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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[X] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
URS Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
7. Form, Schedule or Registration Statement No.:
8. Filing Party:
9. Date Filed:
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URS CORPORATION
100 California Street, Suite 500
San Francisco, CA 94111-4529
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Notice of Special Meeting of Stockholders
[to be held on September 30, 1999]
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TO THE STOCKHOLDERS OF URS CORPORATION:
Notice is hereby given that a Special Meeting of Stockholders of URS
Corporation, a Delaware corporation (the "Company"), will be held on
[September 30, 1999 at 9:00 a.m. local time] at the offices of Cooley Godward
LLP, One Maritime Plaza, 20th Floor, San Francisco, California for the
following purposes:
1. To consider approval of an amendment to our Certificate of
Incorporation to increase the authorized number of shares of common stock
from 20,000,000 shares to 50,000,000 shares and to increase the authorized
number of shares of preferred stock from 1,000,000 shares to 3,000,000
shares;
2. To consider approval of an amendment to and restatement of our
Employee Stock Purchase Plan;
3. To consider approval of our 1999 Equity Incentive Plan; and
4. To consider approval of the issuance of Series B Exchangeable
Convertible Preferred Stock to RCBA Strategic Partners, L.P. ("RCBA
Strategic Partners") in exchange for the shares of Series A and Series C
Preferred Stock issued to RCBA Strategic Partners in connection with our
acquisition of Dames & Moore Group.
The foregoing items of business are more completely described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on [August 27, 1999]
as the record date for the determination of stockholders entitled to notice of
and to vote at this Special Meeting and at any adjournment or postponement
thereof. 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 meeting.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign
and return the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name.
By Order of the Board of Directors,
/s/ Kent P. Ainsworth
Kent P. Ainsworth,
Secretary
San Francisco, California
[August 31, 1999]
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URS CORPORATION
100 California Street, Suite 500
San Francisco, CA 94111-4529
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PROXY STATEMENT
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For Special Meeting of Stockholders
[to be held on September 30, 1999]
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of URS
Corporation, a Delaware corporation ("URS" or the "Company"), for use at the
Special Meeting of Stockholders to be held on [September 30, 1999], at 9:00
a.m. local time (the "Special Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Special Meeting. The Special Meeting will be held at the offices of Cooley
Godward LLP, One Maritime Plaza, 20th Floor, San Francisco, California. We
intend to mail this proxy statement and accompanying proxy card on or about
[August 31, 1999], to all stockholders entitled to vote at the Special
Meeting.
Solicitation
We will pay for the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. We will provide
copies of solicitation materials to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. We 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 or personal
solicitation by our directors, officers or other regular employees or, at our
request, ChaseMellon Shareholder Services, L.L.C. No additional compensation
will be paid to directors, officers or other regular employees for such
services, but ChaseMellon Shareholder Services, L.L.C. will be paid its
customary fee, estimated to be approximately $7,000, if it renders
solicitation services.
Voting Rights and Outstanding Shares
Only stockholders of record at the close of business on [August 27, 1999]
will be entitled to notice of and to vote at the Special Meeting. At the close
of business on [August 27, 1999] [15,652,206] shares of Common Stock were
outstanding and entitled to vote.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Special
Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate the affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
counted toward quorum requirements.
Abstentions and broker non-votes will have the same effect as negative votes
with respect to Proposal 1. Abstentions and broker non-votes will not be
counted for any purpose in determining whether Proposals 2 and 3 have been
approved. Abstentions and broker non-votes will have the effect of a vote
against Proposal 4, unless holders of more than 50% of all outstanding
securities entitled to vote on the proposal cast votes, in which event neither
an abstention nor a broker non-vote will have any effect on the result of the
vote.
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Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 100
California Street, Suite 500, San Francisco, CA 94111-4529, a written notice
of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.
Stockholder Proposals
Proposals by stockholders of URS intended to be presented at the next annual
meeting of stockholders must be received by October 16, 1999 in order to be
considered for inclusion in our proxy statement and form of proxy relating to
that meeting.
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Proposal 1
Proposed Amendments to the Certificate of Incorporation
We have an insufficient number of shares currently authorized under our
Certificate of Incorporation to meet existing commitments and expectations. We
also lack enough available authorized shares to use in the event we have the
opportunity to sell equity on favorable terms, either publicly or privately,
in order to reduce our currently high levels of debt or to pursue other
acquisition opportunities. Therefore, our Board of Directors has adopted,
subject to stockholder approval, an amendment to our Certificate of
Incorporation to increase the authorized number of shares of our common stock,
$0.01 par value (the "Common Stock"), from 20,000,000 shares to 50,000,000
shares and to increase the authorized number of shares of our preferred stock,
$0.01 par value (the "Preferred Stock"), from 1,000,000 shares to 3,000,000
shares.
[15,652,206] shares of Common Stock were outstanding at [August 27, 1999].
In addition, we have reserved approximately 3,215,000 shares in the aggregate
for the exercise of outstanding and available grants under the terms of our
equity incentive and employee stock purchase plans. Therefore, only
approximately 12,437,206 shares of Common Stock currently remain available for
other purposes.
46,082.95 shares of Series A Preferred Stock ("Series A Stock") and 450,000
shares of Series C Preferred Stock ("Series C Stock") were issued to RCBA
Strategic Partners, L.P. ("RCBA Strategic Partners") in connection with our
recent acquisition of Dames & Moore Group, Inc. ("Dames & Moore") and are
currently outstanding. An additional 300,000 shares of Series A Stock are
reserved for issuance in payment of the payment-in-kind ("PIK") dividends due
on the Series A Stock. We also have reserved 150,000 shares of Series B
Exchangeable Convertible Preferred Stock ("Series B Stock") for issuance in
exchange for the Series A and Series C Stock held by RCBA Strategic Partners
and the continuing PIK dividends payable on those shares of Series B Stock (as
described more completely in Proposal 4 below). Therefore, only approximately
100,000 shares of Preferred Stock currently remain available for other
purposes.
We are planning to reserve an additional 800,000 shares of Common Stock
under our Employee Stock Purchase Plan and 1,500,000 shares of Common Stock
under our 1999 Equity Incentive Plan if this Proposal and Proposals 2 and 3
are approved. Additional shares of Common Stock will be reserved under the
terms of both the Employee Stock Purchase Plan and the 1999 Equity Incentive
Plan for the annual increases in the available pools as described more
completely in Proposals 2 and 3 below. In addition, if Proposal 4 below is
approved, we plan to reserve approximately 4.6 million shares of Common Stock
for issuance upon conversion of the Series B Stock.
In short, unless our authorized capital is increased as proposed by this
Proposal 1, we will not have sufficient shares available for these critically
important equity incentive and employee stock purchase plans or to fulfill our
commitment regarding the Series B Stock.
The additional shares of Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common
Stock. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common
Stock, except for effects incidental to increasing the number of shares of
Common Stock outstanding, such as potential dilution of the voting power of
current holders of Common Stock should any new shares of Common Stock be
issued.
The additional shares of Preferred Stock to be authorized by adoption of the
amendment also would have rights identical to the currently authorized but
unissued and undesignated Preferred Stock. The Board is currently authorized,
without the vote of the stockholders, to provide for the issuance of up to
1,000,000 shares of Preferred Stock in one or more series and, with respect to
each series:
. to establish the number of shares;
. to fix the rights, preferences and privileges of the shares within each
series;
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. to determine the limitations on the shares within each series; and
. to increase or generally decrease the number of shares of each series.
If this amendment to increase the authorized number of shares of Common
Stock and Preferred Stock is approved by the stockholders, it will become
effective when we file a Certificate of Amendment to our Certificate of
Incorporation with the Secretary of State of the State of Delaware.
The additional shares of Common Stock and Preferred Stock will provide
enhanced flexibility to use our capital stock for business and financial
purposes in the future. The additional shares may be used, without further
stockholder approval, for various purposes, including the following:
. raising capital;
. providing equity incentives to employees, officers and directors as
contemplated by Proposals 2 and 3 below and otherwise;
. for issuance upon conversion of the Series B Stock as contemplated by
Proposal 4 below;
. establishing strategic relationships with other companies; and
. expanding our business through the acquisition of other companies or
businesses.
We will continue to have the option of using the additional shares of Common
Stock or Preferred Stock to oppose a hostile takeover attempt or delay or
prevent changes in control or management. For example, without further
stockholder approval, we could adopt a "poison pill" that would, under certain
circumstances related to an acquisition of our shares that we did not approve,
give certain holders the right to acquire additional shares of our Common
Stock at a low price. Also, the Board could strategically sell shares of
Common Stock or Preferred Stock in a private transaction to purchasers who
would oppose a takeover or favor the current Board of Directors.
This proposal to increase the authorized Common Stock and Preferred Stock
has been prompted by business and financial considerations and not by the
threat of any hostile takeover attempt (nor are we currently aware of any such
attempts directed at us). You should be aware, however, that approval of this
proposal could facilitate future efforts on our part to deter or prevent
changes in control, including transactions in which you might otherwise
receive a premium for your shares over then-current market prices.
Without the approval of the amendment to our Certificate of Incorporation,
we will be unable to (a) amend and restate the Employee Stock Purchase Plan
discussed in Proposal 2 below, (b) adopt the 1999 Equity Incentive Plan
discussed in Proposal 3 below and (c) issue the Series B Exchangeable
Convertible Preferred Stock to RCBA Strategic Partners discussed in Proposal 4
below.
Richard C. Blum & Associates, L.P., which currently beneficially owns
2,569,891 shares (or approximately 16.4%) of our currently outstanding Common
Stock and which is affiliated with RCBA Strategic Partners, has agreed to vote
its Common Stock in favor of the amendment to our Certificate of
Incorporation.
Required Vote
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding will be required to approve this amendment to the
Certificate of Incorporation. As a result, abstentions and broker non-votes
will have the same effect as negative votes.
The Board Of Directors Recommends
a Vote in Favor of Proposal 1.
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Proposal 2
Approval of Employee Stock Purchase Plan, as Amended and Restated
General
On July 13, 1999, the Board of Directors adopted an amendment of the
Employee Stock Purchase Plan (the "ESPP") described below, subject to the
approval of our stockholders. The purposes of the ESPP are to give eligible
employees an opportunity to share in our success by purchasing Common Stock at
a favorable price and to pay for the purchases solely by means of payroll
deductions, thereby encouraging employees to focus on long-range objectives,
to allow us to attract and retain employees with exceptional qualifications
and to link employees and stockholder interests through equity ownership.
Substantially all of our employees are eligible to participate in the ESPP.
The ESPP was originally adopted by the Board of Directors in May 1985, and was
approved by our stockholders at the 1986 annual meeting of stockholders. The
operation of the ESPP was suspended from 1988 to 1991, when it was reinstated.
We subsequently amended the ESPP in 1996, 1997 and 1998 with the approval of
our stockholders primarily to increase the number of shares available for
purchase under the ESPP.
Reasons for the Amendment
We believed that the 300,000 share increase in the ESPP reserve that was
approved at our annual meeting of stockholders held on March 24, 1998 would be
sufficient to cover anticipated employee purchases for the following three
years (absent unusual circumstances). However, the ESPP has proven to be
exceptionally popular among our employees and, as a result, virtually no
shares remained available for purchase under the ESPP as of July 1, 1999. In
addition, in June 1999, we acquired Dames & Moore Group, which has resulted in
an increase in the number of our employees from approximately 7,000 to
approximately 15,000. The increasing popularity of the ESPP and the increase
in the total number of our employees eligible to participate in the ESPP mean
that the shares available for purchase under the ESPP must be increased if
this critical and valuable employee benefit plan is to continue.
During the last fiscal year, the following individuals purchased shares of
Common Stock in the amounts and at the weighted average prices per share under
the ESPP indicated below:
Mr. Koffel, 0 shares ($0); Mr. Rosenstein, 0 shares ($0); Mr. Perez, 0
shares ($0); Mr. Ainsworth, 0 shares ($0); Mr. Masters, 0 shares ($0); all
current executive officers as a group, 0 shares ($0), and all employees
(excluding executive officers) as a group, 311,236 shares ($14.16).
The Amendment
If this Proposal is approved by our stockholders, effective July 13, 1999,
the number of shares of Common Stock reserved for issuance under the ESPP will
be increased by 800,000 shares to a total of 1,650,000 shares. That number
will be increased each July 1, beginning with July 1, 2000 and continuing
through and including July 1, 2009, by the lesser of (i) 3% of the Common
Stock outstanding on such July 1 or (ii) 800,000 shares. The Board adopted
this amendment in order to ensure that we can continue to grant purchase
rights at levels that the Board deems appropriate.
Principal Features of the ESPP
The following summary of the ESPP's principal features does not purport to
be complete. It is subject to, and qualified in its entirety by, the full text
of the ESPP, a copy of which is available from us upon request.
Purpose. The purpose of the ESPP is to provide an opportunity to our
employees (and any employees of any of our subsidiaries designated by the
Board to participate in the ESPP) to purchase URS Common Stock through payroll
deductions, to assist us in retaining the services of our employees, to secure
and retain the services of new employees and to provide incentives for such
persons to exert maximum efforts for our success. Substantially all of our
approximately 15,000 employees are eligible to participate in the ESPP.
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The rights to purchase Common Stock granted under the ESPP are intended to
qualify as options issued under an "employee stock purchase plan" as that term
is defined in Section 423(b) of the Internal Revenue Code of 1986, as amended
(the "Code").
Administration. The Board administers the ESPP and has the final power to
construe and interpret both the ESPP and the rights granted under it. The
Board has the power, subject to the provisions of the ESPP, to determine when
and how rights to purchase our Common Stock will be granted, the provisions of
each offering of such rights (which need not be identical) and whether
employees of any of our subsidiaries will be eligible to participate in the
ESPP.
The Board has the power to delegate administration of the ESPP to a
committee composed of not fewer than one member of the Board. The Board has
delegated administration of the ESPP to the Compensation/Option Committee of
the Board. As used herein with respect to the ESPP, therefore, the "Board"
refers to the Compensation/Option Committee and to the Board.
Offerings. The ESPP is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each offering is six
months long, and shares of Common Stock are purchased on each participant's
behalf on the last day of each offering.
Eligibility. Any person who is customarily employed by URS (or by any of our
subsidiaries designated by the Board) at least 20 hours per week and five
months per calendar year on the first day of an offering is eligible to
participate in that offering. Officers of URS who are "highly compensated" as
defined in the Code are also eligible to participate in the offerings. No
employee, however, is eligible to participate in the ESPP or any offering
thereunder if, immediately after the grant of purchase rights, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of URS or of any
subsidiary of URS (including any stock that the employee may purchase under
all outstanding rights and options). In addition, no employee may purchase
more than $25,000 worth of Common Stock (as determined by the fair market
value of the shares at the time such rights are granted) under all employee
stock purchase plans of URS and our affiliates in any calendar year.
Participation in the Plan. An eligible employee may enroll in the ESPP by
delivering to us, prior to the date selected by the Board as the offering date
for the offering, an agreement authorizing payroll deductions of up to 10% of
the employee's total compensation during the offering.
Purchase Price. The purchase price per share at which shares of Common Stock
are sold in an offering under the ESPP is the lower of (i) 85% of the fair
market value of a share of Common Stock on first day of the offering or (ii)
85% of the fair market value of a share of Common Stock on the last day of the
offering. However, for the December 31, 1999 purchase date, the purchase price
per share will be the lower of (i) 85% of fair market value on July 1, 1999
or, if greater, 85% of fair market value on the date the stockholders approve
the amendment and restatement of the ESPP or (ii) 85% of fair market value on
December 31, 1999.
Payment of Purchase Price; Payroll Deductions. The purchase price of the
shares is accumulated by payroll deductions over each offering. At any time
during an offering, a participant may reduce or terminate his or her payroll
deductions on such conditions as the Board provides in the offering. A
participant may not increase or begin such payroll deductions after the
beginning of the offering, except, if the Board provides, in the case of an
employee who first becomes eligible to participate as of a date specified
during the offering. All payroll deductions made for a participant are
credited to the participant's account under the ESPP and deposited with our
general funds. A participant may not make additional payments into his or her
account under the ESPP.
Purchase of Stock. By executing an agreement to participate in the ESPP, the
employee is entitled to purchase shares of Common Stock under the ESPP. In
connection with offerings made under the ESPP, the Board specifies a maximum
number of shares of Common Stock an employee may purchase and the maximum
aggregate number of shares of Common Stock that may be purchased pursuant to
such offering by all participants. If the aggregate number of shares to be
purchased upon exercise of rights granted in the offering
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would exceed the maximum aggregate number of shares of Common Stock available,
the Board will make a pro rata allocation of available shares in a uniform and
equitable manner. Unless an employee's participation is discontinued, his or
her right to purchase shares is exercised automatically at the end of each
offering at the applicable price. See "Withdrawal" below.
Withdrawal. While each participant in the ESPP is required to sign an
agreement authorizing payroll deductions pursuant to the ESPP, a participant
may withdraw from a given offering by terminating his or her payroll
deductions and delivering to us a notice of withdrawal from the ESPP. A
participant may withdraw at any time up to ten days prior to the end of the
applicable offering, except as provided by the Board in any offering.
Upon any withdrawal from an offering by a participant, we will distribute to
the participant his or her accumulated payroll deductions without interest,
less any accumulated deductions previously applied to the purchase of shares
of Common Stock on the participant's behalf during such offering, and the
participant's interest in the offering will be automatically terminated. The
participant is then no longer entitled to participate in that offering.
However, a participant's withdrawal from an offering will not affect the
participant's eligibility to participate in subsequent offerings under the
ESPP.
Termination of Employment. Rights granted pursuant to any offering under the
ESPP terminate immediately upon cessation of a participant's employment for
any reason, and, upon such cessation of employment, we will distribute to the
participant all of his or her accumulated payroll deductions, without
interest.
Restrictions on Transfer. Rights granted under the ESPP are not transferable
and may be exercised only by the participant to whom such rights are granted.
Duration, Amendment and Termination. The Board may suspend or terminate the
ESPP at any time. The Board may also amend the ESPP at any time. Any amendment
of the ESPP must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (i) increase the number of shares
of Common Stock reserved for issuance under the ESPP, (ii) modify the
requirements relating to eligibility for participation in the ESPP (to the
extent that such approval is required in order to comply with the requirements
of Rule 16b-3 under the Exchange Act or Section 423 of the Code) or (iii)
modify any other provision of the ESPP in a manner that would materially
increase the benefits accruing to participants under the ESPP, if such
approval is required in order to comply with the requirements of Rule 16b-3
under the Exchange Act or Section 423 of the Code.
Rights granted before amendment or termination of the ESPP will not be
altered or impaired by any amendment or termination of the ESPP without
consent of the participant to whom such rights were granted.
Effect of Change in Control. For purposes of the ESPP, the term "Change in
Control" means (i) any change in control that would have to be disclosed in
our next proxy statement under the rules of the SEC, (ii) a change in the
composition of the Board of Directors as a result of which fewer than two-
thirds of the incumbent directors are directors who either were directors of
URS 24 months prior to such change or were elected or nominated for election
to the Board with the approval of at least a majority of the directors who
were directors of URS 24 months prior to such change and who were still in
office at the time of the election or nomination or (iii) any person is or
becomes the beneficial owner, directly or indirectly, of at least 20% of the
total voting power of our outstanding securities, except that any change in
relative beneficial ownership by reason of our repurchase of our securities
will be disregarded, as will any acquisition of less than 50% of the voting
power of our securities by a passive investor and the acquisition of
additional voting power through the Series B Stock issued to RCBA Strategic
Partners in connection with the acquisition of Dames & Moore Group. In the
event of a Change in Control, then, as determined by the Board in its sole
discretion, (i) the surviving corporation either may assume the outstanding
rights under the ESPP or substitute similar rights for such outstanding
rights, (ii) the outstanding rights will continue in full force and effect or
(iii) the purchase date of any ongoing offering will be accelerated such that
the participant's accumulated payroll deductions will be used to purchase
Common Stock immediately prior to, or concurrent with, any such Change in
Control.
