4th Floor, San Francisco, California 94111, for the
following purposes:
i. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger dated as of August 18, 1997 (the "Merger
Agreement"), among WC, URS Corporation, a Delaware corporation, and W-C
Acquisition Corporation, a Delaware Corporation, which provides for the
merger of WC with and into a wholly-owned subsidiary of URS (the
"Merger"), and to amend the existing Shareholders' Agreement (the
"Shareholders' Agreement") between WC and each of the holders of its
common stock to remove all restrictions and requirements which prohibit
or would prevent the transactions contemplated by the Merger Agreement;
and
ii. To transact such other business as may properly come
before the Special Meeting and any adjournment thereof.
The foregoing items of business are more fully described in
the Prospectus/Joint Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on
September 26, 1997 as the record date for determining the stockholders who will
be entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof. Approval of the Merger Agreement will require the
affirmative vote of 70% of the outstanding shares of WC Common Stock and a
majority of the outstanding shares of WC Preferred Stock, each voting separately
as a class. Approval of the amendment of the Shareholders' Agreement will
require the affirmative vote of 70% of the outstanding shares of WC Common
Stock, voting separately as a class. A complete list of stockholders entitled to
vote will be available at the offices of WC, Stanford Place 3, Suite 600, 4582
South Ulster Street, Denver, Colorado 80237, for ten days prior to the Special
Meeting.
EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, YOU ARE
REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE SO
THAT YOUR SHARES WILL BE REPRESENTED. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND
OR VOTE AT THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Richard L. Fuller, Secretary
October 15, 1997
<PAGE>
URS CORPORATION WOODWARD-CLYDE GROUP, INC.
PROSPECTUS/JOINT PROXY STATEMENT
This Prospectus/Joint Proxy Statement (the "Prospectus") is being
furnished to the stockholders of URS Corporation, a Delaware corporation
("URS"), in connection with the solicitation of proxies by the URS Board of
Directors for use at a Special Meeting of URS stockholders (the "URS Meeting")
to be held on Thursday, November 13, 1997, at 11:00 A.M., local time, at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California 94111, and at any adjournments or postponements of the URS Meeting.
This Prospectus also is being furnished to the stockholders of Woodward
Clyde Group, Inc., a Delaware corporation ("WC"), in connection with the
solicitation of proxies by the WC Board of Directors for use at a Special
Meeting of WC stockholders (the "WC Meeting") to be held on Thursday, November
13, 1997, at 11:00 A.M., local time, at the offices of Bronson, Bronson &
McKinnon LLP, 505 Montgomery Street, 4th Floor, San Francisco, California 94111,
and at any adjournments or postponements of the WC Meeting.
This Prospectus constitutes the prospectus of URS for use in connection
with the offer and issuance of up to 5,200,000 shares of common stock, par value
$0.01 per share, of URS ("URS Common Stock"), to the stockholders of WC pursuant
to the merger of WC with and into a wholly-owned subsidiary of URS (the
"Merger"), contemplated by an Agreement and Plan of Merger dated as of August
18, 1997 among URS, WC and W-C Acquisition Corporation, a wholly-owned
subsidiary of URS (the "Merger Agreement").
This Prospectus and the accompanying forms of proxy are first being
mailed to stockholders of URS and WC on or about October 15, 1997.
---------------
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROSPECTUS. THE PROPOSED
MERGER IS A COMPLEX TRANSACTION. STOCKHOLDERS OF BOTH URS AND WC ARE STRONGLY
URGED TO READ AND CONSIDER CAREFULLY THIS PROSPECTUS IN ITS ENTIRETY,
PARTICULARLY THE MATTERS REFERRED TO UNDER "RISK FACTORS."
---------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is October 15, 1997.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION........................................................................................... 1
SUMMARY ....................................................................................................... 3
The Companies.......................................................................................... 3
URS Meeting of Stockholders............................................................................ 3
Recommendation of the Board of Directors of URS........................................................ 4
WC Meeting of Stockholders............................................................................. 5
Recommendation of the Board of Directors of WC......................................................... 6
The Merger............................................................................................. 6
Selected URS Historical Financial Data................................................................. 12
Selected WC Historical Financial Data.................................................................. 13
Selected Pro Forma Combined Financial Data............................................................. 13
Per Share Data - Historical and Pro Forma.............................................................. 14
Market Price Data of URS Common Stock.................................................................. 16
Dividend Policy........................................................................................ 16
THE URS MEETING................................................................................................. 18
Date, Time and Place of Meeting........................................................................ 18
Record Date, Voting Rights and Outstanding Shares...................................................... 18
Voting of Proxies...................................................................................... 18
Vote Required.......................................................................................... 18
Quorum; Abstentions; Broker Non-Votes.................................................................. 19
Solicitation of Proxies and Expenses................................................................... 19
Board Recommendation................................................................................... 19
THE WC MEETING.................................................................................................. 20
Date, Time and Place................................................................................... 20
Solicitation of Proxies................................................................................ 20
Record Date and Outstanding Shares..................................................................... 20
Voting of Proxies...................................................................................... 20
Vote Required.......................................................................................... 20
Quorum; Abstentions.................................................................................... 21
Solicitation of Proxies and Expenses................................................................... 21
Board Recommendations.................................................................................. 21
RISK FACTORS.................................................................................................... 22
THE MERGER...................................................................................................... 28
General .............................................................................................. 28
Effective Time of the Merger........................................................................... 28
Merger Consideration................................................................................... 29
Conversion and Exchange of WC Common Stock Certificates................................................ 30
Description of URS Capital Stock....................................................................... 30
Effect on Existing WC Benefit Plans.................................................................... 31
Background of the Merger............................................................................... 32
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
Opinion of URS Financial Advisor....................................................................... 33
Reasons for the Merger; Recommendation of the Board of Directors of URS................................ 37
WC Financial Advisor................................................................................... 38
Reasons for the Merger; Recommendation of the Board of Directors of WC................................. 44
Directors and Executive Officers After the Merger...................................................... 44
Registration and Listing............................................................................... 45
The Merger Agreement................................................................................... 45
Accounting Treatment................................................................................... 49
Certain Federal Income Tax Consequences................................................................ 49
Regulatory Approvals................................................................................... 52
Rights of Dissenting Stockholders...................................................................... 52
Financing of the Merger................................................................................ 53
Interests of Certain Persons in the Transaction........................................................ 54
Material Contacts between URS and WC................................................................... 55
Interests of Named Experts and Counsel................................................................. 55
PRO FORMA FINANCIAL INFORMATION................................................................................. 56
SELECTED FINANCIAL INFORMATION.................................................................................. 62
Selected URS Historical Financial Data................................................................. 62
URS Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................................ 63
Selected WC Historical Financial Data.................................................................. 68
WC Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................ 69
INFORMATION CONCERNING URS...................................................................................... 72
Overview .............................................................................................. 72
Services .............................................................................................. 72
Markets .............................................................................................. 72
Clients .............................................................................................. 74
Competition............................................................................................ 75
Employees.............................................................................................. 75
Properties............................................................................................. 76
Acquisitions........................................................................................... 76
Legal Proceedings...................................................................................... 76
INFORMATION CONCERNING WC....................................................................................... 77
Overview .............................................................................................. 77
Services .............................................................................................. 77
Market Price of and Dividends on Common Equity and Related Stockholder Matters......................... 78
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
URS MANAGEMENT.................................................................................................. 80
Executive Officers of URS.............................................................................. 80
Directors of URS....................................................................................... 81
Summary Compensation Table............................................................................. 84
Option/SAR Tables...................................................................................... 85
Directors' Remuneration................................................................................ 86
Certain Relationships and Related Transactions......................................................... 86
Employment Agreements.................................................................................. 86
PRINCIPAL URS STOCKHOLDERS...................................................................................... 89
PRINCIPAL WC STOCKHOLDERS....................................................................................... 92
COMPARISON OF RIGHTS OF STOCKHOLDERS OF URS AND WC.............................................................. 92
AFFILIATES' RESTRICTIONS ON SALE OF URS COMMON STOCK............................................................ 93
LEGAL MATTERS................................................................................................... 93
EXPERTS ....................................................................................................... 93
INDEX TO FINANCIAL STATEMENTS................................................................................... 95
APPENDICES
Appendix A Merger Agreement
Appendix B Opinion of Smith Barney Inc.
Appendix C Opinion of Oppenheimer & Co., Inc.
Appendix D Delaware Dissenters' Rights Statute
iii
</TABLE>
<PAGE>
NO PERSON HAS BEEN AUTHORIZED BY URS OR WC TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY URS OR WC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS
PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES
TO WHICH THIS PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN
SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
URS is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements
and other information filed by URS can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549; and at the following regional offices of the
Commission: New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048 and the Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. The Commission maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the World Wide Web site is http://www.sec.gov. The
Shares are listed on the New York Stock Exchange ("NYSE") and the Pacific
Exchange ("PE"). Reports, proxy and information statements and other information
concerning URS also may be inspected at the office of the NYSE, 11 Wall Street,
New York, New York, 10005, and at the office of the PE, 301 Pine Street, San
Francisco, California 94104.
Under the rules and regulations of the Commission, the solicitation of
proxies from stockholders of WC to approve and adopt the Merger Agreement
constitutes an offering of URS Common Stock to be issued in connection with the
Merger. Accordingly, URS has filed with the Commission a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to such offering (the "Registration Statement"). This Prospectus
constitutes the prospectus of URS that is filed as part of the Registration
Statement. Other parts of the Registration Statement are omitted from this
Prospectus in accordance with the rules and regulations of the Commission.
Copies of the Registration Statement, including the exhibits to the Registration
Statement and other material that is not included herein, may be inspected,
without charge, at the regional offices of the Commission referred to above, or
obtained at prescribed rates from the Public Reference Section of the Commission
at the address set forth above.
1
<PAGE>
Statements made in this Prospectus concerning the contents of any
contract or other document are not necessarily complete. With respect to each
contract or other document filed as an exhibit to the Registration Statement,
reference is hereby made to that exhibit for a more complete description of the
matter involved, and each such statement is hereby qualified in its entirety by
such reference.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. URS's actual results could differ materially from those discussed
here. Factors that might cause such a difference include, but are not limited
to, those discussed under the caption "Risk Factors" and elsewhere in this
Prospectus.
2
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. The summary does not contain a complete description of the
terms of the Merger and is qualified in its entirety by reference to the full
text of this Prospectus and the Appendices hereto. Stockholders of URS and
stockholders of WC are urged to read this Prospectus and the Appendices in their
entirety and, in particular, the matters referred to under "Risk Factors."
The Companies
URS URS offers a broad range of planning, design and
program and construction management services. URS
serves public and private sector clients on
infrastructure projects involving transportation
systems, facilities and environmental programs. URS was
originally incorporated in California in 1957 and
reincorporated in Delaware in 1976. Unless otherwise
indicated, "URS" refers to URS Corporation, a Delaware
corporation, and its wholly-owned subsidiaries. URS's
principal executive offices are located at 100
California Street, Suite 500, San Francisco, California
94111-4529 and its telephone number is (415) 774- 2700.
W-C Acquisition Corporation ("Acquisition Corp.") is a
newly formed Delaware corporation and a wholly-owned
subsidiary of URS. Acquisition Corp.'s principal
executive offices are located at 100 California Street,
Suite 500, San Francisco, California 94111-4529 and its
telephone number is (415) 774-2700.
WC WC is a multinational professional services firm
specializing in environmental and waste management,
pollution control, water resources, geotechnical
engineering and geo-civil construction. WC serves
clients in the chemical, oil and gas, manufacturing,
pharmaceutical, forest production, mining, water
supply, commercial development and utilities
industries, including more than 250 of the Fortune 500
companies. Woodward-Clyde was originally organized as a
partnership in 1950 and was incorporated in 1955. WC
was later incorporated in Delaware in 1987 as a holding
company for the original corporation and other
Woodward-Clyde entities. WC's principal executive
offices are located at Stanford Place 3, Suite 600,
4582 South Ulster Street, Denver, Colorado 80237 and
its telephone number is (303) 740-2600.
URS Meeting of Stockholders
Date, Time and Place The URS Meeting will be held on Thursday, November 13,
1997, beginning at 11:00 A.M., local time, at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th
Floor, San Francisco, California 94111. At the URS
Meeting, stockholders of URS will be asked to consider
and vote upon a proposal to approve the Merger
Agreement, a copy of which is attached hereto as
Appendix A.
3
<PAGE>
Record Date; Shares
Entitled to Vote Only holders of record of URS Common Stock on September
26, 1997 (the "URS Record Date") are entitled to notice
of and to vote at the URS Meeting. At the close of
business on the URS Record Date, there were outstanding
and entitled to vote 10,746,244 shares of URS Common
Stock, each of which will be entitled to one vote on
each matter to be acted upon. As of the date of this
Prospectus, URS directors, executive officers and their
affiliates collectively hold 3,692,509 shares of URS
Common Stock, or 34.36% of the total outstanding URS
Common Stock. See "The URS Meeting-- Record Date,
Voting Rights and Outstanding Shares" and "Principal
URS Stockholders" below.
Votes Required Approval of the Merger Agreement will require the
affirmative vote of the holders of a majority of the
shares of URS Common Stock outstanding on the URS
Record Date. All of URS's directors and executive
officers have indicated that they will vote their
shares of URS Common Stock for the approval of the
Merger Agreement at the URS Meeting. Delivery of the
proxy solicited hereby or attendance and voting at the
URS Meeting will revoke and supersede any prior proxy.
Recommendation of the Board of Directors of URS
Approval by the Board The Board of Directors of URS has unanimously approved
the Merger Agreement and has determined that the Merger
is in the best interests of URS and its stockholders.
THE URS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE
URS STOCKHOLDERS. The primary factors considered and
relied upon by the URS Board of Directors in reaching
its recommendation are described in "The Merger--
Reasons for the Merger."
Opinion of URS
Financial Advisor Smith Barney Inc. ("Smith Barney") has acted as
financial advisor to URS in connection with the Merger
and has delivered to the Board of Directors of URS a
written opinion dated August 18, 1997 to the effect
that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the Merger
Consideration (as defined below) was fair, from a
financial point of view, to URS. The full text of the
written opinion of Smith Barney dated August 18, 1997,
which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is
attached as Appendix B to this Prospectus and should be
read carefully in its entirety. The opinion of Smith
Barney is directed to the Board of Directors of URS and
relates only to the fairness of the Merger
Consideration from a financial point of view to URS,
does not address any other aspect of the Merger or
related transactions and does not constitute a
recommendation to any stockholder as to how such
stockholder should vote at the URS Special Meeting. See
"The Merger-- URS Financial Advisor."
4
<PAGE>
WC Meeting of Stockholders
Date, Time and Place The WC Meeting will be held on Thursday, November 13
1997, beginning at 11:00 A.M., local time, at the
offices of Cooley Godward LLP, One Maritime Plaza, 20th
Floor, San Francisco, California 94111. At the WC
Meeting, stockholders of WC will be asked to consider
and vote upon a proposal to approve the Merger
Agreement, a copy of which is attached hereto as
Appendix A, and to amend the existing Shareholders'
Agreement between WC and each of the holders of its
common stock (the "Shareholders' Agreement") to remove
all restrictions and requirements which prohibit or
would prevent the transactions contemplated by the
Merger Agreement.
Record Date; Shares
Entitled to Vote Only holders of record of shares of WC common stock,
par value $0.01 per share ("WC Common Stock"), and
shares of WC preferred stock, par value $0.01 per share
("WC Preferred Stock"), on September __, 1997 (the "WC
Record Date") are entitled to notice of and to vote at
the WC Meeting. At the close of business on the WC
Record Date, there were outstanding and entitled to
vote 1,964,175 shares of WC Common Stock and 44,898
shares of WC Preferred Stock (collectively, "WC Capital
Stock"). As of the date of this Prospectus, WC
directors, executive officers and their affiliates
collectively held 295,135 shares of WC Common Stock, or
15.02% of the total outstanding WC Common Stock. WC
directors, executive officers and their affiliates do
not hold any shares of WC Preferred Stock. All of the
outstanding shares of WC Preferred Stock are held by
the General Trustees of the WC Capital Accumulation
(Retirement) Plan (the "WC Retirement Plan"). See "The
WC Meeting-- Record Date and Outstanding Shares."
Votes Required Approval of the Merger Agreement and the amendment to
the Shareholders' Agreement to permit consummation of
the Merger will require the affirmative vote of the
holders of 70% of the shares of WC Common Stock
outstanding on the WC Record Date, voting as a separate
class. Approval of the Merger Agreement also will
require the affirmative vote of a majority of the
shares of WC Preferred Stock outstanding on the WC
Record Date, voting as a separate class. All of WC's
directors and executive officers who are stockholders
have indicated that they will vote their shares of WC
Capital Stock for (i) the approval of the Merger
Agreement and (ii) the amendment of the Shareholders'
Agreement at the WC Meeting. All of the General
Trustees of the WC Retirement Plan have indicated that
they will vote the shares of WC Preferred Stock for
approval of the Merger Agreement at the WC Meeting. See
"The WC Meeting-- Vote Required." Delivery of the proxy
and consent solicited hereby or attendance and voting
at the WC Meeting will revoke and supersede any prior
proxy. Delivery of a signed proxy and consent voted in
favor of the Merger Agreement will also constitute such
stockholder's written consent to the amendment of the
Shareholders' Agreement.
5
<PAGE>
Recommendation of the Board of Directors of WC
Approval by the Board The Board of Directors of WC has unanimously approved
the Merger Agreement and the Merger and determined that
the Merger is in the best interests of WC and its
stockholders. THE WC BOARD RECOMMENDS THAT WC
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT AND AMENDMENT OF THE SHAREHOLDERS' AGREEMENT.
For a discussion of the factors considered by the WC
Board in reaching its decision, see "The Merger -
Reasons for the Merger; Recommendations of the Board of
Directors of WC."
Opinion of WC
Financial Advisor Oppenheimer & Co., Inc. ("Oppenheimer") has acted as
financial advisor to WC in connection with the Merger
and has delivered to the Board of Directors of WC a
written opinion that the consideration to be received
by the current holders of WC Capital Stock in
connection with the Merger is fair to such holders from
a financial point of view. The full text of the opinion
of Oppenheimer, which sets forth the assumptions made,
matters considered and limitations on the review
undertaken by Oppenheimer, is attached as Appendix C to
this Prospectus. WC stockholders are urged to read the
opinion in its entirety. The opinion of Oppenheimer is
directed to the Board of Directors of WC and relates
only to the fairness of the Merger Consideration from a
financial point of view to the current holders of WC
Common Stock, does not address any other aspect of the
Merger or related transactions and does not constitute
a recommendation to WC stockholders as to how such
stockholders should vote with respect to whether they
should approve the Merger. See "The Merger - WC
Financial Advisor."
The Merger
General Terms On August 18, 1997, URS, WC and Acquisition Corp.
entered into the Merger Agreement, which sets forth the
terms and conditions of the Merger. A copy of the
Merger Agreement is included in this Prospectus as
Appendix A. The Merger will be consummated promptly
after the necessary approvals of the URS and WC
stockholders have been obtained and the other
conditions to consummation of the Merger have been
satisfied or waived (the "Effective Time of the
Merger"). Upon consummation of the Merger, WC will
merge with and into Acquisition Corp. As a result, the
stockholders of WC will become stockholders of URS (as
described below), and their rights will be governed by
URS's Amended and Restated Certificate of Incorporation
and Bylaws. See "The Merger."
By virtue of the Merger, each of the shares of WC
Capital Stock issued and outstanding immediately prior
to the Effective Time of the Merger (see "The Merger
Effective Time of the Merger") will automatically be
6
<PAGE>
converted into and exchanged for the right to receive,
in the aggregate, the Merger Consideration. See "The
Merger."
Merger Consideration As a result of the Merger, the shares of WC Common
Stock will be converted into the right to receive, in
the aggregate, $91,693,870, consisting of $26,693,870
in cash and shares of URS Common Stock with a value at
the Effective Time of the Merger of $65 million,
subject to adjustment in certain circumstances as
described below. The value of the URS Common Stock will
be determined on the basis of the average daily closing
price for such stock on the NYSE over the 20 trading
days preceding the closing of the Merger (the "URS
Closing Price"). However, in no event will the total
number of shares of URS Common Stock to be issued to
the holders of WC Common Stock as a result of the
Merger exceed 5,200,000 shares or be less than
4,044,804 shares. Consequently, even if the URS Closing
Price is greater than $16.07 (the price resulting from
dividing $65 million by the minimum number of shares of
URS Common Stock), the holders of WC Common Stock will
receive, in the aggregate, the minimum of 4,044,804
shares of URS Common Stock (which will have a value
greater than $65 million) and also will be entitled to
receive the $26,693,870 in cash. Conversely, if the URS
Closing Price is less than $12.50 (the price resulting
from dividing $65 million by the maximum number of
shares of URS Common Stock), the holders of WC Common
Stock will receive, in the aggregate, the maximum of
5,200,000 shares of URS Common Stock (which will have a
value less than $65 million), but in this event the
cash component of the consideration will be increased
so that the sum of the value of the shares of URS
Common Stock and the cash to be received by the holders
of the WC Common Stock will still equal $91,693,870.
The aggregate consideration to be received by the
holders of the WC Common Stock as a result of the
Merger will be allocated among such holders pro rata
based on the number of shares of WC Common Stock held
so that the aggregate consideration to be received in
exchange for each share of WC Common Stock will be
equal. Based on 1,964,175 shares of WC Common Stock
issued and outstanding on the WC Record Date, and
assuming that the URS Closing Price is $14.28 per share
(the average daily closing price for such stock on the
NYSE over the 20 trading days preceding the date the
Merger Agreement was signed), each share of WC Common
Stock would be converted into the right to receive
$13.59 in cash and 2.317 shares of URS Common Stock,
which would have an indicated aggregate value of $46.68
per share of WC Common Stock.
The shares of WC Preferred Stock, all of which are held
by the General Trustee of the WC Retirement Plan, will
be converted into the right to receive $8,306,130 in
the aggregate in cash. Payment will be made upon the
surrender of the certificate(s) formerly representing
such shares of WC Preferred Stock.
7
<PAGE>
The consideration for the WC Common Stock and the WC
Preferred Stock is collectively referred to in this
Prospectus as the "Merger Consideration". No interest
will accrue or be payable with respect to the cash
portion of the Merger Consideration. See "The Merger -
Merger Consideration."
Fractional Shares No fractional shares of URS Common Stock will be issued
in connection with the Merger. Fractional shares
otherwise issuable will be settled for cash, without
interest, based on the closing price per share of URS
Common Stock as quoted in The Wall Street Journal (the
"WSJ") on the trading day immediately preceding the
Closing Date (as defined in the Merger Agreement, this
is the date on which all conditions to the Merger have
been satisfied, which is expected to be immediately
prior or contemporaneous with the Effective Time of the
Merger).
Issuance and Exchange
of Share Certificates At the Effective Time of the Merger, each holder of WC
Capital Stock prior to consummation of the Merger will
be entitled, upon surrender of the certificate
representing such shares or compliance with procedures
for transfer of shares held in book entry form, to
receive such holder's allocable share of the Merger
Consideration described above. The Merger Consideration
allocable to each holder will not be delivered until
such holder's certificates evidencing WC Capital Stock
have been surrendered by the holder or his or her
nominee. WC stockholders will be furnished separately a
Letter of Transmittal to facilitate the delivery of WC
Capital Stock certificates or shares held in book entry
form to the Exchange Agent designated to disburse the
Merger Consideration. PLEASE DO NOT DELIVER YOUR STOCK
CERTIFICATES TO WC OR THE EXCHANGE AGENT UNTIL YOU
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM
THE EXCHANGE AGENT. See "The Merger - Conversion and
Exchange of WC Capital Stock Certificates."
Marketability of
URS Common Stock The shares of URS Common Stock to be issued to the
holders of WC Common Stock as a result of the Merger
will have been registered under the Securities Act of
1933, as amended (the "Securities Act"), will be listed
on the New York Stock Exchange ("NYSE") and the Pacific
Exchange ("PE") and will be freely marketable. However,
any holder of WC Common Stock who is deemed to be an
affiliate of WC at the Effective Time of the Merger and
any such person who becomes an affiliate of URS as a
result of or following the Merger will be subject to
the volume and manner of sale restrictions imposed on
resales of the URS Common Stock by Rules 144 and 145
under the Securities Act. See "Affiliates' Restrictions
on Sale of URS Common Stock." In addition, in
connection with the Merger, each officer, director and
holder of one percent (1%) or more of the outstanding
shares of WC Common Stock will be asked to provide a
continuity of interest representation in a manner
sufficient to satisfy the requirements of the Internal
Revenue Code for treatment of the Merger as a tax-free
reorganization. See "The Merger - Certain Federal
Income Tax Matters."
8
<PAGE>
Comparison of Rights of
Stockholders of URS
and WC The rights of WC's stockholders are currently governed
by Delaware law and by WC's Certificate of
Incorporation and Bylaws. Upon the effectiveness of the
Merger, WC's stockholders will become stockholders of
URS and their rights as URS stockholders will continue
to be governed by Delaware law and by URS's Amended and
Restated Certificate of Incorporation and Bylaws. See
"Comparison of Rights of Stockholders of URS and WC."
Conditions to Merger The obligations of URS and WC to consummate the Merger
are subject to the satisfaction or waiver of certain
conditions set forth in the Merger Agreement,
including: (i) the conditions to the receipt by URS of
funds from its lenders to finance the Merger have been
satisfied, (ii) the registration of URS Common Stock to
be issued in the Merger under the Securities Act has
remained effective, (iii) the listings of URS Common
Stock to be issued in the Merger with the NYSE and the
PE have become effective, (iv) the Merger and the
amendment to the Shareholders' Agreement have been
approved by the requisite votes of WC and URS
stockholders, (v) there has been no material adverse
change affecting WC or URS, (vi) there is no litigation
challenging the Merger, and (vii) each party has
received customary legal opinions, including opinions
of counsel to the effect that the Merger will
constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). The waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended ("HSR Act"), was terminated on September 8,
1997. See "The Merger - The Merger Agreement."
Financing Facilities URS has received a commitment letter from Wells Fargo
Bank, National Association with respect to term and
revolving credit facilities which will provide the
funds necessary for the cash portion of the Merger
Consideration, for refinancing existing credit
facilities and for working capital following the
Merger. The obligation of URS's lenders to provide such
funds is subject to satisfaction of a number of
conditions precedent by each of URS and WC, including
that URS and WC meet specified financial tests, that
there have been no material adverse changes in the
respective businesses of URS and WC, that final loan
documents have been executed and delivered and that all
conditions precedent to the Merger have been satisfied.
See "The Merger - Financing of the Merger."
Termination, Waiver
and Amendment The Merger Agreement may be terminated at any time
prior to the Effective Time of the Merger: (a) by
mutual written consent of URS and WC; or (b) in certain
circumstances by either WC or URS if (i) there has been
an uncured breach by the other party of any material
representation, warranty, covenant or other agreement
in the Merger Agreement; (ii) any of the conditions set
forth in the Merger Agreement have not been fulfilled
on or prior to the date specified for fulfillment or
have become impossible to fulfill, or (iii) the Merger
has not been consummated by December 31, 1997. See "The
Merger - The Merger Agreement."
9
<PAGE>
At any time before the Merger becomes effective, any
party to the Merger Agreement may (i) extend the time
for the performance of any of the obligations or other
acts of the other parties to the Merger Agreement, (ii)
waive any inaccuracies in the representations and
warranties contained in the Merger Agreement, and (iii)
waive compliance with any of the agreements, covenants
or conditions for the benefit of such party contained
in the Merger Agreement. However, the Commitment Letter
provides that URS may not agree to any material
amendment to, or waive any of its material rights
under, the Merger Agreement without the prior written
consent of Wells Fargo.
The terms of the Merger Agreement would permit the
waiver of the condition that the parties receive
opinions from counsel to the effect that the Merger
will constitute a "reorganization" within the meaning
of Section 368 of the Code (see "Certain Federal Income
Tax Consequences" below). However, in the event that
the receipt of such opinions is waived, the parties
have agreed to amend this Prospectus to disclose the
waiver of this condition and any risks to URS and WC
stockholders arising from such waiver, and distribute
such amended Prospectus to the stockholders of URS and
WC and resolicit URS and WC stockholder approval.
The Merger Agreement may be amended by the parties'
Boards of Director at any time before or after the
approval of the Merger Agreement by the URS and the WC
stockholders, but after such stockholder approvals have
been obtained, no amendment that by law requires the
further approval of such stockholders may be made
without such approval. See "The Merger - The Merger
Agreement."
No-Shop;
Termination Fees The Merger Agreement prohibits WC from soliciting or
entertaining any other offers to acquire WC or all or
substantially all its assets unless the failure to do
so would breach the fiduciary duties of the WC
directors. In the event that WC or any of its officers
or directors enters into any negotiations or
discussions for any reason in breach of the no-shop
provision of the Merger Agreement, WC has agreed to
immediately reimburse URS for all expenses and costs
incurred by URS in connection with the Merger up to an
aggregate maximum of $500,000. In the event that WC or
any of its officers or directors enters into any letter
of intent, agreement or understanding with any party
other than URS relating to the sale of all or a
substantial part of the assets, business or stock of WC
during the period prior to the Closing or within nine
months after termination of the Merger Agreement for
any reason, WC has agreed to pay URS a termination fee
of $3,500,000, less the aggregate amount of the URS
expenses and costs previously reimbursed to URS. See
"The Merger - The Merger Agreement."
Accounting Treatment The Merger is expected to be treated as a "purchase"
under generally accepted accounting principles. See
"The Merger - Accounting Treatment."
Tax Consequences of
The Merger URS and WC have received opinions from their respective
legal counsel to the effect that the Merger will be
treated as a "reorganization" within the meaning of
Section 368 of the Code, so that no gain or loss will
be recognized by the WC stockholders on the exchange of
WC Capital Stock for URS Common Stock, except to the
extent that WC stockholders receive cash in lieu of
fractional shares or upon exercise of dissenters'
rights. In addition, gain, but not loss, will be
recognized to the extent of cash received in exchange
for WC Capital Stock, but not in excess of the gain
realized by a WC stockholder in the Merger. The Merger
Agreement does not require the parties to obtain a
ruling from the Internal Revenue Service (the "IRS") as
to the tax consequences of the Merger. WC stockholders
are urged to consult their own tax advisors regarding
such tax consequences. See "The Merger-- Certain
Federal Income Tax Matters."
10
<PAGE>
Effect of Merger on
WC Plan Participants Upon the execution of the Merger Agreement, WC
suspended any obligation to contribute shares of WC
Preferred Stock to, or to redeem shares of WC Preferred
Stock from, the WC Retirement Plan during the period
from the date of the Merger Agreement to the Effective
Time of the Merger.
WC also agreed, at the option of URS, to either
terminate the WC Retirement Plan and/or the GCH
Acquisition Corp. Retirement Program (the "GCH Plan")
prior to the Effective Time of the Merger and/or merge
the WC Retirement Plan and the GCH Plan with and into
the URS 401(k) Retirement Plan (the "URS 401(k) Plan")
from the Effective Time of the Merger, and to eliminate
any options available to the WC Retirement Plan, the
GCH Plan or their participants to purchase employer
securities with assets held in the WC Retirement Plan
or the GCH Plan from and after the Effective Time of
the Merger. In the event that either of these plans is
terminated, participants will have the option of
withdrawing the balance of their accounts (which will
be a taxable event) or rolling such account balance
into the URS 401(k) Plan or another qualified plan
(such as an IRA), which should not be taxed. WC and URS
are currently exploring potential methods of merging
the WC Retirement Plan, the GCH Plan and the URS 401(k)
Plan in a transaction to be made effective some date
after the Effective Date of the Merger.
Effect of Merger on
WC Bonus Plan The Merger Agreement also provides that after the
Effective Time of the Merger, URS will complete an
audit of the consolidated financial statements of WC
for the period beginning on January 1, 1997 and ending
on the Effective Time of the Merger (the "Bonus
Period"). Promptly following the completion of such
audit, URS will pay bonuses to the former employees of
WC in a manner consistent with prior practices, but
prorated for the Bonus Period. See "The Merger - Effect
on Existing WC Benefit Plans."
Dissenters' Rights Holders of WC Capital Stock have rights to dissent to
the Merger and seek a judicial determination of the
value of the shares of WC Capital Stock. See "The
Merger - Rights of Dissenting Stockholders."
Management of URS
Following the Merger The management of URS after the Merger will not change,
except that after the Effective Time of the Merger,
Messrs. Frank S. Waller and Jean-Yves Perez will become
executive officers and directors of URS. See "The
Merger - Directors and Executive Officers After the
Merger."
Merger Expenses and
Fees and Other Costs URS and WC estimate that they will incur direct
transaction costs of approximately $10,000,000 in
connection with the Merger. See "Unaudited Pro Forma
Combined Condensed Financial Information." Whether or
not the Merger is consummated, each party will bear its
own costs and expenses in connection with the Merger
Agreement and the transactions provided for therein.
11
<PAGE>
Regulatory Matters URS and WC are not aware of any governmental or
regulatory approvals required for consummation of the
Merger, other than certain foreign filings and
compliance with the Federal securities laws and
applicable securities ("blue sky") laws of various
states and other jurisdictions in which URS and WC
stockholders reside.
<TABLE>
Selected URS Historical Financial Data
The following selected historical financial information of URS shown
below for the five years ended October 31, 1996 has been derived from URS's
audited consolidated financial statements, and the following selected historical
financial information of URS shown below for the nine months ended July 31, 1996
and 1997 has been derived from URS's unaudited consolidated financial statements
included in its Form 10-Qs for such periods. This information should be read in
conjunction with URS's consolidated financial statements and the related notes
included in this Prospectus. Historical operating results are not necessarily
indicative of the results that may be expected in any future period.
<CAPTION>
Nine Months Ended
July 31, Years Ended October 31,
---------------------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------------
(unaudited) (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenue $295,496 $203,101 $305,470 $179,769 $164,088 $145,761 $136,793
Net Income $7,834 $4,403 $7,355 $5,056 $4,439 $1,293 $4,268
Earnings per share:
Primary $.74 $.51 $.82 $.68 $.60 $.18 $.55
Fully Diluted $.74 $.51 $.80 $.67 $.60 $.18 $.55
Balance Sheet Data
(end of period)
Total assets $191,914 $168,333 $185,607 $75,935 $65,214 $58,074 $54,892
Working Capital $59,264 $51,776 $57,572 $36,307 $33,674 $27,684 $26,836
Long-term liabilities $47,852 $55,990 $58,596 $11,197 $10,650 $9,846 $10,038
Stockholders' Equity $72,354 $53,510 $56,696 $39,478 $33,973 $29,389 $27,878
</TABLE>
12
<PAGE>
<TABLE>
Selected WC Historical Financial Data
The following selected historical financial information of WC shown
below for the five years ended December 31, 1996 has been derived from WC's
audited consolidated financial statements, and the following selected historical
financial information of WC shown below for the six months ended June 30, 1997
and 1996 has been derived from WC's unaudited consolidated financial statements
for such periods. This information should be read in conjunction with WC's
consolidated financial statements and the related notes included in this
Prospectus. Historical operating results are not necessarily indicative of the
results that may be expected in any future period.
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
---------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------
(unaudited) (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenue $161,225 $156,443 $320,228 $310,394 $273,880 $268,801 $271,342
Net Income $ 3,361 $ 1,033 $ 1,604 $ 2,820 $ 5,149 $ 4,562 $ 5,601
Net income applicable to
common shares $ 2,876 $ 485 $ 514 $ 1,599 $ 3,793 $ 3,080 $ 4,602
Net income per share $ 1.46 $ 0.25 $ 0.26 $ 0.82 $ 1.97 $ 1.50 $ 2.24
Balance Sheet Data
(end of period)
Total assets $137,386 $134,729 $127,390 $133,444 $104,836 $104,742 $101,881
Working Capital $ 29,641 $ 31,108 $ 27,829 $ 37,840 $ 46,016 $ 45,936 $ 29,311
Long-term liabilities $ 15,227 $ 22,511 $ 17,787 $ 28,710 $ 29,645 $ 30,540 $ 13,577
Redeemable preferred stock $ 6,437 $ 5,525 $ 5,395 $ 5,035 $ 5,062 $ 4,856 $ 4,419
Stockholders' Equity $ 40,646 $ 37,608 $ 38,272 $ 37,665 $ 34,167 $ 33,059 $ 31,917
</TABLE>
No cash dividends have been declared on the WC Common Stock.
Selected Pro Forma Combined Financial Data
The following unaudited selected pro forma historical financial
information shown below is based on the historical consolidated balance sheets
and related consolidated statements of operations of URS and WC adjusted to give
effect to the Merger using the purchase method of accounting for business
combinations.
The unaudited pro forma combined condensed balance sheet as of July 31,
1997 assumes that the Merger occurred as of that date. The unaudited pro forma
combined condensed statement of operations for the fiscal year ended October 31,
1996 assumes that the Merger occurred as of November 1, 1995. The unaudited pro
forma combined condensed statement of operations for the nine months ended July
31, 1997 assumes that the Merger occurred as of November 1, 1995. In order to
present comparable data for the combining companies, the pro forma statement of
operations includes the historical data for WC for the nine month period ended
June 30, 1997 and for the fiscal year ended December 31, 1996.
This pro forma information should be read in conjunction with the
unaudited pro forma combined condensed financial information and the related
notes included in this Prospectus. The unaudited pro forma financial information
is not necessarily indicative of the operating results or financial position
that
13
<PAGE>
would have occurred had the Merger been consummated on the dates indicated in
the preceding paragraph nor is it necessarily indicative of future operating
results or financial position of the combined companies.
Nine Month Period Ended Fiscal Year Ended
July 31, 1997 October 31, 1996
Pro Forma Income Statement Data:
Revenue $538,354,000 $625,698,000
Net income $ 9,186,000 $ 6,029,000
Earnings per share 0.60 0.43
Cash dividends per share $ -- $ --
As Of
July 31, 1997
Pro Forma Balance Sheet Data:
(end of period)
Total assets $377,190,000
Working capital $ 89,246,000
Long-term liabilities $108,420,000
Stockholders' equity $137,354,000
Per Share Data - Historical and Pro Forma
Set forth below is certain common share data of URS and WC on an
historical basis, a pro forma basis for URS and an equivalent pro forma basis
for WC. The URS pro forma data was derived by combining historical consolidated
financial information of URS and WC, giving effect to the Merger under the
purchase method of accounting for business combinations. The equivalent pro
forma common share data for WC was calculated by multiplying the URS pro forma
per common share data by the exchange ratio of 2.3174 (based on 1,964,175 shares
of WC Common Stock issued and outstanding on the WC Record Date, and assuming
that the URS Closing Price is $14.28 per share (the average daily closing price
for such stock on the NYSE over the 20 trading days preceding the date the
Merger Agreement was signed)).
<TABLE>
This information should be read in conjunction with the historical
financial statements of URS and WC included elsewhere in this Prospectus and the
unaudited pro forma combined condensed financial information included elsewhere
in this Prospectus. <CAPTION>
Nine Month Period Ended Fiscal Year Ended
July 31, 1997 October 31, 1996
<S> <C> <C>
URS
Historical Per Common Share Data:
Net Income $0.74 $0.80
Dividends - -
Book Value $6.84 $6.56
14
<PAGE>
Pro Forma Period Pro Forma Year Ended
Ended July 31, 1997 October 31, 1996
Pro Forma Per Common Share Data:
Net Income $0.60 $0.43
Dividends - -
Book Value $9.03 $ -
Six Month Period Fiscal Year Ended
Ended June 30, 1997 December 31, 1996
WC
Historical Per Common Share Data:
Net Income $ 1.46 $ 0.26
Dividends - -
Book Value $20.68 $19.37
Pro Forma Period Pro Forma Year Ended
Ended July 31, 1997 October 31, 1996
Equivalent Pro Forma Per Common Share Data:
Net Income $ 1.39 $ 1.00
Dividends - -
Book Value $20.95 $ -
</TABLE>
Per share amounts for net income were computed based on the number of
average shares outstanding during the period and the dilutive effect of the
common share equivalents. Per share amounts for book value were computed based
on the number of shares outstanding at the end of the period presented. URS's
pro forma dividends per common share assume no dividend payments in accordance
with URS's historical dividend policy.
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Market Price Data of URS Common Stock
URS Common Stock is quoted under the trading symbol "URS" on the NYSE
and PE. The following table sets forth for the periods indicated the high and
low sales prices per share of URS Common Stock on the NYSE, as reported by the
WSJ.
MARKET PRICE
----------------
LOW HIGH
--- ----
Fiscal Period:
1995:
First Quarter $ 5.00 $6.00
Second Quarter $ 5.38 $6.00
Third Quarter $ 5.25 $5.88
Fourth Quarter $ 5.50 $6.63
1996:
First Quarter $ 6.38 $7.25
Second Quarter $ 6.25 $7.25
Third Quarter $ 6.88 $8.25
Fourth Quarter $ 7.00 $8.88
1997:
First Quarter $ 7.75 $10.38
Second Quarter $ 9.50 $10.88
Third Quarter $ 9.63 $15.06
Fourth Quarter (through October 6, 1997) $13.13 $18.81
On August 18, 1997, the last trading day prior to the announcement by
URS that it had executed the Merger Agreement, the closing price of URS Common
Stock, as reported in the WSJ, was $13.63. As of the URS Record Date, there were
approximately 2,819 stockholders of record who held shares of URS Common Stock,
as shown on the records of URS's transfer agent for such shares.
Shares of WC Common Stock are made available from time to time by WC
for purchase by selected professional employees of WC at prices set by the WC
Board of Directors. Since January 1, 1997, the purchase price has been set at
$25.00 per share. There is no public trading market for WC securities. However,
WC repurchases such securities from time to time upon the satisfaction of
certain conditions. Repurchases are made at the same purchase price as is
determined by the WC Board of Directors for sales of WC Common Stock by WC. See
"Information Concerning WC - Market Price of and Dividends on Common Equity and
Related Stockholder Matters." As of the WC Record Date, there were approximately
490 stockholders of record who held shares of WC Common Stock and one
stockholder of record who held shares of WC Preferred Stock.
Dividend Policy
URS has not paid cash dividends since 1986 and at the present time,
management of URS does not anticipate paying dividends in the near future.
Further, URS is precluded from paying dividends on its outstanding common stock
pursuant to its existing secured credit agreement and the terms of the new
credit arrangement contemplated by the Commitment Letter (as defined below).
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WC has never paid dividends on the WC Common Stock. Under the terms of
its Financing Agreement dated September 23, 1996 with The CIT Group/Business
Credit, Inc. (the "WC Financing Agreement"), WC and certain of its major
subsidiaries are prohibited from paying any dividends on their capital stock
without the prior written consent of the agent of the lenders. It is anticipated
that all indebtedness outstanding under the WC Financing Agreement will be fully
paid and that the WC Financing Agreement will be terminated following the
consummation of the Merger.
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THE URS MEETING
Date, Time and Place of Meeting
The URS Meeting will be held on Thursday, November 13, 1997, beginning
at 11:00 A.M., local time, at the offices of Cooley Godward LLP, One Maritime
Plaza, 20th Floor, San Francisco, California 94111.
Record Date, Voting Rights and Outstanding Shares
Only holders of record of URS Common Stock at the close of business on
September 26, 1997, the URS Record Date are entitled to vote at the URS Meeting.
As of the close of business on the URS Record Date, there were 10,746,244 shares
of URS Common Stock outstanding and entitled to vote, held of record by
approximately 2,819 stockholders. Each URS stockholder is entitled to one vote
for each share of URS Common Stock held as of the URS Record Date.
Each holder of record of URS Common Stock on the URS Record Date will
be entitled to one vote for each share held on all matters to be voted upon. All
votes will be tabulated by the inspector of election appointed for the meeting,
who will separately tabulate affirmative and negative votes, abstentions and
broker non-votes. Abstentions and broker non-votes are counted towards a quorum
but are not counted for any purpose in determining whether a matter is approved.
Voting of Proxies
The URS proxy accompanying this Prospectus is solicited on behalf of
the Board of Directors of URS for use at the URS Meeting. Stockholders are
requested to complete, date and sign the accompanying proxy and promptly return
it in the accompanying envelope or otherwise mail it to URS. All proxies that
are properly executed and returned, and that are not revoked, will be voted at
the URS Meeting in accordance with the instructions indicated on the proxies or,
if no direction is indicated, to approve the Merger Agreement. URS's Board of
Directors does not presently intend to bring any business before the URS Meeting
other than the specific proposals referred to in this Prospectus and specified
in the notice of the URS Meeting. So far as is known to URS's Board of
Directors, no other matters are to be brought before the URS Meeting. As to any
business that may properly come before the URS Meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies. A URS
stockholder who has given a proxy may revoke it at any time before it is
exercised at the URS Meeting, by (i) delivering to the Secretary of URS (by any
means, including facsimile) a written notice, bearing a date later than the date
of the proxy, stating that the proxy is revoked, (ii) signing and so delivering
a proxy relating to the same shares and bearing a later date prior to the vote
at the URS Meeting, or (iii) attending the URS Meeting and voting in person
(although attendance at the URS Meeting will not, by itself, revoke a proxy).
Vote Required
Approval of the Merger Agreement will require the affirmative vote of a
majority of the outstanding shares of URS Common Stock.
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Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the URS Meeting
is a majority of the shares of Common Stock outstanding on the URS Record Date.
Abstentions and broker non-votes each will be included in determining whether a
quorum is present. Abstentions will be counted towards the tabulation of votes
cast. Abstentions will have the same effect as a vote against the Merger
Agreement. Broker non-votes will not be counted for any purpose in determining
whether the proposal to approve the Merger has been approved.
Solicitation of Proxies and Expenses
URS will bear the entire cost of the solicitation of proxies, including
preparation, assembly, printing and mailing of this Prospectus, the proxy and
any additional information furnished to its stockholders. Copies of the
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of URS's Common Stock beneficially
owned by others to forward to such beneficial owners. URS may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, letter or personal
solicitation by directors, officers, or other regular employees of URS. No
additional compensation will be paid to directors, officers and other regular
employees for such services.
Board Recommendation
THE BOARD OF DIRECTORS OF URS BELIEVES THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF URS AND ITS STOCKHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
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THE WC MEETING
Date, Time and Place
The WC Meeting will be held on Thursday, November 13, 1997, beginning
at 11:00 A.M., local time, at the offices of Bronson, Bronson & McKinnon LLP,
505 Montgomery Street, 4th Floor, San Francisco, California 94111.
Solicitation of Proxies
The enclosed proxy and consent is solicited on behalf of the Board of
Directors of WC for use at the WC Meeting, or at any adjournment thereof. Any
proxy and consent given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the corporate
Secretary of WC a written notice of revocation or a duly executed proxy and
consent bearing a later date or by attending the WC Meeting and voting in
person.
Record Date and Outstanding Shares
Only stockholders of record at the close of business on the WC Record
Date are entitled to vote at the WC Meeting. At the close of business on the WC
Record Date, there were 1,964,175 shares of WC Common Stock and 44,898 shares of
WC Preferred Stock outstanding and entitled to vote. WC stockholders are
entitled to one vote for each share of Common Stock and one vote for each share
of WC Preferred Stock held on the Record Date. All of the outstanding shares of
WC Preferred Stock are held by the General Trustees of the WC Capital
Accumulation (Retirement) Plan, who are currently Frank S. Waller, James R.
Obermeyer and Richard L. Fuller.
Voting of Proxies
The WC proxy and consent accompanying this Prospectus is solicited on
behalf of the Board of Directors of WC for use at the WC Meeting. Stockholders
are requested to complete, date and sign the accompanying proxy and consent and
promptly return it in the accompanying envelope or otherwise mail it to WC. The
signature of a stockholder of WC Common Stock on a returned proxy and consent
voted in favor of the Merger Agreement will constitute such stockholder's
written consent to the amendment of the Shareholders' Agreement, as required
therein. All proxies and consents that are properly executed and returned, and
that are not revoked, will be voted at the WC Meeting in accordance with the
instructions indicated on the proxies and consents or, if no direction is
indicated, to approve the Merger Agreement. WC's Board of Directors does not
presently intend to bring any business before the WC Meeting other than the
specific proposals referred to in this Prospectus and specified in the notice of
the WC Meeting. So far as is known to WC's Board of Directors, no other matters
are to be brought before the WC Meeting. As to any business that may properly
come before the WC Meeting, however, it is intended that proxies and consents,
in the form enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such proxies and consents. Any WC stockholder who
has given a proxy and consent may revoke it at any time before it is exercised
at the WC Meeting, by (i) delivering to the Secretary of WC (by any means,
including facsimile) a written notice, bearing a date later than the date of the
proxy and consent, stating that the proxy and consent is revoked, (ii) signing
and so delivering a proxy and consent relating to the same shares and bearing a
later date prior to the vote at the WC Meeting, or (iii) attending the WC
Meeting and voting in person (although attendance at the WC Meeting will not, by
itself, revoke a proxy and consent).
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Vote Required
Approval of the Merger Agreement by WC stockholders is required by the
Delaware General Corporation Law and the WC Certificate. In addition, the Merger
Agreement requires as a condition of closing that the Merger Agreement and the
Merger have been duly approved by the affirmative vote of at least (a) 70% of
the shares of WC Common Stock outstanding on the WC Record Date, voting as a
separate class and (b) a majority of the shares of WC Preferred Stock
outstanding on the WC Record Date, voting as a separate class. See "The Merger
The Merger Agreement."
The Shareholders' Agreement does not expressly contemplate a
transaction such as the Merger, and contains certain rights of first refusal,
transfer restrictions and other provisions which could interfere with or
complicate consummation of the Merger. Accordingly, the Merger Agreement
contemplates amending the Shareholders' Agreement in such manner as may be
necessary to permit consummation of the Merger without interference or
complication. At the Effective Time of the Merger, the Shareholders' Agreement
would then be terminated and have no further force or effect. The amendment of
the Shareholders' Agreement in this manner requires the affirmative vote of
holders of 70% of the shares of WC Common Stock outstanding on the WC Record
Date. The signature of a stockholder of WC Common Stock on a returned proxy and
consent voted in favor of the Merger Agreement will constitute such
stockholder's written consent to the amendment of the Shareholders' Agreement,
as required therein.
All of WC's directors and executive officers who are stockholders have
indicated that they will vote their shares of WC Capital Stock for the approval
of the Merger Agreement and the amendment of the Shareholders' Agreement at the
WC Meeting. All of the General Trustees of the WC Capital Accumulation
(Retirement) Plan have indicated that they will vote the shares of WC Preferred
Stock for approval of the Merger Agreement at the WC Meeting. At the WC Record
Date, the directors and executive officers of WC as a group hold 15.02% of the
outstanding shares of WC Common Stock. As of the WC Record Date and the date of
this Prospectus, URS owns no shares of WC Capital Stock.
Quorum; Abstentions
The required quorum for the transaction of business at the WC Meeting
is a majority of the shares of WC Common Stock and a majority of the shares of
WC Preferred Stock outstanding on the WC Record Date. Abstentions will be
counted for purposes of determining the presence of a quorum. Abstentions will
be counted towards the tabulation of the votes cast. Abstentions will have the
same effect as a vote against the Merger Agreement and the amendment of the
Shareholders' Agreement.
Solicitation of Proxies and Expenses
WC will bear the cost of solicitation of proxies in the enclosed form
from its stockholders. In addition to solicitation by mail, the directors,
officers and employees of WC may solicit proxies from stockholders by telephone,
telegram, telecopy, letter or in person.
Board Recommendation
THE BOARD OF DIRECTORS OF WC BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF WC AND ITS STOCKHOLDERS AND THEREFORE UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE MERGER AGREEMENT AND AMENDMENT OF THE SHAREHOLDERS'
AGREEMENT. STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
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RISK FACTORS
The following risk factors should be considered by holders of WC
Capital Stock in evaluating whether to approve the Merger Agreement and thereby
become holders of URS Common Stock, and by holders of URS Common Stock in
evaluating whether to approve the acquisition of WC and the issuance of shares
of URS Common Stock pursuant to the Merger Agreement. These factors should be
considered in conjunction with the other information included in this
Prospectus.
Except for the historical information contained herein, the following
discussion contains forwardlooking statements that involve risks and
uncertainties. URS's actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in "Risk Factors" as well as in the sections
entitled "Summary," "Unaudited Pro Forma Condensed Combined Financial
Information," "Business of URS," "Business of WC," "Management's Discussion and
Analysis of Financial Condition and Results of Operations of URS" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of WC."
Joint Risk Factors
Merger of WC and URS
The respective Boards of Directors and managements of URS and WC
believe that the combination of the companies is important to the growth and
development of their business domestically and worldwide. Achieving the
anticipated benefits of the acquisition will depend in part upon whether the
integration of the two companies' businesses is accomplished in an efficient and
effective manner. Although the management teams of the two companies are fully
committed to a successful integration, there can be no assurance that this will
occur. The inability of management to integrate the operations of the two
companies successfully, including but not limited to, failure to retain existing
clients and employees of both companies, could have a material adverse effect on
the combined enterprise.
URS Risk Factors
Dependence Upon Government Programs and Contracts
URS derives more than eighty percent of its revenues from local, state
and Federal government agencies. The demand for URS's services is directly
related to the level of funding of government programs that are created in
response to public concern with rebuilding and expanding the nation's
infrastructure and addressing various environmental problems. URS believes that
the success and further development of its business is dependent, in significant
part, upon the continued existence and funding of such programs and upon URS's
ability to participate in such programs. There can be no assurance that public
pressure for such programs will continue, that governments will have the
available resources to fund such programs, that such programs will continue to
be funded even if governments have available financial resources, or that URS
will continue to be awarded contracts under such programs. More than eighty
percent of URS's current and anticipated work is related to government
contracts. Some of these contracts are subject to renewal or extension annually,
so continued work by URS under these contracts in future periods is not assured.
In addition, contracts with government agencies are subject to termination for
convenience of the agency, and contracts with government agencies that have
adopted Federal Acquisition Regulations are subject to an audit of actual costs
incurred and provide for upward or downward adjustment of payments if audited
costs differ from billed costs.
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Pricing Risks
URS's services are billed on either a "cost-plus" or a "fixed-price"
basis. Under cost-plus contracts, the rates for URS's direct and indirect costs
are negotiated and fixed before work commences. Under fixed-price contracts, the
entire contract price is fixed before work commences. Frequently, URS submits
proposals on extremely complex projects that will be performed over the course
of several years, making the accurate forecasting of costs very difficult. To
the extent that URS's actual overhead and general and administrative costs
exceed government limits and cannot be fully recovered, or the scope of URS's
work cannot be completed within its original budget and a supplemental work
order cannot be obtained, URS could experience low profit margins or losses on a
portion of both its cost-plus and fixed-price contracts.
Environmental and Professional Liability Exposure;
Adequacy of Insurance Coverage
A significant part of URS's business involves the planning, design and
program and construction management of a wide variety of complex projects. If
problems develop with these projects, either while under construction or after
they have been completed, claims may be made against URS alleging breach of
contract or negligence in the performance of its professional services. In
addition, URS's professional services involve the planning, design and program
and construction management of waste management and pollution control
facilities. Federal laws, such as the Resource Conservation and Recovery Act of
1976 ("RCRA") and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), and various state and local laws, strictly
regulate the handling, removal, treatment and transportation of toxic and
hazardous substances and impose liability for environmental contamination caused
by such substances. Moreover, so-called "toxic tort" litigation has increased
markedly in recent years as those injured by hazardous substances seek recovery
for personal injuries or property damage under common law theories. While URS
does not directly handle, remove, treat or transport toxic or hazardous
substances, some of URS's contracts require URS to design systems for those
functions or to subcontract for or supervise such work. As a consequence, URS
may be exposed to claims for damages caused by environmental contamination
arising from projects on which URS has worked. Currently, URS has $51.0 million
per occurrence and aggregate commercial general liability insurance coverage.
URS is also insured for professional errors and omissions ("E&O") and contractor
pollution liability ("CPL") claims with an aggregate limit of $30.0 million
after a self-insured retention of $0.5 million. The E&O and CPL coverages are on
a "claims made" basis, covering only claims actually made during the policy
period currently in effect. Thus, if URS does not continue to maintain this
policy, it will have no coverage under the policy for claims made after its
termination date even if the occurrence was during the term of coverage. It is
URS's intent to maintain this type of coverage, but there can be no assurance
that URS can maintain its existing coverage, that claims will not exceed the
amount of insurance coverage or that there will not be claims relating to prior
periods that were subject only to "claims made" coverage.
Attraction and Retention of Qualified Professionals
URS's ability to retain and expand its staff of qualified technical
professionals will be an important factor in determining URS's future success.
There is from time to time a shortage of qualified technical professionals in
various fields. The market for engineering and environmental professionals is
competitive and there can be no assurance that URS will continue to be
successful in its efforts to attract and retain such professionals. In addition,
URS relies heavily upon the experience and ability of its
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senior executive staff and the loss of a significant portion of such individuals
could have a material adverse effect on URS.
Principal Stockholders
As of September 5, 1997, URS has 10,594,025 shares of URS Common Stock
outstanding (assuming no exercise of options after such date). Richard C. Blum &
Associates, Inc. ("RCBA Inc.") is the sole general partner of Richard C. Blum &
Associates, L.P. ("RCBA L.P."), which is, in turn, the sole general partner of
BK Capital Partners I, L.P., BK Capital Partners II, L.P., BK Capital Partners
III, L.P. and BK Capital Partners IV, L.P., and the investment advisor to The
Common Fund. Accordingly, as of the date hereof, RCBA Inc. has voting and
dispositive control with respect to an aggregate of 2,933,888 shares of URS
Common Stock, or approximately 28% of the outstanding shares of URS Common
Stock. Richard C. Blum, Vice Chairman of the Board of Directors of URS, is the
majority shareholder of RCBA Inc. and directly owns 8,833 shares of URS Common
Stock, is the beneficiary of a Keogh Plan which holds 2,454 shares of URS Common
Stock, and holds options to purchase 9,000 shares of URS Common Stock, all of
which are currently exercisable.
URS's principal lender, Wells Fargo Bank, National Association ("Wells
Fargo"), holds an aggregate of 724,371 shares of URS Common Stock, or
approximately 7% of the outstanding shares of URS Common Stock. In addition,
several institutional investors, Heartland Advisors, Inc., Dimensional Fund
Advisors, Inc. and FMR Corp., hold an aggregate of 3,379,561 shares of URS
Common Stock, or approximately 32% of the outstanding shares of URS Common
Stock.
Volatility; Market for the Shares
Shares of URS Common Stock are listed for trading on the NYSE and the
PE. URS Common Stock has been thinly traded, which may have caused substantial
fluctuations in the market price of the Shares. Fluctuations in quarterly
financial results and general economic conditions such as recessions or high
interest rates may also cause the market price of URS Common Stock to fluctuate
substantially.
Competition
The architectural and engineering services industry is highly
fragmented and very competitive. As a result, in each specific market area, URS
competes with many engineering and consulting firms, several of which are
substantially larger than URS and which possess greater financial resources.
Competition is based upon reputation, quality of service, price, expertise and
local presence.
WC Risk Factors
Weakness in 1996 Operating Results
WC's consolidated 1996 financial statements reflect a decline in net
revenue from 1995 levels, due, in part, to a reduction in consulting revenues
from domestic private industry clients and revenues from Federal government
projects. These declines were partly due to the negative impact of delays in
implementation of Federal environmental legislation, and to price discounts
offered by WC to remain competitive. WC's international and construction
businesses also had negative effects on WC's operating results. While net income
reported for the first six months of 1997 increased over 1996, there can be no
assurance that the conditions which existed in 1996 will not reoccur, which
would have a material adverse effect on WC.
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Attraction and Retention of Professional Personnel
WC's future success depends upon the continued service of numerous key
engineering, scientific and executive personnel. The market for these
professionals is competitive. There can be no assurance that WC will be able to
continue to attract and retain qualified personnel necessary for the maintenance
and development of its business. Loss of the services of, or failure to recruit,
key engineering and scientific personnel could have a material adverse effect on
WC.
Professional and Environmental Liability Exposure;
Adequacy of Insurance Coverage
In a similar fashion to those of URS discussed previously, WC's
consulting services, especially those relating to toxic and hazardous materials,
involve significant risks of professional and other liability. WC is subject to
claims against it for breach of contract or negligence in the performance of its
professional planning, design, and program and construction management of
complex projects. WC's services are involved in waste management and pollution
control facilities, and WC is therefore also subject to RCRA, CERCLA, and
various state and local laws regulating the handling, removal, treatment and
transportation of toxic and hazardous substances, the imposition of liability
for environmental contamination caused by such substances, and by "toxic tort"
litigation. WC is actively engaged in planning and design, as well as the
construction of environmental remediation projects. As a result, WC is subject
to exposure to claims for damages caused by environmental contamination arising
from projects on which WC has worked.
WC was founded as a geotechnical engineering firm and has continually
maintained a prominent geotechnical practice, which now represents approximately
23% of its business. This area of professional practice has traditionally been
viewed by the insurance industry as one involving a high professional liability
exposure. Much of this risk, however, has been associated with residential
housing development, a practice from which WC withdrew in the early 1980's.
While the company maintains strong risk management and quality assurance
programs, there is inherent risk associated with the geotechnical practice in
which the firm continues to be engaged, particularly related to large projects
such as dams, tunnels, and other earthworks.
WC maintains insurance coverage, including professional liability and
environmental impairment coverage, for its operations. Although WC's excess
errors and omissions ("E&O") and pollution coverage is procured from standard
insurance providers, approximately the first $4,000,000 of professional
liability risks for each claim year, and approximately the first $1,000,000 of
contractors pollution risks for each claim year, are carried through its
wholly-owned captive insurance subsidiary, Montgomery Group, Ltd. ("MGL"), a
Bermuda insurance company. MGL's sole business purpose is to provide this
insurance to WC. In terms of financial risk, a captive insurance program such as
this is the equivalent of managing a very large deductible or self-insured
retention ("SIR") and requires special procedures for setting and updating loss
reserves within the limit of the SIR. While WC believes that its reserve setting
and reserve funding provisions are adequate, there can be no assurance that
covered losses within this primary layer of self-insurance will not exceed
established reserves. There can be no assurance that insurance above that
portion borne by MGL will continue to be available, or that the dollar amount of
WC's liabilities will not exceed the insurance policy limits. The continued
availability and cost of insurance will depend upon market conditions, the
claims record of WC and the claims experience of the insurers providing such
coverage.
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Competition
As noted above with respect to the business of URS, the architectural
and engineering services industry is highly fragmented and very competitive, and
as a result WC competes with many firms, some of which are substantially larger
and possess greater financial resources, in all of its service areas.
Competition in these service areas is based upon reputation, quality of service,
price, expertise and local presence. Furthermore, given the expanding demand for
the types of services provided by WC, it is likely that additional competitors
will emerge. WC has occasionally found it necessary to provide discounts and
lower prices for its services in order to retain its competitive position,
which, in 1996 in particular, affected WC's revenues and results of operations.
There can be no assurance that the amount and quality of competition will not at
some point again require action which adversely affects revenues and results of
operations.
