<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
EMCON
(Name of Subject Company)
THE IT GROUP, INC.
SEISMIC ACQUISITION CORPORATION
(Bidder)
Common Stock, no par value per share
(Title of Class of Securities)
290843 10 1
(CUSIP Number of Class of Securities)
Anthony J. DeLuca
President and Chief Executive Officer
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
COPIES TO:
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<S> <C>
Peter F. Ziegler, Esq. Paul A. Blumenstein, Esq.
Gibson, Dunn & Crutcher LLP Gerald S. Walters, Esq.
333 South Grand Avenue Gray Cary Ware & Freidenrich LLP
Los Angeles, California 90071 400 Hamilton Avenue
(213) 229-7000 Palo Alto, California 94301
(650) 328-6561
</TABLE>
<TABLE>
<CAPTION>
Calculation of Filing Fee
=========================================================================================================================
Transaction valuation Amount of filing fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
$64,105,553* $12,821**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For purposes of fee calculation only. The total transaction value assumes
the purchase in cash, at an offer price of $6.75 per Share, an aggregate of
(i) 8,340,669 Shares issued and outstanding and (ii) 1,156,450 Shares
issuable pursuant to outstanding options with an exercise price less than
the offer price of $6.75 per Share.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the
value of the Shares to be purchased.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: Not Applicable Filing party: Not Applicable
Form or registration no.: Not Applicable Date filed: Not Applicable
(Continued on the following pages)
(Page 1 of 9)
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 290843 10 1 Page 2 of 9 Pages
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
The IT Group, Inc. - I.R.S. No.: 33-0001212
Seismic Acquisition Corporation - I.R.S. No.: 25-1835135
- -------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [x]
- -------------------------------------------------------------------------------
SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
BK and/or WC
- -------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(e) or 2(f)
5 [_]
- -------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
The IT Group, Inc. - Incorporated in the State of Delaware
Seismic Acquisition Corporation - Incorporated in the State of California
- -------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7
None
- -------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES*
8 [_]
N/A
- -------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9
N/A
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
10
The IT Group, Inc. - CO
Seismic Acquisition Corporation - CO
- ------------------------------------------------------------------------------
2
<PAGE>
INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Seismic Acquisition Corporation, a California corporation
("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT Group,
Inc., a Delaware corporation ("Parent"), to purchase all of the issued and
outstanding shares (the "Shares") of common stock, no par value per share (the
"Company Common Stock"), of EMCON, a California corporation (the "Company"), at
a price of $6.75 per Share, net to each seller in cash, without interest (such
amount, or any greater amount per Share paid pursuant to the Offer (as defined
below), being hereinafter referred to as the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated as of May
17, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (the
"Letter of Transmittal," which, together with the Offer to Purchase, constitute
the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. The Offer is being made pursuant to an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of May 10, 1999, by and among Parent,
Purchaser and the Company, which provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, following the
purchase of Shares pursuant to the Offer, Purchaser will be merged with and into
the Company (the "Merger") with the Company continuing as the surviving
corporation (the "Surviving Corporation"). At the election of Parent, to the
extent that such action would not cause a failure of a condition to the Offer or
the Merger, the Merger may be structured so that the Company shall be merged
with and into Purchaser with the result that Purchaser shall be the Surviving
Corporation. The consummation of the Merger is subject to the satisfaction or,
if permissible, waiver of certain conditions, including, if required, approval
of the adoption of the Merger Agreement by the requisite vote of the
shareholders of the Company. If the Minimum Condition (as defined below) is
satisfied, Purchaser would have acquired sufficient Shares in the Offer to
assure such shareholder approval. If Purchaser acquires at least 90% of the
Shares in the Offer, under the California General Corporation Law (the "CGCL")
it will be able to consummate the Merger without a vote of the Company's
shareholders.
At the effective time of the Merger (the "Effective Time"), if Purchaser
holds at least 90% of the Shares then outstanding, each Share issued and
outstanding prior to the Effective Time (other than Shares held by Parent,
Purchaser, the Company or any of their wholly owned subsidiaries (collectively,
the "Excluded Shares"), and any Shares with respect to which the holder properly
exercises such holder's appraisal rights in accordance with the CGCL (the
"Dissenting Shares")) shall automatically be canceled and extinguished and shall
be converted into the right to receive the Offer Price (the "Cash Merger
Consideration"), in cash without interest thereon, subject to appropriate and
proportionate adjustments in the event of any reclassification,
recapitalization, stock split, stock dividend or similar transaction with
respect to the Shares. If Purchaser does not hold at least 90% of the Shares
then outstanding at the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares and any
Dissenting Shares, shall automatically be canceled and extinguished and shall be
converted into the right to receive that fraction of a fully paid and
nonassessable share of common stock, par value $0.01 per share, of Parent (the
"Parent Common Stock") equal to the Conversion Number (the "Stock Merger
Consideration" and together with
3
<PAGE>
the Cash Merger Consideration, the "Merger Consideration"). The Conversion
Number shall be equal to a fraction (rounded to the nearest third decimal
point), (a) the numerator of which shall be equal to the Cash Merger
Consideration and (b) the denominator of which shall be equal to the average of
the closing sales price of a share of Parent Common Stock as reported on the New
York Stock Exchange for each of the ten (10) consecutive trading days ending on,
and including, the second trading day immediately preceding the date on which a
final vote of the shareholders of the Company on the adoption and approval of
the Merger shall have been held (the "Parent Average Stock Price"); provided,
however, that if the Parent Average Stock Price is equal to or less than $12.50,
then the Conversion Number shall be 0.540.
Each Excluded Share shall be canceled and extinguished and cease to exist
without any conversion thereof, and no payment shall be made with respect
thereto. Each holder (other than holders of Excluded Shares) of a certificate
representing any Shares shall, after the Effective Time, cease to have any
rights with respect to such Shares, except either to receive the Merger
Consideration upon surrender of such certificate, or to exercise such holder's
appraisal rights as provided in the Merger Agreement and the CGCL.
The Offer is conditioned upon, among other things, there being validly
tendered prior to the Expiration Date and not withdrawn at least a number of
Shares equal to eighty percent (80%) of the Shares outstanding on a fully
diluted basis (including for purposes of such calculation all Shares issuable
upon exercise of all stock options that are vested or scheduled to vest on or
before July 9, 1999 with an exercise price less than the Offer Price, and
conversion of all convertible securities or other rights to purchase or acquire
Shares with a conversion price less than the Offer Price (collectively,
"Derivative Securities"); provided, however, that such calculation shall not
include (a) Shares issuable pursuant to Derivative Securities that by their
terms will terminate or be canceled upon consummation of the Offer, (b) Shares
issuable pursuant to Derivative Securities as to which the Company has obtained
a written consent from the holder that such Derivative Securities will not be
converted prior to the Effective Time or (c) Shares issuable pursuant to
Derivative Securities as to which the Company takes appropriate action to
provide that such Derivative Securities shall automatically convert into the
right to receive an amount in cash equal to the product of (i) the excess, if
any, of the Cash Merger Consideration over the per Share exercise or conversion
price of such Derivative Securities and (ii) the number of Shares subject to
such Derivative Securities that are exercisable immediately prior to the
consummation of the Offer) (the "Minimum Condition"). The Offer is also subject
to certain other conditions set forth under the caption "THE TENDER OFFER--18.
Certain Conditions of the Offer" in the Offer to Purchase.
The information contained in this Schedule 14D-1 and the Offer to Purchase
concerning the Company, including, without limitation, information concerning
the deliberations, approvals and recommendations of the Board of Directors of
the Company in connection with the transaction, the opinion of the financial
advisor to the Board of Directors of the Company, and the Company's capital
structure and historical and projected financial information, was supplied by
the Company or has been taken from or based upon publicly available documents or
records. The information contained in this Schedule 14D-1 and the Offer to
Purchase concerning the Offer, the Merger, Parent and Purchaser was supplied by
Purchaser.
4
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the subject company is EMCON, a California corporation,
which has its principal executive offices at 400 South Camino Real, Suite 1200,
San Mateo, California 94402.
(b) The class of equity securities being sought is the Company Common
Stock. The information set forth in the Offer to Purchase under the caption
"INTRODUCTION" is incorporated herein by reference.
(c) The information concerning the principal market in which the Company
Common Stock is traded and certain high and low sales prices for the Company
Common Stock in such principal market set forth in the Offer to Purchase under
the caption "THE TENDER OFFER--6. Price Range of the Shares" is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (d), (g) This Schedule 14D-1 is filed by Purchaser and Parent. The
information concerning the name, state or other place of organization, the
principal business and the address of the principal office of Purchaser and
Parent, and the name, business address, present principal occupation or
employment and the name, principal business and address of any corporation or
other organization in which such employment or occupation is conducted, material
occupations, positions, offices or employment during the last five years and
citizenship of each of the executive officers and directors of Purchaser and
Parent are set forth in the Offer to Purchase under the captions "INTRODUCTION"
and "THE TENDER OFFER--8. Certain Information Concerning Purchaser and Parent"
and in Schedule II to the Offer to Purchase, and are incorporated herein by
reference.
(e) - (f) During the last five years, neither Purchaser, Parent, nor, to
the knowledge of Purchaser or Parent, any of the persons listed in Schedule II
to the Offer to Purchase has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in the Offer to Purchase under the captions
"INTRODUCTION" and "THE TENDER OFFER--8. Certain Information Concerning
Purchaser and Parent" is incorporated herein by reference.
(b) The information set forth in the Offer to Purchase under the captions
"INTRODUCTION," "THE TENDER OFFER--8. Certain Information Concerning Purchaser
5
<PAGE>
and Parent" and "THE TENDER OFFER--10. Contacts with the Company; Background of
the Offer and the Merger" is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
(a) - (b) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--9. Source and Amount of Funds" is incorporated herein
by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER.
(a) - (e) The information set forth in the Offer to Purchase under the
captions "INTRODUCTION," "THE TENDER OFFER--11. Purpose of the Offer and the
Merger" and "THE TENDER OFFER--12. Plans for the Company" is incorporated herein
by reference.
(f) - (g) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--17. Effects of the Offer on the Market for Shares;
Exchange Listing and Exchange Act Registration" is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) - (b) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--8. Certain Information Concerning the Purchaser and
Parent--Directors and Officers" is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under the captions "THE
TENDER OFFER--2. Procedures for Accepting the Offer and Tendering Shares," "THE
TENDER OFFER--11. Purpose of the Offer and the Merger," "THE TENDER OFFER--12.
Plans for the Company" and "THE TENDER OFFER--13. The Merger Agreement and
Related Agreements--Dissenters' Rights in the Merger" is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--20. Fees and Expenses" is incorporated herein by reference.
6
<PAGE>
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--8. Certain Information Concerning Purchaser and Parent" is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase under the captions
"THE TENDER OFFER--11. Purpose of the Offer and the Merger," "THE TENDER OFFER--
12. Plans for the Company" and "THE TENDER OFFER--13. The Merger Agreement and
Related Agreements--Dissenters' Rights in the Merger" is incorporated herein by
reference.
(b), (c) and (d) The information set forth in the Offer to Purchase under
the captions "THE TENDER OFFER--17. Effects of the Offer on the Market for
Shares, Exchange Listing and Exchange Act Registration--Margin Regulations" and
"THE TENDER OFFER--19. Certain Legal Matters; Regulatory Approvals" is
incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated by reference, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated May 17, 1999.
(a)(2) Letter of Transmittal, dated May 17, 1999.
(a)(3) Notice of Guaranteed Delivery, dated May 17, 1999.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees, dated May 17, 1999.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees, dated May 17, 1999.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement, dated May 17, 1999.
(a)(8) Joint Press Release, dated May 11, 1999, issued by Parent and the
Company.
(b)(1) Amended and Restated Credit Agreement, dated as of February 25,
1998, among Parent, IT Corporation ("ITC"), a wholly owned subsidiary of Parent,
OHM Corporation ("OHM"), a wholly owned subsidiary of Parent, OHM Remediation
Services Corp. ("OHMRSC"), a wholly owned subsidiary of OHM, Beneco Enterprises,
Inc. ("Beneco"), a wholly owned subsidiary of OHM, and the institutions from
time to time party thereto as Lenders
7
<PAGE>
and Issuing Banks (the "Lenders and Issuing Banks"), Citicorp USA, Inc., as
Administrative Agent (the "Administrative Agent"), BankBoston, N.A., as
Documentation Agent (the "Documentation Agent"), and Royal Bank of Canada and
Credit Lyonnais New York Branch, as Co-Agents (the "Co-Agents").(1)
(b)(2) First Amendment to Credit Agreement, dated as of September 16,
1998, among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the
Administrative Agent, the Documentation Agent and the Co-Agents.(2)
(b)(3) Second Amendment to Credit Agreement, dated as of October 26, 1998,
among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the
Administrative Agent, the Documentation Agent and the Co-Agents.(3)
(b)(4) Third Amendment to Credit Agreement, dated as of March 5, 1999,
among Parent, ITC, OHM, OHMRSC, Beneco, the Lenders and Issuing Banks, the
Administrative Agent, the Documentation Agent and the Co-Agents.(4)
(b)(5) Consent to Waiver Letter Agreement, dated as of May 10, 1999, among
Parent, ITC, OHM, OHMRSC, Beneco and the Administrative Agent, individually and
on behalf of the Lenders and Issuing Banks, the Documentation Agent and the Co-
Agents.
(c)(1) Agreement and Plan of Merger, dated as of May 10, 1999, among
Parent, Purchaser and the Company.
(c)(2) Mutual Nondisclosure and Confidentiality Agreement, dated as of
February 10, 1999, between Parent and Raymond James Associates, Inc. on behalf
of the Company.
(d) None.
(e) Not Applicable.
(f) None.
_________________________________
(1) Filed as Exhibit 99.1 to the Current Report on Form 8-K filed by Parent on
June 18, 1998 and incorporated herein by reference.
(2) Filed as Exhibit (b)(3) to the Tender Offer Statement on Schedule 14D-1
filed by Parent on November 3, 1998 and incorporated herein by reference.
(3) Filed as Exhibit (b)(4) to the Tender Offer Statement on Schedule 14D-1
filed by Parent on November 3, 1998 and incorporated herein by reference.
(4) Filed as Exhibit 10(ii)(4) to the Transition Report on Form 10-K filed by
Parent for the transition period from March 28, 1998 to December 25, 1998 and
incorporated herein by reference.
8
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SIGNATURE
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: May 17, 1999
SEISMIC ACQUISITION CORPORATION
By: /s/ James G. Kirk
--------------------------------------
James G. Kirk
President and Chief Executive Officer
SIGNATURE
After due inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: May 17, 1999
THE IT GROUP, INC.
By: /s/ Anthony J. DeLuca
---------------------------------------
Anthony J. DeLuca
President and Chief Executive Officer
9
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Offer to Purchase for Cash
All Issued and Outstanding Shares of Common Stock
of
EMCON
at
$6.75 NET PER SHARE
by
SEISMIC ACQUISITION CORPORATION
a wholly owned subsidiary
of
THE IT GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST A NUMBER OF SHARES
(AS DEFINED HEREIN) OF EMCON, A CALIFORNIA CORPORATION (THE "COMPANY"), EQUAL
TO EIGHTY PERCENT (80%) OF THE SHARES ISSUED AND OUTSTANDING ON A FULLY
DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH
IN THIS OFFER TO PURCHASE. SEE "THE TENDER OFFER--18. CERTAIN CONDITIONS OF
THE OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF THE COMPANY, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
HEREUNDER.
-----------
IMPORTANT
Any shareholder of the Company desiring to tender all or any portion of
their Shares should either (1) complete and sign the Letter of Transmittal
dated as of May 17, 1999 (the "Letter of Transmittal"), or a facsimile copy
thereof, in accordance with the instructions in the Letter of Transmittal,
mail or deliver it and any other required documents to the Depositary (as
defined herein) and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or tender such Shares pursuant
to the procedure for book-entry transfer set forth in this Offer to Purchase
under the caption "THE TENDER OFFER--2. Procedure for Accepting the Offer and
Tendering Shares" or (2) request such shareholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for the
shareholder. Shareholders of the Company that have their Shares registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if they desire to tender such Shares.
A shareholder of the Company who desires to tender their Shares and whose
certificates for Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer described in this Offer to
Purchase on a timely basis, may tender such Shares by following the procedure
for guaranteed delivery set forth in this Offer to Purchase under the caption
"THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering Shares."
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) or the Dealer Manager (as defined herein) at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase,
the Letter of Transmittal or other Offer materials, may be directed to the
Information Agent. Shareholders of the Company may also contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.
-----------
The Dealer Manager for the Offer is:
[LOGO OF CIBC WORLD MARKETS]
May 17, 1999
<PAGE>
TABLE OF CONTENTS
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Page
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INTRODUCTION............................................................ 1
THE TENDER OFFER........................................................ 4
1. Terms of the Offer; Expiration Date............................. 4
2. Procedure for Accepting the Offer and Tendering Shares.......... 5
3. Withdrawal Rights............................................... 7
4. Acceptance for Payment and Payment for Shares................... 8
5. Certain Federal Income Tax Consequences......................... 9
6. Price Range of the Shares....................................... 11
7. Certain Information Concerning the Company...................... 11
8. Certain Information Concerning Purchaser and Parent............. 15
9. Source and Amount of Funds...................................... 17
10. Contacts with the Company; Background of the Offer and the
Merger......................................................... 18
11. Purpose of the Offer and the Merger............................. 21
12. Plans for the Company........................................... 22
13. The Merger Agreement and Related Agreements..................... 22
14. Going Private Transactions...................................... 32
15. Interests of Certain Persons in the Offer and the Merger........ 32
16. Dividends and Distributions..................................... 34
17. Effects of the Offer on the Market for Shares; Exchange Listing
and Exchange Act Registration.................................. 34
18. Certain Conditions of the Offer................................. 36
19. Certain Legal Matters; Regulatory Approvals..................... 37
20. Fees and Expenses............................................... 38
21. Miscellaneous................................................... 39
SCHEDULE I Directors and Executive Officers of the Company.............. I-1
SCHEDULE II Directors and Executive Officers of Parent and Purchaser.... II-1
ANNEX A Text of Chapter 13 of the California General Corporation Law... A-1
</TABLE>
i
<PAGE>
To the Shareholders of EMCON:
INTRODUCTION
Seismic Acquisition Corporation, a California corporation ("Purchaser"),
which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a
Delaware corporation ("Parent"), hereby offers to purchase all of the issued
and outstanding shares (the "Shares") of common stock, no par value per share
(the "Company Common Stock") of the Company, upon the terms and subject to the
conditions set forth in this Offer to Purchase, dated as of May 17, 1999 (the
"Offer to Purchase"), and the related Letter of Transmittal (the "Letter of
Transmittal" and, together with the Offer to Purchase, the "Offer"), at a
price of $6.75 per Share, net to each seller in cash, without interest (such
amount or any greater amount per Share paid pursuant to the Offer being
hereinafter referred to as the "Offer Price").
THE BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES HEREUNDER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION DATE AND NOT WITHDRAWN AT LEAST A NUMBER OF
SHARES EQUAL TO EIGHTY PERCENT (80%) OF THE SHARES ISSUED AND OUTSTANDING ON A
FULLY DILUTED BASIS (INCLUDING FOR PURPOSES OF SUCH CALCULATION ALL SHARES
ISSUABLE UPON EXERCISE OF ALL STOCK OPTIONS WHICH ARE VESTED OR SCHEDULED TO
VEST ON OR BEFORE JULY 9, 1999 WITH AN EXERCISE PRICE LESS THAN THE OFFER
PRICE, AND CONVERSION OF ALL CONVERTIBLE SECURITIES OR OTHER RIGHTS TO
PURCHASE OR ACQUIRE SHARES WITH A CONVERSION PRICE LESS THAN THE OFFER PRICE
(COLLECTIVELY, "DERIVATIVE SECURITIES"); PROVIDED, HOWEVER, THAT SUCH
CALCULATION SHALL NOT INCLUDE (A) SHARES ISSUABLE PURSUANT TO DERIVATIVE
SECURITIES THAT BY THEIR TERMS WILL TERMINATE OR BE CANCELED UPON CONSUMMATION
OF THE OFFER OR (B) SHARES ISSUABLE PURSUANT TO DERIVATIVE SECURITIES AS TO
WHICH THE COMPANY HAS OBTAINED A WRITTEN CONSENT FROM THE HOLDER THAT SUCH
DERIVATIVE SECURITIES WILL NOT BE CONVERTED PRIOR TO THE EFFECTIVE TIME (AS
DEFINED HEREIN) OR (C) SHARES ISSUABLE PURSUANT TO DERIVATIVE SECURITIES AS TO
WHICH THE COMPANY TAKES APPROPRIATE ACTION TO PROVIDE THAT SUCH DERIVATIVE
SECURITIES SHALL AUTOMATICALLY CONVERT INTO THE RIGHT TO RECEIVE AN AMOUNT IN
CASH EQUAL TO THE PRODUCT OF (i) THE EXCESS, IF ANY, OF THE CASH MERGER
CONSIDERATION (AS DEFINED HEREIN) OVER THE PER SHARE EXERCISE OR CONVERSION
PRICE OF SUCH DERIVATIVE SECURITIES AND (ii) THE NUMBER OF SHARES SUBJECT TO
SUCH DERIVATIVE SECURITIES WHICH ARE EXERCISABLE IMMEDIATELY PRIOR TO THE
CONSUMMATION OF THE OFFER) (THE "MINIMUM CONDITION"). THE OFFER IS ALSO
SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH UNDER THE CAPTION "THE TENDER
OFFER--18. CERTAIN CONDITIONS OF THE OFFER" IN THIS OFFER TO PURCHASE.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS EXTENDED. SEE "THE TENDER OFFER--
1. TERMS OF THE OFFER; EXPIRATION DATE."
The Offer is being made pursuant to the terms of the Agreement and Plan of
Merger, dated as of May 10, 1999 (the "Merger Agreement"), by and among the
Company, Purchaser and Parent, which provides, among
<PAGE>
other things, for the commencement of the Offer by Purchaser and further
provides that, following the purchase of Shares pursuant to the Offer,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving Corporation").
At the election of Parent, to the extent that such action would not cause a
failure of a condition to the Offer or the Merger, the Merger may be
structured so that the Company shall be merged with and into Purchaser with
the result that Purchaser shall become the Surviving Corporation. The
consummation of the Merger is subject to the satisfaction or, if permissible,
waiver of certain conditions, including the approval, if required, of the
adoption of the Merger Agreement by the requisite vote of the shareholders of
the Company. If the Minimum Condition is satisfied, Purchaser will have
sufficient voting power to approve and adopt the Merger Agreement and the
Merger without the vote of any other shareholder of the Company. If Purchaser
acquires at least 90% of the Shares in the Offer, under the California General
Corporation Law (the "CGCL"), it will be able to consummate the Merger without
a vote of the Company's shareholders.
At the effective time of the Merger (the "Effective Time"), if Purchaser
holds at least 90% of the Shares then outstanding, each Share issued and
outstanding prior to the Effective Time (other than Shares held by Parent,
Purchaser, the Company or any of their wholly owned subsidiaries
(collectively, the "Excluded Shares"), and any Shares with respect to which
the holder properly exercises such holder's appraisal rights in accordance
with the CGCL (the "Dissenting Shares")) shall automatically be canceled and
extinguished and shall be converted into the right to receive the Offer Price
in cash, without interest thereon, subject to appropriate and proportionate
adjustments in the event of any reclassification, recapitalization, stock
split, stock dividend or similar transaction with respect to the Shares (the
"Cash Merger Consideration"). If Purchaser does not hold at least 90% of the
Shares then outstanding at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time, other than Excluded
Shares and any Dissenting Shares, shall automatically be canceled and
extinguished and shall be converted into the right to receive that fraction of
a fully paid and nonassessable share of common stock, par value $0.01 per
share, of Parent (the "Parent Common Stock") equal to the Conversion Number
(the "Stock Merger Consideration" and, together with the Cash Merger
Consideration, the "Merger Consideration"). The Conversion Number shall be
equal to a fraction (rounded to the nearest third decimal point), (a) the
numerator of which shall be equal to the Cash Merger Consideration and (b) the
denominator of which shall be equal to the average of the closing sales price
of a share of Parent Common Stock as reported on the New York Stock Exchange
("NYSE") for each of the ten (10) consecutive trading days ending on, and
including, the second trading day immediately preceding the date on which a
final vote of the shareholders of the Company on the adoption and approval of
the Merger shall have been held (the "Parent Average Stock Price"); provided,
however, that if the Parent Average Stock Price is equal to or less than
$12.50, then the Conversion Number shall be 0.540. Accordingly, the value of
the Stock Merger Consideration may be less than the Offer Price received by
holders of Shares that are purchased pursuant to the Offer if the market price
of shares of Parent Common Stock is less than $12.50 at the Effective Time.
Each Excluded Share shall be canceled and extinguished and cease to exist
without any conversion thereof, and no payment shall be made with respect
thereto. Each holder (other than holders of Excluded Shares) of a certificate
representing any Shares shall, after the Effective Time, cease to have any
rights with respect to such Shares, except either to receive the Merger
Consideration upon surrender of such certificate, or to exercise such holder's
appraisal rights as provided in the Merger Agreement and the CGCL.
RAYMOND JAMES & ASSOCIATES, INC., FINANCIAL ADVISOR TO THE COMPANY ("RAYMOND
JAMES"), HAS DELIVERED A WRITTEN OPINION TO THE BOARD, DATED MAY 10, 1999 (THE
"OPINION"), TO THE EFFECT THAT, AS OF MAY 7, 1999, THE TERMS OF THE OFFER AND
THE MERGER, TAKEN COLLECTIVELY, ARE FAIR FROM A FINANCIAL POINT OF VIEW TO THE
COMPANY'S SHAREHOLDERS. THE FULL TEXT OF THE OPINION IS CONTAINED IN THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE
2
<PAGE>
"SCHEDULE 14D-9") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") IN CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING PROVIDED
TO SHAREHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE. SHAREHOLDERS ARE
URGED TO READ SUCH OPINION CAREFULLY AND IN ITS ENTIRETY.