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Stock Subject to ESPP. Subject to the approval of this Proposal by our
stockholders, the number of shares of Common Stock reserved for issuance under
the ESPP will be increased by 800,000 shares to a total of 1,650,000 shares.
That number will be increased each July 1, beginning with July 1, 2000 and
continuing through and including July 1, 2009, by the lesser of (i) 3% of the
Common Stock outstanding on such July 1 or (ii) 800,000 shares. If rights
granted under the ESPP expire, lapse or otherwise terminate without being
exercised, the shares of Common Stock not purchased under such rights again
become available for issuance under the ESPP.
United States Federal Income Tax Information
The federal income tax information set forth below describes the tax
consequences for URS and ESPP participants only with respect to participants
who are employed in the United States. Tax consequences for ESPP participants
employed in countries other than the United States will differ.
Rights granted under the ESPP are intended to qualify for the favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan that qualifies under provisions of Section 423 of the
Code.
A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. In addition, the
excess of the fair market value of the stock at the time of purchase of the
shares of Common Stock over the purchase price may be subject to employment
taxes. Other than this, no income will be taxable to a participant until
disposition of the acquired shares, and the method of taxation will depend
upon the holding period of the acquired shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the
excess of the fair market value of the stock as of the beginning of the
offering period over the exercise price, determined as of the beginning of the
offering period, will be treated as ordinary income. Any further gain or any
loss will be taxed as a long-term capital gain or loss. Such capital gains
currently are generally subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of
the stock on the exercise date over the exercise price will be treated as
ordinary income at the time of the sale or disposition. The balance of any
gain will be treated as capital gain. Even if the stock is later disposed of
for less than its fair market value on the exercise date, the same amount of
ordinary income is attributed to the participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the stock on such exercise date. Any capital gain or loss will be
short-term or long-term, depending on how long the stock has been held.
There are no federal income tax consequences to URS by reason of the grant
or exercise of rights under the ESPP. URS is entitled to a deduction to the
extent amounts are taxed as ordinary income to a participant (subject to the
requirement of reasonableness and the satisfaction of tax reporting
obligations).
Required Vote
Approval of the amendment to the ESPP requires the affirmative vote of the
majority of shares present in person or represented by proxy and voting at the
meeting. Abstentions and broker non-votes will not be counted for any purpose
in determining whether this matter has been approved. If such amendment is not
approved by the stockholders, the shares available for sale under the ESPP
will not be increased as described above. In addition, if the amendment to our
Certificate of Incorporation described in Proposal 1 is not approved, the
shares available for sale under the ESPP will not be increased as described
above.
The Board of Directors Recommends
a Vote in Favor of Proposal 2.
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Proposal 3
Approval of 1999 Equity Incentive Plan
General
On July 13, 1999, the URS Board of Directors adopted the URS Corporation
1999 Equity Incentive Plan ("1999 Incentive Plan"), subject to stockholder
approval. The 1999 Incentive Plan provides for the grant of incentive stock
options, nonstatutory stock options and restricted stock awards (collectively
"awards"). Incentive stock options granted under the 1999 Incentive Plan are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
Nonstatutory stock options granted under the 1999 Incentive Plan are not
intended to qualify as incentive stock options under the Code. See "Federal
Income Tax Information" below for a discussion of the tax treatment of awards.
An aggregate of 1,500,000 shares of Common Stock have initially been
reserved for issuance under the 1999 Incentive Plan. That number will be
increased as described in "Stock Subject to the 1999 Incentive Plan" below. If
our stockholders approve the 1999 Incentive Plan, then no further grants or
awards will be made under the URS Corporation 1991 Incentive Plan and
Directors Stock Grant Plan. No awards have been granted under the 1999
Incentive Plan to date. The following summary of the principal features of the
1999 Incentive Plan does not purport to be complete. It is subject to, and
qualified in its entirety by, the full text of the 1999 Incentive Plan, a copy
of which is available from us upon request.
Purpose
The Board adopted the 1999 Incentive Plan to provide an opportunity to
employees, directors and consultants of URS and our affiliates to purchase URS
Common Stock, to assist in retaining the services of such persons, to secure
and retain the services of persons capable of filling such positions and to
provide incentives for such persons to exert maximum efforts for our success
and the success of our affiliates. All of the approximately 15,000 employees,
directors and consultants of URS and our affiliates are eligible to
participate in the 1999 Incentive Plan.
Administration
The Board administers the 1999 Incentive Plan. Subject to the provisions of
the 1999 Incentive Plan, the Board has the power to construe and interpret the
1999 Incentive Plan and awards granted under it and to determine the persons
to whom and the dates on which awards will be granted, the number of shares of
Common Stock to be subject to each award, the time or times during the term of
each award within which all or a portion of such award may be exercised, the
exercise price, the type of consideration and other terms of the award.
The Board has the power to delegate administration of the 1999 Incentive
Plan to a committee composed of not fewer than two members of the Board. The
committee must consist solely of two or more non-employee directors in
accordance with Rule 16b-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In the discretion of the Board, the committee may
consist solely of two or more outside directors in accordance with Section
162(m) of the Code. The Board has delegated administration of the 1999
Incentive Plan to the Compensation/Option Committee of the Board. As used
herein with respect to the 1999 Incentive Plan, the "Board" refers to any
committee the Board appoints as well as to the Board itself. The regulations
under Section 162(m) of the Code require that the directors who serve as
members of the committee be "outside directors." This limitation would exclude
from the committee directors who are (i) current employees of URS or an
affiliate, (ii) former employees of URS or an affiliate receiving compensation
for past services (other than benefits under a tax-qualified pension plan),
(iii) current and former officers of URS or an affiliate, (iv) directors
currently receiving direct or indirect remuneration from URS or an affiliate
in any capacity (other than as a director) and (v) any other person who is
otherwise considered an "outside director" for purposes of Section 162(m). The
definition of an "outside director" under Section 162(m) is generally narrower
than the definition of a "non-employee director" under Rule 16b-3 of the
Exchange Act.
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Eligibility
Incentive stock options may be granted under the 1999 Incentive Plan only to
employees (including officers) of URS and its affiliates. Employees (including
officers), directors, and consultants of both URS and its affiliates are
eligible to receive nonstatutory stock options and restricted stock awards
under the 1999 Incentive Plan. Non-executive directors also may receive non-
executive director stock awards under the 1999 Incentive Plan.
No incentive stock option may be granted under the 1999 Incentive Plan to
any person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of URS or any
affiliate of URS, unless the exercise price of such option is at least 110% of
the fair market value of the stock subject to the option on the date of grant
and the term of the option does not exceed five years from the date of grant.
In addition, the aggregate fair market value, determined at the time of grant,
of the shares of Common Stock with respect to which incentive stock options
are exercisable for the first time by an optionholder during any calendar year
(under the 1999 Incentive Plan and all other such plans of the URS and our
affiliates) may not exceed $100,000.
No employee may be granted options under the 1999 Incentive Plan exercisable
for more than 1,000,000 shares of Common Stock during any fiscal year (the
"Section 162(m) Limitation").
Stock Subject to the 1999 Incentive Plan
Subject to stockholder approval of this Proposal, an aggregate of 1,500,000
shares of Common Stock initially have been reserved for issuance under the
1999 Incentive Plan. That number will be increased each July 1 during the ten-
year term of the 1999 Incentive Plan by the lesser of (i) 5% of the Common
Stock outstanding on such July 1 or (ii) 1,500,000 shares. In addition, the
following shares of Common Stock will be available for issuance under the 1999
Incentive Plan: (i) all shares of Common Stock remaining available for award
under the URS Corporation 1991 Incentive Plan on July 13, 1999, (ii) all
shares of Common Stock issuable pursuant to options or stock awards granted
under the 1991 Incentive Plan that expire or otherwise terminate without
having been exercised in full after July 13, 1999 and (iii) all shares of
Common Stock remaining available for award under the URS Corporation Non-
Executive Directors Stock Grant Plan on July 13, 1999. If awards granted under
the 1999 Incentive Plan expire or otherwise terminate without being exercised,
the shares of Common Stock not acquired pursuant to such awards again become
available for issuance under the 1999 Incentive Plan. In addition, to the
extent that any shares of Common Stock are not issued to an optionholder upon
the exercise of an option, such shares will again become available for
issuance under the 1999 Incentive Plan.
Terms of Options
The following is a description of the permissible terms of options under the
1999 Incentive Plan. Individual option grants may be more restrictive as to
any or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options may
not be less than 100% of the fair market value of the stock subject to the
option on the date of the grant and, in some cases (see "Eligibility" above),
may not be less than 110% of such fair market value. The 1999 Incentive Plan
also expressly provides that the exercise price of nonstatutory options may
not be less than 100% of the fair market value of the stock on the date of
grant. A limited exception to this requirement permits the grant of a
nonstatutory stock option with an exercise price of not less than 50% of the
fair market value of the Common Stock on the date of grant but only to
individuals who are not employed by URS or any of our affiliates immediately
prior to the date of grant and only if such option is granted to induce such
individual to accept employment with us or an affiliate. If options are
granted with exercise prices below fair market value, deductions for
compensation attributable to the exercise of such options could be limited by
Section 162(m) of the Code. See "Federal Income Tax Information." The 1999
Incentive Plan does not permit the repricing of outstanding stock options.
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The exercise price of options granted under the 1999 Incentive Plan must be
paid either in cash at the time the option is exercised or, at the discretion
of the Board, (i) by delivery of other URS Common Stock, (ii) by delivery of
an irrevocable order to a securities broker to sell URS Common Stock and
deliver the sales proceeds to us in payment of all or part of the exercise
price of the option, (iii) pursuant to a deferred payment arrangement, or (iv)
in any other form of legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1999 Incentive Plan may become
exercisable in cumulative increments ("vest") as determined by the Board.
Shares covered by options under the 1999 Incentive Plan typically are expected
to vest at the rate of one-third annually during the optionholder's employment
by, or service as a director or consultant to, URS or an affiliate
(collectively, "service"). However, the Board may determine that an option
will be subject to different vesting terms. In particular, the Board has the
power to accelerate the time during which an option may vest or be exercised.
In addition, options granted under the 1999 Incentive Plan may permit exercise
prior to vesting, but in such event the optionholder may be required to enter
into an early exercise stock purchase agreement that allows us to repurchase
unvested shares, generally at their exercise price, should the optionholder's
service terminate before vesting. To the extent provided by the terms of an
option, an optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash
payment upon exercise, by authorizing us to withhold a portion of the stock
otherwise issuable to the optionholder, by delivering already-owned URS Common
Stock or by a combination of these methods.
Term. The maximum term of options under the 1999 Incentive Plan is ten
years, except that in certain cases (see "Eligibility") the maximum term is
five years. Options under the 1999 Incentive Plan generally terminate three
months after termination of the optionholder's service unless (i) such
termination is due to the optionholder's permanent and total disability (as
defined in the Code), in which case the option may, but need not, provide that
it may be exercised (to the extent the option was exercisable at the time of
the termination of service) at any time within 12 months of such termination,
(ii) the optionholder dies before the optionholder's service has terminated,
or within three months after termination of such service, in which case the
option may, but need not, provide that it may be exercised (to the extent the
option was exercisable at the time of the optionholder's death) within 12
months of the optionholder's death by the person or persons to whom the rights
to such option pass by will or by the laws of descent and distribution or
(iii) the option by its terms specifically provides otherwise. The Board
expects to continue the current practice of providing for nonstatutory options
to terminate three years after an employee's retirement at age 65 or older. An
optionholder may designate a beneficiary who may exercise the option following
the optionholder's death. Individual option grants may by their terms provide
for exercise within longer or shorter periods of time following termination of
service.
An option agreement may provide that if the exercise of the option following
the termination of the optionholder's service would be prohibited because the
issuance of stock would violate the registration requirements under the
Securities Act, then the option will terminate on the earlier of (i) the
expiration of the term of the option or (ii) three months after the
termination of the optionholder's service during which the exercise of the
option would not be in violation of such registration requirements.
Restrictions on Transfer
The optionholder may not transfer an incentive stock option other than by
will or by the laws of descent and distribution. During the lifetime of the
optionholder, only the optionholder may exercise an incentive stock option.
The Board may grant nonstatutory stock options that are transferable under
certain limited circumstances.
Terms of Restricted Stock Awards
Payment. The Board determines the purchase price for a restricted stock
award. The Board may award restricted stock awards in consideration of past
services without a purchase price.
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Vesting. Shares of stock awarded under the 1999 Incentive Plan may be, but
need not be, subject to a share repurchase option in our favor in accordance
with a vesting schedule as determined by the Board. The Board has the power to
accelerate the vesting of stock acquired pursuant to a restricted stock award
under the 1999 Incentive Plan.
Restrictions on Transfer. Rights under a restricted stock award may not be
transferred except where such transfer is expressly authorized by the terms of
the applicable restricted stock award.
Terms of Non-Executive Director Stock Awards
Grants. Each non-executive director will receive a non-executive director
stock award on the one-month anniversary of his or her initial election or
appointment as a non-executive director unless such non-executive director is
elected or appointed for the first time at an annual meeting of our
stockholders. In addition, each non-executive director who is elected,
reelected, or otherwise continues to serve as a non-executive director
effective upon and following each annual meeting will receive a non-executive
director stock award.
Number of Shares Subject to Non-Executive Director Stock Award. The number
of shares subject to each non-executive director stock award will be
determined by dividing $25,000 by the fair market value of our Common Stock on
the day before the grant, rounded down to the nearest whole share.
Vesting. Each non-executive director stock award will be fully vested on the
date of grant.
Consideration. Non-executive director stock awards will be awarded in
consideration for services rendered as a director of URS.
Amendment of Terms of Non-Executive Director Stock Awards. The Board may at
any time, and from time to time, amend the terms pursuant to which non-
executive director stock awards will be granted, including the value or number
of shares that will be subject to each non-executive director stock award.
Adjustment Provisions
Transactions not involving the receipt of consideration by URS, such as a
merger, consolidation, reorganization, stock dividend, or stock split, may
change the class and number of shares of Common Stock subject to the 1999
Incentive Plan and outstanding awards. In that event, the 1999 Incentive Plan
will be appropriately adjusted as to the class and the maximum number of
shares of Common Stock subject to the 1999 Incentive Plan, the Section 162(m)
Limitation and outstanding awards will be adjusted as to the class, number of
shares and price per share of Common Stock subject to such awards.
Effect of Certain Corporate Events
The 1999 Incentive Plan provides that, in the event of a dissolution or
liquidation of URS, all outstanding awards under the 1999 Incentive Plan will
terminate. A "Change in Control" is defined in the 1999 Incentive Plan as a
transaction, or series of transactions that occur within a 12-month period, as
a result of which the stockholders of URS immediately prior to the transaction
(or, in the case of a series of transactions, immediately prior to the first
transaction in the series) hold less than 50% of the beneficial ownership of
the securities of the company that survives the transaction (or, if more than
one company survives the transaction, of the controlling company) following
such transaction or transactions. Unless otherwise provided in an award, in
the event of a Change in Control, (i) any surviving corporation may either
assume awards outstanding under the 1999 Incentive Plan or substitute similar
awards for those outstanding under the 1999 Incentive Plan or (ii) the Board
may, in its discretion, provide that, in complete settlement of outstanding
awards, holders of such awards will receive cash payments in amounts that the
Board determines represent the cash value of the outstanding awards. If the
surviving corporation declines to assume awards outstanding under the 1999
Incentive Plan or to substitute similar awards, and the Board does not provide
that such awards shall be settled in cash, then, with respect to
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optionholders whose service has not terminated, the vesting and the time
during which such awards may be exercised will be accelerated as of a time
designated by the Board. Such outstanding awards will terminate if not
exercised before the time designated by the Board. Outstanding awards held by
optionholders whose service has terminated will terminate if not exercised
prior to the time designated by the Board. The acceleration of an award in the
event of a Change in Control may be viewed as an anti-takeover provision,
which may have the effect of discouraging a proposal to acquire or otherwise
obtain control of URS.
Duration, Amendment and Termination
The Board may suspend or terminate the 1999 Incentive Plan without
stockholder approval or ratification at any time or from time to time. Unless
sooner terminated, the 1999 Incentive Plan will terminate on July 12, 2009.
The Board may also amend the 1999 Incentive Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of URS within 12 months before or after its adoption by the Board
if such amendment requires stockholder approval in order to comply with Rule
16b-3 of the Exchange Act or to satisfy the requirements of Section 422 of the
Code or any securities exchange listing requirements. The Board may submit any
other amendment to the 1999 Incentive Plan for stockholder approval,
including, but not limited to, amendments intended to satisfy the requirements
of Section 162(m) of the Code regarding the exclusion of performance-based
compensation from the limitation on the deductibility of compensation paid to
certain executive officers.
United States Federal Income Tax Information
The federal income tax information set forth below describes the tax
consequences for URS and optionholders only with respect to optionholders who
are employed in the United States. For optionholders employed in countries
other than the United States, the tax consequences will differ.
Long-term capital gains currently are subject generally to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term
capital gains rate for federal income tax purposes is currently 20%, while the
maximum ordinary income rate and short-term capital gains rate is effectively
39.6%. Slightly different rules may apply to optionholders who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of
the Exchange Act.
Incentive Stock Options. Incentive stock options under the 1999 Incentive
Plan are intended to be eligible for the favorable federal income tax
treatment accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionholder
or to us by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the
optionholder's alternative minimum tax liability, if any.
If an optionholder holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are
transferred to the optionholder upon exercise of the option, any gain or loss
on a disposition of such stock will be a long-term capital gain or loss.
Generally, if the optionholder disposes of the stock before the expiration of
either of the above holding periods (a "disqualifying disposition"), then at
the time of disposition the optionholder will realize taxable ordinary income
equal to the lesser of (i) the excess of the stock's fair market value on the
date of exercise over the exercise price, or (ii) the optionholder's actual
gain, if any, on the purchase and sale. The optionholder's additional gain or
any loss upon the disqualifying disposition will be a capital gain or loss,
which will be long-term or short-term depending on whether the stock was held
for more than one year.
To the extent the optionholder recognizes ordinary income by reason of a
disqualifying disposition, we will generally be entitled (subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
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Nonstatutory Stock Options, Restricted Stock Awards and Non-Executive
Director Stock Awards. Nonstatutory stock options, restricted stock awards and
non-executive director stock awards granted under the 1999 Incentive Plan
generally have the following federal income tax consequences:
There are no tax consequences to the optionholder or to us by reason of the
grant. Upon acquisition or issuance of the stock subject to the award, the
optionholder normally will recognize taxable ordinary income equal to the
excess, if any, of the stock's fair market value on the acquisition date over
the purchase price (if any). However, to the extent the stock is subject to
certain types of vesting restrictions, the taxable event will be delayed until
the vesting restrictions lapse unless the optionholder elects to be taxed on
receipt of the stock. With respect to employees, we are generally required to
withhold from regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a business expense
deduction equal to the taxable ordinary income realized by the optionholder.