Dependence upon Government Programs and Contracts
Much of WC's business is generated either directly or indirectly as a
result of Federal and state laws, regulations and programs related to
environmental issues. WC derived more than 36% of its revenues during 1996 from
local, state and Federal government agencies. Demand for such services is
directly related to the level of government funding of infrastructure rebuilding
and expansion and in connection with environmental problems. WC believes that
the success and further development of its business is dependent, in significant
part, upon the continued existence and funding of such programs and upon its
ability to participate in such programs. There can be no assurance that public
pressure for such programs will continue, that governments will have the
available resources to fund such programs (especially in light of the budget
constraints currently existing at all levels of government), that such programs
will continue to be funded, or that WC will be awarded such work. In addition,
contracts with government agencies are subject to termination for convenience of
the agency and contracts with government agencies that have adopted Federal
Acquisition Regulations are subject to audit of actual costs incurred and
provide for upward or downward adjustment of payments if audited costs differ
from billed costs.
Pricing Risks
A substantial amount of WC's services, like those of URS, are billed on
either a "cost-plus" or a "fixed-price" basis, and the risk factors set forth
above regarding URS's risks with respect to project financing apply to WC as
well. Like URS, WC submits proposals on extremely complex projects that will be
performed over the course of several years, which make the accurate forecasting
of costs very difficult. In the recent past, WC experienced low profit margins
or losses on a portion of both of its cost-plus and fixed-price contracts
because overhead and general and administrative costs exceeded government limits
and could not be fully recovered or the scope of work could not be completed
within the original budget and a supplemental work order could not be obtained.
To the extent WC does not control overhead, general and administrative costs, or
underestimates such costs, it may have low profit margins, or incur losses.
In April, 1995, WC acquired Geo-Con, Inc. ("Geo-Con"), a contractor
specializing in geotechnical construction projects, such as slurry walls, deep
soil mixing, trenching, landfill construction, and hazardous waste remediation.
Through the following eighteen-month period, Geo-Con sustained substantial
losses on projects which were underway when the acquisition occurred. Most of
Geo-Con's work is performed under fixed-price or lump sum contracts where
projects are awarded to the low bidder and losses may result if the low bidder
is unable to perform the required work within the amount of the
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bid. The industry is very competitive and the projects typically will have some
inherent risks that may exceed contingencies included in the bid. Therefore,
there is a continuing risk that project costs may exceed contract amounts.
International Operations
WC derived approximately 21% of its revenue in 1996 from offices and
projects outside the U.S. Most of this international work, approximately 91%,
has consisted in the past and is expected to continue to consist of work in
Australia, New Zealand, Europe and Canada, where it is performed by WC offices
that are well-established in those countries. The remaining portion of WC's
international work, however, consisted of, and is expected to continue to
consist of, project work in countries where WC has not had an established
presence and which may entail political and economic risks, including political
instability and/ or expropriation. WC's substantial capital investment in
developing its international practice, made over the course of the past ten
years, has been driven in part by the desire to be able to provide global
service to its multinational clients. The profitability of this practice in
certain areas remains to be established. WC's international operations are also
subject to certain risks, including currency controls and fluctuations, changes
in interest rates, and loss or modification of any applicable exemptions for
taxes and tariffs, which could have a material adverse effect on WC.
Domestic and International Economic Conditions
Due to the broad geographic sweep of its current and planned
operations, WC's business is subject to general economic conditions both in the
United States and in other regions of the world in which it currently and plans
in the future to have significant operations. A significant decline in economic
conditions in any one of these geographic areas could have a material adverse
effect on WC.
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THE MERGER
The description of the Merger and the principal terms of the Merger
Agreement in this Prospectus is subject to and qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached as Appendix A and
incorporated herein by reference. This section of this Prospectus contains
information furnished by the Board of Directors of URS and by the Board of
Directors of WC in connection with the URS Meeting and the WC Meeting for the
purpose of obtaining stockholder approval of the Merger Agreement.
The Merger Agreement contains certain representations and covenants of
URS, Acquisition Corp. and WC, certain conditions to the consummation of the
Merger, and other terms and provisions respecting the Merger and related
transactions. Capitalized terms which are used but not defined in this section
have the meanings assigned in the Merger Agreement.
SUMMARIES OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT SET FORTH HEREIN DO NOT
PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
PROVISIONS OF THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A
AND INCORPORATED HEREIN BY REFERENCE. ALL URS AND WC STOCKHOLDERS ARE URGED TO
READ THE MERGER AGREEMENT IN ITS ENTIRETY.
General
On August 18, 1997, URS, WC and Acquisition Corp. entered into the
Merger Agreement, which sets forth the terms and conditions of the Merger. A
copy of the Merger Agreement is included in this Prospectus as Appendix A. The
Merger will be consummated promptly after the necessary approvals of the URS and
WC stockholders have been obtained and the other conditions to consummation of
the Merger have been satisfied or waived. Upon consummation of the Merger, WC
will merge with and into Acquisition Corp. The stockholders of WC will become
stockholders of URS (as described below), and their rights will be governed by
URS's Amended and Restated Certificate of Incorporation and Bylaws.
See "The Merger."
By virtue of the Merger, each of the shares of WC Capital Stock issued
and outstanding immediately prior to the Effective Time of the Merger (see
"Effective Time of the Merger" below) will automatically be converted into and
exchanged for the right to receive, in the aggregate, the Merger Consideration.
Effective Time of the Merger
The Merger will become effective upon the filing of articles of merger
or other appropriate documents (the "Merger Documents") with the Delaware
Secretary of State. The Merger Agreement provides that the parties will cause
the Merger Documents to be filed as soon as practicable after the Closing Date,
which will be the first date after approval of the Merger Agreement by the WC
stockholders and the URS stockholders on which all conditions to the parties'
obligations to close the Merger have been satisfied or waived. The parties have
agreed to use their best efforts to do all things necessary to permit the
closing of the Merger, but there can be no assurance as to whether or when the
Merger will become effective.
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Merger Consideration
As a result of the Merger, the shares of WC Common Stock will be
converted into the right to receive, in the aggregate, $91,693,870, consisting
of $26,693,870 in cash and shares of URS Common Stock with a value at the
Effective Time of the Merger of $65 million, subject to adjustment in certain
circumstances as described below. The value of the URS Common Stock will be
determined on the basis of the average daily closing price for such stock on the
NYSE over the 20 trading days preceding the closing of the Merger (the "URS
Closing Price"). However, in no event will the total number of shares of URS
Common Stock to be issued to the holders of WC Common Stock as a result of the
Merger exceed 5,200,000 shares or be less than 4,044,804 shares. Consequently,
even if the URS Closing Price is greater than $16.07 (the price resulting from
dividing $65 million by the minimum number of shares of URS Common Stock), the
holders of WC Common Stock will receive, in the aggregate, the minimum of
4,044,804 shares of URS Common Stock (which will have a value greater than $65
million) and also will be entitled to receive the $26,693,870 in cash.
Conversely, if the URS Closing Price is less than $12.50 (the price resulting
from dividing $65 million by the maximum number of shares of URS Common Stock),
the holders of WC Common Stock will receive, in the aggregate, the maximum of
5,200,000 shares of URS Common Stock (which will have a value less than $65
million), but in this event the cash component of the consideration will be
increased so that the sum of the value of the shares of URS Common Stock and the
cash to be received by the holders of the WC Common Stock will still equal
$91,693,870.
The aggregate consideration to be received by the holders of the WC
Common Stock as a result of the Merger will be allocated among such holders pro
rata based on the number of shares of WC Common Stock held so that the aggregate
consideration to be received in exchange for each share of WC Common Stock will
be equal. Based on the 1,964,175 shares of WC Common Stock issued and
outstanding on the WC Record Date, and assuming that the URS Closing Price is
$14.28 per share (the average daily closing price for such stock on the NYSE
over the 20 trading days preceding the date the Merger Agreement was signed),
each share of WC Common Stock would be converted into the right to receive
$13.59 in cash and 2.317 shares of URS Common Stock, which would have an
indicated aggregate value of $46.68 per share of WC Common Stock. Based on these
assumptions and the 10,746,244 shares of URS Common Stock issued and outstanding
on the URS Record Date, WC stockholders would receive an aggregate of 4,550,993
shares of URS Common Stock as a result of the Merger, which would represent
29.75% of the outstanding URS Common Stock following the Merger.
The shares of WC Preferred Stock, all of which are held by the General
Trustees of the WC Retirement Plan, will be converted into the right to receive
$8,306,130 in the aggregate in cash, which will be payable upon the surrender of
the certificate(s) formerly representing such share of WC Preferred Stock. No
interest will accrue or be payable with respect to the cash portion of the
Merger Consideration. Pursuant to an agreement dated May 15, 1992 between WC and
the General Trustees of the WC Retirement Plan, WC is entitled, at its option,
to repurchase all of the outstanding WC Preferred Stock from the holders thereof
at a purchase price of $8,306,130, which is equivalent to the portion of the
Merger Consideration being offered for the WC Preferred Stock.
Each of the holders of WC Common Stock and WC are parties to the
Shareholders' Agreement. The Shareholders' Agreement restricts holders of WC
Common Stock from transferring their shares except in certain limited
circumstances and to parties acceptable under the Shareholders' Agreement. In
addition to other matters, the Shareholders' Agreement also provides each of the
holders of WC Common Stock with a right to require WC to purchase their shares,
and provides WC with the right to require the holders of WC Common Stock to sell
such shares to WC if certain circumstances are met. Certain terms
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of the Shareholders' Agreement would prohibit the transactions necessary to
effect the Merger. Therefore, stockholders attending the WC Meeting in person or
by proxy are being asked to approve the amendment of the Shareholders' Agreement
to remove all restrictions and requirements which would prohibit or prevent the
transactions contemplated by the Merger Agreement.
No fractional shares of URS Common Stock will be issued in connection
with the Merger. Fractional shares otherwise issuable will be settled for cash,
without interest, based on the closing price per share of URS Common Stock as
quoted in WSJ on the trading day immediately preceding the Closing Date.
Conversion and Exchange of WC Common Stock Certificates
As soon as practicable after the Effective Time of the Merger, Chase
Mellon Shareholder Services, LLC, URS's exchange agent (the "Exchange Agent"),
will send a notice and transmittal form to each holder of WC Capital Stock of
record at the Effective Time of the Merger advising such holder of the
effectiveness of the Merger and the procedure for transferring shares held in
book entry form and for surrendering to the Exchange Agent any certificates
formerly evidencing WC Capital Stock. WC STOCKHOLDERS SHOULD NOT SEND THEIR
STOCK CERTIFICATES TO THE EXCHANGE AGENT OR WC UNTIL THEY RECEIVE THE LETTER OF
TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
Upon the surrender to the Exchange Agent of one or more certificates
formerly evidencing WC Capital Stock, together with a properly completed and
signed letter of transmittal, there will be issued and mailed to the holder
thereof a new certificate or certificates representing the number of whole
shares of URS Common Stock to which such holder is entitled under the Merger
Agreement, a check for the amount of cash payable for each share of WC Capital
Stock, and, where applicable, a check for the amount of cash payable in lieu of
a fractional share of URS Common Stock. A certificate representing URS Common
Stock or a check in lieu of a fractional share will be issued in a name other
than the name in which the surrendered WC Capital Stock certificate was
registered only if (i) the WC Capital Stock certificate surrendered is properly
endorsed or accompanied by appropriate stock powers and is otherwise in proper
form for transfer, and (ii) the person requesting the issuance of such stock
certificate or check either pays to the Exchange Agent any transfer or other
taxes required or establishes to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
Description of URS Capital Stock
The authorized capital stock of URS consists of 20,000,000 shares of
URS Common Stock, $0.01 par value per share, and 1,000,000 shares of URS
Preferred Stock, $1.00 par value per share. As of September 5, 1997, there were
10,594,025 shares of URS Common Stock outstanding and no outstanding shares of
URS Preferred Stock. Holders of URS Common Stock are entitled to one vote for
each share held with respect to all matters submitted for consideration by the
URS stockholders. The foregoing summary is qualified in its entirety by
reference to URS's Amended and Restated Certificate of Incorporation, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
URS Common Stock. The holders of URS Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the
stockholders. The holders of URS Common Stock are not entitled to cumulate
voting rights with respect to the election of directors, and as a consequence,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any then
outstanding shares of URS Preferred Stock,
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holders of URS Common Stock are entitled to receive ratably such dividends as
may be declared by the URS Board of Directors out of funds legally available
therefor. See "Summary - Dividend Policy." In the event of a liquidation,
dissolution or winding up of URS, holders of the URS Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding URS Preferred Stock. Holders of
URS Common Stock have no preemptive, conversion or other rights to subscribe for
additional securities of URS. There are no redemption or sinking fund provisions
applicable to the URS Common Stock. All outstanding shares of URS Common Stock
are, and all shares of URS Common Stock to be outstanding upon completion of
this offering will be, validly issued, fully paid and nonassessable.
URS Preferred Stock. The Board of Directors has the authority, without
further action by the stockholders, to issue up to 1,000,000 shares of URS
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by stockholders. The issuance
of URS Preferred Stock could adversely affect the voting power of holders of URS
Common Stock and the likelihood that such holders will receive dividend payments
and payments upon liquidation and could have the effect of delaying, deferring
or preventing a change in control of URS. There are no shares of URS Preferred
Stock outstanding and URS has no present plan to issue any shares of URS
Preferred Stock.
Effect on Existing WC Benefit Plans
Woodward-Clyde Capital Accumulation (Retirement) Plan; GCH Acquisition
Corp. Retirement Program. Upon the execution of the Merger Agreement, WC
suspended any obligation to contribute shares of WC Preferred Stock to, or to
redeem shares of WC Preferred Stock from, the WC Retirement Plan during the
period from the date of the Merger Agreement to the Effective Time of the
Merger. Further, WC agreed, at the option of URS, to either terminate the WC
Retirement Plan and/or the GCH Acquisition Corp. Retirement Program (the "GCH
Plan") prior to the Effective Time of the Merger and/or merge the WC Retirement
Plan and the CGH Plan with and into the URS 401(k) Retirement Plan (the "URS
401(k) Plan") from the Effective Time of the Merger, and to eliminate any
options available to the WC Retirement Plan, the GCH Plan or their participants
to purchase employer securities with assets held in the WC Retirement Plan or
the GCH Plan from and after the Effective Time of the Merger. In the event that
either of these plans is terminated, participants will have the option of
withdrawing the balance of their accounts, which withdrawal will be a taxable
event, or rolling such account balance into the URS 401(k) Plan or another
qualified plan (such as an IRA), which should not be taxed. WC and URS are
currently exploring potential methods of merging the WC Retirement Plan, the GCH
Plan and the URS 401(k) Plan in a transaction to be made effective some date
after the Effective Date of the Merger.
WC Bonus Plan. The Merger Agreement also provides that after the
Effective Time of the Merger, URS will complete an audit of the consolidated
financial statements of WC for the period beginning on January 1, 1997 and
ending on the Closing Date (the "Bonus Period"). Promptly following the
completion of such audit, URS will pay bonuses to the former employees of WC in
a manner consistent with prior practices, but prorated for the Bonus Period, as
follows: the aggregate amount of the bonus pool (the "Bonus Pool") will equal
the "Annualization Ratio" multiplied by the greater of either (i) $500,000 or
(ii) 50% of the excess, if any, of Annualized 1997 Profit over $8,000,000.
"Annualized 1997 Profit" means the quotient of (A) the net income of WC for the
Bonus Period, as reported in the Woodward-Clyde Interim Financial Statements (as
defined in the Merger Agreement), as adjusted (i)
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before any deduction for taxes (ii) before any deduction for any bonuses to be
paid, (iii) before the addition of any net income attributable to settlement of
the GeoCon Litigation (as defined in the Merger Agreement), (iv) before the
deduction of any litigation expenses attributable to the GeoCon Litigation up to
the amount of the proceeds of any settlement of the GeoCon Litigation, and (v)
before deduction of the fees and expenses of Oppenheimer and legal expenses,
loan pre-payment charges and other external expenses incurred by WC in
connection with the negotiation, execution and delivery of this Agreement and
consummation of the transactions contemplated hereby, divided by (B) the
Annualization Ratio. "Annualization Ratio" means the ratio determined by
dividing the number of actual days in the Bonus Period by 365.
On or before the Closing Date, WC will appoint a committee of WC
officers (the "Allocation Committee") which will have responsibility for
allocating the amounts available in the Bonus Pool. The Allocation Committee
will allocate bonuses among those individuals who were employed by WC on the
Effective Time of the Merger based upon its evaluation of the relative
contributions of such employees to WC during the Bonus Period, and in a manner
consistent with the past annual bonus plan allocation practices of WC. The final
bonus allocations determined by the Allocation Committee will be subject to the
final reasonable approval of the Chief Executive Officer of URS.
Background of the Merger
From time to time beginning in January 1996, URS and WC management held
informal discussions about the possibility of a transaction between the two
companies.
On March 7, 1996, Martin M. Koffel, the Chief Executive Officer,
President and Chairman of the Board of URS, and Jean-Yves Perez, the President
and Chief Executive Officer of WC, met in person. On March 19, 1996, Mr.
Ainsworth and Mr. Wilson met in person. On March 26, 1996, URS and WC entered
into a confidentiality agreement and exchanged information. On May 17, 1996,
Kent P. Ainsworth, the Executive Vice President, Chief Financial Officer and
Secretary of URS, and Robert K. Wilson, the Executive Vice President and Chief
Financial Officer of WC, met in person, and Mr. Koffel, Mr. Ainsworth, Mr. Perez
and Mr. Wilson met in person. On May 30, 1996, Mr. Ainsworth and Mr. Wilson
again met in person.
At these meetings, the executives discussed informally the possibility
of combining URS and WC but these informal discussions did not result in any
agreement regarding a transaction between the parties.
On or about January 25, 1997, upon the recommendation of WC management,
WC's Board of Directors elected to commence a search for companies interested
either in acquiring WC or in engaging in a transaction which would result in a
substantial infusion of capital into WC. Thereafter, WC retained Oppenheimer to
assist WC in such search, prepared and distributed materials describing WC, and
commenced a formal auction process where WC invited third-party offers for the
acquisition of WC or for other transactions which would result in such a capital
infusion.
The capital search process implemented by Oppenheimer entailed the
preparation of descriptive and financial information about WC that was
distributed to 71 companies, consisting of strategic and financial buyers which
indicated an interest in WC and executed a confidentiality agreement, including
URS. Subsequently, seven companies, including URS, met with WC's senior
management to discuss
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investing in, merging with, or acquiring WC. Final offers were submitted on or
about June 24, 1997 by several companies.
On June 10, 1997, Mr. Koffel and Mr. Ainsworth, together with Robert L.
Costello, an Executive Vice President of URS Greiner Engineering, Inc., Ronald
L. Ewing, a Senior Vice President of URS Greiner Engineering, Inc., and Gary
Jandegian, a Senior Vice President of URS, met at WC's corporate office in
Denver with Mr. Perez, Mr. Wilson, Frank S. Waller, the Chairman of the Board of
WC, James R. Miller, the President of Woodward-Clyde International, and James E.
McCarthy, the President of Woodward-Clyde Federal Services. A representative of
Oppenheimer also attended this meeting. URS and WC senior management exchanged
additional information at this meeting about their respective companies,
including the 1997 YTD financial performances and their strategic visions for
the future.
On July 17 and 18, 1997, Mr. Koffel, Mr. Ainsworth and Joseph Masters,
Vice President and General Counsel of URS, met in San Francisco with Mr. Perez,
Mr. Wilson and Mr. Waller. Representatives of Oppenheimer and Smith Barney
attended the meeting on July 17, 1997 and outside counsel for URS and WC
attended both meetings. Discussions were held concerning the form of a merger
agreement and the manner in which the operations and administrations of the two
companies might be combined. From July 22 through August 8, 1997,
representatives of URS visited numerous WC offices in the United States and
abroad to conduct due diligence and to explore the potential benefits of a
combination of the two companies.
WC management organized a meeting in Denver on August 12-13, 1997 with
about 40 senior WC employee stockholders and managers to discuss the various
proposals resulting from the search for a strategic partner. The discussion
involved an analysis of the various proposals. On August 14, 1997, the WC Board
of Directors evaluated the various proposals and voted unanimously to accept the
proposal submitted by URS.
On August 13, 1997, the Merger Agreement was approved by the Boards of
Directors of URS and Acquisition Corp. and on August 14, 1997, the Merger
Agreement was approved by the Board of Directors of WC. The Merger Agreement was
executed on August 18, 1997. In anticipation of possibly reaching agreement with
WC, URS had informally discussed financing with Wells Fargo and with Wells
Fargo's counsel in August 1997. These discussions ultimately resulted in the
execution on September 12, 1997 of the Commitment Letter (as defined below in
"The Merger Financing of the Merger").
Opinion of URS Financial Advisor
Smith Barney was retained by URS to act as its financial advisor in
connection with the proposed Merger. In connection with such engagement, URS
requested that Smith Barney evaluate the fairness, from a financial point of
view, to URS of the consideration to be paid by URS in the Merger. On August 13,
1997, at a meeting of the Board of Directors of URS held to evaluate the
proposed Merger, Smith Barney delivered an oral opinion (which opinion was
subsequently confirmed by delivery of a written opinion dated August 18, 1997,
the date of the Merger Agreement) to the Board of Directors of URS to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the Merger Consideration was fair, from a financial
point of view, to URS.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement
and held discussions with certain senior officers, directors and other
representatives and advisors of URS and certain senior officers and other
representatives and advisors of WC concerning the businesses, operations and
prospects
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of URS and WC. Smith Barney examined certain publicly available business and
financial information relating to URS and certain business and financial
information relating to WC as well as certain financial forecasts and other
information and data for URS and WC which were provided to or otherwise
discussed with Smith Barney by the respective managements of URS and WC,
including information relating to certain strategic implications and operational
benefits anticipated to result from the Merger. Smith Barney reviewed the
financial terms of the Merger as set forth in the Merger Agreement in relation
to, among other things: current and historical market prices and trading volumes
of URS Common Stock; the historical and projected earnings and other operating
data of URS and WC; and the capitalization and financial condition of URS and
WC. Smith Barney also considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected which
Smith Barney considered relevant in evaluating the Merger and analyzed certain
financial, stock market and other publicly available information relating to the
businesses of other companies whose operations Smith Barney considered relevant
in evaluating those of URS and WC. Smith Barney also evaluated the potential pro
forma financial impact of the Merger on URS. In addition to the foregoing, Smith
Barney conducted other analyses and examinations and considered such other
financial, economic and market criteria which Smith Barney deemed appropriate in
arriving at its opinion. Smith Barney noted that its opinion was necessarily
based upon information available, and financial, stock market and other
conditions and circumstances existing and disclosed, to Smith Barney as of the
date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Smith Barney, the managements of URS and WC advised Smith Barney that such
forecasts and other information and data were reasonably prepared reflecting the
best currently available estimates and judgments of the respective managements
of URS and WC as to the future financial performance of URS and WC and the
strategic implications and operational benefits anticipated to result from the
Merger. Smith Barney assumed, with the consent of the Board of Directors of URS,
that the Merger would be treated as a tax-free reorganization for Federal income
tax purposes. Smith Barney did not express any opinion as to what the value of
the URS Common Stock actually will be when issued to WC stockholders pursuant to
the Merger or the price at which the URS Common Stock will trade subsequent to
the Merger. Smith Barney did not make and was not provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of URS or WC nor did Smith Barney make any physical inspection of the properties
or assets of URS or WC. Smith Barney was not requested to consider, and Smith
Barney's opinion does not address, the relative merits of the Merger as compared
to any alternative business strategies that might exist for URS or the effect of
any other transaction in which URS might engage. Although Smith Barney evaluated
the Merger Consideration from a financial point of view, Smith Barney was not
asked to and did not recommend the specific consideration payable in the Merger,
which was determined through negotiation between URS and WC. No other
limitations were imposed by URS on Smith Barney with respect to the
investigations made or procedures followed by Smith Barney in rendering its
opinion.
The full text of the written opinion of Smith Barney dated August 18,
1997, which sets forth the assumptions made, matters considered and limitations
on the review undertaken, is attached hereto as Appendix B and should be read
carefully in its entirety. The opinion of Smith Barney is directed to the Board
of Directors of URS and relates only to the fairness of the Merger Consideration
from a financial point of view to URS, does not address any other aspect of the
Merger or related transactions and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the URS Meeting. The
summary of the opinion of Smith
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Barney set forth in this Prospectus is qualified in its entirety by reference to
the full text of such opinion.
In preparing its opinion, Smith Barney performed a variety of financial
and comparative analyses, including those described below. The following summary
of these analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Smith Barney made
numerous assumptions with respect to URS, WC, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of URS and WC. The estimates contained in such
analyses and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Smith Barney's
opinion and analyses were only one of many factors considered by the Board of
Directors of URS in its evaluation of the Merger and should not be viewed as
determinative of the views of the Board of Directors or management of URS with
respect to the Merger Consideration or the proposed Merger.
Selected Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
URS and the following selected publicly traded companies in the engineering and
construction industry: CBI Industries, Inc.; Dames & Moore, Inc.; Fluor
Corporation; Foster Wheeler Corporation; Granite Construction Incorporated;
Harding Lawson Associates Group, Inc.; Jacobs Engineering Group Inc.; The Shaw
Group Inc.; and Stone & Webster, Inc. (collectively, the "Selected Companies").
Smith Barney compared market values as a multiple of, among other things, latest
12 months and estimated calendar 1997 and 1998 net income and adjusted market
values (equity market value, plus total debt, less cash) as multiples of latest
12 months revenues, estimated calendar 1997 earnings before interest, taxes,
depreciation and amortization ("EBITDA") and latest 12 months earnings before
interest and taxes ("EBIT"). All multiples were based on closing stock prices as
of August 6, 1997. Net income estimates for the Selected Companies were based on
estimates of selected investment banking firms and net income estimates for URS
and WC were based on internal estimates of the managements of URS and WC. The
range of multiples (excluding outliers) for the Selected Companies of latest 12
months and estimated calendar 1997 and 1998 net income and latest 12 months
revenues, estimated calendar 1997 EBITDA and latest 12 months EBIT were as
follows: (i) latest 12 months and estimated calendar 1997 and 1998 net income:
12.1x to 37.6x (with a mean of 20.0x and a median of 18.5x), 11.2x to 41.3x
(with a mean of 17.7x and a median of 16.0x) and 10.1x to 17.5x (with a mean of
13.6x and a median of 13.7x), respectively; (ii) latest 12 months revenues: 0.2x
to 1.0x (with a mean of 0.5x and a median of 0.5x); (iii) estimated calendar
1997 EBITDA: 4.9x to 10.4x (with a mean of 7.6x and a median of 7.7x); and (iv)
latest 12 months EBIT: 9.2x to 22.0x (with a mean of 12.9x and a median of
11.1x). Multiples of latest 12 months and estimated calendar 1997 and 1998 net
income, latest 12 months revenues, estimated calendar 1997 EBITDA and latest 12
months EBIT of URS were 16.8x, 15.2x, 13.2x, 0.5x, 6.7x and 9.3x, respectively.
Based on the closing stock price of URS Common Stock on August 8, 1997, the
Merger Consideration equated to implied multiples of latest 12 months and
estimated calendar 1997 and 1998 net income, latest 12
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months revenues, latest 12 months and estimated calendar 1997 EBITDA and latest
12 months and estimated calendar 1997 EBIT for WC of 25.4x, 15.5x, 13.3x, 0.34x,
6.7x, 5.3x, 11.0x and 7.7x, respectively.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the purchase price and implied
transaction value multiples paid in selected transactions in the engineering and
consulting industry, consisting of (acquiror/target): Fluor Daniels,
Inc./Groundwater Technology, Inc.; Washington Construction Group, Inc./Morrison
Knudsen Corporation; Emcon Associates/Organic Waste Technologies; Tyco
International Ltd./The Earth Technology Corporation (USA); URS/Greiner
Engineering, Inc.; Dames & Moore, Inc./O'BrienKreitzberg & Associates, Inc.;
Earth Technology Corporation (USA)/HazWaste Industries, Incorporated; Foster
Wheeler Corp./Enserch Environmental Corp.; The Earth Technology Corporation
(USA)/Summit Environmental Group, Inc.; TRC Companies, Inc./Environmental
Solutions, Inc.; Canonie Environmental Services Corp./Riedel Environmental
Services, Inc.; and Heidemij N.V./Geraghy & Miller, Inc. (collectively, the
"Selected Transactions"). Smith Barney compared purchase prices in the Selected
Transactions as multiples of, among other things, latest 12 months net income,
and transaction values as multiples of, among other things, latest 12 months
revenues, EBITDA and EBIT. All multiples for the Selected Transactions were
based on information available at the time of announcement of the transaction.
The range of multiples for the Selected Transactions of latest 12 months net
income, revenue, EBITDA and EBIT were as follows: (i) latest 12 months net
income: 7.7x to 41.2x (with a mean of 20.7x and a median of 18.1x); (ii) latest
12 months revenue: 0.1x to 1.4x (with a mean of 0.7x and a median of 0.7x);
(iii) latest 12 months EBITDA: 5.4x to 16.7x (with a mean of 9.2x and a median
of 7.2x); and (iv) latest 12 months EBIT: 7.7x to 16.4x (with a mean of 11.4x
and a median of 10.3x). Based on the closing stock price of URS Common Stock on
August 8, 1997, the Merger Consideration equated to implied multiples of latest
12 months and estimated calendar 1997 and 1998 net income, latest 12 months
revenues, latest 12 months and estimated calendar 1997 EBITDA and latest 12
months and estimated calender 1997 EBIT for WC of 25.4x, 15.5x, 13.3x, 0.34x,
6.7x, 5.3x, 11.0x and 7.7x, respectively.
No company, transaction or business used in the "Selected Company
Analysis" or "Selected Merger and Acquisition Transactions Analysis" as a
comparison is identical to URS, WC or the Merger. Accordingly, an analysis of
the results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Companies, Selected Transactions
or the business segment, company or transaction to which they are being
compared.
Discounted Cash Flow Analysis. Smith Barney performed a discounted cash
flow analysis of the projected free cash flow of WC for fiscal years 1997
through 2000, based on internal estimates of the management of WC. The
stand-alone discounted cash flow analysis of WC was determined by (i) adding (x)
the present value of projected free cash flows over the four-year period of 1997
to 2000 and (y) the present value of WC's estimated terminal value in year 2000
and (ii) subtracting the current net debt of WC. The range of estimated terminal
values for WC at the end of the four-year period was calculated by applying
terminal value multiples ranging from 5.0x to 8.0x to WC's projected 2000
EBITDA, representing WC's estimated value beyond the year 2000. The cash flows
and terminal values of WC were discounted to present value using discount rates
ranging from 10% to 15%. Utilizing such terminal multiples and discount rates,
this analysis resulted in an equity reference range for WC of approximately
$81.4 million to $151.0 million, as compared to the equity value implied by the
Merger Consideration of approximately $100.0 million based on the closing stock
price of URS Common Stock on August 8, 1997.
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Pro Forma Merger Analysis. Smith Barney analyzed certain pro forma
effects resulting from the Merger, including, among other things, the impact of
the Merger on the projected earnings per share ("EPS") and after-tax cash flow
of URS for the fiscal years ended 1997 through 1999, based on internal estimates
of the managements of URS and WC. The results of the pro forma merger analysis
suggested that the Merger could be accretive to the EPS and after-tax cash flow
of URS in each of the fiscal years analyzed, assuming certain cost savings and
other potential synergies anticipated by the managements of URS and WC to result
from the Merger were achieved. The actual results achieved by the combined
company may vary from projected results and the variations may be material.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) historical and
projected financial results of URS and WC; (ii) the history of trading prices
and volume for URS Common Stock and the relationship between movements in the
URS Common Stock, movements in the common stock of comparable companies and
movements in the S&P 500 Index; and (iii) the pro forma ownership of the
combined company.
Pursuant to the terms of Smith Barney's engagement, URS has agreed to
pay Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee of $1.2 million. URS has also agreed to reimburse Smith
Barney for reasonable travel and other out-of-pocket expenses incurred by Smith
Barney in performing its services, including the reasonable fees and expenses of
its legal counsel, and to indemnify Smith Barney and related persons against
certain liabilities, including liabilities under the Federal securities laws,
arising out of Smith Barney's engagement.
Smith Barney has advised URS that, in the ordinary course of business,
Smith Barney and its affiliates may actively trade or hold the securities of URS
for their own account or for the account of customers and, accordingly, may at
any time hold a long or short position in such securities. In addition, Smith
Barney and its affiliates (including Travelers Group Inc. and its affiliates)
may maintain relationships with URS and WC.
Smith Barney is an internationally recognized investment banking firm
and was selected by URS based on its experience and expertise. Smith Barney
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
Reasons for the Merger; Recommendation of the Board of Directors of URS
The URS Board of Directors believes that the combination of URS and WC
will benefit URS's stockholders. The reasons for the URS Board authorizing the
Merger include, but are not limited to, the following:
1. Consolidation that is occurring within the industry with other
public and private companies. The increased size of the combined organization
after the Merger has been consummated will help URS maintain a competitive
advantage in the marketplace and pursue larger, more comprehensive projects and
client relationships. The combined revenue of the two companies will place URS
in the top echelon of the industry.
2. The Merger helps URS achieve strategic objectives previously
established independently by the two companies. These objectives include:
increased revenues, broader geographic coverage both
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domestically and internationally and expansion into markets that the companies
on their own would find difficult to accomplish without the Merger.
3. The combination will result in administrative efficiencies and cost
savings by consolidating certain overlapping expenses.
The URS Board of Directors considered the above factors in light of its
knowledge of the business, the industry in general and information provided by
URS management and its financial advisor, Smith Barney. In view of the number
and complexity of factors considered, the URS Board did not assign a relative
weight to any of the factors considered.
The URS Board of Directors believes that the Merger is fair to and in
the best interests of URS and its stockholders. Accordingly, the Board of
Directors of URS has unanimously approved the Merger Agreement and recommends
that the holders of URS Common Stock vote FOR the approval of the Merger
Agreement.
WC Financial Advisor
WC retained Oppenheimer to act as its financial advisor and to render
its opinion to WC's Board of Directors as to the fairness, from a financial
point of view, to WC's current holders of Common Stock, of the consideration for
WC Common Stock provided in the Merger Agreement. WC selected Oppenheimer based
on its qualifications, expertise and experience. Oppenheimer is a nationally
recognized firm, and as part of its investment banking business, Oppenheimer is
regularly engaged in valuations of businesses and securities in connection with
mergers and acquisitions, underwritings, secondary distributions of securities,
private placements and valuations for other purposes.
The Merger Agreement provides that, among other things, (i) WC will be
merged with and into a wholly-owned subsidiary of URS (which will be the
Surviving Corporation and which will be renamed Woodward-Clyde Group, Inc.),
(ii) each issued and outstanding share of WC Common Stock will be converted into
the right to receive the Applicable Common Multiple (as defined in the Merger
Agreement) of URS Common Stock and the Applicable Common Cash Component (as
defined in the Merger Agreement) and (iii) the issued and outstanding shares of
WC Preferred Stock will be converted into the right to receive $8,306,130 in the
aggregate in cash. On August 14, 1997, Oppenheimer made a presentation to the
Board of Directors of WC stating that, as of August 14, 1997, based on the terms
of the consideration to be received by the current holders of WC Common Stock as
stated in the draft Agreement and Plan of Merger dated as of August 13, 1997
(the "Draft Merger Agreement"), and additional assumptions made regarding terms
remaining undefined in such draft, such consideration was fair, from a financial
point of view, to the current holders of WC Common Stock (the "WC Fairness
Opinion"). The final terms as stated in the Merger Agreement do not differ
materially from the terms as stated in the Draft Merger Agreement upon which
Oppenheimer relied, and Oppenheimer subsequently delivered its written WC
Fairness Opinion dated August 18, 1997 confirming the oral WC Fairness Opinion
given to the Board of Directors of WC on August 14, 1997.
The full text of the WC Fairness Opinion, which sets forth certain
assumptions made, certain procedures followed and certain matters considered by
Oppenheimer, is attached as Appendix C to this Prospectus. As set forth in the
WC Fairness Opinion, Oppenheimer relied upon and assumed the accuracy and
completeness of all of the financial and other information available to it from
public sources and provided to it by WC, URS and their respective
representatives. Representatives of each of WC and URS provided Oppenheimer with
its respective financial forecasts. With respect to the financial forecasts
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and other data concerning WC and URS reviewed by Oppenheimer, the managements of
each of WC and URS, respectively, advised it that such forecasts and other data
had been reasonably prepared on bases reflecting their best currently available
estimates and judgment as to the future financial performance of WC and URS,
respectively.
In arriving at its opinion, Oppenheimer neither made nor obtained any
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of WC or URS, nor was it furnished with any such evaluations or
appraisals. Oppenheimer also assumed, without independent verification, the
accuracy of the advice and conclusions of the parties' legal counsel and
accountants with respect to tax and accounting matters, including, without
limitation, the intention to qualify the Merger as a tax-free reorganization for
Federal income tax purposes and the accounting of the Merger as a purchase. The
WC Fairness Opinion was necessarily based on information available to
Oppenheimer and the general economic, financial and stock market conditions and
circumstances as they existed and could be evaluated by Oppenheimer as of August
14, 1997. Oppenheimer conducted an extensive process of contacting numerous
third parties to solicit indications of interest in acquiring all or any part of
WC or engaging in a transaction which would result in a substantial infusion of
capital into WC. No limitations were imposed by WC on Oppenheimer with respect
to the investigations made or procedures followed by Oppenheimer.
The summary of the written WC Fairness Opinion set forth in this
Prospectus is qualified in its entirety by reference to the full text of the
opinion which is attached as Appendix C hereto. WC stockholders are urged to,
and should, read this opinion carefully in its entirety in conjunction with this
Prospectus for the assumptions made, matters considered and limits of the review
by Oppenheimer. The WC Fairness Opinion is directed only to the fairness, from a
financial point of view, to the current holders of WC Common Stock of the
consideration for WC Common Stock provided in the Merger Agreement and does not
address any other aspect of the Merger. The WC Fairness Opinion does not
constitute a recommendation to WC stockholders as to how such stockholders
should vote with respect to whether they should approve the Merger.
In rendering the fairness opinion, Oppenheimer: (i) reviewed the Merger
Agreement; (ii) reviewed the historical financial statements and financial
projections and other information prepared by the representatives of WC and URS;
(iii) reviewed publicly available information for WC and URS, including, with
respect to URS, periodic and other reports filed with the Securities and
Exchange Commission; (iv) reviewed the reported market prices and trading
volumes for URS' Common Stock; (v) held discussions with the senior management
and representatives of each of WC and URS concerning WC's and URS' historical
and current operations, financial condition and prospects; and (vi) reviewed
such other documents and financial, economic and market criteria and made such
other investigations as it deemed appropriate for the purposes of such opinion.
Valuation of WC
Oppenheimer performed five primary valuation analyses of WC: (i) a
Comparable Company Analysis, which consisted of reviewing and considering
certain financial and stock market data for certain publicly traded companies
engaged in engineering and consulting or otherwise deemed by Oppenheimer to be
similar to WC; (ii) a Comparable Mergers and Acquisitions Transaction Analysis
which consisted of reviewing certain financial data of selected comparable
acquisitions involving companies engaged in engineering and consulting or
otherwise deemed by Oppenheimer to be similar to WC; (iii) a Discounted Cash
Flow Analysis; (iv) a Contribution Analysis; and (v) an EPS Dilution Analysis.
Each of the Comparable Company Analysis and Comparable Mergers and Acquisitions
Transaction Analysis was
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applied to the most recent twelve months ended June 30, 1997 and to the
projected financial results of WC for the fiscal years ended December 31, 1997
and 1998, and the Discounted Cash Flow Analysis was applied to the projected
financial results of WC for the fiscal years ended December 31, 1998 through
2002, to determine a range of implied equity values for WC.
In establishing the range of values resulting from the application of
each of the analyses, Oppenheimer made qualitative judgments as to the
meaningfulness of the valuation measurements. The judgments were based upon the
number and similarity of comparable companies and transactions, as well as the
predictability and volatility of future earnings when assessing the relative
significance of the Discounted Cash Flow Analysis. The relative appropriateness
of certain other valuation measurements, such as operating cash flow or
price/earnings multiples, as used generally for comparative purposes, were also
taken into account in making such judgments.
Comparable Company Analysis. Oppenheimer compared WC to the following
nineteen companies engaged in engineering and consulting or otherwise deemed by
Oppenheimer to be similar to WC (the "Comparable Companies") which are publicly
traded: ATC Group Services Inc., Air & Water Technologies Corporation, Michael
Baker Corporation, Dames & Moore, Inc., EA Engineering, Science and Technology,
Inc., Ecology and Environment, Inc., EMCON, GZA Geoenvironmental Technologies,
Inc., Harding Lawson Associates Group, Inc., Heidemij N.V., ICF Kaiser
International, Inc., International Technology Corporation, Jacobs Engineering
Group Inc., OHM Corporation, Roy F. Weston, Inc., Tetra Tech, Inc., TRC
Companies, Inc., Versar, Inc. and WS Atkins plc. Using publicly available
information, Oppenheimer analyzed, among other things, the market values and
certain financial criteria for the Comparable Companies including their (i)
revenue, (ii) earnings before interest, taxes, depreciation and amortization
("EBITDA"), (iii) earnings before interest and taxes ("EBIT"), and (iv) net
income, in each case for the most recent twelve month periods for which
financial data were available and, on an estimated basis, for the fiscal years
ended 1997 and 1998. Oppenheimer excluded certain statistics that it deemed to
be not representative for the Comparable Companies as a group. For each of the
multiples of revenue, EBITDA, EBIT and net income, Oppenheimer took the High,
Low and Average (each as defined below) for the Comparable Companies and applied
these multiples to the most recent twelve months ended June 30, 1997 and for
December 31, 1997 and 1998 projected operating results of WC. For these purposes
the "High" was calculated as the average of the upper quartile multiples, the
"Low" was calculated as the average of the lower quartile multiples, and the
"Average" was calculated as a straight average of all multiples, each of the
above calculations excluding those multiples deemed to be not meaningful.
Although Oppenheimer calculated implied equity values using revenue multiples,
it did not deem the results of these calculations to be relevant. The Comparable
Company Analysis resulted in implied equity values (excluding implied equity
values based on revenue multiples) for WC which ranged from a Low of $32.7
million to a High of $125.6 million. In addition, Oppenheimer took the range of
Average implied equity values, for the same periods, resulting in Average
implied equity values (excluding implied equity values based on revenue
multiples) of $62.9 million to $95.4 million. Although Oppenheimer considered
the High and Low implied equity values, it deemed the range of Average implied
equity values to be a better measure of WC's value.
Comparable Mergers and Acquisitions Transaction Analysis. Using
publicly available information, Oppenheimer analyzed the consideration paid in
selected merger and acquisition transactions (the "Comparable Merger and
Acquisition Transactions") involving companies engaged in engineering and
consulting or otherwise deemed by Oppenheimer to be similar to WC. Oppenheimer
examined the following thirty transactions involving companies engaged in
engineering and consulting or otherwise deemed by Oppenheimer to be similar to
WC over the past four years (acquiror/target): Geraghty & Miller, Inc./Acurex
Environmental Corporation; Rust International Inc./JRP Asia Pacific Group;
Pacific
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Nuclear Systems, Inc./ABB Impell Corporation, ABB Government Services, Inc., ABB
Impell Ltd. (U.K.); Heidemij N.V./Geraghty & Miller, Inc.; TRC Companies
Inc./Environmental Solutions, Inc.; The Earth Technology Corporation
(USA)/Summit Environmental Group, Inc.; Canonie Environmental Services
Corporation/BCM Engineers, Inc.; Perma-Fix Environmental Services, Inc./Quadrex
Corporation - Environmental Business; EMCON/Wehran Envirotech Inc.; Canonie
Environmental Services Corporation/Riedel Environmental Services, Inc.; Jacobs
Engineering Group Inc./CRS Sirrine Engineers, Inc., CRSS Constructors, Inc. and
CRSS International; The Earth Technology Corporation (USA)/HazWaste Industries,
Inc.; Foster Wheeler Corporation/Enserch Environmental Corporation; Dames &
Moore, Inc./Walk, Haydel & Associates, Inc.; Dames & Moore,
Inc./O'Brien-Kreitzberg & Associates, Inc.; Thermo Process Systems
Inc./Engineering, Technology and Knowledge Corporation; OHM Corporation/ Rust
International Inc. - Remediation Units; Waste Management, Inc./Resource
Recycling Technologies, Inc.; Thermo Remediation Inc./Nuclear Services Group
(Thermo Process Systems Inc.); Raytheon Engineers & Constructors/Litwin
Engineers & Constructors (United Dominion); Tetra Tech, Inc. (Honeywell
Inc.)/PRC Environmental Management, Inc.; Thermo Remediation Inc./Remediation
Technologies, Inc. (RETEC); Fluor Daniel, Inc.(Fluor Corp.)/Groundwater
Technology, Inc.; URS Corporation/Greiner Engineering, Inc.; Tyco International
Ltd./The Earth Technology Corporation (USA); Exsorbet Industries,
Inc./Eco-Systems, Inc.; Aspen Technology, Inc./Setpoint, Inc. (Alcatel Alstrom);
EMCON/Organic Waste Technologies, Inc.; ATC Environmental, Inc./American Testing
& Engineering Corporation - Certain Assets; and Carlyle Group LP/International
Technology Corporation. Oppenheimer calculated the multiples of the
consideration paid in relation to the acquired companies' most recent twelve
months ending prior to the date of the announcement of the acquisition, for
revenue, EBITDA, EBIT and net income. Similar to the Comparable Company
Analysis, Oppenheimer took the High and Low multiples, respectively, and did not
deem the implied equity values calculated using revenue multiples to be
relevant. Oppenheimer then applied these multiples to WC's most recent twelve
months operating results ended June 30, 1997, which resulted in implied equity
values (excluding implied equity values based on revenue multiples) for WC which
ranged from a Low of $30.1 million to a High of $120.4 million. In addition,
Oppenheimer took the range of Average implied equity values (excluding implied
equity values based on revenue multiples), for the same period, resulting in
Average implied equity values (excluding implied equity values based on revenue
multiples) of $60.6 million to $89.3 million. Oppenheimer also took the range of
Average implied equity values based on the projected operating results for the
years ended December 31, 1997 and 1998 (although Oppenheimer did not consider
the 1997 and 1998 periods to be as relevant because forward multiples were
unavailable) in addition to the most recent twelve months ended June 30, 1997.
This resulted in Average implied equity values (excluding implied equity values
based on revenue multiples) of $60.6 million to $116.5 million. In order to
apply the analyses to 1997 and 1998 data, Oppenheimer developed multiples for
1997 and 1998 by discounting the most recent twelve month multiples in order to
estimate the future value of such multiples.
Discounted Cash Flow Analysis. Oppenheimer performed a Discounted Cash
Flow Analysis of the projected after-tax cash flows of WC for the fiscal years
ending December 31, 1998 through 2002, based on forecasts and other data
provided by the management of WC. This analysis consisted of adding the
discounted present value of the projected future cash flows from WC and the
discounted present value of the terminal value of WC at the end of the reference
period. For purposes of such analysis, Oppenheimer used discount rates of 10%,
12% and 14%. Oppenheimer then calculated the terminal value by applying EBIT
multiples of 6x, 8x and 10x to WC's projected EBIT for the fiscal year ending
December 31, 2002. These multiples are generally consistent with the Comparable
Companies in the industry. The Discounted Cash Flow Analysis resulted in implied
equity values for WC ranging from $54.0 million to $121.8 million.
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Contribution Analysis. Oppenheimer analyzed WC's and URS' relative
percentage contribution to the pro forma operating results for the Surviving
Corporation resulting from the Merger with respect to revenue, EBITDA, EBIT,
pre-tax income, net income, total assets and book value. Such analysis was made
for WC's fiscal years ending December 31, 1997 and 1998 and for URS' fiscal
years ending October 31, 1997 and 1998, based upon projected operating results.
Oppenheimer compared the relative percentage contributions of WC to the
Surviving Corporation with the percentage ownership of the Surviving Corporation
that WC's stockholders would have received if they had received 100% of the
consideration for the WC Common Stock in URS Common Stock. WC's contribution to
the Surviving Corporation's pro forma results for the fiscal years ending
December 31, 1997 and 1998 ranged from 37.0% to 44.2%. The percentage ownership
of the Surviving Corporation offered to the stockholders of WC assuming that
they had received 100% of the consideration for the WC Common Stock in URS
Common Stock is 36.2%.
EPS Dilution Analysis. Oppenheimer performed an analysis to determine
the pro forma effect of the Merger on WC stockholders' earnings per share
("EPS") for the fiscal years ending December 31, 1997 through 2002. For the
purpose of this analysis, Oppenheimer calculated the EPS Dilution as if the
holders of WC Common Stock had received 100% of the consideration for the WC
Common Stock in URS Common Stock. The percentage (dilution)/accretion of WC
stockholder's EPS as a result of the Merger would be 0.62%, (3.05%) and 1.73%
for 1997, 1998 and 1999, respectively.
Valuation of URS
In consideration of the fact that the Merger involves the payment of
URS Common Stock to the stockholders of WC as part of the consideration
described in the Merger Agreement for the WC Common Stock, Oppenheimer performed
a valuation of URS. Oppenheimer applied the Comparable Companies Analysis, the
Comparable Mergers and Acquisitions Transaction Analysis and the Discounted Cash
Flow Analysis following the same methodologies. In addition, since URS is a
public company, Oppenheimer was able to perform a common stock trading analysis.
All such other analyses were applied to the results of URS for comparable
periods and based on the similarities between WC and URS, Oppenheimer used the
same Comparable Companies and Comparable Merger and Acquisition Transactions.
Oppenheimer performed a Common Stock Trading History Analysis for URS,
reviewing current and historical market prices and trading data of URS Common
Stock during the periods from August 8, 1995 to August 8, 1997. Oppenheimer
noted that during such period, URS Common Stock traded between a High of $15.625
and a Low of $5.50 per share. Oppenheimer performed a Comparable Company
Analysis using the same Comparable Companies used in the WC Comparable Companies
Analysis based upon EBITDA, EBIT and net income multiples for the Comparable
Companies, resulting in implied equity values (excluding implied equity values
based on revenue multiples) for URS, which ranged from a Low of $64.3 million to
a High of $223.6 million. In addition, Oppenheimer took the range of Average
implied equity values for the same periods, resulting in Average implied equity
values (excluding implied equity values based on revenue multiples) of $118.3
million to $174.5 million. Although Oppenheimer considered the High and Low
implied equity values, it deemed the range of Average implied equity values
(excluding implied equity values based on revenue multiples) to be a better
measure of URS' value. The Comparable Mergers and Acquisitions Transaction
Analysis compared URS with the Comparable Merger and Acquisition Transactions
used in WC's Comparable Mergers and Acquisitions Transaction Analysis, resulting
in implied equity values (excluding implied equity values based on revenue
multiples) for URS, which ranged from a Low of $89.6 million to a High of $274.4
million. In addition, Oppenheimer took the range of Average implied equity
values (excluding implied equity values based on revenue multiples), resulting
in Average implied equity values for URS of $152.6
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million to $191.8 million. Oppenheimer performed a Discounted Cash Flow Analysis
based on projections provided by the management of URS. Oppenheimer used
discount rates of 10%, 12% and 14% for the URS Discounted Cash Flow Analysis.
Oppenheimer then calculated the terminal value by applying EBIT multiples of 6x,
8x and 10x to URS' projected EBIT for the fiscal year ended October 31, 2002,
which resulted in implied equity values for URS ranging from a Low of $131.3
million to a High of $255.5 million.
Valuation Conclusion
In reviewing the Comparable Company Analysis, the Comparable Mergers
and Acquisitions Transaction Analysis and the Discounted Cash Flow Analysis
performed for WC, as well as the Contribution and EPS Dilution Analysis,
Oppenheimer placed relatively greater weight on the Comparable Company Analysis.
Oppenheimer noted that in performing these analyses, there existed a significant
number of relevant companies that were available to be analyzed.
A fairness opinion is the product of a complex process and cannot
necessarily be partially analyzed or readily summarized. Examining portions of
the analyses summarized above, without considering the analyses as a whole,
could create an incomplete view of the processes underlying Oppenheimer's
opinion. In arriving at its opinion, Oppenheimer considered the results of all
of such analyses as were relevant. The analyses were prepared by Oppenheimer
solely for purposes of providing its opinion as to the fairness of the
consideration provided in the Merger Agreement, from a financial point of view,
to the current holders of WC Common Stock. Analyses based upon forecasts of
future results are inherently subject to substantial uncertainties and are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, analyses
relating to the values of businesses do not purport to be appraisals or to
reflect the prices at which businesses may actually be sold or combined.
Accordingly, Oppenheimer expresses no opinion as to what the value of the shares
of the Surviving Corporation actually will be when issued to holders of WC
Common Stock pursuant to the Merger or the price at which the shares of the
Surviving Corporation will trade subsequent to the Merger. As described above,
Oppenheimer's opinion and presentation to WC's Board of Directors was one of
many factors taken into consideration by WC's Board of Directors in making its
determination to approve the Merger Agreement and should not be viewed as
determinative of the views of WC's Board of Directors or management with respect
to the consideration for the WC Common Stock or the proposed Merger. The
foregoing summary does not purport to be a complete description of the analyses
performed by Oppenheimer.
In connection with the Merger, WC entered into an engagement letter
with Oppenheimer, pursuant to which WC retained Oppenheimer to provide a
fairness opinion. Pursuant to such letter, WC agreed to pay Oppenheimer a fee of
$125,000 for rendering its opinion at the request of WC's Board of Directors in
connection with the Merger. WC has also agreed to reimburse Oppenheimer for its
reasonable out-of-pocket expenses and to indemnify Oppenheimer and certain
related persons against certain potential liabilities arising out of the
engagement of Oppenheimer, including liabilities under the Federal securities
laws. Oppenheimer was also retained by WC to act as its financial advisor in the
Merger. WC entered into an engagement letter with Oppenheimer pursuant to which,
upon consummation of the Merger WC agreed to pay Oppenheimer a fee of
approximately $1.5 million for such services, as adjusted based on the value of
the consideration received by WC stockholders.
In the ordinary course of its business, Oppenheimer may actively trade
the securities of URS for its own account or for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
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Reasons for the Merger; Recommendation
of the Board of Directors of WC
The WC Board of Directors believes that the combination of URS and WC
will benefit WC's stockholders by providing a cash payment for WC Common Stock
and a continuing interest in a larger company. The reasons for the WC Board
authorizing the Merger include, but are not limited to, the following:
1. The consideration which URS is paying to WC stockholders is believed
to be fair, from a financial point of view, as substantiated by the Oppenheimer
Opinion. In evaluating the offer, the Board also considered URS's stock
performance in recent years and the stock prices of other publicly traded
engineering companies.
2. Consolidation that is occurring within the industry with other
public and private companies. The increased size of the combined organization
after the Merger has been consummated will help WC maintain a competitive
advantage in the marketplace and pursue larger, more comprehensive projects and
client relationships. The combined revenue of the two companies will place URS
in the top echelon of the industry.
3. The Merger helps WC achieve strategic objectives previously
established independently by the two companies. These objectives include:
increased revenues, increased services offered to clients of the companies,
broader geographic coverage both domestically and internationally and expansion
into markets that the companies on their own would find difficult to accomplish
without the Merger.
4. The combination will result in administrative efficiencies and cost
savings by consolidating certain overlapping expenses.
The WC Board of Directors considered the above factors in light of its knowledge
of the business, the industry in general and information provided by WC
management and its financial advisor, Oppenheimer. In view of the number and
complexity of factors considered, the WC Board did not assign a relative weight
to any of the factors considered.
The WC Board of Directors believes that the Merger is fair to and in
the best interests of WC and its stockholders. Accordingly, the Board of
Directors of WC has unanimously approved the Merger Agreement and recommends
that the holders of WC Capital Stock vote FOR the approval of the Merger
Agreement and the amendment of the Shareholders' Agreement.
Directors and Executive Officers After the Merger
After the Effective Time of the Merger, the URS Board of Directors and
URS executive officers will be the same as the current URS Board of Directors
and URS executive officers, except that after the Effective Time of the Merger,
Messrs. Frank S. Waller and Jean-Yves Perez will become executive officers and
directors of URS, and Robert K. Wilson will become an executive officer of URS.
See "URS Management - Directors of URS; Interests of Certain Persons in the
Transaction."
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Registration and Listing
URS Common Stock to be issued in the Merger will be registered under
the Securities Act. URS has prepared and filed the Registration Statement with
the SEC, and has agreed to prepare and file any other documents required to be
filed by URS under the Securities Act in connection with the Merger. URS has
also agreed to take any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of URS Common
Stock in connection with the Merger.
URS has filed a listing application with each of the NYSE and the PE
covering the shares of URS Common Stock which are issuable upon consummation of
the Merger and expects such listing applications to be approved.
The Merger Agreement
THE FOLLOWING IS INTENDED MERELY AS A SUMMARY OF CERTAIN TERMS AND PROVISIONS OF
THE MERGER AGREEMENT. REFERENCE IS MADE TO THE MERGER AGREEMENT ATTACHED AS
APPENDIX A FOR A COMPLETE STATEMENT OF SUCH TERMS AND PROVISIONS.
Acquisition Proposals; Limitation on Negotiations; Termination Fee. The
Merger Agreement provides that WC and its subsidiaries will not, and will cause
their respective officers, directors, employees, agents and representatives not
to, directly or indirectly, encourage, solicit, accept, initiate or conduct
discussions or negotiations with, provide any information to, or enter into any
agreement with, any corporation, partnership, limited liability company, person
or other entity or group concerning the acquisition of all or a substantial part
of the assets, business or capital stock of WC, whether through purchase,
merger, consolidation, exchange or any other business combination (each of the
foregoing, an "Acquisition Proposal"). Notwithstanding the foregoing, nothing in
the Merger Agreement prevents WC and its officers and directors from responding
to and considering unsolicited firm offers for any such transactions from
persons other than URS if and to the extent that, in the written opinion of WC's
outside counsel, failure to do so would be reasonably likely to constitute a
violation of applicable law or a breach of the fiduciary duties of WC's
directors to WC's stockholders. WC has agreed to provide written notice to URS
immediately of the terms and other details of any such unsolicited inquiry or
proposal relating to an Acquisition Proposal.
In the event that WC or any of its officers or directors enters into
any negotiations or discussions for any reason which shall constitute a breach
of the no-shop provisions of the Merger Agreement as described in the preceding
paragraph, WC has agreed to reimburse URS immediately for all expenses and costs
incurred by URS in connection with the transactions contemplated by the Merger
Agreement up to an aggregate maximum of $500,000. In the event that WC or any of
its officers or directors enters in to any letter of intent, understanding or
other agreement with a party other than URS relating to the acquisition of all
or a substantial part of the assets, business or capital stock of WC, whether
through purchase, merger, consolidation, exchange or any other business
combination, either in violation of the no-shop provisions of the Merger
Agreement or within nine months after termination of the Merger Agreement for
any reason, then immediately upon entering into such letter of intent,
understanding or other agreement, WC has agreed to pay to URS a termination fee
(the "Termination Fee") of $3,500,000 dollars, less the aggregate amount of the
URS expenses and costs previously reimbursed to URS pursuant to the preceding
sentence. The Termination Fee will not be payable, however, if, prior to the
entry by WC into such letter of intent, understanding or other agreement, URS
has unilaterally declined to close the Merger, or the parties have agreed to
terminate the Merger Agreement by mutual written consent,
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or the Merger Agreement has been properly terminated by WC (without any breach
of its obligations under this Agreement) (a) because a governmental entity has
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable, (b) if
there has been an uncured breach by URS of any material representation,
warranty, covenant or other agreement in the Merger Agreement, or (c) if any of
the conditions set forth in the Merger Agreement have not been fulfilled on or
prior to the date specified for fulfillment, or shall have become impossible to
fulfill for reasons beyond the control of WC. The foregoing provisions of the
Merger Agreement may have the effect of discouraging competing offers to acquire
or merge with WC.
Covenants. The Merger Agreement provides that from the date of the
Merger Agreement until the earlier of the Effective Time of the Merger or the
termination of the Merger Agreement, WC, URS and Acquisition Corp. will perform
the following pre-closing covenants:
Pre-Closing Covenants of All Parties. Each party has agreed to
customary pre-closing covenants, including: (1) advising the other parties
promptly of any event that would make any representation or warranty of such
party untrue or inaccurate in any material respect; (2) using its best efforts
to obtain any required regulatory approvals; (3) keeping all nonpublic
information of the other parties confidential; and (4) using its best efforts to
do all things necessary to consummate the Merger.
Pre-Closing Covenants of WC. WC has agreed to customary
pre-closing covenants affecting WC and its subsidiaries, including: (1)
conducting its business in the usual, regular and ordinary course in
substantially the same manner as conducted in the past, using all reasonable
efforts to preserve intact its present business organizations, keeping available
the services of its present officers and employees, and preserving its
relationships with customers and suppliers; (2) not declaring or paying any
dividends or other capital distributions on its capital stock, splitting,
combining or reclassifying its capital stock or issuing or repurchasing,
redeeming or acquiring its capital stock; (3) not issuing, delivering or selling
shares of its capital stock or any securities convertible into such shares, or
any rights, warrants, calls, subscriptions or options to acquire any such shares
or convertible securities; (4) not amending its certificate of incorporation or
bylaws; (5) not acquiring, or agreeing to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in all or any substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof; (6) other than in the ordinary course of business, not selling,
leasing, licensing, encumbering or otherwise disposing of any of its material
assets; (7) not adopting or amending in any material respect any WC Plan or
paying any pension or retirement allowance not required by any existing WC Plan
and not entering into any employment contracts, paying any special bonuses or
special remuneration to officers, directors or employees, or increasing the
salaries, wage rates or fringe benefits of certain of its officers or employees;
(8) not paying, discharging, settling or satisfying any claims, liabilities or
obligations, except in the ordinary course of business or in amounts which are
not material, individually or in the aggregate, to the business of WC, provided
that WC is not prohibited from settling the litigation filed on March 13, 1996,
by WC in the Denver District Court relating to the acquisition by WC in April
1995 of Geo-Con and all claims and counterclaims relating to or arising out of
such acquisition (collectively, the "GeoCon Litigation") prior to the Effective
Time of the Merger provided that such settlement does not require any payments
by WC or any WC subsidiary to any third party and does not impose any continuing
cost or obligation on WC or any WC subsidiary (other than terms and conditions
typical of standard settlement agreements); (9) using its best efforts to carry
on and preserve its business and its relationships with clients, customers,
suppliers, employees and others in substantially the same manner as it has prior
to the date of the Merger Agreement; and (10) using its best efforts to deliver
to URS, prior to the date the preliminary Prospectus is mailed to the SEC, an
agreement
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or agreements, in form and substance reasonably satisfactory to URS, signed by
each officer, director, holder of more than 1% of the outstanding WC Common
Stock or WC Preferred Stock and each other person who may be deemed to be an
"affiliate" of WC as defined in the Securities Act (the "Affiliate Agreements"),
providing a "continuity of interest" representation in a manner sufficient to
satisfy the requirements of the Code regarding the tax-free nature of the Merger
and acknowledging the restrictions on transfer of URS Common Stock to be
received by them pursuant to the Merger under Rules 144 and 145 promulgated
under the Securities Act.