The Company has informed Purchaser that as of April 30, 1999 all of the
executive officers and directors of the Company as a group owned 195,326
Shares and held options to purchase 423,750 Shares. See "THE TENDER OFFER--15.
Interests in Certain Persons in the Offer and the Merger."
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S SHAREHOLDERS OR AN OFFER TO SELL OR SOLICITATION OF OFFERS TO
BUY PARENT COMMON STOCK OR OTHER SECURITIES. ANY SUCH SOLICITATION, IF
REQUIRED, WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS (THE "PROXY
STATEMENT") COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND ANY OFFER OF PARENT
COMMON STOCK WILL BE MADE ONLY THROUGH A PROSPECTUS PURSUANT TO THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
WHICH FINAL PROSPECTUS SHALL ALSO BE A PART OF THE PROXY STATEMENT.
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares by Purchaser pursuant to the
Offer. However, any tendering shareholder or other payee who fails to complete
and sign the Substitute Form W-9 that is included in the Letter of Transmittal
may be subject to a required backup federal income tax withholding of 31% of
the gross proceeds payable to such shareholder or other payee pursuant to the
Offer. See "THE TENDER OFFER--5. Certain Federal Income Tax Consequences."
Purchaser will pay all charges and expenses of ChaseMellon Shareholder
Services, L.L.C., as Depositary (in such capacity, the "Depositary"),
MacKenzie Partners, Inc., as Information Agent (in such capacity, the
"Information Agent"), and CIBC World Markets Corp., as Dealer Manager (in such
capacity, the "Dealer Manager") incurred in connection with the Offer. For a
description of the fees and expenses to be paid by Purchaser, see "THE TENDER
OFFER--20. Fees and Expenses."
Consummation of the Merger is subject to a number of conditions, including,
if required, the approval of the Merger Agreement and the transactions
contemplated thereby by the shareholders of the Company. See "THE TENDER
OFFER--18. Certain Conditions of the Offer" and "THE TENDER OFFER--19. Certain
Legal Matters; Regulatory Approvals." The Board has recommended that the
Company's shareholders approve the Merger and has taken all lawful action to
solicit such approval. If the Minimum Condition is satisfied, Purchaser will
have sufficient voting power to approve and adopt the Merger Agreement and the
Merger without the vote of any other shareholder of the Company. If Purchaser
acquires at least 90% of the Shares in the Offer, under the CGCL, it will be
able to consummate the Merger without a vote of the Company's shareholders.
The information contained in this Offer to Purchase concerning the Company,
including, without limitation, information concerning the deliberations,
approvals and recommendations of the Board in connection with the transaction,
the Opinion and the Company's capital structure and historical and projected
financial information, was supplied by the Company or has been taken from or
based upon publicly available documents or records. The information contained
in this Offer to Purchase concerning the Offer, the Merger, Parent and
Purchaser was supplied by Purchaser.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY
BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. SEE ALSO "THE TENDER
OFFER--21. MISCELLANEOUS" FOR INFORMATION REGARDING CERTAIN ADDITIONAL
DOCUMENTS FILED WITH THE COMMISSION IN CONNECTION WITH THE OFFER.
3
<PAGE>
THE TENDER OFFER
1. Terms of the Offer; Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all of the Shares
validly tendered pursuant to the Offer prior to the Expiration Date (as
defined below) and not withdrawn in accordance with the provisions set forth
in this Offer to Purchase under the caption "THE TENDER OFFER--3. Withdrawal
Rights." The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Monday, June 14, 1999, unless and until Parent or Purchaser (subject
to any restrictions contained in the Merger Agreement) shall from time to time
have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Parent or Purchaser, shall expire. Any
determination concerning the satisfaction of the terms and conditions of the
Offer will be made by Purchaser in its good faith judgment and such
determination will be final and binding on all tendering shareholders.
Purchaser expressly reserves the right to waive any conditions of the Offer
(except as otherwise provided in the Merger Agreement), to increase the Offer
Price, to extend the duration of the Offer or to make any other changes in the
terms and conditions of the Offer; provided, however, that without the
Company's prior written consent, no change may be made that decreases the
Offer Price, changes the form of consideration to be paid in the Offer,
reduces the maximum number of Shares to be purchased in the Offer, imposes any
conditions to the Offer in addition to the conditions set forth herein under
the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" or amends
any other material terms of the Offer in a manner adverse to the Company's
shareholders.
Parent and Purchaser agree that if all of the conditions set forth herein
under the caption "THE TENDER OFFER--18. Certain Conditions of the Offer" are
not satisfied by the time of any scheduled termination of the Offer then,
provided that all such conditions are reasonably capable of being satisfied,
Purchaser shall extend the Offer until such conditions are satisfied or
waived; provided further, that Purchaser shall not be required to extend the
Offer beyond July 9, 1999. Purchaser may also (a) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Commission or (b) extend the Offer for any reason on one or more occasions for
an aggregate of not more than twenty (20) business days beyond the initial
Expiration Date if more than the number of Shares sufficient to satisfy the
Minimum Condition but less than 90% of the Shares issued and outstanding have
been tendered. As used in this Offer to Purchase, "business day" means any day
other than a day on which banks in the State of New York are authorized to
close or the NYSE is closed.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may retain
tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn
except to the extent tendering shareholders are entitled to withdrawal rights
as described in this Offer to Purchase under the caption "THE TENDER OFFER--
3. Withdrawal Rights." However, the ability of Purchaser to delay payment for
Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c)
under the Exchange Act.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by a public announcement in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to shareholders in connection with the Offer be promptly disseminated to
shareholders in a manner reasonably designed to inform shareholders of such
change) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
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<PAGE>
The Company has provided Purchaser with the Company shareholder list, a non-
objecting beneficial owners list and security position listings for the
purpose of disseminating the Offer to shareholders. This Offer to Purchase and
the Letter of Transmittal and other relevant materials will be mailed to
record shareholders and furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. Procedure for Accepting the Offer and Tendering Shares.
Valid Tender of Shares
For a shareholder to validly tender Shares pursuant to the Offer, either
(a)(i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or an
Agent's Message (as defined herein) in connection with a book-entry delivery
of Shares, and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase and (ii) either certificates for tendered Shares ("Share
Certificates") must be received by the Depositary at one of such addresses or
such Shares must be delivered pursuant to the procedure for book-entry
transfer set forth below (and a Book-Entry Confirmation (as defined herein)
received by the Depositary), in each case prior to the Expiration Date, or (b)
the tendering shareholder must comply with the guaranteed delivery procedures
set forth below.
Book-Entry Transfers
The Depositary will establish an account with respect to the Shares at The
Depositary Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two (2) business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility may make book-entry delivery of the Shares by causing the
book-entry transfer system to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedure for such transfer. Although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined herein) in connection with a book-entry transfer, and any other
required documents, must, in any case, be transmitted to, and received by, the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or the tendering shareholder must
comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at a Book-Entry Transfer Facility as described above is referred to herein as
a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH ITS BOOK-ENTRY PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" as used in this Offer to Purchase means a
message, transmitted by a Book-Entry Transfer Facility to, and received by,
the Depositary and forming a part of the Book-Entry Confirmation, which states
that a Book-Entry Transfer Facility has received an express acknowledgment
from the participant in a Book-Entry Transfer Facility tendering the Shares
that such participant has received the Letter of Transmittal and agrees to be
bound by the terms of the Letter of Transmittal and that Purchaser may enforce
such agreement against such participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING
SHAREHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT
THE DEPOSITARY. IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ENSURE TIMELY DELIVERY.
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Signature Guarantees
No signature guarantee on the Letter of Transmittal is required if (a) the
Letter of Transmittal is signed by the registered holder of the Shares (which
term, for purposes of this Section, includes any participant in a Book-Entry
Transfer Facility system whose name appears on a security position listing as
the owner of the Shares) tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" in such Letter of Transmittal or (b)
such Shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing
of the Securities Transfer Agents Medallion Program, the New York Stock
Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program (each, an "Eligible Institution"). In all other cases, all signatures
on the Letter of Transmittal must be guaranteed by an Eligible Institution.
See Instructions 1 and 5 to the Letter of Transmittal. If the Share
Certificates are registered in the name of a person other than the signer of
the Letter of Transmittal, or if payment is to be made to, or Share
Certificates not validly tendered or not accepted for payment or not purchased
are to be issued or returned to, a person other than the registered holder of
the Share Certificates, the tendered Share Certificates must be endorsed in
blank or accompanied by appropriate stock powers, signed exactly as the name
of the registered holder appears on the Share Certificates with the signature
on such Share Certificates or stock powers guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's Share Certificates are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, such Shares may nevertheless be tendered; provided that
such shareholder has duly complied with all of the following guaranteed
delivery procedures:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
(c) the Share Certificates representing all tendered Shares, in proper
form for transfer (or Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three (3) NYSE trading
days after the date of such Notice of Guaranteed Delivery. An "NYSE trading
day" is any day on which securities are traded on the NYSE.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) Share Certificates for (or a timely Book-
Entry Confirmation with respect to) such Shares, (b) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), or, in the case of
book-entry transfer, an Agent's Message, and (c) any other documents required
by the Letter of Transmittal. Accordingly, tendering shareholders may be paid
at different times depending upon when Share Certificates, Book-Entry
Confirmations and such other documents are actually received by the
Depositary. Under no circumstances will interest on the purchase price of the
Shares be paid by Purchaser to any tendering shareholders, regardless of any
extension of the Offer or any delay in making such payment.
6
<PAGE>
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination will be final and
binding. Purchaser reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the acceptance for payment
of or payment for which may be unlawful. Purchaser also reserves the absolute
right to waive any of the conditions of the Offer (except as otherwise set
forth in the Merger Agreement) or any defect or irregularity in the tender of
any Shares with respect to any particular shareholder, whether or not similar
defects or irregularities are waived in the case of other shareholders. None
of Purchaser, Parent, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notice of any
defects or irregularities in tenders or incur any liability for failure to
give any such notice. Purchaser's interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Other Requirements
By executing the Letter of Transmittal as set forth herein, a tendering
shareholder irrevocably appoints designees of Purchaser as such shareholder's
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such shareholder's rights with
respect to the Shares tendered by such shareholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after the Expiration
Date), effective when, if and to the extent that Purchaser accepts such Shares
for payment pursuant to the Offer. All such proxies shall be considered
coupled with an interest in the tendered Shares. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such
Shares accepted for payment or other securities or rights will, without
further action, be revoked, and no subsequent proxies may be given. Such
designees of Purchaser will, with respect to such Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper in
respect of any annual or special meeting of the Company's shareholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. Purchaser reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon Purchaser's payment
for such Shares, Purchaser must be able to exercise full voting rights with
respect to such Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described herein will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the
conditions of the Offer.
Backup Federal Income Tax Withholding
To prevent backup federal income tax withholding on payments of cash
pursuant to the Offer, a shareholder tendering Shares in the offer must
provide the Depositary with such shareholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury
that such TIN is correct and that such shareholder is not subject to backup
withholding. If a shareholder does not provide its correct TIN or fails to
provide the certification described herein, under federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payment made
to such shareholder pursuant to the Offer. All shareholders tendering Shares
pursuant to the Offer should complete and sign the Substitute Form W-9
included as a part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding. Non-corporate foreign
shareholders should complete and sign a Form W-8, Certificate of Foreign
Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 10 to the Letter of Transmittal.
3. Withdrawal Rights.
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that tendered Shares may be withdrawn at any time prior to the Expiration
Date, and, unless theretofore accepted for payment and paid for as
7
<PAGE>
provided herein, may also be withdrawn at any time after July 15, 1999. If
Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 3.
Any such delay will be by an extension of the Offer to the extent required by
law. The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-
1(c) under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Shares deposited by or on behalf of shareholders promptly
after the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of the Shares to be withdrawn as set forth on such Share
Certificates if different from the name of the person who tendered such
Shares. If Share Certificates have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
furnished to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer set forth above in "THE TENDER
OFFER--2. Procedure for Accepting the Offer and Tendering Shares," any notice
of withdrawal must specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with such withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures for withdrawal, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described
in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
and its determination will be final and binding. No withdrawal of Shares will
be deemed to have been properly made until all defects and irregularities have
been cured or waived. None of Purchaser, Parent, the Depositary, the
Information Agent, the Dealer Manager or any other person will be obligated to
give notice of any defects or irregularities in any notice of withdrawal, nor
shall any of them incur any liability for failure to give any such notice.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be re-tendered by following one of
the procedures described above in "THE TENDER OFFER--2. Procedure for
Accepting the Offer and Tendering Shares" at any time on or prior to the
Expiration Date.
4. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and will pay for all of the
Shares validly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures set forth in "THE TENDER OFFER--3.
Withdrawal Rights" promptly after the latest to occur of (a) the Expiration
Date, (b) the expiration or termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the
"HSR Act") and (c) the satisfaction or waiver of the other conditions to the
Offer set forth under "THE TENDER OFFER--18. Certain Conditions of the Offer."
Subject to applicable rules of the Commission and the terms and conditions of
the Merger Agreement, Purchaser expressly reserves the right, in its sole
discretion, to delay acceptance for payment of, or payment for, Shares in
order to comply in whole or in part with any applicable law or governmental
regulation.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (a)
the Share Certificates (or timely Book-Entry Confirmation of the book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to
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<PAGE>
the procedures set forth under "THE TENDER OFFER--2. Procedure for Accepting
the Offer and Tendering Shares"), (b) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer and (c) any other documents required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to
the Depositary of Purchaser's acceptance for payment of such Shares pursuant
to the Offer. In all cases, upon the terms and subject to the conditions of
the Offer, payment for Shares so accepted for payment will be made by the
deposit of the purchase price therefor with the Depositary, which will act as
paying agent for tendering shareholders for the purpose of receiving payment
from Purchaser and transmitting payment to validly tendering shareholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE
PRICE OF THE SHARES TENDERED PURSUANT TO THE OFFER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit
of funds with the Depositary for the purpose of making payments to tendering
shareholders, Purchaser's obligation to make such payments shall be satisfied
and tendering shareholders thereafter must look solely to the Depositary for
payment of amounts owed to them by reason of the acceptance for payment of
Shares pursuant to the Offer. Purchaser will pay any stock transfer taxes with
respect to the transfer and sale to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 to the Letter of Transmittal, as
well as any charges and expenses of the Depositary, the Information Agent and
the Dealer Manager.
If Purchaser is delayed in its acceptance for payment of, or payment for,
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule 14e-
1(c) under the Exchange Act to pay for or return the tendered Shares promptly
after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering shareholders are entitled
to exercise, and duly exercise, withdrawal rights as described under "THE
TENDER OFFER--3. Withdrawal Rights."
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or for any reason, Share Certificates for any such Shares will
be returned, without expense, to the tendering shareholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set
forth under "THE TENDER OFFER--2. Procedure for Accepting the Offer and
Tendering Shares" above, such Shares will be credited to an account maintained
at such Book-Entry Transfer Facility) as promptly as practicable following the
expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or, from time
to time, in part, to one or more of Purchaser's subsidiaries or affiliates,
the right to purchase all or any Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve Purchaser of its obligations
under the Offer or prejudice the rights of tendering shareholders to receive
payment for Shares validly tendered and accepted for purchase.
5. Certain Federal Income Tax Consequences.
The following is a general summary of certain United States federal income
tax consequences of the Offer and the Merger relevant to a beneficial holder
of Shares whose Shares are tendered and accepted for payment pursuant to the
Offer or whose Shares are converted into the right to receive the Cash Merger
Consideration or are exchanged for the Stock Merger Consideration. The
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), regulations issued thereunder, judicial decisions and administrative
rulings, all of which are subject to change, possibly with retroactive effect.
The following does not address the United States federal income tax
consequences to all categories of shareholders that may be subject to special
rules (e.g., shareholders who acquired their Shares pursuant to the exercise
of employee stock options or other compensation
9
<PAGE>
arrangements with the Company, shareholders who perfect their appraisal rights
under the CGCL, foreign shareholders, insurance companies, tax-exempt
organizations, dealers in securities and persons who have acquired the Shares
as part of a straddle, hedge, conversion transaction or other integrated
investment), nor does it address the United States federal income tax
consequences to persons who do not hold the Shares as "capital assets" within
the meaning of Section 1221 of the Code (generally, property held for
investment).
ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS AND OF CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares tendered pursuant to the Offer will be a
taxable transaction for United States federal income tax purposes and may also
be a taxable transaction under applicable state, local or foreign tax laws.
Generally, for United States federal income tax purposes, a shareholder who
receives cash for Shares pursuant to the Offer or the Merger will recognize
gain or loss for United States federal income tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such shareholder's adjusted tax basis in such Shares. In addition, an
exchange of Shares for the Stock Merger Consideration also will be a taxable
transaction for United States federal income tax purposes. In this instance,
an exchanging shareholder will recognize gain or loss in an amount equal to
the difference between (a) the fair market value, determined as of the time of
such exchange, of the shares of Parent Common Stock and (b) the adjusted tax
basis in the relevant Shares exchanged therefor. Provided that the Shares
constitute capital assets in the hands of the shareholder, such gain or loss
will be capital gain or loss, and will be long term capital gain or loss if
the holder has held the Shares for more than one year at the time of sale.
Gain or loss will be calculated separately for each block of Shares (i.e., a
group of Shares with the same tax basis and holding period) tendered pursuant
to the Offer. The maximum federal income tax rate applicable to non-corporate
taxpayers on long-term capital gains is generally 20%.
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals and entities) who
tenders Shares may be subject to 31% backup withholding unless the shareholder
provides its TIN and certifies that such number is correct or properly
certifies that it is awaiting a TIN, or unless an exemption applies. A
shareholder who does not furnish its TIN may be subject to a penalty imposed
by the Internal Revenue Service (the "IRS"). See "THE TENDER OFFER--2.
Procedure for Accepting the Offer and Tendering Shares."
If backup withholding applies to a shareholder, the Depositary is required
to withhold 31% from payments to such shareholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the shareholder upon filing an appropriate income tax return.
10
<PAGE>
6. Price Range of the Shares.
The Company Common Stock are traded on the Nasdaq National Market System
("Nasdaq") under the symbol MCON. The following table sets forth, for the
periods indicated, the high and low sales prices of the Company Common Stock
as reported on Nasdaq:
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Year Ended December 31, 1997:
First Quarter................................................. $3.75 $3.00
Second Quarter................................................ $4.06 $2.88
Third Quarter................................................. $5.50 $3.13
Fourth Quarter................................................ $6.88 $4.63
Year Ended December 31, 1998:
First Quarter................................................. $5.13 $4.63
Second Quarter................................................ $5.25 $3.31
Third Quarter................................................. $5.13 $2.81
Fourth Quarter................................................ $3.50 $2.50
Year Ended December 31, 1999:
First Quarter................................................. $4.75 $3.06
Second Quarter (through May 14, 1999)......................... $6.50 $3.25
</TABLE>
On May 10, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, according to published
sources, the last reported sale quotation of the Shares on Nasdaq was $5.63
per Share. On May 14, 1999, the last full day of trading before the
commencement of the Offer, according to published sources, the last reported
sale quotation of the Shares on Nasdaq was $6.44 per Share. SHAREHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMPANY COMMON STOCK.
7. Certain Information Concerning the Company.
General
The Company is a California corporation with its principal offices located
at 400 South Camino Real, Suite 1200, San Mateo, California 94402.
The Company provides comprehensive environmental engineering, design,
construction, operations and maintenance, and equipment fabrication services
to a variety of public and private industrial and solid waste clients. The
Company is comprised of two reporting segments (the Operation and Construction
Division and the Professional Services Division) and services three key
service lines: Solid Waste, Site Restoration and Facility Services. The
Company was incorporated in California in 1971.
Company Available Information
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Certain information,
as of particular dates, concerning the Company's directors and officers
(including their remuneration, stock options granted to them and shares held
by them), the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements and annual reports distributed to the Company's
shareholders and filed with the Commission. Such reports, proxy statements and
other information are available for inspection and copying at the public
reference facilities of the Commission located at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission located in Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York,
New York 10048. Copies of this material may also be
11
<PAGE>
obtained by mail, upon payment of the Commission's customary fees from the
Commission's principal office at 450 Fifth Street N.W., Washington, DC 20549.
The Commission also maintains an Internet site on the World Wide Web at
<http://www.sec.gov> that contains reports, proxy statements and other
information.
Directors and Officers
The name, address, principal occupation or employment, five-year employment
history and citizenship of each director and executive officer of the Company
is set forth in Schedule I hereto.
Summary Financial Information
The following tables set forth certain summary consolidated financial
information with respect to the Company and its consolidated subsidiaries
derived from the audited financial statements contained in the Company's 1998
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and the
unaudited financial statements contained in the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1999 and March 31, 1998. The
following summary is qualified in its entirety by reference to the more
comprehensive financial information included in such documents, including the
financial statements and related notes contained therein as well as other
documents filed by the Company with the Commission, which are available for
inspection in the manner set forth above under "Company Available
Information."
12
<PAGE>
THE COMPANY AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
Ended Fiscal Year Ended
---------------- ----------------------------------------
March March
31, 31, December 31, December 31, December 31,
1999 1998 1998 1997 1996
------- ------- ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data (a):
Gross Revenue......... $30,226 $28,779 $151,348 $139,343 $137,626
Net Revenue........... 26,168 25,822 129,960 109,502 117,705
Direct Expenses....... 13,477 13,822 76,749 56,134 52,608
Indirect Expenses..... 13,239 11,857 49,373 49,782 65,844
Restructuring/other
charges.............. -- -- (4)(b) (1,612) 8,197
Loss on disposition of
laboratory........... -- -- -- 333 3,327
Income (loss) from
operations........... (548) 143 3,842 4,865 (12,271)
Interest Income....... 92 168 548 516 317
Interest Expense...... (337) (293) (1,234) (1,251) (1,112)
Equity in income
(loss) of
affiliates........... 41 15 (15) (2) 227
Minority interest
income/(expense)..... (11) 22 -- (810) (188)
Income (loss) before
provision (benefit)
for income taxes..... (763) 55 3,141 3,318 (13,027)
Provision (benefit)
for income taxes..... (378) 35 1,508 1,161 (2,936)
Net income (loss)..... (385) 20 1,633 2,157 (10,091)
Per Share Data (a):
Basic earnings (loss)
per share............ $ (0.05) $ 0 $ 0.19 $ 0.25 $ (1.19)
Diluted earnings per
share................ N/A 0 0.19 0.25 N/A
Shares used in
computing basic
earnings (loss) per
share................ 8,318 8,573 8,648 8,549 8,485
Shares used in
computing diluted
earnings per share... N/A 8,827 8,795 8,693 --
Balance Sheet Data (a):
Total assets.......... $90,769 $89,854 $ 95,889 $ 93,075 $ 90,912
Working capital....... 26,553 32,911 28,307 32,583 34,601
Noncurrent obligations
and deferred income
taxes................ 11,128 13,530 11,584 14,177 16,799
Shareholders' equity.. 58,822 58,124 59,137 58,100 55,812
</TABLE>
- ---------------------
(a) The Company was involved in several acquisitions, mergers and divestitures
during the periods presented.
(b) As of December 31, 1998, $367,000 of the 1996 restructuring charges were
paid and $275,000 remains in other accrued liabilities. Net reductions of
$4,000 and $586,000 to the reserve were recorded in 1998 and 1997,
respectively, to reflect lower than anticipated costs associated with the
abandonment and subsequent sublease of certain office space and lower than
anticipated severance costs due to retaining certain previously identified
personnel.
Except as otherwise noted in this Offer to Purchase, all of the information,
including the preceding financial information, with respect to the Company set
forth in this Offer to Purchase has been supplied by the Company or derived
from publicly available documents and records on file with the Commission or
other public sources. Although Purchaser or Parent has no knowledge that any
such information is untrue, Purchaser and Parent take no responsibility for
the accuracy or completeness of the information concerning the Company
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information.
13
<PAGE>
Certain Company Projections
In the course of discussions giving rise to the Merger Agreement (see "The
TENDER OFFER--10. Contacts with the Company; Background of the Offer and the
Merger"), representatives of the Company furnished representatives of Parent
certain business and financial information that was not publicly available,
including certain financial projections for 1999 (the "Company Projections").
The Company does not as a matter of course make public any estimates as to
future performance or earnings. The Company Projections were prepared solely
for the Company's internal purposes and capital budgeting and other management
decision-making purposes and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based on actual
experience and business developments. The Company projections were not
prepared for publication or with a view to complying with the published
guidelines of the Commission regarding projections or with the American
Institute of Certified Public Accountants Guide for Prospective Financial
Statements, and such information is being included in the Offer to Purchase
solely because it was furnished to Parent in connection with the discussions
giving rise to the Merger Agreement. The independent accountants of the
Company have neither examined nor compiled the prospective financial
information set forth below and, accordingly, do not express an opinion or any
other form of assurance with respect thereto.