Upon disposition of the stock, the optionholder will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon acquisition, issuance or vesting of the stock. Such gain or loss will be
long-term or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionholders who acquire
stock subject to certain repurchase options or who are subject to Section
16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation
to such covered employee exceeds $1,000,000. It is possible that compensation
attributable to awards, when combined with all other types of compensation
received by a covered employee from us, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to awards granted under the 1999 Incentive Plan will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such
awards may be granted during a specified period, the per-employee limitation
is approved by the stockholders and the exercise price of the award is no less
than the fair market value of the stock on the date of grant or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain and the material terms of the performance goal are approved by
stockholders.
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New Plan Benefits Table
The following table presents certain information with respect to options and
rights to purchase restricted stock granted under the 1999 Incentive Plan as
of July 31, 1999, subject to the stockholders' approval of the adoption of the
1999 Incentive Plan, by (i) the Company's Chief Executive Officer and its four
other most highly compensated executive officers at July 31, 1999 (the "Named
Executive Officers"), (ii) all executive officers as a group, (iii) all non-
executive officer employees as a group and (iv) all non-employee directors as
a group.
1999 Incentive Plan
<TABLE>
<CAPTION>
Securities
Restricted Underlying
Name and Position Stock Awards Options Granted
- ----------------- ------------ ---------------
<S> <C> <C>
Martin M. Koffel................................... 0 200,000(1)
Chairman of the Board; Chief Executive Officer;
President
Irwin L. Rosenstein................................ 0 0
President, URS Greiner Woodward Clyde
Jean-Yves Perez.................................... 0 0
Executive Vice President, URS Greiner Woodward
Clyde
Kent P. Ainsworth.................................. 0 0
Executive Vice President; Chief Financial Officer;
Secretary
Joseph Masters..................................... 0 0
Vice President and General Counsel
All Executive Officers as a Group.................. 0 200,000
All Non-Executive Officer Employees as a Group..... 0 0
All Non-Executive Directors as a Group............. 0 0
</TABLE>
- --------
(1) Represents options committed to be granted to Mr. Koffel if Proposals 1
and 3 are approved by our stockholders.
Required Vote
Approval of the 1999 Equity Incentive Plan requires the affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy and voting at the meeting. Abstentions and broker non-votes will not be
counted for any purpose in determining whether this matter has been approved.
In addition, if the amendment to our Certificate of Incorporation described in
Proposal 1 is not approved, shares will not be available for issuance under
the 1999 Equity Incentive Plan as described above.
The Board of Directors Recommends
a Vote in Favor of Proposal 3.
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Proposal 4
Issuance of Series B Exchangeable Convertible Preferred Stock
The RCBA Equity Investment
On May 5, 1999, we entered into a merger agreement with Dames & Moore Group
("Dames & Moore"), and on May 11, 1999, we commenced a tender offer for all of
its outstanding common stock. On June 9, 1999 (the "Funding Date"), we
purchased 96% of Dames & Moore's common stock pursuant to the tender offer,
and accordingly, Dames & Moore became one of our subsidiaries. The total
amount of funds that we needed to acquire Dames & Moore, to pay related fees
and expenses and to refinance most of Dames & Moore's and our own outstanding
debt was approximately $750 million. We obtained the funds through a
combination of a $450 million senior secured credit facility, the issuance of
$200 million of senior subordinated increasing rate notes (subsequently
exchanged for senior subordinated notes on June 23, 1999) and a sale of $100
million of preferred stock to RCBA Strategic Partners.
The sale of preferred stock to RCBA Strategic Partners, effected pursuant to
a Securities Purchase Agreement dated May 5, 1999, consisted of 46,082.95
newly-issued shares of Series A Preferred Stock ("Series A Stock") and 450,000
newly-issued shares of Series C Preferred Stock ("Series C Stock") in exchange
for cash consideration of $100 million (the "RCBA Strategic Partners Equity
Investment"), both of which are non-voting and non-convertible. Under the
terms of the Securities Purchase Agreement, immediately upon approval by our
stockholders of Proposal 1 and this Proposal 4, all of the shares of Series A
Stock and the Series C Stock held by RCBA Strategic Partners will be exchanged
for 46,083 shares of Series B Exchangeable Convertible Preferred Stock
("Series B Stock"). As described in more detail below, the Series B Stock will
have voting and conversion rights, but will have economic terms which we
believe are more favorable to URS and our stockholders than the current terms
of the Series A Stock and the Series C Stock.
New York Stock Exchange Requirements
The Board of Directors proposes to issue 46,083 shares of Series B Stock in
connection with the RCBA Strategic Partners Equity Investment and asks for
your approval for the issuance in accordance with the rules of the New York
Stock Exchange ("NYSE").
The NYSE rules require stockholder approval for the issuance of securities
convertible into Common Stock to a "substantial security holder" if the
convertible securities exceed one percent (1%) of the outstanding shares of
voting stock prior to issuance. The Board's proposed issuance of shares of
Series B Stock to RCBA Strategic Partners falls under this rule because
Richard C. Blum & Associates, L.P. is presently the beneficial owner of
approximately 19% of our outstanding Common Stock, and any holder of aggregate
interests which represent five percent (5%) or more of the outstanding shares
of a company's common stock or other voting securities is generally considered
by the NYSE to be a "substantial security holder." In addition, the Series B
Stock will be convertible into approximately 4.6 million shares of Common
Stock.
Disinterested Transaction
Richard C. Blum & Associates, L.P. is affiliated with RCBA Strategic
Partners, the purchaser of non-voting Series A Stock and Series C Stock as
part of the RCBA Equity Investment. Upon stockholder approval, the Series A
Stock together with the Series C Stock will be exchanged for Series B
Preferred Stock, which will have voting rights. If all of the Series B
Preferred Stock were converted into our common stock, Richard C. Blum &
Associates, L.P. and its affiliates would be the beneficial owners of
approximately 34% of our outstanding common stock.
Richard C. Blum & Associates, L.P. has agreed, pursuant to the terms of the
Securities Purchase Agreement, that it will vote the shares of Common Stock
within its control in favor of this proposal. The votes will be counted to
satisfy the approval requirements of the NYSE. In addition, if the proposal is
approved by a majority
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of votes cast by holders of Common Stock other than Richard C. Blum &
Associates, L.P., then the transaction will have been approved by a
disinterested majority of shares as provided for under the relevant provisions
of the Delaware General Corporation Law.
Series B Exchangeable Convertible Preferred Stock Rights and Preferences
Certificate of Designation. The Series B Stock will have designations,
voting rights, preferences, limitations and special rights as set forth in its
Certificate of Designation, filed with the Secretary of State of Delaware on
June 9, 1999. The following discussion is subject to, and qualified in its
entirety by, the full text of the Certificate of Designation, a copy of which
is available from us upon request.
Conversion Rights. Each share of Series B Stock may be converted into shares
of Common Stock at the option of the holder at any time, subject to certain
conditions as set forth in the Certificate of Designation. The Series B Stock
will be convertible into approximately 4.6 million shares of Common Stock. In
addition, URS will have the right, on or after the third anniversary of the
Funding Date, to convert all, but not less than all, of the outstanding shares
of Series B Stock into Common Stock if the price of our Common Stock on the
relevant exchange reaches certain levels for certain minimum periods of time.
Voting Rights. For so long as the Series B Stock is outstanding, each share
of Series B Stock will entitle its holder to vote on all matters voted on by
holders of our capital stock into which the share of Series B Preferred Stock
is convertible. Holders of Series B Stock will be entitled to vote together as
a single class with the other stockholders entitled to vote at all meetings of
our stockholders. With respect to any such vote, each share of Series B Stock
shall entitle its holder to cast the number of votes equal to the number of
votes which could be cast by a holder of the shares of our capital stock into
which such share of Series B Stock is convertible on the record date for such
vote or, if no such record date is established, on the date any written
consent of stockholders is solicited. The holders of Series B Stock are also
entitled to vote on certain matters as mandated by the Delaware General
Corporation Law.
Dividends and Distributions. The holders of shares of Series B Stock, in
preference to the holders of shares of our Common Stock and of any other
capital stock ranking junior to the Series B Stock as to payment of dividends,
shall be entitled to receive on the last day of each calendar quarter,
cumulative dividends on the Series B Stock. These dividends shall be paid-in-
kind at a dividend rate of 8% per annum from the date of initial issuance of
the Series B Stock, subject to certain qualifications as set forth in the
Certificate of Designation.
Mandatory Redemption. On the twelfth anniversary of the Funding Date, we are
obligated to redeem any outstanding shares of Series B Stock and must pay for
the shares of Series B Stock in cash. The aggregate redemption price is equal
to the aggregate conversion price plus accrued but unpaid dividends subject to
adjustment for stock splits, reclassifications, reorganizations and similar
matters.
Rights and Preferences of the Series A Stock and the Series C Stock
Certificate of Designation. The Series A and Series C Stock will have
designations, voting rights, preferences, limitations and special rights as
set forth in their respective Certificates of Designation, filed with the
Secretary of State of Delaware on June 9, 1999. The following discussion is
subject to, and qualified in its entirety by, the full text of the
Certificates of Designation, copies of which are available from us upon
request.
Conversion Rights. Neither the Series A Stock nor the Series C Stock is
convertible into common stock of URS.
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Voting Rights. Neither the Series A Stock nor the Series C Stock has any
voting rights, except for certain transactions that require the approval of
the holders of such securities.
Dividends and Distributions. Currently, the Series A Stock pays in-kind
dividends quarterly at a per annum rate of 8%. If our stockholders do not
approve the issuance of a sufficient number of shares of Series B Stock by
December 9, 1999, then, under the terms of the Securities Purchase Agreement,
the dividend rate for the Series A Stock will be recalculated and paid as if
the dividend rate were 15% from the date of its issuance. The Series C Stock
does not pay dividends except in limited circumstances.
Mandatory Redemption. On the twelfth anniversary of the Funding Date, we are
obligated to redeem any outstanding shares of Series A Stock and Series C
Stock. We must pay for the Series A Stock in cash, but we can choose to pay
for the Series C Stock either in cash, common stock or a combination thereof.
In addition, holders of Series C Stock can require us to repurchase all of the
outstanding shares of Series C Stock on the sixth anniversary of the Funding
Date at a price determined based on the appreciation in the value of our
Common Stock from the Funding Date through the sixth anniversary of the
Funding Date.
Reasons for the Exchange
If this proposal to exchange the Series A and Series C Stock for Series B
Stock is not approved, certain negative consequences to URS and to our
stockholders may result, including, without limitation:
. the dividend rate on the Series A Stock would be recalculated and paid as
if it had been 15% from the date of issuance, a rate seven percentage
points higher than the current dividend rate of 8% on the Series A Stock;
and
. the Series A and Series C Stock would never be redeemable at our option;
and
. because the Series A Stock and the Series C Stock are not convertible, we
would be obligated to redeem the Series A Stock for cash and the Series C
Stock for cash or common stock on the twelfth anniversary of the Funding
Date. We also may be obligated to redeem the Series C Stock on the sixth
anniversary of the Funding Date. These mandatory redemption requirements,
and especially the requirement that the Series A Stock be redeemed for
cash, could create a situation where we were forced to enter into
unfavorable or unwanted financing transactions in order to generate the
required funds.
However, if this proposal is approved along with Proposal 1 and we are able
to issue the Series B Stock in exchange for the currently outstanding shares
of Series A and Series C Stock, our stockholders could benefit because:
. the dividend rate on the Series B Stock would remain at an annual rate of
8%;
. we will have more flexibility to convert the Series B Stock into Common
Stock after the third anniversary of the Funding Date; and
. if our stock price appreciates, the Series B Stock is more likely to be
converted into our Common Stock at maturity rather than held for cash
redemption, thereby avoiding the need for us to obtain financing to
satisfy the redemption obligation.
Stockholders also should note that the Series B Stock votes on an as-if-
converted basis together with the Common Stock on all matters entitled to be
voted upon by our stockholders and would be convertible into approximately 4.6
million shares of Common Stock. Because of this conversion ratio, Richard C.
Blum & Associates, L.P. and its affiliates would have beneficial ownership of
approximately 34% of the voting power and economic interests of our
outstanding Common Stock. The large interest held by Richard C. Blum &
Associates, L.P. could be used to thwart an acquisition proposal that other
stockholders may deem favorable to us. However, the existence of this large
ownership and voting interest also presents the possibility that Richard C.
Blum & Associates, L.P. could work together with us to delay or prevent a
hostile takeover attempt deemed inadequate by our management.
18
<PAGE>
While this proposal to issue the Series B Stock to RCBA Strategic Partners
is motivated by business and economic concerns and not by the threat of any
hostile takeover attempt (nor are we currently aware of any such attempts
directed at us), you should be aware that approval of this Proposal and of
Proposal 1 could facilitate future efforts on our part to deter or prevent
changes in control.
Required Vote
Approval of the issuance of the Series B Stock requires the affirmative vote
of the majority of the votes cast on the proposal, provided that the total
votes cast on the proposal represent over 50% of all outstanding securities
entitled to vote on the proposal. Abstentions and broker non-votes will have
the effect of a vote against the proposal, unless holders of more than 50% of
all outstanding securities entitled to vote on the proposal casts votes, in
which event neither an abstention nor a broker non-vote will have any effect
on the result of the vote. In addition, if the amendment to our Certificate of
Incorporation described in Proposal 1 is not approved, the issuance of Series
B Stock will not take place as described above.
The Board of Directors Recommends
a Vote in Favor of Proposal 4.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of July 31, 1999 as to the beneficial
ownership of the Common Stock, including Common Stock available upon the
exercise of stock options exercisable on or prior to September 29, 1999 by
each person owning beneficially more than 5% of the Common Stock, each
director and the executive officers. To our knowledge, the persons named in
the table have sole voting and investment power with respect to all Common
Stock shown as beneficially owned by them, subject to applicable community
property laws and except as otherwise noted.
<TABLE>
<CAPTION>
Beneficial Pro Forma
Ownership(1) Beneficial Ownership(2)
-------------------- --------------------------
Beneficial Owner Name and Number of Percent of Number of Percent of
Address Shares Total Shares Total
------------------------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Richard C. Blum & Associates, 2,569,891 16.42% 7,238,788 33.53%
L.P.(3).......................
909 Montgomery Street
San Francisco, CA 94133
Heartland Advisors, Inc........ 1,474,826 9.42% 1,474,826 6.83%
790 North Milwaukee Street
Milwaukee, WI 53202
FMR Corp. ..................... 1,688,600 10.79% 1,688,600 7.82%
82 Devonshire Street
Boston, MA 02109-3614
Richard C. Blum(4)............. 24,475 * 24,475 *
Armen Der Marderosian(5)....... 6,634 * 6,634 *
Admiral S. Robert Foley, Jr.,
USN (Ret.).................... 0 -- 0 --
Martin M. Koffel(6)............ 523,000 3.34% 629,000 2.91%
Richard B. Madden(7)........... 13,634 * 13,634 *
Jean-Yves Perez(8)............. 125,378 * 125,378 *
Richard Q. Praeger(9).......... 18,845 * 18,845 *
Irwin L. Rosenstein(10)........ 120,114 * 120,114 *
William D. Walsh(11)........... 30,134 * 30,134 *
Kent P. Ainsworth(12).......... 176,633 * 253,300 *
Joseph Masters(13)............. 22,068 * 22,068 *
All Officers and Directors as a
group (12 persons)(14)........ 3,630,806 23.20% 8,482,370 39.29%
</TABLE>
- --------
* Less than one percent.
(1) Percentages are calculated with respect to a holder of options
exercisable prior to September 29, 1999 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) Pro Forma Beneficial Ownership is calculated as if the issuance of the
Series B and such Series B Stock was converted into Common Stock on July
30, 1999. Stock to RCBA Strategic Partners (see (3) below) had occurred.
(3) Richard C. Blum is the President, Chairman and majority stockholder of
Richard C. Blum & Associates, Inc. Richard C. Blum & Associates, Inc. is
the sole general partner of Richard C. Blum & Associates, L.P. The number
of shares represents 996 shares owned directly by Richard C. Blum &
Associates, L.P. and 2,568,855 shares owned directly by five limited
partnerships for which Richard C. Blum & Associates, L.P. serves as the
sole general partner and two investment advisory clients for which
Richard C. Blum & Associates, L.P. exercises voting and investment
discretion as to all such shares. One of the investment advisory clients
is The Common Fund, 450 Post Road East, Westport, CT 06881-0969, which
owns 1,077,980 shares, or 6.88% of the outstanding Common Stock,
directly. Richard C. Blum & Associates, Inc. and Richard C. Blum &
Associates, L.P. disclaim beneficial ownership of the shares owned
directly by such partnerships and investment advisory clients except to
the extent of any pecuniary interest therein. Richard C. Blum &
Associates, Inc. is affiliated with RCBA Strategic Partners, L.P. RCBA
Strategic
20
<PAGE>
Partners, L.P. purchased non-voting Series A Stock and Series C Stock as
part of the RCBA Strategic Partners Equity Investment. Upon stockholder
approval, the Series A Stock together with the Series C Stock will be
exchanged for Series B Stock, which will have voting rights. If all of the
Series B Stock were converted into our Common Stock, Richard C. Blum &
Associates, L.P. and its affiliates would be the beneficial owners of more
than 33% of our outstanding Common Stock. Richard C. Blum & Associates,
Inc., Richard C. Blum & Associates, L.P. and RCBA Strategic Partners, L.P.
disclaim beneficial ownership of the shares owned directly by them or
their affiliates except to the extent of any pecuniary interest therein.
(4) Includes 12,021 shares held directly, 2,454 shares held as beneficiary of
the RCB Keogh Plan, and currently exercisable options. Does not include
shares held by Richard C. Blum & Associates, L.P. or entities managed by
Richard C. Blum & Associates, L.P., which Mr. Blum may be deemed to own
indirectly in his capacity as the President, Chairman and majority
stockholder of Richard C. Blum & Associates, Inc., in its capacity as the
sole general partner of Richard C. Blum & Associates, L.P. Mr. Blum
disclaims beneficial ownership of these shares except to the extent of
any pecuniary interest therein.
(5) Includes 4,634 shares held directly and currently exercisable options.
(6) Includes 50,000 restricted shares held directly and currently exercisable
options, but does not include 56,000 options and 50,000 restricted shares
that will vest upon stockholder approval of the issuance of the Series B
Stock described in Proposal 4. These excluded options and shares are
included in the pro forma figures. Also excludes 300,000 options granted
to Mr. Koffel on March 23, 1999 and an additional 200,000 options which
we committed to grant to Mr. Koffel on the same date, subject to
stockholder approval of Proposals 1 and 3 (see "Employment Agreements").
(7) Includes 9,634 shares held directly and currently exercisable options.
(8) Includes 118,711 shares held directly and currently exercisable options.
(9) Includes 8,845 shares held directly and currently exercisable options.
(10) Includes 2,114 shares held directly and currently exercisable options.
(11) Includes 22,134 shares held directly and currently exercisable options.
(12) Includes 7,500 shares held directly, 60,000 restricted shares held
directly and currently exercisable options, but does not include 51,667
options and 25,000 restricted shares that will vest upon stockholder
approval of the issuance of the Series B Stock described in Proposal 4.
These excluded options and shares are included in the pro forma figures.
(13) Includes 101 shares held directly and currently exercisable options.