Pre-Closing Covenants of URS. URS has agreed to customary
pre-closing covenants, including: (1) conducting its business in the usual,
regular and ordinary course in substantially the same manner as conducted in the
past, using all reasonable efforts to preserve intact its present business
organizations, keeping available the services of its present officers and
employees, and preserving its relationships with customers and suppliers; (2)
consulting with the executive management of WC regarding certain material
transaction(s); and (3) without the prior approval of WC, prior to the Closing
Date, not consummating, or entering into any binding agreement or other
commitment to consummate, any transaction or series of related transactions that
would (a) result in the acquisition of assets or a business for total
consideration in excess of $50 million or requiring the issuance of URS Common
Stock in excess of 20% of the shares outstanding at that time; (b) result in the
disposition of assets or any business for total consideration in excess of $100
million, or (c) otherwise require the prior approval of the stockholders of URS.
Conditions Precedent to Consummation of Merger. The Merger will occur
only if the Merger Agreement is approved and adopted by the requisite vote of
URS Stockholders and WC stockholders. In addition, consummation of the Merger is
subject to the satisfaction of certain other conditions, unless waived (to the
extent such waiver is permitted by law). A failure of any such condition to be
satisfied, if not waived, could prevent the consummation of the Merger.
Conditions to Obligations of WC. The obligation of WC to
consummate the Merger is subject to the satisfaction of customary conditions,
including: (1) WC has received an opinion of Bronson, Bronson & McKinnon LLP
(or, if Bronson, Bronson & McKinnon LLP for any reason does not render such
legal opinion, a legal opinion of Cooley Godward LLP), dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code (except that if the aggregate amount of the
Applicable Common Cash (as defined in the Merger Agreement) component exceeds
50% of the total value of the aggregate Merger Consideration determined as of
the Closing Date, then this condition shall be deemed to have been waived with
no further action on the part of WC), and (2) no event has occurred which has
caused a material adverse effect on URS between the date of the Merger Agreement
and the Closing Date.
Conditions to Obligations of URS and Acquisition Corp. The
obligations of URS and Acquisition Corp. to consummate the Merger is subject to
the satisfaction of customary conditions, including (1) URS has received a legal
opinion of a reputable law firm (reasonably acceptable to URS) experienced in
government contracts matters, reasonably satisfactory in form and content to
URS, to the effect that the execution, delivery and performance of the Merger
Agreement and the consummation of the Merger do not and will not contravene,
conflict with or result in a violation of, or give any Governmental Body (as
defined in the Merger Agreement) the right to exercise any remedy or to obtain
any relief under, any Government Contract (as defined in the Merger Agreement)
to which WC or any WC subsidiary is a party or under which WC or any WC
subsidiary has any rights or obligations; (2) URS has received a legal opinion
of Cooley Godward LLP, dated the Closing Date, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the Code;
(3) no event has
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occurred which has caused a material adverse effect on WC between the date of
the Merger Agreement and the Closing Date; and (4) the conditions set forth in
the Commitment Letter have been satisfied.
Representations and Warranties. The following is a summary of the
representations and warranties of the parties contained in the Merger Agreement.
Representations and Warranties of WC. In the Merger Agreement,
WC has made representations and warranties in favor of URS and Acquisition Corp.
with respect to the following matters: (1) organization and good standing of WC;
(2) capitalization of WC; (3) subsidiaries of WC; (4) material investments of
WC; (5) corporate power and authority of WC to enter into the Merger Agreement;
(6) consents and approvals required to consummate the Merger; (7) accuracy of WC
financial statements; (8) accuracy of information supplied by WC in connection
with the preparation of this Prospectus; (9) absence of material adverse changes
in WC's business; (10) absence of undisclosed litigation involving WC; (11)
absence of undisclosed liabilities of WC; (12) absence of defaults under WC
organizational documents, contracts and agreements, orders, decrees, etc., or
registrations, licenses, permits, etc.; (13) good title to WC's properties; (14)
WC tax filings; (15) WC benefit plans; (16) employee and labor relations
matters; (17) WC intellectual property rights; (18) nature and scope of WC
insurance policies; (19) compliance by WC with applicable laws; (20) material
contracts and agreements of WC; (21) no prohibited payments by WC; (22) bank
accounts of WC; (23) related party transactions; (24) powers of attorney issued
by WC; (25) environmental matters and compliance; (26) regulatory matters; (27)
immigration law compliance; (28) WC board approvals; (29) brokers used by WC in
connection with the Merger; and (30) accuracy of disclosure by WC.
Representations and Warranties of URS. URS has made
representations and warranties in favor of WC with respect to the following
matters: (1) organization of URS and Acquisition Corp.; (2) capitalization of
URS and Acquisition Corp.; (3) corporate power and authority of URS and
Acquisition Corp. to enter into the Merger Agreement; (4) consents and approvals
required to consummate the Merger; (5) accuracy of URS SEC filings and financial
statements; (6) absence of material adverse changes in URS's business; (7)
absence of undisclosed litigation involving URS; (8) absence of undisclosed
liabilities of URS; (9) absence of defaults under URS organizational documents,
contracts and agreements, orders, decrees, etc., or registrations, licenses,
permits, etc.; (10) accuracy of information supplied by URS in connection with
the preparation of this Prospectus; (11) URS and Acquisition Corp. board
approvals; (12) brokers used by URS in connection with the Merger; (13) accuracy
of disclosure by URS; and (14) financing commitment letter. The representations
and warranties of all parties will terminate at the Effective Time of the
Merger.
Termination. The Merger Agreement may be terminated at any time before
the Merger becomes effective in the following circumstances: (1) by mutual
written consent of URS and WC; (2) by either WC or URS if (a) the URS and WC
stockholder approval is not obtained, (b) a governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable or (c)
the Merger has not been consummated by December 31, 1997 (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or agreement contained in this Agreement); (3) by URS if
there has been an uncured breach by WC of any material representation, warranty,
covenant or other agreement in the Merger Agreement; (4) by URS if WC has
entered into any discussions, negotiations or any letter of intent,
understanding or other agreement relating to an acquisition of all or a
substantial part of the assets, business or capital stock of WC (an "Acquisition
Proposal"); (5) by WC if there has been an uncured breach by URS of any material
representation, warranty, covenant or other agreement in the Merger Agreement;
(6) by WC if any of
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the conditions set forth in the Merger Agreement have not been fulfilled on or
prior to the date specified for fulfillment, or shall have become impossible to
fulfill for reasons beyond the control of WC; and (7) by URS if any of the
conditions set forth in the Merger Agreement have not been fulfilled on or prior
to the date specified for fulfillment, or shall have become impossible to
fulfill for reasons beyond the control of URS.
If the Merger Agreement is terminated by either WC or URS for any of
the aforesaid reasons, the Merger Agreement will thereupon become void and have
no effect, and there will be no liability or obligation on the part of WC, URS
or Acquisition Corp., or their respective officers and directors, except that
(i) the provisions of Section 6.2.3 of the Merger Agreement (relating to
Acquisition Proposals and the Termination Fee), the provisions relating to
termination and the provisions of any then-existing confidentiality agreements
between the parties, will survive any such termination; and (ii) no party whose
breach of its representations, warranties, covenants or agreements was the basis
of the other party's termination of the Merger Agreement will be relieved from
liability for damages occasioned by such breach.
Waiver and Amendment. At any time before the Merger becomes effective,
any party to the Merger Agreement may (i) extend the time for the performance of
any of the obligations or other acts of the other parties to the Merger
Agreement, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement, and (iii) waive compliance with any of the
agreements, covenants or conditions for the benefit of such party contained in
the Merger Agreement. However, the Commitment Letter provides that URS may not
agree to any material amendment to, or waive any of its material rights under,
the Merger Agreement without the prior written consent of Wells Fargo.
The terms of the Merger Agreement would permit the waiver of the
condition that the parties receive opinions from counsel to the effect that the
Merger will constitute a Reorganization (see "Certain Federal Income Tax
Consequences" below). However, in the event that the receipt of such opinions is
waived, the parties have agreed to amend this Prospectus to disclose the waiver
of this condition and any risks to URS and WC stockholders arising from such
waiver, and distribute such amended Prospectus to the stockholders of URS and
WC and resolicit URS and WC stockholder approval.
The Merger Agreement may be amended by the parties by action taken by
their respective Boards of Directors at any time before or after the approval of
the URS and WC stockholders, but after the respective stockholder approvals, no
amendment may be made which by law requires the further approval of such
stockholders without obtaining such approval. The Merger Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
Accounting Treatment
The Merger will be treated as a "purchase" under generally accepted
accounting principles. The acquisition price will be allocated to the assets
acquired (including identifiable intangible assets) and liabilities. To the
extent any excess exists after the allocation, such excess will be allocated to
goodwill. See "Pro Forma Financial Information."
Certain Federal Income Tax Consequences
The discussion set out below summarizes certain opinions received by WC
from Bronson, Bronson & McKinnon LLP, counsel to WC, and by URS from Cooley
Godward LLP, counsel to URS, regarding the material United States Federal income
tax considerations with respect to the Merger that are generally applicable to
WC stockholders, WC, URS and Acquisition Corp. (the "Tax Opinions"). The
discussion does not deal with all Federal income tax considerations that may be
relevant to specific WC stockholders in light of their particular circumstances,
such as stockholders that are dealers in securities, foreign persons, tax-exempt
entities or stockholders that received their WC Capital Stock in a compensatory
transaction. Furthermore, no state, local or foreign tax considerations are
addressed. The discussion is based upon provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), as well as regulations, administrative rulings
and judicial decisions thereunder, all of which are subject to change (possibly
with retroactive effect) or to different interpretations. ALL WC STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO
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THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
The Tax Opinions are based on certain assumptions as well as
representations received from WC, URS and certain stockholders of WC (including
an assumption, based on representations concerning the "continuity of interest"
requirement discussed below) and will be subject to the limitations discussed
below. The Tax Opinions will not be binding on the IRS nor preclude the IRS from
adopting a contrary position. Moreover, no ruling from the Internal Revenue
Service (the "IRS") has been or will be sought with respect to any of the tax
matters discussed herein.
Subject to the limitations, qualifications and exceptions described
herein, counsel have opined that the Merger will qualify as a reorganization
under Section 368(a) of the Code and that the following consequences will
result:
1. Stockholders of WC who receive part stock and part cash in
the Merger will recognize gain in the amount of such cash, limited,
however, by such stockholder's total gain on the Merger (which is the
difference between the fair market value of the URS Common Stock and
cash received by such stockholder in the Merger less such stockholder's
basis in such stockholder's WC Capital Stock exchanged therefor). A
stockholder's recognized gain should be capital if such WC Capital
Stock was held as a capital asset at the time of the Merger, provided
that the payment is neither essentially equivalent to a dividend within
the meaning of Section 302 of the Code nor has the effect of a dividend
within the meaning of Section 356(a)(2) of the Code (collectively, a
"Dividend Equivalent Transaction"). If a loss, rather than a gain,
results from the application of the stockholder's cost basis for the
stock surrendered against the total consideration received, that loss
will not be recognized;
2. The aggregate tax basis of any URS Common Stock received by
a WC stockholder in the Merger (including any fractional share deemed
received as described in paragraph 4 below) generally should be equal
to the adjusted basis of the WC Capital Stock surrendered in exchange
therefor, less the cash received in the Merger, plus the gain
recognized by such stockholder in the Merger (if any);
3. The holding period (for capital gain purposes) for each
share of URS Common Stock received in the Merger should include the
period during which the share of WC Capital Stock surrendered in
exchange therefor was held, provided that such share of WC Capital
Stock was held as a capital asset at the time of the Merger;
4. A fractional share of URS Common Stock not actually issued
pursuant to the Merger but for which cash is received in lieu thereof
should be treated as a fractional share of URS Common Stock that is
issued in the Merger and then redeemed by URS. A WC stockholder
receiving cash in lieu of a fractional share generally should recognize
gain or loss upon the payment thereof equal to the difference (if any)
between such stockholder's basis in the fractional share and the amount
of cash received. Such gain or loss should be a capital gain or loss
if, at the time of the Merger, the stockholder's WC Capital Stock is
held as a capital asset; and
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5. A WC stockholder who exercises appraisal rights with
respect to shares of WC Capital Stock and receives a cash payment for
such shares generally should recognize capital gain or loss (if such
share was held as a capital asset at the time of the Merger) measured
by the difference between the stockholder's basis in such share and the
amount of cash received, provided that such payment is not a Dividend
Equivalent Transaction. A sale of shares pursuant to an exercise of
appraisal rights generally will not be a Dividend Equivalent
Transaction if, as a result of such exercise, the stockholder
exercising appraisal rights owns no shares of capital stock of URS
(either actually or constructively within the meaning of Section 318 of
the Code) immediately after the Merger.
Under recently enacted legislation, capital gain generally will be
subject to a maximum rate of tax of 28% on property held more than one year but
less than eighteen months and a maximum rate of tax of 20% on property held more
than eighteen months.
The foregoing discussion is based on the assumption that the
"continuity of interest" requirement will be satisfied in the Merger. In order
for this requirement to be met, stockholders of WC must not, pursuant to a plan
or intent existing at or prior to the Merger, dispose of so much of (i) their WC
Capital Stock in anticipation of the Merger, plus (ii) their WC Capital Stock
exchanged for cash in the Merger, plus (iii) the URS Common Stock received in
the Merger (collectively, "Planned Dispositions") such that the WC stockholders,
as a group, would no longer have a "significant equity interest" in the WC
business being conducted by URS after the Merger. WC stockholders will generally
be regarded as having a significant equity interest as long as the URS Common
Stock received in the Merger (after taking into account Planned Dispositions),
in the aggregate, represents a "substantial portion" of the entire consideration
received by the WC stockholders in the Merger. This requirement is frequently
referred to as the "continuity of interest" requirement. If the continuity of
interest requirement is not satisfied, the Merger would not be treated as a
tax-free reorganization. The law is unclear as to what constitutes a
"significant equity interest" or a "substantial portion." The IRS ruling
guidelines require 50% continuity (although such guidelines do not purport to
represent the applicable substantive law). The case law appears to be more
liberal, however, and in one early case, the Supreme Court ruled that
approximately 40% continuity was sufficient. It is possible, although not
anticipated, that the cash to be received in the Merger could become such a
large percentage of the total consideration that the continuity of interest
requirement would not be satisfied. No assurance can be made that the
"continuity of interest" requirement will be satisfied. If such requirement is
not satisfied, the Merger would not be treated as a Reorganization.
A successful IRS challenge to the Reorganization status of the Merger
would result in (i) WC recognizing a corporate level gain or loss on the deemed
sale of all of its assets equal to the difference between the fair market value,
as of the time of the Merger, of the URS Common Stock and cash issued in the
Merger and WC's basis in such assets; and (ii) all WC stockholders recognizing
gain or loss with respect to each share of WC Capital Stock surrendered equal to
the difference between the fair market value, as of the time of the Merger, of
the URS Common Stock and cash received in exchange therefor and the
stockholder's basis in such share of WC Capital Stock. In such event, the WC
stockholder's aggregate basis in the shares of URS Common Stock received in the
exchange would equal the fair market value of such shares, and the WC
stockholder's holding period for such shares would not include the period during
which the shares of WC Capital Stock were held.
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Regulatory Approvals
Under the Merger Agreement, the obligations of URS, WC and Acquisition
Corp. are conditioned upon the receipt of all required consents of Governmental
Entities (as defined therein). There can be no assurance that any applicable
regulatory authority will approve or take other required action with respect to
the Merger or as to the date of such regulatory approval or other action. WC and
URS are not aware of any government approvals that are required in order to
consummate the Merger except as described below. Should any other approval be
required, WC and URS have agreed to use their best efforts to obtain it. See
"The Merger - The Merger Agreement."
HSR Act. The parties' obligations to close the Merger are subject to
the conditions that the waiting period applicable under the HSR Act has expired
and that no action has been instituted by the DOJ or FTC challenging or seeking
to enjoin the consummation of the transactions contemplated by the Merger
Agreement. WC and URS have submitted their respective applications under the HSR
Act to the DOJ and FTC and were notified of early termination of the waiting
period under the HSR Act on September 8, 1997.
Registration Statement. The Registration Statement has been filed with
the SEC and been declared effective prior to the mailing of this Prospectus. The
effectiveness of the Merger is conditioned upon the continued effectiveness of
the Registration Statement.
Listing Applications. URS has filed listing applications with the NYSE
and the PE covering the shares of URS Common Stock to be issued in connection
with the Merger and expects such listing applications to be approved.
Foreign Filings. URS and WC also expect to make certain filings in
foreign jurisdictions which may be required to consummate the Merger.
Rights of Dissenting Stockholders
URS Stockholders. Based upon the structure of the Merger and the
existing listing of the outstanding URS Common Stock on the NYSE and the PE, URS
stockholders will not have any dissenters' rights with respect to the Merger
under the Delaware General Corporation Law.
WC Stockholders. Stockholders of WC who have neither voted in favor of
the Merger or consented thereto in writing pursuant to Section 228 of the
Delaware General Corporation Law (the "Delaware Law") are entitled to an
appraisal by the Delaware Court of Chancery (the "Delaware Court") of the fair
value of their shares of WC Capital Stock as set forth in Section 262 of the
Delaware Law, which section is attached as Appendix D to this Prospectus.
Under Section 262 of the Delaware Law, to assert appraisal rights a
stockholder of WC must deliver to WC, prior to the taking of the vote on the
Merger, a written demand for appraisal of his or
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her shares. A vote against the Merger (whether in person or by proxy) does not
constitute a demand for appraisal. If the Merger is approved by the required
vote at the WC Meeting, the surviving entity in the Merger, Acquisition Corp.,
is required to notify each WC stockholder who has submitted a timely written
demand for appraisal and who has not voted in favor of or consented to the
Merger of the Effective Date of the Merger. This notice must be sent to such
stockholders within ten days after the Effective Date of the Merger.
Within 120 days after the Effective Date of the Merger, Acquisition
Corp., or any stockholder who is entitled to appraisal rights, may file a
petition in the Delaware Court demanding a determination of the value of the WC
Capital Stock held by all WC stockholders entitled to appraisal rights.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Date of the Merger, any WC stockholder has the right to withdraw his or her
demand for appraisal and to accept the terms offered in the Merger.
Within 120 days after the Effective Date of the Merger, a WC
stockholder who has complied with Sections 262(a) and (d) of the Delaware Law is
entitled, upon submitting a written request, to receive from Acquisition Corp. a
statement setting forth the aggregate number of WC Capital Stock not voted in
favor of the Merger, the aggregate number of WC Capital Stock with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement will be mailed by Acquisition
Corp. within 10 days after its receipt of such written request from the
stockholder.
Upon the filing of a petition in the Delaware Court by a WC
stockholder, service of a copy of such petition will be made upon Acquisition
Corp., and Acquisition Corp. will within 20 days after receipt of such service
file in the office of the Delaware Register in Chancery a verified list which
includes the names and addresses of all WC stockholders who have demanded
payment for their shares of WC Capital Stock and with whom agreements as to the
value of their shares have not been reached by Acquisition Corp.
In the absence of an agreement between Acquisition Corp. and the WC
stockholder, the Delaware Court will determine whether the WC stockholders are
entitled to an appraisal and, if so, the Delaware Court will appraise such
shares. The fair value of such shares will be determined without any element of
value arising from the accomplishment or the expectation of the Merger. The
Delaware Court will also determine whether a fair rate of interest will be paid
upon the amount determined to be the fair value of such shares. Payment will be
made by Acquisition Corp. to each stockholder who has participated in the
appraisal process upon the surrender to Acquisition Corp. of the certificates
representing such stockholder's shares of WC Capital Stock.
Financing of the Merger
Generally. To finance some of the cash portion of the Merger, Wells
Fargo signed and delivered to URS a commitment letter dated as of September 12,
1997 (the "Commitment Letter"), which has been accepted by URS. The Commitment
Letter provides that Wells Fargo will provide URS with the following loans to
finance some of the cash portion of the Merger and to provide for the working
capital needs of URS thereafter: a $40 million revolving credit facility
expiring October 31, 2002 and a $110 million term loan maturing October 31, 2004
(the "URS Loans"). The URS Loans will be secured by guarantees from and pledges
of the stock of certain of URS's and WC's subsidiaries and will replace URS's
current secured credit facility. It is expected that the facility will be
syndicated to include other lenders.
53
<PAGE>
Interest Rates. The URS Loans will bear interest based on base rate and
Eurodollar rate indexes, with variable spreads over the applicable index
selected by URS based on loan maturity and URS's financial performance.
Conditions to Initial Funding. Wells Fargo's obligation to fund the URS
Loans will expire on January 31, 1998. In addition, although the Commitment
Letter has been signed and accepted by URS, Wells Fargo's obligation to fund the
URS Loans is contingent upon the execution of definitive loan documents and
certain conditions, including: the satisfactory completion of due diligence by
Wells Fargo; URS and WC must meet specified financial performance tests; there
must be no material adverse change in the business of URS or WC from the end of
their most recent respective fiscal years until the initial funding date; all
necessary governmental approvals required for the Merger have been received; all
conditions to the consummation of the Merger have been satisfied; all necessary
documents and legal opinions must be delivered; all fees must be paid to Wells
Fargo; WC must have repaid in full and canceled its credit line with its
existing lender; and there shall not have occurred any material disruption in
the financial, banking or capital markets that would have an adverse effect on
the loan syndication markets for loans similar to the URS Loans. Although no
assurance may be made, management believes that all conditions to the funding of
the URS Loans will be satisfied.
Interests of Certain Persons in the Transaction.
WC has entered into Change-in-Control Agreements, each dated April 17,
1997, with the following employees: (i) James R. Miller; (ii) Valorie B. Feher;
(iii) Robert K. Wilson; (iv) James E. McCarthy; and (v) Frank S. Waller.
Pursuant to such agreements, if there is an actual or constructive termination
(other than a termination for cause) of employment within two years of a Change
in Control, the employee is entitled to a lump sum payment equal to one year's
base salary and for the one year period following such termination the same
medical, life and dental insurance the employee had immediately prior to such
termination. For purposes of such agreements, a Change of Control includes (1)
shareholder approval of a merger or consolidation with any other company; (2)
the complete liquidation or an agreement for the sale or disposition of all or
substantially all of WC's assets; and (3) the acquisition by any person,
directly or indirectly, of 30% or more of the combined voting power of WC's then
outstanding securities. The Merger will constitute a "change in control" for
purposes of these agreements. Also, for purposes of such agreements, a
constructive termination shall include: (1) a material change in the employee's
functions, duties or responsibilities; (2) significant reduction in base salary
(other than an across-the-board reduction affecting all executive employees of
WC); (3) a material failure by WC to comply with such agreements; (4) change in
location of the employee's office which is more than 50 miles from his or her
current office; and (5) the failure of WC to obtain the assumption of such
agreements by any successor or assign of WC. The terms and conditions of such
agreements shall be in lieu of any severance benefits that would otherwise be
due to the employee under policies of WC or its subsidiaries. If any of these
employees is terminated and the provisions of such agreements are not applicable
to such termination, then the employee shall receive the same severance benefits
that he or she would otherwise be entitled to receive under WC's normal
severance policies, which, for example, in the case of either Mr. Wilson or Mr.
Waller, would be 39 weeks of base salary.
As of August 26, 1997, the directors and executive officers of WC as a
group held 242,598 shares of WC Common Stock. In connection with the Merger,
each of these individuals will receive URS Common Stock transferred as Merger
Consideration. See "Principal WC Stockholders" below.
URS has held discussions with selected members of WC management,
including Messrs. Perez, Waller and Wilson, regarding their status as employees
following the Effective Time of the Merger and the possibility of entering into
employment and related agreements in this regard. However, as of the
54
<PAGE>
date of this Prospectus, no specific terms have been agreed to and no such
agreements have been finalized.
Material Contacts between URS and WC.
Other than as discussed above with respect to the negotiations
regarding the Merger Agreement, there have been no material contracts,
arrangements, understandings, relationships, negotiations, or transactions
between URS and WC in the last two fiscal years or in 1997. Prior to entering
into the Merger Agreement, URS and WC have occasionally been contracted to work
on the same projects, but have not been employed by or for each other in any
material contract. Since the Merger Agreement was signed, URS and WC have been
exploring joint business opportunities and other means of mutually supporting
each other's business in anticipation of the Merger being successfully
consummated.
Interests of Named Experts and Counsel.
Paul J. Sanner, now a partner in the law firm of Bronson, Bronson &
McKinnon LLP, outside counsel to WC in connection with the Merger, was employed
by WC for two years as its general counsel. Mr. Sanner purchased WC Common Stock
during his employment in accordance with WC's policies regarding employee share
ownership. In accordance with the terms of the Shareholders' Agreement, the
shares of WC Common Stock held by Mr. Sanner, which as of August 26, 1997,
equaled 0.67% of the total issued and outstanding shares of WC Common Stock, are
subject to repurchase by WC. As discussed below, the repurchase of WC Common
Stock from employee-stockholders has been restricted by certain terms of WC's
lending arrangements. Mr. Sanner is one of a number of former
employeestockholders of WC on a waiting list to have their shares of WC Common
Stock repurchased by WC.
55
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements are derived from the historical consolidated balance sheets and
related consolidated statements of operations of URS and WC adjusted to give
effect to the Merger using the purchase method of accounting for business
combinations.
The unaudited pro forma combined condensed balance sheet as of July 31,
1997 assumes that the Merger occurred as of that date. The unaudited pro forma
combined condensed statement of operations for the fiscal year ended October 31,
1996 assumes that the Merger occurred as of November 1, 1995. The unaudited pro
forma combined condensed statement of operations for the nine months ended July
31, 1997 assumes that the Merger occurred as of November 1, 1995. In order to
present comparable data for the combining companies, the pro forma statement of
operations includes the historical data for WC for the nine month period ended
June 30, 1997 and for the fiscal year ended December 31, 1996.
The pro forma combined condensed balance sheet and statement of
operations are provided for illustrative purposes only and should be read in
conjunction with the accompanying notes thereto, the audited consolidated
financial statement and notes thereto of URS for the year ended October 31, 1996
and the audited financial statements and notes thereto of WC for the year ended
December 31, 1996 and the related quarterly information for both companies. The
pro forma data is not necessarily indicative of the operating results or
financial position that would have been achieved had the Merger been consummated
at the dates indicated, nor is it necessarily indicative of future operating
results and financial condition.
56
<PAGE>
<TABLE>
Unaudited Pro Forma Combined Condensed Balance Sheet
As of July 31, 1997
(Dollars in thousands)
<CAPTION>
URS WC
July 31, June 30, Pro Forma Pro Forma
1997 1997 Adjustments Combined
----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash, cash equivalents,
and short term investments $ 14,368 $ 9,715 $(15,027) a $ 9,056
Accounts receivable, net 106,214 91,504 -- 197,718
Other current assets 10,390 3,498 -- 13,888
-------- -------- -------- --------
Total current assets 130,972 104,717 (15,027) 220,662
Property & equipment, net 16,131 14,782 -- 30,913
Goodwill, net 43,065 9,964 58,917 b 111,946
Other assets 1,746 7,923 4,000 c 13,669
-------- -------- -------- --------
Total assets $191,914 $137,386 $ 47,890 $377,190
======== ======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current bank debt $ 6,200 $ 25,168 $(15,368) a $ 16,000
Trade payables 62,641 46,053 -- 108,694
Other current liabilities 2,867 3,855 -- 6,722
-------- -------- -------- --------
Total current liabilities 71,708 75,076 (15,368) 131,416
Long-term debt 39,613 9,046 45,341 a 94,000
Other 8,239 6,181 -- 14,420
-------- -------- -------- --------
Total liabilities 119,560 90,303 29,973 239,836
Woodward-Clyde redeemable
preferred stock -- 6,437 (6,437) d --
Woodward-Clyde equity -- 40,646 (40,646) d --
URS equity 72,354 -- 65,000 a,d 137,354
-------- -------- -------- --------
Total liabilities and equity $191,914 $137,386 $ 47,890 $377,190
======== ======== ======== ========
<FN>
See accompanying notes to pro forma combined
condensed financial statements.
</FN>
</TABLE>
57
<PAGE>
<TABLE>
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended October 31, 1996
(Dollars in thousands, except per share data)
<CAPTION>
URS WC
October 31, December 31, Pro Forma Pro Forma
1996 1996 Adjustments Combined
----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $305,470 $320,228 $ -- $625,698
Expenses:
Direct operating expenses 187,129 206,095 -- 393,224
Indirect, general & administrative
expenses 102,389 107,848 2,000 e 212,237
-------- -------- -------- --------
Operating income 15,952 6,285 (2,000) 20,237
Interest expense (income), net 3,897 2,768 3,000 f 9,665
-------- -------- -------- --------
Income before taxes 12,055 3,517 (5,000) 10,572
Income tax expense (benefit) 4,700 1,913 (2,070) g 4,543
-------- -------- -------- --------
Net income 7,355 1,604 (2,930) 6,029
Preferred stock charges -- 1,090 1,090 --
-------- -------- -------- --------
Income applicable to common stock $ 7,355 $ 514 $ (1,840) $ 6,029
======== ======== ======== ========
Weighted average shares outstanding 9,498 1,965 4,552 h 14,050
Earnings per share:
Primary $ .82 $ .26 -- $ .43
======== ======== ======== ========
Fully diluted $ .80 $ .26 -- $ .43
======== ======== ======== ========
<FN>
See accompanying notes to pro forma combined
condensed financial statements.
</FN>
</TABLE>
58
<PAGE>
<TABLE>
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended July 31, 1997
(Dollars in thousands, except per share data)
<CAPTION>
URS WC
July 31, June 30, Pro Forma Pro Forma
1997 1997 Adjustments Combined
----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $295,496 $242,858 $ -- $538,354
Expenses:
Direct operating expenses 174,887 154,831 -- 329,718
Indirect, general & administrative
expenses 103,789 78,630 1,500 e 183,919
-------- -------- -------- --------
Operating income 16,820 9,397 1,500 24,717
Interest expense (income), net 3,806 2,192 2,250 f 8,248
-------- -------- -------- --------
Income before taxes 13,014 7,205 (3,750) 16,469
Income tax expense (benefit) 5,180 3,698 (1,595) g 7,283
-------- -------- -------- --------
Net income 7,834 3,507 (2,155) 9,186
Preferred stock charges -- 782 782 --
-------- -------- -------- --------
Income applicable to common
stock $ 7,834 $ 2,725 $ (1,373) $ 9,186
======== ======== ======== ========
Weighted average shares outstanding 10,652 1,971 4,552 h 15,204
Earnings per share:
Primary $ .74 $ 1.38 -- $ .60
======== ======== ======== ========
Fully diluted $ .74 $ 1.38 -- $ .60
======== ======== ======== ========
<FN>
See accompanying notes to pro forma combined
condensed financial statements.
</FN>
</TABLE>
59
<PAGE>
Notes to the Pro Forma Combined Condensed
Financial Statements
for the Nine Months Ended July 31, 1997 and for the Year Ended October 31, 1996
(Unaudited)
1. Organization and Basis of Presentation:
The Merger Agreement described within this Prospectus contemplates the
merger of WC into a wholly owned subsidiary of URS. Based on the 1,964,175
shares of WC Common Stock issued and outstanding on the WC Record Date, and
assuming that the URS Closing Price is $14.28 per share (the average daily
closing price for such stock on the NYSE over the 20 trading days preceding the
date the Merger Agreement was signed), each share of WC Common Stock would be
converted into the right to receive $13.59 in cash and 2.317 shares of URS
Common Stock, which would have an indicated aggregate value of $46.68 per share
of WC Common Stock.
The pro forma financial statements have been prepared based on the
historical financial statements of WC, whose fiscal year ends December 31, and
URS, whose fiscal year ends October 31, as adjusted for the effects of the
proposed Merger under the purchase method of accounting. The pro forma combined
condensed balance sheet as of July 31, 1997 assumes the Merger was consummated
on that date, and the pro forma combined condensed statement of operations for
the fiscal year ended October 31, 1996 and the nine months ended July 31, 1997
have been prepared as if the Merger had been consummated on November 1, 1995.
However, in order to present comparable data for the combining companies, the
pro forma statement of operations includes the historical data for WC for the
nine month period ended June 30, 1997 and for the fiscal year ended December 31,
1996. These statements should be read in conjunction with the historical
financial statements, and the related notes thereto, included elsewhere herein.
The unaudited pro forma financial statements are not necessarily
indicative of what the actual financial position would have been at either
October 31, 1996 or July 31, 1997, nor of the actual results of operations for
the year ended October 31, 1996 or the nine months ended July 31, 1997, had the
Merger occurred on the dates indicated, nor do they purport to present the
future financial position or results of operations of URS and WC.
2. The Pro Forma Adjustments:
a. The balance sheet has been adjusted to reflect the cash to be paid,
debt to be incurred and equity to be issued to acquire WC as if URS had acquired
WC on July 31, 1997 (dollars in thousands).
Cash $15,027
Term loan - current portion (15,368)
Term loan - long term portion 45,341
Common Stock 65,000
--------
$110,000
========
b. Pro forma adjustments resulting in the excess purchase price over
net assets acquired consist of the following (dollars in thousands):
Purchase price of WC (net of prepaid
loan fees of $4,000) $106,000
Fair value of net assets acquired (47,083)
--------
Excess purchase price over net
assets acquired $ 58,917
========
60
<PAGE>
URS management believes that the amounts reflected on WC historical
consolidated balance sheet as to tangible assets and liabilities approximates
the fair market values of such assets and liabilities and, accordingly, such
amounts have not been adjusted in the accompanying pro forma financial
statements. The excess purchase price over net assets acquired resulting from
the Merger will be amortized on a straight-line basis over 30 years.
c. Fees and expenses related to the Merger are estimated to be
$10,000,000, $4,000,000 of which are associated with the financing of the
transaction. The financing fees are being capitalized and charged to interest
expense over the seven year term of the loan. The remaining fees and expenses
are being capitalized as goodwill.
d. The pro forma combined condensed balance sheet reflects the issuance
of approximately 4,552,000 shares of URS Common Stock and cash consideration of
$13.59 per WC share in exchange for 100% of the shares of WC Common Stock and WC
Preferred Stock, based upon an assumed URS closing stock price of $14.28 per
share.
e. Includes an adjustment for the nine months ended July 31, 1997 to
reflect $1,500,000 of amortization of goodwill arising from the Merger, and an
adjustment for the year ended October 31, 1996 to reflect $2,000,000 of
amortization of goodwill arising from the Merger.
<TABLE>
f. Includes adjustments includes interest expense related to debt
incurred in connection with the Merger, and the reduction in interest income due
to cash reduction as follows (dollars in thousands):
<CAPTION>
Nine Month Period Ended Year Ended
July 31, 1997 October 31, 1996
----------------- ----------------
<S> <C> <C>
Increase in interest expense $1,500 $2,000
Decrease in interest income 750 1,000
------ ------
Net $2,250 $3,000
</TABLE>
g. Subsequent to the Merger, WC's operating results will be included in
URS's consolidated tax returns, which results in a pro forma decrease to the
income tax provision of $1,595,000 for the nine months ended July 31, 1997 and
$2,070,000 for the year ended October 31, 1996.
h. The pro forma combined earnings per share calculation is based upon
the weighted average number of URS Common Stock and Common Stock equivalents
outstanding, assuming the issuance of 4,552,000 shares of URS Common Stock
pursuant to the Merger.
3. Pro Forma Expense Reductions:
In management's opinion, certain cost savings related to general
corporate administration would have been realized during the pro forma periods
had the Merger been in effect at November 1, 1995; however, no such adjustments
have been reflected in the foregoing pro forma financial statements.
61
<PAGE>
<TABLE>
SELECTED FINANCIAL INFORMATION
Selected URS Historical Financial Data.
The following table sets forth selected financial data of URS for the
five years ended October 31, 1996 and the nine months ended July 31, 1997 and
1996. The data presented below should be read in conjunction with the
Consolidated Financial Statements of URS including the notes thereto.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
<CAPTION>
Nine Months Ended
July 31, Years Ended October 31,
---------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $295,496 $203,101 $305,470 $179,769 $164,088 $145,761 $136,793
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Direct operating 174,887 122,552 187,129 108,845 102,500 91,501 85,384
Indirect, general and
administrative 103,789 70,782 102,389 63,217 55,455 51,607 45,473
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 278,676 193,334 289,518 172,062 157,955 143,108 130,857
-------- -------- -------- -------- -------- -------- --------
Operating income 16,820 9,767 15,952 7,707 6,133 2,653 5,936
Interest expense, net 3,806 2,434 3,897 1,351 1,244 1,220 1,208
-------- -------- -------- -------- -------- -------- --------
Income before income taxes 13,014 7,333 12,055 6,356 4,889 1,433 4,728
Income tax expense 5,180 2,930 4,700 1,300 450 140 460
-------- -------- -------- -------- -------- -------- --------
Net income $ 7,834 $ 4,403 $ 7,355 $ 5,056 $ 4,439 $ 1,293 $ 4,268
======== ======== ======== ======== ======== ======== ========
Net income per share:
Primary $ .74 $ .51 $ .82 $ .68 $ .60 $ .18 $ .55
======== ======== ======== ======== ======== ======== ========
Fully diluted $ .74 $ .51 $ .80 $ .67 $ .60 $ .18 $ .55
======== ======== ======== ======== ======== ======== ========
Weighted average shares:
Primary 10,652 9,316 9,498 8,632 8,556 6,971 8,221
Fully diluted 10,652 9,316 9,498 8,632 8,556 6,971 8,221
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: As of July 31, As of October 31,
---------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $ 59,264 $ 51,776 $ 57,572 $36,307 $33,674 $27,684 $26,836
Total assets 191,914 168,333 185,607 75,935 65,214 58,074 54,892
Total debt 45,813 59,908 60,044 9,999 9,270 8,277 8,705
Stockholders' equity $ 72,354 $ 53,510 $ 56,696 $39,478 $33,973 $29,389 $27,878
</TABLE>
62
<PAGE>
URS Management's Discussion and Analysis of Financial Condition and Results of
Operations
Fiscal 1996 Compared with Fiscal 1995
Revenues in fiscal 1996 were $305.5 million, or 70% over the amount
reported in fiscal 1995. The growth in revenues is primarily attributable to the
acquisition of Greiner Engineering, Inc. ("Greiner"), the results of which are
included commencing April 1, 1996, and to a lesser extent, an increase in
revenues derived from existing areas of URS's business, particularly
transportation and other infrastructure projects in the Northeast. Revenues
generated from URS's three largest contracts; Navy CLEAN, EPA ARCS 9&10 and EPA
ARCS 6, 7 & 8, decreased in fiscal 1996 to $30.2 million as compared to $37.1
million in fiscal 1995. The decrease in revenues from these contracts is
primarily due to a decrease in the number of task orders for hazardous waste
services on all of the above EPA ARCS contracts.
Direct operating expenses, which consist of direct labor and direct
expenses including subcontractor costs, increased $78.3 million, or 72%, over
the amount reported in fiscal 1995. The increase is due to the addition of the
direct operating expenses of Greiner and to increases in subcontractor costs and
direct labor costs as well. Indirect general and administrative expenses
("IG&A") increased to $102.4 million in fiscal 1996 from $63.2 million in fiscal
1995 which is the result of the addition of the Greiner overhead as well as an
increase in business activity. Expressed as a percentage of revenues, IG&A
expenses decreased from 35% in fiscal 1995 to 34% in fiscal 1996. URS attributes
this decrease to the cost controls exercised by URS. Net interest expense
increased to $3.9 million in fiscal 1996 from $1.4 million in fiscal 1995 as a
result of increased borrowings incurred in connection with the acquisition of
Greiner.
With an effective income tax rate of 39% in 1996, URS earned net income
of $7.4 million while in 1995 net income was $5.1 million after an effective
income tax rate of 20% when URS had available net operating loss ("NOL")
carryforwards which partially offset otherwise taxable income for Federal income
tax purposes. URS earned $0.80 per share on a fully-diluted basis in fiscal 1996
compared to $0.67 per share in fiscal 1995.
URS's backlog of signed and funded contracts at October 31, 1996 was
$399.2 million as compared to $196.4 million at October 31, 1995. The value of
URS's designations, which are awarded projects for which contracts have not been
signed, was $295.9 million at October 31, 1996, as compared to $194.1 million at
October 31, 1995.
Fiscal 1995 Compared with Fiscal 1994
Revenues in fiscal 1995 grew to $179.8 million, or 10% over the amount
reported in fiscal 1994. The growth in revenues was primarily attributable to
increases in revenues generated from all areas of URS's business, particularly
transportation and other infrastructure projects in the Northeast. Revenues
derived from URS's three largest contracts: Navy CLEAN, EPA ARCS 9&10 and EPA
ARCS 6,7&8, were $37.1 million in fiscal 1995 compared to $41.0 million in
fiscal 1994. The decrease in revenues from these contracts was primarily due to
a decrease in the number of task orders for hazardous waste clean-up services.
Direct operating expenses, which consist of direct labor and direct
expenses including subcontractor costs, increased $6.3 million, or 6%, over the
amount reported in fiscal 1994. The increase was due to an overall increase in
URS's business in fiscal 1995 as compared to fiscal 1994. In
63
<PAGE>
fiscal 1995, IG&A expenses increased to $63.2 million from $55.5 million in
fiscal 1994. However, expressed as a percentage of revenues, IG&A expenses
increased from 34% in fiscal 1994 to 35% in fiscal 1995. URS attributes this
increase to the overall increase in URS's business. Net interest expense
remained relatively constant at $1.4 million in fiscal 1995.
URS earned $6.4 million before income taxes in fiscal 1995 compared to
$4.9 million in fiscal 1994. While URS had available NOL carryforwards which
partially offset otherwise taxable income for Federal income tax purposes, for
state income tax purposes such amounts were not necessarily available to offset
income subject to tax. Accordingly, URS's effective tax rate for fiscal 1995 was
approximately 20% compared to 9% in 1994.
Net income increased 16% to $5.1 million compared to $4.4 million in
fiscal 1994. URS earned $0.67 per share on a fully-diluted basis in fiscal 1995
compared to $0.60 per share in fiscal 1994.
URS's backlog of signed and funded contracts at October 31, 1995 was
$196.4 million as compared to $159.1 million at October 31, 1994. The value of
URS's designations, was $194.1 million at October 31, 1995 as compared to $172.0
million at October 31, 1994.
Third Quarter Ended July 31, 1997 Compared With July 31, 1996 and Nine Months
Ended July 31, 1997 Compared With Nine Months Ended July 31, 1996
Third Quarter Ended July 31, 1997 Compared With July 31, 1996
URS's revenues were $100,196,000 for the third quarter ended July 31,
1997, an increase of $10,462,000 or 12% over the amount reported for the same
period last year. The growth in revenue is attributable to an increase in demand
for URS's services on infrastructure projects. The revenues generated from URS's
three largest indefinite delivery contracts, the Navy CLEAN, EPA ARCS 9 & 10,
and EPA ARCS 6,7 & 8 contracts, were $5,261,000 for the quarter ended July 31,
1997, compared to $7,159,000 for the same period last year.
Direct operating expenses for the quarter ended July 31, 1997, which
consist of direct labor and other direct expenses, including subcontractor
costs, increased $5,786,000 an 11% increase over the amount reported for the
same period last year. This increase is due to the increases in subcontractor
costs and direct labor costs associated with revenues.
Indirect, general and administrative expenses for the quarter ended
July 31, 1997 increased $3,259,000, or 10% over the amount reported for the same
period last year as a result of an increase in business activity.
URS earned $5,291,000 before income taxes for the third quarter ended
July 31, 1997 compared to $3,432,000 for the same period last year. URS's
effective income tax rate for the quarters ended July 31, 1997 and 1996 was
approximately 40%.
URS reported net income of $3,181,000, or $.28 per share for the third
quarter ended July 31, 1997, compared with $2,072,000 or $.22 per share for the
same period last year.
Certain reclassifications have been made to the allowance for doubtful
accounts and other items in the financial statements for the three months ended
July 31, 1997 to conform the presentation previously employed by Greimer to
URS's presentation, with no effect on net income.
64
<PAGE>
Nine months ended July 31, 1997 Compared With July 31, 1996
URS's revenues were $295,496,000 for the nine months ended July 31,
1997, an increase of $92,395,000, or 45% over the amount reported for the same
period last year. The growth in revenues is attributable to all areas of URS's
business including infrastructure projects involving transportation systems,
institutional and commercial facilities and environmental projects as well as
the Greiner acquisition. Revenues generated from URS's three largest indefinite
delivery contracts (Navy CLEAN, EPA ARCS 9 & 10 and EPA ARCS 6, 7 & 8) were
$21,671,000 for the nine months ended July 31, 1997, compared to $21,314,000 for
the same period last year.
Direct operating expenses for the nine months ended July 31, 1997,
which consist of direct labor and other direct expenses including subcontractor
costs, increased $52,335,000, or 43% over the amount reported in the same period
last year. This increase is attributable to the overall increase in URS's
business as compared to the same period last year as well as the Greiner
acquisition. Indirect, general and administrative expenses were $103,789,000 for
the nine months ended July 31, 1997, an increase of $33,007,000, or 47% over the
amount reported for the same period last year. The increase in indirect, general
and administrative expenses is due to an increase in business activity in
addition to the addition of the Greiner overhead.
URS earned $13,014,000 before income taxes for the nine months ended
July 31, 1997 compared to $7,333,000 for the same period last year. URS's
effective income tax rate for the nine months ended July 31, 1997 and 1996 was
approximately 40%.
URS reported net income of $7,834,000 or $.74 per share, for the nine
months ended July 31, 1997, compared with $4,403,000, or $.51 per share for the
same period last year.
URS's backlog at July 31, 1997 was $470,072,000, as compared to
$399,200,000 at October 31, 1996.
On February 12, 1997, Wells Fargo exercised the 435,562 warrants held
by Wells Fargo at $4.34 per share, resulting in the issuance of an additional
435,562 shares to Wells Fargo for $1.9 million. On February 14, 1997, various
partnerships managed by Richard C. Blum & Associates, Inc. ("RCBA") exercised
1,383,586 warrants held by such entities at $4.34 per share. The exercise price
of these warrants was paid by a combination $2.0 million of cash and the
cancellation of the $3.0 million amount of debt drawn under URS's line of credit
with certain RCBA entities. The exercise resulted in the issuance of an
additional 1,383,586 shares to the RCBA entities. These equity transactions are
reflected in URS's financial statements.
Certain reclassifications have been made to the allowance for doubtful
accounts and other items in the financial statements for the nine months ended
July 31, 1997 to conform the presentation previously employed by Greimer to
URS's presentation, with no effect on net income.
Income Taxes
URS currently has a $6.0 million NOL carryforward which is limited to
$750,000 per year, pursuant to Section 382 of the Internal Revenue Code, related
to its October 1989 quasi- reorganization.
65
<PAGE>
<TABLE>
Liquidity and Capital Resources
URS's liquidity and capital measurements are set forth below:
<CAPTION>
July 31, October 31,
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $59,264,000 $51,776,000 $57,572,000 $36,307,000 $33,674,000
Working capital ratio 1.8 to 1 1.9 to 1 1.8 to 1 2.4 to 1 2.6 to 1
Average days to convert billed
accounts receivable to cash 74 99 58 62 66
Percentage of debt to equity 67.3% 112.0% 108.1% 25.0% 27.3%
</TABLE>
URS is a professional services organization and, as such, is not
capital intensive. Capital expenditures during fiscal years 1996, 1995 and 1994
were $3.0 million, $1.6 million and $2.1 million, respectively and for the
nine-month period ended July 31, 1997, 1996 and 1995 were $3.0 million, $2.3
million and $1.1 million, respectively. The expenditures were principally for
computer-aided design and general purpose computer equipment to accommodate
URS's growth. URS expects fiscal 1997 capital expenditures to be comparable to
the expenditures in fiscal 1996.
At July 31, 1997, URS's senior secured revolving credit facility with
Wells Fargo, provided for advances of up to $20.0 million. Also at July 31,
1997, URS had outstanding letters of credit totaling $1.0 million, which reduced
the amount available to URS under its revolving credit facility to $19.0
million.
To finance some of the cash portion of the Merger, Wells Fargo signed
and delivered to URS the Commitment Letter which has been accepted by URS. The
Commitment Letter provides that Wells Fargo will provide URS with the following
loans to finance some of the cash portion of the Merger and to provide for the
working capital needs of URS thereafter: a $40 million revolving credit facility
expiring five years from the issuance date and a $110 million term loan maturing
six years from the date of the loan. Such loans will be secured by guarantees
from and pledges of the stock of URS's major subsidiaries and will replace URS's
current secured credit facility. It is expected that the facility will be
syndicated to include other lenders.
URS believes that its existing financial resources, together with its
planned cash flow from operations and the line of credit described in the
Commitment Letter, will provide sufficient capital to fund its operations and
its capital expenditure needs for the foreseeable future.
<TABLE>
Cash paid during the period for:
<CAPTION>
Nine Month Period Ended July 31, Years Ended October 31,
--------------------------------- ----------------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest $4,107 $1,682 $4,142 $ 891 $1,301
Income taxes $6,777 $2,132 $6,483 $1,358 $ 499
</TABLE>
Acquisitions
On January 4, 1995, URS acquired E.C. Driver & Associates, Inc. ("ECD")
for an aggregate purchase price of $3.6 million, which was paid in cash. In
conjunction with the acquisition, liabilities were assumed as follows:
(In thousands)
Fair value of assets acquired $ 4,952
Cash paid for the capital stock (3,596)
-------
Liabilities assumed $ 1,356
=======
66
<PAGE>
On March 29, 1996, URS acquired Greiner for $78.8 million, comprised of
cash of $69.3 million, and 1.4 million shares of URS Common Stock. The purchase
was partially financed by $50.0 million of secured term loans payable over seven
years beginning October 1996. The loans bear interest based on rate indexes
selected by URS, with variable spreads over the selected index based on loan
maturity and URS's financial performance.
The acquisition has been accounted for by the purchase method of
accounting and the excess of the fair value of the net assets acquired over the
purchase price has been allocated to goodwill. The operating results of Greiner
are included in URS's results of operations from the date of purchase.
The purchase price consisted of: (In thousands)
Cash paid $ 19,321
Term debt-current portion 4,675
Term debt-long-term portion 45,325
Common Stock 9,463
---------
$ 78,784
=========
The purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $ 77,184
Fair value of assets acquired (42,510)
---------
Excess purchase price over net assets acquired (Goodwill) $ 34,674
=========
67
<PAGE>
<TABLE>
Selected WC Historical Financial Data
The following table sets forth selected financial data of WC for the
five years ended December 31, 1996 and the six months ended June 30, 1997 and
1996. The data presented below should be read in conjunction with the
Consolidated Financial Statements of WC including the notes thereto.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
<CAPTION>
Income Statement Data: Six Months Ended
June 30, Years Ended December 31,
----------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gross revenues from services $ 161,225 $ 156,443 $ 320,228 $ 310,394 $ 273,880 $ 268,801 $ 271,342
Direct costs of outside services (51,329) (50,184) (110,830) (94,010) (73,356) (70,730) (75,757)
--------- --------- --------- --------- --------- --------- ---------
Net revenues 109,896 106,259 209,398 216,384 200,524 198,071 195,585
Costs and expenses:
Salaries and benefits 76,095 76,196 147,722 150,894 138,485 137,785 133,264
General expenses 23,025 23,156 48,646 50,725 45,424 45,137 46,679
Depreciation and amortization 3,098 3,475 6,826 6,802 5,587 5,587 4,998
--------- --------- --------- --------- --------- --------- ---------
102,218 102,827 203,194 208,421 189,496 188,509 184,941
Other expenses (income):
Interest 1,466 1,514 2,768 2,745 2,213 1,772 1,355
Other (164) (66) (81) (138) (71) (127) (307)
--------- --------- --------- --------- --------- --------- ---------
1,302 1,448 2,687 2,607 2,142 1,645 1,048
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes 6,376 1,984 3,517 5,356 8,886 7,917 9,596
Income taxes 3,015 951 1,913 2,536 3,737 3,355 3,995
--------- --------- --------- --------- --------- --------- ---------
Net income 3,361 1,033 1,604 2,820 5,149 4,562 5,601
Less:
Dividends on Preferred shares 53 58 111 126 145 155 184
Redemption premium on
Preferred shares 432 490 979 1,095 1,211 1,327 815
--------- --------- --------- --------- --------- --------- ---------
485 548 1,090 1,221 1,356 1,482 999
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common shares $ 2,876 $ 485 $ 514 $ 1,599 $ 3,793 $ 3,080 $ 4,602
========= ========= ========= ========= ========= ========= =========
Net income per share $ 1.46 $ 0.25 $ 0.26 $ 0.82 $ 1.97 $ 1.50 $ 2.24
========= ========= ========= ========= ========= ========= =========
Weighted average shares outstanding 1,975 1,967 1,965 1,955 1,921 2,058 2,055
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: As of
June 30, As of December 31,
-------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $29,641 $ 31,108 $ 27,829 $ 37,840 $ 46,016 $ 45,936 $ 29,311
Total assets 137,386 134,729 127,390 133,444 104,836 104,742 101,881
Total debt 35,451 35,938 29,595 38,891 26,750 27,465 28,059
Long-term liabilities 15,227 22,511 17,787 28,710 29,685 30,540 13,577
Redeemable preferred stock 6,437 5,525 5,395 5,035 5,062 4,856 4,419
Stockholders' equity 40,646 37,608 38,272 37,665 34,167 33,059 31,917
</TABLE>
68
<PAGE>
WC Management's Discussion and Analysis of Financial Condition and Results of
Operations
Fiscal 1996 Compared with Fiscal 1995
Gross Revenues from services in fiscal 1996 were $320.2 million, 3%
greater than in fiscal 1995. Substantially all of the increase was attributable
to increases in direct costs of outside services as a result of using
subcontractors. Net revenues declined to $209.4 million in fiscal 1996 from
$216.4 million in fiscal 1995. While net revenues in Europe were down 11% in
fiscal 1996 reflecting difficult market conditions due to competition, net
revenues in Asia-Pacific increased to $30.0 million in fiscal 1996 from $21.1
million in fiscal 1995 due to increased demand for WC's services. Offsetting
this gain was a decline in North America net revenues to $170.0 million in
fiscal 1996 from $184.9 million in fiscal 1995. This decline is attributable to
a general decline in demand and to delays in U.S. Federal government
procurements for engineering and environmental services and to increased
industry-wide competition.
Salaries and benefits in fiscal 1996 declined to $147.7 million from
$150.9 million in fiscal 1995. This decline generally followed the shift in net
revenues as they are directly related. General expenses declined to $48.6
million in fiscal 1996 from $50.7 million in fiscal 1995 as a result of cost
reduction efforts. Depreciation and amortization and interest expense in fiscal
1996 and fiscal 1995 were consistent from year to year.
As a result of the decline in net revenues in fiscal 1996 versus fiscal
1995, income before income taxes decreased to $3.5 million from $5.4 million in
fiscal 1995. Income taxes in fiscal 1996 were $1.9 million, or 54% of income
before income taxes, compared with an effective income tax rate of 47% in fiscal
1995. Rates in both years were substantially higher than the U.S. Federal
statutory rate of 35% due to state and foreign taxes and to non-deductible costs
and expenses for Federal income tax purposes.
Net income applicable to common shares declined to $0.5 million in
fiscal 1996 from $1.6 million in fiscal 1995, or $0.26 per share in fiscal 1996
versus $0.82 per share in fiscal 1995.
WC's backlog at December 31, 1996 was $189.0 million as compared to
$162.0 million at December 31, 1995.
Fiscal 1995 Compared with Fiscal 1994
Gross revenues from services in fiscal 1995 increased to $310.4 million
from $274.9 million in fiscal 1994, or 13%. Of the increase of $35.5 million,
$26.4 million came from the April 1995 acquisition of a specialty contractor,
$4.4 million came from increases in the use of subcontractors and the remainder
came from an increased demand for WC's services. Net revenues increased to
$216.4 million in fiscal 1995 from $200.5 million in fiscal 1994, or 8%, of
which $10.2 million was from the aforementioned acquisition and the remainder
was from increases in demand for WC's services.
Salaries and benefits increased to $150.9 million in fiscal 1995 from
$138.5 million in fiscal 1994, or 9%. This increase generally followed shifts in
net revenues as they are directly related. General expenses in fiscal 1995
increased following the increase in net revenues and as a result of the
aforementioned acquisition. Depreciation and amortization in fiscal 1995
increased to $6.8 million from $5.6 million in fiscal 1994 due to increased
capital expenditures and to the aforementioned acquisition. Interest expense
increased in fiscal 1995 due to additional borrowings in connection with the
aforementioned acquisition.
69
<PAGE>
Income before income taxes declined to $5.4 million in fiscal 1995 from
$8.9 million in fiscal 1994. Income taxes in fiscal 1995 were $2.5 million based
on an effective tax rate of 47% compared with 42% in fiscal 1994. The increase
in the tax rate is attributable to non-deductible costs and expenses.
Net income applicable to common shares declined to $1.6 million in
fiscal 1995 from $3.8 million in fiscal 1994, or $0.82 per share in fiscal 1995
versus $1.97 per share in fiscal 1994.
<TABLE>
Liquidity and Capital Resources
WC's liquidity and capital measurements are set forth below:
<CAPTION>
June 30 December 31
------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C> <C>
Working capital $29,641,000 $31,108,000 $27,829,000 $37,840,000 $46,016,000
Working capital ratio 1.4 to 1.0 1.5 to 1.0 1.4 to 1.0 1.6 to 1.0 2.3 to 1.0
Average days to convert billed
accounts receivable to cash 82 78 74 73 65
Percentage of debt to equity 87% 96% 77% 103% 78%
</TABLE>
The decline in WC's working capital from December 31, 1994 to December
31, 1996 was primarily due to WC refinancing long-term debt using funds from a
revolving line of credit. The increase in WC's working capital from December 31,
1996 to June 30, 1997 was due to WC's improved operating results.
In September 1996 WC entered into a $30 million revolving line of
credit and a $6 million term loan domestically with a lender. In addition, WC
has international lines of credit with a total capacity of $2.9 million. It is
anticipated that the $30 million revolving line of credit and the $6 million
term loan will be fully paid and terminated following the Effective Time of the
Merger.
WC is primarily a professional services organization and, as such, is
not capital intensive. Capital expenditures for the six months ended June 30,
1997 and the fiscal years ended December 31, 1996, 1995 and 1996 were
$1,799,000, $3,019,000, $4,609,000 and $5,226,000, respectively.
WC believes that its existing financial resources, together with its
planned cash flow will provide sufficient capital to find its operations and its
capital expenditure needs for the foreseeable future.
Cash paid during the periods for:
Six Months Period
Ended June 30, Year ended December 31
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Interest $1,732,000 $1,883,000 $4,235,000 $3,630,000 $2,297,000
Income taxes $ 778,000 $ 184,000 $ 554,000 $4,472,000 $4,001,000
Acquisition
On April 28, 1995, WC purchased all of the issued and outstanding
common stock of GCH Acquisition Corporation for $8,150,000, for which WC paid
cash of $7,146,878 and issued 43,614 shares of its Common Stock with a value of
$1,003,122. The transaction was accounted for under the purchase method of
accounting. Of the purchase price, $5,221,000 was recorded as excess of cost
over net assets (goodwill) acquired. During 1996, an additional amount of
goodwill was recognized in the amount of $3,466,000 net of taxes, as a result of
changes in the estimated profitability of contracts acquired.
70
<PAGE>
Purchase price of GCH Acquisition Corporation $8,150,000
Plus fair value of net liabilities assumed 537,000
(as adjusted in 1996) ----------
Excess of cost over net assets acquired $8,687,000
==========
On October 3, 1995, WC purchased all of the issued and outstanding
stock of Cole Sherman and Associates Limited ("CSA"), a Canadian corporation,
for $1,429,646. The transaction was accounted for under the purchase method of
accounting. During 1996, WC wrote off uncollectible accounts receivable within
CSA of approximately $217,000, and recorded this amount as additional excess of
cost over net assets acquired.
Purchase price of Cole Sherman and Associated Limited $1,429,646
Less fair value of net assets acquired
(as adjusted in 1996) (967,830)
----------
Excess of cost over net assets acquired $ 461,816
==========
Six Months ended June 30, 1997 Compared with Six Months ended June 30, 1996
Gross revenues from services in 1997 increased to $161.2 million from
$156.4 million in 1996, or 3%. Direct costs of outside services increased to
$51.3 million, or 2%. Net revenues increased by $3.6 million, or 3%, to $109.9
million in 1997 from $106.3 million in 1996, due primarily to increased demand
for construction contract services.
Costs and expenses, comprised of salaries and benefits, general
expenses and depreciation and amortization remained consistent at $102.2 million
in 1997 versus $102.8 million in 1996, primarily as a result of cost management.
Interest expense also remained relatively constant in 1997 versus 1996.
As a result of the foregoing, income before income taxes increased to
$6.4 million in 1997 from $2.0 million in 1996. WC's effective income tax rate
in 1997 was 47% compared to 48% in 1996.
Net income applicable to common shares in 1997 was $2.9 million
compared to $0.5 million in 1996, or $1.46 per share versus $0.25 per share in
1996.
WC's backlog at June 30, 1997 was $ 212 million.
Three Months ended June 30, 1997 Compared with Three Months ended June 30, 1996
Gross revenues from services in 1997 increased to $84.6 million from
$79.4 million in 1996, or 7%. Direct costs of outside services increased to
$27.2 million, or 3%. Net revenues increased by $4.4 million, 8%, to $57.4
million in 1997 from $53.0 million in 1996, due primarily to increased demand
for construction contract services.
Costs and expenses, comprised of salaries and benefits, general
expenses and depreciation and amortization, increased by $1.5 million, or 2.9%,
from $51.1 million in 1996 to $52.6 million in 1997. This reflected slower
growth than was experienced in revenues due to cost management. Interest expense
in 1997 decreased to $0.7 million from $0.8 million in 1996, due to reductions
in debt balances and average interest rate.
As a result of the foregoing, income before income taxes increased to
$4.2 million in 1997 compared to $1.1 million in 1996. WC's effective income tax
rate in 1997 was 47% compared to 50% in 1996, reflecting differences in the
effect of state and foreign taxes and the non-deductibility of expenses for
Federal income tax purposes.
Net income applicable to common shares in 1997 was $1.9 million
compared to $0.2 million in 1996, or $0.98 per share versus $0.12 per share in
1996.