THE PROJECTED FINANCIAL INFORMATION SET FORTH BELOW NECESSARILY REFLECTS
NUMEROUS ASSUMPTIONS WITH RESPECT TO GENERAL BUSINESS AND ECONOMIC CONDITIONS
AND OTHER MATTERS, MANY OF WHICH ARE INHERENTLY UNCERTAIN OR BEYOND THE
COMPANY'S OR PARENT'S CONTROL, AND DOES NOT TAKE INTO ACCOUNT ANY CHANGES IN
THE COMPANY'S OPERATIONS OR CAPITAL STRUCTURE THAT MAY RESULT FROM THE OFFER
AND THE MERGER. SEE "THE TENDER OFFER--11. PURPOSE OF THE OFFER AND THE
MERGER," "THE TENDER OFFER--12. PLANS FOR THE COMPANY" AND "THE TENDER OFFER--
13. THE MERGER AGREEMENT AND RELATED AGREEMENTS." IT IS NOT POSSIBLE TO
PREDICT WHETHER THE ASSUMPTIONS MADE IN PREPARING THE PROJECTED FINANCIAL
INFORMATION WILL BE VALID, AND ACTUAL RESULTS MAY PROVE TO BE MATERIALLY
HIGHER OR LOWER THAN THOSE CONTAINED IN THE COMPANY PROJECTIONS. THE INCLUSION
OF THIS INFORMATION SHOULD NOT BE REGARDED AS AN INDICATION THAT THE COMPANY,
PARENT OR ANYONE ELSE WHO RECEIVED THIS INFORMATION CONSIDERED IT A RELIABLE
PREDICTOR OF FUTURE EVENTS, AND THIS INFORMATION SHOULD NOT BE RELIED ON AS
SUCH. INFORMATION PERTINENT TO THE COMPANY PROJECTIONS WAS FURNISHED BY THE
COMPANY AND NONE OF PARENT, PURCHASER OR ANY OF THEIR RESPECTIVE
REPRESENTATIVES ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS,
ACCURACY OR COMPLETENESS OF THE COMPANY PROJECTIONS.
<TABLE>
<CAPTION>
1999*
--------------
(In thousands)
<S> <C>
Total Gross Sales........................................... 164,688
Net Sales................................................... 151,599
Gross Profit................................................ 60,474
Earnings Before Interest, Taxes, Amortization and
Depreciation (after corporate expenses).................... 11,060
Earnings Before Interest and Taxes.......................... 5,033
Net Income.................................................. 2,199
</TABLE>
- ---------------------
* The foregoing information has been excerpted from the materials presented to
Parent by the Company and does not reflect the consummation of the Offer or
the Merger. The foregoing estimates constitute forward-looking statements
that involve risks and uncertainties that could cause results to vary
materially from those estimated. These risks and uncertainties are discussed
in greater detail in the Company's periodic filings with the Commission,
which are available for inspection in the manner set forth above under
"Company Available Information."
14
<PAGE>
8. Certain Information Concerning Purchaser and Parent.
General
Purchaser is a California corporation with its principal executive offices
located at 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792.
Purchaser, incorporated in 1999, is a wholly owned subsidiary of Parent that
was organized for the purpose of acquiring the Company and has not conducted
any unrelated activities since its organization.
Parent is a Delaware corporation with its principal office located at 2790
Mosside Boulevard, Monroeville, Pennsylvania 15146-2792. Parent is a leading
provider of diversified, value-added services in the areas of environmental
consulting, engineering and construction and remediation. In addition, Parent
is leveraging its core project management competencies to offer its clients a
variety of outsourcing services such as facilities management. Parent was
incorporated in 1983; the earliest antecedent of Parent commenced operations
in California in 1926.
Directors and Officers
The name, business address, citizenship, present principal employment or
occupation and five-year employment history of each of the executive officers
of Parent and Purchaser are set forth in Schedule II hereto.
None of Parent or Purchaser nor, to the best of Parent's knowledge, any of
the persons listed in Schedule II hereto, or any associate or majority-owned
subsidiary of Parent or any of the persons so listed, beneficially owns or has
any right to acquire directly or indirectly any Shares or has any contract,
arrangement, understanding or relationship with any other person with respect
to any Shares, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
shares, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss, or the giving or withholding of proxies,
and none of Parent or Purchaser, nor to the best knowledge of Parent, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any Shares during the past 60 days.
Except as set forth in this Offer to Purchase, since January 1, 1995,
neither Parent or Purchaser nor, to the best knowledge of Parent, any of the
persons listed on Schedule II hereto has had any transaction with the Company
or any of its executive officers, directors or affiliates that is required to
be reported under the rules and regulations of the Commission applicable to
the Offer. Except as set forth in this Offer to Purchase, since January 1,
1995, there have been no contracts, negotiations or transactions between
Parent, Purchaser, or any of their subsidiaries or, to the best knowledge of
Parent, any of the persons listed in Schedule II to this Offer to Purchase, on
the one hand, and the Company or its affiliates, on the other hand, concerning
a merger, consolidation or acquisition, a tender offer for or other
acquisition of securities of any class of the Company, an election of
directors of the Company or a sale or other transfer of a material amount of
assets of the Company or any of its subsidiaries.
15
<PAGE>
Summary Financial Information
The following tables set forth certain selected consolidated financial
information with respect to Parent and its subsidiaries for the nine months
ended December 25, 1998 (the transition period as a result of Parent's change
in fiscal year), the twelve months ended March 27, 1998 and March 28, 1997 and
the three months ended March 26, 1999 and March 27, 1998. The financial
information below was excerpted from the information contained in Parent's
Transition Report on Form 10-K for the transition period from March 28, 1998
to December 25, 1998 and Parent's Quarterly Report on Form 10-Q for the
quarter ended March 26, 1999. The following summary is qualified in its
entirety by reference to the more comprehensive financial information included
in such documents, including the financial statements and related notes
contained therein as well as other documents filed by Parent with the
Commission, which are available for inspection in the manner set forth below
under "Parent Available Information."
PARENT AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months Twelve Months
Ended Ended Ended
---------------------- ------------ ---------------------
March 26, March 27, December 25, March 27, March 28,
1999 1998 1998 1998 1997
---------- ---------- ------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Summary of Earnings Data:
Revenues................. $257,974 $136,038 $757,435 $442,216 $362,131
Gross margin............. 33,297 17,200 90,961 51,090 38,138
Special charges.......... -- 5,694 24,971 14,248 8,403
Net income (loss) from
continuing operations
(net of preferred stock
dividends).............. 4,193 (5,086) (12,091) (12,527) (13,693)
Earnings (loss) per
common share diluted.... .17 (1.62) (0.63) (2.38) (1.48)
Weighted average shares
outstanding for dilutive
earnings (loss) per
share................... 29,273 9,733 19,149 9,737 9,227
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Three Months Ended Ended Twelve Months Ended
---------------------- ------------ -------------------
March 26, March 27, December 25, March 27,
1999 1998 1998 1998
----------- ----------- ------------ -------------------
(Unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Working capital.......... $140,902 74,924 120,260 74,924
Total assets............. 956,058 709,217 948,606 709,217
Long-term debt........... 426,802 284,697 405,059 284,697
Long-term accrued
liabilities............. 25,847 27,528 31,979 27,528
Shareholders' equity..... 242,718 148,150 238,168 148,150
</TABLE>
Parent Available Information
Parent is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
Parent's directors and officers, their remuneration, stock options and other
matters, the principal holders of Parent's securities and any material
interest of such persons in transactions with Parent is required to be
disclosed in proxy statements distributed to Parent's stockholders and filed
with the Commission. Such reports, proxy statements and other information
should be available for inspection at the Commission and copies thereof should
be obtainable from the Commission in the same manner as is set forth with
respect to the Company in "THE TENDER OFFER--7. Certain Information Concerning
the Company."
16
<PAGE>
9. Source and Amount of Funds.
Purchaser estimates that the total amount of funds required to purchase
Shares pursuant to the Offer and to complete the Merger will be approximately
$64.4 million (which includes approximately $2.0 million for payment of
estimated costs and expenses).
Parent and IT Corporation, OHM Corporation, OHM Remediation Services Corp.
and Beneco Enterprises, each of which is a direct or indirect subsidiary of
Parent, are party to a credit agreement dated as of February 25, 1998 and
amended and restated as of June 11, 1998 (as further amended, the "Credit
Facility") with the institutions from time to time party thereto as Lenders
and Issuing Banks, Citicorp USA, Inc., as Administrative Agent (the
"Administrative Agent"), BankBoston, N.A., as Documentation Agent, and Royal
Bank of Canada and Credit Lyonnais New York Branch, as Co-Agents. The Credit
Facility provides for a term loan and revolving credit facilities of up to
$413 million in the aggregate. The Credit Facility consists of an eight-year
amortizing term loan of $228 million and a six-year revolving credit facility
of up to $185 million that contains a sublimit of $50 million for letter of
credit issuance.
The proceeds of revolving credit loans made to Parent (or a subsidiary of
Parent) under the Credit Facility will be made available to Purchaser and will
be used to finance the Offer and the Merger and to pay certain expenses and
costs related to the Offer and the Merger. The proceeds of revolving loans
made under the Credit Facility also will be used to provide working capital
for Parent and its subsidiaries (including, after the Merger, the Company and
its subsidiaries) and for general corporate purposes of Parent and its
subsidiaries.
The availability of financing under the Credit Facility is subject to the
following conditions: (a) continued accuracy of representations and
warranties, (b) no default shall have occurred and be continuing, (c) no
material adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of certain operating
subsidiaries of Parent, individually, or Parent and its subsidiaries taken as
a whole, and (d) certain other conditions customary for credit facilities of
this type.
The Credit Facility also requires that, with respect to the Offer and the
Merger, among other things, (a) revolving credit availability under the Credit
Facility shall not be less than $25,000,000 (after giving effect to the
purchase of Shares accepted for payment pursuant to the Offer and the payment
of transaction costs related thereto paid on or prior to such date); (b)(i)
the cash consideration paid to the shareholders of the Company (after giving
effect to the purchase of the Shares pursuant to the Offer) shall not exceed
an amount equal to $73,000,000 and (ii) the transaction costs incurred in
connection with the Offer and the Merger shall not exceed $2,000,000; (c) the
number of Shares accepted for payment in the Offer shall be equal to no less
than the greater of (i) 80% of the issued and outstanding Shares on the date
of the completion of the Offer and (ii) the minimum number of Shares,
determined on a fully diluted basis, necessary to approve the consummation of
the Merger in accordance with the provisions of any applicable corporate
statute, anti-takeover statute or provision in the Company's articles of
incorporation (the "Company's Articles") or bylaws (the "Company's Bylaws");
and (d) the Board shall have published its recommendation that the
shareholders of the Company tender their Shares pursuant to the Offer, and
such recommendation shall not have been withdrawn or adversely modified.
The Credit Facility is secured by a security interest in substantially all
of the assets of Parent and its material subsidiaries (including the Shares
acquired by Purchaser upon completion of the Offer and, after the consummation
of the Merger, the assets of the Company and its subsidiaries).
The term loans made under the Credit Facility bear interest at a rate equal
to LIBOR plus 2.75% as adjusted per annum (or the Administrative Agent's base
rate plus 1.75% per annum) and the revolving loans made under the Credit
Facility bear interest at a rate equal to LIBOR plus 2.25% per annum (or the
Administrative Agent's base rate plus 1.25% per annum), subject to change on a
quarterly basis pursuant to the Credit Facility related to the ratio of
Parent's consolidated total debt to consolidated EBITDA. A commitment fee will
accrue on the portion of the revolving credit facility that is unused from
time to time at a rate initially equal to 0.50% per annum, subject to
adjustment based on the ratio of Parent's consolidated total debt to
consolidated EBITDA. As
17
<PAGE>
of May 14, 1999, based on the prevailing one-month LIBOR rate of approximately
5%, the interest rate applicable to revolving loans under the Credit Facility
is estimated to be approximately 7.25%.
The term loans made under the Credit Facility amortize on a semi-annual
basis in aggregate annual installments of $4.5 million until June 2004, with
the remainder payable in eight equal quarterly installments after June 2004
until the term loan matures in June 2006. The revolving loans are scheduled to
terminate in June 2004, without any reduction in availability before that
date. Parent will also be required to prepay the loans under the Credit
Facility with the net proceeds of asset sales and certain debt and equity
financings, and loans under the Credit Facility will be required to be prepaid
with a portion of Parent's consolidated excess cash flow.
The Credit Facility includes certain representations and warranties and
covenants customary for facilities of this type, including: (a) financial
covenants consisting of a minimum fixed charge coverage ratio, a minimum
interest expense coverage ratio, a maximum leverage ratio, a minimum liquidity
requirement, a maximum capital expenditure limitation and a minimum net worth
requirement; (b) maintenance of cash concentration accounts and lockboxes, (c)
preservation of corporate existence, compliance with laws, payment of taxes,
maintenance of properties and insurance and financial and other reporting
requirements; and (d) limitations (subject to certain exceptions) on
indebtedness, guarantees, liens, lease obligations, mergers and acquisitions,
sales of assets and other fundamental changes, joint ventures and other
investments, transactions with affiliates, dividends and stock repurchases and
redemptions, prepayment or modification of debt, and certain hedging
obligations. The Credit Facility also includes customary events of default,
including payment defaults, breaches of representations and warranties,
covenant defaults, cross defaults to other indebtedness, bankruptcy events,
defaults in satisfaction of money judgments, material adverse change, certain
events under the Employee Retirement Income Security Act of 1974, as amended,
and a change of control of Parent.
Purchaser's obligation to purchase Shares tendered pursuant to the Offer is
not subject to financing. Parent expects that the Credit Facility will provide
sufficient availability to finance the Offer and the Merger and related costs
and expenses.
10. Contacts with the Company; Background of the Offer and the Merger.
During 1997, Parent was actively exploring possible business combinations
with companies in the solid waste industry, with a view to becoming the
leading global provider of fully integrated solid waste services. In April
1997, Parent informally contacted the Company regarding Parent's possible
interest in a transaction with the Company. Representatives of Parent met with
certain executive officers of the Company to explore further the possibility
of a transaction between Parent and the Company.
From February 1997 to October 1998, Raymond James, on behalf of the Company,
reviewed potential candidates and engaged in preliminary discussions with
several potential strategic partners for the Company, including Parent. During
this period, the Board periodically met with Raymond James to review the
various strategic alternatives.
On November 12, 1998, a meeting of the Board was held to review the status
of the Company's search for potential strategic business combinations. At this
meeting, members of senior management presented their analysis of the
alternatives currently available to the Company. At the conclusion of this
meeting, the Board decided to continue its relationship with Raymond James and
directed senior management to focus its efforts on a discrete group of
potential buyers that might be interested in purchasing the Company. The Board
also appointed Douglas P. Crane, Chairman of the Board, and Dr. Franklin J.
Agardy, a director of the Company, to a Special Committee to assist senior
management in its review and negotiation of the terms of the proposed sale of
the Company.
From December 1998 to February 1999, Raymond James contacted 16 potential
purchasers. A total of 11 potential buyers, including Parent, executed
confidentiality agreements with the Company and received certain confidential
information about the Company. Potential purchasers were instructed to submit
initial indications of interest to Raymond James by February 26, 1999. Three
parties, including Parent, submitted preliminary
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indications of interest. The Company invited all three parties to participate
in due diligence and management presentations at the offices of Gray Cary Ware
& Freidenrich LLP ("Gray Cary"), the Company's legal counsel, in Palo Alto,
California. Two of the three interested parties, including Parent, conducted
this due diligence.
In a letter submitted to Raymond James by Parent on February 26, 1999 (the
"February Letter"), Parent estimated the enterprise value to acquire 100% of
the business of the Company to be in a range of $55 million to $70 million and
requested the Company to consider accepting a combination of cash and Parent
Common Stock as consideration in an acquisition.
Parent's representatives visited the Company's headquarters on March 9 and
10, 1999, to enable Parent to become better acquainted with the Company's
operations, business and personnel. During the visit, representatives of
Parent met with certain executive officers of the Company and representatives
of Raymond James, attended a management presentation given by the Company and
conducted a limited due diligence with respect to the Company's operations,
business and personnel.
On March 25, 1999, the Company Board received an offer to enter into a
merger transaction from a company who had not participated in the due
diligence process (the "Unsolicited Bidder").
On March 26, 1999, Parent submitted to Raymond James a preliminary, non-
binding indication of value, and best and final offer with the intent of being
invited to conduct further due diligence and negotiate a definitive purchase
agreement on an exclusive basis (the "March Letter"). As set forth in the
March Letter, Parent's estimate of the enterprise value to acquire 100% of the
Company was a range of $65 million to $70 million. In the March Letter, Parent
continued to propose that, in addition to cash, the Company accept 50% to 75%
of the purchase price in the form of Parent Common Stock.
On March 30, 1999, at a special meeting of the Board, senior management of
the Company and representatives from Raymond James and Gray Cary reviewed and
evaluated the terms of the March Letter in comparison with the terms of
business combinations proposed by the other interested parties, and
representatives of Raymond James reviewed the methodology used in their
financial analyses of the various transactions. Representatives of Raymond
James described the terms and conditions of each of the bids, the background
of the bidders and the status of the due diligence performed by each of the
bidders. The Board discussed each of the bids in detail, focusing on the terms
and conditions of the bids and the likelihood of completing a transaction on
the terms and conditions outlined. The Board decided that, in light of these
factors, it was in the Company's best interest to focus its efforts on the
bids from Parent and the other interested party and not to pursue the bid from
the Unsolicited Bidder at that time.
On April 7 and 8, 1999, Parent and the other interested party conducted
additional due diligence.
On April 10, 1999, the other interested party submitted a revised best and
final offer to acquire 100% of the equity of the Company for $58 million.
On April 12, 1999, the Board, senior management of the Company and
representatives of Parent and Raymond James met in New York to attend a
presentation by Parent's executive officers and discuss strategic issues
associated with the proposed merger.
On April 16, 1999, Parent submitted to Raymond James a revised version of
the March Letter (the "April Letter"). In the April Letter, Parent estimated
the value to acquire 100% of the equity of the Company, on a fully diluted
basis, to be $62 million, assuming that the total debt reflected on the
Company's December 31, 1998 balance sheet would not materially increase prior
to the consummation of the Merger. The $62 million offer contained in the
April Letter represented an enterprise value of approximately $70 million,
including assumed liabilities. The terms of the April Letter provided that $2
million of the $62 million offer was contingent on the Company achieving
certain financial milestones for the six months ended June 30, 1999 (the
"Contingent Payment").
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On April 17, 1999, Raymond James informed the other interested party that
the Board had decided not to pursue that party's offer.
From April 19 to April 23, 1999, Parent conducted due diligence sessions at
the Company's corporate headquarters and at other regional offices of the
Company and its subsidiaries. Participants in these sessions included
representatives of Parent's management, financial, legal and accounting
advisors. Parent and its representatives continued to conduct off-site due
diligence through May 10, 1999.
On April 20, 1999, Gray Cary distributed a proposed first draft merger
agreement to Parent and its legal counsel, Gibson, Dunn & Crutcher LLP
("GD&C"), and each of Gray Cary and GD&C began negotiating the form of a
definitive merger agreement.
From April 20 to May 10, 1999, representatives of the Company, Raymond James
and Gray Cary held discussions with representatives of Parent and GD&C to
negotiate various aspects of the acquisition proposal.
At a scheduled telephonic meeting of Parent's Board of Directors (the
"Parent Board") held on May 4, 1999, a full discussion of the proposed
transaction took place. Following the discussions, the Parent Board approved,
among other things, the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, provided that the final terms of
the Merger Agreement were subsequently reviewed and approved by the Executive
Committee of the Parent Board. Parent informed the Company that it had agreed
to pay approximately $62 million in cash, or $6.75 net per Share, without
interest, for all of the issued and outstanding Shares of the Company, on a
fully diluted basis. The Contingent Payment proposal was eliminated from the
offer.
On May 6, 1999, at a special meeting of the Board, members of senior
management and Gray Cary reported on the revised terms of the Merger
Agreement. Representatives of Raymond James reviewed their financial analysis
with respect to the proposed Merger and delivered an oral opinion
(subsequently confirmed in writing) that the terms of the Offer and the
Merger, taken collectively, were fair from a financial point of view, to the
shareholders of the Company. Following this presentation, the Company Board
asked the representatives from Raymond James and Gray Cary various questions
about the terms of the transaction and the remaining open issues, and the
Board and representatives of Gray Cary discussed the Board's fiduciary duties
to the Company's shareholders. At the conclusion of this discussion, the Board
(a) unanimously approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger and (b) authorized
its senior management to complete the negotiations of the definitive Merger
Agreement and to execute and deliver the Merger Agreement in substantially the
form presented to the Board, subject to the receipt of Raymond James' written
opinion as to the fairness of the Offer and the Merger to the Company's
shareholders.
On May 10, 1999, Parent advised the Company that it had received the
necessary consent from its lender to enter into the Merger Agreement and to
consummate the Offer.
On May 10, 1999, GD&C and Gray Cary finalized their negotiations of the
Merger Agreement. The Executive Committee of the Parent Board reviewed the
final terms of the Merger Agreement and approved the final terms of the Merger
Agreement by unanimous written consent in lieu of a meeting. Senior management
of the Company reviewed the final terms of the Merger Agreement and notified
representatives of Parent that such terms were acceptable.
The Merger Agreement was executed on the evening of May 10, 1999, and a
joint press release was issued by the parties announcing the execution of the
Merger Agreement on the morning of May 11, 1999.
On May 17, 1999, Purchaser commenced the Offer.
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11. Purpose of the Offer and the Merger.
The purpose of the Offer is for Purchaser to acquire all of the Shares. The
purpose of the Merger is for Parent to acquire any remaining equity interest
in the Company not acquired pursuant to the Offer. Upon consummation of the
Merger, the Company will become a direct, wholly owned subsidiary of Parent.
The acquisition of Shares has been structured as a cash tender offer followed
by (a) a cash merger if, at the Effective Time, Purchaser holds at least 90%
of the Shares then outstanding, or (b) a stock-for-stock merger if, at the
Effective Time, Purchaser does not hold at least 90% of the Shares then
outstanding. The acquisition of Shares was structured in such a manner in
order to provide for a prompt and orderly cancellation of all Shares (other
than the Excluded Shares) and the transfer of ownership of the equity interest
in the Company held by the Company's shareholders (other than the Excluded
Shares) from such shareholders to Parent, in accordance with applicable law.
Under the CGCL, the approval of the Board and the affirmative vote of the
holders of a majority of the outstanding Shares may be required to approve and
adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. If a vote of the shareholders of the Company is
required, the Company has agreed in the Merger Agreement to take all actions
necessary to convene and hold a special meeting of its shareholders (the
"Shareholder's Meeting") as soon as practicable after the Proxy Statement is
cleared by the Commission for the purpose of considering and taking action to
approve the Merger Agreement and the principal terms of the Merger. The Proxy
Statement, containing detailed information concerning the Merger, will be
furnished to shareholders of the Company in connection with any Shareholder's
Meeting. Notwithstanding the foregoing, if Parent, Purchaser and/or any other
subsidiary of Parent shall acquire at least 90% of the issued and outstanding
Shares, the parties shall take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after consummation of
the Offer without a Shareholders Meeting in accordance with Section 1110 of
the CGCL.
If Parent is required to issue shares of Parent Common Stock under the terms
of the Merger Agreement, then Parent shall prepare and file with the
Commission a registration statement on Form S-4 pursuant to which the issuance
of the shares of Parent Common Stock in the Merger will be registered under
the Securities Act (the "Registration Statement"). The final prospectus
included in the Registration Statement as declared effective by the Commission
shall be part of the Proxy Statement.
The Board has unanimously determined that the transactions contemplated by
the Merger Agreement are fair to, and in the best interests of, the Company's
shareholders, and has approved and adopted the Merger Agreement and the
transactions contemplated thereby. As described above, the only remaining
corporate action of the Company that may be required is the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the holders of a majority of the Shares. If the Minimum Condition is
satisfied, Purchaser will have sufficient voting power to cause the approval
and adoption of the Merger Agreement and the transactions contemplated thereby
without the affirmative vote of any other shareholder of the Company. If
Purchaser acquires at least 90% of the Shares in the Offer, under the CGCL, it
will be able to consummate the Merger without a vote of the Company's
shareholders. Purchaser reserves the right to purchase additional Shares in
the open market after termination of the Offer.
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12. Plans for the Company.
Following the consummation of the Offer, Parent intends to continue its
evaluation and review of the Company's operations and the potential
opportunities for synergies with Parent's operations, and consideration of
what, if any, additional changes would be desirable in light of the results of
such evaluations and reviews. It is anticipated that, following the
consummation of the Merger, the Company's business will be integrated into
Parent's operations. Parent plans to reorganize the Company into Parent's
existing business line/project delivery organizational structure, which is
expected to produce administrative and operational efficiencies resulting in
the elimination of redundant positions in the combined organization and the
closure or consolidation of certain Parent and Company locations. Such
integration and reorganization is anticipated to result in approximately
$12 million in net cost reductions, taking into account possible loss of
revenue, with approximately 40% of the cost reductions expected to be realized
in calendar 1999. Pursuant to the Merger Agreement, promptly upon delivery to
the Depositary of Parent's notice of acceptance of Shares pursuant to the
Offer (the "Notice of Acceptance"), Parent shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board as is
equal to the product of the total number of directors on the Board (determined
after giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Parent or its affiliates bears to the total number of Shares then
outstanding; provided, however, that if Purchaser shall have acquired at least
90% of the outstanding Shares in the Offer, Parent shall be entitled to
designate all of the members of the Board. The Company shall promptly take all
actions necessary to cause Parent's designees to be so elected, including, if
necessary, increasing the size of the Board (to the extent permitted by the
Company's Articles and the Company's Bylaws) and/or seeking the resignations
of one or more existing directors. If Purchaser shall not have acquired 90% of
the outstanding Shares prior to the Effective Time, the Board shall at all
times have at least two members who are members of the Board as of May 10,
1999 and are neither officers of the Company or any of its subsidiaries nor
officers or directors of Purchaser or any of its affiliates (the "Independent
Directors"). See "THE TENDER OFFER--13. Merger Agreement and Related
Agreements--Board Representation." Except for the Merger and as otherwise
described in this section and elsewhere in this Offer to Purchase, and except
as may be effected in connection with the integration of operations referred
to above, Purchaser and Parent have no current plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation of the Company or any of its subsidiaries with
or into any third entity, the sale or transfer of a material amount of the
Company's or any of its subsidiaries' assets to a third party, a material
change in the Company's capitalization or dividend structure or any other
material change in the Company's corporate structure or business.