(14) Includes shares held by Richard C. Blum & Associates, L.P. and by
entities managed by Richard C. Blum & Associates, L.P., which Mr. Blum
may be deemed to own indirectly in his capacity as the majority
stockholder of Richard C. Blum & Associates, Inc., in its capacity as the
sole general partner of Richard C. Blum & Associates, L.P. Mr. Blum
disclaims beneficial ownership of these shares except to the extent of
any pecuniary interest therein.
21
<PAGE>
Report of the Compensation/Option Committee on Executive Compensation for
Fiscal Year 1998(1)
The Compensation/Option Committee (the "Committee") has the responsibility,
under delegated authority from the Company's Board of Directors, for
developing, administering and monitoring the executive compensation policies
of the Company in the long term interests of the Company and its stockholders.
The Committee is composed solely of independent non-employee Directors of the
Company. In fulfilling its responsibilities, the Committee has used the
services of independent compensation consultants.
With the approval of the Committee, the Company has developed compensation
plans and programs designed to attract and retain qualified key executives and
senior managers critical to the Company's success, and also to provide such
executives and managers with performance-based incentives clearly tied to
Company profitability and stockholder returns. Compensation of the Company's
executives, including the Chief Executive Officer, consists of three basic
components: base compensation, annual bonuses and long-term incentive awards.
Base Compensation
Officer base salaries are currently regularly reviewed and adjusted as
needed based on individual performance and competitive practices. Officer base
compensation for new executives from outside the Company is established
through negotiation between the Company and the executive at the time the
executive is first hired, subject to Committee approval.
Each of the Company's senior executives named in the following Summary
Compensation Table (collectively the "Named Executives") have received
employment contracts which provide for a minimum base salary and other base
compensation benefits (see "Employment Agreements"). Under such contracts,
base salaries are subject to periodic review and possible increase by the
Committee, but cannot be decreased without the Named Executive's consent. Base
salaries of all other executives and senior managers are subject to periodic
review and increase or decrease by the Company's Chief Executive Officer at
his option, within the overall framework of the compensation policies
established by the Committee.
When establishing or reviewing base compensation levels for the Named
Executives, the Committee considers numerous factors, including but not
limited to the following: (i) the qualifications of the executive;
(ii) whether the base compensation is within a reasonable range of executive
pay levels at other publicly and privately-held companies which potentially
compete with the Company for business and executive talent; (iii) the
financial performance of those companies relative to the Company; (iv) the
Company's strategic goals for which the executive has responsibility, and (v)
the recommendations of the Company's Chief Executive Officer (except with
respect to his own base compensation). While the Committee, as discussed
above, considers prevailing compensation levels and practices at other
publicly and privately-held companies, such companies are not necessarily
those identified in the stockholder return peer group discussed in the
"Stockholder Return Chart" below because the Company competes for executive
talent with numerous companies outside that peer group.
Annual Bonus Programs
In addition to base compensation, each of the Company's executives and
selected senior managers, including the Named Executives, participate in
either the annual URS Corporation Incentive Compensation Plan (the "URS Plan")
or the annual URS Greiner and Woodward-Clyde Incentive Compensation Plans (the
"URS Greiner Woodward Clyde Plans"). Under these plans, participating
executives and senior managers ("Participants") can earn annual bonuses based
on a formula tied to certain predefined financial performance targets. Each
Participant is assigned a "Target Bonus" at the beginning of the plan year
expressed as a percentage of his or her base salary. If the financial
performance targets are met, each Participant's bonus is equal to the Target
Bonus. If
- --------
(1) This report discusses information current as of the fiscal year ended
October 31, 1998 as required by the rules of the Securities and Exchange
Commission. For additional information with respect to executive
compensation decisions made subsequent to the end of the 1998 fiscal year,
please refer to "Certain Transactions" and "Employment Agreements" below.
22
<PAGE>
performance targets are not met, bonuses are determined as a declining
percentage of Target Bonuses depending on the extent of the shortfall. No
bonus is paid under the plan if the Company fails to achieve a predefined
minimum performance levels. Conversely, if performance targets are exceeded,
then each Participant can earn a bonus in excess of the Target Bonus
determined by the extent of the performance in excess of target, up to a
maximum of two times the Target Bonus.
Mr. Koffel's Target Bonus is established by contract at 60 percent of his
base salary. Target bonuses for the other Named Executives and the other
Participants are either set by contract or established annually by the Chief
Executive Officer within the overall framework of the compensation policies
established by the Committee. For the Named Executives, Target Bonuses
currently range from 20 percent to 60 percent of base salary.
Financial performance targets are initially developed by the Chief Executive
Officer and are approved by the Committee. Under the URS Plan, the financial
measurement used to gauge individual performance is the Company's fiscal year
net income. Under the URS Greiner Woodward Clyde Plans, measurements of
operating profit contribution, cash flow and new business are applied to the
financial performance of the operating division or unit for which the
Participant has management responsibility. However, increasing emphasis is
placed on Company-wide financial performance as the Participants'
responsibilities increase. Overall financial performance thresholds must be
met before any bonuses can be earned at all participation levels.
Long-Term Incentive Awards
In addition to the 1999 Incentive Plan discussed in Proposal 3, the Company
has also adopted the 1991 Stock Incentive Plan, as amended (the "1991 Plan"),
to provide executives and other key employees with incentives to maximize
stockholder value. Awards under the 1991 Plan can be either stock options,
performance restricted stock or restricted stock, which are designed both to
encourage recipients to focus on critical long-range objectives and award
recipients with an equity stake in the Company, thereby closely aligning their
interests with those of the Company's stockholders. Restricted stock grants
are generally reserved for key technical talent and options are typically used
for the Company's key managers and executives.
Recipients generally fall into five different groups: corporate management,
division managers, office managers, key technical staff, and key
administrative staff, and the size of awards are generally consistent within
each of these groups. The Committee periodically considers whether to approve
specific awards under the 1991 Plan based on the recommendations of the Chief
Executive Officer, who recommends the timing and size of awards. Factors
considered include the executive's or key employee's position in the Company,
his or her performance and responsibilities, and long-term incentive award
levels of comparable executives and key employees at companies which compete
with the Company for talented executives and managers. However, the 1991 Plan
does not provide any formulaic method for weighing these factors, and a
decision to grant an award is primarily based upon the future anticipated
performance and responsibilities of the individual in question. Finally, the
Committee weighs how much grants under long-term stockholder plans can
potentially dilute the Company's outstanding common stock in comparison to
other publicly-traded companies which potentially compete with the Company for
business and executive talent.
If our stockholders approve the 1999 Incentive Plan, then effective July 13,
1999, no further grants or awards will be made under the 1991 Plan.
Chief Executive Officer Compensation
The compensation of Mr. Koffel during fiscal year 1998 was determined on the
same basis as discussed above for certain of the Named Executives: he received
his base salary under the terms of his employment agreement, he participated
in the 1998 URS Plan with a Target Bonus of 60 percent of his base salary, and
he received a grant of 66,000 options under the 1991 Plan. The Company's
financial performance in fiscal year 1998 exceeded planned levels. As a result
of this performance, Mr. Koffel received a bonus of $520,738 under the payout
formula of the 1998 URS Plan. On December 15, 1998, the Committee approved an
increase to Mr. Koffel's base compensation from $500,000 to $550,000 per year,
in recognition of both the Company's performance and its increased size
following the acquisition of Woodward-Clyde Group, Inc.
23
<PAGE>
In order to provide an additional financial incentive for Mr. Koffel to
remain employed by the Company for the next five years, on December 16, 1997
the Committee awarded him 50,000 shares of restricted stock. These shares vest
over the last three years of a five year vesting schedule. No shares will vest
on the first and second anniversaries of the grant, 16,666 shares will vest on
the third anniversary of the grant, 16,666 shares will vest on the fourth
anniversary of the grant and the final 16,667 shares will vest on the fifth
anniversary of the grant.
On December 16, 1997, the Committee also made a contingent grant of up to
50,000 shares of Performance Restricted Stock to Mr. Koffel. The purpose of
this contingent grant is to help retain Mr. Koffel and to provide additional
incentives to deliver superior Company financial performance and stockholder
returns. The exact number of shares of Performance Restricted Stock earned by
Mr. Koffel will be based on the Company's cumulative total returns to its
stockholders over the three, four and five year periods ending December 16,
2000, December 16, 2001 and December 16, 2002. For each period, one-third,
two-thirds and all of the 50,000 shares, respectively, will be earned
cumulatively if annual stockholder returns during the period are twelve
percent or more, no shares will be earned if annual stockholder returns are
eight percent or less, and a prorated portion of the shares will be earned if
annual stockholder returns are more than eight percent but less than twelve
percent.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which was added to the Code by the Omnibus Budget Reconciliation Act
of 1993, precludes the deduction by a publicly held corporation for
compensation paid to certain employees to the extent that such compensation
exceeds $1,000,000, except for compensation paid under a written binding
contract in existence on February 17, 1993 and performance-based compensation.
The Internal Revenue Service has issued regulations for Section 162(m), which
provide that performance-based compensation will not be subject to the
deduction limit if (i) it is payable solely on account of the attainment of
pre-established, objective performance goals, (ii) the performance goals are
established by a compensation committee composed solely of two or more
"outside directors," (iii) the material terms of the performance goals under
which the compensation is to be paid are disclosed to and approved by
stockholders before payment, and (iv) the compensation committee certifies
that the performance goals have been satisfied before payment.
Because the Committee did not approve any executive compensation in fiscal
year 1998 which was within the scope of Section 162(m) of the Code, the
regulations do not affect the preparation of the Company's tax filings for
fiscal year 1998. However, in fiscal year 1999, the compensation level of the
Named Executives (including the vesting of restricted stock and performance
restricted stock granted under the 1991 Plan) could exceed the $1,000,000
threshold of Section 162(m).
Respectfully Submitted,
THE COMPENSATION/OPTION COMMITTEE
Richard B. Madden, Chairman
William D. Walsh
Compensation/Option Committee Interlocks and Insider Participation
As noted above, the Compensation/Option Committee is comprised of two non-
employee directors: Messrs. Madden and Walsh. No member of the
Compensation/Option Committee is or was formerly an officer or an employee of
the Company. No interlocking relationship exists between the Board of
Directors or Compensation/Option Committee and the board of directors or
compensation committee of any other company, nor has such interlocking
relationship existed in the past.
24
<PAGE>
Compensation and Option/SAR Tables
The following tables set forth certain information regarding the salary and
benefits paid during each of the three most recent fiscal years, and options
granted by URS in the most recent fiscal year, to its Chief Executive Officer
and its four most highly compensated executive officers (other than the Chief
Executive Officer) for services rendered to the Company and its subsidiaries.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------
Annual Compensation Awards Payouts
------------------------------ ----------------------- -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position Year ($) ($) ($)(1) ($)(2) SARs (#) ($) ($)
------------------ ---- -------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Martin M. Koffel....... 1998 $489,750 $520,738 $2,715 $703,125(3) 66,000(4) 0 $16,727 (5)
Chairman of the Board; 1997 415,000 446,644 2,712 0 36,000 0 42,146
Chief Executive
Officer; 1996 410,000 492,000 3,235 0 18,000 0 41,583
President
Irwin L. Rosenstein.... 1998 $342,711 $243,305 $3,532 0 27,000 0 $ 8,363 (6)
President, URS Greiner 1997 315,000 214,498 429 0 24,000 0 13,529
Woodward Clyde 1996 312,513 242,800 375 0 12,000 0 14,785
Jean-Yves Perez........ 1998(7) $310,000 $184,687 0 0 20,000 0 $10,917 (8)
Executive Vice
President, 1997
URS Greiner 1996
Woodward Clyde
Kent P. Ainsworth...... 1998 $268,370 $237,793 $3,210 $351,563(9) 27,000 0 $ 3,274(10)
Executive Vice
President; 1997 220,000 157,850 0 20,000 0 1,500
Chief Financial
Officer; 1996 212,083 169,666 0 4,800 0 1,500
Secretary
Joseph Masters......... 1998 $165,000 $ 73,100 0 0 5,000 0 $ 2,297
Vice President and 1997 151,000 55,132 0 0 15,000 0 1,602
General Counsel 1996 138,333 55,334 0 0 2,400 0 1,100(11)
</TABLE>
- --------
(1) The amounts in this column primarily represent automobile allowances.
(2) The aggregate number and value as of October 31, 1998 of each of the
Named Executive's restricted share holdings are as follows: Mr. Koffel,
50,000 shares, $844,000; Mr. Rosenstein, 0 shares, $0; Mr. Ainsworth,
25,000 shares, $422,000; Mr. Perez, 0 shares, $0; Mr. Masters 0 shares,
$0. Dividends will be paid on such restricted stock if and when declared
on our Common Stock.
(3) On December 16, 1997, Mr. Koffel was awarded 50,000 shares of restricted
stock, 16,666 of which will vest of December 16, 2000, 16,667 of which
will vest on December 16, 2001 and 16,667 of which will vest on December
16, 2002 (see "Employment Agreements"). These shares also will vest upon
issuance of the Series B Stock as contemplated by Proposal 4.
(4) Excludes 300,000 option shares granted in March 1999 and 200,000 option
shares committed to be granted if Proposals 1 and 3 are approved by our
stockholders. Also excludes 50,000 performance restricted shares which
will be issued in the event Proposals 1 and 4 are approved (see
"Employment Agreements").
(5) Consists of matching contributions of $2,128 paid pursuant to our Defined
Contribution Plan, a $1,228 inflation adjustment (based on a cost of
living index) to amount previously credited under the Selected Executives
Deferred Compensation Plan and $13,371 of term life and disability
insurance premiums paid pursuant to Mr. Koffel's employment agreement. In
addition, on December 16, 1997, Mr. Koffel received a contingent grant of
50,000 shares of performance restricted stock which may be earned over
the three, four and five year periods ending December 16, 2000, December
16, 2001 and December 16, 2002 based upon URS' cumulative total returns
to stockholders (see "Employment Agreements"). The value of such
25
<PAGE>
performance restricted stock as of October 31, 1998 (assuming that such
performance restricted stock was fully vested on that date) was $844,000.
These shares also will vest upon issuance of the Series B Stock as
contemplated by Proposal 4.
(6) Consists of matching contributions of $2,128 paid pursuant to the Defined
Contribution Plan, a $2,546 inflation adjustment (based on a cost of
living index) to amounts previously credited under the Selected
Executives Deferred Compensation Plan and $3,689 for life and disability
insurance premiums.
(7) Mr. Perez has been employed by URS since November 1, 1997.
(8) Consists of matching contributions of $4,800 paid pursuant to our Defined
Contribution Plan and $3,456 of term life insurance premiums.
(9) On December 16, 1997, Mr. Ainsworth was awarded 25,000 shares of
restricted stock, 8,333 of which will vest on December 16, 2000, 8,333 of
which will vest on December 16, 2001 and 8,334 of which will vest of
December 16, 2002. These shares also will vest upon issuance of the
Series B Stock as contemplated by Proposal 4. Excludes 35,000 shares of
restricted stock awarded to Mr. Ainsworth on July 12, 1999. Also excludes
25,000 performance restricted shares which will be issued in the event
Proposals 1 and 4 are approved (see "Employment Agreements").
(10) Consists of matching contributions of $2,128 paid pursuant to our Defined
Contribution Plan and $1,146 in term life insurance premiums. In
addition, on December 16, 1997, Mr. Ainsworth received a contingent grant
of 25,000 shares of performance restricted stock which may be earned over
the three, four and five year periods ending December 16, 2000, December
16, 2001 and December 16, 2002 based upon URS's cumulative total returns
to stockholders (see "Employment Agreements"). The value of such
performance restricted stock as of October 31, 1998 (assuming that such
performance restricted stock was fully vested on that date) was $422,000.
These shares also will vest upon issuance of the Series B Stock as
contemplated by Proposal 4.
(11) Consists of matching contributions of $1,100 paid pursuant to our Defined
Contribution Plan.
Stock Option Grants and Exercises
We grant options to our executive officers under our 1991 Incentive Plan. As
of July 31, 1999, options to purchase a total of 2,517,868 shares were
outstanding under the Incentive Plan and options to purchase 22,713 shares
remained available for grant thereunder.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
----------------------
Potential
Realizable Value
% of Total at Assumed Annual
Number of Options/ Rates of Stock
Securities SARs Price
Underlying Granted to Exercise Appreciation for
Options/ Employees or Base Option Term
SARs in Fiscal Price Expiration -----------------
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mr. Koffel(1)..... 66,000 11.6% $14.56 3/24/2008 604,343 1,531,523
Mr. Rosenstein.... 27,000 4.7% $14.56 3/24/2008 247,231 626,532
Mr. Perez......... 20,000 3.5% $14.56 12/16/2007 176,845 448,160
Mr. Ainsworth..... 27,000 4.7% $14.56 3/24/2008 247,231 626,532
Mr. Masters....... 5,000 1.0% $14.56 3/24/2008 45,784 116,024
</TABLE>
- -------
(1) Mr. Koffel was granted an option to purchase 300,000 shares on March 23,
1999, and we have committed to grant him an option to purchase another
200,000 shares if Proposals 1 and 3 are approved by our stockholders.
26
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year,
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Value FY-End (#) FY-End ($)(1)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
---- --------------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Mr. Koffel............ 0 0 454,000 $5,671,850
90,000 305,790
Mr. Rosenstein........ 25,000 328,125 108,500 938,875
47,000 205,005
Mr. Perez............. 0 0 0 0
20,000 56,300
Mr. Ainsworth......... 0 0 93,466 353,444
40,334 212,193
Mr. Masters........... 0 0 14,500 128,660
15,800 83,504
</TABLE>
- --------
(1) Based on 1998 fiscal year-end share price equal to $16.88.
27
<PAGE>
EXECUTIVE COMPENSATION
Compensation of Directors
During fiscal year 1998, the non-employee members of our Board of Directors
received the stock fee described below, an annual cash 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 fees.
Pursuant to the terms of the Non-Executive Directors Stock Grant Plan (the
"Non-Executive Directors Plan") approved at the annual meeting of stockholders
held on March 25, 1997, each non-employee member of our Board of Directors
(currently Messrs. Blum, Der Marderosian, Madden, Praeger and Walsh and
Admiral Foley) who is re-elected to serve as a Director at each annual
stockholder meeting also receives a grant of Common Stock at such meeting. The
Non-Executive Directors Plan originally provided that each non-employee
Director would receive that number of shares of Common Stock determined by
dividing $15,000 by the closing price of the Common Stock on the date of the
annual meeting of stockholders, rounded down to the nearest whole share; on
December 16, 1997 the Board of Directors amended the Non-Executive Directors
Plan to increase the numerator to $25,000. Prior to the approval of the Non-
Executive Directors Plan, upon the conclusion of each annual meeting of
stockholders, each non-employee Director who was re-elected to serve as a
Director automatically received an option to purchase 1,000 shares under the
1991 Plan (such annual grants of options to non-employee Directors were
eliminated pursuant to the amended and restated 1991 Plan approved at the
annual meeting of stockholders held on March 25, 1997).
On July 13, 1999, the Board of Directors adopted the 1999 Incentive Plan,
subject to stockholder approval. (See Proposal 3, "Approval of 1999 Equity
Incentive Plan.") If the 1999 Incentive Plan is approved by stockholders, then
effective July 13, 1999, the grants of Common Stock described above that were
previously made under the Non-Executive Directors Plan will be made under the
1999 Incentive Plan and no further grants will be made under the Non-Executive
Directors Plan. The terms of the grants made under the 1999 Incentive Plan
will be identical to the terms of the grants made under the Non-Executive
Directors Plan.