71
<PAGE>
INFORMATION CONCERNING URS
Overview
URS offers a broad range of planning, design and program and
construction management services. URS serves public and private sector clients
on infrastructure projects involving transportation systems, facilities and
environmental programs. URS conducts its business through offices located
throughout the United States. URS has approximately 3,250 employees, many of
whom hold advanced or technical degrees and have extensive experience in
sophisticated disciplines applicable to URS's business. URS believes that its
geographic and technical diversity allow it to compete for local, regional and
national projects, and enable it to apply to each project a variety of resources
from its national network.
Services
URS provides professional services in three major areas: planning,
design and program and construction management through URS's 35 principal
offices. Each of these offices is responsible for obtaining local or regional
contracts. This approach allows regional government agencies and private clients
to view URS's offices as local businesses with superior service delivery
capabilities. Because URS can draw from its large and diverse network of
professional and technical resources, URS has the capability to market and
perform large multi-state projects.
Planning. Planning covers a broad range of assignments ranging from
conceptual design and technical and economic feasibility studies to community
involvement programs. Planning services also involve developing alternative
concepts for project implementation and analyzing the impacts of each
alternative. In addition to traditional engineering and architectural planning
services, URS has extensive expertise in a number of highly specialized areas,
including toll facilities, health care facility renovation, environmental site
analysis, water quality planning for urban storm water management and site
remediation assignments.
Design. URS's professionals provide a broad range of design and
design-related services, including computerized mapping, architectural and
interior design, civil, sanitary and geotechnical engineering, process design
and seismic (earthquake) analysis and design. For each project, URS identifies
the project requirements and then integrates and coordinates the various design
elements. The result is a set of contract documents that may include plans,
specifications and cost estimates that are used to build a project. These
documents detail design characteristics and set forth for the contractor the
materials which should be used and the schedule for construction. Other critical
tasks in the design process may include value analysis and the assessment of
construction and maintenance requirements.
Program and Construction Management. URS's program and construction
management services include master scheduling of both the design and
construction phases, construction and life-cycle cost estimating, cash flow
analysis, value engineering, constructability reviews and bid management. Once
construction has begun, URS supervises and coordinates the activities of the
construction contractor. This frequently involves acting as the owner's
representative for on-site supervision and inspection of the contractor's work.
In this role, URS's objective is to monitor a project's schedule, cost and
quality. URS generally does not take contractual responsibility for the
contractor's risks and methods, nor for site safety conditions.
Markets
URS's strategy is to focus on the infrastructure market which includes
surface and air transportation systems, institutional and commercial facilities,
and environmental programs involving pollution control, water resources and
hazardous waste management.
Surface and Air Transportation Systems. URS's engineers, designers,
planners and managers provide services for projects involving all types of
transportation systems and networks, such as highways, roadways,
72
<PAGE>
streets, bridges, rapid and mass transit, airports and marine facilities. These
services range from the design of interstate highways to harbor traffic
simulation studies and may extend from conceptual planning through the
preliminary and final design to construction management. Historically, URS's
emphasis in this market area has been on the design of new transportation
systems, but in recent years the rehabilitation of existing systems has become a
major focus.
Institutional and Commercial Facilities. URS provides architectural,
engineering design, space planning and construction supervision services to this
market area. Demand for low-maintenance, energy efficient facilities drives
today's market for commercial and industrial buildings. In addition, there is
increased pressure to renovate facilities to meet changing needs and current
building standards.
Pollution Control. URS's principal services in this market include the
planning and design of new wastewater facilities, such as sewer systems and
wastewater treatment plants, and the analysis and expansion of existing systems.
The types of work performed by URS include infiltration/inflow studies, combined
sewer overflow studies, water quality facilities planning projects and design
and construction management services for wastewater treatment plants.
Water Resources. URS's capabilities in this market area include the
planning, design and program and construction management of water supply,
storage, distribution and treatment systems, as well as work in basin plans,
groundwater supply, customer rate studies, urban run-off, bond issues, flood
control, water quality analysis and beach erosion control.
Hazardous Waste Management. In this market segment, URS conducts
initial site investigations, designs remedial actions for site clean-up and
provides construction management services during site clean-up. This market
involves identifying and developing measures to effectively dispose of hazardous
and toxic waste at contaminated sites. URS also provides air quality monitoring
and designs individual facility modifications required to meet local, state and
Federal air quality standards. This work requires specialized knowledge of and
compliance with complex Federal and state regulations, as well as the permitting
and approval processes. Solid waste management services provided by URS include
facility siting, transfer station design and community-wide master planning.
73
<PAGE>
<TABLE>
Clients
General. URS's clients include local, state and Federal government
agencies and private sector businesses. URS's revenues from local, state and
Federal government agencies and private businesses for the last five fiscal
years and the nine month period ended July 31, 1997 are as follows:
<CAPTION>
July 31, October 31,
1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Local and
state
agencies $185,316 63% $198,472 65% $ 99,871 56% $88,207 54% $80,350 55% $65,315 48%
Federal
agencies 53,636 18 64,226 21 58,751 33 59,611 36 48,713 33 52,530 38
Private
businesses 56,544 19 42,772 14 21,147 11 16,270 10 16,698 12 18,948 14
-------- --- ------- --- ------- --- ------- --- ------- --- ------ ---
Total $295,496 100% $305,470 100% $179,769 100% $164,088 100% $145,761 100% $136,793 100%
======= ==== ======= === ======= === ======= === ======= === ======= ===
</TABLE>
Contract Pricing and Terms of Engagement. Under its cost-plus
contracts, URS charges clients negotiated rates based on URS's direct and
indirect costs. Labor costs and subcontractor services are the principal
components of URS's direct costs. Federal Acquisition Regulations limit the
recovery of certain specified indirect costs on contracts subject to such
regulations. In negotiating a cost-plus contract, URS estimates all recoverable
direct and indirect costs and then adds a profit component, which is either a
percentage of total recoverable costs or a fixed negotiated fee, to arrive at a
total dollar estimate for the project. URS receives payment based on the total
actual number of labor hours expended. If the actual total number of labor hours
is lower than estimated, the revenues from that project will be lower than
estimated. If the actual labor hours expended exceed the initial negotiated
amount, URS must obtain a contract modification in order to receive payment for
such overage. URS's profit margin will increase to the extent URS is able to
reduce actual costs below the estimates used to produce the negotiated fixed
prices on contracts not covered by Federal Acquisition Regulations; conversely,
URS's profit margin will decrease and URS may realize a loss on the project if
URS does not control costs and exceeds the overall estimates used to produce the
negotiated price. Cost-plus contracts covered by Federal Acquisition Regulations
require an audit of actual costs and provide for upward or downward adjustments
if actual recoverable costs differ from billed recoverable costs. The Defense
Contract Audit Agency, auditors for the Department of Defense and other Federal
agencies, has completed incurred cost audits of URS's Federal contracts for
fiscal years ended through October 31, 1988, resulting in immaterial
adjustments.
Under its fixed-price contracts, URS receives an agreed sum negotiated
in advance for the specified scope of work. Under fixed-price contracts, no
payment adjustments are made if URS overestimates or under-estimates the number
of labor hours required to complete the project, unless there is a change of
scope in the work to be performed. Accordingly, URS's profit margin will
increase to the extent the number of labor hours and other costs are below the
contracted amounts. The profit margin will decrease and URS may realize a loss
on the project if the number of labor hours required and other costs exceed the
estimates.
For the fiscal year ended October 31, 1996, the percentage of revenues
attributable to cost-plus contracts was 50.1% and the percentage of revenues
attributable to fixed-price contracts was 26.6%. For the nine months ended July
31, 1997, the percentage of revenues attributable to cost-plus contracts was 72%
and the percentage of revenues attributable to fixed-price contracts was 20%.
Backlog, Project Designations and Indefinite Delivery Contracts. URS's
contract backlog was $470.1 million at July 31, 1997, $399.2 million at October
31, 1996, and $196.4 million at October 31, 1995. URS's contract backlog
consists of the amount billable at a particular point in time for future
services under executed funded contracts. Indefinite delivery contracts, which
are executed contracts requiring the issuance of task orders, are included in
contract backlog only to the extent the task orders
74
<PAGE>
are actually issued and funded. Of the contract backlog of $470.1 million at
July 31, 1997, approximately 30%, or $141.0 million, is not reasonably expected
to be filled within the next fiscal year ending October 31, 1997.
URS has also been designated by customers as the recipient of certain
future contracts. These "designations" are projects that have been awarded to
URS but for which contracts have not yet been executed. Task orders under
executed indefinite delivery contracts which are expected to be issued in the
immediate future are included in designations. Total contract designations were
estimated to be $454.2 million at July 31, 1997, $295.9 million at October 31,
1996 and $194.1 million at October 31, 1995. Typically, a significant portion of
designations are converted into signed contracts. However, there is no assurance
this will continue to occur in the future.
<TABLE>
Indefinite delivery contracts are signed contracts pursuant to which
work is performed only when specific task orders are issued by the client.
Generally these contracts exceed one year and often indicate a maximum term and
potential value. Certain indefinite delivery contracts are for a definite time
period with renewal option periods at the client's discretion. While URS
believes that it will continue to get work under these contracts over their
entire term, because of renewals and the necessity for issuance of individual
task orders, continued work by URS and the realization of their potential
maximum values under these contracts are not assured. However, because of the
increasing frequency with which URS's government and private sector clients use
this contracting method, URS believes their potential value should be disclosed
along with backlog and designations as an indicator of URS's future business.
When the client notifies URS of the scope and pricing of task orders, the
estimated value of such task orders is added to designations. When such task
orders are signed and funded, their value goes into backlog. At July 31, 1997,
the potential value of URS's five largest indefinite delivery contracts was as
follows:
<CAPTION>
Revenues At July 31, 1997
Recognized for ----------------------------------------------
Total the Nine Month Estimated
Potential Period Ended Funded Estimated Remaining
Contract Term Values July 31, 1997 Backlog Designations Values
-------- ---- -------- --------------- ------- ------------ ------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
EPA ARCS (9&10) 1989-99 $182.5 $ 43.1 $ 19.5 $ 4.3 $115.6
Navy CLEAN 1989-99 166.0 134.0 5.8 2.6 23.6
EPA ARCS (6,7&8) 1989-99 119.7 74.8 3.9 -- 41.0
Brooks AFB System 1994-99 50.0 10.6 9.4 -- 30.0
NY State Environmental 1994-99 20.0 7.9 .2 -- 11.9
------ ------ ------ ------ ----
Remediation
Total $538.2 $270.4 $ 38.8 $ 6.9 $222.1
====== ====== ====== ====== ======
</TABLE>
Competition
The engineering and architectural services industry is highly
fragmented and very competitive. As a result, in each specific market area URS
competes with many engineering and consulting firms, several of which are
substantially larger than URS and which possess greater financial resources. No
firm currently dominates any significant portion of URS's market areas.
Competition is based on quality of service, expertise, price, reputation and
local presence. URS believes that it competes favorably with respect to each of
these factors in the market areas it serves.
75
<PAGE>
Employees
URS has approximately 3,250 employees, many of whom hold advanced or
technical degrees and have extensive experience in a variety of disciplines
applicable to URS's business. URS also employs, at various times on a temporary
basis, up to several hundred additional persons to meet contractual
requirements. Thirteen of URS's employees are covered by a collective bargaining
agreement. URS has never experienced a strike or work stoppage. URS believes
that employee relations are good.
Properties
URS leases office space in 35 principal locations throughout the United
States. Most of the leases are written for a minimum term of three years with
options for renewal, sublease rights and allowances for improvements.
Significant lease agreements expire at various dates through the year 2005. URS
believes that its current facilities are sufficient for the operation of its
business and that suitable additional space in various local markets is
available to accommodate any needs that may arise.
Acquisitions
In January 1995, URS acquired privately-held ECD of Tallahassee,
Florida, an engineering firm specializing in bridge and highway design. In March
1996 URS acquired publicly-held Greiner Engineering, Inc., an Irving, Texas
engineering and architectural design services firm ("Greiner"). The acquisition
of Greiner nearly doubled the size of URS, increasing the number of offices from
24 to 35, and the number of employees from approximately 1,300 to approximately
3,000. Following this acquisition, Greiner became a wholly-owned subsidiary of
URS. Major efforts have been made to integrate the functions of both companies.
URS undertook to change the name of each of its and Greiner's operating
subsidiaries to reflect the name "URS Greiner." In addition, regional divisions
of both companies were combined under common management to facilitate the
operation of the combined business and the delivery of services to its clients.
In July 1997, URS acquired privately-held WVP Corporation of St. Louis,
Missouri, an engineering, architecture and planning firm with offices in St.
Louis, and Chicago and Decatur, Illinois.
Legal Proceedings
Various legal proceedings are pending against URS or its subsidiaries
alleging breaches of contract or negligence in connection with URS's performance
of professional services. In some actions, damages (including punitive or treble
damages) are sought which substantially exceed URS's insurance coverage. Based
upon management's experience that most legal proceedings settle for less than
any claimed damages, at this time management does not believe that any of such
proceedings are likely to result in a judgment against, or settlement by, URS
materially exceeding URS's insurance coverage or have a material adverse effect
on the consolidated financial position and operations of URS.
76
<PAGE>
INFORMATION CONCERNING WC
Overview
Founded in 1950 as a soils consulting engineering firm based in
Oakland, CA, by the late 1960's WC had grown to become one of the leading firms
in the field of geotechnical engineering and applied earth sciences consultancy
in the U.S. Following the passage of the National Environmental Policy Act in
1969, WC added environmental consulting to its lines of business. In the late
1970's WC established a hazardous waste management practice and European
operations. WC has performed work for the Federal government since its
formation, and in the late 1980's WC formed a subsidiary specifically to
consolidate and expand its services to Federal government agencies. At that time
WC also expanded geographically into the Asian-Pacific region and increased its
European operations. In 1987 a holding company (Woodward-Clyde Group, Inc.) was
formed, which has since moved its headquarters to Denver. Woodward-Clyde
Consultants (now Woodward-Clyde International-Americas), was at that time the
primary operating entity, and became WC's major subsidiary following its
incorporation. In 1995 WC acquired Cole, Sherman & Associates, Ltd., a
full-service Canadian engineering, architectural design and planning firm, and
Geo-Con, a geotechnical and environmental construction firm. These acquisitions
brought WC capacity in the geo-civil design market and a construction
subsidiary.
WC offers a broad range of environmental engineering services, ranging
from planning through construction of major projects for both private and
governmental clients. Services include implementation of solutions for problems
such as hazardous waste, air pollution, water pollution, facility permitting and
regulatory compliance. WC also provides specialized consulting services relating
to civil and geotechnical engineering, geo-civil design and construction and
water supply. Services offered by WC cover all phases of a project's life cycle,
including planning, consulting, permitting, design, construction and operations.
Services
WC separates its business into four major service areas: Waste
Management and Remediation Engineering, Environmental Management and Pollution
Control, Civil and Geo-Engineering and Construction Contracting.
Waste Management. Representing nearly 41% of 1996 revenue, the waste
management area provides greater revenue than any of WC's other service areas.
WC provides integrated services to characterize waste and site contamination,
select appropriate cost-effective remedies, engineer and design the remedies,
and then implement the remedies selected. WC performs environmental audits,
environmental site assessments and contamination assessments, provides health
risk assessment and cleanup criteria, and also performs engineering feasibility
studies. In addition, WC develops remediation plans, designs and specifications
for treatment, storage and disposal, including in-plant waste minimization,
industrial and municipal wastewater treatment, landfill siting, design and
construction, waste treatment and solid waste management. WC frequently manages
remedial action, as well as construction and post-construction environmental
monitoring. WC also performs remediation construction, which is described below
in "Construction Contracting."
Environmental Management and Pollution Control. WC performs
environmental impact assessments and mitigation studies as well as environmental
document preparation services including the production of both program and
project-level feasibility studies, environmental checklists, initial studies,
environmental impact reports, environmental assessments, and permit applications
and similar documents required by Federal, state and local agencies. WC also
presents documentary findings to governmental agencies or other firms and
provides expert testimony at administrative and judicial hearings. Other
environmental services provided by WC include services related to strategic
environmental management (including preparation for ISO 14000 certification and
remediation assessment); air pollution, including
77
<PAGE>
air quality impact assessment, engineering and toxic air emissions control
program development; industrial wastewater treatment, including planning,
analysis, design and construction management for wastewater discharge and
reclamation; and stormwater runoff management.
Civil and Geo-Engineering. WC was originally founded as a geotechnical
engineering firm specializing in soil mechanics and foundation engineering. WC's
primary services in this field include foundation engineering for all types of
man-made, earth-based structures. WC has developed extensive knowledge in
underground construction, including tunneling and deep open cut excavations. WC
has contributed in whole or in part to the design construction or rehabilitation
of over 2,000 dams worldwide, and is experienced in engineering geology applied
to natural hazard assessment and mitigation, such as landslides and active
faults. WC applies risk assessment and management services to the fields of
seismological analysis and earthquake engineering design, as well as water
supply and flood studies, and assessment of health risks posed by industrial or
commercial activities. WC's primary services related to water supply include
surface and ground water hydrologic analysis; supply and demand studies; siting,
site investigations, design and construction of dams and tunnels; and planning,
economic studies and management. WC sites and designs major earth, rockfill and
concrete dams and tunnels, and its services include drawings, specifications,
cost estimates and schedules. Planning and management services include river
basin planning, water management and conservation studies, water rights
evaluation, conduct of public involvement and conflict resolution programs and
various economic and cost-benefit analyses.
Construction Contracting. WC entered the construction contracting
market with the acquisition of Geo-Con in 1995. WC provides specialty
contracting services in several geotechnologies applicable to environmental site
restoration and soil improvement for infrastructure projects. In addition, by
combining engineering and construction capabilities, WC is now able to provide
turnkey design/construct services to its clients.
Market Price of and Dividends on
Common Equity and Related Stockholder Matters
Market Information. There is no established public trading for either
the WC Common Stock or WC Preferred stock. WC Common Stock is available for
purchase only by selected professional employees of WC and its subsidiaries. The
price per share is set by the Board of Directors not less than once per year,
which price pertains until a new price is set, in accordance with the
Shareholders' Agreement. The Shareholders' Agreement provides a range in which
the Board of Directors may set the price per share: the price may not exceed 1.2
times the book value per share as reported in the latest financial statements of
WC, and may not be set below a price 0.8 times the last transaction price per
share. The prices determined by the Board of Directors for the periods covering
the last two fiscal years and latest interim periods are as follows:
January 1, 1997 to present: $ 25.00
August 1, 1995 to December 31, 1996: $ 23.60
January 1, 1995 to July 31, 1995: $ 23.00
As previously noted, there is no public market for the trading of any
of WC Common Stock. WC Common Stock can be transferred, once purchased, only to
WC or under certain limited circumstances to other employee-stockholders, and
only when the stockholder ceases to be an employee of WC or one of its
subsidiaries, upon the attainment by the employee of age 55, upon the special
vote of the Board of Directors and the stockholders, under certain circumstances
when WC is unable to purchase the WC Common Stock, or if the stockholder's
shares become "Qualified Shares" as determined in accordance with the
Shareholders' Agreement. WC is not required to purchase such shares unless
certain requirements have been met, one of which is the acceptability of such
purchase under applicable lending agreements. Since late 1995, WC has been
significantly restricted from purchasing shares by
78
<PAGE>
certain terms of its lending arrangements. There has been, therefore, a waiting
list of stockholders in line to have their shares purchased by WC when WC is
able to resume such purchases.
There is likewise no public market for the trading of any WC Preferred
Stock. All of the issued and outstanding shares of WC Preferred Stock are held
by the General Trustees for the WC Retirement Plan, which is a qualified
retirement benefit plan. An agreement between WC and the General Trustees in
1992 provides the General Trustees a "put option" in the shares of WC Preferred
Stock, in that 10% of the outstanding WC Preferred Stock held by the General
Trustees as of the date of the agreement are subject to repurchase by WC each
year. However, repurchases in connection with these put options of Preferred
Stock have been restricted in accordance with the terms of WC's lending
arrangements.
Holders. The WC Retirement Plan is the sole stockholder of WC Preferred
Stock. Pursuant to the Shareholders' Agreement, WC Common Stock is held by
employees of WC and the WC subsidiaries. As of August 26, 1997, there were 399
employee stockholders, none of whom owned 5% or more of WC Common Stock. At that
date, there were also 91 non-employee stockholders, none of whom owned 5% or
more of WC Common Stock. Non-employee stockholding arises due to retirement or
termination of employees only. The non-employee stockholders are currently on a
waiting list to have their shares purchased by WC. The terms of the Merger
Agreement prevent WC from issuing or repurchasing any shares of its Common or
Preferred Stock until the termination of the Merger Agreement or the Effective
Time of the Merger. Until such time, existing restrictions on WC's ability to
repurchase its shares also remain in effect.
Dividends. WC has never paid dividends on the WC Common Stock. Under
the terms of the WC Financing Agreement, WC and certain of its major
subsidiaries are prohibited from paying any dividends on their capital stock
without the prior written consent of the agent of the lenders. It is anticipated
that all indebtedness outstanding under the WC Financing Agreement will be fully
paid and that the WC Financing Agreement will be terminated following the
consummation of the Merger.
79
<PAGE>
URS MANAGEMENT
<TABLE>
Executive Officers of URS
The following is a list of URS's executive officers and other key
employees, their ages and their positions as of the date of this Prospectus:
<CAPTION>
Name Age Position
<S> <C> <C>
Martin M. Koffel 58 Chief Executive Officer, President and Chairman of the Board of URS
Kent P. Ainsworth 51 Executive Vice President, Chief Financial Officer and Secretary of URS
Robert L. Costello 46 Vice President and Director of URS; Executive Vice President of URS
Greiner Engineering, Inc.
Joseph Masters 40 Vice President and General Counsel of URS
Irwin L. Rosenstein 61 Vice President and Director of URS; President of URS Greiner
Consultants, Inc.
</TABLE>
Business Experience
Martin M. Koffel has been the Chief Executive Officer, President and
Director of URS since May 1989. Mr. Koffel has served as Chairman of the Board
of URS since June 1989. Mr. Koffel has also served as a Director of Regent
Pacific Corporation since 1993.
Kent P. Ainsworth has served as Chief Financial Officer of URS since
January 1991, and since March 1997, as Executive Vice President. From 1991 to
March 1997, Mr. Ainsworth served as Vice President of URS. Mr. Ainsworth has
also served as Secretary of URS since May 1994. From March 1990 to December
1990, Mr. Ainsworth served as a financial consultant. From November 1987 to
February 1990, Mr. Ainsworth was Vice President and Chief Financial Officer of
DiGiorgio Corporation.
Robert L. Costello has served as Vice President and a Director of URS
since April 1996; as Executive Vice President of URS Greiner Engineering, Inc.
(formerly Greiner Engineering, Inc. ("GEI")), one of URS's principal
subsidiaries, since April 1996; President of GEI and Director of same since
August 1995; President and Chief Operating Officer of same from February 1994 to
August 1995; Executive Vice President and Chief Financial Officer of same from
August 1987 to August 1994.
Joseph Masters has served as Vice President and General Counsel of URS
since July 1997. Mr. Masters served as Vice President, Legal Affairs, of URS
from July 1994 to July 1997. From April 1994 through July 1994, Mr. Masters
served as Vice President and Director of Legal Affairs for URS Greiner
Consultants, Inc. (formerly URS Consultants, Inc.). From May 1992 through April
1994, Mr. Masters served as Vice President and Associate General Counsel of URS
Greiner Consultants, Inc. From January 1990 through May 1992, Mr. Masters served
as outside counsel to URS Greiner Consultants, Inc.
Irwin L. Rosenstein has served as President of URS Greiner Consultants,
Inc. since February 1989. Mr. Rosenstein has served as Vice President of URS
since 1987 and as Director of URS since February 1989. From August 1986 through
February 1989, Mr. Rosenstein served as President of Eastern Region of URS
Greiner Consultants, Inc.
Frank S. Waller, age 61, Jean-Yves Perez, age 52, and Robert K. Wilson,
age 57, will be appointed as executive officers of URS as of the Effective Time
of the Merger if the Merger and the Merger Agreement are approved at the URS
Meeting and the WC Meeting (see "The Merger - Directors and Executive Officers
After the Merger").
80
<PAGE>
Business Experience
Frank S. Waller has served as Chairman of the Board of WC since 1992
and as a Director of WC since 1986. Mr. Waller has also been a principal of
Woodward-Clyde Consultants since 1970.
Jean-Yves Perez has served as the President and Chief Executive Officer
of WC since July 1987 and has been a Director of WC since 1987. Mr. Perez has
been the President of GCH Acquisition Corporation since 1995.
Robert K. Wilson has served as an Executive Vice President and the
Chief Financial Officer of WC since 1975 and has been a Director of WC since
1987.
<TABLE>
Directors of URS
The following is an alphabetical list of URS's directors, their ages
and the year first elected as of the date of this Prospectus:
<CAPTION>
Name Age Year First Elected
<S> <C> <C>
Richard C. Blum 62 1975
Robert L. Costello 46 1996
Armen Der Marderosian 59 1994
Admiral S. Robert Foley, Jr., USN (Ret.) 69 1994
Robert D. Glynn, Jr. 54 1996
Senator J. Bennett Johnston 65 1997
Martin M. Koffel 58 1989
Richard B. Madden 68 1992
Richard Q. Praeger 73 1970
Irwin L. Rosenstein 61 1989
William D. Walsh 67 1988
</TABLE>
Business Experience
Richard C. Blum has served as Chairman and President, Richard C. Blum &
Associates, Inc. ("RCBA, Inc."), the sole general partner of Richard C. Blum &
Associates, L.P., a merchant banking firm ("RCBA, L.P."); as Vice Chairman of
the Board of Directors and financial consultant to URS; as a Director of
Northwest Airlines Corporation since 1989; as a Director of Shaklee Corporation
since 1990; as a Director of CB Commercial since 1993; and as the Co-Chairman of
Newbridge Capital since 1997.
Robert L. Costello has served as Executive Vice President of GEI since
1996; as Vice President and Director of URS since 1996; as a Director and the
Chief Executive Officer of GEI from August 1995 to March 1996; as President and
Chief Operating Officer of GEI from February 1994 to August 1995; as Vice
President and Chief Financial Officer of GEI from 1987 to February 1994.
Armen Der Marderosian has served as Senior Vice President, Technology
and Systems, GTE Corporation since 1995; as Executive Vice President and General
Manager, 1993 to 1995, and as Vice President and General Manager, 1990 to 1992,
GTE Government Systems Corporation.
Admiral S. Robert Foley, Jr., USN (Ret.) has served as Vice President,
Raytheon International Inc. and as President, Raytheon Japan since January 1995;
as a Director of New Japan Radio Company since 1995; as Vice President,
Commercial Marketing and Planning, Raytheon Corporation, 1991 to 1993; and as
Commander-In-Chief, U.S. Pacific Fleet, United States Navy, 1982 to 1985.
81
<PAGE>
Robert D. Glynn, Jr. has served as President and Chief Executive
Officer of PG&E Corporation since June 1997, as a Director since December 1996,
and as a Director of Pacific Gas and Electric Company since 1995; as President
and Chief Operating Officer of PG&E Corporation from December 1996 to May 1997;
as President and Chief Operating Officer of Pacific Gas and Electric Company
from 1995 to May 1997, as Executive Vice President from July 1994 to 1995, as
Senior Vice President and General Manager-Customer Energy Services, from January
1994 to June, 1994, and as Senior Vice President and General Manager-Electric
Supply from 1991 to 1994.
Senator J. Bennett Johnston has served as President of Johnston
Development Co. since 1997; as President of Johnston & Associates, L.L.C. since
1997; as a United States Senator (D-LA) 1972 to 1996; and Chairman of the Senate
Committee on Energy and Natural Resources for eight years; and as a Director of
Chevron Corp. since 1997.
Martin M. Koffel has been the Chief Executive Officer, President and
Director of URS since May 1989. Mr. Koffel has served as Chairman of the Board
of URS since June 1989. Mr. Koffel has also served as a Director of Regent
Pacific Corporation since 1993.
Richard B. Madden has served as a Director of Potlatch Corporation
since 1971 and as Chairman, from 1977 to 1994, Chief Executive Officer, from
1971 to 1994 and as a Director of Potlatch Corporation since 1971; as a Director
of PG&E Corporation since 1997 and Pacific Gas and Electric Company since 1977;
and as a Director of CNF Transportation Inc. since 1992.
Richard Q. Praeger has been a management and engineering consultant
since 1974; he has been the owner of Transition Books, a book store, since 1979;
and served as President, URS/Madigan-Praeger, Incorporated prior to November
1974.
Irwin L. Rosenstein has served as President of URS Greiner Consultants,
Inc. since February 1989. Mr. Rosenstein has served as Vice President of URS
since 1987 and as Director of URS since February 1989. From August 1986 through
February 1989, Mr. Rosenstein served as President of Eastern Region of URS
Greiner Consultants, Inc.
William D. Walsh has served as President, Chief Executive Officer and
General Partner, Sequoia Associates, a private investment firm, since 1982; as
Chairman of the Board of Consolidated Freightways Corporation since 1996; as
Chairman of the Board of Champion Road Machinery, Ltd., Newell Manufacturing
Corporation and Newell Industrial Corporation since 1988; as Chairman of the
Board of Clayton Group, Inc. since 1996; as Chairman of the Board of Golden
Valley Farms LLC since 1996; as a Director of National Education Corporation
since 1987; as a Director of Newcourt Credit Group since 1994; as a Director of
Basic Vegetable Products since 1990; as a Director of Crown Vantage, Inc. since
1996; as Chairman of the Board of Deanco, Inc. from 1994 to 1995; as a Director
of Consolidated Freightways, Inc. from 1994 to 1996; and as a Director of Mike
Yurosek & Son, L.P. from 1990 to 1995.
Frank S. Waller, age 61, and Jean-Yves Perez, age 52, will be elected
to the URS Board of Directors as of the Effective Time of the Merger if the
Merger and the Merger Agreement are approved at the URS Meeting and the WC
Meeting (see "The Merger - Directors and Executive Officers After the Merger").
82
<PAGE>
Business Experience
Frank S. Waller has served as Chairman of the Board of WC since 1992
and as a Director of WC since 1986. Mr. Waller has also been a principal of
Woodward-Clyde Consultants since 1970.
Jean-Yves Perez has served as the President and Chief Executive Officer
of WC since July 1991 and has been a Director of WC since 1987. Mr. Perez has
been the President of GCH Acquisition Corporation since 1995.
83
<PAGE>
Summary Compensation Table
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation
-------------------------------------------------------------------------
Other
Annual
Principal Compen-
Name Position Year Salary Bonus sation (1)
-------- ------------ ---- ------ ----- --------
($) ($) ($)
<S> <C> <C> <C> <C> <C>
Martin M. Chairman of the 1996 $410,000 $492,000 $3,235
Koffel Board; Chief 1995 $385,000 $280,261 $1,585
Executive Officer; 1994 $385,000 $283,580 $1,585
President
Irwin L. Vice President 1996 $312,513 $242,800 $375
Rosenstein 1995 $300,000 $190,659 $1,190
1994 $300,400 $169,106 $840
Robert L. Vice President 1996 $178,082 $81,104 $0
Costello (5)
Kent P. Executive Vice 1996 $212,083 $169,666 $0
Ainsworth President; 1995 $188,986 $94,633 $0
Chief Financial 1994 $185,000 $90,844 $0
Officer; Secretary
Joseph Masters Vice President, 1996 $138,333 $55,334 $0
General Counsel 1995 $130,000 $31,544 $0
1994 $119,237 $21,489 $0
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------------------------------------
Awards Payouts
---------------------------------------------------------------------
Securities
Restricted Underlying All Other
Stock Options/ LTIP Compen-
Name Award(s) (2) SARs Payouts sation
-------- -------- -------- ------- ---------
($) (#) ($) ($)
<S> <C> <C> <C> <C>
Martin M. $0 18,000 $0 $41,583 (3)
Koffel $0 25,000 $0 $40,775
$0 40,000 $0 $39,639
Irwin L. $0 12,000 $0 $14,785 (4)
Rosenstein $0 25,000 $0 $13,270
$0 25,000 $0 $18,105
Robert L. $0 50,000 $0 $203,830 (6)
Costello
Kent P. $0 4,800 $0 $1,500 (7)
Ainsworth $0 12,000 $0 $1,500
$0 10,000 $0 $1,500
Joseph Masters $0 2,400 $0 $1,100 (8)
$0 2,400 $0 $1,100
$0 3,000 $0 $ 842
=============================================================================================
<FN>
(1) The amounts in this column primarily represent automobile allowances.
(2) The aggregate number and value as of October 31, 1996 of each of the Named
Executive's restricted share holdings are as follows: Mr. Koffel, zero (0)
shares, $0; Mr. Rosenstein, zero (0) shares, $0; Mr. Costello, zero (0)
shares, $0; Mr. Ainsworth, 7,500 shares, $43,125; Mr. Masters, zero (0)
shares, $0. Mr. Ainsworth's shares vested in 1995.
(3) Consists of matching contributions of $1,500 paid pursuant to the
Company's Defined Contribution Plan, a $2,183 cost of living adjustment to
amounts previously credited under the Company's Selected Executives
Deferred Compensation Plan, and $11,350 of term life insurance premiums
and $26,550 of disability insurance premiums paid pursuant to Mr. Koffel's
employment agreement (see "Employment Agreements").
(4) Consists of matching contributions of $1,500 paid by the Company pursuant
to the Company's Defined Contribution Plan, $6,058 paid by the Company for
the surrender of accrued vacation time, a $4,843 cost of living adjustment
to amounts previously credited under the Company's Selected Executives
Deferred Compensation Plan and $2,009 for life and disability insurance
premiums.
(5) Mr. Costello has been employed by the Company since March 29, 1996.
(6) Consists of matching contributions of $1,500 paid by the Company pursuant
to the Company's Defined Contribution Plan, $60,852 paid by the Company
for moving expenses, a $139,669 stock option payout and $1,809 for life
and medical insurance premiums.
(7) Consists of matching contributions of $1,500 paid by the Company pursuant
to the Company's Defined Contribution Plan.
(8) Consists of matching contributions of $1,100 paid by the Company pursuant
to the Company's Defined Contribution Plan.
</FN>
</TABLE>
84
<PAGE>
Option/SAR Tables
<TABLE>
<CAPTION>
Option/SAR Grants In Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
- --------------------------------------------------------------------------------------------------- ---------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
------ ----------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
M. M. Koffel 18,000 7% $6.75 3/26/2006 76,411 193,640
I. L. Rosenstein 12,000 5% $6.75 3/26/2006 50,940 129,093
R.L. Costello 50,000 21% $6.75 3/29/2006 212,252 537,888
K. P. Ainsworth 4,800 2% $6.75 3/26/2006 20,376 51,637
J. Masters 2,400 1% $6.75 3/26/2006 10,188 25,819
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs at FY-End ($)(1)
FY-End (#)
--------------- ----------------
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
(#) ($)
<S> <C> <C> <C> <C>
M. M. Koffel 0 $0 442,000 $2,019,250
0 $0
I. L. Rosenstein 0 $0 109,167 $160,420
20,333 $35,583
R.L. Costello 0 $0 0 $0
50,000 $87,500
K. P. Ainsworth 0 $0 86,800 $77,650
0 $0
J. Masters 0 $0 5,300 $8,200
5,000 $10,350
<FN>
(1) Based on 1996 fiscal year-end share price equal to $8.50.
</FN>
</TABLE>
85
<PAGE>
Directors' Remuneration
During fiscal year 1996, the non-employee members of URS's Board of
Directors received an annual Director's fee of $15,000, plus an attendance fee
of $2,000 for each Board of Directors meeting attended in person, and a fee of
$500 for participation in any Board of Directors meeting by telephone.
Non-employee Directors who are members of a committee of the Board received $625
for each committee meeting attended in person, and a fee of $500 for
participation in any committee meeting by telephone. The Chairman of the
committee received an additional $625 per meeting. Employee members of the Board
of Directors did not receive any such fees. Non-employee Directors also are
entitled to participate, at URS's expense, in a medical benefit plan. Based upon
URS's costs, the monetary value of such medical benefit plan to those
non-employee Directors participating in fiscal year 1996 was $7,476. URS also
maintains a policy whereby non-employee Directors may be hired on an asneeded
basis from time to time as consultants for special projects at the rate of up to
$3,000 per day (plus reasonable expenses) upon the recommendation of the
Chairman of the Board or any officer designated by the Chairman of the Board.
Upon the conclusion of each annual meeting of URS stockholders, each
non-employee Director who was reelected to serve as a Director automatically
receives a stock grant equal to that number of shares of URS Common Stock
determined by dividing $15,000 by the closing price of the URS Common Stock on
the date of each annual meeting of stockholders.
Certain Relationships and Related Transactions
Richard C. Blum, a Director of URS, receives $60,000 per year for
services provided under a consulting agreement with URS. In addition, URS pays
$90,000 per year to RCBA, L.P. under a separate consulting agreement. URS may
terminate these consulting agreements at any time. Mr. Blum is the majority
stockholder of RCBA, Inc. RCBA, Inc., in its capacity as the sole general
partner of RCBA, L.P., indirectly through several entities, holds 2,952,729
shares (assuming the exercise of certain warrants), or approximately 33 percent,
of URS's outstanding Common Stock.
Employment Agreements
Martin M. Koffel
Mr. Koffel has an evergreen employment agreement with URS, executed in
December 1991, under which Mr. Koffel is eligible for a target bonus equal to 60
percent of his base salary and received an annual base salary of not less than
$385,000 through December 17, 1995. On December 15, 1995, the
Compensation/Option Committee increased Mr. Koffel's annual base salary,
effective December 18, 1995, to $415,000. The agreement obligates URS to
reimburse Mr. Koffel for the cost of maintaining disability insurance providing
monthly benefits of not less than $10,000 in the event of his disability and
provides for certain supplemental life insurance benefits which currently are in
the form of a $1,155,000 term life insurance policy. If Mr. Koffel's employment
is terminated involuntarily by URS without cause (other than by reason of death
or disability), URS must pay a severance payment equal to 150 percent of his
then current base salary and his then current target bonus. If Mr. Koffel
voluntarily resigns his employment within one year following a Change in Control
(see below), or if Mr. Koffel is terminated for any reason other than for cause
at any time after a Change of Control, he becomes entitled to a special
severance payment equal to 300 percent the sum of his then current base salary
and his then current target bonus. In addition, all awards held by Mr. Koffel
under any of URS's incentive, deferred compensation, bonus, stock and similar
plans, to the extent unvested, will become vested immediately upon a "Change in
Control." A "Change in Control" is defined in the agreement to include (i) a
change in control required to be reported pursuant to Item 6(e) of Schedule 14A
of Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or (ii) any person acquiring 20 percent or more of the voting
power of URS or (iii) more than two-thirds of the Directors not having served on
the Board for 24 months prior to the "Change in Control." On or about May 10,
1996,
86
<PAGE>
Heartland Advisors, Inc. ("Heartland"), one of URS's stockholders, purchased
additional shares of URS's Common Stock, which increased Heartland's ownership
of outstanding Common Stock from approximately 19 percent to approximately 22
percent (the "Heartland Transaction"), resulting in a technical "Change of
Control" under Mr. Koffel's employment agreement and the terms of the URS
Corporation 1991 Stock Incentive Plan (the "1991 Plan"). As a result, the
special severance payment will now be payable to Mr. Koffel if he is terminated
for any reason other than for cause at any time during the term of his
employment agreement. In addition, the options previously granted to Mr. Koffel
in 1994, 1995 and 1996 under the 1991 Plan are now fully vested.
Under the terms of an earlier employment agreement executed in May 1989,
Mr. Koffel was granted SARs on 15,000 shares at the base price of $28.75 which
expire upon the earlier of May 9, 1999 or the termination of Mr. Koffel's
employment with URS. At URS's option, Mr. Koffel's SARs may at any time be
replaced with options to purchase Common Stock on the same economic basis as the
SARs. The SARs are fully vested.
Irwin L. Rosenstein
Mr. Rosenstein has an evergreen employment agreement with URS Greiner
Consultants, Inc., executed in August 1991, under which Mr. Rosenstein received
an annual base salary of not less than $300,000 from March 2, 1992 through
December 17, 1995. On December 15, 1995, the Compensation/Option Committee
increased Mr. Rosenstein's annual base salary, effective December 18, 1995, to
$315,000. The agreement also obligates URS to maintain a $400,000 term life
insurance policy for Mr. Rosenstein and disability insurance providing him with
benefits of at least $7,000 per month in the event of his disability. If Mr.
Rosenstein's employment is terminated involuntarily by URS without cause (other
than by reason of death or disability) he is entitled to continuation of his
base salary for one year (or until normal retirement at age 65, if less). Under
the agreement, as amended, if Mr. Rosenstein ceases to be employed by URS within
one year following a "Change of Control" (see below), Mr. Rosenstein will be
entitled to receive a severance payment equal to 200 percent of his then current
base salary. A "Change in Control" is defined in Mr. Rosenstein's agreement as
the acquisition by any person of 51 percent of more of URS Greiner Consultants,
Inc.'s or URS's then current outstanding securities having the right to vote at
elections of Directors. The Heartland Transaction did not result in a "Change of
Control" under Mr. Rosenstein's employment agreement, but resulted in a
technical "Change of Control" under certain stock options granted to Mr.
Rosenstein in 1995 under the 1991 Plan. As a result, such options are now fully
vested.
Under the terms of an earlier employment agreement executed in February
1989, Mr. Rosenstein was granted SARs on 7,500 shares at the base price of
$27.50 which expire upon the earlier of February 24, 1999 or the termination of
Mr. Rosenstein's employment with URS. At URS's option, Mr. Rosenstein's SARs may
at any time be replaced with options to purchase Common Stock on the same
economic basis as the SARs. The SARs are fully vested.
Robert L. Costello
Mr. Costello has an employment agreement with Greiner, Inc. ("Greiner"),
a wholly-owned subsidiary of URS, executed in March 1996, which provides for a
term of three years (unless terminated earlier as provided therein), under which
Mr. Costello receives an annual base salary of not less than $250,000. If Mr.
Costello's employment is terminated involuntarily by Greiner without cause
(other than by reason of death or disability) or Mr. Costello voluntarily
resigns his employment in the event that his salary is reduced or Greiner has
breached its obligation to employ Mr. Costello in an executive position as
described in the agreement, Greiner must pay a severance payment equal to 100
percent of his then current base salary less base salary paid to Mr. Costello
for any period up to one month between the date of termination and the date that
notice thereof is given plus any accrued and unpaid vacation at the time of such
termination. Under the agreement, if Mr. Costello ceases to be employed by URS
within one
87
<PAGE>
year following a "Change of Control" (see below), Mr. Costello will be entitled
to receive a severance payment equal to 200 percent of his then current base
salary. A "Change in Control" is defined in Mr. Costello's agreement as the
acquisition by any person of 51 percent of more of Greiner's or URS's then
current outstanding securities having the right to vote at elections of
Directors. The Heartland Transaction did not result in a "Change of Control"
under Mr. Costello's employment agreement.
Kent P. Ainsworth
Mr. Ainsworth executed an evergreen employment agreement with URS in May
1991 following his employment as URS's Vice President and Chief Financial
Officer in January 1991. Under this employment agreement, Mr. Ainsworth received
an annual base salary of $165,000 from February 24, 1992 through March 22, 1993,
$185,000 through December 14, 1994 and $195,000 through December 17, 1995. On
December 15, 1995, the Compensation/Option Committee increased Mr. Ainsworth's
annual base salary, effective December 18, 1995, to $205,000. On March 26, 1996,
the Committee increased Mr. Ainsworth's annual base salary, effective March 29,
1996, to $220,000, and approved the payment of a special bonus to Mr. Ainsworth
in the amount of $50,000 in recognition of his work in connection with the
acquisition of GEI. If Mr. Ainsworth's employment is terminated involuntarily by
URS without cause (other than by reason of death or disability), he is entitled
to continuation of his base salary for one year (or until normal retirement at
age 65, if less). If Mr. Ainsworth voluntarily resigns his employment for
specified reasons within one year following a Change in Control (as defined
above in the description of Mr. Koffel's employment agreement), or if Mr.
Ainsworth is terminated for any reason at any time after a Change of Control, he
becomes entitled to a special severance payment equal to 280 percent of his then
current base salary (reduced pro rata if such termination occurs within two
years prior to normal retirement). In addition, all awards held by Mr. Ainsworth
under any of URS's incentive, deferred compensation, bonus, stock and similar
plans, to the extent unvested, will become vested immediately upon a "Change of
Control." The Heartland Transaction resulted in a technical "Change of Control"
under Mr. Ainsworth's employment agreement and the terms of the 1991 Plan. As a
result, the special severance payment will now be payable to Mr. Ainsworth if he
is terminated for any reason at any time during the term of his employment
agreement. In addition, the options previously granted to Mr. Ainsworth in 1994,
1995 and 1996 under the 1991 Plan are now fully vested.
Joseph Masters
Mr. Masters does not have a written employment agreement with URS. Mr.
Masters's compensation is reviewed and established periodically by the
Compensation/Option Committee. Effective March 17, 1997, Mr. Masters's annual
base salary was increased from $140,000 to $150,000 and on July 15, 1997, Mr.
Masters's annual base salary was increased from $150,000 to $165,000 by the
Compensation/Option Committee. Mr. Masters has a severance agreement with URS,
executed on November 22, 1993, which provides that if Mr. Masters is terminated
by URS at any time during the term of the agreement other than for cause, or if
Mr. Masters voluntarily leaves for specified reasons within one year following a
"Change of Control" (as defined above in the description of Mr. Koffel's
employment agreement), he will be entitled to receive his base salary and
participate in any insurance plans maintained by URS during a severance period
commencing on the date his employment terminates and ending on the earlier of
six months thereafter or his death.
88
<PAGE>
<TABLE>
PRINCIPAL URS STOCKHOLDERS
The following table contains information as of September 5, 1997 as to
the beneficial ownership of URS Common Stock and upon exercise of stock options
exercisable on or prior to August 31, 1997, by (i) each person owning
beneficially more than five percent of the total outstanding shares of URS
Common Stock; (ii) each Director; and (iii) the executive officers. To URS's
knowledge, the persons named in the table have sole voting and investment power
with respect to all URS Common Stock shown as beneficially owned by them,
subject to applicable community property laws and except as otherwise noted.
<CAPTION>
Name and Address Number of Shares Percent of Class (1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wells Fargo Bank, N.A. 724,371 shares 6.84%
420 Montgomery Street
San Francisco, CA 94104
Richard C. Blum & Associates, L.P.
909 Montgomery Street
San Francisco, CA 94133
(directly)(2) 996 shares Less than 1%
(through the following
entities) (3):
BK Capital Partners I, L.P. 508,265 shares 4.80%
BK Capital Partners II, L.P. 521,415 shares 4.92%
BK Capital Partners III, L.P. 364,037 shares 3.44%
BK Capital Partners IV, L.P. 461,195 shares 4.35%
The Common Fund 1,077,980 shares 10.18%
Heartland Advisors, Inc. 1,797,466 shares 16.97%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc. 501,117 shares 4.73%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
FMR Corp. 1,080,978 shares 10.20%
82 Devonshire Street
Boston, MA 02109-3614
Richard C. Blum (4) 20,287 shares Less than 1%
Robert L. Costello (5) 20,486 shares Less than 1%
Armen Der Marderosian (6) 3,446 shares Less than 1%
Admiral S. Robert Foley, Jr.,
USN (Ret.) (7) 13,446 shares Less than 1%
89
<PAGE>
Robert D. Glynn, Jr. (8) 1,546 shares Less than 1%
Senator J. Bennett Johnston (8) 1,446 shares Less than 1%
Martin M. Koffel (9) 427,000 shares 4.03%
Richard B. Madden (10) 10,446 shares Less than 1%
Richard Q. Praeger (11) 15,657 shares Less than 1%
Irwin L. Rosenstein (12) 116,114 shares Less than 1%
William D. Walsh (13) 26,946 shares Less than 1%
Kent P. Ainsworth (14) 94,300 shares Less than 1%
Joseph Masters (15) 7,501 shares Less than 1%
All Officers and Directors 3,692,509 shares 34.86%
as a group (13 persons) (16)
<FN>
- --------------------------
(1) Percentages are calculated with respect to a holder of options
exercisable prior to August 31, 1997 as if such holder had exercised
its options. Option shares held by other holders are not included in
the percentage calculation with respect to any other stockholder.
(2) Richard C. Blum is the President, Chief Executive Officer and majority
stockholder of RCBA, Inc.
(3) RCBA, Inc. is the sole general partner of RCBA, L.P., which is, in
turn, the sole general partner of BK Capital Partners I, a California
Limited Partnership, BK Capital Partners II, a California Limited
Partnership, BK Capital Partners III Limited Partnership, and BK
Capital Partners IV, a California Limited Partnership, the address of
each of which is 909 Montgomery Street, San Francisco, California
94133. RCBA, L.P. is an investment adviser to The Common Fund, the
address of which is 909 Montgomery Street, San Francisco, California
94133. RCBA, L.P. exercises voting and investment discretion as to all
such shares.
(4) Includes 8,833 shares held directly, 2,454 shares held as beneficiary
of the RCB Keogh Plan, and currently exercisable portions of options.
Does not include shares held by RCBA, L.P. or entities managed by RCBA,
L.P., which Mr. Blum may be deemed to own indirectly in his capacity as
the majority stockholder of RCBA, Inc., in its capacity as the sole
general partner of RCBA, L.P.
(5) Represents 1,887 shares held directly and 1,932 shares held indirectly
in the Greiner Engineering, Inc. 401(k) Plan and currently exercisable
portions of options.
(6) Represents currently exercisable portions of options.
(7) Includes 10,000 shares held directly and currently exercisable portions
of options.
(8) Represents shares held directly.
90
<PAGE>
(9) Represents currently exercisable portions of options.
(10) Includes 5,000 shares held directly and currently exercisable portions
of options.
(11) Includes 4,211 shares held directly and currently exercisable portions
of options.
(12) Includes 2,114 shares held directly and currently exercisable portions
of options.
(13) Includes 17,500 shares held directly and currently exercisable portions
of options.
(14) Includes 7,500 shares held directly and currently exercisable portions
of options.
(15) Includes 101 shares held directly and currently exercisable portions of
options.
(16) Includes shares held by RCBA, L.P. and by entities managed by RCBA,
L.P., which Mr. Blum may be deemed to own indirectly in his capacity as
the majority stockholder of RCBA, Inc., in its capacity as the sole
general partner of RCBA, L.P.
</FN>
</TABLE>
91
<PAGE>
PRINCIPAL WC STOCKHOLDERS
The following table contains information as of August 31, 1997 as to
the beneficial ownership of WC Common Stock by (i) each person owning
beneficially more than five percent of WC Capital Stock; (ii) each Director; and
(iii) the executive officers. To WC's knowledge, the persons named in the table
have sole voting and investment power with respect to all WC Capital Stock shown
as beneficially owned by them, subject to applicable community property laws.
Name and Address Number of Shares Percent of Class
- --------------------------------------------------------------------------------
John A. Bischoff 28,909 1.47%
Michael P. C. Carns 0 Less than 1%
Socrates S. Christopher 0 Less than 1%
Peter J. Dundon 12,393 Less than 1%
Steven C. Haley 41,133 2.09%
Harry M. Horn 38,276 1.95%
Michael T. Jacobs 0 Less than 1%
Anna K. Longobardo 0 Less than 1%
James T. Stewart 0 Less than 1%
Frank S. Waller 41,863 2.13%
James E. McCarthy 1,272 Less than 1%
James R. Miller 7,650 Less than 1%
Peter J. Nicholson 0 Less than 1%
Jean-Yves Perez 57,647 2.78%
Charles H. Wahtola 11,404 Less than 1%
Robert K. Wilson 54,588 2.39%
All Officers and Directors
as a group (16 persons) 295,135 15.02%
COMPARISON OF RIGHTS OF STOCKHOLDERS OF URS AND WC
Both URS and WC are incorporated in the State of Delaware and subject to
the provisions of the Delaware General Corporation Law. For this reason, by
reason of receiving URS Common Stock, following the Merger WC stockholders will
continue to hold stock of a corporation subject to the same corporations law.
However, following the Merger, WC stockholders will be subject to URS's charter
documents and there are a number of differences between such URS charter
documents and WC's charter documents. The following is a summary comparison of
certain differences affecting stockholder rights in the charter documents and
bylaws of URS and WC. This summary does not purport to be a complete discussion
of, and is qualified in its entirety by reference to, the URS Amended and
Restated Certificate of Incorporation and Bylaws and the WC Certificate of
Incorporation and Bylaws.
The Certificate of Incorporation and Bylaws of each of URS and WC
contain certain differences. In URS's Bylaws, the President may call special
meetings of the stockholders, and the President and the Secretary must call such
meetings upon written request by the URS Board of Directors or the holders of at
least 20 percent of the outstanding URS stock entitled to vote. In contrast,
WC's Bylaws provide that the Chairman may call special meetings of the
stockholders, and that the Chairman and the Secretary must call such meetings
upon written request of a majority of the Board of Directors or WC stockholders
entitled to vote. URS's Bylaws provide that URS Board of Directors may not be
less than five nor more than fifteen persons, to be determined from time to time
by resolution of the URS Board of Directors or the stockholders at their annual
meeting. The URS Board of Directors currently consists of eleven members. The WC
Bylaws set the number of directors at twelve. URS does not have a classified
Board of Directors under its Bylaws or its Amended and Restated Certificate of
Incorporation. Under its
92
<PAGE>
Bylaws, WC does not have a strictly classified Board, but different directors
are elected to staggered terms of office. URS's Amended and Restated Certificate
of Incorporation provides for the elimination of personal liability of the
directors to the corporation or its stockholders for certain breaches of
fiduciary duty. WC's Certificate of Incorporation contains no such provisions.
In addition, holders of WC Common Stock are subject to the provisions of
the Shareholders' Agreement, and are being asked to amend the Shareholders'
Agreement to remove all restrictions and requirements which prohibit or would
prevent the transactions contemplated by the Merger Agreement. See "The WC
Meeting" and "Information Concerning WC -- Market Price of and Dividends on
Common Equity and Related Stockholder Matters."
AFFILIATES' RESTRICTIONS ON SALE OF URS COMMON STOCK
The shares of URS Common Stock to be issued to the holders of WC Common
Stock as a result of the Merger will have been registered under the Securities
Act, will be listed on the NYSE and the PE and will be freely marketable.
However, any holder of WC Common Stock who is deemed to be an affiliate of WC at
the Effective Time of the Merger and any such person who becomes an affiliate of
URS as a result of or following the Merger will be subject to the volume and
manner of sale restrictions imposed on resales of the URS Common Stock by Rules
144 and 145 under the Securities Act. In addition, in connection with the
Merger, each officer, director and holder of one percent (1%) or more of the
outstanding shares of WC Common Stock will be asked to provide a continuity of
interest representation in a manner sufficient to satisfy the requirements of
the Internal Revenue Code for treatment of the Merger as a tax-free
reorganization. See "The Merger - Certain Federal Income Tax Matters."
The Merger Agreement requires WC affiliates to enter into agreements not
to make any sale of URS Common Stock received upon conversion of WC Capital
Stock in the Merger except in compliance with Rule 145 under the Securities Act.
See "The Merger -- The Merger Agreement." In general, Rule 145, as currently in
effect, imposes restrictions on the manner in which such affiliates, who remain
affiliates of URS after the Merger, may make resales of URS Common Stock and
also on the number of shares of URS Common Stock that such affiliates, and
others (including persons with whom the affiliates act in concert), may sell
within any three-month period. These restrictions will generally apply for at
least a period of two years after the Merger (or longer if the person remains an
affiliate of URS).
LEGAL MATTERS
Certain legal matters with respect to the validity of URS Common Stock
to be issued in connection with the Merger are being passed on for URS by Cooley
Godward LLP, San Francisco, California. Bronson, Bronson & McKinnon LLP, counsel
to WC, and Cooley Godward LLP, counsel to URS, have each rendered an opinion
that the Merger will constitute a reorganization under Section 368(a) of the
Code.
EXPERTS
The consolidated financial statements of URS for the three year period
ended October 31, 1996 have been included in this Prospectus and in the
Registration Statement in reliance upon the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of WC at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996
included in this Prospectus which is referred to and made a part of the
Registration Statement have been audited by Ernst & Young LLP, independent
93
<PAGE>
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
94
<PAGE>
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
Page
<S> <C>
URS CORPORATION
Reports of Independent Accountants........................................................................... F-1
Audited Consolidated Balance Sheets as of October 31, 1996 and 1995.......................................... F-2
Audited Consolidated Statements of Operations at October 31, 1996, 1995 and 1994............................. F-3
Audited Consolidated Statements of Changes in Stockholders' Equity at
October 31, 1994, 1995 and 1996.............................................................................. F-4
Audited Consolidated Statements of Cash Flows at October 31, 1996, 1995 and 1994............................. F-5
Notes to Consolidated Financial Statements................................................................... F-6
Unaudited Consolidated Balance Sheets as of July 31, 1997 and October 31, 1996............................... F-20
Unaudited Consolidated Statements of Operations for the three months and nine
months ended July 31, 1997 and 1996.......................................................................... F-21
Unaudited Consolidated Statements of Cash Flows for the nine months ended July 31,
1997 and 1996................................................................................................ F-22
Selected Quarterly Financial Data for three months ended January 31, 1997,
April 30, 1997 and July 31, 1997............................................................................. F-23
WOODWARD-CLYDE GROUP, INC.
Report of Independent Auditors............................................................................... F-25
Audited Consolidated Statements of Financial Position as of December 31, 1996 and 1995....................... F-26
Audited Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994............................................................................. F-28
Audited Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994............................................................................. F-29
Audited Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994............................................................................. F-30
Notes to Consolidated Financial Statements................................................................... F-32
Unaudited Consolidated Statements of Financial Position as of June 30, 1997
and December 31, 1996........................................................................................ F-46
Unaudited Consolidated Statements of Operations for the three months and six
months ended June 30, 1997 and 1996.......................................................................... F-48
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30,
95
<PAGE>
1997 and 1996................................................................................................ F-50
Selected Quarterly Financial Data for years ended December 31, 1996 and 1995................................. F-52
Selected Quarterly Financial Data for three months ended March 31, 1997 and
and June 30, 1997............................................................................................ F-53
</TABLE>
96
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of URS Corporation:
We have audited the accompanying consolidated balance sheets of URS
Corporation and its subsidiaries as of October 31, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended October 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of URS
Corporation and its subsidiaries as of October 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1996, in conformity with generally
accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
December 17, 1996
F-1
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
October 31,
------------------------
1996 1995
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,370 $ 8,836
Accounts receivable, including retainage amounts of $8,379 and $3,895, less
allowance for doubtful accounts of $5,189 and $664 72,417 35,822
Costs and accrued earnings in excess of billings on contracts in process, less
allowance for losses of $2,419 and $606 23,597 13,200
Deferred income taxes 7,077 1,860
Prepaid expenses and other assets 2,426 1,849
--------- ---------
Total current assets 127,887 61,567
Property and equipment at cost, net 15,815 5,835
Goodwill, net 40,261 7,765
Other assets 1,644 768
--------- ---------
$ 185,607 $ 75,935
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,684 $ 7,724
Accrued salaries and wages 12,131 6,588
Accrued expenses and other 20,063 9,088
Billings in excess of costs and accrued earnings on contracts in process 8,849 --
Deferred income taxes 2,913 1,860
Long-term debt, current portion 4,675 --
--------- ---------
Total current liabilities 70,315 25,260
Long-term debt 52,390 7,204
Long-term debt to related parties 2,979 2,795
Deferred compensation and other 3,227 1,198
--------- ---------
Total liabilities 128,911 36,457
--------- ---------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common shares, par value $.01; authorized 20,000 shares;
issued 8,640 and 7,167 shares, respectively 88 73
Treasury stock (287) (287)
Additional paid-in capital 41,894 31,791
Retained earnings since February 21, 1990, date of quasi-reorganization 15,001 7,901
--------- ---------
Total stockholders' equity 56,696 39,478
--------- ---------
$185,607 $75,935
========= =========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
F-2
<PAGE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended October 31,
------------------------------
1996 1995 1994
-------- -------- --------
Revenues $305,470 $179,769 $164,088
-------- -------- --------
Expenses:
Direct operating 187,129 108,845 102,500
Indirect, general and administrative 102,389 63,217 55,455
Interest expense, net 3,897 1,351 1,244
-------- -------- --------
293,415 173,413 159,199
-------- -------- --------
Income before taxes 12,055 6,356 4,889
Income tax expense 4,700 1,300 450
-------- -------- --------
Net income $ 7,355 $ 5,056 $ 4,439
======== ======== ========
Net income per share:
Primary $ .82 $ .68 $ .60
======== ======== ========
Fully diluted $ .80 $ .67 $ .60
======== ======== ========
See Notes to Consolidated Financial Statements
F-3
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Common Shares Additional Total
------------------- Treasury Paid-in Retained Stockholders'
Number Amount Stock Capital Earnings Equity
------ ------ ----- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances, November 1, 1993 6,989 $ 70 $ 0 $ 28,365 $ 954 $ 29,389
Employee stock purchases 40 1 -- 203 -- 204
Purchase of treasury shares (10) -- (59) -- -- (59)
Quasi-reorganization
NOL carryforward -- -- -- 1,693 (1,693) --
Net income -- -- -- -- 4,439 4,439
-------- -------- -------- -------- -------- --------
Balances, October 31, 1994 7,019 71 (59) 30,261 3,700 33,973
Employee stock purchases 190 2 -- 675 -- 677
Purchase of treasury shares (42) -- (228) -- -- (228)
Quasi-reorganization
NOL carryforward -- -- -- 855 (855) --
Net income -- -- -- -- 5,056 5,056
-------- -------- -------- -------- -------- --------
Balances, October 31, 1995 7,167 73 (287) 31,791 7,901 39,478
Employee stock purchases 72 1 -- 399 -- 400
Issuance of 1,401,983
shares in connection with
the Greiner acquisition 1,401 14 -- 9,449 -- 9,463
Quasi-reorganization
NOL carryforward -- -- -- 255 (255) --
Net income -- -- -- -- 7,355 7,355
-------- -------- -------- -------- -------- --------
Balances, October 31, 1996 8,640 $ 88 $ (287) $ 41,894 $ 15,001 $ 56,696
======== ======== ======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<CAPTION>
Years Ended October 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,355 $ 5,056 $ 4,439
-------- -------- --------
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Deferred income taxes (1,880) (615) 70
Depreciation and amortization 5,295 3,124 2,596
Changes in current assets and liabilities:
Accounts receivable and costs and accrued earnings in excess
of billings on contracts in process (8,810) (4,067) (4,938)
Prepaid expenses and other assets 1,411 (881) 26
Accounts payable, accrued salaries and wages and accrued
expenses 6,777 1,252 1,682
Billings in excess of costs and accrued earnings on contracts in process 8,849 -- --
Other, net 5,517 224 (42)
-------- -------- --------
Total adjustments 17,159 (963) (606)
-------- -------- --------
Net cash provided by operating activities 24,514 4,093 3,833
-------- -------- --------
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired (56,354) (3,596) --
Capital expenditures (2,962) (1,610) (2,149)
Other -- 43 --
-------- -------- --------
Net cash used by investing activities (59,316) (5,163) (2,149)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 50,000 -- --
Repayment of debt (2,056) -- --
Repurchase of common shares -- (228) (59)
Proceeds from sale of common shares 389 247 204
Proceeds from exercise of stock options 11 430 --
Other ( 8 ) -- 1,000
-------- -------- --------
Net cash provided by financing activities 48,336 449 1,145
-------- -------- --------
Net increase (decrease) in cash 13,534 (621) 2,829
Cash at beginning of year 8,836 9,457 6,628
-------- -------- --------
Cash at end of year $ 22,370 $ 8,836 $ 9,457
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
F-5
<PAGE>
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of URS
Corporation and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements account for the acquisition of Greiner
Engineering, Inc. ("Greiner") in March, 1996 as a purchase. (See Note 3
Acquisitions.)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue from contract services is recognized by the
percentage-of-completion method and includes a proportion of the earnings
expected to be realized on a contract in the ratio that costs incurred bear to
estimated total costs. Revenue on cost reimbursable contracts is recorded as
related contract costs are incurred and includes estimated earned fees in the
proportion that costs incurred to date bear to total estimated costs. The fees
under certain government contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or other criteria. Such incentive fee awards or
penalties are included in revenue at the time the amounts can be reasonably
determined. Revenue for additional contract compensation related to unpriced
change orders is recorded when realization is probable. Revenue from claims by
the Company for additional contract compensation is recorded when agreed to by
the customer. If estimated total costs on any contract indicate a loss, the
Company provides currently for the total loss anticipated on the contract.