13. The Merger Agreement and Related Agreements.
The Merger Agreement
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to
the Merger Agreement, a copy of which is filed with the Commission as an
exhibit to Parent's Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1"). The Merger Agreement may be examined and copies may be obtained at
the places and in the manner set forth under the caption "THE TENDER OFFER--7.
Certain Information Concerning the Company--Company Available Information."
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering shareholder shall receive the Offer
Price for each Share tendered in the Offer. Purchaser's obligation to accept
for payment or pay for Shares is subject to the satisfaction of the conditions
that are described in "THE TENDER OFFER--18. Certain Conditions of the Offer,"
including the Minimum Condition. Any determination concerning the satisfaction
of the terms and conditions of the Offer will be made by Purchaser in its good
faith judgment and such determination will be final and binding on all
tendering shareholders. Purchaser expressly reserves the right to waive any
conditions of the Offer (except as otherwise provided in the Merger
Agreement), to increase the Offer Price, to extend the duration of the Offer
or to make any other changes in the terms and conditions of the Offer;
provided, however, that without the Company's prior written consent, no change
may be
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made that decreases the Offer Price, changes the form of consideration to be
paid in the Offer, reduces the maximum number of Shares to be purchased in the
Offer, imposes any conditions to the Offer in addition to the conditions set
forth herein under the caption "THE TENDER OFFER--18. Certain Conditions of
the Offer" or amends any other material terms of the Offer in a manner adverse
to the Company's shareholders. Parent and Purchaser have agreed that if all of
the conditions set forth herein under the caption "THE TENDER OFFER--18.
Certain Conditions of the Offer" are not satisfied by the time of any
scheduled termination of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer until
such conditions are satisfied or waived; provided further, that Purchaser
shall not be required to extend the Offer beyond July 9, 1999; provided
further, however, that Purchaser may (a) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
or (b) extend the Offer for any reason on one or more occasions for an
aggregate of not more than twenty (20) business days beyond the initial
Expiration Date if more than the number of Shares sufficient to satisfy the
Minimum Condition but less than 90% of the Shares issued and outstanding have
been tendered.
Board Representation. Pursuant to the Merger Agreement and subject to
compliance with applicable law, promptly upon delivery to the Depositary of
the Notice of Acceptance, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as is equal to
the product of the total number of directors on the Board (determined after
giving effect to the directors elected pursuant to this sentence) multiplied
by the percentage that the aggregate number of Shares beneficially owned by
Parent or its affiliates bears to the total number of Shares then outstanding;
provided, however, that if Purchaser shall have acquired at least 90% of the
outstanding Shares in the Offer, Parent shall be entitled to designate all of
the members of the Board. If Purchaser shall not have acquired 90% of the
outstanding Shares prior to the Effective Time, the Board shall at all times
have at least two Independent Directors. If the number of Independent
Directors is reduced below two prior to the Effective Time, the remaining
Independent Director shall be entitled to designate a person to fill such
vacancy who shall not be an officer or affiliate of the Company or any of its
subsidiaries or an officer, director or affiliate of Parent or any of its
subsidiaries, and such person shall be deemed an Independent Director for all
purposes of the Merger Agreement. If no Independent Directors then remain, the
other directors of the Company shall designate two persons to fill such
vacancies who shall not be officers or affiliates of the Company or any of its
subsidiaries, or officers, directors or affiliates of Parent or any of its
subsidiaries, and such persons shall be deemed to be Independent Directors for
all purposes of the Merger Agreement. Following the election or appointment of
Parent's designees, pursuant to the Merger Agreement and prior to the
Effective Time, any amendment or termination of the Merger Agreement by the
Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of Parent or Purchaser or any waiver of any
of the Company's rights hereunder shall require the concurrence of a majority
of the Independent Directors (or in the case where there is only one
Independent Director, the concurrence of such Independent Director). The
Company's obligations to appoint the designees of Parent to the Board shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser will be merged with and into the Company,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation. At the election of Parent, to the
extent that such action would not cause a failure of a condition to the Offer
or the Merger, the Merger may be structured so that the Company will be merged
with and into Purchaser with the result that Purchaser will become the
Surviving Corporation. The Effective Time will occur at the date and time the
Merger becomes effective in accordance with the CGCL. The Surviving
Corporation shall continue its corporate existence under the laws of the State
of California. The Company's Articles shall be amended and restated to contain
the substantive provisions of the Articles of Incorporation of Purchaser, as
in effect immediately prior to the Effective Time, and, as so amended and
restated, shall be the Articles of Incorporation of the Surviving Corporation
until thereafter duly amended in accordance with the provisions thereof and
applicable law. The Bylaws of Purchaser in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation until thereafter duly amended in
accordance with the provisions thereof and applicable law. The directors of
Purchaser immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal in accordance with the Articles and
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Bylaws of the Surviving Corporation. The officers of Purchaser immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal in
accordance with the Articles and Bylaws of the Surviving Corporation.
Consideration to be Paid in the Merger. At the Effective Time, if the
Purchaser holds at least 90% of the Shares then outstanding, each Share issued
and outstanding prior to the Effective Time (other than Excluded Shares and
any Dissenting Shares) shall automatically be canceled and extinguished and
shall be converted into the right to receive the Cash Merger Consideration,
without interest thereon, subject to appropriate and proportionate adjustments
in the event of any reclassification, recapitalization, stock split, stock
dividend or similar transaction with respect to the Shares. At the Effective
Time, if Purchaser does not hold at least 90% of the Shares then outstanding,
each Share issued and outstanding immediately prior to the Effective Time
(other than Excluded Shares and any Dissenting Shares) shall automatically be
canceled and extinguished and shall be converted into the right to receive the
Stock Merger Consideration.
Employee/Director Stock Options. Pursuant to the Merger Agreement, Parent
will not assume any option to purchase shares of the Company Common Stock (an
"Option") outstanding under any option plans of the Company, including the
1986 Incentive Stock Option Plan, the 1988 Stock Option Plan or the 1998 Stock
Option Plan (collectively, the "Company Stock Plans"). Pursuant to the terms
of such Company Stock Plans, all outstanding Options under such plans will
become fully vested and immediately exercisable immediately prior to a change
of control. The parties to the Merger Agreement shall take all appropriate
action to provide that, at or following the consummation of the Offer, each
holder of an outstanding Option shall be entitled to receive an amount in cash
equal to the product of (a) the excess, if any, of the Cash Merger
Consideration over the per share exercise price of each such Option and (b)
the number of Shares subject to such Option that are exercisable immediately
prior to the Effective Time.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
existence and power, subsidiaries, capitalization, corporate authorization
relative to the Merger Agreement, governmental consents and approvals,
Commission filings, financial statements, absence of undisclosed liabilities,
absence of certain changes or events, taxes, real properties, intellectual
property, litigation, environmental matters, employee benefit plans,
compliance with laws, labor matters, insurance, customers' revenues, financial
projections, government contracts and certain other matters. The Merger
Agreement also includes representations and warranties of Parent and Purchaser
with respect to corporate existence and power, corporate authorization
relative to the Merger Agreement, governmental consents and approvals,
available funds, the valid issuance of Parent Common Stock, if required, and
certain other matters. No representations or warranties made by the Company,
Parent or Purchaser will survive beyond the Effective Time, and no covenants
or agreements made in the Merger Agreement will survive beyond the Effective
Time, except for those covenants or agreements which by their terms
contemplate performance after the Effective Time. Certain representations and
warranties of the Company, Parent and Purchaser set forth in the Merger
Agreement will not be breached unless the matter constituting the breach would
have a material adverse effect on the business, assets (including intangible
assets), liabilities, financial condition, operations or results of operations
of the respective entity and its subsidiaries taken as a whole (a "Material
Adverse Effect"); provided, however, that an adverse change in or effect on
the revenues or gross margins of the Company, Parent or Purchaser (or the
direct consequences thereof) following the date of the Merger Agreement to the
extent attributable to a delay of, reduction in or cancellation or change in a
material contract that is directly and primarily attributable to the
transactions contemplated by the Merger Agreement shall not be deemed to
constitute a Material Adverse Effect. Additionally, certain of the
representations and warranties of the Company, Parent and Purchaser set forth
in the Merger Agreement will not be breached unless the matter constituting
the breach would have a material adverse effect on the ability of such
entities to consummate the Offer or the Merger.
Conduct of Business. During the period from the date of the Merger Agreement
and continuing until the earlier of the termination of the Merger Agreement or
the Effective Time, the Company has agreed as to itself and its subsidiaries
(except to the extent that Parent shall otherwise consent in writing, which
consent shall not
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be unreasonably withheld) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously conducted, to
pay its debts and taxes when due, subject to good faith disputes over such
debts or taxes, to pay or perform its other obligations when due, and to use
all reasonable efforts consistent with past practices and policies to (i)
preserve intact its present business organization, (ii) keep available the
services of its present officers and key employees and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees
and others having business dealings with it. Without limiting the generality
of the foregoing, the Company shall not (and shall not permit any of its
subsidiaries to), without the prior written consent of Parent, which consent
shall not be unreasonably withheld:
(a) accelerate, amend or change the period of exercisability of Options
or restricted stock granted under any employee stock plan of the Company or
authorize cash payments in exchange for any Options granted under any of
such plans except as required by the terms of such plans or any related
agreements in effect as of the date of the Merger Agreement, except as
expressly contemplated by the Merger Agreement;
(b) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company's intellectual property other
than in the ordinary course of business consistent with past practices;
(c) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock
(other than distributions declared with respect to the capital stock of any
subsidiary in the ordinary course of business consistent with past
practice), or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock;
(d) issue, deliver or sell, subject to any lien or authorize or propose
any of the foregoing with respect to any shares of its capital stock or
securities convertible into shares of its capital stock, or any bonds,
debentures, notes or other obligations the holders of which have the right
to vote (or are convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities other than (i) the issuance of rights to
purchase shares of the Company Common Stock as and to the extent required
under the Company Option Plans as in effect as of the date of the Merger
Agreement, (ii) the issuance of the Company Common Stock upon the exercise
of Options outstanding on the date of the Merger Agreement in accordance
with their present terms or pursuant to the Company's Employee Stock
Purchase Plan or the Company's Restricted Stock Plan in accordance with
their present terms and (iii) the granting, in the ordinary course of
business consistent with past practice, pursuant to Company Stock Plans in
effect on the date of the Merger Agreement, of Options to purchase up to a
number of shares of the Company Common Stock as shall be agreed to by the
Company and Parent, and the issuance of the Company Common Stock upon
exercise thereof;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division;
(f) adopt a plan of complete or partial liquidation or dissolution,
merger or otherwise restructure or recapitalize or consolidate with any
person other than Purchaser or another wholly owned subsidiary of Parent;
(g) sell, lease, license or otherwise dispose of any of its properties or
assets, except for transactions entered into in the ordinary course of
business;
(h) take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees,
except for increases in salary or wages of employees in accordance with
agreements entered into before the date of the Merger Agreement and
previously provided to Parent; (ii) grant any additional severance or
termination pay to, or enter into any employment or severance agreements
with, officers; (iii) grant any severance or termination pay to, or enter
into any employment or
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severance agreement, with any employee, except in accordance with
agreements entered into before the date of the Merger Agreement and
previously provided to Parent; (iv) enter into any collective bargaining
agreement; or (v) establish, adopt, enter into or amend in any material
respect any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees;
(i) amend or propose to amend the Company's Articles or the Company's
Bylaws, except as contemplated by the Merger Agreement;
(j) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligation of any
other person except in the ordinary course of business consistent with past
practices and except for obligations of the Company or its subsidiaries
incurred in the ordinary course of business and in an amount not to exceed
$250,000;
(k) make any loans to any other person (other than subsidiaries of the
Company or customary loans or advances to employees in connection with
business-related travel in the ordinary course of business consistent with
past practices);
(l) make, authorize or commit to make any capital expenditures except for
capital expenditures in the ordinary course of business and consistent with
past practice or in amounts less than $150,000 individually and $750,000 in
the aggregate;
(m) make any acquisition of, or investment in, assets or stock of any
other person, by any means;
(n) except as may be required as a result of change in law or to
generally accepted accounting principles consistently applied, change any
of the accounting principles or practices used by it or revalue in any
respect any of its material assets, including writing down the value of
inventory or writing-off notes or accounts receivable, other than in the
ordinary course of business consistent with past practices;
(o) settle or compromise any material claims or litigation or terminate
or materially amend or modify any of its agreements, contracts or
commitments (that have not expired or been terminated) filed as an exhibit
to any forms, reports and documents required to be filed by the Company
with the Commission or waive, release or assign any material rights or
claims;
(p) make, revoke or amend any tax election;
(q) enter into or amend any agreement or settlement with any tax
authority; or
(r) take, or agree in writing or otherwise to take, any of the actions
described in the foregoing clauses (a) through (q) or any action that is
reasonably likely to make any of the Company's representations or
warranties contained in the Merger Agreement untrue or incorrect in any
material respect on the date made (to the extent so limited) or as of the
Effective Time.
Indemnification. Pursuant to the Merger Agreement, Parent agrees that all
rights to indemnification now existing in favor of any of the current or
former directors and officers of the Company (the "Indemnified Parties") as
provided in the Company's Articles or the Company's Bylaws, in each case as of
the date of the Merger Agreement, and all indemnification agreements between
the Company and the Indemnified Parties shall survive the Merger and shall
continue in full force and effect from and after consummation of the Offer in
accordance with their terms, as such terms exist on the date of the Merger
Agreement. After the Effective Time, Parent agrees to cause the Surviving
Corporation to honor all rights to indemnification referred to in the
preceding sentence. Additionally, Parent agrees to cause the Company and, from
and after the Effective Time, the Surviving Corporation to purchase a six-year
extended reporting period endorsement under the current policy of directors'
and officers' liability insurance maintained by the Company; provided that (a)
the Surviving Corporation may substitute therefor other policies not less
advantageous (other than to a de minimus extent) to the beneficiaries of the
current policies, (b) such substitution shall not result in any gaps or lapses
in coverage with respect to matters occurring prior to the Effective Time and
(c) the Surviving Corporation shall not be
26
<PAGE>
required to pay an annual premium in excess of 150% of the last annual premium
paid (the "Maximum Premium") by the Company prior to the date of the Merger
Agreement (which the Company represents to be $58,000 for the twelve month
period ending January 1, 2000). If the Surviving Corporation is unable to
obtain the insurance required by this paragraph for the Maximum Premium, it
shall obtain as much comparable insurance as possible for an annual premium
equal to the Maximum Premium.
Conditions to the Merger. Pursuant to the Merger Agreement, if Purchaser
shall have purchased Shares pursuant to the Offer, the respective obligations
of Parent, Purchaser and the Company to consummate the Merger are subject to
the satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) the Merger Agreement and the Merger shall have been duly approved and
adopted by the shareholders of the Company, if required by applicable law;
(b) Purchaser shall have delivered the Notice of Acceptance for the
Shares to the Depositary pursuant to the Offer in accordance with the terms
of the Merger Agreement;
(c) the consummation of the Merger shall not be restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a
governmental entity of competent jurisdiction and there shall not have been
any statute, rule or regulation enacted, promulgated or issued by any
governmental entity that prevents the consummation of the Merger or has the
effect of making the purchase of Shares illegal, and no governmental entity
shall have instituted any proceeding seeking any such order and such
proceeding remains unresolved; and
(d) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated and, other than
filing the Certificate of Merger or the Certificate of Ownership in the
State of California, all filings with any governmental entity required to
be made prior to the Effective Time by the Company or Parent or any of
their respective subsidiaries and all government consents required to be
obtained prior to the Effective Time by the Company or Parent or any of
their respective subsidiaries in connection with the execution and delivery
of the Merger Agreement and the consummation of the transactions
contemplated thereby by the Company, Parent and Purchaser shall have been
made or obtained (as the case may be), except where the failure to so make
or obtain will not result in either a Material Adverse Effect on the
Company or have, or be reasonably likely to have, a material adverse effect
on the ability of the parties hereto to consummate the transactions
contemplated by the Merger Agreement.
Acquisition Proposals. Pursuant to the Merger Agreement, from and after the
date of the Merger Agreement until the earlier of the Effective Time or
termination of the Merger Agreement, (a) the Company and its subsidiaries have
agreed that they will not, and they will direct their respective
Representatives (as defined herein) not to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any Alternative Proposal (as
defined herein) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect
to, or take any other action to facilitate the making of any proposal that
constitutes or may reasonably be expected to lead to, an Alternative Proposal,
and (b) neither the Board nor any committee thereof will (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent or Purchaser, their approval or recommendation to the Company's
shareholders of the Offer, the Merger Agreement or the Merger or (ii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (an "Acquisition Agreement")
with respect to any Alternative Proposal. In addition, the Company and its
subsidiaries will immediately cease, and will instruct and cause their
respective Representatives to immediately cease, any and all existing
activities, discussions or negotiations with any parties with respect to any
Alternative Proposal and the Company and its subsidiaries will not, and they
will direct their Representatives not to, directly or indirectly, make or
authorize any public statement, recommendation or solicitation in support of
any Alternative Proposal. Any violation of the restrictions set forth in
(a)(i) and (ii) of this paragraph by any Representative of the Company or any
of its subsidiaries will be deemed to be a material breach of the Merger
Agreement by the Company.
Notwithstanding the foregoing paragraph, if, at any time prior to the
consummation of the Offer, the Board reasonably determines in good faith,
after taking into account the advice of its outside legal counsel, that it is
27
<PAGE>
necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, (a) the Company and its
Representatives may, in response to a Superior Proposal (as defined herein)
that was unsolicited or that did not otherwise result from a breach of the
restrictions set forth in the preceding paragraph, and subject to compliance
with certain other terms set forth in the Merger Agreement, furnish non-public
information with respect to the Company pursuant to a non-disclosure agreement
with terms at least as restrictive as such terms in the Confidentiality
Agreement (as defined herein) and participate in discussions and negotiations
regarding such Superior Proposal, and (b) the Board may, after terminating the
Merger Agreement, withdraw or modify its approval or recommendation of the
Offer, the Merger Agreement or the Merger, approve or recommend a Superior
Proposal or enter into an Acquisition Agreement with respect to a Superior
Proposal; provided that the Company shall have given Parent written notice (a
"Notice of Superior Proposal") at least two (2) business days prior to
entering into any such Acquisition Agreement and at least two (2) business
days prior to public disclosure by the Board of such withdrawal, modification,
approval or recommendation, advising Parent that the Board has received a
Superior Proposal, specifying the material terms and conditions of the
Superior Proposal (including the proposed financing) and identifying the
person making such Superior Proposal. Any amendment to the price or material
terms of a Superior Proposal shall require an additional Notice of Superior
Proposal and an additional two (2) business day period thereafter, to the
extent permitted under applicable law, prior to public disclosure by the Board
of its recommendation with respect thereto.
As used in this Offer to Purchase, (a) "Representative" means the officers,
directors or employees or any investment banker, attorney, accountant or other
advisor or representative retained by the Company or its subsidiaries, (b)
"Alternative Proposal" means any inquiry, proposal or offer, whether written
or oral, from any person or Group (as defined under Section 13(d) of the
Exchange Act) relating to any direct or indirect acquisition or purchase of
any product line or other material portion of the assets of the Company and
its subsidiaries taken as a whole (other than the purchase of the Company's
products or used equipment in the ordinary course of business), or more than a
20% interest in the total outstanding voting securities of the Company or any
of its subsidiaries, or any tender offer or exchange offer that if consummated
could result in any person or Group beneficially owning 10% or more of the
total outstanding voting securities of the Company or any of its subsidiaries,
or any merger, consolidation, business combination, sale of substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement, and (c) a "Superior Proposal" means a
bona fide offer, whether written or oral, made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the total outstanding voting securities of
the Company or all or substantially all of the assets of the Company, which
offer is otherwise on terms which the Board determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be reasonably capable of being completed (taking into account
all material legal, financial, regulatory and other aspects of the proposal)
and more favorable to the Company's shareholders from a financial point of
view than the Offer and the Merger, and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board,
is capable of being obtained by such third party.
In addition to the obligations of the Company set forth above in this
section on "Acquisition Proposals", the Company as promptly as practicable,
and in any event within 24 hours, will advise Parent orally and in writing of
(a) any request for non-public information that the Company reasonably
believes may lead to an Alternative Proposal, or of any Alternative Proposal,
(b) the material terms and conditions of such information request or
Alternative Proposal and (c) the identity of the person making any such
information request or Alternative Proposal. The Company will keep Parent
informed in all material respects of the status and details (including
material amendments) of any such request or Alternative Proposal.
Nothing contained in the Merger Agreement shall prohibit the Company from
(a) taking and disclosing to its shareholders a position contemplated by Rules
14d-9 and 14e-2(a) under the Exchange Act or (b) making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board, after
taking into account the advice of its outside legal counsel, failure to so
disclose would be inconsistent with applicable laws; provided
28
<PAGE>
that neither the Company nor the Board nor any committee thereof shall, except
in accordance with the provisions of the Merger Agreement, withdraw or modify,
or publicly propose to withdraw or modify, its position with respect to the
Offer, the Merger Agreement or the Merger or approve or recommend, or propose
to approve or recommend, an Alternative Proposal.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger contemplated thereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the Company's shareholders
(with any termination by Parent also being an effective termination by
Purchaser):
(a) by mutual written consent duly authorized by the Board and the Parent
Board, subject to the concurrence of the Independent Directors to the
extent required;
(b) by either Parent or the Company if:
(i) the Offer is terminated, withdrawn or expires pursuant to its
terms without any Shares having been purchased thereunder; provided,
however, that neither Parent nor the Company may terminate the Merger
Agreement pursuant to this paragraph (b)(i) if such party is in
material breach of the Merger Agreement or, in the case of Parent, if
Parent or Purchaser is in material violation of the terms of the Offer;
(ii) a governmental entity shall have issued an order, decree or
ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Offer
or the Merger, which order, decree, ruling or other action is final and
nonappealable; provided that the party seeking to terminate the Merger
Agreement shall have used its reasonable efforts to remove or lift such
order, decree or ruling; or
(iii) prior to the purchase of Shares pursuant to the Offer, the
Board has recommended, or the Company has entered into an Acquisition
Agreement with respect to, a Superior Proposal after fully complying
with the applicable procedures set forth in the Merger Agreement;
provided, however, that termination by the Company pursuant to this
paragraph (b)(iii) shall be conditioned upon concurrent payment by the
Company to Parent in immediately available funds of $500,000 as
reimbursement for all of Parent's costs and expenses in connection with
the Merger Agreement, the Offer and the Merger (the "Transaction
Expenses") and $1,750,000 as a termination fee (the "Termination Fee");
(c) by Parent prior to the purchase of Shares pursuant to the Offer if:
(i) the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Board that the shareholders of the Company
accept the Offer;
(ii) the Board or any committee thereof shall have (A) withdrawn or
modified (including, but not limited to, by amendment of the Schedule
14D-9) in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, (B)
approved or recommended, taken no position with respect to, or failed
to recommend against any Alternative Proposal, or (C) resolved to do
any of the foregoing;
(iii) the Company or any of its subsidiaries or any of their
respective Representatives participates in any discussions or
negotiations with or provide any non-public information to any third
party in breach of the terms of the Merger Agreement summarized under
"Acquisition Proposals" in this Section 13; or
(iv) the Company is in material breach of any of its covenants or
obligations under the Merger Agreement; provided that if such breach is
curable through the exercise of the Company's commercially reasonable
efforts, Parent may not terminate the Merger Agreement under this
paragraph (c)(iv) unless such breach is not cured on or prior to the
earlier of (A) twenty (20) days after written notice of such breach is
given by Parent to the Company or (B) two (2) business days before the
date on which the Offer expires;
29
<PAGE>
(d) by the Company prior to the purchase of Shares pursuant to the Offer
if:
(i) the Offer shall not have been commenced in accordance with the
Merger Agreement, or Parent or Purchaser shall have failed to purchase
validly tendered Shares in violation of the terms of the Offer within
ten (10) business days after the expiration of the Offer; provided,
however, that the Company shall not be entitled to terminate this
Agreement pursuant to this paragraph (d)(i) if it is in material breach
of the Merger Agreement; or
(ii) Parent or Purchaser is in material breach of any of its
covenants or obligations under the Merger Agreement; provided that if
such breach is curable through exercise of Parent's or Purchaser's
commercially reasonable efforts, the Company may not terminate the
Merger Agreement under this paragraph (d)(ii) unless such breach is not
cured within the earlier of (A) twenty (20) days after written notice
of such breach is given by the Company to Parent or (B) two (2)
business days before the date on which the Offer expires.
If the Merger Agreement is terminated for any of the above reasons, the
Merger Agreement shall be of no further force or effect, except as otherwise
set forth in the Merger Agreement. Additionally, any termination of the Merger
Agreement shall not (a) relieve any party from liability for any willful
breach of the Merger Agreement or (b) affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive the termination of the Merger Agreement. Furthermore, in the event the
Merger Agreement is terminated pursuant to paragraph (b)(iii) or paragraphs
(c)(i), (ii) or (iii) set forth above in this section on "Termination of
Merger Agreement," the Company irrevocably waives any otherwise applicable
standstill or other agreement or restrictions in favor of the Company
(contractual or otherwise) on the ability and right of Parent, Purchaser or
any of their affiliates to acquire Shares.