Non-employee Directors who were elected prior to December 17, 1996 also are
entitled to participate, at our expense, in a medical benefit plan. Based upon
our costs, the annualized monetary value of this benefit to those non-employee
Directors participating in fiscal year 1998 was $4,723. We also maintain a
policy whereby non-employee Directors may be hired on an as-needed 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.
Certain Relationships and Related Transactions
Prior to July 13, 1999, Richard C. Blum, one of our Directors, received
$60,000 per year for services provided under a consulting agreement with us.
In addition, we paid $90,000 per year to Richard C. Blum & Associates, L.P.
under a separate consulting agreement. On July 13, 1999, Mr. Blum voluntarily
terminated the consulting agreements. Mr. Blum is the majority stockholder of
Richard C. Blum & Associates, Inc. Richard C. Blum & Associates, Inc., in its
capacity as the sole general partner of Richard C. Blum & Associates, L.P.,
indirectly through several entities, holds 2,569,851 shares, or approximately
19 percent, of our outstanding Common Stock.
Richard C. Blum & Associates, Inc. is affiliated with RCBA Strategic
Partners, L.P. RCBA Strategic Partners, L.P. purchased non-voting Series A
Stock and Series C Stock as part of the RCBA Strategic Partners Equity
Investment described more completely in Proposal 4. Upon stockholder approval,
the Series A Stock together with the Series C Stock will be exchanged for
Series B Stock, which will have voting rights. If all of the Series B Stock
were converted into our Common Stock, Richard C. Blum & Associates, L.P. and
its affiliates would be the beneficial owners of approximately 34% of our
outstanding Common Stock.
28
<PAGE>
Employment Agreements
Martin M. Koffel
Mr. Koffel has an evergreen employment agreement with us, executed in
December 1991, under which Mr. Koffel received an annual base salary of
$385,000 through December 17, 1995, $415,000 from December 18, 1995 through
December 31, 1997 and $500,000 from January 1, 1998 through December 31, 1998.
On December 15, 1998, our Compensation/Option Committee (the "Committee")
approved an increase in Mr. Koffel's base compensation, effective January 1,
1999, to $550,000 per year. The agreement also provides that Mr. Koffel is
eligible for a target bonus equal to 60% of his base salary.
On December 16, 1997, the Committee also awarded Mr. Koffel 50,000 shares of
restricted stock under the terms of our 1991 Stock Incentive Plan. In the
absence of a Change in Control (see below), 16,666 will vest on December 16,
2000, 16,666 will vest on December 16, 2001 and 16,667 will vest on December
16, 2002. The Committee also made a contingent grant to Mr. Koffel of up to
50,000 shares of performance restricted stock. In the absence of a Change in
Control, the exact number of shares of such performance restricted stock
earned by Mr. Koffel will be based on our cumulative total returns to our
stockholders over the three, four and five year periods ending December 16,
2000, December 16, 2001 and December 16, 2002. For each period, 1/3, 2/3 and
all of the 50,000 shares, respectively, will be earned cumulatively if annual
stockholder returns during the period are 12% or more, no shares will be
earned if annual stockholder returns are 8% or less, and a prorated portion of
the shares will be earned if annual stockholder returns are more than 8% but
less than 12%.
On October 13, 1998, following a recommendation made by the Committee, the
Board of Directors approved an amendment to Mr. Koffel's employment agreement
to provide for a tax gross-up payment to Mr. Koffel to offset the cost of
excise taxes that could be imposed if his employment is terminated following a
Change in Control, as defined below, and any resulting severance payments due
Mr. Koffel are considered to be "excess parachute payments" subject to excise
tax under Sections 280G and 4999 of the Code, and to reimburse Mr. Koffel for
the cost of term life insurance with a face amount equal to up to four times
his base salary and to provide for a tax gross-up payment to Mr. Koffel to
offset the cost of all income and employment taxes imposed on Mr. Koffel
because of such reimbursement. Accordingly, Mr. Koffel and URS entered into an
Amendment to Employment Agreement dated as of October 13, 1998 reflecting such
amendments.
Mr. Koffel's employment agreement provides that if his employment is
terminated by us without cause, other than by reason of death or disability,
we will pay a severance payment equal to 150% 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, as defined below, or
if Mr. Koffel is terminated for any reason other than for cause at any time
after a Change in Control, he becomes entitled to a special severance payment
equal to 300% of 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 our
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:
. a change in control required to be reported pursuant to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act;
. any person acquiring 20% or more of the voting power of the Company; or
. more than two-thirds of our directors not having served on our Board of
Directors for 24 months prior to the change in control.
On or about May 10, 1996, Heartland Advisors, Inc. ("Heartland"), one of our
stockholders, purchased additional shares of common stock, which increased
Heartland's ownership of outstanding common stock from approximately 19% to
approximately 22% (the "Heartland Transaction"), resulting in a technical
Change in
29
<PAGE>
Control under Mr. Koffel's employment agreement and the terms of stock options
granted to Mr. Koffel under our 1991 Stock Incentive Plan. As a result, the
special severance payment is 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 our 1991 Stock Incentive Plan are now fully vested. The
RCBA Equity Investment will increase the ownership of our voting common stock
held by Richard C. Blum & Associates, L.P. and its affiliates from
approximately 19% to more than 33% upon the exchange of the Series A Stock
together with the Series C Stock for shares of Series B Stock. As a result, a
Change in Control will occur under Mr. Koffel's employment agreement, and the
stock options for 56,000 shares granted to Mr. Koffel in 1997 and 1998, and
the 100,000 shares of restricted stock granted to Mr. Koffel in 1997 will
become fully vested.
On March 23, 1999, our Board of Directors approved special supplemental
compensation for Martin Koffel. Its purpose is to recognize Mr. Koffel's
significant contributions to our growth and success during the past decade, to
induce him to continue as our Chief Executive Officer through his expected
retirement at age 65, and to incentivize him to continue to increase
stockholder value. This special supplemental compensation includes:
. an immediate grant of options for 300,000 shares under the 1991 Stock
Incentive Plan;
. a commitment to grant options for an additional 200,000 shares as soon
as our stockholders approve an extension or replacement of our 1991
Stock Incentive Plan so that sufficient shares are available for such a
grant (which will occur upon approval of Proposals 1 and 3 by our
stockholders); and
. a commitment to provide Mr. Koffel with a supplemental executive
retirement plan ("SERP").
The options for 300,000 shares have an exercise price of $15.75 per share,
the closing price of our common stock on the day preceding the grant, and will
vest over five years at the rate of 20% on each anniversary of the grant date.
The options for the additional 200,000 shares will have an exercise price
equal to the fair market value of our common stock on the date of grant, and
will vest as if they had been granted at the same time as the 300,000 share
options. Both the 300,000 share options and the 200,000 share options will be
exercisable during a three-year period following Mr. Koffel's retirement. The
options also will vest immediately and become exercisable in full upon a
Change in Control, as defined below.
Effective July 13, 1999, Mr. Koffel entered into the above mentioned SERP.
Under the terms of the SERP, we will provide him with an annual lifetime
retirement benefit. Benefits are based on Mr. Koffel's final average annual
compensation and his age at the time of employment termination. "Final average
compensation" means the average of Mr. Koffel's salary plus target bonus
established for him under our incentive compensation program during the
consecutive 36 months in his final 120 months of employment in which such
average was the highest. Estimated annual benefits are as follows:
<TABLE>
<CAPTION>
Age at Termination of Employment
Final ----------------------------------------------------------------
Average 61 65
Compensation or Younger 62 63 64 or Older
------------ ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$500,000 $50,000 $100,000 $150,000 $200,000 $250,000
550,000 55,000 110,000 165,000 220,000 275,000
600,000 60,000 120,000 180,000 240,000 300,000
650,000 65,000 130,000 195,000 260,000 325,000
700,000 70,000 140,000 210,000 280,000 350,000
750,000 75,000 150,000 225,000 300,000 375,000
800,000 80,000 160,000 240,000 320,000 400,000
850,000 85,000 170,000 255,000 340,000 425,000
900,000 90,000 180,000 270,000 360,000 450,000
950,000 95,000 190,000 285,000 380,000 475,000
</TABLE>
As of the July 13, 1999 effective date of the SERP, Mr. Koffel had attained
age 60, and his final average compensation was $823,979.
30
<PAGE>
Benefits under the SERP shown in the above table are computed on the basis
of an annuity for the life of Mr. Koffel, with a guarantee of payments for at
least ten years, and are not subject to offset for Social Security or any
other payments or benefits. Actuarially equivalent forms of payment are
available under the SERP.
The 300,000 share options, the 200,000 share options and the SERP contain a
definition of Change in Control which parallels the definition contained in
Mr. Koffel's employment agreement described above. The acquisition or holding
by a person of in excess of 20% but less than a majority of our voting power
in the ordinary course of such person's business and not with the purpose or
effect of changing or influencing the control of us, and otherwise in a
situation where the person is eligible to file a short-form statement on
Schedule 13G under Rule 13d-1 under the Exchange Act is excluded from the
definition of Change in Control, however. In addition, Mr. Koffel has agreed
that the acquisition and holding of Series B Stock by Richard C. Blum &
Associates, L.P. or its affiliates, and the acquisition and holding of
additional shares of our Common Stock upon the conversion of the Series B
Stock will not constitute a Change in Control for purposes of the 300,000
share options, the 200,000 share options or the SERP.
Irwin L. Rosenstein
Mr. Rosenstein has an evergreen employment agreement with URS Greiner
Woodward Clyde 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 31, 1998. On December 15, 1998, the Committee
increased Mr. Rosenstein's annual base salary, effective January 1, 1999, to
$385,000. On October 13, 1998, following a recommendation made by the
Committee, the Board of Directors approved an amendment to Mr. Rosenstein's
employment agreement to provide for a tax gross-up payment to Mr. Rosenstein
to offset the cost of excise taxes that could be imposed if his employment is
terminated following a change in control and any resulting severance payments
due Mr. Rosenstein are considered to be "excess parachute payments" subject to
excise tax under Sections 280G and 4999 of the Code. Accordingly, Mr.
Rosenstein entered into an Amendment to Employment Agreement dated as of
October 13, 1998 reflecting such amendments.
The agreement also obligates employer 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 without cause (other than by reason
of death or disability) or he voluntarily resigns his employment in the event
that his salary is reduced, 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 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 employer's or our 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.
Jean-Yves Perez
Mr. Perez executed an evergreen employment agreement with URS Greiner
Woodward-Clyde Group, Inc. in November 1997. Under his employment agreement,
Mr. Perez receives an annual base salary of $310,000 per year. If during the
first half of employer's fiscal year Mr. Perez's employment is terminated
without cause (other than by reason of death or disability) or Mr. Perez
voluntarily resigns his employment in the event that his salary is reduced or
his employer breaches its obligation to employ Mr. Perez in an executive
position as described in the agreement, Mr. Perez is entitled to a severance
payment equal to 100 percent of his then current base salary plus any accrued
and unpaid vacation at the time of such termination, and if during the second
half of employer's fiscal year Mr. Perez's employment is terminated without
cause (other than by reason of death or disability) or Mr. Perez voluntarily
resigns his employment in the event that his salary is reduced or his employer
breaches its
31
<PAGE>
obligation to employ Mr. Perez in an executive position as described in the
agreement, Mr. Perez is entitled to a severance payment equal to 120 percent
of his then current base salary plus any accrued and unpaid vacation at the
time of such termination.
Also, under his employment agreement, if Mr. Perez ceases to be employed
within one year following a "Change of Control" (see below), Mr. Perez 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. Perez's agreement
as the acquisition by any person of 51 percent of more of employer's or the
Company's then-current outstanding securities having the right to vote at
elections of Directors. On October 13, 1998, following a recommendation made
by the Committee, the Board of Directors approved an amendment to Mr. Perez'
employment agreement to provide for a tax gross-up payment to Mr. Perez to
offset the cost of excise taxes that could be imposed if his employment is
terminated following a change in control and any resulting severance payments
due Mr. Perez are considered to be "excess parachute payments" subject to
excise tax under Sections 280G and 4999 of the Code. Accordingly, Mr. Perez
entered into an Amendment to Employment Agreement dated as of October 13, 1998
reflecting such amendments.
Kent P. Ainsworth
Mr. Ainsworth executed an evergreen employment agreement with us in May 1991
following his employment as our 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, $195,000 through December 17, 1995,
$205,000 through March 28, 1996, $220,000 through December 31, 1997, and
$275,000 through December 31, 1998. On December 15, 1998, the Committee
approved an increase in Mr. Ainsworth's base compensation, effective January
1, 1999, to $305,000 per year.
On December 16, 1997, the Committee also awarded Mr. Ainsworth 25,000 shares
of restricted stock under the terms of the 1991 Plan. In the absence of a
Change in Control (see below), 8,333 will vest on December 16, 2000, 8,333
will vest on December 16, 2001 and 8,334 will vest on December 16, 2002. The
Committee also made a contingent grant to Mr. Ainsworth of up to 25,000 shares
of performance restricted stock. In the absence of a Change in Control, the
exact number of shares of such performance restricted stock earned by Mr.
Ainsworth will be based on cumulative total returns to our stockholders over
the three, four and five year periods ending December 16, 2000, December 16,
2001 and December 16, 2002. For each period, 1/3, 2/3 and all of the
25,000 shares, respectively, will be earned cumulatively if annual stockholder
returns during the period are twelve percent or more, no shares will be earned
if annual stockholder returns are eight percent or less, and a prorated
portion of the shares will be earned if annual stockholder returns are more
than 8% but less than 12%.
On October 13, 1998, following a recommendation made by the Committee, the
Board of Directors approved an amendment to Mr. Ainsworth's employment
agreement to provide for a tax gross-up payment to Mr. Ainsworth to offset the
cost of excise taxes that could be imposed if his employment is terminated
following a change in control and any resulting severance payments due Mr.
Ainsworth are considered to be "excess parachute payments" subject to excise
tax under Sections 280G and 4999 of the Code. Accordingly, Mr. Ainsworth and
the Company entered into an Amendment to Employment Agreement dated as of
October 13, 1998 reflecting such amendments.
Mr. Ainsworth's employment agreement provides that if his employment is
terminated by us without cause, other than by reason of death or disability,
we will continue to pay his base salary for one year, or until normal
retirement at age 65, if less. If Mr. Ainsworth voluntarily resigns his
employment both for specified reasons and 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 in Control, he becomes entitled to a special severance payment equal
to 280% 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 our incentive, deferred compensation,
bonus, stock and similar plans, to the extent unvested, will become vested
immediately upon a Change in Control.
32
<PAGE>
The Heartland Transaction resulted in a technical Change in Control under
Mr. Ainsworth's employment agreement and the terms of stock options granted to
Mr. Ainsworth under our 1991 Stock Incentive Plan. As a result, the special
severance payment is payable to Mr. Ainsworth if he is terminated for any
reason other than cause 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 our 1991 Stock Incentive Plan are now fully vested.
The RCBA Equity Investment will increase the ownership of our voting common
stock held by Richard C. Blum & Associates, L.P. and its affiliates from
approximately 19% to more than 33% upon the exchange of the Series A Stock
together with the Series C Stock for shares of Series B Stock as described
more completely in Proposal 4. As a result, a Change in Control will occur
under Mr. Ainsworth's employment agreement, and the stock options for 51,667
shares granted to Mr. Ainsworth in 1997, 1998 and 1999, and the 50,000 shares
of restricted stock granted to Mr. Ainsworth in 1997 will become fully vested.
On July 12, 1999 following a recommendation made by the Committee, the Board
of Directors granted to Mr. Ainsworth an additional 35,000 shares of
restricted stock. None of such shares will vest on July 12, 2000, the first
anniversary of the grant; 66 2/3% of the shares will vest on July 1, 2001; and
100% of the shares will vest on July 1, 2002. Mr. Ainsworth has agreed that
the acquisition and holding of Series B Stock by Richard C. Blum & Associates,
L.P. or its affiliates, and the acquisition and holding of additional shares
of our Common Stock upon the conversion of the Series B Stock (described in
Proposal 4 above) will not constitute a Change in Control for purposes of the
35,000 restricted shares. In addition, the acquisition or holding by a person
of in excess of 20% but less than a majority of our voting power in the
ordinary course of such person's business and not with the purpose or effect
of changing or influencing the control of us, and otherwise in a situation
where the person is eligible to file a short-form statement on Schedule 13G
under Rule 13d-1 under the Exchange Act is excluded from the definition of
Change in Control.
Joseph Masters
Mr. Masters executed an evergreen employment agreement with us on March 20,
1998. Under this employment agreement, Mr. Masters received an annual base
salary of $165,000. On December 15, 1998, the Compensation/Option Committee
approved an increase in Mr. Masters' base compensation, effective December 26,
1998, to $190,000 per year.
On October 13, 1998, following a recommendation made by the Committee, the
Board of Directors approved an amendment to Mr. Masters' employment agreement
to provide for a tax gross-up payment to Mr. Masters to offset the cost of
excise taxes that could be imposed if his employment is terminated following a
change in control and any resulting severance payments due Mr. Masters are
considered to be "excess parachute payments" subject to excise tax under
Sections 280G and 4999 of the Code. Accordingly, Mr. Masters and URS entered
into an Amendment to Employment Agreement dated as of October 13, 1998
reflecting such amendments.
Mr. Masters' employment agreement provides that if, within one year
following a Change in Control, Mr. Masters' employment with us is terminated
by us without cause, he will be entitled to receive a severance payment equal
to 200 percent of his then current base salary. Mr. Masters will also be
entitled to receive this severance benefit if he voluntarily resigns his
employment with us for specified reasons within one year following a "Change
in Control." Under Mr. Master's employment agreement, "Change in Control" has
the meaning described above in the description of Mr. Koffel's employment
agreement. In addition, if Mr. Masters' employment with us is terminated by us
without cause or if he voluntarily resigns his employment for specified
reasons and he is not entitled to receive the severance payment described
above, Mr. Masters will be entitled to receive a severance payment equal to
100 percent of his then-current base salary.
33
<PAGE>
Performance Measurement Comparison(1)
The following chart compares the cumulative total stockholder returns
(including reinvested dividends) from a $100 investment in Common Stock for
the last five fiscal years compared to the cumulative return of the Standard &
Poor's 500 index and a weighted average peer index. The peer index is
comprised of the following companies:
<TABLE>
<S> <C>
Dames & Moore Group(2) IT Group
Emcon Associates Jacobs Engineering Group, Inc.
Fluor Daniel GTI, Inc. Michael Baker Corporation
Foster Wheeler Corporation Roy F. Weston, Inc.
Harding Lawson Associates Group, Inc. Stone & Webster Incorporated
ICF Kaiser International, Inc. STV Group
</TABLE>
Comparison of Five Year Cumulative Total Stockholder Returns Based on Fiscal
Year 1998(3)
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<TABLE>
<CAPTION>
10/31/93 10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Peer Group $100 $100 $104 $108 $117 $102
URS Corp. $100 $118 $131 $174 $326 $346
S&P 500 $100 $104 $131 $162 $214 $260
</TABLE>
- --------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
(2) This Performance Measure Comparison is based on fiscal year 1998. Dames &
Moore Group was subsequently acquired by us during fiscal year 1999. The
peer index for the Performance Measure Comparison for fiscal year 1999
will be adjusted accordingly.
(3) As of July 30, 1999, the stock price of URS Common Stock as reported on
the New York Stock Exchange was $26.00.