Costs under contracts with the U.S. Government are subject to
government audit upon contract completion. Therefore, all contract costs,
including direct and indirect, general and administrative expenses, are
potentially subject to adjustment prior to final reimbursement. Management
believes that adequate provision for such adjustments, if any, has been made in
the accompanying consolidated financial statements. All overhead and general and
administrative expense recovery rates for fiscal 1989 through fiscal 1996 are
subject to review by the U.S. Government.
F-6
<PAGE>
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments
including cash, accounts receivable, accounts payable and other liabilities
approximate fair value due to their short maturities. Based on borrowing rates
currently available to the Company for loans with similar terms, the carrying
values of long term debt approximate fair value.
Income Taxes
The Company uses an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period plus or minus the change in deferred tax assets and
liabilities during the period.
Property and Equipment
Property and equipment are stated at cost. In the year assets are
retired or otherwise disposed of, the costs and related accumulated depreciation
are removed from the accounts and any gain or loss on disposal is included in
income. Depreciation is provided on the straight-line method over the useful
service lives of the assets. Leasehold improvements are amortized over the
length of the lease or estimated useful life, whichever is less.
Income Per Share
The computation of earnings per common and common equivalent shares is
based upon the weighted average number of common shares outstanding during the
period plus (in periods in which they have a dilutive effect) the effect of
common shares contingently issuable, primarily from stock options, exercise of
warrants and the potential conversion of convertible debentures, less the number
of shares assumed to be purchased from the proceeds using the average market
price of the Company's common stock.
The fully diluted per share computation reflects the effect of common
shares contingently issuable upon the exercise of warrants in periods in which
such exercise would cause dilution. Fully diluted earnings per share may also
reflect additional dilution related to stock options due to the use of the
market price at the end of the period when higher than the average price for the
period.
F-7
<PAGE>
<TABLE>
Computation of Net Income Per Share
<CAPTION>
Years Ended October 31,
-------------------------------------
1996 1995 1994
---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C>
Net income $ 7,355 $ 5,056 $ 4,439
Add:
Interest on debentures and notes, net of
applicable income taxes 209 696 715
------- ------- -------
Net income for fully-diluted income per common share $ 7,564 $ 5,752 $ 5,154
======= ======= -------
Weighted average number of common shares
outstanding during the year 8,020 7,080 7,001
Add:
Common equivalent shares (determined using the
"treasury stock" method) representing shares issuable
upon exercise of employee stock options and 3,206 2,985 2,959
warrants
Less:
Twenty percent limit on repurchase (1,728) (1,433) (1,404)
------- ------- -------
Weighted average number of shares used in
calculation of fully-diluted income per share 9,498 8,632 8,556
======= ======= =======
Fully-diluted income per common share $ .80 $ .67 $ .60
======= ======= =======
</TABLE>
Industry Segment Information
The Company's single business segment, consulting, provides engineering and
architectural services to local and state governments, the Federal government
and the private sector. The Company's services are primarily utilized for
planning, design and program and construction management of infrastructure
projects.
<TABLE>
The Company's revenues from local, state and Federal government agencies
and private businesses for the last three fiscal years are as follows:
<CAPTION>
Years Ended October 31,
------------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Local and state agencies $198,472 65% $ 99,871 56% $ 88,207 54%
Federal agencies 64,226 21 58,751 33 59,611 36
Private business 42,772 14 21,147 11 16,270 10
-------- -------- -------- -------- -------- --------
Total $305,470 100% $179,769 100% $164,088 100%
======== ======== ======== ======== ======== ========
<FN>
Adoption of Statements of Financial Accounting Standards
</FN>
</TABLE>
F-8
<PAGE>
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121
requires that long-lived assets, certain identifiable intangibles, and goodwill
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairment would be recorded if
the expected future undiscounted cash flows were less than the carrying amount
of the asset. SFAS 121 is effective for fiscal years beginning after December
15, 1995, with earlier adoption permitted. The Company will adopt SFAS 121
effective for its fiscal year ending October 31, 1997. The Company does not
believe that adoption of SFAS 121 will have a material adverse effect on its
financial position or results of operations.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
is effective for fiscal years beginning after December 15, 1995. SFAS 123
encourages entities to adopt a fair value based method of accounting for
employee stock compensation plans; however, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting. Under the intrinsic value based method, companies do not
recognize compensation cost for many of their stock compensation plans. Under
the fair value based method, companies would recognize compensation costs for
those same plans. The Company elects to continue to use the intrinsic value
based method, and therefore does not expect the impact on its financial
statements, if any, to be material.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the 1996 presentation with no effect on net income as
previously reported.
NOTE 2. QUASI-REORGANIZATION
In conjunction with a restructuring completed in fiscal year 1990, the
Company, with the approval of its Board of Directors, implemented a
quasi-reorganization effective February 21, 1990 and revalued certain assets and
liabilities to fair value as of that date.
The fair values of the Company's assets and liabilities at the date of the
quasi-reorganization were determined by management to approximate their carrying
value and no further adjustment of historical bases was required. No assets were
written-up in conjunction with the revaluation. As part of the
quasi-reorganization, the deficit in retained earnings of $92.5 million was
eliminated against additional paid-in capital. The balance in retained earnings
at October 31, 1996 represents the accumulated net earnings arising subsequent
to the date of the quasi-reorganization.
NOTE 3. ACQUISITIONS
During the year ended October 31, 1995, the Company acquired E.C. Driver &
Associates, Inc. ("ECD") for an aggregate purchase price of $3.6 million, and
the assumption of ECD's liabilities totaling $1.4 million. This acquisition was
accounted for by the purchase method of accounting and the net assets of ECD are
included in the Company's consolidated balance sheet
F-9
<PAGE>
as of October 31, 1995 based upon their estimated fair value at the
transaction's effective date of January 4, 1995. Pro forma operating results for
the years ended October 31, 1994 and 1995, as if the acquisition had been made
on November 1, 1993, are not presented as they would not be materially different
from the Company's reported results. The excess of the purchase price over the
estimated fair value of the assets acquired has been allocated to goodwill.
During the year ended October 31, 1996, the Company acquired Greiner for an
aggregate purchase price of $78.8 million, comprised of cash of $69.3 million,
and 1.4 million shares of the Company's Common Stock. The acquisition has been
accounted for by the purchase method of accounting and the excess of the fair
value of the net assets acquired over the purchase price has been allocated to
goodwill. The operating results of Greiner are included in the Company's results
of operations from the date of purchase.
The purchase price consisted of:
(In thousands)
Cash paid $19,321
Term debt-current portion 4,675
Term debt-long-term portion 45,325
Common Stock 9,463
------
$78,784
The purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $77,184
Fair value of assets acquired (42,510)
------
Excess purchase price over net assets acquired (Goodwill) $34,674
======
The following unaudited pro forma summary presents the consolidated results
of operations as if the Greiner acquisition had occurred at the beginning of the
periods presented and does not purport to indicate what would have occurred had
the acquisition been made as of those dates or of results which may occur in the
future.
Fiscal Years Ended October 31:
1996 1995
-------- --------
(In thousands)
Revenues $368,572 $334,904
======== ========
Net income $ 4,691 $ 2,868
======== ========
Net income per share $ .49 $ .33
======== ========
F-10
<PAGE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31,
1996 1995
-------- --------
(In thousands)
Equipment $ 17,789 $ 9,074
Furniture and fixtures 3,421 2,713
Leasehold improvements 2,213 887
-------- --------
23,423 12,674
Less: accumulated depreciation
and amortization (7,608) (6,839)
-------- --------
Net property and equipment $ 15,815 $ 5,835
======== ========
NOTE 5. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
the net tangible assets of various operations acquired by the Company.
Accumulated amortization at October 31, 1996 and 1995 was $3.8 million and $3.1
million, respectively. Goodwill is amortized on the straight-line method over 30
years.
F-11
<PAGE>
NOTE 6. INCOME TAXES
The components of income tax expense applicable to the operations each year
are as follows:
Years Ended October 31,
-----------------------------
1996 1995 1994
------- ------- -------
(In thousands)
Current:
Federal $ 5,020 $ 1,325 $ 150
State and local 1,560 590 230
------- ------- -------
Subtotal 6,580 1,915 380
------- ------- -------
Deferred:
Federal (1,320) (385) --
State and local (560) (230) 70
------- ------- -------
Subtotal (1,880) (615) 70
------- ------- -------
Total tax provision $ 4,700 $ 1,300 $ 450
======= ======= =======
As of October 31, 1996, the Company has available net operating loss
("NOL") carryforwards for Federal income tax purposes and financial statement
purposes of $6.0 million. The NOL utilization is limited to $750,000 per year.
While the Company had available NOL carryforwards which partially
offset otherwise taxable income for Federal income tax purposes, for state tax
purposes such amounts are not necessarily available to offset income subject to
tax.
The significant components of the Company's deferred tax assets and
liabilities as of October 31 are as follows:
Deferred tax assets/(liabilities) - due to:
1996 1995
-------- --------
(In thousands)
Allowance for doubtful accounts $ 1,520 $ 200
Other accruals and reserves 6,630 3,270
Net operating loss 2,050 2,300
-------- --------
Total 10,200 5,770
Valuation allowance (3,123) (3,910)
-------- --------
Deferred tax asset 7,077 1,860
-------- --------
Other deferred gain and unamortized bond premium (2,160) (1,820)
Depreciation and amortization (753) (40)
-------- --------
Deferred tax liability (2,913) (1,860)
-------- --------
Net deferred tax asset $ 4,164 $ --
======== ========
F-12
<PAGE>
The net change in the total valuation allowance for the year ended October
31, 1996 was a decrease of $788,000 due to the utilization of net operating
losses, AMT credits and other changes in deferred tax assets.
The difference between total tax expense and the amount computed by
applying the statutory Federal income tax rate to income before taxes is as
follows:
Years Ended October 31,
-----------------------------
1996 1995 1994
------- ------- -------
Federal income tax expense based upon
federal statutory tax rate of 40% $ 4,100 $ 2,160 $ 1,660
Nondeductible goodwill amortization 400 160 160
Nondeductible expenses 240 210 120
NOL carryforwards utilized (250) (1,140) (1,690)
AMT credit utilized -- (330) --
State taxes, net of Federal benefit 660 240 200
Adjustment to state tax rate 80 -- --
Utilization of deferred tax benefits and other (530) -- --
------- ------- -------
Total taxes provided $ 4,700 $ 1,300 $ 450
======= ======= =======
NOTE 7. LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
October 31,
-----------------
1996 1995
------- -------
(In thousands)
Third party:
<S> <C> <C>
Bank term loan, payable in quarterly installments $49,207 $ --
6 1/2% Convertible Subordinated Debentures due 2012 (net
of bond issue costs of $39 and $41) 2,106 2,104
8 5/8% Senior Subordinated Debentures due 2004 (net of
discount and bond issue costs of $3,657 and $3,830)
(effective interest rate on date of restructuring was 25%) 2,798 2,625
Obligations under capital leases 4,173 3,406
------- -------
58,284 8,135
Less: Current maturities of long-term debt 4,675 --
Current maturities of capital leases 1,219 931
------- -------
$52,390 $ 7,204
======= =======
Related parties:
January Notes (net of discount of $1,021 and $1,205) $ 2,979 $ 2,795
======= =======
</TABLE>
F-13
<PAGE>
At October 31, 1996, the Company's senior secured revolving credit facility
with Wells Fargo Bank, N.A. (the "Bank") provides for advances up to $20.0
million and expires March 29, 1999. Borrowings on the revolving credit facility
bear interest at the option of the Company based on rate indexes selected by the
Company, with variable spreads over the selected index based on loan maturity
and the Company's financial performance. At October 31, 1996, the interest rate
was based on the London Interbank Offered Rate ("LIBOR") of 5.53%, plus spreads
of 2.625% to 3.00%. At October 31, 1996, the Company had outstanding letters of
credit totaling $600,000 which reduced the amount available to the Company under
its revolving credit facility to $19.4 million.
Also at October 31, 1996, the Company had outstanding with the Bank $49.2
million of senior secured term loans payable over seven years beginning October
1996. The loans bear interest based on rate indexes selected by the Company,
with variable spreads over the selected index based on loan maturity and the
Company's financial performance. At October 31, 1996, the interest rate was
based on the LIBOR of 5.53%, plus spreads of 2.625% to 3.00%.
Related Parties
At October 31, 1996, the Company had fully-drawn $4.0 million under its
line of credit with Richard C. Blum & Associates, Inc. ("RCBA"). The
indebtedness is represented by the January Notes, which bear interest at 6 1/2%
per annum, are subordinate only to the Bank line of credit and are due November
1, 2000. RCBA, through various partnerships, beneficially owns approximately 18%
of the Company's common shares (approximately 33% assuming exercise of
additional warrants) outstanding at October 31, 1996. Richard C. Blum, a
director of the Company, is also Chairman of RCBA.
Debentures
The Company's 6 1/2% Convertible Subordinated Debentures due 2012 are
convertible into the Company's common shares at the rate of $206.30 per share.
Sinking fund payments are calculated to retire 70% of the debentures prior to
maturity beginning in February 1998. Interest is payable semi-annually in
February and August. Interest is payable semi-annually in January and July on
the Company's 85/8% Senior Subordinated Debentures due 2004 ("85/8 Debentures").
Both the 6 1/2% Convertible Subordinated Debentures and the 85/8 Debentures are
subordinate to all debt to RCBA and the Bank.
Maturities
The amounts of long-term debt outstanding at October 31, 1996 maturing in
the next five years are as follows:
(In thousands)
1997 $ 4,675
1998 3,581
1999 5,075
2000 5,475
2001 6,025
Thereafter 36,975
Amounts payable under capitalized lease agreements are excluded from the above
table.
F-14
<PAGE>
Obligations Under Leases
Total rental expense included in operations for operating leases for the
fiscal years ended October 31, 1996, 1995 and 1994 amounted to $10.9 million,
$5.7 million and $5.3 million, respectively. Certain of the lease rentals are
subject to renewal options and escalation based upon property taxes and
operating expenses. These operating lease agreements expire at varying dates
through 2005.
Obligations under non-cancelable lease agreements are as follows:
Capital Operating
Leases Leases
------- --------
(In thousands)
1997 $1,265 $12,593
1998 1,147 10,068
1999 1,069 7,803
2000 428 6,094
2001 241 5,195
Thereafter 23 13,512
------ ------
Total minimum lease payments $4,173 $55,265
=======
Less amounts representing
interest 963
------
Present value of net minimum
lease payments $3,210
======
NOTE 8. COMMITMENTS AND CONTINGENCIES
Currently, the Company has $51.0 million per occurrence and aggregate
commercial general liability insurance coverage. The Company is also insured for
professional errors and omissions ("E&O") and contractor pollution liability
("CPL") claims with an aggregate limit of $30.0 million after a self-insured
retention of $.5 million. The E&O and CPL coverages are on a "claims made"
basis, covering only claims actually made during the policy period currently in
effect. Thus, if the Company does not continue to maintain this policy, it will
have no coverage under the policy for claims made after its termination date
even if the occurrence was during the term of coverage. It is the Company's
intent to maintain this type of coverage, but there can be no assurance that the
Company can maintain its existing coverage, that claims will not exceed the
amount of insurance coverage or that there will not be claims relating to prior
periods that were subject only to "claims made" coverage.
Various legal proceedings are pending against the Company or its
subsidiaries alleging breaches of contract or negligence in connection with the
performance of professional services. In some actions punitive or treble damages
are sought which substantially exceed the Company's insurance coverage. The
Company's management does not believe that any of such proceedings will have a
material adverse effect on the consolidated financial position and operations of
the Company.
F-15
<PAGE>
NOTE 9. CAPITAL STOCK
Declaration of dividends, except Common Stock dividends, is restricted by
the Bank line of credit agreement and the Indenture governing the 85/8
Debenture. Further, declaration of dividends may be precluded by existing
Delaware law.
During fiscal year 1995, the Company repurchased a total of 42,000 shares
of its Common Stock at an average repurchase price of $5.43, pursuant to a
systematic repurchase plan approved by the Company's Board of Directors on
September 13, 1994. The systematic repurchase plan expired on September 13,
1995. The Company, as of that date, had repurchased a total of 52,000 shares of
its Common Stock at an average repurchase price of $5.49.
The 1987 Restricted Stock Plan (the "Plan") provides for grants of up to
16,537 shares of Common Stock to key employees of the Company and its
subsidiaries. An employee selected to receive shares under the Plan will not be
required to pay any consideration for the shares. Shares issued to an employee
are subject to forfeiture in the event that the employment of the employee
terminates for any reason other than death. The forfeiture restrictions lapse
with respect to portions of the grant over a five-year period subsequent to the
grant date. As of October 31, 1996, 6,872 restricted shares have been granted.
The 1979 Stock Option Plan (the "1979 Plan") provided for grants of options
to purchase shares of Common Stock to directors, officers and key employees of
the Company and its subsidiaries at prices and for periods (not to exceed ten
years) as determined by the Board of Directors. The 1979 Plan also provided for
the granting of Stock Appreciation Rights and incentive stock options. The 1979
Plan expired in February 1989, and no further options or rights may be granted
under the 1979 Plan.
On October 20, 1988, the stockholders approved a replacement option program
pursuant to which non-management members of the Board of Directors granted
replacement stock options to selected employees, exercisable at then current
market prices. The selected employees then exchanged their outstanding options
for new options covering two shares for each three shares covered by the options
being replaced. Options to purchase 16,561 shares were exchanged for
pre-existing options.
On April 27, 1989, the stockholders approved the 1989 Stock Option and
Rights Plan (the "1989 Plan"). The 1989 Plan provides for the grant of options
to purchase 50,000 shares of Common Stock to directors, officers and key
employees of the Company and its subsidiaries at prices and for periods (not to
exceed ten years) as determined by the Board of Directors. The 1989 Plan also
provides for the granting of Stock Appreciation Rights. No options have been
granted under the 1989 Plan.
On March 26, 1991, the stockholders approved the 1991 Stock Incentive Plan
(the "1991 Plan"). The 1991 Plan provides for the grant not to exceed 1,500,000
Restricted Shares, Stock Units and Options, plus the number of shares of Common
Stock remaining available for awards under the 1987 Plan (9,665) and the 1989
Plan (50,000) to key employees of the Company and its subsidiaries at prices and
for periods as determined by the Board of Directors. The 1991 Plan prohibits
granting new options under the 1987 Plan and the 1989 Plan. As of October 1996,
the Company had issued 21,200 shares of Restricted Stock under the 1991 Plan.
F-16
<PAGE>
Under the Employee Stock Purchase Plan (the "ESP Plan") implemented in
September 1985, employees may purchase shares of Common Stock through payroll
deductions of up to 10% of the employee's base pay. Contributions are credited
to each participant's account on the last day of each six-month participation
period of the ESP Plan (which commences on January 1 and July 1 of each year).
The purchase price for each share of Common Stock shall be the lower of 85% of
the fair market value of such share on the last trading day before the
participation period commences or 85% of the fair market value of such share on
the last trading day in the participation period. Employees purchased 69,692
shares under the ESP Plan in fiscal 1996 and 46,610 shares in fiscal 1995.
On February 21, 1990, the Company issued warrants to purchase 1,819,148
shares of Common Stock at a purchase price of $4.34 per share which expire on
February 14, 1997.
A summary of the number of stock options granted under the 1979, 1989 and
1991 Plans is as follows:
October 31, 1996
----------------
Shares Per Share (1)
------ -------------
Number of options:
Outstanding at year end 1,386,469 $3.12 - $31.25
Exercisable at year end 1,033,768 $3.12 - $31.25
Exercised during the year 2,000 $5.50 - $5.75
Available for grant at year end 19,231 -
October 31, 1995
----------------
Shares Per Share (1)
------ -------------
Number of options:
Outstanding at year end 1,166,324 $3.12 - $31.25
Exercisable at year end 768,166 $3.12 - $31.25
Exercised during the year 137,600 $3.12 - $3.12
Available for grant at year end 239,665 -
October 31, 1994
----------------
Shares Per Share (1)
------ -------------
Number of options:
Outstanding at year end 1,139,964 $3.12 - $31.25
Exercisable at year end 790,967 $3.12 - $31.25
Exercised during the year - -
Available for grant at year end 413,765 -
(1) Reflects lowest and highest exercise price.
F-17
<PAGE>
NOTE 10. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Years Ended October 31,
---------------------------
1996 1995 1994
------ ------- ------
(In thousands)
Interest $4,142 $ 891 $1,301
Income taxes $6,483 $ 1,358 $ 499
On January 4, 1995 the Company purchased all of the capital stock of ECD for
$3.6 million. In conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired $4,952
Cash paid for the capital stock (3,596)
Liabilities assumed $ 1,356
======
On March 29,1996 the Company acquired all of the capital stock of Greiner for
$78.8 million.
Purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $77,184
Fair value of assets acquired (42,510)
--------
Excess purchase price over net assets acquired $34,674
=========
There were no significant non-cash investing or financing activities in
fiscal 1994.
NOTE 11. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution retirement plan under Internal Revenue
Code Section 401(k). The plan covers all full-time employees who are at least 18
years of age. Contributions by the Company are made at the discretion of the
Board of Directors. Contributions in the amount of $1.6 million, $.8 million and
$.6 million were made to the plan in fiscal 1996, 1995 and 1994, respectively.
<TABLE>
NOTE 12. VALUATION AND ALLOWANCE ACCOUNTS
<CAPTION>
Additions
Charged to Deductions
Beginning Costs and from Ending
Balance Expenses Reserves Other Balance
------- -------- -------- ----- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
October 31, 1996
Allowances for losses and doubtful
collections $1,270 $2,600 $1,083 $4,821 $7,608
October 31, 1995
Allowances for losses and doubtful
collections $1,141 $ 442 $ 313 $ -- $1,270
October 31, 1994
Allowances for losses and doubtful
collections $1,081 $ 322 $ 262 $ -- $1,141
</TABLE>
F-18
<PAGE>
NOTE 13. RELATED PARTY TRANSACTIONS
Interest paid to related parties in connection with the January Notes was
$260,712, $194,000 and $363,000 in fiscal 1996, 1995 and 1994, respectively.
(See Note 7 - Long-Term Debt.)
The Company has agreements for business consulting services to be provided
by RCBA and Richard C. Blum, a Director of the Company. Under these agreements,
the Company paid $90,000 and $60,000 to RCBA and Richard C. Blum, respectively,
during each of fiscal 1996, 1995 and 1994. Richard C. Blum also received an
additional cash amount of $23,000, $25,000 and $24,000 for his services as a
Director of the Company in fiscal 1996, 1995 and 1994, respectively.
NOTE 14. CONCENTRATION OF CREDIT RISK
The Company provides services primarily to local, state and Federal
government agencies. The Company believes the credit risk associated with these
types of revenues is minimal. However, the Company does perform ongoing credit
evaluations of its customers and, generally, requires no collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Substantially all cash balances are held in one
financial institution and at times exceed federally insured limits.
NOTE 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for fiscal 1996 and 1995 is summarized
as follows:
Fiscal 1996 Quarters Ended
-----------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
-------- -------- -------- --------
(In thousands, except per share data)
Revenues $ 48,503 $ 64,864 $ 89,734 $102,369
Operating income 1,637 3,270 4,863 6,182
Net income $ 812 $ 1,522 $ 2,072 $ 2,949
Income per share:
Primary $ .11 $ .18 $ .22 $ .31
======== ======== ======== ========
Fully diluted $ .11 $ .18 $ .22 $ .29
======== ======== ======== ========
Weighted average
number of shares 8,713 9,188 10,096 10,093
======== ======== ======== ========
Fiscal 1995 Quarters Ended
-------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
------- ------- ------- -------
(In thousands, except per share data)
Revenues $40,307 $44,810 $44,456 $50,196
Operating income 1,356 1,625 2,060 2,666
Net income $ 800 $ 1,051 $ 1,336 $ 1,869
Income per share:
Primary $ .11 $ .15 $ .18 $ .24
======= ======= ======= =======
Fully diluted $ .11 $ .15 $ .18 $ .23
======= ======= ======= =======
Weighted average
number of shares 8,528 8,725 8,731 8,696
======= ======= ======= =======
Operating income represents continuing operations before interest income
and interest expense.
F-19
<PAGE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
July 31, October 31,
ASSETS 1997 1996
--------- ----------
(unaudited)
Current assets:
Cash $ 14,368 $ 22,370
Accounts receivable, less allowance for
doubtful accounts of $1,647 and $2,447 80,815 75,159
Costs and accrued earnings in excess of
billings on contracts in process, less
allowances for losses of $1,792 and $2,419 25,399 20,855
Deferred income taxes 7,233 7,077
Prepaid expenses and other 3,157 2,426
--------- ---------
Total current assets 130,972 127,887
Property and equipment at cost, net 16,131 15,815
Goodwill, net 43,065 40,261
Other assets 1,746 1,644
--------- ---------
$ 191,914 $ 185,607
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,680 $ 21,684
Accrued salaries and wages 14,052 12,131
Accrued expenses and other 17,849 20,063
Billings in excess of costs and accrued earnings on
contracts in process 11,060 8,849
Deferred income taxes 2,867 2,913
Long-term debt, current portion 6,200 4,675
--------- ---------
Total current liabilities 71,708 70,315
Long-term debt 39,613 52,390
Long-term debt, related parties -- 2,979
Deferred compensation and other accruals 8,239 3,227
--------- ---------
Total liabilities 119,560 128,911
Stockholders' equity:
Common shares, par value $.01; authorized
20,000 shares; issued 10,579 and 8,640 shares 106 88
Treasury stock (287) (287)
Additional paid-in capital 49,700 41,894
Retained earnings since February 21, 1990, date of
quasi-reorganization 22,835 15,001
--------- ---------
Total stockholders' equity 72,354 56,696
--------- ---------
$ 191,914 $ 185,607
========= =========
F-20
<PAGE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three months ended Nine months ended
July 31, July 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
Revenues $100,196 $ 89,734 $295,496 $203,101
-------- -------- -------- --------
Expenses:
Direct operating 58,813 53,027 174,887 122,552
Indirect, general and
administrative 35,103 31,844 103,789 70,782
Interest expense, net 989 1,431 3,806 2,434
-------- -------- -------- --------
94,905 86,302 282,482 195,768
-------- -------- -------- --------
Income before taxes 5,291 3,432 13,014 7,333
Income tax expense 2,110 1,360 5,180 2,930
-------- -------- -------- --------
Net income $ 3,181 $ 2,072 $ 7,834 $ 4,403
======== ======== ======== ========
Net income per share:
Primary and fully diluted $ .28 $ .22 $ .74 $ .51
======== ======== ======== ========
F-21
<PAGE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
July 31,
---------------------
1997 1996
-------- --------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,834 $ 4,403
-------- --------
Adjustment to reconcile net income to net cash provided (used) by operating
activities:
Depreciation and amortization 5,791 4,060
Allowance for doubtful accounts and losses (1,427) 3,684
Changes in current assets and liabilities, net of effect of business
acquisitions:
Accounts receivable and costs and accrued earnings
in excess of billings on contracts in process (8,773) (2,377)
Prepaid expenses and other assets (832) (2,094)
Accounts payable, accrued salaries and wages
and accrued expenses (1,740) 2,307
Billing in excess of costs and accrued earnings on
contracts in process 2,211 8,685
Deferred taxes (202) (2,035)
Other, net (44) 120
-------- --------
Total adjustments (5,016) 12,350
-------- --------
Net cash provided by operating activities 2,818 16,753
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired -- (54,556)
Capital expenditures (3,010) (2,280)
-------- --------
Net cash (used) by investing activities (3,010) (56,836)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt -- 50,000
Principal payments on long-term debt (12,508) (127)
Proceeds from sale of common shares 444 163
Proceeds from exercise of stock options 402 8
Proceeds from exercise of warrants 3,895 --
Other (43) (16)
-------- --------
Net cash provided by financing activities (7,810) 50,028
-------- --------
Net (decrease) increase in cash (8,002) 9,945
Cash at beginning of period 22,370 8,836
-------- --------
Cash at end of period $ 14,368 $ 18,781
======== ========
SUPPLEMENTAL INFORMATION:
Interest paid $ 4,107 $ 1,682
======== ========
Taxes paid $ 6,777 $ 2,132
======== ========
Equipment purchased through capital lease obligations $ 2,429 $ --
======== ========
Noncash purchase allocation adjustment $ 3,000 $ --
======== ========
Retirement of debt, related parties $ 3,028 $ --
======== ========
Issuance of common stock in business acquisition $ -- $ 9,463
======== ========
F-22
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for three months ended January 31,
1997, April 30, 1997 and July 31, 1997 is summarized as follows:
Fiscal 1997 Quarters Ended
-----------------------------------------
Jan. 31 Apr. 30 July 31
(In thousands, except per share data)
Revenues $95,541 $99,759 $100,196
Operating income 5,081 5,458 6,280
Net income $ 2,196 $ 2,457 $ 3,181
Income per share:
Primary $ .22 $ .24 $ .28
======= ======= ========
Fully diluted $ .22 $ .24 $ .28
======= ======= ========
Weighted average
number of shares 10,102 9,430 10,588
======= ======= ========
F-23
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
Contents
Report of Independent Auditors.................................................1
Audited Consolidated Financial Statements:
Consolidated Statements of Financial Position...............................2
Consolidated Statements of Income...........................................4
Consolidated Statements of Shareholders' Equity.............................5
Consolidated Statements of Cash Flows.......................................6
Notes to Consolidated Financial Statements..................................8
F-24
<PAGE>
Report of Independent Auditors
Board of Directors
Woodward-Clyde Group, Inc.
We have audited the accompanying consolidated statements of financial position
of Woodward-Clyde Group, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Woodward-Clyde Group, Inc. and subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Denver, Colorado
March 28, 1997
F-25
<PAGE>
<TABLE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Statements of Financial Position
<CAPTION>
December 31
1996 1995
--------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,231,186 $ 5,181,014
Available-for-sale investments 5,302,336 5,678,600
Receivables and unbilled revenues:
Accounts receivable 71,719,273 73,555,272
Unbilled revenues 15,404,918 17,727,680
Other 1,124,279 862,237
Less allowance for uncollectible accounts (6,950,290) (7,134,552)
--------------------------------------------
81,298,180 85,010,637
Prepaid income taxes 1,723,602 1,936,410
Prepaid expenses and other assets 1,208,942 2,068,212
--------------------------------------------
Total current assets 93,764,246 99,874,873
Property and equipment--at cost, less accumulated
depreciation and amortization of $28,392,482 in
1996 and $27,871,642 in 1995 15,768,262 19,040,952
Other assets:
Excess of cost over net assets of subsidiaries at
acquisition, less accumulated amortization of
$1,372,573 in 1996 and $791,228 in 1995 10,323,610 7,100,666
Property held for resale 2,324,608 2,459,522
Deferred income taxes 3,581,420 3,360,647
Other 1,627,715 1,607,370
--------------------------------------------
17,857,353 14,528,205
--------------------------------------------
Total assets $ 127,389,861 $ 133,444,030
============================================
</TABLE>
F-26
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------------------------
<S> <C> <C>
Liabilities and shareholders' equity Current liabilities:
Loans payable to banks $ 15,756,158 $ 13,985,835
Accounts payable 21,236,739 18,022,149
Accrued payroll and related benefits 12,081,974 11,452,030
Other accrued expenses 9,372,818 9,590,615
Deferred income taxes 2,978,686 3,105,573
Current portion of long-term debt 4,508,884 5,878,221
--------------------------------------------
Total current liabilities 65,935,259 62,034,423
Long-term liabilities:
Long-term debt, less current portion 9,329,676 19,027,340
Estimated liability for self-insured risk 5,943,703 6,987,609
Other 2,513,721 2,694,842
--------------------------------------------
17,787,100 28,709,791
Redeemable preferred stock 5,395,156 5,035,024
Commitments and contingencies
Shareholders' equity:
Common shares 19,763 19,832
Additional paid-in capital 19,614,755 19,075,369
Unrealized gain (loss) on investments (1,872) 49,883
Retained earnings 18,670,587 18,891,854
Foreign currency translation adjustment 258,254 (372,146)
--------------------------------------------
38,561,487 37,664,792
Less notes receivable from shareholders
from sale of Common shares (289,141) -
--------------------------------------------
38,272,346 37,664,792
--------------------------------------------
Total liabilities and shareholders' equity $ 127,389,861 $ 133,444,030
============================================
<FN>
See accompanying notes.
</FN>
</TABLE>
F-27
<PAGE>
<TABLE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Statements of Income
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Gross revenues from services $320,227,844 $310,394,420 $273,879,711
Direct costs of outside services (110,829,846) (94,009,890) (73,356,077)
------------------------------------------------------------------
Net revenues 209,397,998 216,384,530 200,523,634
Costs and expenses:
Salaries and benefits 147,721,700 150,894,374 138,484,977
General expenses 48,646,275 50,724,616 45,423,370
Depreciation and amortization 6,825,549 6,801,661 5,587,187
------------------------------------------------------------------
203,193,524 208,420,651 189,495,534
Other expenses (income):
Interest 2,768,335 2,745,564 2,212,716
Other (80,804) (137,962) (70,609)
------------------------------------------------------------------
2,687,531 2,607,602 2,142,107
------------------------------------------------------------------
Income before income taxes 3,516,943 5,356,277 8,885,993
Income taxes 1,912,123 2,535,876 3,736,948
------------------------------------------------------------------
Net income 1,604,820 2,820,401 5,149,045
Less:
Dividends on Preferred shares 111,231 125,739 145,081
Redemption premium on Preferred
shares 979,171 1,095,227 1,211,281
------------------------------------------------------------------
1,090,402 1,220,966 1,356,362
------------------------------------------------------------------
Net income applicable to common
shares $ 514,418 $ 1,599,435 $ 3,792,683
==================================================================
Net income per share $ 0.26 $ 0.82 $ 1.97
==================================================================
Weighted average shares outstanding 1,964,853 1,954,598 1,921,025
==================================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
F-28
<PAGE>
<TABLE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<CAPTION>
Unrealized Foreign
Additional Gain (Loss) Currency
Common Paid-In on Retained Translation
Shares Capital Investments Earnings Adjustment
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $20,431 $16,236,305 $ - $17,297,200 $(490,526)
Common shares issued 971 2,010,161 -
Common shares purchased and retired (2,477) (2,204,531) - (2,839,805) -
Collection of notes receivable from
shareholders
Currency translation adjustment - - - - 349,568
Net income - - - 5,149,045 -
Cash dividends paid on Preferred
shares ($2.50 per share) - - - (145,081) -
Accretion of redeemable preferred stock - - - (1,211,281) -
-------------------------------------------------------------------------------------
Balance at December 31, 1994 18,925 16,041,935 - 18,250,078 (140,958)
Common shares issued 1,700 3,922,770 - - -
Common shares purchased and retired (793) (889,336) - (957,659) -
Collection of notes receivable from
shareholders - - - - -
Currency translation adjustment - - - - (231,188)
Net income - - - 2,820,401 -
Unrealized gain on investments - - 49,883 - -
Cash dividends paid on Preferred
shares ($2.50 per share) - - - (125,739) -
Accretion of redeemable preferred stock - - - (1,095,227) -
-------------------------------------------------------------------------------------
Balance at December 31, 1995 19,832 19,075,369 49,883 18,891,854 (372,146)
Common shares issued 519 1,224,769 - - -
Common shares purchased and retired (588) (685,383) - (735,685) -
Currency translation adjustment - - - - 630,400
Net income - - - 1,604,820 -
Unrealized loss on investments - - (51,755) - -
Cash dividends paid on Preferred
shares ($2.50 per share) - - - (111,231) -
Accretion of redeemable preferred stock - - - (979,171) -
-------------------------------------------------------------------------------------
Balance at December 31, 1996 $19,763 $19,614,755 $ (1,872) $18,670,587 $ 258,254
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Notes
Receivable
From
Shareholders Total
------------------------------------
<S> <C> <C>
Balance at January 1, 1994 $ (4,890) $33,058,520
Common shares issued - 2,011,132
Common shares purchased and retired - (5,046,813)
Collection of notes receivable from
shareholders 2,333 2,333
Currency translation adjustment - 349,568
Net income - 5,149,045
Cash dividends paid on Preferred
shares ($2.50 per share) - (145,081)
Accretion of redeemable preferred stock - (1,211,281)
------------------------------------
Balance at December 31, 1994 (2,557) 34,167,423
Common shares issued - 3,924,470
Common shares purchased and retired - (1,847,788)
Collection of notes receivable from
shareholders 2,557 2,557
Currency translation adjustment - (231,188)
Net income - 2,820,401
Unrealized gain on investments - 49,883
Cash dividends paid on Preferred
shares ($2.50 per share) - (125,739)
Accretion of redeemable preferred stock - (1,095,227)
------------------------------------
Balance at December 31, 1995 - 37,664,792
Common shares issued (289,141) 936,147
Common shares purchased and retired - (1,421,656)
Currency translation adjustment - 630,400
Net income - 1,604,820
Unrealized loss on investments - (51,755)
Cash dividends paid on Preferred
shares ($2.50 per share) - (111,231)
Accretion of redeemable preferred stock - (979,171)
------------------------------------
Balance at December 31, 1996 $(289,141) $38,272,346
====================================
<FN>
See accompanying notes.
</FN>
</TABLE>
F-29
<PAGE>
<TABLE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 1,604,820 $ 2,820,401 $ 5,149,045
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,825,549 6,801,661 5,587,187
Provision for claims costs 1,412,860 1,385,204 619,770
Provision for deferred income taxes (368,235) 927,687 (559,707)
Common shares issued as incentive
compensation - 1,224,543 982,196
Loss (gain) on disposal of available-for-
sale investments (34,868) 129,431 -
Changes in operating assets and
liabilities:
Receivables and unbilled revenues (870,119) (4,312,181) 4,723,000
Prepaid expenses and other assets 859,270 (344,118) (221,265)
Other long-term assets (20,345) 210,863 564,937
Property held for resale 134,914 (119,997) (174,893)
Accounts payable 3,214,590 4,334,742 (1,045,065)
Accrued payroll and other
accrued expenses (54,154) (5,630,258) 1,609,683
Prepaid income taxes 2,306,389 (3,356,448) 181,469
Contributions payable to WCG CAP - (1,694,000) (64,000)
Other long-term liabilities (2,788,487) (1,501,721) (1,549,863)
------------------------------------------------------------
Net cash provided by operating activities 12,222,184 875,809 15,802,494
Investing activities
Additions to property and equipment (3,018,932) (4,609,179) (5,226,269)
Purchase of companies, net of cash acquired - (7,507,627) (541,795)
Purchase of available-for-sale investments (8,501,882) (5,628,717) (2,000,000)
Proceeds from disposal of available-for-sale
investments 8,861,259 1,607,087 6,097,682
Net reduction in certificates of deposit - 1,600,000 730,408
------------------------------------------------------------
Net cash used in investing activities (2,659,555) (14,538,436) (939,974)
Financing activities
Net borrowings on loans payable to banks 1,770,323 8,075,536 (646,680)
Principal payments on long-term borrowings (12,152,945) (2,766,399) (3,121,496)
Principal payments on notes receivable
from shareholders - 2,557 2,333
Redemption of Preferred shares (619,039) (1,121,865) (1,005,810)
</TABLE>
F-30
<PAGE>
<TABLE>
Woodward-Clyde Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<CAPTION>
Year ended December 31
1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Financing activities (continued)
Purchase of Common shares (net of long-term
debt issue: $1,085,944 in 1996 and
$730,205 in 1995) $ (335,712) $ (1,117,583) $(1,993,998)
Proceeds from sale of Common shares 936,147 1,696,805 1,028,936
Dividends paid on Preferred shares (111,231) (125,739) (77,376)
---------------------------------------------
Net cash provided (used) by financing
activities (10,512,457) 4,643,312 (5,814,091)
---------------------------------------------
Net increase (decrease) in cash and cash
equivalents (949,828) (9,019,315) 9,048,429
Cash and cash equivalents at beginning of year 5,181,014 14,200,329 5,151,900
---------------------------------------------
Cash and cash equivalents at end of year $ 4,231,186 $ 5,181,014 $14,200,329
=============================================
<FN>
See accompanying notes.
</FN>
</TABLE>
F-31
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies
Organization
Woodward-Clyde Group, Inc. and its subsidiaries (the Company) provide
geotechnical, waste management and environmental consulting services with
offices in North America, Western Europe and the Asia Pacific region. The
Company also provides contract services to the remediation and civil
construction industry for on-site pollution control and cleanup. The
consolidated financial statements include the accounts of Woodward-Clyde Group,
Inc. and its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Contract Revenues and Related Costs
The Company recognizes income on the accrual basis and performs work under both
fixed price and reimbursable cost plus fee contracts. Revenues on cost-type
contracts are recognized as costs are incurred and include estimated earned
fees. Revenues on fixed-price-type contracts are recognized using the
percentage-of-completion method by comparing costs of progress completed during
the period to total expected costs of the contracts.
Revenues recognized on contracts in process that are in excess of related
billings are recorded as unbilled revenues. These amounts are generally billable
upon delivery or satisfaction of contract requirements specific to each project.
Provisions for estimated losses on contracts are recorded when identified.
Receivables
Retainage balances are expected to be substantially collected within one year.
Credit is extended based on an evaluation of the client's financial condition,
and collateral is generally not required. Provision for losses has been
consistently within management's expectations.
Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or less
when purchased to be cash equivalents. Cash and available-for-sale investments
at December 31, 1996 and 1995, of $6,086,785, and $7,343,260 respectively, were
held in bank and investment accounts of the Company's offshore captive insurance
company.
F-32
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Intangible Assets
The excess of cost over net assets of subsidiaries at acquisition is amortized
over 10 to 40 years.
Property and Equipment
Provision for depreciation and amortization of property and equipment is
computed by the straight-line method over estimated useful lives as follows:
Buildings 25 to 30 years
Transportation equipment 3 to 6 years
Other equipment 3 to 10 years
Software 2 to 3 years
Leasehold improvements Life of lease or estimated useful life,
whichever is shorter
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present.
The Company adopted Statement No. 121 effective January 1, 1996 and the effect
of adoption was not material.
Property Held for Resale
The Company has acquired certain properties held for resale in connection with
claim settlements and values these properties at the lower of cost or market.
Foreign Currency Translation
The effects of foreign exchange rate fluctuations for countries in which the
Company operates are included in the foreign currency translation adjustment
account within shareholders' equity.
Fair Values of Financial Instruments
The Company's financial instruments consist principally of cash and cash
equivalents, receivables and unbilled revenues, loans payable to banks, accounts
payable, and long-term debt. All of the Company's financial instruments have
fair values which approximate their recorded values as the financial instruments
are either short-term in nature or carry interest rates which approximate market
rates.
F-33
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Use of Estimates
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenues and expenses during the
reporting periods for long-term contracts.
The Company has a substantial history of making reasonably dependable estimates
of the extent of progress towards completion, contract revenues, and contract
costs on its contracts. However, due to uncertainties inherent in the estimation
process, actual results could differ from those estimates.
2. Business Combinations
On April 28, 1995, the Company purchased all of the issued and outstanding
common stock of GCH Acquisition Corporation (GCH) for $8,150,000, for which the
Company paid cash of $7,146,878 and issued 43,614 shares of its Common Stock
with a value of $1,003,122. The transaction was accounted for under the purchase
method of accounting. Of the purchase price, $5,221,000 was recorded as excess
of cost of net assets acquired (goodwill). The consolidated results of the
Company include the results of GCH since the date of acquisition. During 1996,
an additional amount of goodwill was recognized for the GCH acquisition of
$3,466,000, net of taxes, as a result of changes in estimated profitability of
contracts acquired. These contracts were in process or completed at the date of
acquisition. There are acquisition provisions for additional purchase price
consideration to be paid to the former owners of GCH of a contingent nature;
however, such amounts have not been recognized because payment is not probable.
In March 1996, the Company sued certain former owners of GCH, seeking relief for
injury caused to the Company and GCH through their misrepresentations and
omissions at the time GCH was sold to the Company. The action seeks actual
damages, costs, interest and attorneys' fees from the defendants. The ultimate
resolution of this matter is uncertain, but it is possible this action may
result in future adjustment to GCH's and the Company's financial statements.
F-34
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Business Combinations (continued)
In April 1996, two former shareholders and officers of GCH each sued GCH and the
Company for breach of employment contract, for intentional interference with
contractual relations and for breach of contract related to their respective
agreements as shareholders of the Company. Management believes these suits have
no merit and intends to defend against them vigorously.
On October 3, 1995, the Company purchased 100% of the outstanding stock of Cole
Sherman and Associates Limited (CSA), a Canadian corporation, for $1,429,646.
The transaction was accounted for under the purchase method of accounting. The
consolidated results of the Company include the results of CSA since the date of
acquisition. During 1996, the Company wrote off uncollectible accounts
receivable at CSA of approximately $217,000. Since these accounts receivable
were acquired as part of the purchase of CSA, this adjustment has been reflected
in the Company's reallocation of purchase price to CSA's net assets, and
goodwill has been adjusted for the same amount.
3. Contributions to WCG CAP
The Woodward-Clyde Group Capital Accumulation Plan Trust (WCG CAP) is a defined
contribution plan (401(k) Plan) covering all employees except for employees of
one subsidiary which maintains its own plan. Employees may contribute up to 15%
of their compensation for each plan year, subject to the maximum allowable under
current tax regulations. The Company matches contributions for U.S. based
employees with one or more years of service up to 2% of an employee's
compensation and matches 50% of contributions on the next 4% of compensation. An
additional contribution of $25 to $250, depending on compensation, is made to
eligible employees earning less than $45,000 per year whether or not they choose
to make 401(k) Plan contributions. The Company contributed $2,956,945 to the
401(k) Plan for the year ended December 31, 1996.
Prior to January 1, 1996, the WCG CAP was a profit-sharing retirement plan.
Total contributions to the WCG CAP, including an incentive-matching
contribution, totaled $1,605,477 and $3,361,849 for the years ended December 31,
1995 and 1994, respectively.
F-35
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Income Taxes
At December 31, 1996, the Company has both domestic and foreign net operating
loss carryforwards. Domestic net operating loss carryforwards, which are
attributable to one of the Company's subsidiaries, total approximately
$2,500,000 and expire in 2010. Foreign net operating losses total $7,245,000,
including $4,498,000 which carries forward indefinitely and $2,747,000 which
expires in 1997 through 2003.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and carryforward losses.
Significant components of the Company's deferred assets and tax liabilities as
of December 31, 1996 and 1995 are as follows:
1996 1995
-----------------------------
Deferred tax assets:
Carryforward losses of domestic subsidiaries $ 1,226,000 $ 1,226,000
Carryforward losses of foreign subsidiaries 3,437,592 1,727,695
Claims costs 1,085,858 1,764,006
Allowance for uncollectible accounts
receivable 441,623 490,517
Reserve for unbilled revenues 1,332,824 1,679,786
Accrued vacation 398,041 417,010
Deferred contract loss 270,679 316,750
Settlement reserve 1,631,627 859,750
Other 337,269 858,483
-----------------------------
Total deferred tax assets 10,161,513 9,339,997
Valuation allowance for deferred tax assets (3,199,944) (1,490,047)
-----------------------------
Net deferred tax assets $ 6,961,569 $ 7,849,950
=============================
Deferred tax liabilities:
Gross profit on unbilled revenues $ 751,361 $ 1,491,179
Cash basis income for wholly owned subsidiary 4,597,812 4,784,951
Depreciation 307,286 656,508
Other 702,376 662,238
-----------------------------
Total deferred tax liabilities $ 6,358,835 $ 7,594,876
=============================
F-36
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
The provision for income taxes includes the following components at December 31:
1996 1995 1994
------------------------------------------------------
Current:
Federal $ 2,164,303 $ 736,869 $ 3,238,358
State 4,208 701,762 631,656
Foreign 111,847 169,558 426,641
------------------------------------------------------
Total current 2,280,358 1,608,189 4,296,655
Deferred
Federal (533,968) 1,488,518 (601,018)
State (167,476) 279,652 69,798
Foreign 333,209 (840,483) (28,487)
------------------------------------------------------
Total deferred (368,235) 927,687 (559,707)
------------------------------------------------------
$ 1,912,123 $ 2,535,876 $ 3,736,948
======================================================
The Company made income tax payments of $554,199, $4,472,410 and $4,001,387 in
1996, 1995 and 1994, respectively.
At December 31, 1996, the Company has not provided for taxes on undistributed
foreign earnings of $1,700,308 as the Company intends to permanently reinvest
these earnings in the future growth of the business. Upon distribution of these
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (adjusted by foreign tax credits) and withholding taxes
payable to the various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practical because of the
complexities associated with its calculation; however, unrecognized foreign tax
credit carryforwards would be available to reduce some portion of the U.S.
liability.
The following table reconciles the amount which would be provided by applying
the 35% federal statutory rate to income before income tax expense to federal
income taxes actually provided:
1996 1995 1994
-------------------------------------
Income taxes at federal statutory of 35% $1,230,930 $1,874,697 $3,110,098
State taxes, net of federal benefit 228,948 432,735 462,752
Meal and entertainment expenses 322,326 380,825 273,789
Book goodwill 172,347 86,965 54,490
Foreign earnings
subject to different income tax rates 37,376 431,395 (227,298)
Reduction in deferred tax asset
valuation allowance -- (840,483) --
Other, net (79,804) 169,742 63,117
-------------------------------------
Total income tax expense $1,912,123 $2,535,876 $3,736,948
=====================================
F-37
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Available-for-Sale Investments
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Company has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at cost. The Company has no held-to-maturity securities at
December 31, 1996 and 1995.
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized gains and losses, net of
tax, reported as a separate component of shareholders' equity. The amortized
cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in income.
The cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are
included in investment income.
<TABLE>
The following is a summary of available-for-sale investments:
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1996:
Corporate bonds $2,336,160 $ 3,179 $5,151 $2,334,188
Foreign government bond 998,814 - 41 998,773
Mortgage-backed
securities 1,969,234 3,138 2,997 1,969,375
-------------------------------------------------------------
$5,304,208 $ 6,317 $8,189 $5,302,336
=============================================================
December 31, 1995:
Corporate bonds $3,675,149 $14,912 $6,703 $3,683,358
Foreign government bond 992,239 22,136 - 1,014,375
Mortgage-backed
securities 961,329 19,538 - 980,867
-------------------------------------------------------------
$5,628,717 $56,586 $6,703 $5,678,600
=============================================================
</TABLE>
F-38
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Available-for-Sale Investments (continued)
Gross realized gains on sales of available-for-sale securities totaled
approximately $29,500, $5,800 and $0 in 1996, 1995 and 1994, respectively, and
gross realized losses totaled $129,000 and $250,000 in 1995 and 1994,
respectively. The change in unrealized gains and losses on available-for-sale
securities was a $49,883 gain for the year ended December 31, 1995 and a $51,755
loss for the year ended December 31, 1996.
The mortgage-backed securities mature in the years 2000 and 2001, but their
expected maturities could differ from the contractual maturities because the
issuer of the security may have the right to prepay obligations without
prepayment penalties. Assuming the issuers do not exercise early prepayment
rights, except for the Company's corporate bond investments whose maturities are
displayed below, all other investments held by the Company will mature by
December 31, 1997.
Amortized Estimated
Cost Fair Value
------------------------------------
December 31, 1996:
Due after one year through five years $ 330,071 $ 332,738
Due after five years through ten years 2,006,089 2,001,450
------------------------------------
$ 2,336,160 $ 2,334,188
====================================
6. Property and Equipment
<TABLE>
A summary of property and equipment follows:
<CAPTION>
December 31, 1996 December 31, 1995
--------------------------------------------------------------------------------
Net Net
Cost Book Value Cost Book Value
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 212,000 $ 212,000 $ 312,000 $ 312,000
Buildings 1,565,008 936,234 1,975,133 1,212,520
Transportation equipment 1,755,492 951,086 1,447,200 817,365
Field equipment 8,562,765 3,779,785 8,589,929 4,994,129
Laboratory equipment 691,078 228,582 702,242 265,360
Office equipment 10,412,716 4,330,424 10,325,977 4,743,661
Information systems
equipment 14,561,501 2,986,883 16,869,382 4,053,233
Software 1,418,666 152,085 1,578,776 438,621
Leasehold improvements 4,981,518 2,191,183 5,111,955 2,204,063
--------------------------------------------------------------------------------
$44,160,744 $15,768,262 $46,912,594 $19,040,952
================================================================================
F-39
</TABLE>
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Loans Payable and Long-Term Debt
Loans payable to banks consist of the following:
1996 1995
------------------------
Secured $30,000,000 limit revolving line of credit $13,239,392 $ -
Unsecured $15,000,000 limit line of credit - 8,100,000
Secured $4,550,000 limit line of credit - 3,348,290
Foreign secured lines of credit with limits totaling
$2,900,000 2,516,766 2,537,545
------------------------
$15,756,158 $13,985,835
========================
The Company, together with three subsidiaries, entered into a financing
agreement with certain lenders and CIT Group/Business Credit, Inc. as agent,
effective September 23, 1996. The agreement is structured as a $30 million
revolving line of credit and a $6 million term loan. Loans under the revolving
line of credit automatically continue until specific notification is made by
either party to the agreement on an anniversary date, or in the event of a
default. In addition, loans under the revolving line of credit are limited to
available collateral, which is generally defined as the sum of 85% of the
Company's domestic commercial accounts receivable plus 50% of domestic
government accounts receivable.
Proceeds from borrowings under the financing agreement were used to pay off all
outstanding debt with two commercial banks and one insurance company.
The financing agreement places certain restrictions on the Company and requires
the Company to comply with certain financial covenants. The financing agreement
is secured by substantially all the assets of the Company. Interest on the
revolving line of credit is based on various rates available under the financing
agreement and selected by the Company, none of which are fixed for a period
greater than six months. At December 31, 1996, the rate was 8.25%.
The Company also maintains three foreign lines of credit which are secured by
assets of foreign subsidiaries having a carrying value of approximately
$15,000,000 at December 31, 1996. Certain of these foreign lines of credit have
variable interest rates which ranged from 4.75% to 13.25% at December 31, 1996.
F-40
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Loans Payable and Long-Term Debt (continued)
Long-term debt consists of the following:
1996 1995
--------------------------
8.85% term loan, due in annual installments from
1997 to 2000 $ 6,000,000 $ -
7.88% notes - 15,000,000
8.75% to 10.9% mortgage notes, due in monthly
installments to 2005 880,539 1,237,964
8.0% to 10.0% capitalized lease obligations, due in
monthly installments through 1999 423,243 416,778
1% over prime rate (9.25% at December 31, 1996)
unsecured notes payable to former shareholders,
due in annual installments to 1999 4,971,206 5,924,231
6.33% to 8.23% equipment purchase notes, due in
monthly installments to 1999 1,530,959 2,249,016
Other 32,613 77,572
--------------------------
13,838,560 24,905,561
Less current portion 4,508,884 5,878,221
--------------------------
$ 9,329,676 $19,027,340
==========================
Aggregate maturities of long-term debt at December 31, 1996 were as follows:
1997 $4,508,884
1998 3,817,173
1999 2,722,863
2000 1,887,167
2001 192,554
2002 and after 709,919
Interest paid for the years ended December 31, 1996, 1995 and 1994 was
$4,234,762, $3,629,747 and $2,296,754 respectively.
F-41
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Redeemable Preferred and Common Stock
There were 42,558, 46,427 and 54,164 Preferred shares issued and outstanding at
December 31, 1996, 1995 and 1994, respectively. Upon liquidation, holders of
Preferred shares would be entitled to receive a liquidation preference of $85.00
per share and, after payment of $85.00 per share to the holders of Common
shares, would receive an equal per share distribution of any remaining assets
together with the holders of Common shares. Under the May 15, 1992 revised
agreement between the Company and WCG CAP, holder of all the Preferred shares,
WCG CAP has an option to sell 7,737 Preferred shares annually from 1997 through
2000, and 7,742 in the year 2001 to the Company. The purchase price per share is
$100.00 plus $15.00 times the number of years elapsed since July 15, 1992. WCG
CAP is also entitled to an annual dividend of $2.50 per share. The Company
charges redemption premiums on Preferred shares to retained earnings as the
shares are redeemed. The following minimum amounts will be required to redeem
the Preferred shares over the next five years:
Original Redemption
Cost Premium Total
-----------------------------------------------------------
1997 $656,526 $1,316,329 $1,972,855
1998 437,703 1,032,327 1,470,030
1999 437,703 1,148,382 1,586,085
2000 437,703 1,264,437 1,702,140
2001 437,876 1,381,494 1,819,370
There were 1,976,310 and 1,983,244 Common shares issued and outstanding at
December 31, 1996 and 1995, respectively. The Common and Preferred shares of the
Company have a $0.01 par value, and there are 4,922,625 and 77,375 shares
authorized, respectively, at December 31, 1996. The purchase price per Common
share is a function of book value per share and is determined by the Board of
Directors. At January 1, 1997, the purchase price of Common shares was $25.00
per share. The purchase price of Common shares at January 1, 1996 was $23.60 per
share. Ownership of Common shares is restricted to employees and former
employees of Woodward-Clyde Group, Inc. and its subsidiaries.
F-42
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Commitments and Contingent Liabilities
The Company and its subsidiaries occupy premises and lease equipment under
noncancelable operating and capital leases expiring at various dates through
2008. Future minimum payments, by year and in the aggregate, under the capital
leases and noncancelable operating leases with initial or remaining terms of one
year or more consisted of the following at December 31, 1996:
Capital Operating
Leases Leases
-----------------------------------
1997 $251,279 $11,498,463
1998 154,982 10,146,999
1999 52,040 9,390,562
2000 - 6,762,442
2001 - 6,061,963
2002 and after - 9,559,288
-----------------------------------
Total minimum lease payments 458,301 $53,419,717
=============
Less amounts representing interest 35,058
----------------------
Present value of net minimum lease payments $423,243
======================
Rental expense for the years ended December 31, 1996, 1995 and 1994 was
$17,868,809, $14,678,575 and $13,956,859, respectively. Certain operating lease
agreements contain escalation clauses which are included in the above operating
lease commitment schedule.
The Company has issued unused letters of credit and bank guarantees totaling
$3,383,781 at December 31, 1996. The Company has committed to repurchase 310,757
Common shares and 3,868 Preferred shares valued at approximately $7,768,925 and
$618,880, respectively, at December 31, 1996.
During 1996, the Company and its subsidiary GCH settled a dispute with a
customer for $3,362,000 to be paid in five yearly installments of $818,826
beginning January 1997 through January 2001. The Company has recorded an accrual
for this amount, classified as short-term ($818,826) and long-term ($2,542,979)
based upon this payment schedule discounted to present value at approximately
11%. Additionally, the Company or any Woodward-Clyde subsidiary will make
available to this customer discounted services amounting to $1.8 million. There
is no expiration period for utilizing these discounts. The discounts will be
recognized by the Company if and when granted to the customer.
F-43
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Commitments and Contingent Liabilities (continued)
Contract disputes and other claims may arise in connection with government
contracts and subcontracts. A substantial portion of the Company's sales for the
current year is subject to audit by the Defense Contract Audit Agency. Such
audits may occur at any time up to three years after contract closure. In the
opinion of the Company's management, a provision for government claims is not
necessary.
Various claims have been made and litigation instituted against the Company in
the ordinary course of business. In the opinion of management, adequate
provision has been made for all known liabilities that may result from these
matters.
The Company's GCH subsidiary has a bonding facility of $20 million for each
project and $60 million in the aggregate with United Pacific Insurance Company.
Additional amounts are available with United Pacific Insurance Company subject
to, among other things, review and acceptance of final contract terms and
confirmation of adequate financing. At December 31, 1996, GCH had approximately
$43 million available under this bonding program.
10. Segment and Geographic Information
The Company operates principally in one industry segment which includes
geotechnical, waste management and environmental consulting services and
construction contract services to the remediation and civil construction
industry for on-site pollution control and clean-up.
The Company's areas of operations are North America, Asia-Pacific and Europe.
North American amounts include the Company's operations in Canada and Mexico but
are substantially comprised of the Company's operations in the United States. No
one single foreign country in which the Company operates is significant to
consolidated operations.
Information about the Company's operations in different geographic locations is
shown below:
North America Asia-Pacific Europe Consolidated
-------------------------------------------------------
1996:
Net revenues $170,233,410 $ 30,045,422 $ 9,119,166 $209,397,998
Operating income (loss) 6,156,920 1,114,122 (1,066,568) 6,204,474
Identifiable assets 101,875,747 18,092,477 7,421,637 127,389,861
1995:
Net revenues $184,907,415 $ 21,213,514 $ 10,263,601 $216,384,530
Operating income (loss) 9,005,967 (553,713) (488,375) 7,963,879
Identifiable assets 114,818,808 11,241,917 7,383,305 133,444,030
1994:
Net revenues $175,261,897 $ 18,493,948 $ 6,767,789 $200,523,634
Operating income (loss) 11,149,037 473,221 (594,158) 11,028,100
Identifiable assets 94,593,590 9,031,979 1,210,704 104,836,273
F-44
<PAGE>
Woodward-Clyde Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Segment and Geographic Information (continued)
Net revenue to agencies of the United States government amounted to $38,593,280,
$45,585,462 and $45,643,150 for the years ended December 31, 1996, 1995 and
1994, respectively.