If the Merger Agreement is terminated by Parent pursuant to paragraph
(b)(iii) or paragraphs (c)(i), (ii), (iii) and (iv) set forth above in this
section on "Termination of Merger Agreement," the Company shall reimburse
Parent in an amount of $500,000 as reimbursement for Transaction Expenses. If
the Merger Agreement is terminated by the Company pursuant to paragraph
(d)(ii) above, Parent shall reimburse the Company in an amount of $500,000 as
reimbursement for Transaction Expenses. Additionally, in the event the Merger
Agreement is terminated pursuant to paragraphs (b)(iii) or (c)(ii) set forth
above, the Company shall pay Parent the Termination Fee in immediately
available funds. Furthermore, in the event that the Merger Agreement is
terminated pursuant to paragraphs (c)(i), (iii) or (iv) set forth above and,
within 12 months following such termination, any person other than Parent or
any affiliate of Parent effects an acquisition relating to an Alternative
Proposal, or enters into an agreement relating to an Alternative Proposal with
the Company or commences a tender offer for a transaction relating to an
Alternative Proposal and the transactions contemplated thereby are
subsequently consummated at any time, the Company shall pay Parent the
Termination Fee at or prior to the consummation of such transaction in
immediately available funds.
Amendment. The Merger Agreement can only be amended by a written agreement
executed by the Company, Parent and Purchaser.
Extension and Waiver. At any time prior to the Effective Time, the Company,
Parent or Purchaser may, to the extent legally allowed and subject to the
terms and conditions of the Merger Agreement, (a) extend the time for the
performance of any of the obligations or other acts of the other parties to
the Merger Agreement, (b) waive any inaccuracies in the representations and
warranties made to such party contained therein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained therein. Any agreement on
the part of the Company, Parent or Purchaser to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party. Delay in exercising any right under the Merger Agreement shall
not constitute a waiver of such right.
Expenses. Except as otherwise set forth in the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the negotiation, execution and delivery of the Merger Agreement, the
Merger and the other transactions contemplated by the Merger Agreement,
including the
30
<PAGE>
Offer, shall be paid by the party incurring such expense; provided, however,
that any expenses incurred in connection with the filing fee for the
Registration Statement and the printing and mailing of the final prospectus
shall be borne by Parent.
The Confidentiality Agreement
Raymond James, on behalf of the Company, and Parent entered into a Mutual
Nondisclosure and Confidentiality Agreement, dated as of February 10, 1999
(the "Confidentiality Agreement"). Pursuant to the Confidentiality Agreement,
the Company and Parent agreed to make available to each other certain non-
public information concerning their respective business, financial condition,
operations, assets, properties, liabilities and prospects in order to
facilitate discussions relating to a possible transaction involving the two
companies. In accordance with the terms of the Confidentiality Agreement, the
party receiving such non-public information in verbal, visual, written,
electronic or other form has agreed to (a) use such information solely for the
purpose of evaluating and considering any potential transaction, (b) keep such
information strictly confidential and (c) provide such information only to its
representatives to whom disclosure of such information is reasonably deemed to
be required to facilitate the evaluation or consideration of any potential
transaction. However, the Company's and Parent's obligations under the
Confidentiality Agreement will not extend to information which the party
receiving such information can demonstrate (a) was rightfully in the
possession of the receiving party prior to disclosure by the furnishing party,
(b) was or is independently developed by the receiving party without use of
any information supplied by the furnishing party, (c) became available to the
public other than as a result of disclosure by the receiving party or any of
its representatives or (d) became available to the receiving party or any of
its representatives on a non-confidential basis from a source other than the
furnishing party or any of its respective representatives and such source is
not, to the knowledge of the receiving party, under any obligation to the
furnishing party or any of its representatives to keep such information
confidential. For a period of two years subsequent to any termination of
discussions regarding a potential transaction, Parent has agreed that it will
not directly or indirectly solicit for hire any employee of the Company or any
person who was an employee of the Company within six months of the date of
such solicitation with whom it has first had contact or who first became known
to it in connection with its consideration of a potential transaction;
provided, however, that the foregoing sentence will not prevent Parent from
employing any employee or former employee of the Company who contacts Parent,
directly or indirectly at his or her own initiative without any direct or
indirect solicitation by or encouragement from Parent. The foregoing summary
of certain provisions of the Confidentiality Agreement is qualified in its
entirety by reference to the full text thereof, a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Confidentiality
Agreement may be examined and copies may be obtained at the places and in the
manner set forth under the caption "THE TENDER OFFER--7. Certain Information
Concerning the Company--Company Available Information."
Dissenters' Rights in the Merger
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, shareholders of the Company may have certain
rights under Chapter 13 of the CGCL to dissent and demand appraisal of, and to
receive payment in cash of the fair value of, their Shares. If the Surviving
Corporation and a dissenting shareholder agree that his or her Shares are
Dissenting Shares and agree upon the fair market value of the Shares, then the
dissenting shareholder is entitled to receive a cash payment equal to the
agreed fair market value and interest thereon at the legal rate on judgments
from the date of such agreement. If, however, the Surviving Corporation denies
that Shares are Dissenting Shares, or the Surviving Corporation and a
dissenting shareholder fail to agree upon the fair market value of his or her
Shares, then the dissenting shareholder may seek to have the applicable
California superior court determine whether his or her Shares are Dissenting
Shares or the fair market value of such Shares. If the status of such Shares
as Dissenting Shares is in issue, the superior court shall determine that
issue first, and if the fair market value of the Dissenting Shares is in
issue, the superior court shall determine, or appoint one or more impartial
appraiser to determine, the fair market value of such Shares. The fair market
value shall be determined as of the day before the first announcement of the
terms of the Merger, excluding any appreciation or depreciation as a result of
the transactions contemplated by the Merger Agreement.
31
<PAGE>
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF CHAPTER 13 OF THE
CGCL INCLUDED HEREWITH IN ANNEX A. THE PRESERVATION AND EXERCISE OF APPRAISAL
RIGHTS ARE CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
CGCL.
14. Going Private Transactions
The Merger, or another business combination following the purchase of Shares
pursuant to the Offer in which the Purchaser seeks to acquire the remaining
Shares not held by it, would have to comply with any applicable federal law
operating at the time of its consummation. Rule 13e-3 under the Exchange Act
is applicable to certain "going private" transactions. If applicable, Rule
13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger, or such other business combination and the consideration offered to
minority shareholders be filed with the Commission and disclosed to minority
shareholders prior to the consummation of the Merger or such other business
combination. However, Rule 13e-3 will not be applicable to the Merger or any
such other business combination if (a) the Shares are deregistered under the
Exchange Act prior to the Merger or other business combination or (b) the
Merger or other business combination is consummated within one (1) year after
the purchase of the Shares pursuant to the Offer and the value of the
consideration paid per Share in the Merger or other business combination
(measured at the time of consummation of the Merger) is at least equal to the
amount paid per Share in the Offer.
15. Interests of Certain Persons in the Offer and the Merger
Consummation of the Offer and the Merger will have certain effects under
certain compensation and incentive plans and arrangements in which officers
and directors of the Company are participants, as summarized below or in the
Information Statement filed by the Company with the Commission pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, a copy of which
has been mailed to the Company's shareholders as Annex A to the Schedule 14D-
9.
Agreements Relating to Outstanding Convertible Securities. The Company is a
party to the Rescission and Reformation Agreement and the New Note Agreement
each dated November 1, 1996 by and among the Company, Organic Waste
Technologies, Inc. ("OWT") and certain of the former shareholders and option
holders of OWT, pursuant to which OWT issued convertible promissory notes and
unfunded contractual obligations to pay, in the aggregate, $1,716,887 (the
"OWT Debt"). Under the original terms of the OWT Debt, upon consummation of
the Offer, the OWT Debt would have become convertible into an aggregate of
264,136 Shares at a conversion price of $6.50 per Share. Each holder of the
OWT Debt has agreed to cancel such holder's conversion right in exchange for
either (i) the right to have such holder's portion of the OWT Debt cashed out
upon consummation of the Offer or (ii) an increase in the interest rate
applicable to the OWT Debt from 8% to 10% per annum. Any portion of the OWT
Debt that is cashed out upon consummation of the Offer will be canceled in
exchange for a cash payment equal to $6.75 multiplied by the number of Shares
that would have been issuable upon conversion of such portion of the OWT Debt.
Mark H. Shipps, Vice President of the Company, holds OWT Debt in the amount of
$1,022,047.
In addition, the Merger Agreement contains certain provisions with respect
to indemnification of directors and executive officers and maintenance of
current policies of directors' and officers' liability insurance maintained by
the Company from and after the Effective Time. See "THE TENDER OFFER--13. The
Merger Agreement and Related Agreements--Indemnification."
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<PAGE>
Beneficial Ownership of Shares
The following table sets forth information as of April 30, 1999, concerning
the ownership of Company Common Stock by each current member of the Board,
each of the executive officers named in the Summary Compensation Table
included in the Information Statement attached as Annex A to the Schedule 14D-
9, all current directors and executive officers of the Company as a group and
each shareholder known by the Company to be the beneficial owner of more than
five percent of the outstanding Company Common Stock. As of May 17, 1999, none
of the members on the Parent Board owned any Shares. Except as otherwise
noted, the persons or entities identified have sole voting and investment
power with respect to such Shares.
<TABLE>
<CAPTION>
Number of Shares
Beneficially
Name and Address Owned(1) Percent(1)
---------------- ---------------- ----------
<S> <C> <C>
Franklin Resources, Inc.(2).................... 1,125,400 13.5%
901 Mariners Island Blvd., 6th Floor
San Mateo, CA 94404
Grace & White, Inc.(3)......................... 1,024,600 12.3%
515 Madison Avenue, Suite 1700
New York, NY 10022
T. Rowe Price Associates, Inc.(4).............. 715,000 8.6%
100 E. Pratt Street
Baltimore, MD 21202
Dimension Fund Advisors, Inc.(5)............... 540,300 6.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Eugene M. Herson(6)............................ 247,854 2.9%
Richard A. Peluso(6)........................... 146,485 1.7%
R. Michael Momboisse(6)........................ 91,288 1.1%
Peter Vardy(6)................................. 25,000 *
Douglas P. Crane(6)............................ 19,000 *
Mark H. Shipps(6).............................. 17,500 *
Patrick Gillespie(6)........................... 16,751 *
Donald R. Kerstetter(6)........................ 10,000 *
Franklin J. Agardy(6).......................... 2,000 *
All executive officers and directors as a group
(13 persons)(6)............................... 619,076 7.1%
</TABLE>
- ---------------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Company
Common Stock subject to options or warrants held by that person that are
currently exercisable, or will become exercisable within 60 days of April
30, 1999 (without regard to the effects of the Offer), are deemed
outstanding. Such shares, however, are not deemed outstanding for purposes
of computing the percentage ownership of any other person. Unless
otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) As reported in a Schedule 13G amendment filed jointly on September 10,
1997 by Franklin Resources, Inc. ("FRI"), Charles B. Johnson, Rupert H.
Johnson, Jr. and Franklin Advisory Services, Inc. Consists of shares held
in accounts that are managed by direct and indirect investment advisory
subsidiaries of FRI ("Advisory Subsidiaries") pursuant to contracts that
give such subsidiaries sole voting and investment power with respect to
such shares. Charles B. Johnson and Rupert H. Johnson, Jr. are principal
shareholders of FRI ("Principal Shareholders"). FRI, the Advisory
Subsidiaries and the Principal Shareholders disclaim any economic interest
or beneficial ownership of the shares.
33
<PAGE>
(3) As reported in a Schedule 13G amendment filed on February 18, 1999 by
Grace & White, Inc. ("G&W"). Includes 28,000 shares as to which G&W has
sole voting power and 1,024,600 shares as to which G&W has sole
dispositive power.
(4) As reported in a Schedule 13G amendment filed jointly on February 12, 1999
by T. Rowe Price Associates, Inc. ("Price Associates") and T. Rowe Price
Small Cap Value Fund, Inc. ("Price Small Cap Value"). These securities are
owned by various individual and institutional investors including Price
Small Cap Value (which owns 715,000 shares) which Price Associates serves
as investment adviser with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(5) As reported in a Schedule 13G amendment filed on February 11, 1999 by
Dimensional Fund Advisors Inc. ("Dimensional"). Dimensional, an investment
advisor registered under Section 203 of the Investment Advisors Act of
1940, furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and services as investment
manager to certain other investment vehicles, including commingled group
trusts. (These investment companies and investment vehicles are the
"Portfolios"). In its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over the Company's
shares owned by the Portfolios. All such securities are owned by the
portfolios, and Dimensional disclaims beneficial ownership of such
securities.
(6) Includes the following numbers of shares of the Company Common Stock
subject to outstanding options which are exercisable within 60 days of
April 30, 1999 (without regard to the effects of the Offer): Eugene M.
Herson, 187,500; Richard A. Peluso, 63,750; R. Michael Momboisse, 85,750;
Peter Vardy, 8,000; Mark H. Shipps, 17,500; Patrick Gillespie, 15,000;
Douglas P. Crane, 10,000; Donald R. Kerstetter, 8,000; Franklin J. Agardy,
2,000; and all executive officers and directors as a group 423,750.
16. Dividends and Distributions.
According to the Company's 1998 Annual Report on Form 10-K filed with the
Commission, although the Company has made annual distributions to a minority
shareholder of one if its indirect subsidiaries, the Company did not declare
or pay any cash dividends to its shareholders during the fiscal years ended
December 31, 1997 and December 31, 1998 and does not plan to pay cash
dividends to its shareholders in the near future. Furthermore, the payment of
cash dividends is restricted by the Company's bank line of credit arrangement.
The Company presently intends to retain earnings for further development of
its business.
In addition, pursuant to the terms of the Merger Agreement, the Company is
not permitted, without the consent of Parent (which consent shall not be
unreasonably withheld) to declare or pay dividends on or make any other
distributions (whether in cash or property) in respect of any of its capital
stock (other than distributions declared with respect to the capital stock of
any subsidiary of the Company in the ordinary course of business consistent
with past practice), or split, combine, reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock.
17. Effects of the Offer on the Market for Shares; Exchange Listing and
Exchange Act Registration.
Possible Effects of the Offer on the Market for the Shares
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public. It is expected that, following the
Offer, a large percentage of the Shares will be owned by Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares
34
<PAGE>
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Shares or whether it would
cause future market prices to be greater or less than the Offer Price
therefor.
Stock Quotation
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq.
The maintenance for continued inclusion requires the Company to substantially
meet one of two maintenance standards. The Company must have either (a)(i) at
least 750,000 publicly held shares, (ii) at least 400 shareholders of round
lots, (iii) a market value of at least $5 million, (iv) a minimum bid price
per Share of $1.00, (v) at least two registered and active market makers for
its Shares and (vi) net tangible assets of at least $4 million, or (b)(i) at
least 1,100,000 publicly held shares, (ii) at least 400 shareholders of round
lots, (iii) a market value of at least $15 million, and (iv) either (x) a
market capitalization of at least $50 million or (y) total assets and total
revenue of at least $50 million each for the most recently completed fiscal
year or two of the last three most recently completed fiscal years, (v) a
minimum bid price per Share of $5.00 and (vi) at least four registered and
active market makers. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the Shares are not
considered as being publicly held for this purpose.
If, as a result of the purchase of the Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq or in any other tier of the Nasdaq Stock
Market, and the Shares are, in fact, no longer included in the Nasdaq or in
any other tier of the Nasdaq Stock Market, the market for Shares could be
adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it may be possible
that the Shares would continue to trade in the over-the-counter market and
that price quotations would be reported by other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of Shares remaining at such time,
the interest in maintaining a market in Shares on the part of securities
firms, the possible termination of registration of the Shares under the
Exchange Act, as described below, and other factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. The termination of the registration
of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and
to the Commission and would make certain provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirements of furnishing a proxy statement in connection with shareholders'
meetings and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares.
In addition, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for Nasdaq market
reporting. Parent currently intends to seek to cause the Company to terminate
the registration of the Shares under the Exchange Act promptly after the
Effective Time as the requirements for termination of registration are met.
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares for the purpose of buying,
carrying or trading in securities ("Purpose Loans"). Depending upon factors
similar to those described above regarding the continued listing,
35
<PAGE>
public trading and market quotations of the Shares, it is possible that,
following the consummation of the transactions contemplated by the Merger
Agreement, the Shares would no longer constitute "margin securities" for the
purposes of the margin regulations of the Federal Reserve Board and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers.
18. Certain Conditions of the Offer.
Notwithstanding any other provisions of the Offer or the Merger Agreement,
and subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to Parent's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer), Purchaser shall not be required to accept for
payment or pay for any tendered Shares, shall delay the acceptance for payment
of any tendered Shares, and (subject to the terms of the Merger Agreement)
shall extend the Offer by one or more extensions, if (i) the Minimum Condition
is not satisfied prior to the Expiration Date; (ii) any applicable waiting
period under the HSR Act shall not have expired or been terminated prior to
the Expiration Date, or (iii) at any time after the date of the Merger
Agreement, and prior to the Expiration Date, any of the following conditions
exist:
(a) any statute, rule, regulation, legislation, ruling, judgment, order
or injunction enacted, enforced, promulgated, amended, issued or deemed
applicable to the Offer or the Merger, by any governmental entity of
competent jurisdiction that (i) makes illegal or otherwise prohibits
consummation of the Offer or the Merger, (ii) prohibits or materially
limits the ownership or operation by Parent or Purchaser of all or any
substantial portion of the business or assets of the Company (or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as
a whole), or compels Parent or Purchaser to dispose of, divest or hold
separately all or any substantial portion of the business or assets of
Parent, Purchaser or the Company or its subsidiaries, individually or taken
as a whole, or imposes any material limitation on the ability of Parent or
Purchaser to conduct its business or own such assets, (iii) imposes any
material limitation on the ability of Parent or Purchaser effectively to
acquire, hold or exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Purchaser or Parent on the adoption of the Merger Agreement and
all other matters properly presented to the Company's shareholders, (iv)
requires divestiture by Parent or Purchaser of any Shares or (v) results in
a Material Adverse Effect on the Company;
(b) there shall be instituted and pending any action or proceeding by any
governmental entity that would reasonably be expected to result in any of
the consequences referred to in clauses (i) through (v) of the preceding
paragraph (a);
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) any of the representations and warranties of the Company set forth in
the Merger Agreement, when read without any exception or qualification as
to materiality or Material Adverse Effect, shall not be true and correct,
as if such representations and warranties were made immediately prior to
the consummation of the Offer (except as to any such representation or
warranty which speaks as of a specific date, which must be untrue or
incorrect as of such specific date), except where the failure or failures
to be so true and correct, individually or in the aggregate, do not and
would not reasonably be expected to have a Material Adverse Effect on the
Company;
(e) the Company shall have failed to perform or to comply with any of its
obligations, covenants or agreements under the Merger Agreement in any
material respect;
(f) there shall have occurred any events or changes which have had or
which are likely to have a Material Adverse Effect on the Company, or
(g) the Board shall have withdrawn, or modified or changed in a manner
adverse to Parent (including by amendment of the Schedule 14D-9), its
recommendation of the Offer, the Merger Agreement or the Merger, or
recommended another proposal or offer for the acquisition of the Company,
or the Board shall have resolved to do any of the foregoing.
36
<PAGE>
The foregoing conditions are for the benefit of Parent and Purchaser and may
be asserted by Parent or Purchaser regardless of the circumstances giving rise
to any such conditions (except for any action or inaction in material breach
of the Merger Agreement by Parent or Purchaser) and, except for the Minimum
Condition, may be waived by Parent or Purchaser, in whole or in part, at any
time and from time to time in their sole discretion, in each case, subject to
the terms of the Merger Agreement. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
19. Certain Legal Matters; Regulatory Approvals.
General
Except as described below, based upon an examination of publicly available
filings made by the Company with the Commission, other publicly available
information about the Company and the representations and warranties of the
Company in the Merger Agreement, neither Purchaser nor Parent is aware of any
license or regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by Purchaser's acquisition of Shares pursuant to the Offer, or of any
approval or other action by any governmental, administrative or regulatory
agency or authority or public body, domestic or foreign, that would be
required for the acquisition or ownership of Shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, it is
presently contemplated that such approval or action would be sought except as
described below in this Section 19 under "State Takeover Statutes." While,
except as otherwise expressly described herein, Purchaser currently does not
intend to delay acceptance for payment of Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
Company's business or that certain parts of the Company's business might not
have to be disposed of in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action, any of which could cause Purchaser to decline to accept for
payment or pay for any Shares tendered. Purchaser's obligation under the Offer
to accept for payment and pay for Shares is subject to the conditions set
forth in "THE TENDER OFFER--18. Certain Conditions of the Offer," including
conditions relating to legal matters discussed in this Section 19.
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied. The acquisition
of Shares pursuant to the Offer is subject to such requirements.
Purchaser expects to file a Notification and Report Form with the FTC and
the Antitrust Division with respect to the Offer under the HSR Act as soon as
practicable following commencement of the Offer. The waiting period under the
HSR Act with respect to the Offer will expire at 11:59 p.m., Washington D.C.
time, on the 15th day after the date such form is filed, unless early
termination of the waiting period is granted. In addition, the Antitrust
Division or the FTC may extend such waiting period by requesting additional
information or documentary material from Purchaser. If such a request is made
with respect to the Offer, the waiting period related to the Offer will expire
at 11:59 p.m. Washington D.C. time on the 10th day after substantial
compliance by Purchaser with such request. With respect to each acquisition,
the Antitrust Division or the FTC may issue only one request for additional
information. In practice, complying with a request for additional information
or material can take a significant amount of time. In addition, if the
Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties may engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. Expiration or termination of applicable waiting periods under the
HSR Act is a condition to Purchaser's obligation to accept for payment and pay
for Shares tendered pursuant to the Offer.
37
<PAGE>
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
by Purchaser pursuant to the Offer. At any time before or after such purchase,
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the transaction or seeking divestiture of the Shares so
acquired or divestiture of substantial assets of Purchaser, Parent or the
Company. Litigation seeking similar relief could be brought by private
parties.
Purchaser does not believe that consummation of the Offer and the other
transactions contemplated by the Merger Agreement will result in violation of
any applicable antitrust laws. However, there can be no assurance that a
challenge to the Offer and the other transactions contemplated by the Merger
Agreement on antitrust grounds will not be made, or if such a challenge is
made, what the result will be. See "TENDER OFFER--18. Certain Conditions of
the Offer" for certain conditions to the purchase of the Shares in the Offer,
including conditions with respect to litigation and certain other governmental
actions.
State Takeover Statutes
A number of states have adopted "takeover" statutes that purport to apply to
attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
that have substantial assets, security holders, employees, principal executive
offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, the Supreme Court held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without prior approval of the remaining shareholders,
provided that such laws were applicable under certain conditions, in
particular, that the corporation has a substantial number of shareholders in
the state and is incorporated there.
Since January 1, 1999, the Company, directly or through subsidiaries, has
leased space in 20 states and performed work in 44 states in the United
States, and some of these states have enacted takeover statutes. Purchaser
does not know whether any of these statutes will, by their terms, apply to the
Offer, and Purchaser has not complied with any such statutes. To the extent
that certain provisions of these statutes purport to apply to the Offer,
Purchaser believes that there are reasonable bases for contesting such
statutes. If any person should seek to apply any state takeover statute,
Purchaser would take such action as then appears desirable, which action may
include challenging the validity or applicability of any such statute in
appropriate court proceedings. If it is asserted that one or more takeover
statutes apply to the Offer and it is not determined by an appropriate court
that such statute or statutes do not apply or are invalid as applied to the
Offer, Purchaser might be required to file certain information with, or
receive approvals from, the relevant state authorities, and Purchaser might be
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
or be delayed in continuing or consummating the Offer. In such case, Purchaser
may not be obligated to accept for payment or pay for Shares tendered pursuant
to the Offer.
20. Fees and Expenses.
CIBC World Markets Corp. ("CIBC World Markets") is acting as Dealer Manager
for the Offer and as Parent's exclusive financial advisor in connection with
Parent's proposed acquisition of the Company, for which services CIBC World
Markets will receive customary compensation. Parent also has agreed to
reimburse CIBC World Markets for reasonable out-of-pocket expenses (including
reasonable fees and expenses of its legal counsel), and to indemnify CIBC
World Markets and certain related parties against certain liabilities,
including liabilities under the federal securities laws, arising out of its
engagement. In the ordinary course of business, CIBC World Markets and its
affiliates may actively trade or hold the securities of Parent and the Company
for their own account or for the account of customers and, accordingly, may at
any time hold a long or short position in such securities.
38
<PAGE>
Purchaser has retained MacKenzie Partners, Inc. to act as the Information
Agent and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent and the Dealer Manager may
contact holders of Shares by mail, telephone, telegraph and personal interview
and may communicate with brokers, dealers, commercial banks and trust
companies and other nominee shareholders with respect to the Offer or to
request such brokers, dealers, commercial banks and trust companies and other
nominee shareholders to forward the Offer materials to beneficial owners of
the Shares. The Information Agent will receive a fee for services as
Information Agent not to exceed $7,500 and will be reimbursed for certain out-
of-pocket expenses. The Depositary will receive reasonable and customary
compensation for services relating to the Offer and will be reimbursed for
certain out-of-pocket expenses. Purchaser has also agreed to indemnify the
Information Agent and the Depositary against certain liabilities and expenses
in connection with the Offer, including certain liabilities under the federal
securities laws.