34
<PAGE>
Other Matters
The Board of Directors knows of no other matters that will be presented for
consideration at the Special Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Kent P. Ainsworth
Kent P. Ainsworth
Secretary
San Francisco, California
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended October 31, 1998 is
available without charge upon written request to: Corporate Secretary, URS
Corporation, 100 California Street, Suite 500, San Francisco, CA 94111-4529.
Financial information contained therein is incorporated herein by reference
where appropriate.
35
<PAGE>
Exhibit A
URS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Adopted Effective July 1, 1997
Amended and Restated Effective July 1, 1999
Amendment and Restatement Approved By Stockholders on ____________, 1999
1. Purpose.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of URS Corporation, a Delaware corporation
(the "Company"), and its Affiliates, as defined in Subsection 1(b), which are
designated as provided in Subsection 2(b), may be given an opportunity to
purchase the common stock of the Company (the "Common Stock").
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in Subsection 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration,
including, but not by
1.
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way of limitation, rules and regulations necessary to conform the Plan or any
Offering thereunder to the laws and regulations of foreign jurisdictions. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in Section 13.
(v) To suspend or terminate the Plan as provided in Section 16.
(vi) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee of
one or more members of the Board. If administration is delegated to a Committee,
the Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate one million six hundred fifty
thousand (1,650,000) shares of the Company's common stock (the "Reserved
Shares"). As of each July 1, beginning with July 1, 2000 and continuing through
and including July 1, 2009, the number of Reserved Shares shall be increased
automatically by the lesser of (i) three percent (3.0%) of the total number of
shares of Common Stock outstanding, including for this purpose outstanding
shares of capital stock convertible into Common Stock, on such date, or
(ii) eight hundred thousand (800,000) shares of Common Stock. If any right
granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation
2.
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of the provisions of this Plan by reference in the document comprising the
Offering or otherwise) the period during which the Offering shall be effective,
which period shall not exceed twenty-seven (27) months beginning with the
Offering Date, and the substance of the provisions contained in Sections 5
through 8, inclusive.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in Subsection 2(b), to
employees of any Affiliate of the Company. Except as provided in Subsection
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
Subsection 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company
3.
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and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit
such employee's rights to purchase stock of the Company or any Affiliate to
accrue at a rate which exceeds twenty-five thousand ($25,000) of fair market
value of such stock (determined at the time such rights are granted) for each
calendar year in which such rights are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding ten percent (10%) of such employee's
Earnings (as defined by the Board or the Committee in each Offering) during the
period which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
4.
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deductions of up to the maximum percentage specified by the Board or the
Committee of such employee's Earnings during the Offering (as defined by the
Board or Committee in each Offering). The payroll deductions made for each
participant shall be credited to an account for such participant under the Plan
and shall be deposited with the general funds of the Company. A participant may
reduce (including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld during the
Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee) under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in Section 14 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such rights are
granted.
8. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
5.
<PAGE>
from such next Offering, as provided in Subsection 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in Section 5, in which
case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to the extent that
the shares of Common Stock to be issued upon such exercise (including rights
granted thereunder) are not covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") or the
Plan is not in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan with respect to such rights. If
on a Purchase Date in any Offering hereunder the Plan is not so registered or in
such compliance, rights granted under the Plan or any Offering shall not be
exercised on such Purchase Date to the extent such exercise would violate the
Securities Act or other applicable laws, and the Purchase Date shall be delayed
with respect to those rights until the Plan is subject to such an effective
registration statement and/or in such compliance, except that the Purchase Date
shall not be delayed more than twelve (12) months and the Purchase Date shall in
no event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, the rights so
affected shall not be exercised and all payroll deductions accumulated during
the Offering (reduced to the extent, if any, such deductions have been used to
acquire stock) shall be distributed to the participants, without interest.
(c) Common Stock that is purchased under the Plan may be registered in the
name of the participant or jointly in the name of the participant and his or her
spouse as joint tenants with right of survivorship or as community property.
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such rights unless
and until such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
6.
<PAGE>
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. Adjustments upon Changes in Stock.
(a) If any change is made in the Common Stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event a Change in Control (as defined in Subsection 12(c)
below), then, as determined by the Board in its sole discretion (i) any
surviving or acquiring corporation may assume outstanding rights or substitute
similar rights for those under the Plan, (ii) such rights may continue in full
force and effect, or (iii) participants' accumulated payroll deductions may be
used to purchase Common Stock immediately prior to the transaction described
above and the participants' rights under the ongoing Offering terminated.
(c) For purposes of the Plan, "Change in Control" means the occurrence of
any of the following events after the Effective Date:
(i) a change in control required to be reported pursuant to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act;
(ii) a change in the composition of the Board, as a result of which
fewer than two-thirds of the incumbent directors are directors who either (i)
had been directors of the Company twenty-four (24) months prior to such change
or (ii) were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the directors who had been directors
of the Company twenty-four (24) months prior to such change and who were still
in office at the time of the election or nomination; or
(iii) any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then-outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections of
directors (the "Base Capital Stock"); except that:
7.
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(1) the beneficial ownership by a person of twenty percent (20%)
or more, but less than a majority, of the Base Capital Stock in the ordinary
course of such person's business and not with the purpose or effect of changing
or influencing the control of the Company, and otherwise in a situation where
the person is eligible to file a short-form statement on Schedule 13G under Rule
13d-1 under the Exchange Act with respect to such beneficial ownership, shall be
disregarded;
(2) any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company; and
(3) the beneficial ownership by Richard C. Blum & Associates,
Inc. ("RCBA") or any person "affiliated" (within the meaning of the Exchange
Act) with RCBA (collectively, the "RCBA Group") of (w) shares of the Company's
Series B Preferred Stock (x) additional shares of Series B Preferred Stock
issued in payment of dividends on the Series B Preferred Stock, (y) additional
shares of the Company's Common Stock issued upon the conversion of the Series B
Preferred Stock in accordance with its terms, and (z) shares of other securities
of the Company issued in exchange for the Series B Preferred Stock in accordance
with its terms (collectively, the "RCBA Preferred Investment Shares"), shall be
disregarded unless and until the RCBA Group becomes the beneficial owner,
directly or indirectly, of securities of the Company (including the RCBA
Preferred Investment Shares) representing more than fifty percent (50%) of the
Base Capital Stock; provided that the beneficial ownership of all or a portion
of the RCBA Preferred Investment Shares by a third person who acquires such
shares through purchase, assignment or other transfer from RCBA or another
member of the RCBA Group, and the beneficial ownership by a third person not
affiliated with the RCBA Group as of the date of this Agreement who acquires
control of RCBA or the RCBA Group, shall not be disregarded.
13. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
8.
<PAGE>
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Subject to Section 12, rights granted before amendment of the Plan
shall not be impaired by any amendment of the Plan, except with the consent of
the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. No Employment or Service Rights.
Nothing in the Plan or any instrument executed or rights granted pursuant
thereto shall confer upon any employee any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the right was
granted or shall affect the right of the Company or an Affiliate to terminate
the employment of an employee with or without notice and with or without cause.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the
9.
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Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
17. Effective Date of Plan.
This amended and restated Plan shall become effective on the date on which
it is adopted by the Board (the "Effective Date"), but no rights granted under
the Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted by the Board.
10.
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EXHIBIT B
URS CORPORATION
1999 EQUITY INCENTIVE PLAN
Adopted July 13, 1999
Approved By Stockholders _______________, 1999
Termination Date: July 12, 2009
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates .
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) rights to acquire restricted stock and (iv) Non-Executive
Director Stock Awards.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" means any transaction, or series of transactions
that occur within a twelve (12) month period, as a result of which the
stockholders of the Company immediately prior to the completion of the
transaction (or, in the case of a series of transactions, immediately prior to
the first transaction in the series) hold, directly or indirectly, less than
fifty percent (50%) of the beneficial ownership (within the meaning of Rule 13d-
3 of the Exchange Act or comparable successor rules) of the outstanding
securities of the surviving entity, or, if more than one entity survives the
transaction or transactions, the controlling entity, following such transaction
or transactions.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(f) "Common Stock" means the common stock of the Company.
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(g) "Company" means URS Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(i) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(j) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(k) "Director" means a member of the Board of Directors of the Company.
(l) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means the closing sales price of a share of
Common Stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable.
(p) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(q) "1991 Plan" means the URS Corporation 1991 Stock Incentive Plan.
2.
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(r) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(s) "Non-Executive Director" means a Director who is not an Employee.
(t) "Non-Executive Director Stock Award" means a Stock Award made to a
Non-Executive Director pursuant to Section 8.
(u) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(w) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(x) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(y) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(z) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(aa) "Participant" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(bb) "Plan" means this URS Corporation 1999 Equity Incentive Plan.
(cc) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
3.
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(dd) "Securities Act" means the Securities Act of 1933, as amended.
(ee) "Stock Award" means any right granted under the Plan, including an
Option, a right to acquire restricted stock and a Non-Executive Director Stock
Award.
(ff) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(gg) "Ten Percent Stockholder" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 14.
(iv) To suspend or terminate the Plan as provided in Section 15.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. Subject to the limitation set forth in subsection
3(c)(ii), the Board may delegate administration of the Plan to a Committee or
Committees of one (1) or more
4.
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members of the Board, and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
(ii) Limitation on Delegation. Notwithstanding anything to the
contrary in subsection 3(c)(i), the Board may not delegate the administration of
the Plan to a Committee to the extent such administration would in any way
affect Non-Executive Director Stock Awards described in Section 8.
(iii) Committee Composition. The Committee shall consist solely of two
or more Non-Employee Directors, in accordance with Rule 16b-3 and, in the
discretion of the Board, may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code. Within the scope of such authority,
the Board or the Committee may (1) delegate to a committee of one or more
members of the Board who are not Outside Directors, the authority to grant Stock
Awards to eligible persons who are either (a) not then Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Stock Award or (b) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code and/or (2) delegate to
a committee of one or more members of the Board who are not Non-Employee
Directors the authority to grant Stock Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate one million five
hundred thousand (1,500,000) shares of Common Stock plus (i) the number of
shares of Common Stock added to the share reserve pursuant to the next sentence
of this subsection 4(a), (ii) the number of shares of Common Stock remaining
available for award under the Company's 1991 Stock Incentive Plan (the "1991
Plan") on the Effective Date of this Plan, (iii) the number of shares of Common
Stock that were issuable pursuant to options or stock award agreements under the
1991 Plan that revert to the share reserve pursuant to subsection 4(b) below and
(iv) the number of shares of Common Stock remaining available for award under
the Company's Non-Executive Directors Stock Grant Plan on the Effective Date of
this Plan. As of each July 1, beginning with July 1, 2000 and continuing through
and including July 1, 2009, the number of reserved shares shall be increased
automatically by the lesser of (i) five percent (5%) of the total number of
shares of Common Stock outstanding, including for this purpose outstanding
shares of capital stock convertible to Common Stock, on such date or (ii) one
million five hundred thousand (1,500,000) shares of Common Stock.
5.
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(b) Reversion of Shares to the Share Reserve.
(i) Expiration or Termination of Stock Award. If any Stock Award
granted under this Plan or any option or stock award agreement granted under the
1991 Plan shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the shares of Common Stock not
acquired under such Stock Award shall revert to and again become available for
issuance under the Plan.
(ii) Issuance of Common Stock. To the extent that any shares of Common
Stock are not issued to a Participant upon the exercise of an Option granted
under this Plan, such shares shall revert to and again become available for
issuance under this Plan. If shares of Common Stock are not issued to a
Participant because the Common Stock issuable upon the exercise of the Option is
used to satisfy an applicable tax withholding requirement, such shares will be
deemed not to have been issued to a Participant. In addition, if the exercise
price of any Option is satisfied by a Participant's tender of shares of Common
Stock to the Company (by actual delivery or attestation), only the number of
shares of Common Stock issued net of the shares so tendered shall be deemed
issued to the Participant.
(c) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants. Non-Executive Director Stock
Awards may be granted only to Non-Executive Directors and only pursuant to the
formula set forth in Section 8.
(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Consultants. A Consultant shall not be eligible for the grant of a
Stock Award if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act ("Form S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(d) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) shares of the Common Stock during any fiscal year of the Company.
6.
<PAGE>
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if (i) such Option is granted with an exercise of not less
than fifty percent (50%) of the Fair Market Value of the Common Stock subject to
the Option to an individual who is not employed by the Company or an Affiliate
or immediately prior to the date of grant of the Option to induce such
individual to accept employment with the Company or an Affiliate or (ii) such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option): (1) by delivery to the
Company of other Common Stock that has been held by the Optionee for more than
six (6) months, which delivery may be made by attestation or actual delivery,
(2) by delivery, in a form prescribed by the Company, of an irrevocable
direction to a securities broker approved by the Company to sell Common Stock
and to deliver all or part of the sales proceeds to the Company in payment of
all or part of the purchase price and applicable withholding taxes, (3)
according to a deferred payment or other similar arrangement with the Optionee
or (4) in any other form of legal consideration that may be acceptable to the
Board; provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as
7.
<PAGE>
defined in the Delaware General Corporation Law, shall not be made by deferred
payment. If, pursuant to clause (ii)(2) above, the Optionee delivers shares of
Common Stock that the Optionee has acquired pursuant to a restricted stock award
made under this Plan or a stock award agreement made under the 1991 Plan and
that have not yet vested, the restrictions applicable to the delivered shares
shall be imposed upon the Common Stock issued upon the exercise of the Option.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionee only
by the Optionee. Notwithstanding the foregoing, the Optionee may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionee only by the Optionee. Notwithstanding the foregoing, the Optionee
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise such Option as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Service (or such
longer or shorter period specified in the Option Agreement) or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination of Continuous Service, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate.
8.
<PAGE>
(i) Extension of Termination Date. An Optionee's Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionee's Continuous Service (other than upon the Optionee's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionee's Continuous Service during which the exercise of the Option would not
be in violation of such registration requirements.
(j) Disability of Optionee. In the event that an Optionee's Continuous
Service terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement)
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination of Continuous Service, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionee. In the event (i) an Optionee's Continuous Service
terminates as a result of the Optionee's death or (ii) the Optionee dies within
the period (if any) specified in the Option Agreement after the termination of
the Optionee's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionee was entitled to exercise such
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionee's death pursuant to
subsection 6(e) or 6(f), but only within the period ending on the earlier of (1)
the date twelve (12) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time before the Optionee's Continuous
Service terminates to exercise the Option as to any part or all of the shares of
Common Stock subject to the Option prior to the full vesting of the Option. Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
7. Provisions of Restricted Stock Awards.
Each restricted stock purchase agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The terms
and conditions of restricted stock purchase agreements may change from time to
time, and the terms and conditions of separate restricted stock purchase
agreements need not be identical, but each restricted stock purchase agreement
shall include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
9.
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(a) Consideration. A restricted stock award may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.
(b) Vesting. Shares of Common Stock acquired under a restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board. The restricted stock award may be subject to such other terms and
conditions on the time or times at which it may be exercised (which may be based
on performance or other criteria) as the Board may deem appropriate. The vesting
provisions of individual restricted stock awards may vary.
(c) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(d) Transferability. Rights to acquire shares under the restricted stock
purchase agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the restricted stock purchase agreement, as
the Board shall determine in its discretion, so long as Common Stock awarded
under the restricted stock purchase agreement remains subject to the terms of
the restricted stock purchase agreement.
8. Non-executive Director Stock Awards.
Without any further action of the Board, each Non-Executive Director will
be granted a Non-Executive Director Stock Award at each of the times specified
in subsections 8(a) and 8(b) below, which Non-Executive Director Stock Award
shall have the terms set forth in subsections 8(c) through 8(f) below.
(a) Initial Grants. Each Non-Executive Director shall, on the one (1)
month anniversary of the date of his or her initial election or appointment as a
Non-Executive Director, be granted a Non-Executive Director Stock Award (an
"Initial Grant"); provided, however, that a Non-Executive Director who is
elected or appointed to be a Non-Executive Director for the first time at an
Annual Meeting of the Company's stockholders (an "Annual Meeting") shall not
receive an Initial Grant but instead shall receive an Annual Grant with respect
to such Annual Meeting.
(b) Annual Grants. Each Non-Executive Director who is elected, reelected
or otherwise continues to serve as a Non-Executive Director effective upon and
following each Annual Meeting shall be granted a Non-Executive Director Stock
Award on the day after each such Annual Meeting (an "Annual Grant").
(c) Number of Shares. The number of shares of the Company's Common Stock
subject to each Non-Executive Director Stock Award will be determined by
dividing Twenty-Five Thousand Dollars ($25,000) by the Fair Market Value of the
Common Stock on the date of grant, rounded down to the nearest whole share.
(d) Vesting. Each Non-Executive Director Stock Award shall be fully vested
on the date of grant.
10.
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(e) Consideration. Each Non-Executive Director Stock Award shall be
awarded in consideration for services rendered as a Director.
(f) Delivery of Shares. The Company shall direct its transfer agent to
deliver a certificate representing the Common Stock awarded pursuant to each
Non-Executive Director Stock Award to each Non-Executive Director promptly
following the date of grant.
(g) Amendment of Terms of Non-Executive Director Stock Awards. The Board
may at any time, and from time to time, amend the terms pursuant to which Non-
Executive Director Stock Awards shall be granted including, without limitation,
amendment of the dollar amount specified in subsection 8(a) above and any other
provision of this Section 8.
9. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Legal Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
11.
<PAGE>
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionee during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (A) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state, local or
foreign tax withholding obligation relating to the exercise or acquisition of
Common Stock under a Stock Award by any of the following means (in addition to
the Company's right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) tendering a cash payment,
(ii) authorizing the Company to withhold shares of Common Stock from the shares
of Common Stock otherwise issuable to the Participant as a result of the
exercise or acquisition of Common Stock under the Stock Award or (iii)
delivering to the Company owned and unencumbered shares of the Common Stock.
Notwithstanding the foregoing, the Company shall
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not be authorized to withhold shares of Common Stock at rates in excess of the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes.
12. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(d), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) Change in Control. Unless otherwise provided in the Stock Award
Agreement, in the event of a Change in Control, then (i) prior to the completion
of the Change in Control, any surviving entity or controlling entity may assume
any Stock Awards outstanding under the Plan or may substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the Change in Control) for those outstanding under the Plan or
(ii) prior to the completion of the Change in Control, the Board may, in its
sole discretion, make cash payments to Participants holding Stock Awards in
amounts that the Board determines represent the cash value of the outstanding
Stock Awards and such payments shall completely discharge the Company's
obligations under such outstanding Stock Awards. In the event (i) any surviving
corporation or acquiring corporation does not assume such Stock Awards or
substitute similar stock awards for those outstanding under the Plan and (ii)
the Board does not settle the outstanding Stock Awards in cash, then (a) with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full as
of a time designated by the Board, and the Stock Awards shall terminate if not
exercised (if applicable) at or prior to a time designated by the Board and (b)
with respect to any other Stock Awards outstanding under the Plan, such Stock
Awards shall terminate if not exercised (if applicable) prior to a time
designated by the Board.
13. Limitation on Payments.
(a) Basic Rule. Any provision of the Plan to the contrary notwithstanding,
in the event that the independent auditors most recently selected by the Board
(the "Auditors") determine that any payment or transfer by the Company to or for
the benefit of a Participant, whether paid or payable (or transferred or
transferable) pursuant to the terms of this Plan or
13.
<PAGE>
otherwise (a "Payment"), would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in Section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount; provided
that the Board, at the time of granting a Stock Award under this Plan or at any
time thereafter, may specify in writing that such Award shall not be so reduced
and shall not be subject to this Section 13. For purposes of this Section 13,
the "Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of section 280G of the Code.