F-45
<PAGE>
WOODWARD-CLYDE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(In thousands)
June 30 December 31
1997 1996
------------ -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,373 $ 4,231
Available-for-sale investments 7,342 5,302
Receivables and unbilled revenues:
Accounts receivable 74,062 71,719
Unbilled revenues 23,058 15,405
Other 965 1,124
Less allowance for uncollectible accounts (6,581) (6,950)
--------- ---------
91,504 81,298
Prepaid income taxes -- 1,724
Prepaid expenses and other assets 3,498 1,209
--------- ---------
TOTAL CURRENT ASSETS 104,717 93,764
PROPERTY and EQUIPMENT
at cost, less accumulated depreciation
and amortization of $30,242 in 1997
and $28,392 in 1996 14,782 15,768
OTHER ASSETS
Excess of cost over net assets of
subsidiaries at acquisition, less
accumulated amortization of $1,643
in 1997 and $1,373 in 1996 9,964 10,324
Property held for resale 2,325 2,325
Deferred income taxes 4,117 3,581
Miscellaneous 1,481 1,628
--------- ---------
17,887 17,858
--------- ---------
$ 137,386 $ 127,390
========= =========
See accompanying notes.
F-46
<PAGE>
WOODWARD-CLYDE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(In thousands)
June 30 December 31
1997 1996
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable to banks $ 20,301 $ 15,756
Accounts payable 19,904 21,237
Accrued payroll and other accrued expenses 24,549 21,455
Income taxes payable 363 --
Deferred income taxes 3,855 2,978
Notes payable 1,237 --
Current portion of long term debt 4,867 4,509
--------- ---------
TOTAL CURRENT LIABILITIES 75,076 65,935
LONG-TERM LIABILITIES
Long-term debt, less current portion 9,046 9,330
Other 6,181 8,457
--------- ---------
15,227 17,787
Redeemable preferred stock 6,437 5,395
SHAREHOLDERS' EQUITY
Common Stock 20 20
Additional paid-in capital 19,493 19,615
Retained earnings 21,368 18,671
Unrealized gain (loss) on investments (7) (2)
Foreign currency translation adjustment (78) 258
--------- ---------
40,796 38,562
Less notes receivable from shareholders
from sale of Common shares (150) (289)
--------- ---------
40,646 38,273
--------- ---------
$ 137,386 $ 127,390
========= =========
See accompanying notes.
F-47
<PAGE>
<TABLE>
WOODWARD-CLYDE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
<CAPTION>
Three Months Ended Three Months Ended
June 30, June 30,
1997 1996
----------------------------
<S> <C> <C>
REVENUES
Gross revenues from services $ 84,561 $ 79,431
Direct costs of outside services (27,184) (26,466)
----------- -----------
NET REVENUE 57,377 52,965
COSTS AND EXPENSES
Salaries and benefits 39,798 37,700
General expenses 11,256 11,682
Depreciation and amortization 1,539 1,750
----------- -----------
52,593 51,132
OTHER EXPENSES (INCOME)
Interest 711 797
Other income (82) (33)
----------- -----------
629 764
----------- -----------
INCOME BEFORE TAXES 4,155 1,069
INCOME TAXES 1,953 530
----------- -----------
NET INCOME 2,202 539
=========== ===========
Less:
Dividends on Preferred shares 53 58
Redemption premium on Preferred shares 216 245
----------- -----------
269 303
----------- -----------
Net income applicable to common shares $ 1,933 $ 236
=========== ===========
Net income per share $ 0.98 $ 0.12
=========== ===========
Weighted average shares outstanding 1,972,310 1,962,759
=========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
F-48
<PAGE>
WOODWARD-CLYDE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
Six Months Ended Six Months Ended
June 30, June 30,
1997 1996
----------------------------
REVENUES
Gross revenues from services $ 161,225 $ 156,443
Direct costs of outside services (51,329) (50,184)
----------- -----------
NET REVENUE 109,896 106,259
COSTS AND EXPENSES
Salaries and benefits 76,095 76,196
General expenses 23,025 23,156
Depreciation and amortization 3,098 3,475
----------- -----------
102,218 102,827
OTHER INCOME AND EXPENSES
Interest 1,466 1,514
Other income (164) (66)
----------- -----------
1,302 1,448
----------- -----------
INCOME BEFORE TAXES 6,376 1,984
INCOME TAXES 3,015 951
----------- -----------
NET INCOME 3,361 1,033
=========== ===========
Less:
Dividends on Preferred shares 53 58
Redemption premium on Preferred shares 432 490
----------- -----------
485 548
----------- -----------
Net income applicable to common shares $ 2,876 $ 485
=========== ===========
Net income per share $ 1.46 $ 0.25
=========== ===========
Weighted average shares outstanding 1,974,596 1,966,789
=========== ===========
See accompanying notes.
F-49
<PAGE>
WOODWARD-CLYDE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended
-----------------------------
June 30, 1997 June 30, 1996
--------------- -------------
Operating Activities
Net income $ 3,361 $ 1,033
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,098 3,475
Provision for claims costs 1,203 600
Provision for deferred income taxes 340 (276)
Loss (gain) on disposal of available-for-sale
investments -- (83)
Changes in operating assets and liabilities:
Receivables and unbilled revenues (10,206) 114
Prepaid expenses and other assets (2,289) (1,788)
Other 193 229
Accounts payable (1,333) 2,328
Accrued payroll and other accrued
expenses 3,094 (926)
Income taxes payable 2,087 2,243
Payment of claims (621) (1,045)
Other long-term liabilities (652) (133)
-------- --------
Net cash provided (used) by operating activities (1,725) 5,771
Investing Activities
Net additions to property and equipment (1,799) (1,413)
Net purchases of available-for-sale investments (2,044) (1,735)
-------- --------
Net cash used in investing activities (3,843) (3,148)
Financing activities
Net borrowings on loans payable to banks 4,545 (170)
Net borrowings on notes payable 1,237 2,024
Principal payments on long-term debt (2,709) (5,151)
Principal payments on notes receivable from
shareholders 139 --
Purchase of Preferred shares (299) --
Redemption of Common shares (60) (152)
Dividends paid on Preferred shares (53) (58)
Proceeds from sale of Preferred shares 910 --
-------- --------
Net cash provided (used) by financing activities 3,710 (3,507)
-------- --------
Net decrease in cash and cash equivalents (1,858) (884)
Cash and cash equivalents at beginning of period 4,231 5,181
-------- --------
Cash and cash equivalents at end of period $ 2,373 $ 4,297
======== ========
See accompanying notes.
F-50
<PAGE>
Woodward-Clyde Group, Inc.
Notes to Consolidated Condensed Financial Statements
(unaudited)
1. Basis of Presentation
Woodward-Clyde Group, Inc. ("WC"), in its opinion, has included all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented. The consolidated
condensed financial statements and notes thereto should be read in conjunction
with the financial statements and notes for the years ended December 31, 1996,
1995 and 1994 included elsewhere herein. The results of operations for the six
months ended June 27, 1997 and 1996 are not necessarily indicative of the
results for a full year.
2. Redeemable Preferred Stock
During the six months ended June 27, 1997, shares of prefered stock were issued
to the WCG CAP as a $1,056,799 matching contribution into this WC-sponsored
defined contribution (401(k)) Plan as follows: 2,101 shares at a price of
$168.30 per share and 4,107 shares at a price of $171.22 per share.
3. Stockholders' Equity
During the six months ended June 27, 1997, WC issued no shares of common stock
and purchased and retired 12,000 shares of common stock. All common stock
transactions were recorded at a price which is a function of book value per
share and is determined by WC's Board of Directors. For the six months ended
June 27, 1997, all transactions were executed at a price of $25.00 per share.
F-51
<PAGE>
WOODWARD CLYDE GROUP, INC.
SUPPLEMENTARY DATA
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED Years Ended
December 31, 1996 and 1995
<CAPTION>
1996
------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Gross revenues from services $ 77,011,799 $ 79,430,772 $ 82,152,680 $ 81,632,593
============= ============= ============= ============
Net revenues $ 53,293,938 $ 52,964,763 $ 53,610,154 $ 49,529,143
============= ============= ============= ============
Net income $ 493,880 $ 538,935 $ 424,823 $ 147,182
============= ============= ============= ============
Earnings per share $ 0.13 $ 0.12 $ 0.09 $ (0.08)
============= ============= ============= ============
1995
------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------- ------------- ------------- ------------
Gross revenues from services $ 72,545,626 $ 77,655,803 $ 79,828,477 $ 80,364,514
============= ============= ============= ============
Net revenues $ 54,104,467 $ 55,186,152 $ 55,594,829 $ 51,499,082
============= ============= ============= ============
Net income (loss) $ 1,167,530 $ 862,321 $ 1,743,104 $ (952,554)
============= ============= ============= ============
Earnings per share $ 0.46 $ 0.27 $ 0.74 $ (0.65)
============= ============= ============= ============
F-52
</TABLE>
<PAGE>
WOODWARD CLYDE GROUP, INC.
SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED Quarters Ended
March 31 and June 30, 1997
(In thousands, except per share data)
Quarter Ended
---------------------------------------------
March 31 June 30
------------------ ------------------
Gross revenues from services $ 76,664 $ 84,560
================== ==================
Net revenues $ 52,520 $ 57,376
================== ==================
Net income $ 1,159 $ 2,202
================== ==================
Earnings per share $ 0.48 $ 0.98
================== ==================
F-53
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
WOODWARD-CLYDE GROUP, INC.,
URS CORPORATION,
AND
W-C ACQUISITION CORPORATION
August 18, 1997
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
RECITALS ....................................................................................................... 1
AGREEMENT....................................................................................................... 2
<S> <C> <C>
ARTICLE 1 THE MERGER.................................................................................... 2
Section 1.1 Merger of Woodward-Clyde into the Subsidiary........................................ 2
Section 1.2 Effective Time of the Merger........................................................ 2
Section 1.3 Effects of the Merger............................................................... 2
Section 1.4 Tax Consequences.................................................................... 3
ARTICLE 2 EFFECT OF MERGER ON CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS.................................................................................. 4
Section 2.1 Conversion of the Woodward-Clyde Common and
Preferred Stock..................................................................... 4
Section 2.2 Dissenting Shares................................................................... 7
Section 2.3 Subsidiary Common Stock............................................................. 7
Section 2.4 Cancellation of Treasury Shares..................................................... 7
Section 2.5 Withholding Tax..................................................................... 7
ARTICLE 3 CLOSING....................................................................................... 8
Section 3.1 Closing; Closing Date............................................................... 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF WOODWARD-CLYDE.............................................. 8
Section 4.1 Organization........................................................................ 8
Section 4.2 Capitalization...................................................................... 8
Section 4.3 Subsidiaries........................................................................ 9
Section 4.4 Material Investments................................................................ 9
Section 4.5 Authority Relative to this Agreement................................................ 10
Section 4.6 Consents and Approvals; No Violations............................................... 10
Section 4.7 Woodward-Clyde Reports and Financial Statements..................................... 11
Section 4.8 Information Supplied................................................................ 12
Section 4.9 Absence of Material Adverse and Other Changes....................................... 12
Section 4.10 Litigation.......................................................................... 13
Section 4.11 Absence of Undisclosed Liabilities.................................................. 13
Section 4.12 No Default.......................................................................... 13
Section 4.13 Properties, Liens, Etc.............................................................. 14
Section 4.14 Taxes............................................................................... 14
</TABLE>
i.
<PAGE>
<TABLE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
<S> <C> <C>
Section 4.15 Benefit Plans....................................................................... 15
Section 4.16 Employment Matters; Labor Relations................................................. 18
Section 4.17 Intellectual Property............................................................... 19
Section 4.18 Insurance........................................................................... 21
Section 4.19 Compliance with Applicable Law...................................................... 21
Section 4.20 Certain Contracts and Arrangements.................................................. 21
Section 4.21 Prohibited Payments................................................................. 22
Section 4.22 Bank Accounts; Receivables.......................................................... 22
Section 4.23 Related Party Transactions.......................................................... 23
Section 4.24 Powers of Attorney.................................................................. 23
Section 4.25 Environmental Matters............................................................... 23
Section 4.26 Regulatory Matters.................................................................. 24
Section 4.27 Immigration Reform and Control Act.................................................. 25
Section 4.28 Board Approvals; Opinion of Financial Advisor....................................... 25
Section 4.29 Brokers............................................................................. 25
Section 4.30 Disclosure.......................................................................... 25
Section 4.31 Reliance............................................................................ 25
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF URS......................................................... 25
Section 5.1 Organization........................................................................ 26
Section 5.2 Capitalization...................................................................... 26
Section 5.3 Authority Relative to this Agreement................................................ 26
Section 5.4 Consents and Approvals; No Violations............................................... 27
Section 5.5 URS SEC Reports and Financial Statements............................................ 27
Section 5.6 Absence of Material Adverse and Other Changes....................................... 28
Section 5.7 Litigation.......................................................................... 29
Section 5.8 Absence of Undisclosed Liabilities.................................................. 29
Section 5.9 No Default.......................................................................... 29
Section 5.10 Information Supplied. ............................................................. 29
Section 5.11 Board Approvals; Opinion of Financial Advisor....................................... 30
Section 5.12 Brokers............................................................................. 30
Section 5.13 Disclosure.......................................................................... 30
Section 5.14 Financing Commitment Letter......................................................... 30
ARTICLE 6 PRE-CLOSING COVENANTS......................................................................... 31
Section 6.1 Covenants of All Parties............................................................ 31
6.1.1 Advice of Changes................................................................... 31
</TABLE>
ii.
<PAGE>
<TABLE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
<S> <C> <C>
6.1.2 Regulatory Approvals................................................................ 31
6.1.3 Confidentiality..................................................................... 31
6.1.4 Best Efforts........................................................................ 31
6.1.5 Financing Arrangements.............................................................. 32
6.1.6 Tax Matters......................................................................... 32
Section 6.2 Covenants of Woodward-Clyde......................................................... 32
6.2.1 Conduct of Business Pending Merger.................................................. 32
6.2.2 Stockholders' Meeting; Proxy Statement.............................................. 34
6.2.3 Acquisition Proposals............................................................... 35
6.2.4 Maintenance of Business............................................................. 36
6.2.5 Access.............................................................................. 36
6.2.6 Liability Insurance................................................................. 36
6.2.7 Affiliate Agreements................................................................ 36
6.2.8 Comfort Letter...................................................................... 36
6.2.9 FIRPTA Matters...................................................................... 37
6.2.10 Employment and Noncompetition Agreements............................................ 37
Section 6.3 Covenants of URS.................................................................... 37
6.3.1 Stockholders' Meeting; Proxy Statement.............................................. 37
6.3.2 Registration Statement.............................................................. 37
6.3.3 Listing Agreement................................................................... 37
6.3.4 Conduct of Business; Consultation................................................... 37
6.3.5 Access.............................................................................. 38
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER...................................................... 38
Section 7.1 Conditions to Obligations of Woodward-Clyde......................................... 38
7.1.1 Representations and Warranties True at Closing...................................... 38
7.1.2 Covenants Performed................................................................. 38
7.1.3 Certificate......................................................................... 38
7.1.4 Stockholder Approvals............................................................... 38
7.1.5 Opinion of Counsel.................................................................. 39
7.1.6 Tax Opinion......................................................................... 39
7.1.7 Listing............................................................................. 40
7.1.8 Form S-4............................................................................ 40
7.1.9 Merger Documents. ................................................................. 40
7.1.10 Material Adverse Changes............................................................ 40
7.1.11 HSR Filing.......................................................................... 40
</TABLE>
iii.
<PAGE>
<TABLE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
<S> <C> <C>
Section 7.2 Conditions to Obligations of URS and the Subsidiary................................. 40
7.2.1 Representations and Warranties True at Closing...................................... 40
7.2.2 Covenants Performed................................................................. 40
7.2.3 Certificate......................................................................... 40
7.2.4 Stockholder Approvals............................................................... 40
7.2.5 Opinion of Counsel.................................................................. 40
7.2.6 Government Contracts Opinion........................................................ 41
7.2.7 Tax Opinion......................................................................... 41
7.2.8 Listing............................................................................. 41
7.2.9 Agreements.......................................................................... 42
7.2.10 Form S-4............................................................................ 42
7.2.11 Merger Documents.................................................................... 42
7.2.12 Material Adverse Changes............................................................ 42
7.2.13 HSR Filing.......................................................................... 42
7.2.14 Consents. ......................................................................... 42
7.2.15 No Litigation....................................................................... 42
7.2.16 Financing Arrangements.............................................................. 42
ARTICLE 8 ADDITIONAL AGREEMENTS......................................................................... 42
Section 8.1 Public Announcements................................................................ 42
Section 8.2 Confidentiality..................................................................... 43
Section 8.3 Additional Agreements............................................................... 43
Section 8.4 Non-Liability of Agents and Stockholders............................................ 43
Section 8.5 Woodward-Clyde Capital Accumulation (Retirement) Plan............................... 43
Section 8.6 Woodward-Clyde Annual Bonus Plan.................................................... 43
8.6.1 Bonus Pool.......................................................................... 43
8.6.2 Bonus Pool Allocation............................................................... 44
Section 8.7 URS Board of Directors.............................................................. 44
ARTICLE 9 TERMINATION................................................................................... 45
Section 9.1 Termination......................................................................... 45
Section 9.2 Effect of Termination and Abandonment............................................... 46
Section 9.3 Amendment........................................................................... 46
Section 9.4 Extension; Waiver................................................................... 46
</TABLE>
iv.
<PAGE>
<TABLE>
TABLE OF CONTENTS
(continued)
<CAPTION>
Page
ARTICLE 10 MISCELLANEOUS................................................................................. 46
<S> <C> <C>
Section 10.1 Survival of Representations and Warranties.......................................... 46
Section 10.2 Entire Agreement; Modification; Waiver.............................................. 47
Section 10.3 Counterparts........................................................................ 47
Section 10.4 Assignment.......................................................................... 47
Section 10.5 Fees and Expenses................................................................... 47
Section 10.6 Notices............................................................................. 47
Section 10.7 Governing Law....................................................................... 48
Section 10.8 Further Action...................................................................... 48
Section 10.9 No Third Party Beneficiary.......................................................... 48
Section 10.10 Effect of Headings.................................................................. 48
Section 10.11 Severability........................................................................ 49
</TABLE>
v.
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is entered into as
of August 18, 1997, by and among WOODWARD-CLYDE GROUP, INC., a Delaware
corporation ("Woodward-Clyde"), URS CORPORATION, a Delaware corporation ("URS"),
and W-C ACQUISITION CORPORATION, a Delaware corporation (the "Subsidiary").
Woodward-Clyde is sometimes referred to herein as the "Surviving Corporation"
and Woodward-Clyde and the Subsidiary are sometimes collectively referred to
herein as the "Constituent Corporations."
RECITALS
A. Woodward-Clyde is a corporation duly organized and existing under
the laws of the State of Delaware, having as of the date hereof authorized
capital stock consisting of (i) 4,922,625 shares of common stock, par value
$0.01 per share (the "Woodward-Clyde Common Stock"), of which as of the date
hereof, 1,964,175 shares are issued and outstanding, no shares are issued and
held in treasury, and no shares are reserved for issuance, and (ii) 77,375
shares of preferred stock, par value $0.01 per share, of which as of the date
hereof 44,898 shares are issued and outstanding, 32,477 shares are issued and
held in treasury, and no shares are reserved for issuance (the "Woodward-Clyde
Preferred Stock" and, together with the Woodward-Clyde Common Stock, the
"Woodward-Clyde Stock").
B. URS is a corporation duly organized and existing under the laws of
the State of Delaware, having as of the date hereof authorized capital stock
consisting of (i) 20,000,000 shares of common stock, par value $0.01 per share
(the "URS Common Stock"), of which as of the date hereof, 10,561,263 are issued
and outstanding, 51,902 are issued and held in treasury, and 2,463,043 are
reserved for issuance, and (ii) 1,000,000 shares of preferred stock, par value
$1.00 per share, of which no shares are issued and outstanding.
C. The Subsidiary is a corporation duly organized and existing under
the laws of the State of Delaware, having as of the date hereof authorized
capital stock consisting of 100 shares of common stock, par value $1.00 per
share (the "Subsidiary Common Stock"), all of which have been issued to, and are
owned by, URS.
D. URS, Woodward-Clyde and the Subsidiary have determined that it is
advisable that Woodward-Clyde be merged with and into the Subsidiary on the
terms and conditions set forth herein and pursuant to the applicable statutes
and regulations (the "Merger").
E. The Merger is intended to qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as it
may be amended from time to time (the "Code").
F. The respective boards of directors of Woodward-Clyde, URS and the
Subsidiary have authorized and approved the execution, delivery and the
performance of this Agreement and the transactions contemplated hereby, and the
boards of directors of
1.
<PAGE>
Woodward-Clyde and URS have directed that this Agreement be submitted to the
respective stockholders of Woodward-Clyde and URS for consideration of and vote
upon the approval of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, and subject to the terms and conditions hereof,
and intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1 Merger of Woodward-Clyde into the Subsidiary. Upon the
terms and subject to the conditions set forth in this Agreement, and in
accordance with the Delaware General Corporation Law (the "Delaware Law"), at
the Effective Time of the Merger (as defined in Section 1.2 below),
Woodward-Clyde shall be merged with and into the Subsidiary, and the separate
existence of Woodward-Clyde shall thereupon cease, and the Subsidiary shall
continue its corporate existence as the surviving corporation of the Merger
under the laws of the State of Delaware under the name of Woodward-Clyde Group,
Inc. (the "Surviving Corporation"), and the Subsidiary shall succeed to and
assume all the rights and obligations of Woodward-Clyde in accordance with the
Delaware Law.
Section 1.2 Effective Time of the Merger. Subject to the provisions of
this Agreement, as soon as practicable after the Closing Date, the parties shall
file articles of merger, certificate of merger or other appropriate documents
(in any such case, the "Merger Documents"), executed in accordance with the
relevant provisions of the Delaware Law and shall make all other filings or
recordings required under the Delaware Law. The Merger shall become effective at
such time as the Merger Documents are duly filed with the Secretary of State of
the State of Delaware, or at such other time as the parties hereto shall agree
should be specified in the Merger Documents (the "Effective Time of the
Merger").
Section 1.3 Effects of the Merger. At the Effective Time of the Merger:
(a) the separate corporate existence of Woodward-Clyde shall
cease and Woodward-Clyde shall be merged with and into the Subsidiary, which
shall be the Surviving Corporation, and all of the assets of Woodward-Clyde
shall become the property of the
2.
<PAGE>
Subsidiary as the Surviving Corporation of the Merger, subject to the
liabilities of Woodward-Clyde as of the Effective Time of the Merger;
(b) the Certificate of Incorporation of the Subsidiary, as in
effect immediately prior to the Effective Time of the Merger and as amended to
reflect the new corporate name of "Woodward-Clyde Group, Inc.", shall be the
Certificate of Incorporation of the Surviving Corporation, and may be amended
thereafter as provided by law;
(c) the Bylaws of the Subsidiary, as in effect immediately
prior to the Effective Time of the Merger, shall be the Bylaws of the Surviving
Corporation, and may be amended thereafter in accordance with their terms and as
provided by law;
(d) the directors of the Subsidiary immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, each of such directors to hold office, subject to the applicable
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until the next annual stockholders' meeting of the Surviving
Corporation and until their successors are elected and duly qualified; if at the
Effective Time of the Merger, any of the foregoing persons shall for any reason
be unwilling or unable to serve, the resulting vacancy shall be filled as
provided in such Bylaws;
(e) the officers of Woodward-Clyde immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving Corporation,
each of such officers to hold office, subject to the applicable provisions of
the Certificate of Incorporation and Bylaws of the Surviving Corporation, at the
pleasure of the board of directors of the Surviving Corporation and until their
successors are elected and duly qualified; and
(f) the Surviving Corporation shall possess all the rights,
privileges, immunities, powers and purposes of each of the Constituent
Corporations; and all the property, real, personal or mixed, including causes of
action and every other asset of each of the Constituent Corporations, shall vest
in the Surviving Corporation without further act or deed. The Surviving
Corporation shall be responsible and liable for all liabilities and obligations
of each of the Constituent Corporations. No liability or obligation due or to
become due, claim or demand for any cause existing against either of the
Constituent Corporations, or any stockholder, officer or director thereof, shall
be released or impaired by the Merger. No action or proceeding, whether civil or
criminal, then pending by or against the Constituent Corporations, or any
stockholder, officer or director thereof, shall abate or be discontinued by the
Merger, but may be enforced, prosecuted, settled or compromised as if the Merger
had not occurred, or the Surviving Corporation may be substituted in such action
or special proceeding in place of the Constituent Corporations.
3.
<PAGE>
Section 1.4 Tax Consequences. For federal income tax purposes, the
Merger is intended to constitute a reorganization within the meaning of Section
368 of the Code. The parties to this Agreement hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations. None of Woodward-Clyde,
URS or Subsidiary will take a position on a tax return inconsistent with this
Section 1.4.
ARTICLE 2
EFFECT OF MERGER ON CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
Section 2.1 Conversion of the Woodward-Clyde Common and Preferred
Stock.
(a) Conversion; Merger Consideration. At the Effective Time of
the Merger, each share of the Woodward-Clyde Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue of the
Merger, and without any action on the part of the holder thereof, be converted
as follows:
(i) the shares of Woodward-Clyde Preferred Stock shall
be converted into the right to receive $8,306,130 in the aggregate in
cash, to be allocated between such shares in such manner as may be
determined by the trustees of the Retirement Plan (as defined in
Section 8.5 below), all of which shall be payable upon the surrender of
the certificate(s) formerly representing such share of Woodward-Clyde
Preferred Stock; and
(ii) each share of Woodward-Clyde Common Stock shall be
converted into the right to receive (a) the Applicable Common Multiple
(as defined below) of URS Common Stock, and (b) the Applicable Common
Cash Component (as defined below) in cash, all of which shall be
payable upon the surrender of the certificate(s) formerly representing
such share of Woodward-Clyde Common Stock.
For purposes of this Agreement:
the "Applicable Common Multiple" shall be the multiple: (A) having a
numerator equal to $65 million divided by the average closing price of
the URS Common Stock on the New York Stock Exchange over the last
twenty (20) trading days ending two (2) trading days prior to the
Closing Date (the "URS Average Closing Price"), but in no event less
than $12.50 or greater than $16.07, and (B) having a denominator equal
4.
<PAGE>
to the aggregate number of shares of Woodward-Clyde Common Stock issued
and outstanding immediately prior to the Effective Time of the Merger;
and
The "Applicable Common Cash Component" shall mean the amount determined
by dividing (A) a numerator equal to $26,693,870, plus an amount equal
to the excess, if any, of $65 million over the product of the
Applicable Common Multiple, the aggregate number of shares of
Woodward-Clyde Common Stock issued and outstanding immediately prior to
the Effective Time of the Merger and the URS Average Closing Price, by
(B) a denominator equal to the aggregate number of shares of
Woodward-Clyde Common Stock issued and outstanding immediately prior to
the Effective Time of the Merger.
The cash and the URS Common Stock so deliverable is hereinafter
collectively referred to as the "Merger Consideration."
(b) Fractional Shares. No fractional shares of the URS Common
Stock will be issued as a result of the Merger. In lieu of the issuance of any
fractional shares of the URS Common Stock, holders of shares of the
Woodward-Clyde Stock who would otherwise have been entitled to receive a
fraction of a share of the URS Common Stock shall be entitled to receive, from
URS, an amount of cash, without interest, equal to the closing price of the URS
Common Stock as reported on the New York Stock Exchange on the trading day
immediately preceding the Closing Date as listed in The Wall Street Journal,
multiplied by the fraction of a share of the URS Common Stock to which such
holder would otherwise have been entitled.
(c) Surrender of Certificates and Receipt of Consideration.
(1) Appointment of Exchange Agent; Exchange Fund. As
of the Effective Time of the Merger, URS shall deposit, or shall cause to be
deposited with an exchange agent selected by URS and reasonably satisfactory to
Woodward-Clyde (the "Exchange Agent"), for the benefit of holders of the
Woodward-Clyde Stock, for exchange in accordance with this Article 2, (i)
certificates representing the number of shares of the URS Common Stock issuable
as part of the Merger Consideration, and (ii) cash in an amount equal to the
aggregate cash component of the Merger Consideration, and (iii) cash to be paid
in lieu of the issuance of fractional shares (such cash and certificates for the
shares of URS Common Stock are hereinafter referred to collectively as the
"Exchange Fund").
(2) Notice to Woodward-Clyde Stockholders. As soon
as reasonably practicable after the Effective Time of the Merger, URS shall
cause the Exchange
5.
<PAGE>
Agent to mail to each holder of record of a certificate or certificates
representing the Woodward-Clyde Stock (A) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates for shares of the Woodward-Clyde Stock shall pass, only upon
delivery of the certificates for the shares of the Woodward-Clyde Stock to the
Exchange Agent, and shall be in such form and have such other provisions as URS
may reasonably specify, and (B) instructions for use in effecting the surrender
of the certificates for the shares of the Woodward-Clyde Stock in exchange for
the Merger Consideration.
(3) Surrender of Woodward-Clyde Stock Certificates.
Upon surrender of a certificate for shares of the Woodward-Clyde Stock (a
"Woodward-Clyde Stock Certificate") for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by URS, together with such letter
of transmittal, duly executed and completed in accordance with the instructions
thereto, the holder thereof shall be entitled to receive in exchange therefor
the number of whole shares of the URS Common Stock to which the holder of the
Woodward-Clyde Stock is entitled pursuant to this Article 2 plus that portion of
the cash in the Exchange Fund which such holder has the right to receive
pursuant to the provisions of this Section 2.1, after giving effect to any
required withholding tax, and the Woodward-Clyde Stock Certificate for the
shares of the Woodward-Clyde Stock so surrendered shall forthwith be canceled.
(4) Limitations. Notwithstanding any other provision
of this Agreement, until holders of Woodward-Clyde Stock Certificates
representing shares of the Woodward-Clyde Stock have surrendered them for
exchange as provided herein, (1) no dividends or other distributions shall be
paid with respect to any shares represented by such Certificates and no payment
for fractional shares shall be made, and (2) without regard to when such
Woodward-Clyde Stock Certificates are surrendered for exchange as provided
herein, no interest shall be paid on any dividends or other distributions or any
payment for fractional shares. Upon surrender of a Woodward-Clyde Stock
Certificate, there shall be paid to the holder of such Woodward-Clyde Stock
Certificate the amount of any dividends or other distributions which theretofore
became payable, but which were not paid by reason of the preceding sentence,
with respect to the number of whole shares of URS Common Stock represented by
the Woodward-Clyde Stock Certificate or Certificates issued upon such surrender.
If any certificate for URS Common Stock is to be issued in a name other than in
which the Woodward-Clyde Stock Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange pay any transfer or other taxes required by reason of the issuance
of certificates for such shares of URS Common Stock in a name other than that of
the registered holder of the Woodward-Clyde Stock Certificate surrendered, or
establish to the satisfaction of Woodward-Clyde that
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such tax has been paid or is not applicable. Certificates of URS Common Stock
issued to holders of Woodward-Clyde Stock issued under a Woodward-Clyde
restricted stock plan shall bear legends substantially similar to the legends
presently on the Woodward-Clyde Stock Certificates and as required by applicable
law.
(5) Payment. The Exchange Agent shall within fifteen
(15) business days of receipt of such Woodward-Clyde Stock Certificate pay the
holder of such certificate, in immediately available funds, the amount of cash
into which the shares theretofore represented by such certificate shall have
been converted pursuant to Section 2.1, and the Woodward-Clyde Stock Certificate
so surrendered shall be canceled. In the event of a transfer of ownership of
shares of Woodward-Clyde Stock that is not registered in the transfer records of
Woodward-Clyde, payment may be made to a person other than the person in whose
name the certificate so surrendered is registered, if such certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such
Woodward-Clyde Stock Certificate or establish to the satisfaction of the
Woodward-Clyde that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.1, each Woodward-Clyde Stock
Certificate shall be deemed at any time after the Effective Time of the Merger
to represent only the right to receive upon such surrender the amount of the
Merger Consideration, without interest, into which the shares theretofore
represented by such Woodward-Clyde Stock Certificate shall be converted pursuant
to this Section 2.1. No interest will be paid or will accrue on the cash payable
upon the surrender of any Woodward-Clyde Stock Certificate.
(d) Cancellation of the Woodward-Clyde Stock; Closing of Stock
Transfer Books. At the Effective Time of the Merger, all of the authorized and
outstanding shares of the Woodward-Clyde Stock shall be canceled and cease to
represent any interest in Woodward-Clyde and such holders shall cease to have
any rights of a stockholder of Woodward-Clyde. The stock transfer books of
Woodward-Clyde shall be closed at the Effective Time of the Merger, and no
further transfers of Woodward-Clyde Stock will be made on such stock transfer
books. From and after the Effective Time of the Merger, the holders of shares of
the Woodward-Clyde Stock outstanding immediately prior to the Effective Time of
the Merger as such holders shall be entitled to receive only the Merger
Consideration. From the Effective Time of the Merger, the holders of the shares
of the Woodward-Clyde Stock which shall be converted into the URS Common Stock
pursuant to Section 2.1(a) shall have all of the rights of holders of the number
of shares of the URS Common Stock into which such Woodward-Clyde Stock has been
converted.
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Section 2.2 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Woodward-Clyde Stock that are issued and
outstanding immediately prior to the Effective Time of the Merger and that are
held by stockholders who have not voted such shares in favor of the Merger and
who have delivered a written demand for appraisal of such shares in the manner
provided in Section 262 of the Delaware Law ("Dissenting Shares") shall not be
canceled and converted into shares of URS Common Stock in accordance with
Section 2.1 above unless and until such holder shall have failed to perfect, or
shall have effectively withdrawn or lost, such holder's right to appraisal and
payment under the Delaware Law. If such stockholder shall have so failed to
perfect, or shall have effectively withdrawn or lost such right, such holder's
shares of Woodward-Clyde Stock shall thereupon be deemed to have been canceled
and converted as described in Section 2.1 at the Effective Time of the Merger,
and each such share shall represent solely the right to receive shares of URS
Common Stock and cash in accordance with Section 2.1. Woodward-Clyde shall give
URS prompt notice of any demands received by Woodward-Clyde for appraisal of its
shares, and, prior to the Effective Time of the Merger, URS shall have the right
to participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time of the Merger, Woodward-Clyde shall not, except with
the prior written consent of URS, make any payment with respect to, or settle or
offer to settle, any such demands. From and after the Effective Time of the
Merger, no stockholder of Woodward-Clyde who has demanded appraisal rights as
provided in Section 262(d) of the Delaware Law shall be entitled to vote such
holder's shares of Woodward-Clyde Stock for any purpose or to receive payment of
dividends or other distributions with respect to such holder's shares (except
dividends and other distributions payable to stockholders of record at a date
which is prior to the Effective Time of the Merger).
Section 2.3 Subsidiary Common Stock. At the Effective Time of the
Merger, each share of the Subsidiary Common Stock outstanding immediately prior
to the Effective Time of the Merger shall remain issued and outstanding.
Section 2.4 Cancellation of Treasury Shares. Any share of the Woodward-
Clyde Stock held in the treasury of Woodward-Clyde at the Effective Time of the
Merger shall be canceled and retired at the Effective Time of the Merger and no
shares shall be issuable with respect thereto.
Section 2.5 Withholding Tax. The right of any stockholder to receive
the Merger Consideration shall be subject to and reduced by the amount of any
required tax withholding obligation.
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ARTICLE 3
CLOSING
Section 3.1 Closing; Closing Date. Unless this Merger Agreement shall
have been terminated and the Merger abandoned pursuant to the provisions of
Article 9, a closing ("Closing") shall take place at the offices of Cooley
Godward LLP, One Maritime Plaza, 20th Floor, San Francisco, CA 94111-3580 at
10:00 a.m., California time, on the business day following the later of the
approval of the Woodward-Clyde stockholders as contemplated by Section 6.2.2 and
the approval of the URS stockholders as contemplated by Section 6.3.1, or at
such other time and place as may be agreed upon in writing by the parties hereto
(the "Closing Date").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WOODWARD-CLYDE
Except as otherwise disclosed to URS in a letter delivered to it prior
to the execution hereof (which letter shall contain appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Woodward-Clyde Disclosure Letter"), Woodward-Clyde
represents and warrants to URS and the Subsidiary as follows:
Section 4.1 Organization. Each of Woodward-Clyde and the Woodward-Clyde
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease,
and operate its properties, and to carry on its business as now being conducted,
except where the failure to be so organized, existing, and in good standing or
to have such power and authority would not have a Woodward-Clyde Material
Adverse Effect (as defined below). Each of Woodward-Clyde and the Woodward-
Clyde Subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased, or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except in any such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a Woodward-Clyde
Material Adverse Effect (defined below). For purposes of this Agreement: (a)
"Woodward-Clyde Material Adverse Effect" means, when used in connection with
Woodward-Clyde, any change or effect that is materially adverse to the business,
financial condition, results of operations, or assets of Woodward-Clyde and the
Woodward-Clyde Subsidiaries taken as a whole, other than changes or effects
resulting from (i) changes
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attributable to conditions affecting the engineering business generally, (ii)
changes in general economic conditions, or (iii) changes attributable to the
announcement or pendency of the Merger.
Section 4.2 Capitalization. The authorized capital stock of
Woodward-Clyde consists of 4,922,625 shares of Woodward-Clyde Common Stock, par
value $0.01 per share, and 77,375 shares of preferred stock, par value $0.01 per
share (the "Woodward-Clyde Preferred Stock"). As of the date hereof, (i)
1,964,175 shares of Woodward-Clyde Common Stock are issued and outstanding, (ii)
no shares of Woodward-Clyde Common Stock are held in treasury, (iii) 44,898
shares of Woodward-Clyde Preferred Stock are issued and outstanding, and (iv)
32,477 shares of Woodward-Clyde Preferred Stock are held in treasury. All of the
issued and outstanding shares of Woodward-Clyde Stock are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as set forth above
or as specified in Section 4.2 of the Woodward-Clyde Disclosure Letter or as
disclosed in the notes to the Woodward-Clyde Financial Statements (as defined in
Section 4.7 below) for the period ended December 31, 1996, as of the date of
this Agreement there are no shares of Woodward-Clyde capital stock of any other
class issued or outstanding or any options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Woodward-Clyde to issue, transfer, sell, redeem, repurchase or otherwise acquire
any shares of its capital stock or securities. Except as provided in this
Agreement or as set forth in Section 4.2 of the Woodward-Clyde Disclosure
Letter, after the Effective Time of the Merger, Woodward-Clyde will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
Section 4.3 Subsidiaries. Section 4.3 of the Woodward-Clyde Disclosure
Letter identifies each corporation or other entity of which Woodward-Clyde,
directly or indirectly, owns or controls voting securities or other interests
which are sufficient to elect a majority of the board of directors or others
performing similar functions of such corporation or other entity (a
"Woodward-Clyde Subsidiary") and sets forth for each Woodward-Clyde Subsidiary:
(i) its name and jurisdiction of incorporation or organization; (ii) its
authorized capital stock; and (iii) the number of issued and outstanding shares
of capital stock. Woodward-Clyde 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 Woodward-Clyde Subsidiary) of
each of the Woodward-Clyde Subsidiaries. Each of the outstanding shares of
capital stock of each of the Woodward-Clyde Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable. Each of the outstanding shares of
capital stock of each Woodward-Clyde Subsidiary is owned, directly or
indirectly, by Woodward-Clyde, free and clear of all liens, pledges, security
interests, claims, or other encumbrances of any nature
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whatsoever ("Liens"). There are not now, and at Closing there will not be, (a)
any issued or outstanding securities convertible into or exchangeable for, or
any options, warrants, calls, subscriptions or other rights (preemptive or
otherwise) to acquire, any shares of capital stock of any of the Woodward-Clyde
Subsidiaries; or (b) any agreements or contractual commitments obligating
Woodward-Clyde, or restricting Woodward-Clyde's rights, to transfer, sell, or
vote, the capital stock of the Woodward-Clyde Subsidiaries owned by it, directly
or indirectly.
Section 4.4 Material Investments. Except as set forth in Section 4.4 of
the Woodward-Clyde Disclosure Letter, Woodward-Clyde does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation (other than a Woodward-Clyde Subsidiary), partnership, joint venture
or other business association or entity that is material to Woodward-Clyde. With
respect to those entities indicated on Section 4.4 of the Woodward-Clyde
Disclosure Letter, Woodward-Clyde has heretofore delivered to URS financial
statements (audited to the extent available) and interim unaudited financial
statements of each of such entities (through the most recently concluded fiscal
quarter for each of such persons) and, to the best knowledge of Woodward-Clyde,
such financial statements fairly present, in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto or in Section 4.4 of the Woodward-Clyde
Disclosure Letter), the financial condition of each thereof as at and the
results of operations for the periods so indicated (subject to normal year-end
adjustments in the case of the interim unaudited financial statements), and
Woodward-Clyde's disclosures with respect to its investment in each such
entities otherwise included in the Woodward-Clyde Reports (as defined below) do
not contain any untrue statements of material fact or omit to state any material
fact required to be stated therein or which are necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as set forth in Section 4.4 of the Woodward-Clyde
Disclosure Letter, Woodward-Clyde (or, as indicated thereon, a Woodward-Clyde
Subsidiary) has good and marketable title to the securities evidencing its
investment in the entities indicated in Section 4.4 of the Woodward-Clyde
Disclosure Letter, and such securities have been validly issued and are fully
paid and nonassessable and are held by Woodward-Clyde or a Woodward-Clyde
Subsidiary free and clear of any Lien, restraint on alienation, or any other
restriction with respect of the transferability or assignability thereof (other
than restrictions on transfer imposed by Federal or state securities laws).
Section 4.5 Authority Relative to this Agreement. Woodward-Clyde has
all requisite corporate power and authority to enter into this Agreement and
subject, in the case
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of this Agreement, to approval of this Agreement by the stockholders of
Woodward-Clyde and to the consents and approvals set forth in Section 4.6 below,
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Woodward-Clyde and the consummation by
Woodward-Clyde of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Woodward-Clyde, including the
unanimous approval of the Board of Directors of Woodward-Clyde, and no other
corporate proceedings on the part of Woodward-Clyde are necessary to authorize
this Agreement or the transactions contemplated hereby except for approval by
the stockholders of Woodward-Clyde. This Agreement has been duly and validly
executed and delivered by Woodward-Clyde and constitutes a valid and binding
agreement of Woodward-Clyde, enforceable against Woodward-Clyde in accordance
with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws relating to
enforcement of creditors' rights generally, and (ii) general equitable
principles.
Section 4.6 Consents and Approvals; No Violations. Except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (the HSR Act, Securities Act and Exchange Act, collectively, the
"Governmental Requirements"), state securities or blue sky laws, state and local
laws and regulations relating to licensing, and the filing of the Documents of
Merger as required by the Delaware Law, no filing with, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority ("Government Entity") is
necessary for the execution, delivery and performance of this Agreement by
Woodward-Clyde for the consummation by Woodward-Clyde of the transactions
contemplated by this Agreement. Neither the execution, delivery nor performance
of this Agreement by Woodward-Clyde, nor the consummation by Woodward-Clyde of
the transactions contemplated hereby, nor compliance by Woodward-Clyde with any
of the provisions hereof, will (i) conflict with or result in any breach of any
provisions of the Certificate of Incorporation or Bylaws of Woodward-Clyde or
the articles or certificate of incorporation, as the case may be, or Bylaws of
any of the Woodward-Clyde Subsidiaries, (ii) except as set forth in Section
4.6(ii) of the Woodward-Clyde Disclosure Letter, result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, acceleration,
vesting, payment, exercise, suspension or revocation) under, any of the terms,
conditions or provisions of any note, bond, mortgage, deed of trust, security
interest, indenture, license, contract, agreement, plan or other instrument or
obligation to which Woodward-Clyde or any of the Woodward-Clyde Subsidiaries is
a party or by which any of them or any of their properties or assets may be
bound or affected,
12.
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(iii) except as set forth in Section 4.6(iii) of the Woodward-Clyde Disclosure
Letter, violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Woodward-Clyde, any Woodward-Clyde Subsidiary or any of their
properties or assets, (iv) except as set forth in Schedule 4.6(iv) of the
Woodward-Clyde Disclosure Letter, result in the creation or imposition of any
Lien on any asset of Woodward-Clyde or any Woodward-Clyde Subsidiary, or (v)
except as set forth in Section 4.6(v) of the Woodward-Clyde Disclosure Letter,
cause the suspension or revocation of any certificates of need, accreditation,
registrations, licenses, permits and other consents or approvals of governmental
agencies or accreditation organizations, except in the case of clauses (ii),
(iii), (iv) and (v) for violations, breaches, defaults, terminations,
cancellations, accelerations, creations, impositions, suspensions or revocations
which would not individually or in the aggregate have a Woodward-Clyde Material
Adverse Effect.
Section 4.7 Woodward-Clyde Reports and Financial Statements. Woodward-
Clyde has delivered or made available to URS true and complete copies of each
financial report delivered to its lenders, and each proxy statement or annual
information statement, including, without limitation, its Annual Reports to
Stockholders, delivered to its stockholders, at any time since January 1, 1992
(collectively, the "Woodward-Clyde Reports"). Except as set forth in Section 4.7
of the Woodward-Clyde Disclosure Letter, as of the respective dates of such
Woodward-Clyde Reports, each of the Woodward-Clyde Reports 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. Each of the
audited consolidated financial statements of Woodward-Clyde (including any
related notes and schedules) included in the Woodward-Clyde Reports for each of
the five fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996, and
each of the interim unaudited financial statements of Woodward-Clyde (including
any related notes and schedules) for each of the interim periods in the year
ended December 31, 1996 and for all interim periods subsequent thereto
(collectively, the "Woodward-Clyde Financial Statements"), fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Woodward-Clyde and
the Woodward-Clyde Subsidiaries as of its date and the consolidated results of
operations and cash flows for the period then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements). There
has been no change in Woodward-Clyde's accounting policies or the methods of
making accounting estimates or changes in estimates that are material to the
Woodward-Clyde Financial Statements, except as described in the notes thereto.
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Section 4.8 Information Supplied. None of the information supplied or
to be supplied by Woodward-Clyde or the Woodward-Clyde Subsidiaries, auditors,
attorneys, financial advisors, or other consultants or advisors for inclusion in
(a) the registration statement on Form S-4, and any amendment thereto, to be
filed under the Securities Act with the Securities and Exchange Commission (the
"SEC") by URS in connection with the issuance of the URS Common Stock in or as a
result of the Merger (the "Form S-4"), or (b) the joint proxy statement and any
amendment or supplement thereto to be distributed in connection with the
meetings of the stockholders of Woodward-Clyde and URS to vote upon this
Agreement and the transactions contemplated hereby (the "Proxy Statement" and,
together with the Form S-4, the "Proxy Statement/Form S-4"), will: (i) in the
case of the Proxy Statement and any amendment or supplement thereto, (1) at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and (2) at the time of Woodward-Clyde's meeting of stockholders, and
(ii) in the case of the Form S-4, as amended or supplemented, (x) at the time it
becomes effective, (y) at the time of any post-effective amendment thereto, and
(z) at the time of the meeting of the stockholders of Woodward-Clyde, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Woodward-Clyde agrees to correct as promptly as practicable any such
information provided by it that shall have become false or misleading in any
material respect and to take all steps necessary to enable URS to file with the
SEC and have declared effective or cleared by the SEC any amendment or
supplement to the Proxy Statement so as to correct the same and to cause the
Proxy Statement as so corrected to be disseminated to the Woodward-Clyde and URS
stockholders to the extent required by applicable law. The Proxy Statement/Form
S-4 as it relates to Woodward-Clyde and its Subsidiaries will comply as to form
in all material respects with the provisions of all applicable laws, including
the provisions of the Exchange Act and the rules and regulations of the SEC
thereunder, except that no representation is made by Woodward-Clyde with respect
to information supplied by URS specifically for inclusion therein.
Section 4.9 Absence of Material Adverse and Other Changes. Except as
contemplated by this Agreement, and except as set forth in Section 4.9 of the
Woodward-Clyde Disclosure Letter, since December 31, 1996, Woodward-Clyde and
the Woodward-Clyde Subsidiaries have conducted their business in the ordinary
course, consistent with past practices, and there has not been: (a) any event or
occurrence that has resulted in a Woodward-Clyde Material Adverse Effect, or any
development or combination of developments of which Woodward-Clyde has knowledge
that is reasonably likely, in Woodward-Clyde's commercially reasonable judgment,
to result in a Woodward-Clyde Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend or
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other capital distributions in respect of any of its capital stock, except for
regular cash dividends to holders of Woodward-Clyde Common Stock in amounts and
at times consistent with prior practice, or any redemption or repurchase or
other acquisition of any shares of its capital stock, (c) any increase in the
regular compensation of any of the officers or employees of Woodward-Clyde or
the Woodward-Clyde Subsidiaries, except such increases as have been granted in
the ordinary course of business in accordance with its customary practices
(which shall include normal periodic performance reviews, promotions and related
compensation increases), (d) any incurrence, assumption or guarantee by
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries of any indebtedness for
borrowed money other than in the ordinary course of business consistent with
past practices, (e) any transaction or commitment made, or any contract or
agreement entered into, by Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries (including the acquisition or disposition of any assets) or any
relinquishment by Woodward-Clyde or any of the Woodward-Clyde Subsidiaries of
any contract or other right, in either case, material to Woodward-Clyde's
business taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement, (f) any change in any method of accounting or
accounting practice by Woodward-Clyde or any of the Woodward-Clyde Subsidiaries,
except for any such change after the date hereof required by reason of a
mandatory concurrent change in GAAP, (g) any loss or damage to the properties or
assets of Woodward-Clyde or the Woodward-Clyde Subsidiaries which has resulted
or is reasonably likely to result in a Woodward-Clyde Material Adverse Effect,
or (h) any agreement or any commitment to take any of the actions described in
this Section 4.9.
Section 4.10 Litigation. Except for litigation disclosed in the notes
to the financial statements included in the Woodward-Clyde Reports or as set
forth in Section 4.10 of the Woodward-Clyde Disclosure Letter, there is no suit,
action or proceeding (whether at law or equity, before or by any Federal, state
or foreign court, tribunal, commission, board, agency or instrumentality, or
before any arbitrator) pending or, to the best knowledge of Woodward-Clyde,
threatened against or affecting Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries, the outcome of which, in the reasonable judgment of
Woodward-Clyde, is likely individually or in the aggregate to have a
Woodward-Clyde Material Adverse Effect, or which challenges the validity of this
Agreement or seeks to prevent, enjoin, materially alter or materially delay the
transactions contemplated hereby, nor is there any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Woodward-Clyde or any of the
Woodward-Clyde Subsidiaries having, or which, insofar as can reasonably be
foreseen, in the future may have, any such effect.
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Section 4.11 Absence of Undisclosed Liabilities. Except for liabilities
or obligations which are accrued or reserved against in the Woodward-Clyde
Financial Statements (or reflected in the notes thereto) or which were incurred
after December 31, 1996 in the ordinary course of business and consistent with
past practices or in connection with the transactions contemplated by this
Agreement, Woodward-Clyde and the Woodward-Clyde Subsidiaries do not have any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a consolidated balance sheet (or
reflected in the notes thereto).
Section 4.12 No Default. Except as set forth in Section 4.12 of the
Woodward-Clyde Disclosure Letter, neither Woodward-Clyde nor any of the
Woodward-Clyde Subsidiaries is in violation or breach of, or default under (and
to the best knowledge of Woodward-Clyde no event has occurred which with notice
or the lapse of time or both would constitute a violation or breach of, or
default under) any term, condition or provision of (a) its Certificate or
Articles of Incorporation, as the case may be, or Bylaws, (b) any note, bond,
mortgage, deed of trust, security interest, indenture, license, contract,
agreement, plan, lease, commitment or other instrument or obligation to which
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or affected, (c)
any order, writ, injunction, decree, statute, rule or regulation applicable to
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries or any of their
properties or assets, or (d) any certificate of need, accreditation,
registration, license, permit and other consent or approval of governmental
agencies or accreditation organization, except in the case of clauses (b), (c)
and (d) above for violations, breaches or defaults which would not individually
or in the aggregate have a Woodward-Clyde Material Adverse Effect.
Section 4.13 Properties, Liens, Etc. Woodward-Clyde and the
Woodward-Clyde Subsidiaries own all of their tangible and intangible property,
real and personal, free and clear of any Liens, except for statutory mechanics'
and materialmens' liens, liens for current taxes not yet delinquent, and liens
and encumbrances which do not confer upon the secured parties rights to property
which, if exercised upon default, would have a Woodward-Clyde Material Adverse
Effect. All plants, structures and material equipment owned or leased by
Woodward-Clyde or the Woodward-Clyde Subsidiaries and used in the operation of
their business are in satisfactory condition and repair for the requirements of
such business as presently conducted. Neither Woodward-Clyde nor any of the
Woodward-Clyde Subsidiaries have received notice, or have knowledge of, any
pending, threatened or contemplated condemnation proceeding, or of any sale or
other disposition in lieu of condemnation, affecting any real property owned or
leased by Woodward-Clyde or any of the Woodward-Clyde Subsidiaries.
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Section 4.14 Taxes. Except as set forth in Section 4.14 of the
Woodward-Clyde Disclosure Letter:
(a) Woodward-Clyde and each of the Woodward-Clyde Subsidiaries
(i) has timely filed (or has had timely filed on its behalf) all material Tax
Returns (as defined below) required by applicable law to be filed by any of them
whose due dates fall on or prior to the date of this Agreement, and will cause
to be timely filed all required material Tax Returns whose due dates fall on or
before the Closing Date, and all such Tax Returns and amendments thereto are or
will be true, complete, and correct in all material respects, (ii) has paid (or
has had paid on its behalf) all Taxes due or has properly accrued or reserved
for all such Taxes covered by such reports and (iii) has properly accrued for
all Taxes for periods subsequent to the periods covered by such Tax Returns.
(b) There are no material liens for Taxes upon the assets of
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries, except liens for Taxes
not yet due.
(c) There are no material deficiencies or adjustments for
Taxes that have been proposed or assessed by any Tax Authority (as defined
below) against Woodward-Clyde or any of the Woodward-Clyde Subsidiaries and
which remain unpaid.
(d) The Federal income tax returns of Woodward-Clyde and each
of the Woodward-Clyde Subsidiaries have been examined by the Internal Revenue
Service for all past taxable years and periods to and including the years set
forth in Section 4.14 of the Woodward-Clyde Disclosure Letter, and all material
deficiencies finally assessed as a result of such examinations have been paid.
Section 4.14 of the Woodward-Clyde Disclosure Letter sets forth (i) all taxable
years and periods of Woodward-Clyde and the Woodward-Clyde Subsidiaries that are
presently under Audit (as defined below) or in respect of which Woodward-Clyde
or any of the Woodward-Clyde Subsidiaries has been notified in writing by the
relevant Tax Authority that it will be Audited, (ii) the taxable years of
Woodward-Clyde and the Woodward-Clyde Subsidiaries in respect of which the
statutory period of limitations for the assessment of Federal, state and local
income or franchise Taxes has expired, and (iii) all waivers extending the
statutory period of limitation applicable to any material Tax Return filed by
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries for any taxable period
ending prior to the date of this Agreement.
(e) Prior to the date hereof, Woodward-Clyde and the
Woodward-Clyde Subsidiaries have disclosed all material Tax sharing, Tax
indemnity, or similar agreements to which Woodward-Clyde or any of the
Woodward-Clyde Subsidiaries is a party, is bound by, or has any obligation or
liability for Taxes.
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(f) As used in this Agreement, (i) "Audit" shall mean any
audit, assessment of Taxes, other examination by any Tax Authority, proceeding
or appeal of such proceeding relating to Taxes, (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto, (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign governmental authority responsible for the administration of any Taxes,
and (iv) "Tax Returns" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
Section 4.15 Benefit Plans.
(a) Section 4.15 of the Woodward-Clyde Disclosure Letter lists
each Woodward-Clyde Plan (as defined below). With respect to each of the
Woodward-Clyde Plans, Woodward-Clyde has heretofore delivered or made available
to URS true and complete copies of each of the following documents: (i) a copy
of each written plan (including all amendments thereto) or a description of each
unwritten plan; (ii) a copy of the annual report, if required under ERISA, with
respect to each Woodward-Clyde Plan for the last three years; (iii) a copy of
the actuarial report, if required under ERISA, with respect to each
Woodward-Clyde Plan for the last three years and any interim actuarial reports
or calculations provided by the actuary since the date of the most recent annual
actuarial report; (iv) the most recent summary plan description and all
succeeding summaries of material modifications for each Woodward-Clyde Plan for
which a summary plan description is required; (v) if the Woodward-Clyde Plan is
funded through a trust or any third party funding vehicle, a copy of the trust
or other funding agreement (including all amendments thereto) and the latest
financial statements thereof; and (vi) the most recent determination letter
issued with respect to each Qualified Woodward-Clyde Plan. Each of the Woodward-
Clyde Plans has been operated and administered in all material respects in
accordance with their terms and with all applicable laws, including Federal and
state securities laws. Each Woodward-Clyde Plan intended to be qualified under
Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the Internal Revenue Service with respect to such
qualification, its related trust has been determined to be exempt from taxation
under Section 501(a) of the Code and nothing has occurred since the date of such
letter that would adversely affect such qualification or exemption.
(b) Section 4.15 of the Woodward-Clyde Disclosure Letter lists
each Woodward-Clyde Benefit Arrangement which provides, or is expected to
provide, for aggregate payments of in excess of $100,000 in any calendar year.
With respect to each of
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the Woodward-Clyde Benefit Arrangements, Woodward-Clyde has heretofore delivered
to or made available to URS true and complete copies of each written plan
(including all amendments thereto) or a description of each unwritten plan. Each
Woodward-Clyde Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules, and regulations, including, without limitation, ERISA and the
Code, that are applicable to such Woodward-Clyde Benefit Arrangement, including
Federal and state securities laws.
(c) Neither Woodward-Clyde nor the Woodward-Clyde Subsidiaries
nor any of their ERISA Affiliates has been involved in any transaction, taken
any action, or failed to take any action relating to a Woodward-Clyde Benefit
Arrangement that could cause Woodward-Clyde or the Woodward-Clyde Subsidiaries
to be subject to any liability that would likely cause a Woodward-Clyde Material
Adverse Effect. No fiduciary of any Woodward-Clyde Plan or Woodward-Clyde
Benefit Arrangement has taken any action that would result in such fiduciary
being liable for the payment of damages under ERISA Section 409 and that would
result in any material liability for Woodward-Clyde, the Woodward-Clyde
Subsidiaries or URS.
(d) Except with respect to contributions to Woodward-Clyde
Plans under Section 412 of the Code that are current and not past due, neither
Woodward-Clyde nor the Woodward-Clyde Subsidiaries has incurred (directly or
indirectly) prior to the Closing any current obligation to pay (i) any liability
under Title IV of ERISA or (ii) any liability under Section 412 of the Code that
remains unpaid at the date of signing of this Agreement. There is no "unfunded
pension liability," i.e., excess of the value of benefits earned to date over
assets, with respect to Employee Benefit Plans subject to Title IV of ERISA. All
premiums owed to the Pension Benefit Guaranty Corporation with respect to any
Employee Benefit Plan subject to Title IV have been paid.
(e) None of Woodward-Clyde, the Woodward-Clyde Subsidiaries,
or their ERISA Affiliates is making or accruing an obligation to make
contributions or has, on or after January 1, 1980, made or accrued an obligation
to make contributions to a "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA.
(f) Full payment has been made of all amounts that
Woodward-Clyde and the Woodward-Clyde Subsidiaries are required to pay as
contributions to the Employee Benefit Plans as of the last day of the most
recent fiscal year of each of the plans ended prior to the date of this
Agreement.
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(g) No Woodward-Clyde Plan or Woodward-Clyde Benefit
Arrangement provides or ever provided benefits, including without limitation,
death or medical benefits (whether or not insured and whether or not funded),
with respect to current or former employees of Woodward-Clyde and the
Woodward-Clyde Subsidiaries beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death
benefits, or retirement benefits under any "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of Woodward-Clyde and disclosed
heretofore to URS, or (iv) benefits the full cost of which are borne by the
current or former employee (or his or her beneficiary)). The consummation of the
transactions contemplated hereby will not (i) entitle any current or former
employee of Woodward-Clyde or the Woodward-Clyde Subsidiaries to severance pay,
unemployment compensation or any similar payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to any such
employee or former employee.
(h) With respect to Woodward-Clyde Plans and Woodward-Clyde
Benefit Arrangements, all reports, forms, and other documents required to be
filed with any governmental authority or distributed to plan participants
(including, without limitation, summary plan descriptions, Forms 5500, and
summary annual reports) have been timely filed (if applicable) and distributed
(if applicable) and were accurate.
(i) There are no pending, threatened, or anticipated claims
(other than routine claims for benefits) by, on behalf of, or against any
Woodward-Clyde Plans or Woodward-Clyde Benefit Arrangements. No Woodward-Clyde
Plans or Woodward-Clyde Benefit Arrangements are presently under audit or
examination (nor has notice been received of a potential audit) by the Internal
Revenue Service, the Department of Labor, or PBGC, nor are there any matters
pending with respect to any Woodward-Clyde Plan with the Internal Revenue
Service under its Voluntary Compliance Resolution program, its Closing Agreement
Program, or other similar programs.
(j) No "prohibited transaction," as such term is defined in
Code Section 4975 and ERISA Section 406, has occurred with respect to any
Woodward-Clyde Plan or Woodward-Clyde Benefit Arrangement that could subject
such plan, any fiduciary thereof, Woodward-Clyde, the Woodward-Clyde
Subsidiaries or URS to a material penalty for such prohibited transaction
imposed by ERISA Section 502 or a material tax imposed by Code Section 4975.
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(k) Any bonding required by applicable provisions of ERISA
with respect to any Woodward-Clyde Plan or Woodward-Clyde Benefit Arrangement
has been obtained and is in full force and effect.
(l) For purposes of this Section 4.15:
(1) "Woodward-Clyde Benefit Arrangement" means each
employment, severance, or other similar contract, arrangement, or policy and
each plan or arrangement (written or oral, formal or informal) providing for
insurance coverage (including any self-insured arrangements), cafeteria benefits
under Section 125 of the Code, fringe benefits (including but not limited to
paid holidays, personal leave, employee discount, educational benefit, or
similar programs), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or postretirement
insurance or health benefits, compensation or benefits that (i) is not a
Woodward-Clyde Plan, (ii) is or has been entered into, maintained, or
contributed to by Woodward-Clyde or its ERISA Affiliates, and (iii) covers, or
within the last five years covered and under which Woodward-Clyde or its ERISA
Affiliates has further or continuing obligations to, any employee of
Woodward-Clyde or any Woodward-Clyde Subsidiary.
(2) "Woodward-Clyde Plan" means any Employee Benefit
Plan or "multiemployer plan" as defined in Section 4001(a)(3) of ERISA (a)
maintained or contributed to by or on behalf of Woodward-Clyde or any
Woodward-Clyde Subsidiary, whether currently or within the six years prior to
the Closing Date, or (b) in which any employee of Woodward-Clyde or any
Woodward-Clyde Subsidiary has participated, as an employee of Woodward-Clyde or
any Woodward-Clyde Subsidiary, within the six years prior to the Closing Date,
or under which any such employee has accrued and remains entitled to any
benefit.