Purchaser will not pay any fees or commissions to any broker or dealer or
any other person for soliciting tenders of Shares pursuant to the Offer (other
than to the Information Agent or the Dealer Manager). Brokers, dealers,
commercial banks, trust companies and other nominees will, upon request, be
reimbursed by Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
21. Miscellaneous.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. Purchaser may, in its
discretion, however, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in any
such jurisdiction.
Except for the Depositary's authorization to enter into agreements or
arrangements with the Book-Entry Transfer Facility, no person has been
authorized to give any information or to make any representation on behalf of
Purchaser not contained herein or in the Letter of Transmittal and, if given
or made, such information or representation must not be relied upon as having
been authorized. Neither the delivery of this Offer to Purchase nor any
purchase pursuant to the Offer shall, under any circumstances, create any
implication that there has been no change in the affairs of Purchaser or the
Company since the date as of which information is furnished or the date of
this Offer to Purchase.
Purchaser and Parent have filed with the Commission the Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. In
addition, the Company has filed with the Commission the Schedule 14D-9,
together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting
forth the recommendations of the Board with respect to the Offer and the
reasons for such recommendations and furnishing certain additional related
information. Such Schedules and any amendments thereto, including exhibits,
may be inspected and copies may be obtained from the Commission in the manner
set forth in "THE TENDER OFFER--7. Certain Information Concerning the
Company--Company Available Information" (except that they will not be
available at the regional offices of the Commission).
SEISMIC ACQUISITION CORPORATION
May 17, 1999
39
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, principal occupation or employment
at the present time and during the last five years, and the name of any
corporation or other organization in which such employment is conducted or was
conducted of each executive officer and director of the Company. Except as
otherwise indicated, all of the persons listed below are citizens of the
United States. The business address of each director and executive officer of
the Company is 400 South Camino Real, Suite 1200, San Mateo California 99402,
unless otherwise set forth below. Directors of the Company are indicated with
an asterisk. Unless otherwise indicated, none of the persons listed below have
bought or sold any Company Common Stock within the past 60 days.
<TABLE>
<CAPTION>
Name, Citizenship and Present Occupation Material Positions Held
Current Business Address or Employment During The Past Five Years
------------------------ ------------------ --------------------------
<S> <C> <C>
*Dr. Franklin J. Agardy... President of Forensic President of FMA from 1988 to
Management Associates, Inc. present.
("FMA").
Member of the Audit Committee
and Director of the Company
since 1998.
*Douglas P. Crane......... Chairman of CJM Associates, Chairman of CJM from February
Inc. ("CJM"). Chairman of the 1989 to present.
Board, member of the Executive
Committee, Audit Committee,
Compensation Committee and
Director of the Company since
1992.
*Eugene M. Herson......... President and Chief Executive President and Chief Executive
Officer of the Company. Member Officer of the Company from
of the Executive Committee and October 1994 to present; Vice
Director of the Company since President--Special Operations
1985. of the Company from April 1993
to October 1994.
*Donald R. Kerstetter..... Member of the Audit Committee, President of ET Environmental
Compensation Committee and Corporation from May 1994 to
Director of the Company since December 1997; was an employee
1994. of Turner Construction Company
since 1956 and served as an
officer of Turner from 1976
until his retirement in 1996
from his position as Executive
Vice President of Turner.
*Richard A. Peluso........ Vice President and Director of Vice President of the Company
the Company since 1996. from April 1994 to present;
Senior Vice President of
Wehran Envirotech, Inc. from
June 1972 to April 1994.
*Peter Vardy.............. Managing Director of Peter Managing Director of PV&A from
Vardy & Associates ("PV&A"). June 1990 to present.
Member of the Executive
Committee, Compensation
Committee and Director of the
Company since 1994.
</TABLE>
I-1
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY--(Continued)
<TABLE>
<CAPTION>
Name, Citizenship and Present Occupation Material Positions Held
Current Business Address or Employment During The Past Five Years
------------------------ ------------------ --------------------------
<S> <C> <C>
R. Michael Momboisse..... Chief Financial Officer, Vice Chief Financial Officer and
President--Legal and Secretary Vice President--Legal of the
of the Company Company from July 1993 to
present and Secretary of the
Company from 1996 to present.
Vincent Franceschi....... Vice President of the Company Vice President of the Company
from May 1998 to present and
Area Operations Manager of the
Southwest areas of the
Company's Professional
Services Division ("PSD") from
April 1998 to present;
President and Chief Operating
Officer of Vectra
Technologies, Inc. ("Vectra")
from April 1997 to December
1997; Vice President and
General Manager of Vectra from
January 1994 to March 1997.
Patrick Gillespie........ Vice President of the Company Vice President of the Company
from May 1998 to present and
Area Operations Manager of the
North areas of the Company's
PSD from April 1994 to
present.
John Kinsella............ Vice President of the Company Vice President of the Company
(citizen of the United Kingdom) from May 1998 to present and
Area Operations Manager of the
Northwest areas of the
Company's PSD from April 1998
to present; Vice President of
SCS Engineers from January
1992 to April 1998.
Gary McEntee............. Vice President of the Company Vice President of the Company
in charge of business
development from February 1997
to present; Manager of the
Company's Northeast and East
Consulting areas from April
1994 to February 1997.
Alan Ortiz............... Vice President of the Company Vice President of the Company
from May 1998 to present and
Area Operations Manager of the
South areas of the Company's
PSD from September 1996 to
present; Senior Manager at
KPMG Peat Marwick Consulting
from September 1995 to
September 1996; Vice President
of Golder Associates from
October 1991 to August 1995.
Mark A. Shipps........... Vice President of the Company Vice President of the Company
from May 1998 to present;
President of Organic Waste
Technologies, Inc., a wholly
owned subsidiary of the
Company, from 1990 to present.
</TABLE>
I-2
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER
The following table sets forth the name, principal occupation or employment
at the present time and during the last five years, and the name of any
corporation or other organization in which such employment is conducted or was
conducted of each executive officer or director of Parent. Except as otherwise
indicated, all of the persons listed below are citizens of the United States
of America. Unless otherwise indicated, the principal business address of each
director or executive officer of Parent is 2790 Mosside Boulevard,
Monroeville, Pennsylvania 15146-2792. Directors of Parent are indicated with
an asterisk. None of the persons listed below have bought or sold any Company
Common Stock within the past 60 days.
<TABLE>
<CAPTION>
Name, Citizenship and Present Occupation Material Positions Held
Current Business Address or Employment During the Past Five Years
------------------------ ------------------ --------------------------
<S> <C> <C>
*Daniel A. D'Aniello...... Managing Director of the Managing Director of Carlyle
Carlyle Group ("Carlyle"). from 1987 to the present.
Chairman of the Executive
Committee, member of the
Compensation Committee and
Director of Parent since 1996.
*Anthony J. DeLuca........ Chief Executive Officer and Chief Executive Officer and
President of Parent. Member of President of Parent from July
the Executive Committee and 1997 to the present; President
Director of Parent since 1996. and acting Chief Executive
Officer of Parent from July
1996 to July 1997; Senior Vice
President and Chief Financial
Officer of Parent from March
1990 to July 1997.
*Philip B. Dolan.......... Principal of Carlyle. Member Principal of Carlyle from 1998
of the Executive Committee, to the present; Vice President
Compensation Committee and of Carlyle from 1992 to 1998.
Director of Parent since 1996.
*E. Martin Gibson......... Chairman of the Audit Chairman of the Board of
Committee and Director of Directors of Parent from April
Parent since 1994. 1995 to November 1996;
Chairman of Corning Life
Sciences, Inc. from 1992 to
December 1994.
*James C. McGill.......... Director and Private Investor. Director of Parent from 1990
Member of the Audit Committee to the present; Private
and Director of Parent since investor for the last 5 years.
1990.
*Richard W. Pogue......... Member of the Audit Committee A consultant with Dix & Eaton;
and Director of Parent since Lawyer with the law firm
June 1998. Jones, Day, Reavis & Pogue
from 1961 to June 1994.
*Robert F. Pugliese....... Special Counsel to Eckert Special Counsel to Eckert from
Seamans Cherin & Mellott 1993 to the present.
("Eckert"). Member of the
Audit Committee and Director
of Parent since 1996.
*Charles W. Schmidt....... Member of the Compensation Senior Vice President,
Committee and Director of External Affairs of Raytheon
Parent since June 1998. Company, and President and
Chief Executive Officer of SCA
Services, Inc.
</TABLE>
II-1
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER--(Continued)
<TABLE>
<CAPTION>
Name, Citizenship and Current Present Occupation Material Positions Held
Business Address or Employment During the Past Five Years
----------------------------- ------------------ --------------------------
<S> <C> <C>
*Admiral James David Watkins.. President of the Joint President of JOI from 1993 to
Oceanographic Institutions, the present; President of
Inc. ("JOI"). Member of the Consortium Oceanographic
Compensation Committee and Research and Education from
Director of Parent since 1996. 1994 to the present; Secretary
of Energy under President Bush
from 1989 to 1993.
David L. Backus........... Senior Vice President, Senior Vice President,
Outsourced Services and Outsourced Services and
International of Parent. International of Parent from
December 1998 to the present;
Vice President, Western
Operations of Fluor Daniel
GTI, Inc. from 1992
to December 1998.
James G. Kirk............. Vice President, General Vice President, General
Counsel and Secretary of Counsel and Secretary of
Parent. Parent from September 1996 to
the present; General Counsel,
Eastern Operations of Parent
from 1991 to September 1996.
James R. Mahoney.......... Senior Vice President, Senior Vice President,
Consulting and Ventures of Consulting and Ventures of
Parent. Parent from July 1996 to the
present; Senior Vice
President, Technical
Operations and Corporate
Development of Parent from
March 1995 to July 1996;
Senior Vice President,
Corporate Development and
Sales of Parent from April
1992 to March 1995.
Raymond J. Pompe.......... Senior Vice President, Senior Vice President,
Engineering and Construction Engineering and Construction
of Parent. of Parent from July 1996 to
the present; Senior Vice
President, Project Operations
of Parent from March 1995 to
July 1996; Vice President,
Construction and Remediation
of Parent from 1988 to March
1995.
Philip O. Strawbridge..... Senior Vice President and Senior Vice President and
Chief Administrative Officer Chief Administrative Officer
of Parent. of Parent from May 1998 to the
present; Senior Vice
President, Chief Financial and
Administrative Officer of OHM
Corporation from February 1996
to May 1998; Senior Director
of Contracts and Finance of
Fluor Daniel, Inc. prior to
February 1996.
</TABLE>
II-2
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER--(Continued)
The following table sets forth the name, principal occupation or employment
at the present time and during the last five years, and the name of any
corporation or other organization in which such employment is conducted or was
conducted of each executive officer or director of Purchaser. Except as
otherwise indicated, all of the persons listed below are citizens of the
United States of America. Unless otherwise indicated, the principal business
address of each director or executive officer of Purchaser is 2790 Mosside
Boulevard, Monroeville, Pennsylvania 15146-2792. Directors of Purchaser are
indicated with an asterisk. None of the persons listed below have bought or
sold any Company Common Stock within the past 60 days.
<TABLE>
<CAPTION>
Name, Citizenship and Present Occupation Material Positions Held
Current Business Address or Employment During the Past Five Years
------------------------ ------------------ --------------------------
<S> <C> <C>
*James G. Kirk............ Chief Executive Officer and Vice President, General
President of Purchaser. Vice Counsel and Secretary of
President, General Counsel and Parent from September 1996 to
Secretary of Parent. Director the present; General Counsel,
of Purchaser since 1999. Eastern Operations of Parent
from 1991 to September 1996.
*James M. Redwine......... Secretary of Purchaser. Senior Currently Senior Corporate
Corporate Counsel and Counsel and Assistant
Assistant Secretary of Parent. Secretary of Parent and has
Director of Purchaser since been an employee of Parent for
1999. the past five years. He has
held the positions of
Corporate Counsel and
Associate Counsel of Parent.
*Harry J. Soose........... Chief Financial Officer and Currently Vice President,
Vice President of Purchaser. Finance and Controller of
Vice President, Finance and Parent and has been an
Controller of Parent. Director employee of Parent since 1991.
of Purchaser since 1999. He has held positions of Vice
President and Controller and
Controller, Construction and
Remediation Division of
Parent.
Richard R. Conte.......... Treasurer of Purchaser. Vice Vice President and Treasurer
President and Treasurer of of Parent from June 1997 to
Parent. present; Chairman, President
and Principal Financial
Officer of Rymac Mortgage
Investment Corporation,
a publicly traded REIT, which
in 1996 became known as Core
Materials Corporation, from
1992 to May 1997.
James R. Mahoney.......... Vice President of Purchaser. Senior Vice President,
Senior Vice President, Consulting and Ventures of
Consulting and Ventures of Parent from July 1996 to the
Parent. present; Senior Vice
President, Technical
Operations and Corporate
Development of Parent from
March 1995 to July 1996;
Senior Vice President,
Corporate Development and
Sales of Parent from April
1992 to March 1995.
</TABLE>
II-3
<PAGE>
ANNEX A
TEXT OF CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
<TABLE>
<C> <S>
Section
-------
1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions.
1301. Notice to holders of dissenting shares in reorganizations; demand for
purchase; time; contents.
1302. Submission of share certificates for endorsement; uncertificated
securities.
1303. Payment of agreed price with interest; agreement fixing fair market
value; filing; time of payment.
1304. Action to determine whether shares are dissenting shares or fair
market value; limitation; joinder; consolidation; determination of
issues; appointment of appraisers.
1305. Report of appraisers; confirmation; determination by court; judgment;
payment; appeal; costs.
1306. Prevention of immediate payment; status as creditors; interest.
</TABLE>
<TABLE>
<C> <S>
Section
-------
1307. Dividends on dissenting shares.
1308. Rights of dissenting shareholders pending valuation; withdrawal of
demand for payment.
1309. Termination of dissenting share and shareholder status.
1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval.
1311. Exempt shares.
1312. Right of dissenting shareholder to attack, set aside or rescind merger
or reorganization; restraining order or injunction; conditions.
</TABLE>
(S) 1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair
market value the shares owned by the shareholder which are dissenting shares
as defined in subdivision (b). The fair market value shall be determined as of
the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or
depreciation in consequence of the proposed action, but adjusted for any stock
split, reverse stock split, or share dividend which becomes effective
thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any
A-1
<PAGE>
class of shares described in subparagraph (A) or (B) if demands for payment
are filed with respect to 5 percent or more of the outstanding shares of
that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record. (Added by
Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1976, c. 641,
(S) 21.3, eff. Jan. 1, 1977; Stats.1982, c. 36, p. 69, (S) 3, eff. Feb. 17,
1982; Stats.1990, c. 1018 (A.B.2259), (S) 2; Stats.1993, c. 543 (A.B.2063),
(S) 13.)
(S) 1301. Notice to holders of dissenting shares in reorganizations; demand
for purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision
(b) of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such
price. (Added by Stats.1975, c. 682, (S) 7, eff. Jan. 1, 1977. Amended by
Stats.1976, c. 641, (S) 21.6, eff. Jan. 1, 1997; Stats.1980, c. 501, p. 1052,
(S) 5; Stats.1980, c. 1155, p. 3831, (S) 1.)
(S) 1302. Submission of share certificates for endorsement; uncertificated
securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the
A-2
<PAGE>
corporation purchase, to be stamped or endorsed with a statement that the
shares are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed or (b) if the shares are
uncertificated securities, written notice of the number of shares which the
shareholder demands that the corporation purchase. Upon subsequent transfers
of the dissenting shares on the books of the corporation, the new
certificates, initial transaction statement, and other written statements
issued therefor shall bear a like statement, together with the name of the
original dissenting holder of the shares. (Added by Stats.1975, c. 682, (S) 7,
eff. Jan. 1, 1977. Amended by Stats.1986, c. 766, (S) 23.)
(S) 1303. Payment of agreed price with interest; agreement fixing fair market
value; filing, time of payment
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement. (Added by Stats.1975, c.
682, (S) 7, eff. Jan. 1, 1977. Amended by Stats.1980, c. 501, p. 1053, (S) 6;
Stats.1986, c. 766, (S) 24.)
(S) 1304. Action to determine whether shares are dissenting shares or fair
market value; limitation; joinder; consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152)
or notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares. (Added by
Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.)
(S) 1305. Report of appraisers; confirmation; determination of court;
judgment; payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of
any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market
value of each dissenting share multiplied by the number of
A-3
<PAGE>
dissenting shares which any dissenting shareholder who is a party, or who has
intervened, is entitled to require the corporation to purchase, with interest
thereon at the legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than
125 percent of the price offered by the corporation under subdivision (a) of
Section 1301). (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977. Amended
by Stats.1976, c. 641, (S) 22, eff Jan. 1, 1977; Stats.1977, c. 235, p. 1068,
(S) 16; Stats.1986, c. 766, (S) 25.)
(S) 1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5. (Added by Stats.1975, c. 682,
(S) 7, eff Jan. 1, 1977.)
(S) 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.)
(S) 1308. Rights of dissenting shareholders pending valuation; withdrawal of
demand for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1,
1977.)
(S) 1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys'
fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i)
of Section 1110 was mailed to the shareholder.
A-4
<PAGE>
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting, shares.
(Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.)
(S) 1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation. (Added by Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977.)
(S) 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect
to such shares in the event of a reorganization or merger. (Added by
Stats.1975, c. 682, (S) 7, eff Jan. 1, 1977. Amended by Stats.1988, c. 919,
(S) 8.)
(S) 1312. Right of dissenting shareholder to attack, set aside or rescind
merger or reorganization; restraining order or injunction; conditions
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set
aside or rescinded, except in an action to test whether the number of shares
required to authorize or approve the reorganization have been legally voted in
favor thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event
of a reorganization or short-form merger is entitled to payment in accordance
with those terms and provisions or, if the principal terms of the
reorganization are approved pursuant to subdivision (b) of Section 1202, is
entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash
for such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable
as to the shareholders of any party so controlled. (Added by Stats.1975, c.
682, (S) 7, eff Jan. 1, 1977. Amended by Stats.1976, c. 641, (S) 22.5, eff
Jan. 1, 1977; Stats.1988, c. 919, (S) 9.)
A-5
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and Share Certificates should be sent or
delivered by each shareholder of the Company or his or her broker, dealer,
commercial bank or trust company to the Depositary at one of its addresses set
forth below:
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By First Class Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, New Jersey 07606 Mail Drop-Reorg New York, New York 10271
Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department
Attn: Reorganization Department
By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call:
(For Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth below. Requests for additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent. Shareholders may also contact their brokers, dealers, commercial banks
or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
[LOGO OF CIBC WORLD MARKETS]
One World Financial Center
New York, New York 10281
(212) 856-3540
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
EMCON
AT
$6.75 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED MAY 17, 1999
BY
SEISMIC ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
THE IT GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By First Class Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, New Jersey 07606 Mail Drop-Reorg New York, New York 10271
Attn: Reorganization Department Ridgefield Park, New Jersey 07660 Attn: Reorganization Department
Attn: Reorganization Department
</TABLE>
<TABLE>
<S> <C>
By Facsimile Transmission: To Confirm Facsimile Transmission Only, Call:
(For Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
<TABLE>
<CAPTION> DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
delivered to the Depositary are being tendered. See Instruction 4
accompanying this Letter of Transmittal.
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR, WITH SIGNATURE
GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH IN THIS
LETTER OF TRANSMITTAL. SEE INSTRUCTIONS 1, 5 AND 10 ACCOMPANYING THIS LETTER
OF TRANSMITTAL.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY AND IN THEIR ENTIRETY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized if delivery is to be made by book-entry transfer to the
account maintained by the Depositary at The Depositary Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Shareholders whose certificates are not
immediately available or who cannot deliver their certificates or deliver
confirmation of the book-entry transfer of their Shares (as defined below)
into the Depositary's account at the Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary prior
to the Expiration Date (as defined in the Offer to Purchase) must tender their
Shares according to the guaranteed delivery procedures set forth in Section 2
of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If Delivered by Book-Entry Transfer, Check box: [ ]
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS TO THIS
LETTER OF TRANSMITTAL CAREFULLY AND IN ITS ENTIRETY.
Ladies and Gentlemen:
The undersigned hereby tenders to Seismic Acquisition Corporation, a
California corporation ("Purchaser"), which is a newly formed, wholly owned
subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), the
above-described shares of common stock, no par value per share (the "Company
Common Stock"), of EMCON, a California corporation (the "Company"), pursuant
to Purchaser's offer to purchase all of the issued and outstanding shares (the
"Shares") of the Company Common Stock upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 17, 1999 (the "Offer
to Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase, constitute the
"Offer"), at the purchase price of $6.75 per Share, net to each tendering
shareholder in cash, without interest (the "Offer Price").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, and transfers to, upon the order
of Purchaser, all right, title and interest in and to all the Shares that are
being tendered hereby and irrevocably constitutes and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares (and any
such other Shares or securities) on the account books maintained by the Book-
Entry Transfer Facility, together, in either such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of Purchaser, (b)
present such Shares for transfer on the books of the Company and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares, all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or his or
her substitute shall in his or her sole discretion deem proper, and otherwise
act (including pursuant to written consent) with respect to all the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of such vote or action, which the undersigned is entitled to vote at any
meeting of shareholders (whether annual or special and whether or not an
adjourned meeting) of the Company, or consent in lieu of any such meeting, or
otherwise. This proxy is coupled with an interest in the Company and in the
Shares and is irrevocable and is granted in consideration of the deposit by
Purchaser with the Depositary of the Offer Price for such Shares in accordance
with the terms of the Offer. Purchaser's acceptance for payment of the Shares
shall revoke all proxies granted by the undersigned at any time with respect
to such Shares and no subsequent proxies will be given (and if given will be
deemed not to be effective) with respect thereto by the undersigned.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and that, when the same are accepted for payment by Purchaser,
Purchaser will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and the same will not be
subject to any adverse claim. The undersigned, upon request, will execute and
deliver any additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
3
<PAGE>
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer.
Unless otherwise indicated herein under "Special Payment Instructions," the
undersigned hereby directs that the check for the total purchase price or any
certificates for Shares not tendered or accepted for payment be issued in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," the undersigned hereby directs that the check
for the total purchase price or the return of any certificates for Shares not
tendered or accepted for payment (and accompanying documents, as appropriate)
be mailed to the undersigned at the address shown below the undersigned's
signature. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, the undersigned hereby directs the
check for the total purchase price or any certificates for Shares not tendered
or accepted for payment be issued in the name of, and such check or such
certificates be mailed to, the person or persons so indicated. Shareholders
delivering Shares by book-entry transfer may request that any Shares not
accepted for payment be returned by crediting such account maintained at the
Book-Entry Transfer Facility by making an appropriate entry under "Special
Payment Instructions." The undersigned recognizes that Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if Purchaser does not accept
for payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if certif-
icates for Shares not tendered To be completed ONLY if certif-
or not purchased and/or the icates for Shares not tendered
check for the Offer Price of or not purchased and/or the
Shares purchased are to be is- check for the Offer Price of
sued in the name of someone Shares purchased are to be sent
other than the undersigned, or to someone other than the under-
if Shares delivered by book-en- signed, or to the undersigned at
try transfer which are not pur- an address other than that shown
chased are to be returned by above.
credit to an account maintained
at the Book-Entry Transfer Fa-
cility other than that desig-
nated above.
Issue check and/or certifi-
cate(s) to:
Name: ___________________________
(PLEASE PRINT)
Issue check and/or certifi- Address: ________________________
cate(s) to:
_________________________________
(INCLUDE ZIP CODE)
Name: ___________________________ _________________________________
(PLEASE PRINT) (TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
Address: ________________________
_________________________________
(INCLUDE ZIP CODE)
_________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
[ ] Credit unpurchased Shares
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account.
_________________________________
(ACCOUNT NUMBER)
4
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 included herewith)
X
----------------------------------------------------------------------------
X
----------------------------------------------------------------------------
Signature(s) Of Owner(s)
Dated: ________________________________________________________________, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please provide the
following information. See Instructions 1 and 5.)
Name(s) _____________________________________________________________________
(Please Print)
-----------------------------------------------------------------------------
Capacity (Full Title) _______________________________________________________
(See Instruction 5)
Address _____________________________________________________________________
-----------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number ______________________________________________
Tax Identification or Social Security No. ___________________________________
(Complete Substitute Form W-9 included herewith)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
(Please Print)
Title _______________________________________________________________________
Name of Firm ________________________________________________________________
Address _____________________________________________________________________
-----------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number ______________________________________________
Dated: ______________________________________________________________________
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (a) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions"
above, or (b) if such Shares are tendered for the account of a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (each an "Eligible Institution"). In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by shareholders either if certificates are to
be forwarded herewith or if tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in Section 2 of the
Offer to Purchase. Certificates for all physically tendered Shares, or any
Book-Entry Confirmation of Shares, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
and any other documents required by this Letter of Transmittal must be
received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date (as defined in the Offer to Purchase). Shareholders whose
certificates for Shares are not immediately available or who cannot deliver
their certificates and all other required documents to the Depositary prior to
the Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant
to such procedure, (a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, must be received by
the Depositary prior to the Expiration Date and (c) the certificates for all
physically tendered Shares or Book-Entry Confirmation of Shares, as the case
may be, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), unless an Agent's Message is utilized, and
any other documents required by this Letter of Transmittal, must be received
by the Depositary within three (3) New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided
in Section 2 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-
ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE
TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to shareholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares that are to be tendered in
the box entitled "Number of Shares Tendered" on the front cover page of this
Letter of Transmittal. In such case, new certificate(s) for the remainder of
the Shares that were evidenced by your old certificate(s) will be sent to you,
unless otherwise provided in the appropriate box on this Letter of
Transmittal, as soon as
6
<PAGE>
practicable after the Expiration Date. All Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsement(s) of certificate(s) or
separate stock power(s) are required unless payment or certificate(s) for
Shares not tendered or purchased are to be issued to a person other than the
registered owner(s). Signatures on such certificate(s) or stock power(s) must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of purchased Shares to it or its order pursuant to
the Offer. If payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder, or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such person) payable on account
of the transfer to such person will be deducted from the total purchase price
for all tendered Shares unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check or certificate(s)
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent or such
certificates are to be returned to someone other than the signer of this
Letter of Transmittal or to an address other than that shown above, the boxes
entitled "Special Payment Instructions" or "Special Delivery Instructions"
(whichever the case may be) in this Letter of Transmittal should be completed.