(b) Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within ten (10) days of
receipt of notice; provided, however, that such election shall be subject to
Company approval if made on or after the effective date of a Change in Control.
If no such election is made by the Participant within such ten (10) day period,
then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Section 13, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Section 13 shall be binding upon
the Company and the Participant and shall be made within sixty (60) days of the
date when a payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
(c) Overpayments and Underpayments. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors determine, based upon
the assertion of a deficiency by the Internal Revenue Service against the
Company or the Participant which the Auditors believe has a high probability of
success, that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount that is subject to taxation under Section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in Section 7872(f)(2) of the Code.
14.
<PAGE>
(d) Related Corporations. For purposes of this Section 13, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.
14. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
15. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect, except with the written consent of the Participant.
15.
<PAGE>
16. Effective Date of Plan.
The Plan shall become effective on the date on which it is adopted by the
Board (the "Effective Date"), but no Stock Award shall be exercised unless and
until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
17. Choice of Law.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
16.
<PAGE>
EXHIBIT C
---------
CERTIFICATE OF DESIGNATION
of
SERIES B EXCHANGEABLE
CONVERTIBLE PREFERRED STOCK
of
URS CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
URS Corporation, a Delaware corporation (the "Corporation"), certifies that
pursuant to the authority contained in its Certificate of Incorporation, as
amended, and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors (the "Board of
Directors") has adopted the following resolution creating a series of its
Preferred Stock, par value $1.00 per share, designated as Series B Exchangeable
Convertible Preferred Stock:
RESOLVED, that a series of authorized Preferred Stock, par value $1.00 per
share, of the Corporation be hereby created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
-----------------------
The shares of such series shall be designated as the "Series B Exchangeable
Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of
shares constituting such series shall be 150,000 shares of Series B Preferred
Stock. Section 14 below contains the definitions of certain defined terms used
herein.
Section 2. Dividends and Distributions.
----------------------------
(a) The holders of shares of Series B Preferred Stock, in
preference to the holders of shares of the Common Stock and of any other capital
stock of the Corporation ranking junior to the Series B Preferred Stock as to
payment of dividends, shall be entitled to receive on the last day of each
calendar quarter, cumulative dividends on the Series B Preferred Stock accruing
on a daily basis (computed on the basis of a
<PAGE>
360-day year of twelve 30-day months) at the rate per annum equal to the
Dividend Rate (as defined herein) per share of Series B Preferred Stock
calculated as a percentage of $2,170.00, compounded quarterly, from and
including the date of issuance of the Series B Preferred Stock until the
conversion or exchange of the Series B Preferred Stock. Such dividends shall be
paid in kind as herein provided, and will be paid whether or not they have been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. Dividends on the
Series B Preferred Stock shall be paid in additional shares of Series B
Preferred Stock valued at $2,170.00 per share. For purposes hereof, the
"Dividend Rate" shall mean eight percent (8%) per annum from the date of initial
issuance of the Series B Preferred Stock (except as otherwise provided in the
last sentence of Section 4(b)(ii)).
(b) In case the Corporation or any Subsidiary of the Corporation
shall at any time or from time to time declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Corporation or any of its Subsidiaries by way of dividend or spin off) on
the Common Stock, other than any dividend or distribution of shares of Common
Stock covered by paragraph (b)(i) of Section 8 hereof (a "Covered
Distribution"), the holders of shares of Series B Preferred Stock shall be
entitled to receive from the Corporation, with respect to each share of Series B
Preferred Stock held, in addition to the dividends payable under paragraph (a)
of this Section 2, the same dividend or distribution received by a holder of the
number of shares of Common Stock into which such share of Series B Preferred
Stock is convertible on the record date for such dividend or distribution. Any
such dividend or distribution shall be declared, ordered, paid or made on the
Series B Preferred Stock at the same time such dividend or distribution is
declared, ordered, paid or made on the Common Stock and shall be in addition to
any dividends payable under paragraph (a) of this Section 2.
Section 3. Voting Rights.
--------------
In addition to any voting rights provided elsewhere herein, and any voting
rights provided by law, the holders of shares of Series B Preferred Stock shall
have the following voting rights:
(a) So long as the Series B Preferred Stock is outstanding, each
share of Series B Preferred Stock shall entitle the holder thereof to vote on
all matters voted on by holders of the capital stock of the Corporation into
which such share of Series B Preferred Stock is convertible, voting together as
a single class with the other shares entitled to vote, at all meetings of the
stockholders of the Corporation. With respect to any such vote, each share of
Series B Preferred Stock shall entitle the holder thereof to cast the number of
votes equal to the number of votes which could be cast in such vote by a holder
of the shares of capital stock of the Corporation into which such share of
Series B Preferred Stock is convertible on the record date for such vote or, if
no such record date is established, on the date any written consent of
stockholders is solicited.
<PAGE>
(b) So long as any shares of Series B Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of shares
shall then be required by law, without first obtaining the consent or approval
of the Requisite Holders, voting as a single class, given in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class, or by written consent, the Corporation shall not (and
shall not permit or authorize any subsidiary to): (i) authorize, create or issue
any class or series, or any shares of any class or series, of stock having any
preference or priority as to voting, dividends or upon liquidation, dissolution
or winding up over the Series B Preferred Stock ("Senior Stock"); (ii)
authorize, create or issue any class or series, or any shares of any class or
series, of stock ranking on a parity as to voting, dividends or upon
liquidation, dissolution or winding up with the Series B Preferred Stock
("Parity Stock"); (iii) reclassify any shares of stock of the Corporation into
shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable
for, convertible into, or evidencing the right to purchase any shares of Senior
Stock or Parity Stock; (v) alter or change the rights, preferences or privileges
of the Series B Preferred Stock; (vi) increase or decrease the authorized number
of shares of Series B Preferred Stock or issue shares of Series B Preferred
Stock other than to holders of Series B Preferred Stock pursuant to its terms;
(vii) amend or waive any provision of the Corporation's Certification of
Incorporation or bylaws in a manner adverse in any respect to the holders of
Series B Preferred Stock; (viii) authorize or pay any cash dividend on Common
Stock or any other class or series of stock over which the Series B Preferred
Stock has any preference or priority as to voting, dividends or upon
liquidation, dissolution or winding-up ("Junior Stock"); or (ix) redeem,
repurchase, retire or otherwise acquire Common Stock or any other Junior Stock
(other than by conversion into or exchange for shares of Junior Stock and other
than any redemptions, repurchases or acquisitions made pursuant to and as
required by the terms of any employee incentive or benefit plan of the
Corporation as in effect from time to time).
Section 4. Mandatory Repurchase by the Corporation.
----------------------------------------
(a) On the twelfth anniversary of the Closing Date of the
Securities Purchase Agreement, the Corporation shall purchase for cash from each
holder of shares of Series B Preferred Stock the number of shares of the Series
B Preferred Stock held by such holder on such twelfth anniversary. Repurchases
made pursuant to this Section 4(a) shall be effected on such anniversary date
(or such other day as the holder and the Corporation may agree) and shall be for
the Conversion Value. The place of payment shall be at an office or agency fixed
therefor by the Corporation or, if not fixed, at the principal executive office
of the Corporation.
(b) (i) On the date fixed for repurchase, each holder of shares of
Series B Preferred Stock shall surrender the certificate representing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment in cash therefor provided in this
Section 4. Dividends with respect to the shares of Series B Preferred Stock so
purchased shall cease to accrue after the date so purchased, such shares shall
no longer be deemed outstanding after such date and the
<PAGE>
holders thereof shall cease to be stockholders of the Corporation and all rights
whatsoever with respect to the shares so purchased shall terminate.
(ii) If the funds legally available for such purchase are not
sufficient to purchase all the shares of Series B Preferred Stock tendered to
the Corporation for purchase, the Corporation shall purchase the greatest number
of whole shares for which such funds are so available on a pro rata basis among
all tendering holders based on the ratio of the number of shares tendered by
each of them to the aggregate amount of all shares so tendered, and the
certificates representing the unpurchased shares shall be deemed not to be
surrendered for repurchase, such unpurchased shares shall remain outstanding and
the rights of the holders of shares of Series B Preferred Stock thereafter shall
continue to be those of a holder of shares of the Series B Preferred Stock;
provided, however, the Corporation shall thereafter be required to repurchase
- -------- -------
all such remaining shares at the first date it has sufficient funds legally
available for such purpose at the price it would have paid at the date such
shares were actually tendered and the Corporation shall give notice as aforesaid
to each holder whose shares were not repurchased for such reason and such holder
shall thereafter have the right to elect to have such shares repurchased, such
election to be made within 30 days of receipt of such notice. For purposes of
this Section, the Corporation shall be deemed not to have sufficient funds
legally available for any such purchase if the Board of Directors reasonably
determines that immediately after such repurchase the Corporation would be
insolvent. Upon the failure to purchase all of the Series B Preferred Stock as
required by this Section 4, the Dividend Rate on any such stock that has not
been purchased shall automatically, pursuant to Section 2(a), increase to twelve
percent (12%). If any part of the Series B Preferred Stock has not been
purchased pursuant to this Section 4 three (3) months after the twelfth
anniversary of the Closing Date of the Securities Purchase Agreement, the
Dividend Rate shall thereafter increase to fifteen percent (15%).
Section 5. Conversion at Option of the Corporation.
-----------------------------------------
(a) Securities Purchase Agreement (the "Third Anniversary"), so
long as shares of Common Stock shall have traded on the Primary Exchange for at
least thirty (30) of the forty-five (45) trading days immediately preceding the
Determination Date (defined below), at a Closing Price in excess of the Hurdle
Percentage of the Conversion Price then in effect for the Series B Preferred
Stock for each such trading day, all, but not less than all, of the shares of
Series B Preferred Stock may, at the option of the Corporation, be converted
into shares of Common Stock. The Corporation shall send notice of mandatory
conversion to each of the holders of the Series B Preferred Stock at such
holder's address as it appears on the transfer books of the Corporation.
<PAGE>
(b) Subject to the provisions for adjustment set forth in Section
8, each share of Series B Preferred Stock shall be -- if the Corporation so
elects as provided in Section 5(a) -- converted into a number of fully paid and
nonassessable shares of Common Stock equal to the product obtained by
multiplying the Applicable Conversion Rate by the number of shares of Series B
Preferred Stock being converted. The Applicable Conversion Rate shall be the
quotient obtained by dividing the Conversion Value on the date of conversion by
the applicable Conversion Price.
Section 6. Reacquired Shares.
-----------------
Any shares of Series B Preferred Stock converted, purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof, and, if necessary to provide
for the lawful purchase of such shares, the capital represented by such shares
shall be reduced in accordance with the General Corporation Law of the State of
Delaware. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, par value $1.00 per share, of the
Corporation and may be reissued as part of another series of Preferred Stock,
par value $1.00 per share, of the Corporation subject to the conditions or
restrictions on authorizing, or creating or issuing any class or series, or any
shares of any class or series, set forth in paragraph (b) of Section 3.
Section 7. Liquidation, Dissolution or Winding Up.
---------------------------------------
If the Corporation shall adopt a plan of liquidation or of dissolution, or
commence a voluntary case under the Federal bankruptcy laws or any other
applicable state or Federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under any such law or
to the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Corporation or of any substantial part
of its property, or make an assignment for the benefit of its creditors, or
admit in writing its inability to pay its debts generally as they become due, or
if a decree or order for relief in respect of the Corporation shall be entered
by a court having jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and any such decree or order shall be unstayed and
in effect for a period of ninety (90) consecutive days and on account of such
event the Corporation shall liquidate, dissolve or wind up, or upon any other
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (i) to the holders of shares of Junior Stock, unless prior thereto, the
holders of shares of Series B Preferred Stock shall have received in cash the
Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except
distributions made ratably on the Series B Preferred Stock and all such Parity
Stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up of the
Corporation.
<PAGE>
Section 8. Conversion.
----------
Each share of Series B Preferred Stock may, at the option of the holder
thereof, be converted into shares of Common Stock at any time, whether or not
the Corporation has given notice of exchange under Section 9, on the terms and
conditions set forth in this Section 8. In addition:
(a) Subject to the provisions for adjustment hereinafter set forth,
each share of Series B Preferred Stock shall be convertible in the manner
hereinafter set forth into a number of fully paid and nonassessable shares of
Common Stock equal to the product obtained by multiplying the Applicable
Conversion Rate by the number of shares of Series B Preferred Stock being
converted. The Applicable Conversion Rate shall be the quotient obtained by
dividing the Conversion Value on the date of conversion by the applicable
Conversion Price.
(b) The Conversion Price shall be subject to adjustment from time
to time as follows:
(i) In case the Corporation shall at any time or from time to
time after the original issuance of the Series B Preferred Stock declare a
dividend, or make a distribution, on the outstanding shares of Common Stock in
either case, in shares of Common Stock, or effect a subdivision, combination,
consolidation or reclassification of the outstanding shares of Common Stock into
a greater or lesser number of shares of Common Stock, then, and in each such
case, the Conversion Price in effect immediately prior to such event or the
record date therefor, whichever is earlier, shall be adjusted by multiplying the
Conversion Price by a fraction, the numerator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this clause (i)
shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision, reclassification,
consolidation or combination, at the close of business on the day upon which
such corporate action becomes effective.
(ii) In addition to the foregoing adjustments in subsections
(i), the Corporation will be permitted to make such reductions in the Conversion
Price as it considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the holders of the shares of Common Stock.
(iii) In any case in which this Section 8 shall require that an
adjustment (including by reason of the last sentence of subsection (i) above) be
made immediately following a record date, the Corporation may elect to defer the
effectiveness
<PAGE>
of such adjustment (but in no event until a date later than the effective time
of the event giving rise to such adjustment), in which case the Corporation
shall, with respect to any share of Series B Preferred Stock converted after
such record date and on and before such adjustment shall have become effective
(x) defer paying any cash payment pursuant to Section 8(f) hereof or issuing to
the holder of such shares of Series B Preferred Stock the number of shares of
Common Stock and other capital stock of the Corporation (or other assets or
securities) issuable upon such conversion in excess of the number of shares of
Common Stock and other capital stock of the Corporation issuable thereupon only
on the basis of the Conversion Price prior to adjustment, and (y) not later than
five Business Days after such adjustment shall have become effective, pay to
such holder the appropriate cash payment pursuant to Section 8(f) hereof and
issue to such holder the additional shares of Common Stock and other capital
stock of the Corporation issuable on such conversion.
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 0.1% of
the Conversion Price; provided, that any adjustments which by reason of this
subsection (iv) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
(c) (i) In case of any capital reorganization or reclassification
of outstanding shares of Common Stock (other than a reclassification covered by
paragraph (b) (i) of this Section 8), or in case of any consolidation or merger
of the Corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety (each of the foregoing being referred
to as a "Transaction"), (x) if such Transaction occurs prior to the Third
Anniversary and constitutes or leads to a Change in Control, each holder of
Series B Preferred Stock shall then be entitled to the acceleration and
immediate vesting of all dividends such holder would have accrued on and prior
to the Third Anniversary, and (y) each share of Series B Preferred Stock then
outstanding shall thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to the consummation of such Transaction, the
kind and amount of shares of stock and other securities and property (including
cash) receivable upon the consummation of such transaction by a holder of that
number of shares of Common Stock into which one share of Series B Preferred
Stock was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any tender or exchange offer that is a step in such Transaction). In any such
case, if necessary, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions set forth in this
Section 8 with respect to rights and interests thereafter of the holders of
shares of Series B Preferred Stock to the end that the provisions set forth
herein for the protection of the conversion rights of the Series B Preferred
Stock shall thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities and property deliverable upon
conversion of the shares of Series B Preferred Stock remaining outstanding (with
such
<PAGE>
adjustments in the conversion price and number of shares issuable upon
conversion and such other adjustments in the provisions hereof as the Board of
Directors shall determine to be appropriate). In case securities or property
other than Common Stock shall be issuable or deliverable upon conversion as
aforesaid, then all references in this Section 8 shall be deemed to apply, so
far as appropriate and as nearly as may be, to such other securities or
property.
(ii) Notwithstanding anything contained herein to the
contrary, the Corporation will not effect any Transaction unless, prior to the
consummation thereof, the Surviving Person (as defined in Section 14) thereof
shall assume, by written instrument mailed to each record holder of shares of
Series B Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation, the obligation to deliver to such holder such cash and
such securities to which, in accordance with the foregoing provisions, such
holder is entitled. Nothing contained in this paragraph (c) shall limit the
rights of holders of the Series B Preferred Stock to convert the Series B
Preferred Stock in connection with the Transaction.
(d) The holder of any shares of Series B Preferred Stock may
exercise its right to convert such shares into shares of Common Stock by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose, a
certificate or certificates representing the shares of Series B Preferred Stock
to be converted duly endorsed to the Corporation in blank accompanied by a
written notice stating that such holder elects to convert all or a specified
whole number of such shares in accordance with the provisions of this Section 8.
The Corporation will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series B Preferred Stock pursuant
hereto. As promptly as practicable, and in any event within three Business Days
after the surrender of such certificate or certificates and the receipt of such
notice relating thereto and, if applicable, payment of all transfer taxes (or
the demonstration to the satisfaction of the Corporation that such taxes have
been paid), the Corporation shall deliver or cause to be delivered (i)
certificates registered in the name of such holder representing the number of
validly issued, fully paid and nonassessable full shares of Common Stock to
which the holder of shares of Series B Preferred Stock so converted shall be
entitled and (ii) if less than the full number of shares of Series B Preferred
Stock evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates less the number
of shares converted. Such conversion shall be deemed to have been made at the
close of business on the date of receipt of such notice and of such surrender of
the certificate or certificates representing the shares of Series B Preferred
Stock to be converted so that the rights of the holder thereof as to the shares
being converted shall cease except for the right to receive shares of Common
Stock and any declared but unpaid dividends in accordance herewith, and the
person entitled to receive the shares of Common Stock shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time.
<PAGE>
(e) Notwithstanding any other provisions of this Certificate of
Designation, shares of Series B Preferred Stock may be converted at any time
and, if subject to exchange, up to the close of business on the last Business
Day immediately preceding the date fixed for such exchange of such shares.
(f) In connection with the conversion of any shares of Series B
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the day on which such
shares of Series B Preferred Stock are deemed to have been converted.
(g) In case at any time or from time to time the Corporation shall
pay any dividend or make any other distribution to the holders of its Common
Stock, or shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other right, or there
shall be any capital reorganization or reclassification of the Common Stock of
the Corporation or consolidation or merger of the Corporation with or into
another corporation, or any sale or conveyance to another corporation of the
property of the Corporation as an entirety or substantially as an entirety, or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then, in any one or more of said cases the Corporation shall
give at least twenty (20) days' prior written notice (the time of mailing of
such notice shall be deemed to be the time of giving thereof) to the registered
holders of the Series B Preferred Stock at the addresses of each as shown on the
books of the Corporation of the date on which (i) the books of the corporation
shall close or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or winding
up shall take place, as the case may be, provided that in the case of any
Transaction to which paragraph (c) applies the Corporation shall give at least
thirty (30) days' prior written notice as aforesaid. Such notice shall also
specify the date as of which the holders of the Common Stock and of the Series B
Preferred Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock or
Series B Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or conveyance, or
participate in such dissolution, liquidation or winding up, as the case may be.