(3) "Employee Benefit Plan" means any deferred
compensation, retirement, severance, health, or other plan or program
constituting an "employee benefit plan" as defined in Section 3(3) of ERISA
maintained or previously maintained for current or former employees of
Woodward-Clyde or the Woodward-Clyde Subsidiaries, or any ERISA Affiliate of
Woodward-Clyde or the Woodward-Clyde Subsidiaries or in which any such employees
participate or participated, other than a Multiemployer Plan.
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(4) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all regulations and published
interpretations promulgated thereunder, as in effect from time to time.
(5) "ERISA Affiliate" means each person (as defined
in Section 3(9) of ERISA) that, together with Woodward-Clyde or a Woodward-Clyde
Subsidiary, would be treated as a single employer under Section 4001(b) of ERISA
or that would be deemed to be a member of the same "controlled group" within the
meaning of Section 414(b), (c), (m), and (o) of the Code (provided, however,
that when the subject of the provision is a Multiemployer Plan only subsections
(b) and (c) of Section 414 shall be taken into account).
Section 4.16 Employment Matters; Labor Relations.
(a) Section 4.16 of the Woodward-Clyde Disclosure Letter sets
forth a true and complete list of the names, classifications, dates of hire and
base compensation for the year ending December 31, 1996, of each employee of
Woodward-Clyde and the Woodward-Clyde Subsidiaries whose base compensation
exceeds $100,000 per annum.
(b) With respect to current or former employees of
Woodward-Clyde and the Woodward-Clyde Subsidiaries,
(i) Each of Woodward-Clyde and the Woodward-Clyde
Subsidiaries is in substantial compliance with all applicable laws respecting
employment and employment practices, and occupational safety and health, except
for such violations, if any, that in the aggregate have not had and would not
have a Woodward-Clyde Material Adverse Effect. There is no charge or compliance
action pending or threatened against or with respect to Woodward-Clyde or any of
the Woodward-Clyde Subsidiaries before the Equal Employment Opportunity
Commission or any state, local, or foreign agency responsible for the prevention
of unlawful employment practices as to which there is a reasonable likelihood of
adverse determination. None of Woodward-Clyde nor any of the Woodward-Clyde
Subsidiaries has received notice of the intent of any Federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation, and, to Woodward-Clyde's knowledge, no such
investigation is in progress.
(ii) The employees of Woodward-Clyde and the
Woodward-Clyde Subsidiaries are not represented by any labor union, nor are
there any collective bargaining agreements or any other types of agreements with
labor unions otherwise in effect with respect to such employees, nor are any
collective bargaining agreements currently being
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negotiated, and, to Woodward-Clyde's knowledge, no union organizational campaign
is in progress. None of Woodward-Clyde or the Woodward-Clyde Subsidiaries is
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law, ordinance, or regulation. There is no unfair labor
practice charge or complaint against any of Woodward-Clyde or the Woodward-Clyde
Subsidiaries pending or, to Woodward-Clyde's knowledge, threatened before the
National Labor Relations Board. There is no labor strike, lockout, slow-down or
work stoppage pending or threatened against Woodward-Clyde or any of the
Woodward-Clyde Subsidiaries. None of Woodward-Clyde and the Woodward-Clyde
Subsidiaries has experienced any significant work stoppage or been party to any
proceedings before the National Labor Relations Board for the past three years.
Section 4.17 Intellectual Property.
(a) Except as set forth in Section 4.17 of the Woodward-Clyde
Disclosure Letter, and except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually
and in the aggregate, would not have a Woodward-Clyde Material Adverse Effect:
(i) Woodward-Clyde and the Woodward-Clyde Subsidiaries
own, or are licensed or otherwise have the right to use (in each case, clear of
any lien or encumbrance of any kind) all Intellectual Property (as defined
below) that in any material respect is used or proposed to be used in the
business of Woodward-Clyde and the Woodward-Clyde Subsidiaries.
(ii) No claims are pending, or to the knowledge of
Woodward- Clyde, threatened that Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries is infringing on or otherwise violating the rights of any person
with regard to any Intellectual Property owned by and/or licensed to
Woodward-Clyde or the Woodward-Clyde Subsidiaries.
(iii) To the knowledge of Woodward-Clyde, no person is
infringing on or otherwise violating any right of Woodward-Clyde or any
Woodward-Clyde Subsidiary with respect to any Intellectual Property owned by
and/or licensed to Woodward-Clyde or the Woodward-Clyde Subsidiaries, provided,
that the foregoing representation is qualified to the extent of publicly known
problems of general applicability with respect to software piracy and copyright
protection.
(iv) None of the former or current members of
management or key personnel of Woodward-Clyde or any Woodward-Clyde Subsidiary,
including all former and
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current employees, agents, consultants and contractors who have contributed to
or participated in the conception and development of designs, computer software
or other Intellectual Property of Woodward-Clyde or the Woodward-Clyde
Subsidiaries, has asserted in writing any claim against Woodward-Clyde or any of
the Woodward-Clyde Subsidiaries in connection with the involvement of such
persons in the conception and development of any design, computer software or
other Intellectual Property, and no such claim, to the knowledge of
Woodward-Clyde, has been threatened.
(v) The execution and delivery of this Agreement,
compliance with its terms and the consummation of the transactions contemplated
hereby do not and will not conflict with or result in any violation or default
(with or without notice or the lapse of time) or give rise to any right, license
or encumbrance relating to the Intellectual Property, or any right of
termination, cancellation, or acceleration of any material Intellectual Property
right or obligation.
(b) For purposes of this Agreement, "Intellectual Property"
means (i) trademarks (registered on unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; (ii) inventions, discoveries and ideas,
whether patented, patentable or not in any jurisdiction; (iii) nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; (iv) writings
and other works, whether copyrighted, copyrightable or not in any jurisdiction;
(v) registration or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; (vi) any similar
intellectual property or proprietary rights and computer programs and software
(including source code, object code and data); (vii) licenses, immunities,
covenants not to sue and the like relating to the foregoing; and (viii) any
claims or causes of action arising out of or related to any infringement or
misappropriation of any of the foregoing.
(c) Except for the name "Woodward-Clyde" and the
Woodward-Clyde logo, there are no (i) material domestic and foreign registered
trademarks, registered copyrights and patents, and applications for registration
of any of the foregoing owned by Woodward-Clyde or any Woodward-Clyde
Subsidiary; (ii) material trade names, service marks, service names, logos and
assumed names which are owned by Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries, as the case may be, and that are used or proposed to be used in
the business of Woodward-Clyde and the Woodward-Clyde Subsidiaries as currently
conducted; or (iii) material licenses and other agreements to which Woodward-
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Clyde or any Woodward-Clyde Subsidiary is a party and pursuant to which
Woodward-Clyde is authorized to use any Intellectual Property. To the knowledge
of Woodward-Clyde, all registered Intellectual Property of Woodward-Clyde has
been validly issued or registered and is subsisting. Neither Woodward-Clyde nor
the Woodward-Clyde Subsidiaries have taken or omitted to take any act which act
or omission might have the effect of waiving or impairing any of the rights of
Woodward-Clyde to practice and enforce any patent, or to use and enforce any
trademark or copyright listed on Section 4.17 of the Woodward-Clyde Disclosure
Letter.
Section 4.18 Insurance. Section 4.18 of the Woodward-Clyde Disclosure
Letter contains a complete and correct list and accurate summary description of
all insurance policies and material completion bonds (including, without
limitation, professional liability coverage) maintained by or on behalf of or
covering Woodward-Clyde and the Woodward-Clyde Subsidiaries, their assets or
operations, or the conduct of their business. Woodward-Clyde has made available
to URS complete and correct copies of all the declaration sheets or binders (if
declaration sheets are not yet issued) relating to such policies and bonds.
Except as noted on Section 4.18 of the Woodward-Clyde Disclosure Letter, all
such policies and bonds are in full force and effect, no notices of cancellation
or nonrenewal have been received with respect thereto, and all premiums due
thereon have been paid. Woodward-Clyde and the Woodward-Clyde Subsidiaries have
complied in all material respects with the provisions of such policies and
bonds.
Section 4.19 Compliance with Applicable Law. Woodward-Clyde and the
Woodward-Clyde Subsidiaries are not in violation of, and to Woodward-Clyde's
knowledge, are neither under investigation with respect to nor have been
threatened to be charged with or given notice of any violation of, any
applicable laws, ordinances, rules and regulations of any court, administrative
agency or commission or other governmental authority or instrumentality, whether
domestic or foreign (each a "Governmental Entity") applicable to Woodward-Clyde
or any Woodward-Clyde Subsidiary, except for such violations, if any, that, in
the aggregate, have not had and would not, in the reasonable judgment of
Woodward-Clyde, be likely to have a Woodward-Clyde Material Adverse Effect.
Section 4.20 Certain Contracts and Arrangements. Section 4.20 of the
Woodward-Clyde Disclosure Letter lists all of the following agreements to which
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries is a party ("Material
Agreements"):
(a) Each partnership, joint venture or other similar agreement
or arrangement to which Woodward-Clyde or any Woodward-Clyde Subsidiary is a
party that
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has involved or is expected to involve an annual sharing of revenues of
$5,000,000 or more to other persons;
(b) Each lease for real or personal property in which the
amount of payments which Woodward-Clyde or a Woodward-Clyde Subsidiary is
required to make on an annual basis is $500,000 or more;
(c) Each agreement of Woodward-Clyde and the Woodward-Clyde
Subsidiaries relating to indebtedness for borrowed money (whether incurred,
assumed, guaranteed or secured by any asset) in an aggregate outstanding
principal amount of $1,000,000 or more;
(d) Each other agreement, license or franchise which has not
been terminated or performed in its entirety and not renewed which may be, by
its terms, terminated, impaired or adversely affected by reason of the execution
of this Agreement, the closing of the Merger, or the consummation of the
transactions contemplated hereby or thereby, and the loss of which would,
individually or in the aggregate with other such agreements, licenses, or
franchises, have a Woodward-Clyde Material Adverse Effect;
(e) Each agreement of Woodward-Clyde or the Woodward-Clyde
Subsidiaries with or for the benefit of any affiliate of Woodward-Clyde (other
than any Woodward-Clyde Subsidiary) with annual payments of $50,000 or more;
(f) Each contract containing covenants purporting to
materially limit the freedom of Woodward-Clyde or any Woodward-Clyde Subsidiary
to compete in any line of business or in any geographic area; and
All Material Agreements are valid, binding and enforceable in accordance with
their terms and none of Woodward-Clyde or the Woodward-Clyde Subsidiaries nor,
to the knowledge of Woodward-Clyde, any other party thereto, is in default under
any of such agreements, nor, to the knowledge of Woodward-Clyde, has any event
or circumstance occurred that, with notice or lapse of time or both, would
constitute any event of default by Woodward-Clyde or the Woodward-Clyde
Subsidiaries or any other party thereto other than with respect to any of the
foregoing such defaults, if any, that would not, individually or in the
aggregate, have a Woodward-Clyde Material Adverse Effect. To Woodward-Clyde's
knowledge, none of the parties to the contracts identified in this Section have
terminated, or have expressed an intent to reduce materially or terminate
presently or in the future, such contracts.
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Section 4.21 Prohibited Payments. Woodward-Clyde has not, with respect
to the opportunities, business or operation of Woodward-Clyde, (a) entered into
any understanding agreement or arrangement, written or oral, under or pursuant
to which bribes, kickbacks, rebates, payoffs or other forms of illegal payments
have been or will be made, provided for or suffered, either directly or
indirectly, through agents, brokers or other intermediaries, (b) made any
illegal payment or contribution of moneys, services or property to any political
party, candidate or elected official, directly or indirectly, for any purpose or
(c) directly or indirectly engaged in any activity prohibited by the Foreign
Corrupt Practices Act of 1977.
Section 4.22 Bank Accounts; Receivables.
(a) Part 4.22(a) of the Woodward-Clyde Disclosure Letter
provides accurate information with respect to each account maintained by or for
the benefit of the Company at any bank or other financial institution.
(b) Except as set forth in Part 4.22(b) of the Woodward-Clyde
Disclosure Letter, all existing accounts receivable of Woodward-Clyde (including
those accounts receivable reflected on the unaudited interim balance sheet as of
June 30, 1997 that have not yet been collected and those accounts receivable
that have arisen since such date and have not yet been collected) represent
valid obligations of customers of Woodward-Clyde arising from bona fide
transactions entered into in the ordinary course of business.
Section 4.23 Related Party Transactions. Except as set forth in Part
4.23 of the Woodward-Clyde Disclosure Letter: (a) no Related Party has, and no
Related Party has at any time since January 1, 1992 had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
Woodward-Clyde; (b) no Related Party is, or has at any time since January 1,
1992 been, indebted to Woodward-Clyde; (c) since January 1, 1992, no Related
Party has entered into, or has had any direct or indirect financial interest in,
any material Contract, transaction or business dealing involving Woodward-Clyde;
(d) no Related Party is competing, or has at any time since January 1, 1992
competed, directly or indirectly, with Woodward-Clyde; and (e) no Related Party
has any claim or right against Woodward-Clyde (other than rights to receive
compensation for services performed as an employee of Woodward-Clyde). For
purposes of the Section 4.23 each of the following shall be deemed to be a
"Related Party": (i) each individual who is, or who has at any time since
January 1, 1992 been, an officer or director of Woodward-Clyde; (ii) each member
of the immediate family of each of the individuals referred to in clause (i)
above; and (iii) any corporation, partnership, company, trust or other entity
(other than Woodward Clyde) in which any one of the individuals referred to in
clauses (i) and (ii) above holds (or in which
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more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.
Section 4.24 Powers of Attorney. Woodward-Clyde has not given a power
of attorney, except for revocable powers of attorney routinely granted in the
ordinary course of business which related to routine representations before
governmental agencies or given in connection with the qualification to conduct
business in other jurisdictions.
Section 4.25 Environmental Matters.
(a) (i) Woodward-Clyde and each of the Woodward-Clyde
Subsidiaries hold, and are in substantial compliance with, all Environmental
Permits, and with all applicable Environmental Laws, except where the failure to
hold such permits or to be in compliance would not have a Woodward-Clyde
Material Adverse Effect.
(ii) Neither Woodward-Clyde nor any of the Woodward-Clyde
Subsidiaries has received any written request for information, or has been
notified that it is a potentially responsible party, under the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or any similar state law with respect to any on-site or off-site
location.
(iii) No notice, notification, demand, request for
information, citation, summons, complaint or order has been issued, no complaint
has been filed, no penalty has been assessed and no investigation or review
(collectively, "Environmental Notices") is pending, or to Woodward-Clyde's
knowledge, threatened by any governmental entity or other person with respect to
any (1) alleged violation by Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries of any Environmental Law or liability thereunder or (2) alleged
failure by Woodward-Clyde or any of the Woodward-Clyde Subsidiaries to have any
Environmental Permit, except, in each case, for Environmental Notices that would
not have a Woodward-Clyde Material Adverse Effect.
(iv) To Woodward-Clyde's knowledge, there have been no
discharges, emissions or releases of Hazardous Substances by Woodward-Clyde
which are or were reportable under Environmental Laws, other than such
discharges, emissions or releases that would not have a Woodward-Clyde Material
Adverse Effect.
(b) There has been no material environmental investigation of
Woodward-Clyde, study, audit, test, review or other analysis (including any
Phase I environmental assessments) conducted of which Woodward-Clyde has
knowledge in relation to any real
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property or lease of Woodward-Clyde or any Woodward-Clyde Subsidiary which has
not been delivered to URS prior to the date hereof. Neither Woodward-Clyde nor
any of the Woodward-Clyde Subsidiaries is subject to any judgment, decree or
order relating to compliance with, or the cleanup of regulated substances under,
any applicable Environmental Law.
(c) For purposes of this Agreement: (i) the term
"Environmental Laws" means any and all applicable Federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, judicial orders, decrees, codes, injunctions, permits, consent
decrees, consent orders and governmental restrictions, now in effect, relating
to human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment,
including without limitation ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof;
(ii) the term "Environmental Permits" means all permits licenses,
authorizations, certificates and approvals of governmental authorities relating
to or required by Environmental Laws and necessary or proper for the business of
Woodward-Clyde and the Woodward-Clyde Subsidiaries as currently conducted; and
(iii) "Hazardous Substance" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, including, without limitation, any substance
regulated under Environmental Laws.
Section 4.26 Regulatory Matters. Woodward-Clyde has filed or otherwise
provided all reports, data, other information and applications which are
required to be filed with or otherwise provided to the U.S. Environmental
Protection Agency (the "EPA"), the U.S. Occupational Safety and Health
Administration ("OSHA"), and any other Federal, state, local or foreign
governmental authorities with jurisdiction and all regulatory approvals in
respect thereof are in full force and effect on the date hereof, the failure to
file or provide which or obtain which would, in the aggregate, result in a
Woodward-Clyde Material Adverse Effect.
Section 4.27 Immigration Reform and Control Act.
(a) Woodward-Clyde has fully complied with the verification
requirements and the recordkeeping requirements of the Immigration Reform and
Control Act of 1986 ("IRCA").
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(b) To the best knowledge and belief of Woodward-Clyde, the
information and documents on which Woodward-Clyde relied in complying with IRCA
are true and correct.
(c) To the best knowledge and belief of Woodward-Clyde, there
have not been any discrimination complaints filed against Woodward-Clyde
pursuant to IRCA.
Section 4.28 Board Approvals; Opinion of Financial Advisor. The Board
of Directors of Woodward-Clyde (at a meeting duly called and held or pursuant to
valid written consent) has unanimously determined that the transactions
contemplated hereby are fair to and in the best interests of Woodward-Clyde and
its stockholders. The Board of Directors of Woodward-Clyde has received the
opinion of Oppenheimer & Co., Inc. ("OC"), Woodward-Clyde's financial advisor,
substantially to the effect that the Merger Consideration to be paid to holders
of the Woodward-Clyde Stock in the Merger is fair to such stockholders from a
financial point of view.
Section 4.29 Brokers. No broker, finder or investment banker (other
than OC) is entitled to any brokerage, finder's fee or commission payable by
Woodward-Clyde in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Woodward-Clyde.
Section 4.30 Disclosure. No representation or warranty by
Woodward-Clyde in this Agreement, the schedules hereto or any certificates
delivered pursuant to the terms hereof, contains or will contain an untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
Section 4.31 Reliance. The foregoing representations and warranties are
made by Woodward-Clyde with the knowledge and expectation that URS is placing
reliance thereon.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF URS
Except as otherwise disclosed to Woodward-Clyde in a letter delivered
to it prior to the execution hereof (which letter shall contain appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "URS Disclosure Letter"), URS and the
Subsidiary represent and warrant to Woodward-Clyde as follows:
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Section 5.1 Organization. Each of URS and the Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease, and operate its properties, and to carry on
its business as now being conducted, except where the failure to be so
organized, existing, and in good standing or to have such power and authority
would not have a URS Material Adverse Effect. Each of URS and the Subsidiary is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except in any such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a URS Material Adverse Effect. For
purposes of this Agreement, "URS Material Adverse Effect" means, when used in
connection with URS, any change or effect that is materially adverse to the
business, financial condition, results of operations or assets of URS and its
Subsidiaries taken as a whole, other than changes or effects resulting from (i)
changes attributable to conditions affecting the engineering business generally,
(ii) changes in general economic conditions, or (iii) changes attributable to
the announcement or pendency of the Merger.
Section 5.2 Capitalization. The authorized capital stock of URS
consists of 20,000,000 shares of URS Common Stock, par value $0.01 per share,
and 1,000,000 shares of preferred stock, par value $1.00 per share (the "URS
Preferred Stock"). As of the date hereof, (i) 10,561,263 shares of URS Common
Stock are issued and outstanding, (ii) options to acquire 1,623,938 shares of
URS Common Stock are outstanding under all stock option plans and agreements of
URS, (iii) 2,463,043 shares of URS Common Stock (including shares of URS Common
Stock issuable upon exercise of the options identified in clause (ii) above) are
reserved for issuance pursuant to all employee and director plans of URS, and
(iv) there are no shares of URS Preferred Stock outstanding. All of the issued
and outstanding shares of URS Common Stock are validly issued, fully paid and
nonassessable and free of preemptive rights, and are listed on the New York
Stock Exchange and the Pacific Exchange. All of the URS Common Stock reserved
for issuance in exchange for the shares of the Woodward-Clyde Stock at the
Effective Time of the Merger in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and free
of preemptive rights, and are listed on the New York Stock Exchange and the
Pacific Exchange. The authorized capital stock of the Subsidiary consists of 100
shares of the Subsidiary Common Stock, par value $1.00 per share, all of which
shares are validly issued and outstanding, fully paid and nonassessable and are
owned by URS. Except as set forth above or as specified in Section 5.2 of the
URS Disclosure Letter, as of the date of this Agreement there are no shares of
capital stock of URS issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating URS to issue, transfer, sell, redeem, repurchase or
otherwise acquire
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any shares of its capital stock or securities. Except as provided in this
Agreement or as set forth in Section 5.2 of the URS Disclosure Letter, after the
Effective Time of the Merger, URS will have no obligation to issue, transfer or
sell any shares of its capital stock pursuant to any employee benefit plan or
otherwise.
Section 5.3 Authority Relative to this Agreement. Each of URS and the
Subsidiary has all requisite corporate power and authority to enter into this
Agreement and subject, in the case of this Agreement, to the consents and
approvals set forth in Section 5.4 below, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by URS and the Subsidiary and the consummation by URS and the Subsidiary of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of URS and the Subsidiary, including the unanimous
approval of their respective Boards of Directors, and no other corporate
proceedings on the part of URS or the Subsidiary are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by URS and the Subsidiary and constitutes a
valid and binding agreement of each of them, enforceable against each of them in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization or other similar laws relating to
enforcement of creditors' rights generally, and (ii) general equitable
principles.
Section 5.4 Consents and Approvals; No Violations. Except for the
applicable requirements of the Governmental Requirements, state securities or
blue sky laws, state and local laws and regulations relating to licensing, and
the filing of the Documents of Merger as required by the Delaware Law, no filing
with, and no permit, authorization, consent or approval of, any Government
Entity is necessary for the execution, delivery and performance of this
Agreement by URS and the Subsidiary or for the consummation by URS and the
Subsidiary of the transactions contemplated by this Agreement. Neither the
execution, delivery nor performance of this Agreement by URS and the Subsidiary,
nor the consummation by URS and the Subsidiary of the transactions contemplated
hereby, nor compliance by URS and the Subsidiary with any of the provisions
hereof, will (i) conflict with or result in any breach of any provisions of the
Certificate of Incorporation or By-Laws of URS or the Subsidiary or the Articles
or Certificate of Incorporation, as the case may be, or By-Laws of any of the
URS Subsidiaries, (ii) except as set forth in Section 5.4(ii) of the URS
Disclosure Letter, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, acceleration, vesting, payment, exercise,
suspension or revocation) under, any of the terms, conditions or provisions of
any note, bond, mortgage, deed of trust, security interest, indenture, license,
contract, agreement, plan or other instrument or obligation to which URS or any
of the URS Subsidiaries is a party or by which any of them or any of
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their properties or assets may be bound or affected, (iii) except as set forth
in Section 5.4(iii) of the URS Disclosure Letter, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to URS, any URS
Subsidiary or any of their properties or assets, (iv) except as set forth in
Section 5.4(iv) of the URS Disclosure Letter, result in the creation or
imposition of any Lien on any asset of URS or any URS Subsidiary, or (v) except
as set forth in Section 5.4(v) of the URS Disclosure Letter, cause the
suspension or revocation of any certificates of need, accreditation,
registrations, licenses, permits and other consents or approvals of governmental
agencies or accreditation organizations, except in the case of clauses (ii),
(iii), (iv) and (v) for violations, breaches, defaults, terminations,
cancellations, accelerations, creations, impositions, suspensions or revocations
which would not individually or in the aggregate have a URS Material Adverse
Effect.
Section 5.5 URS SEC Reports and Financial Statements. URS has delivered
to Woodward-Clyde true and complete copies of each registration statement,
report and proxy or information statement, including, without limitation, its
Annual Reports to Stockholders incorporated in material part by reference in
certain of such reports, in the form (including exhibits and any amendments
thereto) required to be filed with SEC since January 1, 1992 (collectively, the
"URS SEC Reports"). Except as set forth in Section 5.5 of the URS Disclosure
Letter, as of the respective dates such URS SEC Reports were filed or, if any
such URS SEC Reports were amended, as of the date such amendment was filed, each
of the URS SEC Reports (i) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder, and (ii) 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. Each of the
audited consolidated financial statements and unaudited consolidated interim
financial statements of URS (including any related notes and schedules) included
(or incorporated by reference) in its Annual Reports on Form 10-K for each of
the five fiscal years ended October 31, 1992, 1993, 1994, 1995 and 1996, when
filed, and Quarterly Reports on Form 10-Q for all interim periods subsequent
thereto (the "URS Financial Statements") fairly present, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of URS and the URS Subsidiaries as of its
date and the consolidated results of operations and cash flows for the period
then ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements). There has been no change in URS's accounting
policies or methods of making accounting estimates or changes in estimates that
are material to the URS Financial Statements, except as described in the notes
thereto.
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Section 5.6 Absence of Material Adverse and Other Changes. Except as
contemplated by this Agreement, and except as set forth in Section 5.6 of the
URS Disclosure Letter, since December 31, 1996, URS and the URS Subsidiaries
have conducted their business in the ordinary course, consistent with past
practices, and there has not been: (a) any event or occurrence that has resulted
in a URS Material Adverse Effect, or any development or combination of
developments of which URS has knowledge that is reasonably likely, in URS's
commercially reasonable judgment, to result in a URS Material Adverse Effect,
(b) any declaration, setting aside or payment of any dividend or other capital
distributions in respect of any of its capital stock or any redemption or
repurchase or other acquisition of any shares of its capital stock, (c) any
increase in the regular compensation of any of the officers or employees of URS
or the URS Subsidiaries, except such increases as have been granted in the
ordinary course of business in accordance with its customary practices (which
shall include normal periodic performance reviews, promotions and related
compensation increases), (d) any incurrence, assumption or guarantee by URS or
any of the URS Subsidiaries of any indebtedness for borrowed money other than in
the ordinary course of business consistent with past practices, (e) any
transaction or commitment made, or any contract or agreement entered into, by
URS or any of the URS Subsidiaries (including the acquisition or disposition of
any assets) or any relinquishment by URS or any of the URS Subsidiaries of any
contract or other right, in either case, material to URS's business taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement, (f) any change in any method of accounting or accounting practice by
URS or any of the URS Subsidiaries, except for any such change after the date
hereof required by reason of a mandatory concurrent change in GAAP, (g) any loss
or damage to the properties or assets of URS or the URS Subsidiaries which has
resulted or is reasonably likely to result in a URS Material Adverse Effect, or
(h) any agreement or any commitment to take any of the actions described in this
Section 5.6.
Section 5.7 Litigation. Except for litigation disclosed in the notes to
the financial statements included in the URS SEC Reports or as set forth in
Section 5.7 of the URS Disclosure Letter, there is no suit, action or proceeding
(whether at law or equity, before or by any Federal, state or foreign court,
tribunal, commission, board, agency or instrumentality, or before any
arbitrator) pending or, to the best knowledge of URS, threatened against or
affecting URS or any of the URS Subsidiaries, the outcome of which, in the
reasonable judgment of URS, is likely individually or in the aggregate to have a
URS Material Adverse Effect, or which challenges the validity of this Agreement
or seeks to prevent, enjoin, materially alter or materially delay the
transactions contemplated hereby, nor is there any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against URS or
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any of the URS Subsidiaries having, or which, insofar as can reasonably be
foreseen, in the future may have, any such effect.
Section 5.8 Absence of Undisclosed Liabilities. Except for liabilities
or obligations which are accrued or reserved against in the URS Financial
Statements (or reflected in the notes thereto) or which were incurred after
December 31, 1996 in the ordinary course of business and consistent with past
practices or in connection with the transactions contemplated by this Agreement,
URS and the URS Subsidiaries do not have any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated balance sheet (or reflected in the notes thereto).
Section 5.9 No Default. Except as set forth in Section 5.9 of the URS
Disclosure Letter, neither URS nor any of the URS Subsidiaries is in violation
or breach of, or default under (and to the best knowledge of URS no event has
occurred which with notice or the lapse of time or both would constitute a
violation or breach of, or default under) any term, condition or provision of
(a) its Certificate or Articles of Incorporation, as the case may be, or Bylaws,
(b) any note, bond, mortgage, deed of trust, security interest, indenture,
license, contract, agreement, plan, lease, commitment or other instrument or
obligation to which URS or any of the URS Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or affected, (c)
any order, writ, injunction, decree, statute, rule or regulation applicable to
URS or any of the URS Subsidiaries or any of their properties or assets, or (d)
any certificate of need, accreditation, registration, license, permit and other
consent or approval of governmental agencies or accreditation organization,
except in the case of clauses (b), (c) and (d) above for violations, breaches or
defaults which would not individually or in the aggregate have a URS Material
Adverse Effect.
Section 5.10 Information Supplied. None of the information supplied or
to be supplied by URS, the URS Subsidiaries, auditors, attorneys, financial
advisors, other consultants or advisors or the Subsidiary for inclusion in the
Form S-4 or the Proxy Statement/Form S-4, will, in the case of the Proxy
Statement and any amendment or supplement thereto, at the time of the mailing of
the Proxy Statement and any amendment or supplement thereto, and at the time of
any meetings of stockholders of Woodward-Clyde and URS to vote upon this
Agreement and the transactions contemplated hereby, or in the case of the Form
S-4, as amended or supplemented, at the time it becomes effective and at the
time of any post-effective amendment thereto contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading or necessary to correct any statement in any
earlier filing with the SEC of such Proxy
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Statement/Form S-4 or any amendment or supplement thereto or any earlier
communication (including the Proxy Statement/Form S-4) to stockholders of
Woodward-Clyde or URS with respect to the transactions contemplated by this
Agreement. The Form S-4 and the Proxy Statement/Form S-4 as it relates to URS
and its Subsidiaries will comply as to form in all material respects with the
provisions of all applicable laws including the provisions of the Securities Act
and the Exchange Act and the rules and regulations of the SEC thereunder, except
that no representation is made by URS with respect to information supplied by
Woodward-Clyde specifically for inclusion therein.
Section 5.11 Board Approvals; Opinion of Financial Advisor. The Boards
of Directors of URS and the Subsidiary (at meetings duly called and held or
pursuant to valid written consents) have unanimously determined that the
transactions contemplated hereby are fair to and in the best interests of URS
and the Subsidiary and the stockholders of URS. The Board of Directors of URS
have received the opinion, dated the date of this Agreement, of Smith Barney
Inc. ("SB"), URS's financial advisor, substantially to the effect that, as of
such date, the Merger Consideration is fair to URS from a financial point of
view.
Section 5.12 Brokers. No broker, finder or investment banker (other
than SB) is entitled to any brokerage, finder's fee or commission payable by URS
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of URS.
Section 5.13 Disclosure. No representation or warranty by URS in this
Agreement, the schedules hereto or any certificates delivered pursuant to the
terms hereof, contains or will contain an untrue statement of material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
Section 5.14 Financing Commitment Letter. URS has delivered to
Woodward-Clyde a true and correct copy of a commitment letter from Wells Fargo
Bank, National Association, in the form of a letter dated July 7, 1997 and a
letter dated August 13, 1997 with a Summary of Terms and Conditions attached,
relating to the financing necessary to fund the cash component of the Merger
consideration and refinance the outstanding indebtedness of URS and
Woodward-Clyde and provide a working capital facility following the Closing Date
(the "Commitment Letter"). The Commitment Letter has not been amended or
rescinded, and remains in full force and effect in accordance with its terms as
of the date of this Agreement.
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ARTICLE 6
PRE-CLOSING COVENANTS
Section 6.1 Covenants of All Parties. During the period from the date
of this Agreement until the earlier of the termination of this Agreement or the
Effective Time of the Merger, each of the parties hereto covenants and agrees as
follows;
6.1.1 Advice of Changes. Each party shall promptly advise each
of the other parties in writing of (i) any event, condition, fact or
circumstance occurring or existing prior to, on or subsequent to the date of
this Agreement that would render any representation or warranty of such party
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, (ii) any breach of
any covenant or obligation of such party arising under this Agreement, and (iii)
any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Article 7 impossible or
unlikely.
6.1.2 Regulatory Approvals. Each party shall execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body, Federal, state or local or foreign, which may be
reasonably required, or which the other party may reasonably request, in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, filings under the HSR Act. Each party
shall use its best efforts to obtain all such authorizations, approvals and
consents.
6.1.3 Confidentiality. Each party shall hold in confidence all
nonpublic information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Each party shall continue to abide by the terms of the
confidentiality agreement between URS and Woodward-Clyde in effect as of the
date hereof (the "Confidentiality Agreement").
6.1.4 Best Efforts. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its best
efforts to take or cause to be taken all actions, to do or cause to be done, and
to assist and cooperate with the other party hereto in doing, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective, in the most expeditious manner practicable, the
transactions
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contemplated by this Agreement, including (i) using all reasonable efforts to
obtain all necessary waivers, consents and approvals from third parties, (ii)
defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby and thereby, and (iii) executing and delivering
such instruments, and taking such other actions as the other party hereto may
reasonably require in order to cause the conditions set forth in Article 7 to be
satisfied on a timely basis and otherwise carry out the intent of this
Agreement.
6.1.5 Financing Arrangements. The parties hereto shall take
all actions as may be reasonably necessary to fulfill the covenants and
conditions set forth in the Commitment Letter to obtain the consent of the
Lenders to the Merger and the financing necessary to fund the cash component of
the Merger Consideration.
6.1.6 Tax Matters. Prior to filing the Form S-4 with the SEC,
and again prior to the Closing, Woodward-Clyde and URS shall execute and deliver
to Cooley Godward llp and to Bronson, Bronson & McKinnon LLP, tax representation
letters in such form as such firms may reasonably request for use in connection
with the legal opinions required in connection with the filing of the Proxy
Statement/Form S-4 with the SEC and as contemplated by Sections 7.1.6 and 7.2.7.
Section 6.2 Covenants of Woodward-Clyde. During the period from the
date of this Agreement until the earlier of the termination of this Agreement or
the Effective Time of the Merger, Woodward-Clyde agrees (except as expressly
contemplated by this Agreement or with the prior written consent of URS) that:
6.2.1 Conduct of Business Pending Merger.
(a) Ordinary Course. Woodward-Clyde and the
Woodward-Clyde Subsidiaries shall carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such businesses, use all
reasonable efforts to preserve intact their present business organizations, keep
available the services of their present officers and employees, and preserve
their relationships with customers, suppliers and others having business
dealings with Woodward-Clyde and the Woodward-Clyde Subsidiaries. Woodward-Clyde
shall promptly notify URS of any event or occurrence or emergency not in the
ordinary course of business of Woodward-Clyde or the Woodward-Clyde Subsidiaries
which could result in a Woodward-Clyde Material Adverse Effect. Neither
Woodward-Clyde nor any of the Woodward-Clyde Subsidiaries shall (except with the
prior written consent of URS):
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(i) grant any options, warrants, restricted
stock, stock bonus or other awards under any stock option or employee benefit
plan or otherwise, or authorize cash payments in exchange for any options,
restricted stock, stock bonus or other awards granted under any of such plans;
(ii) grant any severance or termination pay
to any officer or director or, except in the ordinary course of business
consistent with past practices, to any employee of Woodward-Clyde or any
Woodward-Clyde Subsidiary;
(iii) except in the ordinary course of
business consistent with past practices and other than transfers between or
among Woodward-Clyde and any Woodward-Clyde Subsidiary, transfer to any person
or entity any rights to the Woodward-Clyde Intellectual Property Rights;
(iv) commence a lawsuit other than: (1) for
the routine collection of bills; (2) in such cases where Woodward-Clyde in good
faith determines that failure to commence suit would result in a material
impairment of a valuable aspect of Woodward-Clyde's business, provided
Woodward-Clyde consults with URS prior to filing such suit; or (3) for a breach
of this Agreement; and
(v) enter into one or more leases which
extend for a period of two years beyond the date of this Agreement and which
obligate the Company to pay aggregate gross rent in excess of $500,000.
(b) Dividends; Changes in Stock. Woodward-Clyde
shall not, and it shall not permit any of the Woodward-Clyde Subsidiaries to,
(i) declare or pay any dividends on or make other capital distributions in
respect of any of its capital stock, except for intercompany dividends at times
consistent with prior practice, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) repurchase, redeem or otherwise acquire, any shares of
its capital stock.
(c) Issuances of Securities. Woodward-Clyde shall
not, and it shall not permit any of the Woodward-Clyde Subsidiaries to, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into such shares, or
any rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interests in such
capital stock.
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(d) Governing Documents. Woodward-Clyde shall not,
nor shall it cause or permit any of the Woodward-Clyde Subsidiaries to, amend
its articles or certificate of incorporation or by-laws.
(e) No Acquisitions. Woodward-Clyde shall not, and
it shall not permit any of the Woodward-Clyde Subsidiaries to acquire, or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof.
(f) No Dispositions. Other than sales or licenses of
products or technology in the ordinary course of business consistent with prior
practice, Woodward-Clyde shall not, and it shall not permit any of the
Woodward-Clyde Subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, any of its assets, except for such dispositions in the ordinary
course of business or in amounts which are not material, in the aggregate, to
the business of Woodward-Clyde.
(g) Indebtedness. Woodward-Clyde shall not, and
shall not permit any of the Woodward-Clyde Subsidiaries to, incur any
indebtedness for borrowed money or guarantee any such indebtedness or sell any
debt securities or warrants or rights to acquire any debt securities of
Woodward-Clyde or any of the Woodward-Clyde Subsidiaries or guarantee any debt
securities of others, except in the ordinary course of business consistent with
past practices.
(h) Plans; Compensation. Except as otherwise
provided in this Agreement, Woodward-Clyde shall not, and shall not permit any
of the Woodward-Clyde Subsidiaries to, adopt or amend in any material respect
any Woodward-Clyde Plan or pay any pension or retirement allowance not required
by any existing Woodward-Clyde Plan. Woodward-Clyde shall not and shall not
permit any Woodward-Clyde Subsidiary to, enter into any employment contracts,
pay any special bonuses or special remuneration to officers, directors or
employees, or increase the salaries, wage rates or fringe benefits of (i) any of
its officers or employees whose compensation exceeded $100,000 during the fiscal
year ending December 31, 1996, or (ii) any of its other officers and employees
other than pursuant to scheduled reviews under Woodward-Clyde's or the
Woodward-Clyde Subsidiary's normal compensation review cycle, in all cases
consistent with existing policies and past practice.
(i) Tax Matters. Woodward-Clyde shall not make any
tax election that would have a Woodward-Clyde Material Adverse Effect or settle
or compromise
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any income tax liability of Woodward-Clyde or any of the Woodward-Clyde
Subsidiaries that would have a Woodward-Clyde Material Adverse Effect.
(j) Discharge of Liabilities. Woodward-Clyde shall
not, and it shall not permit any of the Woodward-Clyde Subsidiaries to, pay,
discharge, settle or satisfy any claims, liabilities or obligations, except in
the ordinary course of business or in amounts which are not material,
individually or in the aggregate, to the business of Woodward-Clyde, provided
that nothing herein shall prevent Woodward-Clyde from settling the litigation
filed on March 13, 1996, by Woodward-Clyde in the Denver District Court relating
to the acquisition by Woodward-Clyde in April 1995 of Geo-Con, Inc. and all
claims and counterclaims relating to or arising out of such acquisition
(collectively, the "GeoCon Litigation") prior to the Closing provided that such
settlement does not require any payments by Woodward-Clyde or any Woodward-Clyde
Subsidiary to any third party and does not impose any continuing cost or
obligation on Woodward-Clyde or any Woodward-Clyde Subsidiary (other than terms
and conditions typical of standard settlement agreements).
(k) Material Agreements. Except in the ordinary
course of business, neither Woodward-Clyde nor any of the Woodward-Clyde
Subsidiaries shall modify, amend, or terminate any Material Agreement or waive,
release or assign any material rights or claims under such Material Agreement.
(l) Agreement. Neither Woodward-Clyde nor any of the
Woodward-Clyde Subsidiaries shall agree or commit to do any of the actions
described in this Section 6.2.1.
6.2.2 Stockholders' Meeting; Proxy Statement. Woodward-Clyde
shall hold a meeting of its stockholders at the earliest practicable date to
submit this Agreement and related matters for their consideration and approval,
which approval shall be recommended by Woodward-Clyde's Board of Directors
(subject to the fiduciary obligations of its directors and officers).
Woodward-Clyde shall send to its stockholders, for the purpose of considering
and voting upon the Merger, a Proxy Statement satisfying all requirements of
applicable state and Federal laws, shall use its best efforts to obtain approval
of this Agreement and the Merger by the requisite stockholder vote (subject to
the fiduciary obligations of its directors and officers), and shall be solely
responsible for any statement, information or omission in the Proxy Statement
relating to it or its affiliates.
6.2.3 Acquisition Proposals. From the date hereof until the
earlier of the termination of this Agreement or the consummation of the Merger,
Woodward-Clyde and the Woodward-Clyde Subsidiaries will not, and will cause
their respective officers, directors,
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employees, agents and representatives not to, directly or indirectly, encourage,
solicit, accept, initiate or conduct discussions or negotiations with, provide
any information to, or enter into any agreement with, any corporation,
partnership, limited liability company, person or other entity or group
concerning the acquisition of all or a substantial part of the assets, business
or capital stock of Woodward-Clyde, whether through purchase, merger,
consolidation, exchange or any other business combination (each of the
foregoing, an "Acquisition Proposal"). Notwithstanding anything to the contrary
in the preceding sentence, nothing herein shall prevent Woodward-Clyde and its
officers and directors, from considering, discussing, negotiating, responding to
and accepting unsolicited firm offers for any such transaction from persons
other than URS if and to the extent that, in the written opinion of
Woodward-Clyde's outside counsel, failure to do so would be reasonably likely to
constitute a violation of applicable law or a breach of the fiduciary duties of
Woodward-Clyde's directors to Woodward-Clyde's stockholders. Woodward-Clyde
shall immediately provide written notice to URS of the terms and other details
of any such unsolicited inquiry or proposal relating to an Acquisition Proposal.
In the event that Woodward-Clyde or any of its officers or directors enters into
any discussions for any reason or negotiations relating to any such Acquisition
Proposal from any person other than URS, Woodward-Clyde shall immediately
reimburse URS for all expenses and costs incurred by URS in connection with the
transactions contemplated by this Agreement up to an aggregate maximum of
$500,000, whether or not Woodward-Clyde ultimately responds favorably to,
accepts or enters into any letter of intent, understanding or other agreement
relating to such Acquisition Proposal. In addition, in the event that
Woodward-Clyde or any of its officers or directors shall enter into any letter
of intent, understanding or other agreement with a party other than URS relating
to the acquisition of all or a substantial part of the assets, business or
capital stock of Woodward-Clyde, whether through purchase, merger,
consolidation, exchange or any other business combination, either in violation
of the no-shop agreement set forth in this Section or within nine (9) months
after termination of this Agreement for any reason, then immediately upon
entering into such letter of intent, understanding or other agreement,
Woodward-Clyde shall pay to URS a termination fee in the amount of $3.5 million,
less the aggregate amount of the URS expenses and costs previously reimbursed to
URS pursuant to the preceding sentence (the "Termination Fee"); provided,
however, that such Termination Fee shall not be payable if, prior to the entry
by Woodward-Clyde into such letter of intent, understanding or other agreement,
URS has unilaterally declined to close the Merger, or the parties have agreed to
terminate this Agreement by mutual written consent under Section 9.1.1 of this
Agreement, or this Agreement has been properly terminated by Woodward-Clyde
(without any breach of its obligations under this Agreement) pursuant to
Sections 9.1.2(ii), 9.1.5 or 9.1.6. The parties acknowledge and agree that the
expense reimbursement obligation and Termination Fee described in this Section
shall be the exclusive remedy to URS in the event of a breach by Woodward-Clyde
of this Section 6.2.3, and, in any such event, URS shall be
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entitled, in addition to receiving such payments, to equitable remedies,
including, without limitation, specific performance and enjoining of any actions
determined to be in breach of this Agreement; provided that such exclusive
remedy limitation applicable to breach of this Section 6.2.3 shall not prevent
URS from pursuing any and all remedies available to it, including without
limitation seeking actual and consequential damages and equitable remedies, for
breach by Woodward-Clyde of any other provision of this Agreement.
6.2.4 Maintenance of Business. Woodward-Clyde will use its
best efforts to carry on and preserve its business and its relationships with
clients, customers, suppliers, employees and others in substantially the same
manner as it has prior to the date hereof. If the executive management of
Woodward-Clyde becomes aware of a material deterioration in the relationship
with any significant client, customer, supplier or key employee, it will
promptly bring such information to the attention of URS in writing and, if
requested by URS, will use its best efforts to restore the relationship.
6.2.5 Access. Woodward-Clyde shall afford to URS and to URS's
financial advisors, legal counsel, accountants, financing sources and other
authorized representatives access during normal business hours to all of its
books, records, properties, offices and personnel.
6.2.6 Liability Insurance. On or before the Closing Date,
Woodward-Clyde shall procure (subject to the approval of URS) continuing
directors' and officers' liability coverage (tail coverage) for directors and
officers of Woodward-Clyde who have served as directors and officers of
Woodward-Clyde or its affiliates (the "Woodward-Clyde D & O Policy"), prior to
the Effective Time of the Merger, with respect to acts or failures to act prior
to the Effective Time of the Merger. Said policy shall have a term of not less
than three (3) years after the Closing Date.
6.2.7 Affiliate Agreements. Woodward-Clyde shall use its best
efforts to deliver to URS, prior to the date the preliminary Proxy Statement is
mailed to the SEC, an agreement or agreements, in form and substance reasonably
satisfactory to URS, signed by each officer, director, holder of more than 1% of
the outstanding Woodward-Clyde Common Stock or Woodward-Clyde Preferred Stock
and each other person who may be deemed to be an "affiliate" of Woodward-Clyde
as defined in the Securities Act, providing a "continuity of interest"
representation in a manner sufficient to satisfy the requirements of the Code
regarding the tax-free nature of the Merger and acknowledging the restrictions
on transfer of the URS Common Stock to be received by them pursuant to the
Merger under Rules 144 and 145 promulgated under the Securities Act.
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6.2.8 Comfort Letter. Woodward-Clyde shall deliver to URS a
comfort letter, dated a date not more than two (2) business days before the date
upon which the Form S-4 becomes effective, from Ernst & Young, independent
public accountants for Woodward-Clyde, in form and substance reasonable
satisfactory to URS, covering such matters as are normally covered in a comfort
letter delivered in connection with a registration statement on Form S-4
covering transactions similar to the Merger.
6.2.9 FIRPTA Matters. At the Closing, Woodward-Clyde shall
deliver (a) to URS a statement (in form reasonable acceptable to URS) conforming
to the requirements of Section 1.897-2(h)(1)(i) of the United States Treasury
Regulations, and (b) to the Internal Revenue Service the notification required
under Section 1.897-2(h)(2) of such Regulations.
6.2.10 Employment and Noncompetition Agreements.
Woodward-Clyde shall use its best efforts to cause such of its key employees as
may be identified in advance by URS to execute and deliver Employment and
Noncompetition Agreements in such form and substance as may be reasonably
requested by URS.
Section 6.3 Covenants of URS. During the period from the date of this
Agreement until the earlier of the termination of this Agreement or the
Effective Time of the Merger, URS and the Subsidiary agree (except as expressly
contemplated by this Agreement or with the prior written consent of
Woodward-Clyde) that:
6.3.1 Stockholders' Meeting; Proxy Statement. URS shall hold a
meeting of its stockholders at the earliest practicable date to submit the
Agreement and related matters for their consideration and approval, which
approval shall be recommended by URS's Board of Directors (subject to the
fiduciary obligations of its directors and officers). URS shall send its
stockholders, for purposes of considering and voting upon the Merger, a Proxy
Statement satisfying all the requirements of applicable state and Federal laws,
shall use its best efforts to obtain approval of this Agreement and the Merger
by the requisite stockholder vote, and shall be solely responsible for any
statement, information or omission in the Proxy Statement relating to it or its
affiliates.
6.3.2 Registration Statement. The URS Common Stock to be
issued in the Merger shall be registered under the Securities Act on Form S-4.
As promptly as practicable after the date hereof, URS shall prepare and file
with the SEC the Form S-4 and any other documents required by the Securities Act
in connection with the Merger. URS shall use its best efforts to have the Form
S-4 declared effective as promptly as practicable after such filing. URS shall
also take any action required to be taken under any applicable state
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securities or "blue sky" laws in connection with the issuance of the URS Common
Stock in connection with the Merger.
6.3.3 Listing Agreement. As promptly as practicable after the
date hereof, URS shall prepare and submit to each of the New York Stock Exchange
and the Pacific Exchange a listing application covering the shares of the URS
Common Stock to be issued in connection with the Merger. URS shall use its best
efforts to obtain, prior to the Effective Time of the Merger, approval for the
listing of such URS Common Stock, subject to official notice of issuance.
6.3.4 Conduct of Business; Consultation. URS and the URS
Subsidiaries will carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent with such businesses, use all reasonable efforts to
preserve intact their present business organizations and their relationships
with clients, customers, suppliers and employees. URS will promptly notify
Woodward-Clyde of any event or occurrence or emergency not in the ordinary
course of business which could result in a URS Material Adverse Effect. In the
event URS is considering any material transaction or series of related
transactions involving the acquisition or disposition of assets with a value or
for consideration in excess of $20 million, it will first consult with the
executive management of Woodward-Clyde regarding such transaction(s), provided
that the approval of Woodward-Clyde shall not be required for any such
transaction(s) (except as indicated in the following sentence). Without the
prior approval of Woodward-Clyde, prior to the Closing Date, URS shall not
consummate, or enter into any binding agreement or other commitment to
consummate, any transaction or series of related transactions that would (i)
result in the acquisition of assets or a business for total consideration in
excess of $50 million or requiring the issuance of URS Common Stock in excess of
20% of the shares outstanding at that time, (ii) result in the disposition of
assets or any business for total consideration in excess of $100 million, or
(iii) otherwise require the prior approval of the stockholders of URS.
6.3.5 Access. URS shall afford to Woodward-Clyde and to
Woodward-Clyde's financial advisors, legal counsel and other authorized
representatives such access during normal business hours to its books, records,
properties, offices and personnel as Woodward-Clyde may reasonably request in
connection with the transactions contemplated by this Agreement.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
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Section 7.1 Conditions to Obligations of Woodward-Clyde. The
obligations of Woodward-Clyde to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the Merger of the following
conditions:
7.1.1 Representations and Warranties True at Closing. The
representations and warranties contained in this Agreement of URS and the
Subsidiary shall be deemed to have been made again at and as of the Closing with
respect to the stated facts then existing and shall be true in all material
respects.
7.1.2 Covenants Performed. All of the obligations of URS and
the Subsidiary to be performed at or before the Closing pursuant to the terms of
this Agreement shall be been duly performed.
7.1.3 Certificate. At the Closing, Woodward-Clyde shall have
received a Certificate signed by the President of each of URS and the Subsidiary
to the effect that each of the conditions set forth in Section 7.1.1 and 7.1.2
have been satisfied.
7.1.4 Stockholder Approvals. This Agreement and the Merger
shall have been duly approved by the affirmative vote of at least (a) 70% of the
shares of Woodward-Clyde Common Stock entitled to vote with respect thereto, (b)
a majority of the shares of Woodward-Clyde Preferred Stock entitled to vote with
respect thereto, and (c) a majority of the shares of URS Common Stock entitled
to vote with respect thereto (collectively, the "Stockholder Approvals").
7.1.5 Opinion of Counsel. Cooley Godward llp, counsel to URS,
shall have issued an opinion of counsel to Woodward-Clyde, dated the Closing
Date, in form and substance reasonably satisfactory to Woodward-Clyde, to the
effect that:
(i) URS and the Subsidiary are corporations validly
existing and in good standing under the laws of the State of Delaware and have
all requisite corporate power to own, operate and lease their properties and to
carry on their businesses as it is now being conducted;
(ii) URS and the Subsidiary have full corporate
power to enter into this Agreement and to carry out the transactions provided
for herein;
(iii) All corporate action required to be taken on
the part of URS and the Subsidiary to authorize them to execute and deliver this
Agreement and to consummate the transactions contemplated hereby have been duly
and validly taken.
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(iv) This Agreement has been duly and validly
authorized, executed and delivered by URS and the Subsidiary and, assuming due
authorization, execution, delivery and performance by each of the other parties
hereto, constitutes the valid and binding obligations of URS and the Subsidiary,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy or other laws relating to or affecting creditors' rights
generally and by equitable principles; and
(v) The shares of URS Common Stock issuable in
connection with the Merger have been duly and validly authorized and, upon
issuance, such shares will be fully paid and nonassessable.
In giving such opinions, such counsel shall be entitled to rely upon
certificates of officers of URS or any of its subsidiaries and public officials
with respect to factual matters upon which their opinions may be based, provided
that the extent of such reliance is set forth in such opinion and such opinion
states that it is reasonable for Woodward-Clyde to rely thereon.
7.1.6 Tax Opinion. Woodward-Clyde shall have received a legal
opinion of Bronson, Bronson & McKinnon LLP (or, if Bronson, Bronson & McKinnon
LLP for any reason does not render such legal opinion, a legal opinion of Cooley
Godward llp), dated as of the Closing Date, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code (it
being understood that, in rendering such opinion, such counsel may rely upon the
tax representation letters referred to in Section 6.1.6 and the continuity of
interest representations contained in the Affiliate Agreements referred to in
Section 6.2.7.); provided that, in the event that the aggregate amount of the
Applicable Common Cash Component exceeds 50% of the total value of the aggregate
Merger Consideration determined as of the Closing Date, then this condition
shall be deemed to have been waived with no further action on the part of
Woodward-Clyde.
7.1.7 Listing. The shares of URS Common Stock to be issued in
the Merger shall have been approved for listing (subject to notice of issuance)
on the New York Stock Exchange and the Pacific Exchange.
7.1.8 Form S-4. The Form S-4 pertaining to the URS Common
Stock to be issued in connection with the Merger shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
7.1.9 Merger Documents. The Merger Documents shall have been
filed with the Secretary of State of the State of Delaware, as required by law.
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7.1.10 Material Adverse Changes. There shall have been no URS
Material Adverse Effect between the date of this Agreement and the date of the
Closing.
7.1.11 HSR Filing. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transaction contemplated by this Agreement, which action
shall not have been withdrawn or terminated.
Section 7.2 Conditions to Obligations of URS and the Subsidiary. The
obligations of URS and the Subsidiary to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the Merger of the
following conditions:
7.2.1 Representations and Warranties True at Closing. The
representations and warranties contained in this Agreement of Woodward-Clyde
shall be deemed to have been made again at and as of the Closing with respect to
the stated facts then existing and shall be true in all material respects.
7.2.2 Covenants Performed. All of the obligations of
Woodward-Clyde to be performed at or before the Closing pursuant to the terms of
this Agreement shall be been duly performed.
7.2.3 Certificate. At the Closing, URS and the Subsidiary
shall have received a Certificate signed by the President of Woodward-Clyde to
the effect that each of the conditions set forth in Section 7.2.1 and 7.2.2 have
been satisfied.
7.2.4 Stockholder Approvals. The Stockholder Approvals shall
have been obtained; and the Woodward-Clyde Group, Inc. Shareholders' Agreement
(the "Shareholders' Agreement") shall have been effectively amended or
terminated in such manner as may be necessary or appropriate to consummate the
Merger without further liability or cost to URS thereunder following the Closing
Date.
7.2.5 Opinion of Counsel. Bronson, Bronson & McKinnon LLP,
counsel to Woodward-Clyde, shall have issued an opinion of counsel to URS, dated
the Closing Date, in form and substance reasonably satisfactory to URS, to the
effect that:
(i) Woodward-Clyde is a corporation validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power to
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own, operate and lease its properties and to carry on its business as it is now
being conducted;
(ii) Woodward-Clyde has full corporate power to
enter into this Agreement and to carry out the transactions provided for herein;
(iii) All corporate action required to be taken on
the part of Woodward-Clyde to authorize it to execute and deliver this Agreement
and to consummate the transactions contemplated hereby have been duly and
validly taken; and
(iv) This Agreement has been duly and validly
authorized, executed and delivered by Woodward-Clyde and, assuming due
authorization, execution, delivery and performance by each of the other parties
hereto, constitutes the valid and binding obligation of Woodward-Clyde,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy or other laws relating to or affecting creditors' rights
generally and by equitable principles.
In giving such opinions, such counsel shall be entitled to rely upon
certificates of officers of Woodward-Clyde or any of its subsidiaries and public
officials with respect to factual matters upon which their opinions may be
based, provided that the extent of such reliance is set forth in such opinion
and such opinion states that it is reasonable for URS to rely thereon.
7.2.6 Government Contracts Opinion. URS shall have received a
legal opinion of a reputable law firm (reasonably acceptable to URS) experienced
in government contracts matters, reasonably satisfactory in form and content to
URS, to the effect that the execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not contravene, conflict with or
result in a violation of, or give any Governmental Body the right to exercise
any remedy or to obtain any relief under, any Government Contract to which
Woodward-Clyde or any Woodward-Clyde Subsidiary is a party or under which the
Woodward-Clyde or any Woodward-Clyde Subsidiary has any rights or obligations.
7.2.7 Tax Opinion. URS shall have received a legal opinion of
Cooley Godward llp, dated as of the Closing Date, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the Code
(it being understood that, in rendering such opinion, such counsel may rely upon
the tax representation letters referred to in Section 6.1.6 and the continuity
of interest representations contained in the Affiliate Agreements referred to in
Section 6.2.7.)
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7.2.8 Listing. The shares of URS Common Stock to be issued in
the Merger shall have been approved for listing (subject to notice of issuance)
on the New York Stock Exchange and the Pacific Exchange.
7.2.9 Agreements. URS shall have received duly executed copies
of the Affiliate Agreements contemplated by Section 6.2.7 and the Employment and
Noncompetition Agreements contemplated by Section 6.2.10.
7.2.10 Form S-4. The Form S-4 pertaining to the URS Common
Stock to be issued in connection with the Merger shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
7.2.11 Merger Documents. The Merger Documents shall have been
filed with the Secretary of State of the State of Delaware, as required by law.
7.2.12 Material Adverse Changes. There shall have been no
Woodward- Clyde Material Adverse Effect between the date of this Agreement and
the date of the Closing.
7.2.13 HSR Filing. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transaction contemplated by this Agreement, which action
shall not have been withdrawn or terminated.
7.2.14 Consents. Other than the filing of the Merger Documents
as contemplated in Section 1.2, the parties shall have made such filings, and
obtained all consents of Governmental Entities, required to consummate the
transactions contemplated hereby.
7.2.15 No Litigation. There shall not be pending any action,
proceeding or other application before any court or Government Entity brought by
any Government Entity (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking to
obtain any material damages, or (ii) seeking to prohibit or impose any material
limitations on URS's ownership or operation of all or any portion of the
combined business of URS and Woodward-Clyde.
7.2.16 Financing Arrangements. The conditions set forth in the
Commitment Letter shall have been satisfied.
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ARTICLE 8
ADDITIONAL AGREEMENTS
Section 8.1 Public Announcements. URS, the Subsidiary and
Woodward-Clyde agree that they will not issue any press release or otherwise
make any public statement or respond to any press inquiry with respect to this
Agreement or the transactions contemplated hereby without the prior approval of
the other party (which approval will not be unreasonably withheld), except as
may be required by applicable law.
Section 8.2 Confidentiality. No party to this Agreement shall use or
disclose any non-public information obtained from another party for any purpose
unrelated to the Merger, and, if this Agreement is terminated for any reason
whatsoever, each party shall return to the other all originals and copies of all
documents and papers containing all information furnished to such party pursuant
to this Agreement, or during the negotiations which preceded this Agreement, and
shall neither use nor disclose any such information except to the extent that
such information is available to the public, is rightfully obtained from third
parties, or is independently developed.
Section 8.3 Additional Agreements. In case at any time after the
Effective Time of the Merger any further action is reasonably necessary or
desirable to vest the Surviving Corporation with full title to all properties,
assets, rights, approvals, immunities and franchises of either of the
constituent corporations, the proper officers and directors of each corporation
which is a party to this Agreement shall take all such necessary corporate
action.
Section 8.4 Non-Liability of Agents and Stockholders. No stockholder,
director, officer or employee of any party hereto shall be individually liable
for any breach of the representations, warranties or covenants of any party
hereto contained herein in the absence of fraud or willful misconduct on the
part of such stockholder, director, officer or employee.
Section 8.5 Woodward-Clyde Capital Accumulation (Retirement) Plan; GCH
Acquisition Corp. Retirement Program. Woodward-Clyde will take and cause to be
taken any and all actions necessary or appropriate, including any necessary or
appropriate plan amendments, (i) to suspend any obligation to contribute shares
of Woodward-Clyde Stock to, or to redeem shares of Woodward-Clyde Stock from,
the Woodward-Clyde Capital Accumulation (Retirement) Plan (the "Retirement
Plan") during the period from the date of this Agreement to the Effective Time
of the Merger, (ii) to either, at the option of URS, terminate the Retirement
Plan and/or the GCH Acquisition Corp. Retirement Program (the
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"GCH Plan") one day prior to the Effective Time of the Merger and/or merge the
Retirement Plan and the CGH Plan with and into the URS 401(k) Retirement Plan
from the Effective Time of the Merger, and (iii) to eliminate any options
available to the Retirement Plan, the CGH Plan or their participants to purchase
employer securities with assets held in the Retirement Plan or the GCH Plan from
and after the Effective Time of the Merger.
Section 8.6 Woodward-Clyde Annual Bonus Plan. Following the Closing,
URS will cause to be completed an audit of the consolidated financial statements
of Woodward-Clyde for the period beginning on January 1, 1997 and ending on the
Closing Date (the "Bonus Period"), which will be prepared in accordance with
GAAP applied on a consistent basis with the Woodward-Clyde Financial Statements
(the "Woodward-Clyde Interim Financial Statements"). Promptly following the
completion of such audit, URS will cause the Surviving Corporation to pay
bonuses to the former employees of Woodward-Clyde in a manner consistent with
prior practices, but prorated for the Bonus Period, as follows:
8.6.1 Bonus Pool. The aggregate amount of the bonus pool (the
"Bonus Pool") shall equal the "Annualization Ratio" multiplied by the greater of
either (i) $500,000 or (ii) 50% of the excess, if any, of Annualized 1997 Profit
over $8,000,000. "Annualized 1997 Profit" shall mean the product of (A) the net
income of Woodward-Clyde for the Bonus Period, as reported in the Woodward-Clyde
Interim Financial Statements, as adjusted (i) before any deduction for taxes
(ii) before any deduction for any bonuses to be paid pursuant to this Section
8.6, (iii) before the addition of any net income attributable to settlement of
the GeoCon Litigation, (iv) before the deduction of any litigation expenses
attributable to the GeoCon Litigation up to the amount of the proceeds of any
settlement of the GeoCon Litigation, and (v) before deduction of the fees and
expenses of OC and legal expenses, loan pre-payment charges and other external
expenses incurred by Woodward-Clyde in connection with the negotiation,
execution and delivery of this Agreement and consummation of the transactions
contemplated hereby, divided by (B) the Annualization Ratio. "Annualization
Ratio" means the ratio determined by dividing the number of actual days in the
Bonus Period by 365.