Shareholders tendering Shares by book-entry transfer may request that Shares
not purchased be credited to such account maintained at the Book-Entry
Transfer Facility. If no such instructions are given, such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility.
8. Requests for Assistance or Additional Copies. Requests for assistance may
be directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth below. Additional copies of the
Offer to Purchase and this Letter of Transmittal may be obtained from the
Information Agent or from your broker, dealer, commercial bank or trust
company.
7
<PAGE>
9. Waiver of Conditions. Subject to the terms of the Merger Agreement (as
defined in the Offer to Purchase), the conditions of the Offer may be waived
by Purchaser, in whole or in part, at any time and from time to time in the
Purchaser's sole discretion, in the case of any Shares tendered.
10. Substitute Form W-9. The tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify whether the shareholder is subject to backup withholding of
federal income tax. If a tendering shareholder is subject to backup
withholding, the shareholder must cross out Item (2) of the Certification box
of the Substitute Form W-9. Failure to provide the information on the
Substitute Form W-9 may subject the tendering shareholder to 31% federal
income tax withholding on the payment of all reportable payments made to such
shareholder. If the tendering shareholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, he
or she should write "Applied For" in the space provided for the TIN in Part I,
and sign and date the Substitute Form W-9. If "Applied For" is written in Part
I, the Depositary will withhold 31% on all payments of the purchase price
until a TIN is provided to the Depositary.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is
an individual, the TIN is his or her social security number. If a tendering
shareholder is subject to backup withholding, he or she must cross out Item
(2) of the Certification box on the Substitute Form W-9. Failure to provide
the requisite information on the Substitute Form W-9 may cause the tendering
shareholder to be subject to backup withholding. In addition, failure to
provide the correct information, including the correct TIN, on the Substitute
Form W-9 may cause the shareholder to be subject to various penalties,
including a $50 penalty for each such failure, unless such failure is due to
reasonable cause and not willful neglect.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. Exempt shareholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax owed by persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to (1) notify the Depositary of his or her correct TIN by
8
<PAGE>
completing the form below certifying that the TIN provided on the Substitute
Form W-9 is correct and (2) certify that he or she is not subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for
in the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied
For" is written in Part I, the Depositary will withhold 31% on all payments of
the purchase price until a TIN is provided to the Depositary.
9
<PAGE>
- -------------------------------------------------------------------------------
PAYER'S NAME:
PART I--Please provide -------------------------
your TIN in the box at Social Security Number
right and certify by or Employer
signing and dating Identification Number
below. (if awaiting TIN write
"Applied For")
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY
INTERNAL -----------------------------------------------------
REVENUE SERVICE PART II--For Payees exempt from backup
withholding, see the attached Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
-----------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number; or a Taxpayer
Identification Number has not been issued to
me and either (a) I have mailed or delivered
an application to receive a Taxpayer
Identification Number to the appropriate
Internal Revenue Service ("IRS") center or
Social Security Administration office or (b) I
intend to mail or deliver an application in
the near future. (I understand that if I do
not provide a Taxpayer Identification Number
within 60 days, 31% of all reportable payments
made to me thereafter will be withheld until I
provide a number); and
(2) I am not subject to backup withholding either
because I have not been notified by the IRS
that I am subject to backup withholding as a
result of a failure to report all interest or
dividends, or the IRS has notified me that I
am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are subject to backup withholding be-
cause of underreporting interest or dividends on
your tax return. However, if after being notified
by the IRS that you were subject to backup with-
holding you received another notification from the
IRS that you are no longer subject to backup with-
holding, do not cross out item (2). (Also see in-
structions in the enclosed Guidelines.)
-----------------------------------------------------
SIGNATURE __________________ DATE _________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
<PAGE>
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
[LOGO OF CIBC WORLD MARKETS]
ONE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
(212) 856-3540
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
EMCON
TO
SEISMIC ACQUISITION CORPORATION
a wholly owned subsidiary
OF
THE IT GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates representing issued and
outstanding shares of common stock, no par value per share (the "Shares"), of
EMCON, a California corporation (the "Company"), are not immediately
available, if the procedure for book-entry transfer cannot be completed on a
timely basis or if time will not permit all required documents to reach the
Depositary (as defined in the Offer to Purchase) prior to the Expiration Date
(as defined in the Offer to Purchase). This form may be delivered by hand,
overnight delivery or by first class mail or transmitted by telegram or
facsimile transmission to the Depositary. See Section 2 of the Offer to
Purchase.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By First Class Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th
South Hackensack, New Mail Drop-Reorg Floor
Jersey 07606 Ridgefield Park, New Jersey New York, New York
Attn: Reorganization 07660 Attn: Reorganization 10271
Department Department Attn: Reorganization
Department
By Facsimile Transmission:
(For Eligible Institutions Only) To Confirm Facsimile Transmission Only,
Call:
(201) 296-4293
(201) 296-4860
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Seismic Acquisition Corporation, a
California corporation ("Purchaser"), which is a newly formed, wholly owned
subsidiary of The IT Group, Inc., a Delaware corporation ("Parent"), upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
May 17, 1999 (the "Offer to Purchase") and the related Letter of Transmittal
(which, together with the Offer to Purchase, constitute the "Offer"), receipt
of which is hereby acknowledged. The information regarding the number of
Shares indicated below is provided pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
Certificate No(s): Name(s) of Record Holder(s): _______
(if available) _____________________
____________________________________
Number of Shares: __________________
____________________________________
____________________________________ (Please Type or Print)
Check box if Shares will be Address(es): _______________________
tendered by book-entry
transfer: [_]
Area Code and Tel. No.: ____________
Account Number: ____________________ Signature(s): ______________________
Dated: _______________________, 1999
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, (a) represents that
the above named person(s) "own(s)" the Shares tendered hereby within the
meaning of Rule l4e-4 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (b) represents that such tender of Shares
complies with Rule 14e-4 under the Exchange Act, and (c) guarantees delivery
to the Depositary, at one of its addresses set forth above, of certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
accounts at The Depositary Trust Company, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), and any other required documents, within three (3) New York Stock
Exchange trading days after the date hereof.
____________________________________ ____________________________________
Name of Firm Authorized Signature
____________________________________ ____________________________________
Address Title
____________________________________ Name _______________________________
Zip Code Please Type or Print
Area Code and Tel. No. _____________ Date _________________________, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
One World Financial Center
New York, New York 10281
OFFER TO PURCHASE FOR CASH
ALL ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK
OF
EMCON
AT
$6.75 NET PER SHARE
BY
SEISMIC ACQUISITION CORPORATION
a wholly owned subsidiary
OF
THE IT GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED.
May 17, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged to act as Dealer Manager in connection with the offer
by Seismic Acquisition Corporation, a California corporation ("Purchaser"),
which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a
Delaware corporation ("Parent"), to purchase all of the issued and outstanding
shares of common stock, no par value per share (the "Shares"), of EMCON, a
California corporation (the "Company"), at $6.75 per Share, net to each
tendering shareholder in cash, without interest, upon the terms and subject to
the conditions set forth in Purchaser's Offer to Purchase dated May 17, 1999
(the "Offer to Purchase") and the related Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT WITHDRAWN, AT
LEAST A NUMBER OF SHARES OF THE COMPANY EQUAL TO EIGHTY PERCENT (80%) OF THE
SHARES ISSUED AND OUTSTANDING ON A FULLY DILUTED BASIS. SEE "INTRODUCTION" OF
THE OFFER TO PURCHASE. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS,
INCLUDING, BUT NOT LIMITED TO, RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN
GOVERNMENTAL AND REGULATORY APPROVALS. SEE SECTION 18 OF THE OFFER TO
PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. Offer to Purchase, dated May 17, 1999;
2. Letter of Transmittal, to be used by shareholders of the Company in
accepting the Offer and tendering Shares;
3. Letter to Clients, which may be sent to your clients for whose account
you hold Shares in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;
<PAGE>
4. Notice of Guaranteed Delivery, to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary prior to the
Expiration Date or if the procedures for book-entry transfer, as set forth
in the Offer to Purchase, cannot be completed in a timely manner;
5. A letter to the shareholders of the Company from Douglas P. Crane,
Chairman of the Company, and Eugene M. Herson, President, Chief Executive
Officer and Director of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9, dated May 17,
1999, which has been filed by the Company with the Securities and Exchange
Commission;
6. Guidelines for certification of taxpayer identification number on
Substitute Form W-9; and
7. Return envelope addressed to ChaseMellon Shareholders Services,
L.L.C., as Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all of the Shares
validly tendered pursuant to the Offer prior to the Expiration Date and not
withdrawn in accordance with the provisions set forth in the Offer to
Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Monday, June 14, 1999, unless and until Parent or Purchaser (subject
to any restrictions set forth in the Offer to Purchase) shall from time to
time have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Parent or Purchaser, shall expire.
Purchaser expressly reserves the right to waive any conditions of the Offer
(subject to certain restrictions set forth in the Offer to Purchase), to
increase the Offer Price, to extend the duration of the Offer or to make any
other changes in the terms and conditions of the Offer; provided, however,
that without the Company's prior written consent, no change may be made which
decreases the Offer Price, changes the form of consideration to be paid in the
Offer, reduces the maximum number of Shares to be purchased in the Offer,
imposes any conditions to the Offer in addition to the conditions set forth in
Section 18 of the Offer to Purchase or amends any other material terms of the
Offer in a manner adverse to the Company's shareholders.
If all of the conditions set forth in Section 18 of the Offer to Purchase
are not satisfied by the time of any scheduled termination of the Offer then;
provided that all such conditions are reasonably capable of being satisfied,
Purchaser shall extend the Offer until such conditions are satisfied or
waived; provided further, that Purchaser shall not be required to extend the
Offer beyond July 9, 1999. Purchaser may also (a) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission or (b) extend the Offer for any reason on
one or more occasions for an aggregate of not more than twenty (20) business
days beyond the initial Expiration Date if more than the number of Shares
sufficient to satisfy the Minimum Condition (as defined in the Offer to
Purchase) but less than 90% of the Shares issued and outstanding have been
tendered.
Any extension by Parent shall be effective by giving oral or written notice
of such extension to the Depositary. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of a tendering shareholder to withdraw such
shareholder's Shares. If Parent extends the Offer, or if Purchaser (whether
before or after its acceptance for payment of Shares) is delayed in its
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering shareholders are entitled
to withdrawal rights as described in the Offer to Purchase. However, the
ability of Purchaser to delay payment for Shares that Purchaser has accepted
for payment is limited by Rule 14e-1(c) under the Securities Exchange Act of
1934, as amended.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after either (a)(i) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares and any other
required documents, has been timely received by the Depositary at
<PAGE>
one of its addresses set forth on the back cover of the Offer to Purchase and
(ii) either Share certificates for tendered Shares have been timely received
by the Depositary at one of such addresses or such Shares have been timely
delivered pursuant to the procedure for book-entry transfer set forth in the
Offer to Purchase (and a Book-Entry Confirmation (as defined in the Offer to
Purchase) timely received by the Depositary) or (b) the tendering shareholder
has complied with the guaranteed delivery procedures set forth in the Offer to
Purchase.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Depositary, the Dealer Manager and the
Information Agent as described in the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Offer. However,
Purchaser will upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable on
the transfer of Shares to it, except as otherwise provided in Instruction 6 of
the enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER
IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be
sent to the Depositary and certificates representing the tendered Shares
should be delivered, or such Shares should be tendered by book-entry transfer,
all in accordance with the instructions set forth in the Letter of Transmittal
and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2 in the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
either CIBC World Markets Corp., as the Dealer Manager, or MacKenzie Partners,
Inc., as the Information Agent, at their respective addresses and telephone
numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the
Information Agent at (212) 929-5500 or call toll free (800) 322-2885.
Very truly yours,
CIBC WORLD MARKETS CORP.
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON BEING DEEMED AN AGENT OF PURCHASER, PARENT, THE DEPOSITARY, THE
DEALER MANAGER OR THE INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON
TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS
CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
OF
EMCON
AT
$6.75 NET PER SHARE
BY
SEISMIC ACQUISITION CORPORATION
a wholly owned subsidiary
OF
THE IT GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED.
May 17, 1999
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated May 17, 1999
(the "Offer to Purchase") and the related Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer") relating to an
offer by Seismic Acquisition Corporation, a California corporation
("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT
Group, Inc., a Delaware corporation ("Parent"), to purchase all of the issued
and outstanding shares of common stock, no par value per share (the "Shares"),
of EMCON, a California corporation (the "Company"), at a purchase price of
$6.75 per Share, net to each tendering shareholder in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer to
Purchase (the "Offer Price"). We are the holder of record of Shares held by us
for your account. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares. A tender of
Shares can be made only by us as the holder of record of your Shares and
pursuant to your instructions.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer to Purchase.
Your attention is directed to the following:
1. The Offer Price is $6.75 per Share, net to each tendering shareholder
in cash, without interest.
2. The Offer is being made for all of the Shares.
3. The Offer is being made pursuant to the terms of an Agreement and Plan
of Merger, dated as of May 10, 1999 (the "Merger Agreement"), by and among
the Company, Purchaser and Parent. The Merger Agreement provides, among
other things, for the commencement of the Offer by Purchaser, and further
provides that, following the purchase of Shares pursuant to the Offer and
promptly after the satisfaction or, if permissible, waiver of certain other
conditions, Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation"). At the election of Parent, to the extent that
such action would not cause a failure of a condition to the Offer or the
Merger, the Merger may be structured so that the Company shall be merged
with and into Purchaser with the result that Purchaser shall become the
Surviving Corporation.
At the effective time of the Merger (the "Effective Time"), if the
Purchaser holds at least 90% of the Shares then outstanding, each Share
issued and outstanding prior to the Effective Time (other than Shares held
by Parent, Purchaser, the Company or any of their wholly owned subsidiaries
(collectively, the "Excluded Shares"), and any Shares with respect to which
the holder properly exercises such holder's appraisal rights in accordance
with the California General Corporation Law (the "Dissenting Shares"))
shall automatically be canceled and extinguished and shall be converted
into the right to receive the Offer
<PAGE>
Price in cash, without interest thereon, subject to appropriate and
proportionate adjustments in the event of any reclassification,
recapitalization, stock split, stock dividend or similar transactions with
respect to the Shares (the "Cash Merger Consideration").
If, however, Purchaser does not hold at least 90% of the Shares then
outstanding at the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares and any
Dissenting Shares, shall automatically be canceled and extinguished and
shall be converted into the right to receive that fraction of a fully paid
and nonassessable share of common stock, par value $0.01 per share, of
Parent (the "Parent Common Stock") equal to the Conversion Number (the
"Stock Merger Consideration" and, together with the Cash Merger
Consideration, the "Merger Consideration"). The Conversion Number shall be
equal to a fraction (rounded to the nearest third decimal point), (a) the
numerator of which shall be equal to the Cash Merger Consideration and (b)
the denominator of which shall be equal to the average of the closing sales
price of a share of Parent Common Stock as reported on the New York Stock
Exchange for each of the ten (10) consecutive trading days ending on, and
including, the second trading day immediately preceding the date on which a
final vote of the shareholders of the Company on the adoption and approval
of the Merger shall have been held (the "Parent Average Stock Price");
provided, however, that if the Parent Average Stock Price is equal to or
less than $12.50, then the Conversion Number shall be 0.540.
Each Excluded Share shall be canceled and extinguished and cease to exist
without any conversion thereof, and no payment shall be made with respect
thereto. Each holder (other than holders of Excluded Shares) of a
certificate representing any Shares shall, after the Effective Time, cease
to have any rights with respect to such Shares, except either to receive
the Merger Consideration upon surrender of such certificate, or to exercise
such holder's appraisal rights as provided in the Merger Agreement and the
applicable California law.
4. The Company's Board of Directors has unanimously determined that the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, are fair to and in the best interests of the
shareholders of the Company, has unanimously approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the
Merger, and recommends that the shareholders accept the Offer and tender
their Shares thereunder.
Raymond James & Associates, Inc. ("Raymond James"), financial advisor to
the Company, has delivered a written opinion to the Company's Board of
Directors, dated as of May 10, 1999 (the "Opinion"), to the effect that, as
of May 7, 1999, the terms of the Offer and the Merger are fair from a
financial point of view to the shareholders of the Company. The full text
of the Opinion is contained in the Company's solicitation/recommendation
statement on Schedule 14D-9 filed with the Securities and Exchange
Commission in connection with the Offer. Shareholders are urged to read the
Opinion carefully and in its entirety for assumptions made, matters
considered and limits of the review of Raymond James.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, June 14, 1999, unless extended.
6. The Offer is conditioned upon, among other things, there being validly
tendered by the expiration date and not withdrawn at least a number of
Shares of the Company equal to eighty percent (80%) of the Shares issued
and outstanding on a fully diluted basis. The Offer is subject to certain
other conditions, including, but not limited to, receipt by Purchaser and
the Company of certain governmental and regulatory approvals.
7. Shareholders who tender Shares will not be obligated to pay brokerage
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant
to the Offer.
If you wish to have us tender any or all of your Shares, please complete,
sign and return the form set forth on the next page. Your instructions to us
should be forwarded in ample time to permit us to submit a tender on your
behalf prior to the expiration of the Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH ALL ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
OF
EMCON
BY
SEISMIC ACQUISITION CORPORATION
a wholly owned subsidiary
OF
THE IT GROUP, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase of Seismic Acquisition Corporation, a California corporation
("Purchaser"), which is a newly formed, wholly owned subsidiary of The IT
Group, Inc., a Delaware corporation ("Parent"), dated May 17, 1999, and the
related Letter of Transmittal relating to the issued and outstanding shares of
common stock, no par value per share (the "Shares"), of EMCON, a California
corporation (the "Company").
This will instruct you to tender to Purchaser the number of Shares indicated
below held by you for the account of the undersigned, on the terms and subject
to the conditions set forth in the Offer to Purchase and Letter of
Transmittal.
NUMBER OF SHARES TO BE TENDERED: SIGN HERE
[______] SHARES*
_____________________________________
_____________________________________
Signature(s)
_____________________________________
_____________________________________
Account Number: _____________________ Please print name(s) and address(es)
here
Dated: _______________________ , 1999 _____________________________________
Tax Identification or Social
Security Number
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer--
Social Security numbers have nine digits separated by two hyphens: i.e. 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to give
the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Give the
SOCIAL SECURITY
For this type of account: number of--
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the
only contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor, or incompetent person
7. a The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
- --------------------------------------------------------------------------------
<CAPTION>
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of--
- --------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless
the legal entity itself is not
designated in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
- --------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not know your
number, obtain Form 55-5, Application for a Social Security Number Card, or
Form 55-4, Application for an Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
Payees Exempt From Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in Section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number--If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect To Withholding--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated May 17, 1999, and the related Letter of
Transmittal, and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the securities, blue sky or other laws of such
jurisdiction. Purchaser (as defined below) may, in its discretion, however, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by the Dealer Manager (as defined below) or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK
OF
EMCON
AT
$6.75 NET PER SHARE
BY
SEISMIC ACQUISITION CORPORATION
A Wholly Owned Subsidiary
OF
THE IT GROUP, INC.
Seismic Acquisition Corporation, a California corporation ("Purchaser"),
which is a newly formed, wholly owned subsidiary of The IT Group, Inc., a
Delaware corporation ("Parent"), is offering to purchase all of the issued and
outstanding shares of common stock, no par value per share (the "Shares"), of
EMCON, a California corporation (the "Company"), at a price of $6.75 per Share,
net to each tendering shareholder in cash, without interest (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated May 17, 1999 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with the Offer to Purchase, constitute the
"Offer"). The Offer is being made pursuant to the terms of an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of May 10, 1999, by and among
the Company, Purchaser and Parent. The Merger Agreement provides, among other
things, for the commencement of the Offer by Purchaser, and further provides
that, following the purchase of Shares pursuant to the Offer and promptly after
the satisfaction or, if permissible, waiver of certain other conditions,
Purchaser will be merged with and into the Company (the "Merger"). The Company
will continue as the surviving corporation after the Merger. At the election of
Parent, to the extent that such action would not cause a failure of a condition
to the Offer or the Merger, the Merger may be structured so that the Company
shall be merged with and into Purchaser with the result that Purchaser shall
become the surviving corporation.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JUNE 14, 1999, UNLESS THE OFFER IS EXTENDED
At the effective time of the Merger (the "Effective Time"), if the
Purchaser holds at least 90% of the Shares then outstanding, each Share issued
and outstanding prior to the Effective Time (other than Shares held by Parent,
Purchaser, the Company or any of their wholly-owned subsidiaries (collectively,
the "Excluded Shares"), and any Shares with respect to which the holder properly
exercises such holder's appraisal rights in accordance with the applicable
California General Corporation Law (the "Dissenting Shares")) shall
automatically be canceled and
<PAGE>
extinguished and shall be converted into the right to receive the Offer Price,
or the greatest amount per Share as is paid pursuant to the Offer, (the "Cash
Merger Consideration") in cash, without interest thereon.
If Purchaser does not hold at least 90% of the Shares then outstanding at
the Effective Time, each Share issued and outstanding immediately prior to the
Effective Time, other than Excluded Shares and any Dissenting Shares, shall
automatically be canceled and extinguished and shall be converted into the right
to receive that fraction of a fully paid and nonassessable share of common
stock, par value $0.01 per share, of Parent (the "Parent Common Stock") equal to
the Conversion Number (the "Stock Merger Consideration" and together with the
Cash Merger Consideration, the "Merger Consideration"). The Conversion Number
shall be equal to a fraction (rounded to the nearest third decimal point), (a)
the numerator of which shall be equal to the Cash Merger Consideration and (b)
the denominator of which shall be equal to the average of the closing sales
price of a share of Parent Common Stock as reported on the New York Stock
Exchange for each of the ten (10) consecutive trading days ending on, and
including, the second trading day immediately preceding the date on which a
final vote of the shareholders of the Company on the adoption and approval of
the Merger shall have been held (the "Parent Average Stock Price"); provided,
however, if the Parent Average Stock Price is equal to or less than $12.50, then
the Conversion Number shall be 0.540.
At the Effective Time, each Excluded Share shall be canceled and
extinguished and cease to exist without any conversion thereof, and no payment
shall be made with respect thereto. Each holder (other than holders of Excluded
Shares) of a certificate representing any Shares shall, after the Effective
Time, cease to have any rights with respect to such Shares, except either to
receive the Merger Consideration upon surrender of such certificate, or to
exercise such holder's appraisal rights as provided in the Merger Agreement and
the California General Corporation Law.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY,
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is conditioned upon, among other things, there being validly
tendered prior to the Expiration Date and not withdrawn, at least a number of
Shares equal to eighty percent (80%) of the Shares issued and outstanding on a
fully diluted basis (the "Minimum Condition"). The Offer is also conditioned on
the satisfaction or waiver of certain other conditions, including receipt by
Purchaser and the Company of certain governmental and regulatory approvals. Any
determination concerning the satisfaction of such terms and conditions will be
made by Purchaser in its good faith judgment and such determination will be
final and binding on all tendering shareholders.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all of the Shares
validly tendered pursuant to the Offer prior to the Expiration Date and not
withdrawn in accordance with the provisions set forth in the Offer to Purchase.
The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on the
twentieth business day following the commencement of the Offer, unless and until
Purchaser, in its sole discretion (subject to any restrictions contained in the
Merger Agreement), shall from, time to time, extend the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date to which the Offer is extended.
If all of the conditions to the Offer are not satisfied on any scheduled
Expiration Date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer until
such conditions are satisfied or waived; provided further, that Purchaser shall
not be required to extend the Offer beyond July 9, 1999; and provided further,
however, that Purchaser may (i) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission or (ii) extend the Offer for any reason on one or more occasions for
an aggregate of not more than twenty (20) business days beyond
2
<PAGE>
the initial Expiration Date if more than the number of Shares sufficient to
satisfy the Minimum Condition but less than 90% of the Shares issued and
outstanding have been tendered.
Any extension by Purchaser shall be effective by giving oral or written
notice of such extension to ChaseMellon Shareholder Services, L.L.C., as
Depositary (the "Depositary"). During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering shareholder to withdraw such shareholder's Shares. If
Purchaser extends the Offer, or (whether before or after its acceptance for
payment of Shares) is delayed in its payment for Shares or is unable to pay for
Shares pursuant to the Offer for any reason, then, without prejudice to
Purchaser's rights under the Offer, the Depositary may retain tendered Shares on
behalf of Purchaser, and such Shares may not be withdrawn except to the extent
tendering shareholders are entitled to withdrawal rights as described in the
Offer to Purchase. However, the ability of Purchaser to delay payment for
Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after either (a)(i) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), together with any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry delivery of Shares and any other
required documents, has been timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase and (ii) either
Share certificates for tendered Shares have been timely received by the
Depositary at one of such addresses or such Shares have been timely delivered
pursuant to the procedure for book-entry transfer set forth in the Offer to
Purchase (and a Book-Entry Confirmation (as defined in the Offer to Purchase)
timely received by the Depositary) or (b) the tendering shareholder has complied
with the guaranteed delivery procedures set forth in the Offer to Purchase.