(h) Whenever the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible (or the number of votes to
which each share of Series B Preferred Stock is entitled) is adjusted as
provided in Section 8 hereof, the Corporation shall promptly mail to the holders
of record of the outstanding shares of Series B Preferred Stock at their
respective addresses as the same shall appear in the Corporation's stock records
a notice stating that the number of shares of Common Stock into which the shares
of Series B Preferred Stock are convertible has been adjusted and
<PAGE>
setting forth the new number of shares of Common Stock (or describing the new
stock, securities, cash or other property) into which each share of Series B
Preferred Stock is convertible, as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof,
and when such adjustment became effective.
Section 9. Exchange at the Option of the Corporation.
------------------------------------------
(a) The Corporation may, at its option, exchange the Series B
Preferred Stock, in whole but not in part, at any time, for Exchange Debentures;
provided, however, that (i) on the date of such exchange there are no
- -------- -------
accumulated and unpaid dividends on the Series B Preferred Stock (including the
dividend payable on such date) that are not paid contemporaneously with such
exchange or other contractual impediments to such exchange; (ii) such exchange
is permitted under applicable law; and (iii) the Corporation shall have
delivered to the Trustee under the Exchange Indenture, an opinion of counsel
with respect to the due authorization and issuance of the Exchange Debentures.
(b) Upon any exchange of Series B Preferred Stock for Exchange
Debentures pursuant to this Section 9, each Holder of Series B Preferred Stock
will be entitled to receive, subject to the second succeeding sentence, $1.00
principal amount of Exchange Debentures for each $1.00 of Conversion Value of
Series B Preferred Stock so exchanged. The Exchange Debentures will be issued in
registered form without coupons. Exchange Debentures issued in exchange for
Preferred Stock will be issued in principal amounts of $1,000 and integral
multiples thereof to the extent possible, and will also be issued in principal
amounts less than $1,000 so that each Holder of Series Preferred Stock will
receive certificates representing the entire amount of Exchange Debentures to
which such Holder's shares of Preferred Stock entitle such Holder; provided,
--------
however, that the Corporation may pay cash in lieu of issuing a Exchange
- -------
Debenture in a principal amount less than $1,000.
(c) The Corporation will send a written notice of exchange (the
"Exchange Notice") by first-class mail to each Holder of record of shares of
Series B Preferred Stock not fewer than thirty (30), nor more than sixty (60),
days before the date fixed for any exchange (the "Exchange Date") at its
registered address and notice, if mailed in the manner herein provided, shall
conclusively be presumed to have been given, whether or not the Holder receives
such notice; provided, however, that no failure to give such notice nor any
-------- -------
deficiency therein shall affect the validity of the procedure for the exchange
of any shares of Series B Preferred Stock to be exchanged except as to the
Holder or Holders to whom the Corporation has failed to give said notice or
except as to the Holder or Holders whose notice was defective. The Exchange
Notice shall state: (1) the Exchange Date; (2) that the Holder is to surrender
to the Corporation, in the manner and at the place or places designated, his
certificate or certificates representing the shares of Preferred Stock to be
exchanged; (3) that dividends on the shares of Series B Preferred Stock to be
exchanged shall cease to accrue on such Exchange Date whether or not
certificates representing shares of Series B Preferred Stock are surrendered for
exchange
<PAGE>
on such Exchange Date unless the Corporation shall default in the delivery of
the Exchange Debentures to Holders of the Preferred Stock who have duly
surrendered their certificates for exchange in accordance with Section 9(c) on
or before the Exchange Date; and (4) that interest on the Exchange Debentures
shall accrue from the Exchange Date whether or not certificates for shares of
Series B Preferred Stock are surrendered for exchange on such Exchange Date.
(d) On and after the Exchange Date, dividends will cease to accrue
on the outstanding shares of Series B Preferred Stock, and all rights of the
Holders of Series B Preferred Stock (except the right to receive the Exchange
Debentures or an amount in cash, to the extent applicable, equal to the
accumulated and unpaid dividends to the Exchange Date and, if the Corporation so
elects, cash in lieu of any Exchange Debenture that is in a principal amount
that is not an integral multiple of $1,000) will terminate. From and after the
Exchange Date, the person entitled to receive the Exchange Debentures issuable
upon such exchange will be treated for all purposes as the registered holder of
such Exchange Debentures.
(e) On or before the Exchange Date, each Holder of Series B
Preferred Stock shall surrender the certificate or certificates representing
such shares of Preferred Stock, in the manner and at the place designated in the
Exchange Notice. Upon surrender in accordance with the Exchange Notice of the
certificates representing any shares of Series B Preferred Stock so exchanged,
duly endorsed (or otherwise in proper form for transfer, as determined by the
Company), such shares shall be exchanged by the Company for Exchange Debentures
in accordance with Section 9(b). The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(f) Notwithstanding the foregoing provisions of this Section 9, the
Corporation shall not be entitled to exchange the Series B Preferred Stock for
Exchange Debentures if such exchange, or any term or provision of the Exchange
Indenture or the Exchange Debentures, or the performance of the Company's
obligations under this Certificate of Designation, the Preferred Stock, the
Exchange Indenture or the Exchange Debentures, shall violate or conflict with
any applicable law or agreement or instrument then binding on the Company or if,
at the time of such exchange, the Company is insolvent or would be rendered
insolvent by such exchange.
(g) Notwithstanding the foregoing, if notice of exchange has been
given pursuant to this Section 9 and any holder of shares of Preferred Stock
shall, prior to the close of business on the Exchange Date, give written notice
to the Corporation pursuant to Section 8 of the conversion of any or all of the
shares held by the holder (accompanied by a certificate or certificates for such
shares, duly endorsed or assigned to the Corporation), then the exchange shall
not become effective as to the shares to be converted and the conversion shall
become effective as provided in Section 8.
<PAGE>
(h) Prior to the Exchange Date, the Corporation will comply with
any applicable securities and blue sky laws with respect to the exchange of the
Series B Preferred Stock for the Debentures.
Section 10. Rank.
-----
The Series B Preferred Stock shall rank, with respect to dividend rights
and rights upon liquidation, winding up and dissolution, prior to all classes
and series of the Corporation's preferred stock authorized or outstanding on the
date of initial issuance of the Series B Preferred Stock and prior to all
classes of Common Stock.
Section 11. Other Covenants.
----------------
(a) Reservation of Shares; Transfer Taxes; Etc.
------------------------------------------
(i) The Corporation shall at all times reserve and keep
available, out of its authorized and unissued stock, solely for the purpose of
effecting the conversion of the Series B Preferred Stock, such number of shares
of its Common Stock or Common Stock free of preemptive rights as shall from time
to time be sufficient to effect the conversion of all shares of Series B
Preferred Stock from time to time outstanding. The Corporation shall from time
to time, in accordance with the laws of the State of Delaware, increase the
number of authorized shares of Common Stock if at any time the number of shares
of authorized and unissued Common Stock shall not be sufficient to permit the
conversion of all the then outstanding shares of Series B Preferred Stock.
(ii) If any shares of Common Stock required to be reserved
for purposes of conversion of the Series B Preferred Stock hereunder require
registration with or approval of any governmental authority under any Federal or
State law before such shares may be issued upon conversion, the Corporation will
in good faith and as expeditiously as possible endeavor to cause such shares to
be duly registered or approved, as the case may be. If the Common Stock is
listed on the New York Stock Exchange or any other national securities exchange
or national quotation service, the Corporation will list and keep listed on such
exchange, upon official notice of issuance, all shares of Common Stock issuable
upon conversion of the shares of Series B Preferred Stock.
(iii) The Corporation shall pay any and all issue or other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion or exchange of the Series B Preferred Stock. The
Corporation shall not, however, be required to pay any income tax or tax which
may be payable in respect of any transfer involved in the issue or delivery of
Common Stock (or other securities or assets) in a name other than that in which
the shares of Series B Preferred Stock so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
<PAGE>
(b) Prior Notice of Certain Events. In case:
------------------------------
(i) the Corporation shall authorize the granting to all
holders of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or
(ii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of the Corporation or
of any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(iii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
(iv) then the Corporation shall cause to be filed with the
transfer agent for the Series B Preferred Stock, and shall cause to be mailed to
the holders of record of the Series B Preferred Stock, at their last addresses
as they shall appear upon the stock transfer books of the Corporation, at least
fifteen days prior to the applicable record date hereinafter specified, a notice
stating, as the case may be, (x) the record date (if any) for the purpose of
such dividend, distribution, redemption, repurchase or granting of rights or
warrants or, if no record date is to be set, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date, if any, as of which it is expected that holders of shares of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
Section 12. Remedies.
---------
(a) The Corporation stipulates that the remedies at law of each
holder of Series B Preferred Stock in the event of any Triggering Event or
threatened Triggering Event or otherwise or other failure in the performance of
or compliance with any of the terms hereof are not and will not be adequate and
that, to the fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms hereof or
otherwise without requiring any holder to post a bond or other security except
to the extent required by applicable law.
<PAGE>
(b) Any holder of Series B Preferred Stock shall be entitled to
recover from the Corporation the reasonable attorneys' fees and expenses
incurred by such holder in connection with any Triggering Event or enforcement
by such holder of any obligation of the Corporation hereunder.
(c) No failure or delay on the part of any holder of Series B
Preferred Stock in exercising any right, power or remedy hereunder or under
applicable law or otherwise shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder or thereunder. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law or otherwise.
Section 13. Severability of Provisions.
---------------------------
Whenever possible, each provision hereof shall be interpreted in a manner
as to be effective and valid under applicable law, but if any provision hereof
is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating or otherwise adversely affecting the remaining provisions
hereof. If a court of competent jurisdiction should determine that a provision
hereof would be valid or enforceable if a period of time were extended or
shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
Section 14. Definitions.
------------
For the purposes of the Certificate of Designation of Series B Exchangeable
Convertible Preferred Stock which embodies this resolution:
(a) "Acceleration Amount" per share of Series B Preferred Stock
shall mean, as of the date of conversion or exchange of the Series B Preferred
Stock under Section 5, 8 or 9 hereof, or the date of any payments on the Series
B Preferred Stock under Section 7 hereof, or as of any other date on which it is
necessary to determine the number of shares of Common Stock into which a share
of Series B Preferred Stock is then convertible: (i) following a Change in
Control and prior to the Third Anniversary, an amount calculated to provide the
holder of a share of Series B Preferred Stock, as of such date, with a gross
amount of accretion calculated at the rate of eight percent (8%) on $2,170.00
per share of Series B Preferred Stock, compounded quarterly, from the date of
conversion or exchange of the Series B Preferred Stock under Section 5, 8 or 9
hereof, or the date of any payments on the Series B Preferred Stock under
Section 7 hereof, or the date of any other determination, as the case may be, to
and including the Third Anniversary, or (ii) other than as specified in clause
(i), zero.
<PAGE>
(b) "Accrued Dividends" to a particular date (the "Applicable
Date") shall mean (i) all dividends accrued but not paid on the Series B
Preferred Stock pursuant to paragraph (a) of Section 2, whether or not declared,
accrued to the Applicable Date, plus (ii) all dividends or distributions payable
pursuant to paragraph (b) of Section 2 for which the Covered Distribution was
declared, ordered, paid or made on or prior to the Applicable Date.
(c) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated by the Securities and Exchange Commission under the Exchange Act.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which commercial banks in the City of New York are
authorized or obligated by law or executive order to close.
(e) "Capital Stock" shall mean (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.
(f) "Change in Control" shall mean any of the following:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other
than the Corporation, or any of its Subsidiaries, or any employee benefit plan
or related trust of the Corporation or any of its Subsidiaries or any Excluded
Person or Excluded Group (an "Acquiring Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote generally in the election
of directors; or
(ii) the approval by the stockholders of the Corporation,
other than any Excluded Person or Excluded Group, of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such reorganization,
merger or consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than fifty percent
(50%) of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the Corporation
resulting from such reorganization, merger or consolidation; or
<PAGE>
(iii) the sale or other disposition of all or any substantial
part of the assets of the Corporation, other than to any Excluded Person or
Excluded Group, in one transaction or series of related transactions;
provided that the occurrence of any event identified in subparagraphs (i)
through (iii) above that would otherwise be treated as a Change in Control shall
not constitute a Change in Control hereunder if (x) the Board of Directors of
the Corporation, by vote duly taken, and (y) the Requisite Holders of Series B
Preferred Stock, by written consent, shall so determine.
(g) "Closing Price" per share of Common Stock on any date shall
mean the last sale price, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, in either case as reported on the
Nasdaq National Market or in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or American Stock Exchange, as the case may be, or, if the Common
Stock is listed or admitted to trading on the New York Stock Exchange or
American Stock Exchange, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or such other system then in use,
or, if on any such date the Common Stock is not quoted by any such organization,
the average of the Closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock selected by the Board of
Directors and reasonably acceptable to the Requisite Holders.
(h) "Conversion Price" shall mean initially $21.70 per share, as
adjusted from time to time in accordance with Section 8.
(i) "Conversion Value" per share of Series B Preferred Stock shall
mean an amount equal to the sum of (x) $2,170.00, (y) all Accrued Dividends
thereon to the date of conversion and (z) the Acceleration Amount.
(j) "Current Market Price" per share of Common Stock on any date
shall mean the average of the Closing Prices of a share of Common Stock for the
twenty (20) consecutive Trading Days ending on the date in question. If on any
such Trading Day the Common Stock is not quoted by any organization referred to
in the definition of Closing Price, the fair value of the Common Stock on such
day, as reasonably determined in good faith by the Board of Directors of the
Corporation, shall be used.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(l) "Exchange Debenture" shall mean the Subordinated Exchange
Debentures of the Corporation, issuable in exchange for the Series B Preferred
Stock.
<PAGE>
(m) "Excluded Group" shall mean a "group" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) that includes one or more Excluded
Persons; provided that the voting securities of the Corporation "beneficially
owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act)
by such Excluded Persons represents a majority of the voting securities
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such group.
(n) "Excluded Person" shall mean each of RCBA Strategic Partners,
L.P., Richard C. Blum & Associates, L.P. and any affiliate (as defined in the
Exchange Act) of any of the foregoing.
(o) "Hurdle Percentage" shall mean 135%.
(p) "Liquidation Preference" shall mean an amount per share of
Series B Preferred Stock equal to the greater of (i) the Conversion Value or
(ii) in the event of any liquidation or winding up of the Corporation, the
amount the holders of the Series B Preferred Stock would have received had they
converted into Common Stock immediately prior to such liquidation or winding up
and, if such liquidation or winding up occurs prior to the Third Anniversary of
the Closing Date of the Securities Purchase Agreement, the amount such holders
would have received had they received the additional dividends that would have
been paid from the date of liquidation or winding up through such Third
Anniversary, and such additional shares were also converted into Common Stock
immediately prior to such liquidation or winding up.
(q) "Person" shall mean an individual, partnership, corporation,
limited liability company or partnership, unincorporated organization, trust or
joint venture, or a governmental agency or political subdivision thereof, or
other entity of any kind.
(r) "Requisite Holders" shall mean the holders of sixty-seven
percent (67%) of the then-outstanding shares of Series B Preferred Stock.
(s) "Securities Purchase Agreement" shall mean that certain
agreement dated as of May 5, 1999 by and among the Corporation and certain
purchasers of the Series B Preferred Stock party thereto.
(t) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(u) "Surviving Person" shall mean the continuing or surviving
Person of a merger, consolidation or other corporate combination, the Person
receiving a transfer of all or a substantial part of the properties and assets
of the Corporation, or the Person consolidating with or merging into the
Corporation in a merger, consolidation or other
<PAGE>
corporate combination in which the Corporation is the continuing or surviving
Person, but in connection with which the Series B Preferred Stock or Common
Stock of the Corporation is exchanged, converted or reinstated into the
securities of any other Person or cash or any other property; provided, however,
-------- -------
if such Surviving Person is a direct or indirect Subsidiary of a Person, the
parent entity also shall be deemed to be a Surviving Person.
(v) "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is quoted, listed or admitted to
trading is open for the transaction of business or, if the Common Stock is not
quoted, listed or admitted to trading on any national securities exchange
(including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(w) "Triggering Event" shall mean any one or more of the
following:
(i) The Corporation shall fail to redeem any part or all of
the Series B Preferred Stock in accordance with Section 4.
(ii) The Corporation shall fail to pay any dividend on any
Series B Preferred Stock on any dividend payment date in accordance with Section
2 for any reason, including but not limited to, that such payment is prohibited
by applicable law or the Board of Directors elect not to pay such dividend, or
shall otherwise violate any term of Section 2 and such failure shall not be
cured within a period of 30 days after such dividend payment date or violation
(which cure shall be effected in a manner ensuring the holders the same yield as
if such violation had not occurred).
(iii) The Corporation shall enter into any transaction or
take any action required to be approved by any holders of Series B Preferred
Stock without obtaining the requisite approval of the holders of the Series B
Preferred Stock.
(iv) The Corporation shall (A) fail for any reason to issue
Common Stock as required under Section 8 upon the request of any holder of
Series B Preferred Stock; or (B) so long as any shares of the Series B Preferred
Stock are outstanding, fail to make any anti-dilution adjustment thereunder,
and, in each case, such failure to issue Common Stock or to make such adjustment
shall continue for 30 days after notice.
(v) The Corporation shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the Federal bankruptcy laws or
any other applicable state or Federal bankruptcy, insolvency or similar law, or
consent to the entry of an order for relief in any involuntary case under any
such law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts
<PAGE>
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs.
(x) "Voting Stock" shall mean the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series B Exchangeable Convertible Preferred Stock to be duly
executed by its President and attested to by its Secretary and has caused its
corporate seal to be affixed hereto, this 9th day of June, 1999.
URS CORPORATION
By: /s/ Kent P. Ainsworth
---------------------
Kent P. Ainsworth
<PAGE>
URS CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [SEPTEMBER 30, 1999]
The undersigned hereby appoints [KENT P. AINSWORTH] and [CAROL
BRUMMERSTEDT], and each of them, as attorneys and proxies of the undersigned,
with full power of substitution, to vote all of the shares of stock of URS
Corporation that the undersigned may be entitled to vote at the Special Meeting
of Stockholders of URS Corporation to be held on [Thursday, September 30, 1999],
at [__:__] a.m. local time, at the offices of Cooley Godward LLP, One Maritime
Plaza, 20th Floor, San Francisco, California 94111, and at any and all
continuations and adjournments of that meeting, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3
AND 4, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR
INSTRUCTIONS.
WE RECOMMEND A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
Proposal 1: To consider approval of an amendment to our Certificate of
Incorporation to increase the authorized number of shares of
common stock from 20,000,000 shares to 50,000,000 shares and to
increase the authorized number of shares of preferred stock from
1,000,000 shares to 3,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 2: To consider approval of an amendment to and restatement of our
Employee Stock Purchase Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 3: To consider approval of our 1999 Equity Incentive Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 4: To consider approval of the issuance of Series B Exchangeable
Convertible Preferred Stock to RCBA Strategic Partners, L.P.
("RCBA Strategic Partners") in exchange for the shares of Series
A and Series C Preferred Stock issued to RCBA Strategic Partners
in connection with our acquisition of Dames & Moore Group.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Dated: , 1999
------------------------------------
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Signature(s)
Please sign exactly as your name appears hereon. If the stock is registered
in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and
have a duly authorized officer sign, stating title. If signer is a
partnership, please sign in partnership name by authorized person.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE THAT IS POSTAGE PREPAID IF MAILED IN THE
UNITED STATES.
</TABLE>