8.6.2 Bonus Pool Allocation. On or before the Closing Date,
Woodward-Clyde shall appoint a committee of Woodward-Clyde officers (the
"Allocation Committee") which will have responsibility for allocating the
amounts available in the Bonus Pool. The Allocation Committee shall allocate
bonuses among those individuals who were employed by Woodward-Clyde on the
Closing Date based upon its evaluation of the relative contributions of such
employees to Woodward-Clyde during the ten month period ending October 31, 1997,
and in a manner consistent with the past annual bonus plan allocation practices
of Woodward-Clyde. The final bonus allocations determined by the Allocation
Committee shall
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be subject to the final approval of the Chief Executive Officer of URS, which
shall not be unreasonably withheld.
Section 8.7 URS Board of Directors. On or before the Closing Date, URS
will cause the authorized number of directors serving on its Board of Directors
to be increased by two (2), and will cause Messrs. Frank S. Waller ("Waller")
and Jean-Yves Perez ("Perez"), or in the event either of them is unable to
serve, Mr. Robert K. Wilson ("Wilson"), to be appointed to the vacancies created
effective as of the Effective Time of the Merger. Subsequent to the Closing
Date, URS will take such actions as may be reasonably necessary to nominate
Waller and Perez (or, in the event that either or both of them is unable to
serve or has ceased to be an employee of URS or any of its Subsidiaries, Wilson)
for reelection, and to vote any proxies obtained on behalf of the URS Board of
Directors for their reelection, at any meeting of the URS stockholders at which
directors are to be elected or in connection with any action to be taken by
written consent by the URS stockholders for the election of directors, until the
second anniversary of the Closing Date. In the event that either Waller or Perez
(or Wilson if he is then serving as a director of URS) ceases to be employed by
URS or any of its Subsidiaries within such two year period, then he shall resign
his position as a director concurrent with such termination of employment.
53.
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ARTICLE 9
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Merger, whether before or after the
Stockholder Approvals have been obtained:
9.1.1 by mutual written consent of URS and Woodward-Clyde;
9.1.2 by either Woodward-Clyde or URS if (i) the Stockholder
Approvals shall not have been obtained at duly called meetings of the
stockholders of Woodward-Clyde and URS or any adjournment thereof; (ii) a
Governmental Entity of competent jurisdiction shall have issued an order, decree
or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
or (iii) the Merger shall not have been consummated before December 31, 1997
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or agreement contained in this Agreement);
9.1.3 By URS if there has been a breach by Woodward-Clyde of
any representation, warranty, covenant or other agreement in this Agreement
which has a Woodward-Clyde Material Adverse Effect, and such breach has not been
cured, or Woodward-Clyde has not commenced reasonable efforts to cure such
breach, within thirty (30) days after written notice of such breach is given by
URS to Woodward-Clyde;
9.1.4 By URS if Woodward-Clyde shall enter into any
discussions, negotiations or any letter of intent, understanding or other
agreement relating to an Acquisition Proposal, provided that no such termination
shall affect the rights of URS to reimbursement of expenses and the Termination
Fee as provided in Section 6.2.3; or
9.1.5 By Woodward-Clyde if there has been a breach by URS or
the Subsidiary of any material representation, warranty, covenant or other
agreement, and such breach has not been cured, or URS and the Subsidiary have
not commenced reasonable efforts to cure such breach, within thirty (30) days
after written notice of such breach is given by Woodward-Clyde to URS. In the
event of a breach by URS of the covenant set forth in the last sentence of
Section 6.3.4, then termination of this Agreement under this Section 9.1.5 shall
be the sole remedy of Woodward-Clyde with respect to such breach.
54.
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9.1.6 By Woodward-Clyde if any of the conditions set forth in
Section 7.1 hereof shall not have been fulfilled on or prior to the date
specified for fulfillment thereof, or shall have become impossible to fulfill
for reasons beyond the control of Woodward-Clyde, and such condition shall not
have been waived.
9.1.7 By URS if any of the conditions set forth in Section 7.2
hereof shall not have been fulfilled on or prior to the date specified for
fulfillment thereof, or shall have become impossible to fulfill for reasons
beyond the control of URS, and such condition shall not have been waived.
Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action without any requirement to
submit such action to the stockholders of such party.
Section 9.2 Effect of Termination and Abandonment. In the event of
termination of the Agreement by either Woodward-Clyde or URS as provided in
Section 9.1, this Agreement shall forthwith become void and have no effect, and
there shall be no liability or obligation on the part of Woodward-Clyde, URS or
the Subsidiary, or their respective officers and directors, except that (i) the
provisions of Section 6.2.3, this Section 9.2, and the Confidentiality Agreement
shall survive any such termination, and (ii) no party whose breach of its
representations, warranties, covenants or agreements set forth in this Agreement
was the basis of the other party's termination of this Agreement shall be
relieved from liability for damages occasioned by such breach, including any
expenses incurred by the other party in connection with this Agreement and the
transactions contemplated hereby.
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors at any time
before or after the Stockholder Approvals, but after the respective Stockholder
Approvals, no amendment shall be made which by law requires the further approval
of such stockholders without obtaining such approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 9.4 Extension; Waiver. At any time prior to the Effective Time
of the Merger, any party hereto, by action taken by its Board of Directors may,
to the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements, covenants, or conditions for the benefit of such party
55.
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contained herein. Any agreement on the part of a party hereto 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 shall not constitute a waiver of
these rights.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Survival of Representations and Warranties. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Effective Time of the
Merger. This Section 10.1 shall not limit any covenant or agreement after the
Effective Time of the Merger.
Section 10.2 Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter contained herein and supersedes all prior and contemporaneous agreements,
representations and undertakings of the parties. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by any party making the waiver.
Section 10.3 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed in
original, but all of which together shall constitute one and the same
instrument.
Section 10.4 Assignment. This Agreement shall be binding on, and shall
inure to the benefit of, the parties to it and their respective heirs, legal
representatives, successors and assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties hereto.
Section 10.5 Fees and Expenses. Except as otherwise expressly provided,
each of the parties shall pay their own fees, costs and expenses (including,
without limitation, legal and accounting expenses) incurred, or to be incurred,
by them in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated by this Agreement.
56.
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Section 10.6 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally or by facsimile
on the party to whom notice is to be given, or on the fifth day after mailing,
if mailed to the party on whom notice is to be given, by registered or certified
mail, postage prepaid, and properly addressed as follows:
If to URS and the Subsidiary:
URS Corporation 100
California Street, Suite
500 San Francisco, CA 94111-5239
Attn: Kent P. Ainsworth
Facsimile: (415) 398-1905
Confirmation: (415) 774-2700
with a copy to:
Cooley Godward llp
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
Attn: Samuel M. Livermore, Esq.
Facsimile: (415) 951-3699
Confirmation: (415) 693-2000
If to Woodward-Clyde:
Woodward-Clyde Group, Inc.
4582 S. Ulster Street, Suite 600
Denver, CO 80237
Attn: Robert K. Wilson
Facsimile: (303) 740-2650
Confirmation: (303) 740-2600
57.
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with a copy to:
Bronson, Bronson & McKinnon LLP
505 Montgomery Street
San Francisco, CA 94111-2514
Attn: Paul J. Sanner, Esq.
Facsimile: (415) 982-1397
Confirmation: (415) 986-4200
Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
Section 10.7 Governing Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California, without
giving effect to provisions thereof relating to conflicts of law.
Section 10.8 Further Action. Each of the parties hereto shall use such
party's best efforts to take such action as may be necessary or reasonably
requested by the other party hereto to carry out and consummate the transactions
contemplated by this Agreement.
Section 10.9 No Third Party Beneficiary. Nothing herein is intended to
create rights in any third party.
Section 10.10 Effect of Headings. The subject headings of the Articles
and Sections of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
Section 10.11 Severability. If any term of this Agreement or
application thereof shall be invalid or unenforceable, the remainder of this
Agreement shall remain in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
58.
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In Witness Whereof, the parties to this Agreement have duly executed it
on the day and year first above written.
WOODWARD-CLYDE: WOODWARD-CLYDE GROUP, INC.
By:/s/Robert K. Wilson
----------------------
Name: Robert K. Wilson
Title: Executive Vice President and
Chief Financial Officer
URS: URS CORPORATION
By:/s/Kent. P. Ainsworth
----------------------
Name: Kent. P. Ainsworth
Title: Executive Vice President and
Chief Financial Officer
THE SUBSIDIARY: W-C ACQUISITION CORPORATION
By:/s/Kent. P. Ainsworth
----------------------
Name: Kent. P. Ainsworth
Title: Vice President and
Chief Financial Officer
59.
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ACKNOWLEDGMENT
OF THE GENERAL TRUSTEES OF THE
WOODWARD-CLYDE CAPITAL ACCUMULATION (RETIREMENT PLAN)
The undersigned, constituting all the General Trustees of the Woodward-Clyde
Capital Accumulation (Retirement) Plan (the "Retirement Plan"), hereby
acknowledge that they have received and reviewed the foregoing Agreement and
Plan of Merger Among Woodward-Clyde Group, Inc., URS Corporation and W-C
Acquisition Corporation (the "Agreement"), and hereby approve, accept and agree
to the terms of the Agreement and the merger contemplated thereby insofar as
they relate, directly or indirectly, to the Retirement Plan or to the shares of
Woodward-Clyde Stock held by the Retirement Plan.
/s/Richard L. Fuller
- --------------------
name: Richard L. Fuller
/s/Frank S. Waller
- ------------------
name: Frank S. Waller
/s/James R. Obermeyer
- ---------------------
name: James R. Obermeyer
60.
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APPENDIX B
SMITH BARNEY
A Member of TravelersGroup
CONFIDENTIAL
August 18, 1997
Board of Directors
URS Corporation
100 California Street, Suite 500
San Francisco, California 94111
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to URS Corporation ("URS") of the consideration to be paid by URS pursuant
to the terms and subject to the conditions set forth in the Agreement and Plan
of Merger, dated as of August 18, 1997 (the "Merger Agreement"), by and among
Woodward-Clyde Group, Inc. ("Woodward-Clyde"), URS and W-C Acquisition Corp., a
wholly owned subsidiary of URS ("Subsidiary"). As more fully described in the
Merger Agreement, (i) Woodward-Clyde will be merged with and into Subsidiary
(the "Merger") and (ii) the outstanding shares of the preferred stock, par value
$0.01 per share, of Woodward-Clyde (the "Woodward-Clyde Preferred Stock") will
be converted into the right to receive $8,306,130 in the aggregate in cash and
each outstanding share of the common stock, par value $0.01 per share, of
Woodward-Clyde (the "Woodward-Clyde Common Stock") will be converted into the
right to receive (A) that number of shares of the common stock, par value $0.01
per share, of URS (the "URS Common Stock") equal to the result obtained by
dividing (x) $65.0 million divided by the average last closing price of the URS
Common Stock on the New York Stock Exchange over the last 20 trading days ending
two trading days prior to the closing date of the Merger (the "URS Average
Closing Price"), but in no event less than $12.50 or greater than $16.07 by (y)
the aggregate number of shares of Woodward-Clyde Common Stock outstanding
immediately prior to the effective time of the Merger (the "Applicable Common
Multiple") and (B) a cash amount determined by dividing (x) $26,693,870 plus an
amount equal to the excess, if any, of $65.0 million over the product of the
Applicable Common Multiple, the aggregate number of shares of Woodward Common
Stock outstanding immediately prior to the effective time of the Merger and the
URS Average Closing Price by (y) the aggregate number of shares of
Woodward-Clyde Common Stock outstanding immediately prior to the effective time
of the Merger (the "Applicable Common Cash Component" and, together with the
Applicable Common Multiple, the "Merger Consideration").
<PAGE>
The Board of Directors
URS Corporation
August 18, 1997
Page 2
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of URS and certain senior officers and other representatives and
advisors of Woodward-Clyde concerning the businesses, operations and prospects
of URS and Woodward-Clyde. We examined certain publicly available business and
financial information relating to URS and certain business and financial
information relating to Woodward-Clyde as well as certain financial forecasts
and other information and data for URS and Woodward-Clyde which were provided to
or otherwise discussed with us by the respective managements of URS and
Woodward-Clyde, including information relating to certain strategic implications
and operational benefits anticipated to result from the Merger. We reviewed the
financial terms of the Merger as set Forth in the Merger Agreement in relation
to, among other things: current and historical market prices and trading volumes
of URS Common Stock; the historical and projected earnings and other operating
data of URS and Woodward- Clyde; and the capitalization and financial condition
of URS and Woodward-Clyde. We considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected which we
considered relevant in evaluating the Merger and analyzed certain financial,
stock market and other publicly available information relating to the businesses
of other companies whose operation we considered relevant in evaluating those of
URS and Woodward-Clyde. We also evaluated the potential pro forma financial
impact of the Merger on URS. In addition to the foregoing, we conducted such
other analyses and examinations and considered such other financial, economic
and market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of URS and Woodward-Clyde that such forecasts and
other information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective management of URS
and Woodward-Clyde as to the future financial performance of URS and
Woodward-Clyde and the strategic implications and operational benefits
anticipated to result from the Merger. We have assumed, with your consent, that
the Merger will be treated as a tax-free reorganization for federal income tax
purposes. We are not expressing any opinion as to what the value of the URS
Common Stock actually will be when issued to Woodward-Clyde stockholders
pursuant to the Merger or the price at which the URS Common Stock will trade
subsequent to the Merger. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of URS or WoodWard-Clyde nor have we made any physical inspection of the
properties or assets of URS or Woodward-Clyde. We were not requested to
consider, and our opinion does not address, the relative merits of the Merger as
compared to any
<PAGE>
The Board of Directors
URS Corporation
August 18, 1997
Page 3
alternative business strategies that might exist for URS or the effect of any
other transaction in which URS might engage. Our opinion is necessarily based
upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to URS in
connection with the Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger.
We also will receive a fee upon delivery of this opinion. In the ordinary course
of our business, we and our affiliates may actively trade or hold the securities
of URS for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. In addition,
we and our affiliates (including Travelers Group Inc. and its affiliates) may
maintain relationship with URS and Woodward-Clyde.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of URS in its evaluation of the proposed
Merger, and our opinion is not intended to and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on any
matter relating to the proposed Merger. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Smith Barney be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to URS.
Very truly yours,
/s/ Smith Barney, Inc.
SMITH BARNEY INC.
<PAGE>
APPENDIX C
Oppenheimer Tower
World Financial Center
New York, New York 10281
(212) 667-7000 - Fax (212) 667-4468
Oppenheimer & Co., Inc.
Environmental Services Group
Investment Banking Department
August 18, 1997
The Board of Directors
Woodward-Clyde Group, Inc.
Stanford Place 3, Suite 600
4582 South Ulster Street
Denver, CO 80237
Dear Sirs:
You have requested our opinion as to the fairness, from a financial point of
view, to the current holders of common stock of Woodward-Clyde Group, Inc.
("Woodward-Clyde"), of the consideration to be received by such holders pursuant
to the final Agreement and Plan of Merger prepared as of August 18, 1997 (the
"Merger Agreement"), by and among Woodward-Clyde Group, Inc., URS Corporation
("URS") and W-C Acquisition Corporation ("Mergersub"). The Merger Agreement
provides that, among other things, (i) Woodward-Clyde will be merged with and
into Mergersub, and the separate existence of Woodward-Clyde shall thereupon
cease, and Mergersub shall continue its corporate existence as the surviving
corporation under the name of Woodward-Clyde Group, Inc. (the "Surviving
Corporation"), and (ii) the consideration paid is as defined in the Merger
Agreement.
In arriving at our opinion, we have (i) reviewed the latest available draft of
the Merger Agreement, (ii) reviewed the historical financial statements and the
financial projections and other information prepared by representatives of
Woodward-Clyde and URS, (iii) reviewed publicly available information for
Woodward-Clyde and URS, including, with respect to URS, periodic and other
reports filed with the Securities and Exchange Commission, (iv) reviewed the
reported market prices and trading volumes for URS' common stock, (v) held
discussions with representatives of Woodward-Clyde and URS concerning
Woodward-Clyde's and URS' historical and current operations, financial condition
and prospects, and (vi) reviewed such other documents and financial, economic
and market criteria and made such other investigations as we deemed appropriate
for the purposes of such opinion.
<PAGE>
The Board of Directors
Woodward-Clyde Group, Inc.
August 18, 1997
Page 2
We also considered certain stock market data of URS and compared that data, and
historical operating data of URS and Woodward-Clyde, with similar data for other
publicly held companies in businesses similar to those of Woodward-Clyde and
URS. We considered to the extent publicly available, the financial terms of
certain other business combinations which have recently been effected. In
addition, we conducted an extensive process of contacting numerous third parties
to solicit indications of interest in acquiring all or any part of
Woodward-Clyde.
In connection with our review, we have not assumed responsibility for
independent verification of any of the foregoing information and have relied
upon its being complete and accurate in all respects. With respect to the
financial forecasts and other data concerning Woodward-Clyde and URS reviewed by
us, the managements of Woodward-Clyde and URS advised us that such forecasts and
other data have been reasonably prepared on bases reflecting their best
currently available estimates and judgments as to their future financial
performance. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of
Woodward-Clyde or URS, nor have we been furnished with any such evaluations or
appraisals. We have assumed, without independent verification, the accuracy of
the advice and conclusions of the parties' legal counsel and accountants with
respect to accounting and tax matters as provided to Oppenheimer by
Woodward-Clyde's management, including without limitation, the treatment of the
Merger as a tax-free reorganization for federal income tax purposes and the
accounting treatment of the merger as a purchase. We express no opinion as to
what the value of the URS common stock actually will be when issued to holders
of Woodward-Clyde common stock pursuant to the Merger or the price at which URS
common stock will trade subsequent to the Merger. Our opinion is necessarily
based on information available to us and general economic, financial and stock
market conditions and circumstances as they exist and can be evaluated by us on
the date hereof.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to the Board of Directors of Woodward-Clyde in
rendering this opinion and will receive a fee for our services. We also acted as
financial advisor to Woodward-Clyde in the Merger for which we expect to receive
a fee for our services. In the ordinary course of its business, Oppenheimer &
Co., Inc. and its affiliates may actively trade securities of URS for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
<PAGE>
The Board of Directors
Woodward-Clyde Group, Inc.
August 18, 1997
Page 3
On August 14, 1997, we made a presentation to the Board of Directors of
Woodward-Clyde stating that, based on the terms of the consideration to be
received by the current holders of Woodward-Clyde common stock as stated in the
draft Agreement and Plan of Merger dated as of August 13, 1997, and additional
assumptions made regarding terms undefined in such draft Agreement and Plan of
Merger, such consideration is fair to such holders, from a financial point of
view. The terms of the consideration to be paid to the current holders of
Woodward-Clyde common stock as stated in the Merger Agreement are not materially
different from the terms stated in the draft Agreement and Plan of Merger dated
as of August 13, 1997 or from the assumptions we made regarding terms undefined
in such draft Agreement and Plan of Merger. This fairness opinion confirms our
oral opinion given on August 14, 1997, that based upon and subject to the
foregoing and such other factors as we deem relevant, it is our opinion that, as
of August 14, the consideration to be received by the current holders of
Woodward-Clyde common stock pursuant to the Merger Agreement is fair to such
holders, from a financial point of view. This fairness opinion is directed to
the Board of Directors of Woodward-Clyde in its consideration of the Merger and
is not a recommendation to any holder of Woodward-Clyde common stock as to how
such holder should vote with respect to such Merger. Neither this fairness
opinion nor the services provided by Oppenheimer in connection therewith may be
publicly disclosed or referred to in any manner by Woodward-Clyde or URS without
Oppenheimer's prior written approval. This fairness opinion may be reproduced in
full in any proxy or information statement mailed to the current holders of
Woodward-Clyde common stock and in any registration statement related to the
Merger filed by Woodward-Clyde or URS with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, and Oppenheimer consents to
the inclusion of this fairness opinion in any such registration statement. This
fairness opinion may not otherwise be disclosed publicly in any manner without
our prior written approval and must be treated as confidential.
Very truly yours,
/s/ Oppenheimer & Co., Inc.
OPPENHEIMER & CO., INC.
<PAGE>
APPENDIX D
(Delaware Dissenters' Rights)
(Section 262 of the Delaware General Corporation Law)
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 ss.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's 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 ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.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 designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. 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 ss.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 ss.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 at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
1.
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security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. 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 ss.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 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
subsections (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 his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his 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 his 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 ss.228 or
ss.253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten 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 a constituent corporation, and shall include
in such notice a copy of this section: provided that, if the notice is given on
or after the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to appraisal
rights. Such
2.
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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 holder's 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 holder's 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 holder's
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) hereof and who is otherwise entitled to
appraisal rights, may file 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 shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. 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) 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
his 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) hereof, whichever is
later.
(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
3.
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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 determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of 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. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. 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, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder 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 his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he 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. Interest may be simple or compound, as the Court
may direct. 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 Court's 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.
(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 attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
4.
<PAGE>
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his 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 his 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 fight 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.
(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. (Last amended by Ch.
299, L. '96, eff. 2-1-96 and Ch. 349, L. '96. eff. 7-1-96.)
5.
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APPENDIX E
URS CORPORATION
Proxy Solicited by Board of Directors for Special Meeting on October 31, 1997
Kent P. Ainsworth and Carol Brummerstedt, or either of them, each with
the power of substitution, are hereby authorized to represent and vote, as
designated below, the shares of the undersigned at the special meeting of
stockholders of URS Corporation to be held on October 31, 1997, or at any
adjournment of the special meeting.
The Board of Directors recommends a vote FOR Item 1.
1. Approval of the Agreement and Plan of Merger, dated as of
August 18, 1997, among URS Corporation, Woodward-Clyde Group,
Inc., and W-C Acquisition Corporation, a wholly-owned
subsidiary of URS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Upon any other matters which might come before the meeting.
Shares voted by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have
authority to vote FOR Item 1.
Dated ____________________, 1997
----------------------------------------
Stockholder's Signature
----------------------------------------
Stockholder's Signature
Please sign exactly as name appears on
this proxy. If signing for estates,
trusts, or corporations, title or
capacity should be stated. If shares are
held jointly, each holder should sign.
PLEASE MARK, DATE, SIGN AND RETURN
1.
<PAGE>
APPENDIX F
WOODWARD-CLYDE GROUP, INC.
Common Stock Proxy Solicited by Board of Directors for Special Meeting on
October 31, 1997
Robert K. Wilson and Richard L. Fuller, or either of them, each with
the power of substitution, are hereby authorized to represent and vote, as
designated below, the shares of the undersigned at the special meeting of
stockholders of Woodward-Clyde Group, Inc. to be held on October 31, 1997, or at
any adjournment of the special meeting.
The Board of Directors recommends a vote FOR Item 1.
1. Approval of the Agreement and Plan of Merger, dated as of
August 18, 1997, among URS Corporation, Woodward-Clyde Group,
Inc., and W-C Acquisition Corporation, a wholly-owned
subsidiary of URS (the "Merger Agreement"), and to amend the
existing Shareholders' Agreement between Woodward-Clyde Group,
Inc. and each of the holders of its common stock (the
"Shareholders' Agreement") to remove all restrictions and
requirements which prohibit or would prevent the transactions
contemplated by the Merger Agreement:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Upon any other matters which might come before the meeting.
Shares voted by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have
authority to vote FOR Item 1. Delivery of a signed proxy voted in favor of the
Merger Agreement will also constitute such stockholder's written consent to the
amendment of the Shareholders' Agreement.
Dated ____________________, 1997
----------------------------------------
Stockholder's Signature
----------------------------------------
Stockholder's Signature
Please sign exactly as name appears on
this proxy. If signing for estates,
trusts, or corporations, title or
capacity should be stated. If shares are
held jointly, each holder should sign.
PLEASE MARK, DATE, SIGN AND RETURN
2.
<PAGE>
APPENDIX G
WOODWARD-CLYDE GROUP, INC.
Preferred Stock Proxy Solicited by Board of Directors for Special Meeting on
October 31, 1997
Robert K. Wilson and Richard L. Fuller, or either of them, each with
the power of substitution, are hereby authorized to represent and vote, as
designated below, the shares of the undersigned at the special meeting of
stockholders of Woodward-Clyde Group, Inc. to be held on October 31, 1997, or at
any adjournment of the special meeting.
The Board of Directors recommends a vote FOR Item 1.
1. Approval of the Agreement and Plan of Merger, dated as of
August 18, 1997, among URS Corporation, Woodward-Clyde Group,
Inc., and W-C Acquisition Corporation, a wholly-owned
subsidiary of URS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Upon any other matters which might come before the meeting.
Shares voted by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have
authority to vote FOR Item 1.
Dated ____________________, 1997
----------------------------------------
Stockholder's Signature
----------------------------------------
Stockholder's Signature
Please sign exactly as name appears on
this proxy. If signing for estates,
trusts, or corporations, title or
capacity should be stated. If shares are
held jointly, each holder should sign.
PLEASE MARK, DATE, SIGN AND RETURN
3.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation contains a provision, permitted
by Section 102(b)(7) of the Delaware General Corporation Law (the "Delaware
Law"), eliminating the personal liability of a director to the Company or its
stockholders for monetary damages for breach of fiduciary duties as a director,
except for liability (i) for breach of the director's duty of loyalty, (ii)
under Section 174 of the Delaware Law (concerning the illegal payment of
dividends by a corporation), (iii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law or (iv) for
any transaction from which the director derived an improper personal benefit.
Section 145 of the Delaware Law permits, subject to certain conditions, the
indemnification of directors or officers of a Delaware corporation for expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
incurred in connection with the defense of any action, suit or proceeding in
relation to certain matters against them as such directors or officers. Article
VI of the Company's By-laws generally provides that the Company shall indemnify
its officers and directors in accordance with the provisions of Section 145.
A third-party insurance carrier has agreed to reimburse the Company for
losses resulting from certain liabilities for wrongful acts or matters claimed
against officers or directors by reason of their status as such, including
liabilities that may arise in connection with certain sales of securities by the
Company.
Item 21. Exhibits and Financial Statement Schedules.
Number Exhibit
------ -------
2.1 Agreement and Plan of Merger dated as of August 18, 1997 between
URS Corporation, Woodward-Clyde Group, Inc. and W-C Acquisition
Corporation, filed with the Commission as Exhibit 2.1 to the
Company's Form 8-K filed on August 19, 1997 and incorporated herein
by reference.
4.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1
to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1991 (the "1991 Form 10-K"), filed with the
Commission and incorporated herein by reference.
4.2 Bylaws of the Company, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996 (the
"1996 Form 10-K"), filed with the Commission and incorporated
herein by reference.
5 Opinion of Cooley Godward LLP. FILED HEREWITH.
8.1 Opinion of Cooley Godward LLP. FILED HEREWITH.
8.2 Opinion of Bronson, Bronson & McKinnon LLP. FILED HEREWITH.
10.1 1979 Stock Option Plan of the Company, filed as Exhibit 10.01 to
the Company's Registration Statement on Form S-14 (Commission File
No. 2-73909) and incorporated herein by reference.
10.2 1987 Restricted Stock Plan of the Company, filed as Appendix I to
the Company's definitive proxy statement filed with the Commission
on March 2, 1987 and incorporated herein by reference.
10.3 1985 Employee Stock Purchase Plan of the Company, adopted effective
July 1, 1997, filed as Exhibit 10.3 to the 1996 Form 10-K and
incorporated herein by reference.
10.4 1991 Stock Incentive Plan of the Company, amended and restated
effective December 17, 1996, filed as Exhibit 10.4 to the 1996 Form
10-K and incorporated herein by reference.
10.5 Non-Executive Directors Stock Grant Plan of the Company, adopted
December 17, 1996, filed as Exhibit 10.5 to the 1996 Form 10-K and
incorporated herein by reference.
10.6 Selected Executive Deferred Compensation Plan of the Company, filed
as Exhibit 10.3 to the Company's Registration Statement on Form S-1
(Commission File No. 33-56296) ("1990 Form S-1") and incorporated
herein by reference.
10.7 1996 Incentive Compensation Plan of the Company, filed as Exhibit
10.7 to the 1996 Form 10-K and incorporated herein by reference.
10.8 1996 Incentive Compensation Plan of URS Consultants, Inc., filed as
Exhibit 10.8 to the 1996 Form 10-K and incorporated herein by
reference.
II-1.
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10.9 1996 Incentive Compensation Plan of Greiner Engineering, Inc.,
filed as Exhibit 10.9 to the 1996 Form 10-K and incorporated herein
by reference.
10.10 Stock Appreciation Rights Agreement, dated July 18, 1989, between
the Company and Irwin L. Rosenstein, filed as Exhibit 10.13 to the
1990 Form S-1 and incorporated herein by reference.
10.11 Stock Appreciation Rights Agreement, dated October 9, 1989, between
the Company and Martin M. Koffel, filed as Exhibit 10.15 to the
1990 Form S-1 and incorporated herein by reference.
10.12 Employment Agreement, dated August 1, 1991, between URS
Consultants, Inc. and Irwin L. Rosenstein, filed as Exhibit 10.12
to the 1991 Form 10-K and incorporated herein by reference.
10.12(a) Amendment to Employment Agreement, dated October 11, 1994, between
URS Consultants, Inc., and Irwin L. Rosenstein, filed as Exhibit
10.12(a) to the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1994 (the "1994 Form 10-K"), filed with the
Commission and incorporated herein by reference.
10.13 Employment Agreement, dated December 16, 1991, between the Company
and Martin Koffel, filed as Exhibit 10.13 to the 1991 Form 10-K and
incorporated herein by reference.
10.14 Employment Agreement, dated May 7, 1991, between the Company and
Kent P. Ainsworth, filed as Exhibit 10.16 to the 1991 Form 10-K and
incorporated herein by reference.
10.15 Agreement and Plan of Merger, dated as of January 10, 1996, between
URS Corporation, URS Acquisition Corporation and Greiner
Engineering, Inc., filed as Exhibit 2(a) to the Form 8-K filed on
January 12, 1996 (the "January 12, 1996 Form 8-K"), and
incorporated herein by reference.
10.16 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum, filed as Exhibit 10.31 to the 1990 Form S-1 and
incorporated herein by reference.
10.17 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum & Associates, Inc., filed as Exhibit 10.32 to the
1990 Form S-1 and incorporated herein by reference.
10.18 Registration Rights Agreement, dated February 21, 1990, among the
Company, Wells Fargo Bank, N.A. and the Purchaser Holders named
therein, filed as Exhibit 10.33 to the 1990 Form S-1 and
incorporated herein by reference.
II-2.
<PAGE>
10.19 Post-Affiliation Agreement, dated July 19, 1989, between the
Company and URS International, Inc., filed as Exhibit 10.42 to the
Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1989 and incorporated herein by reference.
10.20 Contract between URS Consultants, Inc. and the U.S. Department of
the Navy (No N62474-89-R-9295) dated June 6, 1989, filed as Exhibit
10.34 to the 1991 Form 10-K and incorporated herein by reference.*
10.21 Form of Indemnification Agreement dated as of May 1, 1992 between
the Company and each of Messrs. Ainsworth, Blum, Cashin, Koffel,
Madden, Praeger, Rosenstein, Walsh, Der Marderosian, Costello,
Glynn and Admiral Foley, filed as Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31,
1992 and incorporated herein by reference.
10.22 Credit Agreement, dated as of January 10, 1996, between URS
Corporation, the Financial Institutions listed therein as Lenders
and Wells Fargo Bank, National Association, as Administrative Agent
for the Lenders, filed as Exhibit 99(a) to the January 12, 1996
Form 8-K, and incorporated herein by reference.
10.23 Severance Agreement, dated as of November 22, 1993, between the
Company and Joseph Masters, filed as Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31,
1995 and incorporated herein by reference.
10.24 Employment Agreement, dated March 29, 1996, between Greiner, Inc.
and Robert L. Costello, filed as Exhibit 10.1 to the 1996 second
quarter Form 10-Q and incorporated herein by reference.
21 Subsidiaries of the Company, filed as Exhibit 21.1 to the 1996 Form
10-K and incorporated herein by reference.
23.1 Consent of Coopers & Lybrand L.L.P. FILED HEREWITH.
23.2 Consent of Ernst & Young LLP. FILED HEREWITH.
23.3 Consent of Cooley Godward LLP (included in Exhibits 5 and 8.1).
23.4 Consent of Bronson, Bronson & McKinnon LLP (included in Exhibit
8.2).
24 Powers of Attorney of the Company's directors and officers (see
Part II, page 7).
99.1 Consent of Smith Barney Inc. FILED HEREWITH.
99.2 Consent of Oppenheimer & Co., Inc. FILED HEREWITH.
* Note: Certain material contained in this exhibit and indicated by an
asterisk has been omitted and filed separately with the Commission pursuant
to an application for confidential treatment under Rule 24b-2 promulgated
under the Securities Exchange Act of 1934, as amended, which was granted by
the Commission effective April 30, 1992.
Item 22. Undertakings.
(A)
(a) The undersigned registrant hereby undertakes:
II-3.
<PAGE>
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act") (unless the
information required to be included in a post-effective amendment by this
paragraph is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference in this registration
statement).
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement (unless the information required to be included in a post-effective
amendment by this paragraph is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this registration statement). Notwithstanding the
foregoing, any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(g)
(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(B) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(C) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on October 10, 1997.
URS CORPORATION
By /s/MARTIN M. KOFFEL
-------------------------
Martin M. Koffel
Chairman of the Board,
President and Chief
Executive Officer
II-5.
<PAGE>
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by the following persons
in the capacities and on the date indicated.
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/MARTIN M. KOFFEL Chairman of the Board, Chief Executive October 10, 1997
- ------------------------------- Officer, President and Director (Principal
Martin M. Koffel Executive Officer)
/s/KENT P. AINSWORTH Executive Vice President, Chief Financial October 10, 1997
- ------------------------------- Officer, Principal Accounting Officer and
Kent P. Ainsworth Secretary
/s/IRWIN L. ROSENSTEIN* Vice President and Director October 10, 1997
- ------------------------------
Irwin P. Rosenstein
/s/RICHARD C. BLUM* Director October 10, 1997
- ------------------------------
Richard C. Blum
/s/ROBERT L. COSTELLO* Director October 10, 1997
- ------------------------------
Robert L. Costello
/s/ARMEN DER MARDEROSIAN* Director October 10, 1997
- ------------------------------
Armen Der Marderosian
/s/ADM. S. ROBERT FOLEY, JR.* Director October 10, 1997
- ------------------------------
Adm. S. Robert Foley, Jr.
/s/ROBERT D. GLYNN, JR.* Director October 10, 1997
- ------------------------------
Robert D. Glynn, Jr.
/s/SENATOR J. BENNETT JOHNSTON* Director October 10, 1997
- ------------------------------
Senator J. Bennett Johnston
/s/RICHARD B. MADDEN* Director October 10, 1997
- ----------------------------
Richard B. Madden
/s/RICHARD Q. PRAEGER* Director October 10, 1997
- ----------------------------
Richard Q. Praeger
/s/WILLIAM D. WALSH* Director October 10, 1997
- ----------------------------
William D. Walsh
* By
/s/ Kent P. Ainsworth
- -------------------------------------
(Kent P. Ainsworth, Attorney-in-fact)
</TABLE>
II-6
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Sequential
Number Exhibit Page No.
- ------ ------- --------
<S> <C>
2.1 Agreement and Plan of Merger dated as of August 18, 1997 between URS
Corporation, Woodward- Clyde Group, Inc. and W-C Acquisition
Corporation, filed with the Commission as Exhibit 2.1 to the Company's
Form 8-K filed on August 19, 1997 and incorporated herein by reference.
4.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, filed with the Commission and incorporated herein by
reference.
4.2 Bylaws of the Company, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996 (the
"1996 Form 10-K"), filed with the Commission and incorporated herein by
reference.
5 Opinion of Cooley Godward LLP. FILED HEREWITH.
8.1 Opinion of Cooley Godward LLP. FILED HEREWITH.
8.2 Opinion of Bronson, Bronson & McKinnon LLP. FILED HEREWITH.
10.1 1979 Stock Option Plan of the Company, filed as Exhibit 10.01 to the
Company's Registration Statement on Form S-14 (Commission File No.
2-73909) and incorporated herein by reference.
10.2 1987 Restricted Stock Plan of the Company, filed as Appendix I to the
Company's definitive proxy statement filed with the Commission on March
2, 1987 and incorporated herein by reference.
10.3 1985 Employee Stock Purchase Plan of the Company, adopted effective
July 1, 1997, filed as Exhibit 10.3 to the 1996 Form 10-K and
incorporated herein by reference.
10.4 1991 Stock Incentive Plan of the Company, amended and restated
effective December 17, 1996, filed as Exhibit 10.4 to the 1996 Form
10-K and incorporated herein by reference.
10.5 Non-Executive Directors Stock Grant Plan of the Company, adopted
December 17, 1996, filed as Exhibit 10.5 to the 1996 Form 10-K and
incorporated herein by reference.
10.6 Selected Executive Deferred Compensation Plan of the Company, filed as
Exhibit 10.3 to the Company's Registration Statement on Form S-1
(Commission File No. 33-56296) ("1990 Form S- 1") and incorporated
herein by reference.
10.7 1996 Incentive Compensation Plan of the Company, filed as Exhibit 10.7
to the 1996 Form 10-K and incorporated herein by reference.
10.8 1996 Incentive Compensation Plan of URS Consultants, Inc., filed as
Exhibit 10.8 to the 1996 Form 10-K and incorporated herein by
reference.
10.9 1996 Incentive Compensation Plan of Greiner Engineering, Inc., filed as
Exhibit 10.9 to the 1996 Form 10-K and incorporated herein by
reference.
10.10 Stock Appreciation Rights Agreement, dated July 18, 1989, between the
Company and Irwin L. Rosenstein, filed as Exhibit 10.13 to the 1990
Form S-1 and incorporated herein by reference.
10.11 Stock Appreciation Rights Agreement, dated October 9, 1989, between the
Company and Martin M. Koffel, filed as Exhibit 10.15 to the 1990 Form
S-1 and incorporated herein by reference.
10.12 Employment Agreement, dated August 1, 1991, between URS Consultants,
Inc. and Irwin L. Rosenstein, filed as Exhibit 10.12 to the 1991 Form
10-K and incorporated herein by reference.
10.12(a) Amendment to Employment Agreement, dated October 11, 1994, between URS
Consultants, Inc., and Irwin L. Rosenstein, filed as Exhibit 10.12(a)
to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1994 (the "1994 Form 10-K"), filed with the Commission and
incorporated herein by reference.
10.13 Employment Agreement, dated December 16, 1991, between the Company and
Martin Koffel, filed as Exhibit 10.13 to the 1991 Form 10-K and
incorporated herein by reference.
<PAGE>
Sequential
Number Exhibit Page No.
- ------ ------- --------
10.14 Employment Agreement, dated May 7, 1991, between the Company and Kent
P. Ainsworth, filed as Exhibit 10.16 to the 1991 Form 10-K and
incorporated herein by reference.
10.15 Agreement and Plan of Merger, dated as of January 10, 1996, between URS
Corporation, URS Acquisition Corporation and Greiner Engineering, Inc.,
filed as Exhibit 2(a) to the Form 8-K filed on January 12, 1996 (the
"January 12, 1996 Form 8-K"), and incorporated herein by reference.
10.16 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum, filed as Exhibit 10.31 to the 1990 Form S-1 and
incorporated herein by reference.
10.17 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum & Associates, Inc., filed as Exhibit 10.32 to the 1990
Form S-1 and incorporated herein by reference.
10.18 Registration Rights Agreement, dated February 21, 1990, among the
Company, Wells Fargo Bank, N.A. and the Purchaser Holders named
therein, filed as Exhibit 10.33 to the 1990 Form S-1 and incorporated
herein by reference.
10.19 Post-Affiliation Agreement, dated July 19, 1989, between the Company
and URS International, Inc., filed as Exhibit 10.42 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1989
and incorporated herein by reference.
10.20 Contract between URS Consultants, Inc. and the U.S. Department of the
Navy (No N62474-89-R-9295) dated June 6, 1989, filed as Exhibit 10.34
to the 1991 Form 10-K and incorporated herein by reference.*
10.21 Form of Indemnification Agreement dated as of May 1, 1992 between the
Company and each of Messrs. Ainsworth, Blum, Cashin, Koffel, Madden,
Praeger, Rosenstein, Walsh, Der Marderosian, Costello, Glynn and
Admiral Foley, filed as Exhibit 10.34 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1992 and incorporated
herein by reference.
10.22 Credit Agreement, dated as of January 10, 1996, between URS
Corporation, the Financial Institutions listed therein as Lenders and
Wells Fargo Bank, National Association, as Administrative Agent for the
Lenders, filed as Exhibit 99(a) to the January 12, 1996 Form 8-K, and
incorporated herein by reference.
10.23 Severance Agreement, dated as of November 22, 1993, between the Company
and Joseph Masters, filed as Exhibit 10.35 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995 and
incorporated herein by reference.
10.24 Employment Agreement, dated March 29, 1996, between Greiner, Inc. and
Robert L. Costello, filed as Exhibit 10.1 to the 1996 second quarter
Form 10-Q and incorporated herein by reference.
<PAGE>
Sequential
Number Exhibit Page No.
- ------ ------- --------
21 Subsidiaries of the Company, filed as Exhibit 21.1 to the 1996 Form
10-K and incorporated herein by reference.
23.1 Consent of Coopers & Lybrand L.L.P. FILED HEREWITH.
23.2 Consent of Ernst & Young LLP. FILED HEREWITH.
23.3 Consent of Cooley Godward LLP (included in Exhibits 5 and 8.1).
23.4 Consent of Bronson, Bronson & McKinnon LLP (included in Exhibit 8.2).
24 Powers of Attorney of the Company's directors and officers (see Part
II, page 5).
99.1 Consent of Smith Barney Inc. FILED HEREWITH.
99.2 Consent of Oppenheimer & Co., Inc. FILED HEREWITH.
</TABLE>
Cooley Godward LLP
ATTORNEYS AT LAW Palo Alto, CA
415 843-5000
Menlo Park, CA
One Maritime Plaza 415 843-5000
20th Floor
San Francisco, CA San Diego, CA
94111-3580 619 550-6000
Main 415 693-2000
Fax 415 951-3699 Boulder, CO
303 546-4000
Denver, CO
http://www.cooley.com 303 606-4800
October 9, 1997
URS Corporation
100 California Street, 5th Floor
San Francisco, CA 94111
Ladies and Gentlemen:
We have acted as counsel to you, URS Corporation, a Delaware corporation
("URS"), in connection with the transactions contemplated by the Agreement and
Plan of Merger dated as of August 18, 1997 (the "Merger Agreement") among URS,
Woodward-Clyde Group, Inc., a Delaware corporation ("WC"), and W-C Acquisition
Corporation ("Acquisition Corp."), a wholly-owned subsidiary of URS, pursuant to
which WC will be merged with and into Acquisition Corp. (the "Merger") and each
outstanding share of WC common stock will be converted into the right to
receive, in the aggregate, $91,693,870, consisting of $26,693,870 in cash and up
to 5,200,000 shares, par value $0.01 per share, of URS common stock (the
"Shares").
In connection with the Merger, URS is filing with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-4 (the
"Registration Statement") to register under the Securities Act of 1933, as
amended, the Shares to be issued under the terms of the Merger Agreement.
We have examined a copy of the Merger Agreement, the Registration Statement,
your Certificate of Incorporation and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when issued under the terms of the Merger Agreement and as
contemplated by the Joint Proxy Statement/Prospectus included in the
Registration Statement, will be validly issued, fully paid, and nonassessable.
We do not purport to render an opinion based on the laws of any jurisdiction
other than the corporate laws of the State of Delaware, and we express no
opinion as to the effect of any other laws.
<PAGE>
URS Corporation
October 9, 1997
Page 2
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Cooley Godward LLP
By: /s/Samuel M. Livermore
-----------------------
Samuel M. Livermore
Cooley Godward LLP
ATTORNEYS AT LAW Palo Alto, CA
415 843-5000
Menlo Park, CA
One Maritime Plaza 415 843-5000
20th Floor
San Francisco, CA San Diego, CA
94111-3580 619 550-6000
Main 415 693-2000
Fax 415 951-3699 Boulder, CO
303 546-4000
Denver, CO
http://www.cooley.com 303 606-4800
October 10, 1997
URS Corporation
100 California Street, Suite 500
San Francisco, CA 94111-5239 WEBB B. MORROW III
415 693-2170
Ladies and Gentlemen: [email protected]
This opinion is being delivered to you in accordance with the Agreement and Plan
of Merger dated August 18, 1997 (the "Plan of Merger") by and among URS
CORPORATION, a Delaware corporation ("Parent"), W-C ACQUISITION CORPORATION, a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
WOODWARD-CLYDE GROUP, INC., a Delaware corporation (the "Company"). The Company
will merge with and into Merger Sub (the "Merger") pursuant to the Plan of
Merger and related Merger Documents (collectively, including the exhibits to
each, the "Agreements").
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Plan of Merger or in certificates dated October 10,
1997 delivered to us by Parent, Merger Sub and the Company containing certain
representations of Parent, Merger Sub and the Company (the "Certificates of
Representations"). All section references, unless otherwise indicated, are to
the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as counsel to the Parent in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined originals,
certified copies or copies otherwise identified to our satisfaction as being
true copies of the original of the following documents (including all exhibits
and schedules attached thereto):
(a) the Agreements;
(b) the Certificates of Representations; and
(c) such other instruments and documents related to the formation,
organization and operation of Parent, Merger Sub and the Company and related to
the consummation of the Merger and the transactions contemplated thereby as we
have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof):
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there is (or
will be prior to the Closing) due execution and delivery of all documents where
due execution and delivery are a prerequisite of the effectiveness thereof;
<PAGE>
URS Corporation
October 10, 1997
Page 2
2. The truth and accuracy at all relevant times, of all
representations, warranties and statements made or agreed to by Parent, Merger
Sub and the Company, their management, employees, officers, directors and
stockholders in connection with the Merger, including but not limited to those
set forth in the Agreements (including the exhibits) and the Certificates of
Representations; and that all covenants contained in such agreements are
performed without waiver or breach of any material provision thereof;
3. There is no plan or intention on the part of the Company's
stockholders (a "Plan") to engage in a sale, exchange, transfer, distribution,
pledge, or other disposition (including a distribution by a corporation to its
stockholders) or any transaction which results in a reduction of risk of
ownership, or a direct or indirect disposition (a "Sale") of shares of Parent
Common Stock to be received in the Merger that would reduce the Company
stockholders' ownership of Parent Common Stock to a number of shares having an
aggregate fair market value, as of the Effective Time, of less than fifty
percent (50%) of the value of all of the stock of the Company outstanding
immediately prior to the Merger. Shares of the Company stock with respect to
which dissenters' rights are exercised in the Merger, which are exchanged for
cash in lieu of fractional shares of Parent Common Stock or which are sold,
redeemed or disposed of in a transaction that is in contemplation of or related
to the Merger shall be considered shares of the Company stock held by
stockholders of the Company immediately before the Merger which are exchanged in
the Merger for shares of Parent Common Stock which are then disposed of pursuant
to a Plan;
4. Shares of stock of the Company surrendered pursuant to the Merger
will not be subject to any liability at the time surrendered and that no
liabilities of any stockholder of the Company will be assumed by Parent or
Merger Sub in connection with the Merger; and
5. Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that for federal income tax purposes:
A. The Merger will be a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code;
B. Parent, Merger Sub and the Company are all "parties" to the
reorganization within the meaning of Section 368(b) of the Code;
<PAGE>
URS Corporation
October 10, 1997
Page 3
C. Stockholders of the Company who receive part stock and part cash in
the Merger will recognize gain in the amount of such cash, limited, however, by
such stockholder's total gain on the Merger (which is the difference between the
fair market value of the Parent Common Stock and cash received by such
stockholder in the Merger less such stockholder's basis in such stockholder's
Company stock exchanged therefor). A stockholder's recognized gain should be
capital if such Company stock was held as a capital asset at the time of the
Merger, provided that the payment is neither essentially equivalent to a
dividend within the meaning of Section 302 of the Code nor has the effect of a
dividend within the meaning of Section 356(a)(2) of the Code (collectively, a
"Dividend Equivalent Transaction"). If a loss, rather than a gain, results from
the application of the stockholder's cost basis for the stock surrendered
against the total consideration received, that loss will not be recognized;
D. The aggregate tax basis of any Parent Common Stock received by a
Company stockholder in the Merger (including any fractional share deemed
received as described in paragraph F below) generally should be equal to the
adjusted basis of the Company stock surrendered in exchange therefor, less the
cash received in the Merger, plus the gain recognized by such stockholder in the
Merger (if any);
E. The holding period (for capital gain purposes) for each share of
Parent Common Stock received in the Merger should include the period during
which the share of Company stock surrendered in exchange therefor was held,
provided that such share of Company stock was held as a capital asset at the
time of the Merger;
F. A fractional share of Parent Common Stock not actually issued
pursuant to the Merger but for which cash is received in lieu thereof should be
treated as a fractional share of Parent Common Stock that is issued in the
Merger and then redeemed by Parent. A Company stockholder receiving cash in lieu
of a fractional share generally should recognize gain or loss upon the payment
thereof equal to the difference (if any) between such stockholder's basis in the
fractional share and the amount of cash received. Such gain or loss should be a
capital gain or loss if, at the time of the Merger, the stockholder's Company
stock is held as a capital asset;
G. A Company stockholder who exercises appraisal rights with respect to
shares of Company stock and receives a cash payment for such shares generally
should recognize capital gain or loss (if such share was held as a capital asset
at the time of the Merger) measured by the difference between the stockholder's
basis in such share and the amount of cash received, provided that such payment
is not a Dividend Equivalent Transaction. A sale of shares pursuant to an
exercise of appraisal rights generally will not be a Dividend Equivalent
Transaction if, as a result of such exercise, the stockholder exercising
appraisal rights owns no shares of capital
<PAGE>
URS Corporation
October 10, 1997
Page 4
stock of Parent (either actually or constructively within the meaning of Section
318 of the Code) immediately after the Merger;
H. Parent and Merger Sub will not recognize gain or loss as a result of
the Merger; and
I. The Company will not recognize gain or loss as a result of the
Merger.
In addition to your request for our opinion on these specific federal income tax
law matters, you have asked us to review the discussion of federal income tax
issues contained in the S-4 Registration Statement filed in connection with the
Merger ("Registration Statement"). We have reviewed the discussion entitled
"Certain Federal Income Tax Considerations" contained in the Registration
Statement and believe that such information fairly presents the current federal
income tax law applicable to the Merger and the material federal tax
consequences to Parent, Merger Sub and the Company, and the Company's
stockholders as a result of the Merger.
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger except as
specifically set forth herein, and this opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
No opinion is expressed as to any transaction other than the Merger as described
in the Agreements or to any other transaction whatsoever including the Merger if
all the transactions described in the Agreements are not consummated in
accordance with the terms of the Agreements and without waiver of any material
provisions thereof. To the extent any of the representations, warranties,
statements and assumptions material to our opinion and upon which we have relied
are not complete, correct, true and accurate in all material respects at all
relevant times, our opinion would be adversely affected and should not be relied
upon.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
the courts. The conclusions are based on the Code, existing judicial decisions,
administrative regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes would not adversely
affect the accuracy of the conclusions stated herein. Nevertheless, by rendering
this opinion, we undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal income tax
laws.
<PAGE>
URS Corporation
October 10, 1997
Page 5
We consent to the reference to our firm under the caption "Certain Federal
Income Tax Considerations" in the Proxy Statement/Prospectus included in the
Registration Statement and to the filing of this opinion as an exhibit to the
Prospectus and as an exhibit to the Registration Statement.
This opinion has been delivered for your benefit in connection with the filing
of the Registration Statement and may not be distributed or otherwise made
available to any other person or entity without our prior written consent.
Sincerely,
COOLEY GODWARD LLP
By: /S/ WEBB B. MORROW III
-----------------------------------------
Webb B. Morrow III
WBM:ekh
LAW OFFICES OF
BRONSON, BRONSON & MCKINNON LLP
FACSIMILE 505 MONTGOMERY STREET LOS ANGELES
(415) 982-1394 SAN FRANCISCO, CALIFORNIA 94111-2514 SAN JOSE
TELEPHONE (415) 986-4200
October 10, 1997
Woodward Clyde Group, Inc.
4582 S. Ulster Street, Suite 600
Denver, CO 80237
Re: Agreement and Plan of Merger, dated August 18, 1997, by and among
URS Corporation, a Delaware corporation, W-C Acquisition
Corporation, a Delaware corporation, and Woodward-Clyde Group,
Inc., a Delaware corporation
Ladies and Gentlemen:
We have acted as special tax counsel to Woodward-Clyde Group, Inc., a
Delaware corporation (the "Company"), with respect to the Agreement and Plan of
Merger dated August 18, 1997 (the "Plan of Merger") and entered into by and
among URS Corporation, a Delaware corporation ("URS"), W-C Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of URS ("WCAC"),
and the Company. Pursuant to the Plan of Merger, the Company will merge with and
into WCAC (the "Merger") in accordance with the Plan of Merger and related
Merger Documents (collectively, including the exhibits to each, the "Merger
Agreement"). This opinion is being rendered pursuant to your request. Except as
otherwise provided, capitalized terms not defined herein have the meanings set
forth in the Plan of Merger or in certificates dated October 10, 1997 delivered
to us by URS, WCAC and the Company containing certain representations of URS,
WCAC and the Company (the "Certificates of Representations").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Plan of Merger and such other documents as we have deemed necessary or
appropriate in order to enable us to render the opinion below. In our
examination, we have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. In rendering the opinion set forth below, we have
relied upon certain written representations and covenants of the Company, URS
and WCAC, which are annexed hereto, and upon representations and facts set forth
in the Plan of Merger. Further, our opinion assumes that the Merger will occur
fully in accordance with the terms and provisions of the Plan of Merger and
there is (or will be prior to
<PAGE>
BRONSON, BRONSON & MCKINNON LLP
Bronson, Bronson & McKinnon
October 10, 1997
Page 2
the Closing) due execution and delivery of all documents where due execution and
delivery are a prerequisite of the effectiveness thereof.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. The opinions set forth below are also predicated upon and limited by
the assumptions set forth herein and are further subject to the qualifications,
assumptions, exceptions and limitations set forth below:
(a) The opinions and conclusions set forth herein are based upon the
federal income tax laws of the United States, including the Code, final,
temporary and proposed Treasury regulations, and judicial and administrative
interpretations thereof as they exist on the date of this letter. There can be
no assurance that the legal authorities upon which our opinion is based will not
be modified, revoked, supplemented or otherwise changed, and no assurance can be
given that future legislative, judicial or administrative changes will not
adversely affect the accuracy of the conclusions stated herein. To the extent of
any such changes, our opinion is not applicable. Furthermore, we undertake no
obligations to reexamine or in any way revise our opinion in the light of such
changes, or otherwise advise you of any new developments in the application or
interpretation of the federal income tax laws which might relate to the opinions
expressed herein.
(b) This opinion only represents our best judgment as to the federal
income tax consequences of the Merger and is not binding on the Internal Revenue
Service or the courts.
(c) There is no plan or intention on the part of the Company's
stockholders (a "Plan") to engage in a sale, exchange, transfer, distribution,
pledge, or other disposition (including a distribution by a corporation to its
stockholders) or any transaction which results in a reduction of risk of
ownership, or a direct or indirect disposition (a "Sale") of shares of URS
Common Stock to be received in the Merger that would reduce the Company
stockholders' collective ownership of URS Common Stock to a number of shares
having an aggregate fair market value, as of the Effective Time, of less than
fifty percent (50%) of the value of all of the stock of the Company outstanding
immediately prior to the Merger. Shares of the Company stock with respect to
which dissenters' rights are exercised in the Merger, which are exchanged for
cash in lieu of fractional shares of URS Common Stock or which are sold,
redeemed or disposed of in a transaction that is in contemplation of or related
to the Merger shall be considered shares of the Company stock held by
stockholders of the Company immediately before the Merger which are
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October 10, 1997
Page 3
exchanged in the Merger for shares of URS Common Stock which are then disposed
of pursuant to a Plan.
(d) The shares of Common Stock of the Company surrendered pursuant to
the Merger will not be subject to any liability at the time surrendered and that
no liabilities of any stockholder of the Company will be assumed by URS or WCAC
in connection with the Merger.
(e) Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification.
Based upon and subject to the foregoing, we are of the opinion that
under current law:
1. The Merger will constitute a tax-free reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code;
2. URS, WCAC and the Company are all "parties" to the
reorganization within the meaning of Section 368(b) of the Code;
3. Stockholders of the Company who receive part stock and part
cash in the Merger will recognize gain in the amount of such cash, limited,
however, by the total gain realized by such stockholder as a result of the
Merger (which is the difference between the fair market value of the URS Common
Stock and cash received by such stockholder in the Merger less such
stockholder's basis in such stockholder's Company stock exchanged therefor). A
stockholder's recognized gain should be capital if such Company stock was held
as a capital asset at the time of the Merger, provided that the payment is
neither essentially equivalent to a dividend within the meaning of Section 302
of the Code nor has the effect of a dividend within the meaning of Section
356(a)(2) of the Code (collectively, a "Dividend Equivalent Transaction"). If a
loss, rather than a gain, is realized as a result of the application of the
stockholder's cost basis for the Company stock surrendered against the total
consideration received, that loss will not be recognized;
4. The aggregate tax basis of any URS Common Stock received by a
Company stockholder in the Merger (including any fractional share deemed
received as described in Paragraph 6 below) generally should be equal to the
adjusted basis of the Company stock surrendered in exchange therefor, less the
cash received in the Merger, plus the gain recognized by such stockholder in the
Merger (if any);
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October 10, 1997
Page 4
5. The holding period (for federal income tax purposes) for each
share of URS Common Stock received in the Merger should include the period
during which the share of Company stock surrendered in exchange therefor was
held, provided that such share of Company stock was held as a capital asset at
the time of the Merger;
6. A fractional share of URS Common Stock not actually issued
pursuant to the Merger but for which cash is received in lieu therefor should be
treated as a fractional share of URS Common Stock that is issued in the Merger
and then redeemed by URS. A Company stockholder receiving cash in lieu of a
fractional share generally should recognize gain or loss upon the payment
thereof equal to the difference (if any) between such stockholder's basis in the
fractional share and the amount of cash received. Such gain or loss should be a
capital gain or loss if, at the time of the Merger, the Company stock is held as
a capital asset;
7. A Company stockholder who exercises appraisal rights with
respect to shares of Company stock and receives cash payment for such shares
generally should recognize capital gain or loss (if such share was held as a
capital asset at the time of the Merger) measured by the difference between the
stockholder's basis in such share and the amount of cash received, provided that
such payment is not a Dividend Equivalent Transaction. A sale of shares pursuant
to an exercise of appraisal rights generally will not be a Dividend Equivalent
Transaction if, as a result of such exercise, the stockholder exercising
appraisal rights owns no shares of capital stock of URS (either actually or
constructively within the meaning of Section 318 of the Code) immediately after
the Merger;
8. URS and WCAC will not recognize gain or loss as a result of
the Merger; and
9. The Company will not recognize gain or loss as a result of the
Merger.
In addition to your request for our opinion on this specific matter of
federal income tax law, you have asked us to review the discussion of federal
income tax issues contained in the S-4 Registration Statement filed in
connection with the Merger ("Registration Statement"). We have reviewed the
discussion entitled "Certain Federal Income Tax Considerations" contained in the
Registration Statement and believe that such information fairly presents the
current federal income tax law applicable to the Merger and the material federal
tax consequences to URS, WCAC and the Company, and the Company's stockholders as
a result of the Merger.
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BRONSON, BRONSON & MCKINNON LLP
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October 10, 1997
Page 5
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger except as
specifically set forth herein, and this opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
No opinion is expressed as to any transaction other than the Merger as
described in the Agreements or to any other transaction whatsoever including the
Merger if all the transactions described in the Agreements are not consummated
in accordance with the terms of the Agreements and without waiver of any
material provisions thereof. To the extent any of the representations,
warranties, statements and assumptions material to our opinion and upon which we
have relied are not complete, correct, true and accurate in all material
respects at all relevant times our opinion would be adversely affected and
should not be relied upon.
We consent to the reference to our firm under the caption "Certain
Federal Income Tax Considerations" in the Proxy Statement/Prospectus included in
the Registration Statement and to the filing of this opinion as an exhibit to
the Prospectus and as an exhibit to the Registration Statement.
This opinion has been delivered for your benefit in connection with the
filing of the Registration Statement and may not be distributed or otherwise
made available to any other person or entity without our prior written consent.
Very truly yours,
/s/ Bronson, Bronson & McKinnon, LLP
RAS
Coopers Coopers & Lybrand L.L.P.
& Lybrand
a professional services firm
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of Form S-4 of our
report dated December 17, 1996 on our audits of the financial statements of URS
Corporation.
/s/Coopers & Lybrand L.L.P
San Francisco, California
October 7, 1997
Exhibit 23.2
------------
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Prospectus/Joint Proxy Statement of URS Corporation and Woodward-Clyde Group,
Inc. that is made a part of the Registration Statement (Form S-4) and to the use
of our report therein dated March 28, 1997, with respect to the consolidated
financial statements of Woodward-Clyde Group, Inc. as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Denver, Colorado
October 8, 1997
SMITH BARNEY
- ------------
A Member of TravelersGroup
The Board of Directors
URS Corporation
100 California Street, Suite 500
San Francisco, California 94111
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board
of Directors of URS Corporation ("URS") as Appendix B to the
Prospectus/Joint Proxy Statement of URS and Woodward-Clyde Group, Inc.
("WC") relating to the proposed merger transaction involving URS and WC and
references thereto in such Prospectus/Joint Proxy Statement under the
captions "SUMMARY--Recommendation of the Board of Directors of URS--Opinion
of URS Financial Advisor" and "THE MERGER--Opinion of URS Financial
Advisor." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, and we do not admit
that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
By: /s/ Smith Barney, Inc.
-----------------------
SMITH BARNEY, INC.
October 8, 1997
SMITH BARNEY INC.
388 Greenwich Street
New York, N.Y. 10013
(212) 816-6000
CONSENT
As financial advisor to the Woodward-Clyde Group, Inc., we hereby consent
to the use of our fairness opinions (and all references to our firm) included in
or made part of this Registration Statement on Form F-4 for the URS Corporation.
OPPENHEIMER & CO., INC.
/s/ Oppenheimer & Co., Inc.
New York, New York
October 7, 1997