Purchaser expressly reserves the right to waive any conditions to the Offer
(except as otherwise provided in the Merger Agreement), to increase the Offer
Price, to extend the duration of the Offer, or to make any other changes in the
terms and conditions of the Offer; provided, however, that, without the
Company's prior written consent, no such change may be made which decreases the
Offer Price, changes the form of consideration to be paid in the Offer, reduces
the maximum number of Shares to be purchased in the Offer, imposes conditions to
the Offer in addition to the conditions set forth in the Merger Agreement or
amends any other material terms of the Offer in a manner adverse to the
Company's shareholders.
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that Shares tendered may be withdrawn at any time prior to the Expiration Date,
and, unless theretofore accepted for payment and paid for as provided herein,
may also be withdrawn at any time on or after July 15, 1999. For a withdrawal
to be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn as set forth on such Share certificates if different from
the name of the person who tendered such Shares. If Share certificates have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share certificates, the serial numbers shown on such
Share certificates must be furnished to the Depositary and, unless such Shares
have been tendered by an Eligible Institution (as defined in the Offer to
Purchase), the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer set forth in the Offer to Purchase, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase) to be credited with such
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures for withdrawal, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
the second sentence of this paragraph. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by Purchaser in its sole discretion, and its determination will be final and
binding. No withdrawal of Shares will be deemed to have been properly made
until all defects and irregularities have been cured or waived. Withdrawals of
tendered Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by following one of the procedures described
in the Offer to Purchase at any time prior to the Expiration Date.
3
<PAGE>
The Company has provided Purchaser with the Company shareholder list, a
nonobjecting beneficial owners list, and security position listings for the
purpose of disseminating the Offer to holders of Shares. The Offer to Purchase
and the Letter of Transmittal and other material relevant to the Offer will be
mailed to record holders of Shares and furnished to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Exchange Act is contained in the Offer to Purchase and is incorporated herein by
reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
other materials related to the Offer may be directed to the Information Agent as
set forth below, and copies will be furnished promptly at Purchaser's expense.
Questions or requests for assistance may be directed to the Information Agent or
the Dealer Manager at their respective addresses and telephone numbers set forth
below.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
CIBC World Markets
One World Financial Center
New York, New York 10281
(212) 856-3540
May 17, 1999
4
<PAGE>
Exhibit (a)(8)
Tuesday May 11, 7:31 am Eastern Time
Company Press Release
SOURCE: IT Group, Inc.
The IT Group to Acquire EMCON for $6.75 Per Share in Cash Establishes
Leadership Position in the Solid Waste Services Market
$0.15 Earnings Per Share Accretion Driven by Synergies
PITTSBURGH, May 11 /PRNewswire/ -- The IT Group, Inc. (NYSE: ITX; the Company)
---
and EMCON (Nasdaq: MCON) announced today that they have signed a definitive
----
agreement under which The IT Group will acquire EMCON for $6.75 per share in
cash, or a total of approximately $62 million, plus the assumption of
approximately $8 million in debt, for a total transaction value of $70 million.
The acquisition is anticipated to add $130 million in revenue and $0.15 earnings
per share on an annual basis in year 2000 after synergies. The transaction is
expected to add $0.05 earnings per share in 1999. The transaction has been
approved unanimously by the boards of both companies.
EMCON is a fully integrated environmental consulting, engineering, design,
construction and related outsourcing services firm, serving primarily the
private sector with a focus in the solid waste services market. EMCON has
annual revenues of approximately $150 million, and employs about 1,000 employees
in 40 offices throughout the United States. The addition of EMCON establishes
The IT Group as a market leader within the solid waste services sector.
Anthony J. DeLuca, chief executive officer and president of The IT Group, said,
"EMCON solidifies The IT Group's leadership position in the solid waste services
market. Our combined resources will allow us to provide the full range of
integrated services to our solid waste clients. EMCON enjoys tremendous
recognition in the solid waste services market and is known in the industry for
its broad-ranging and specialized capabilities. We are confident that our $12
million synergy plan will be fully realized by year 2000, generating $20 million
of operating cash flow."
"We each have respective strengths in different service areas," DeLuca added.
"EMCON is a leader in the design-build of solid waste infrastructure facilities,
including landfills, transfer stations and material recovery facilities. They
are also strong in landfill gas and leachate control technologies. Our
strengths in cell construction, groundwater, and remediation/closure services
round out the full spectrum of solid waste capabilities. The prospect of the
combined companies' clients gaining greater access to technical depth, broader
geographical reach, and integrated capabilities will be very compelling in the
marketplace. The IT Group will also benefit from EMCON's added capabilities in
air quality, health and safety, and environmental information management
systems. And our revenue mix is further balanced by EMCON, increasing the
private sector from 35% to 40% of revenues."
<PAGE>
Gene Herson, president and chief executive officer of EMCON, stated, "Becoming
part of The IT Group provides EMCON with the strategic combination we were
actively seeking to capitalize on our greatest strengths. We will now be better
positioned to support the rapidly consolidating solid waste industry by
expanding our integrated services strategy through more design-build services.
The IT Group provides a larger revenue base to support delivery of services on a
national and global basis, as well as a stronger capital base to support future
growth and expansion. With The IT Group, we will offer our industrial clients
more value-added solutions by combining their extensive remedial construction
services with EMCON's expertise in regulatory, compliance, and site
investigation services. Our employees will also enjoy greater career
development opportunities."
The transaction is structured as a cash tender offer at $6.75 per EMCON share.
Assuming that The IT Group receives at least 90% of the outstanding EMCON shares
in the tender offer, the balance of the shares will be acquired in a short form
merger at $6.75 cash per EMCON share. In the event The IT Group receives less
than 90% of the outstanding EMCON shares in the tender offer, the balance of the
EMCON shares will be acquired in a merger in which each EMCON share will be
converted into shares of The IT Group Common Stock at a value of $6.75 per
share. The exchange rate would be based on the 10 trading day average closing
price ending two days prior to the merger. The exchange rate will have a floor
at an average price for The IT Group's Common Stock of $12.50. The minimum
share condition in the tender offer will be 80% of the issued and outstanding
EMCON shares. The IT Group expects to commence a tender offer for all EMCON's
common stock within the next five business days. The acquisition of EMCON is
subject to certain customary closing conditions, including receiving required
clearances under the Hart-Scott-Rodino Act. The IT Group intends to finance the
transaction through its revolving credit facilities under which it had $106
million in availability on April 30, 1999.
The IT Group, Inc. is a leading provider of diversified, value-added services,
with more than 6,700 employees in more than 80 offices, offering a full range of
consulting, facilities management, engineering and construction and remediation.
The IT Group's common stock and depository shares are traded on the New York
Stock Exchange under the symbols ITX and ITXpr, respectively. More information
on The IT Group can be found on the Internet at www.theitgroup.com.
------------------
Statements regarding the intentions, beliefs, expectations or predictions of The
IT Group and its management, including, but not limited to, those statements
denoted by the words "anticipate," "believe," "expect," "should" and similar
expressions (including "confidence") are forward-looking statements that
reflect the current views of The IT Group its management about future events and
are subject to certain risks, uncertainties and assumptions. Actual results
could differ materially from those projected in such forward-looking statements
as a result of a number of factors, including, but not limited to, competition
and pricing pressures, bidding opportunities and success, project results,
funding of backlog, the success of the tender offer for EMCON, the effects of
the integration of EMCON and the Company's other major acquisitions and the
achievement of expected synergies there from, and industry-wide factors.
SOURCE: IT Group, Inc.
2
<PAGE>
EXHIBIT (b)(5)
FORM OF EXECUTION COPY
May 10, 1999
The IT Group, Inc.
IT Corporation
OHM Corporation
OHM Remediation Services Corp.
Beneco Enterprises, Inc.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Attention: Philip O. Strawbridge
Chief Administrative Officer
Ladies and Gentlemen:
In this consent dated as of May 10, 1999 (this "Consent") we refer to the
Credit Agreement dated as of February 25, 1998, as amended and restated as of
June 11, 1998, and as further amended pursuant to the First Amendment to Credit
Agreement dated as of September 16, 1998, the Second Amendment to Credit
Agreement dated as of October 26, 1998 and the Third Amendment to Credit
Agreement dated as of March 5, 1999 (as so amended, the "Credit Agreement"), by
and among The IT Group, Inc. (formerly International Technology Corporation), a
Delaware corporation (the "Company"), IT Corporation, a California corporation
("ITC"), OHM Corporation, an Ohio corporation ("OHM"), OHM Remediation Services
Corp., an Ohio corporation ("OHM Remediation"), and Beneco Enterprises, Inc., a
Utah corporation ("Beneco"; together with the Company, ITC, OHM and OHM
Remediation, the "Borrowers"), the institutions from time to time party thereto
as lenders (the "Lenders"), the institutions from time to time party thereto as
issuing banks (the "Issuing Banks"), Citicorp USA, Inc., in its capacity as
administrative agent and collateral agent for the Lenders and Issuing Banks (the
"Administrative Agent"), BankBoston, N.A., in its capacity as documentation
agent for the Lenders and Issuing Banks (the "Documentation Agent"; together
with the Administrative Agent, the "Agents"), and Royal Bank of Canada and
Credit Lyonnais New York Branch, as co-agents. Capitalized terms used herein
and not defined herein are used herein as defined in the Credit Agreement.
You have informed the Administrative Agent that the Company intends to
acquire all of the issued and outstanding shares of the common stock of a target
company previously identified to the Administrative Agent (the "Target") in a
two step transaction for a purchase price of approximately $73,000,000 (the
"Proposed Acquisition"). The terms of the Proposed Acquisition would be set
forth in a definitive merger agreement (the "Merger Agreement") and would
provide for a cash tender offer (the "Tender Offer") for all outstanding common
stock of the Target at a purchase price of $6.75 per share, subject to the
condition that the Company acquire at least 80% of the voting power of the
Target upon the closing of the Tender Offer.
<PAGE>
Following the consummation of the Tender Offer the Target would be merged with a
wholly-owned Subsidiary of the Company (the "Proposed Merger") and the remaining
shareholders of the Target (other than the Company) would receive solely Company
Common Stock in consideration for the Shares that were not purchased in the
Tender Offer; provided, however, in the event the Company acquires more than 90%
-------- -------
of the voting power of the Target upon the closing of the Tender Offer, the
remaining shareholders of the Target would receive cash only upon the
consummation of the Proposed Merger as required by Requirements of Law
applicable to short-form mergers.
With respect to the Proposed Acquisition and the transactions contemplated
thereby you have requested the Requisite Lenders (i) to waive compliance with
clause (i)(e) of the definition of Permitted Acquisition in respect of the
Proposed Acquisition and (ii) with respect to clause (i)(g) of the definition of
Permitted Acquisition, to waive compliance with such clause (A) for a period of
no more than 10 Business Days after the consummation of the Tender Offer, solely
with respect to the requirement to deliver a stock certificate and stock power
in respect of the Shares purchased by the Company in the Tender Offer to the
Administrative Agent and (B) for a period beginning on the date of the
consummation of the Tender Offer and ending no more than three Business Days
after the consummation of the Proposed Merger, solely with respect to the
requirement to make the Target a party to a Subsidiary Guaranty and a Subsidiary
Guarantor Security Agreement and to perfect the Agent's Lien on the Collateral
covered by such Subsidiary Guarantor Security Agreement, it being understood and
agreed that on such third Business Day such requirement shall have been met as
long as the surviving corporation of the Proposed Merger has complied therewith.
Except as expressly waived in this paragraph, the Borrowers shall, in connection
with the Proposed Acquisition, comply with all requirements for a Permitted
Acquisition on or prior to the consummation of each of the Tender Offer and the
Proposed Merger.
In accordance with Section 13.07 of the Credit Agreement, by its execution
of this Consent, each of the undersigned Lenders and the Agents hereby consent
and agree to the requests made by you in the preceding paragraph; provided,
--------
however, this Consent shall not become effective unless and until the
- -------
Administrative Agent shall have received all of the following, all of which
shall be in form and substance satisfactory to the Administrative Agent, in
sufficient originally executed copies for each of the Lenders:
(A) this Consent executed by the Borrowers and Lenders constituting
the Requisite Lenders;
(B) an execution copy of the Merger Agreement for the Proposed
Acquisition; and
(C) such additional documentation as the Agents or the Requisite
Lenders may reasonably require.
Notwithstanding anything herein to the contrary, (i) this Consent shall
cease to be effective (and the Revolving Loans shall not be permitted to be used
for the purpose of funding the purchase of Shares in the Tender Offer) if any of
the following conditions shall not have been
2
<PAGE>
satisfied on or prior to the date of the consummation of the purchase of Shares
in the Tender Offer:
(A) the Revolving Credit Availability on the date of such purchase
(after giving effect to the purchase of Shares accepted for payment in the
Tender Offer and the payment of transaction costs related thereto paid on
or prior to such date), shall not be less than $25,000,000;
(B) (I) the cash consideration paid to the shareholders of the Target
(after giving effect to the purchase of the Shares in the Tender Offer)
shall not exceed an amount equal to $73,000,000 and (II) the transaction
costs incurred in connection with the Proposed Acquisition shall not exceed
$2,000,000;
(C) the number of Shares accepted for payment in the Tender Offer by
the Company shall be equal to no less than the greater of (I) 80% of the
issued and outstanding Shares on the date of the consummation of the Tender
Offer and (II) the minimum number of shares, determined on a fully diluted
basis, necessary to approve the consummation of the Proposed Acquisition in
accordance with the provisions of any applicable corporate statute, anti-
takeover statute or provision in the Target's certificate of incorporation,
by-laws, etc.;
(D) the Board of Directors of the Target shall have published its
recommendation that the shareholders of the Target tender their Shares
pursuant to the Tender Offer, and such recommendation shall not have been
withdrawn or adversely modified;
(E) all documentation and other requirements set forth in the
definition of "Permitted Acquisition" (to the extent not waived in this
Consent) shall have been satisfied with respect to the purchase of the
Shares in the Tender Offer;
(F) no Event of Default or Default shall have occurred and be
continuing on the date of the purchase of the Shares in the Tender Offer or
would result from the consummation of such purchase;
(G) to the extent required under Regulation U, the Agent and the
Company shall have executed and delivered a Form U-1 in respect of the
Shares purchased in the Tender Offer; and
(H) the Tender Offer shall have been consummated on or prior to July
1, 1999; and
(ii) this Consent shall cease to be effective if any of the following conditions
shall not have been satisfied on or prior to the date of the consummation of
Proposed Merger (it being understood and agreed that the failure to meet any of
the following conditions on or prior to such date shall constitute an Event of
Default):
3
<PAGE>
(A) all documentation and other requirements set forth in the
definition of "Permitted Acquisition" (to the extent not waived in this
Consent) shall have been satisfied with respect to the Proposed Merger; and
(B) no Event of Default or Default shall have occurred and be
continuing on the date of the consummation of the Proposed Merger or would
result from the consummation of the Proposed Merger.
The execution and delivery of this Consent shall in no way affect any
right, power or remedy of the Agent or any Lender with respect to any Event of
Default nor constitute a waiver of any provision of the Credit Agreement or any
of the other Loan Documents, except as expressly set forth above. Except as
expressly set forth above, the Credit Agreement, the other Loan Documents and
all other documents, instruments, amendments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
4
<PAGE>
This Consent may be executed in one or more counterparts, each of which
shall be deemed an original and all of which shall constitute one and the same
document.
Very truly yours,
CITICORP USA, INC.
By________________________________
Name:
Title:
5
<PAGE>
ACKNOWLEDGED AND AGREED TO BY:
THE IT GROUP, INC.
(f/k/a INTERNATIONAL TECHNOLOGY
CORPORATION)
By_____________________________
Name:
Title:
IT CORPORATION
By_____________________________
Name:
Title:
OHM CORPORATION
By_____________________________
Name:
Title:
OHM REMEDIATION SERVICES CORP.
By_____________________________
Name:
Title:
BENECO ENTERPRISES, INC.
By_____________________________
Name:
Title:
6
<PAGE>
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
THE IT GROUP, INC.
SEISMIC ACQUISITION CORPORATION
and
EMCON
dated as of
May 10, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
---------
into as of May 10, 1999, by and among The IT Group, Inc., a Delaware corporation
("Parent"), Seismic Acquisition Corporation, a California corporation and a
------
wholly-owned subsidiary of Parent ("Purchaser"), and EMCON, a California
---------
corporation (the "Company").
-------
RECITALS
--------
A. The respective Boards of Directors of Parent, Purchaser and the Company
and the sole stockholder of Purchaser have unanimously approved the acquisition
of the Company by the Purchaser on the terms and subject to the conditions set
forth in this Agreement;
B. Pursuant to this Agreement, Purchaser has agreed to commence a tender
offer (the "Offer") to purchase all of the outstanding shares of the Company's
-----
common stock (the "Common Stock"), no par value per share (the "Shares"), at a
------------ ------
price per Share of $6.75 (the "Offer Price");
-----------
C. The Board of Directors of the Company (the "Company Board") has (i)
-------------
unanimously approved the Offer and (ii) adopted and approved this Agreement and
is recommending that the Company's shareholders accept the Offer, tender their
Shares to Purchaser and, if necessary, approve this Agreement;
D. The Board of Directors of Purchaser and the Company Board have
unanimously approved the merger of the Purchaser with and into the Company, as
set forth in this Agreement (the "Merger"), in accordance with the California
------
General Corporation Law (the "CGCL") and upon the terms and subject to the
----
conditions set forth in this Agreement, whereby each of the issued and
outstanding Shares not owned directly or indirectly by Parent, Purchaser or the
Company (other than Excluded Shares as defined below) will be converted into the
right to receive the Cash Merger Consideration (as defined below) or the Stock
Merger Consideration (as defined below) as provided for in Section 2.7; and
F. Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and to prescribe various conditions to the Offer and the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
Purchaser and the Company agree as follows:
1
<PAGE>
ARTICLE I
THE OFFER
Section 1.1. The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VII hereof, as promptly as practicable, but in no event
later than the fifth business day following the date of the public announcement
of the execution of this Agreement by the parties, Purchaser shall, and Parent
shall cause Purchaser to, commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) the Offer at
------------
the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and to accept
for payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on Annex I hereto (the "Tender Offer Conditions"),
------- -----------------------
including the condition that a number of Shares equal to eighty percent (80%) of
the Shares issued and outstanding on a fully diluted basis (including for
purposes of such calculation all Shares issuable upon exercise of all stock
options which are vested or scheduled to vest on or before July 9, 1999 with an
exercise price less than the Offer Price, and conversion of all convertible
securities or other rights to purchase or acquire Shares with a conversion price
less than the Offer Price (collectively, "Derivative Securities"); provided,
---------------------
however, that such calculation shall not include (A) Shares issuable pursuant to
Derivative Securities that by their terms will terminate or be canceled upon
consummation of the Offer or (B) shares issuable pursuant to Derivative
Securities as to which the Company has obtained a written consent from the
holder that such Derivative Securities will not be converted prior to the
Effective Time, or (C) Shares issuable pursuant to Derivative Securities as to
which the Company takes appropriate action to provide that such Derivative
Securities shall automatically convert into the right to receive an amount in
cash equal to the product of (i) the excess, if any, of the Cash Merger
Consideration (as defined below) over the per share exercise or conversion price
of such Derivative Securities and (ii) the number of Shares subject to such
Derivative Securities which are exercisable immediately prior to the
consummation of the Offer) shall be validly tendered and not withdrawn prior to
the Expiration Date or shall be held by Parent, Purchaser or any affiliate
thereof (the "Minimum Condition"). The amount of the Offer Price shall be net to
-----------------
the seller in cash, without interest, upon the terms and subject to the
conditions of the Offer and subject to reduction for any applicable federal
back-up or other applicable withholding or stock transfer taxes. The Offer shall
remain open until 12:00 Midnight, New York City time, on the twentieth business
day following the commencement of the Offer. Parent and Purchaser agree that if
all of the conditions set forth in Annex I hereto are not satisfied by the time
-------
of scheduled termination of the Offer then, provided that all such conditions
are reasonably capable of being satisfied, Purchaser shall extend the Offer
until such conditions are satisfied or waived; provided further, that Purchaser
shall not be required to extend the Offer beyond July 9, 1999; provided further,
however, that Purchaser may (x) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or (y) extend the Offer for any reason on one or more
---
occasions for an aggregate of not more than twenty (20) business days beyond the
initial Expiration Date if more than the number of Shares sufficient to satisfy
the Minimum Condition but less than 90% of the Shares issued and
2
<PAGE>
outstanding have been tendered. As used in this Agreement, the "Expiration Date"
---------------
means 12:00 Midnight, New York City time, on the twentieth business day
following the commencement of this Offer, unless Purchaser extends the Offer as
permitted or required by this Agreement, in which case the "Expiration Date"
---------------
means the latest time and date to which the Offer is extended.
(c) Purchaser expressly reserves the right to waive any conditions to the
Offer (other than the conditions set forth in clauses (a)(1) or (c) of Annex I),
-------
to increase the price per Share payable in the Offer, to extend the duration of
the Offer, or to make any other changes in the terms and conditions of the
Offer; provided, however, that, without the Company's prior written consent, no
such change may be made which decreases the Offer Price, changes the form of
consideration to be paid in the Offer, reduces the maximum number of Shares to
be purchased in the Offer, imposes conditions to the Offer in addition to the
Tender Offer Conditions or amends any other material terms of the Offer in a
manner adverse to the Company's shareholders.
(d) The Offer shall be made by means of an offer to purchase to which the
Company shall not have reasonably objected (the "Offer to Purchase") containing
-----------------
the terms set forth in this Agreement and the Tender Offer Conditions. As soon
as practicable on the date the Offer is commenced, Parent and Purchaser shall
file with the SEC a tender offer statement on Schedule 14D-1 under the Exchange
Act to which the Company shall not have reasonably objected reflecting the Offer
(together with all exhibits, amendments and supplements thereto, the "Schedule
--------
14D-1"). The Schedule 14D-1 will contain or will incorporate by reference the
- -----
Offer to Purchase (or portions thereof) and forms of the related letter of
transmittal, notice of guaranteed delivery and summary advertisements (which
Schedule 14D-1, Offer to Purchase and other documents, together with any
supplements or amendments thereto, are referred to herein collectively as the
"Offer Documents"). The Company and its counsel shall be given a reasonable
---------------
opportunity to review and comment on the Offer Documents prior to their filing
with the SEC or dissemination to the shareholders of the Company. Parent and
Purchaser agree to provide the Company and its counsel with any comments which
Parent, Purchaser or their counsel may receive from the SEC or the staff of the
SEC with respect to such documents promptly after receipt thereof. Parent and
Purchaser further agree that the Offer Documents will, on the date filed with
the SEC and on the date first published, sent or given to the Company's
shareholders, comply in all material respects with all provisions of applicable
federal securities laws and the rules and regulations promulgated thereunder.
Parent, Purchaser and the Company agree promptly to correct any information
provided by any of them for use in the Offer Documents that shall be or have
become false or misleading in any material respect, and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule 14D-1, as so
corrected, to be filed with the SEC and the other Offer Documents, as so
corrected, to be disseminated to the holders of Shares, in each case as and to
the extent required by applicable federal securities laws, except that no
representation or warranty is made by Parent or Purchaser with respect to
information supplied by the Company or any of its stockholders in writing
specifically for inclusion or incorporation by reference in the Offer Documents.
(e) Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment),
3
<PAGE>
Purchaser will purchase by accepting for payment and will pay for Shares validly
tendered and not properly withdrawn, as promptly as practicable after the
Expiration Date. Parent shall provide or cause to be provided to Purchaser on a
timely basis the funds necessary to pay for any Shares that Purchaser becomes
obligated to accept for payment, and pay for, pursuant to the Offer.
Section 1.2. Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that (i) the Company Board has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (B) approved and adopted this Agreement
and the transactions contemplated hereby and (C) resolved to recommend that the
shareholders of the Company accept the Offer and approve and adopt this
Agreement and approve the transactions contemplated hereby; provided, however,
that subject to the provisions of Section 5.9, such recommendation may be
withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 5.9) and (ii) Raymond James & Associates, Inc. ("Raymond
-------
James"), the Company's financial advisor, has rendered to the Company Board its
- -----
written opinion to the effect that the terms of the Offer and the Merger are
fair, from a financial point of view, to the shareholders of the Company. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company Board described in clause (i) of the first
sentence of this Section 1.2(a), and represents and warrants that it has
obtained the consent of Raymond James to the inclusion in the Offer Documents
and the Schedule 14D-9 (as defined in Section 1.2(b)) of a copy of the written
opinion referred to in clause (ii) of the first sentence of this Section 1.2(a).
(b) The Company shall file with the SEC, concurrently with the filing by
Parent and Purchaser of the Schedule 14D-1, or promptly thereafter on the same
day, a Solicitation/Recommendation Statement on Schedule 14D-9 under the
Exchange Act, to which Parent shall not have reasonably objected, relating to
the Offer (together with all exhibits, amendments and supplements thereto, the
"Schedule 14D-9"), which shall, subject to Section 5.9, contain the
--------------
recommendation of the Company Board described in Section 1.2(a) and the
information required pursuant to Section 14(f) of the Exchange Act and Rule 14f-
1 thereunder, and shall disseminate the Schedule 14D-9 as required by Rule 14D-9
under the Exchange Act. Parent and Purchaser each will supply to the Company any
information with respect to itself and its officers, directors and affiliates
required to be provided in the Schedule 14D-9. Parent and its counsel shall be
given a reasonable opportunity to review and comment on the Schedule 14D-9 prior
to its filing with the SEC or dissemination to the shareholders of the Company.
The Company agrees to provide Purchaser and its counsel with any comments the
Company or its counsel may receive from the SEC with respect to the Schedule
14D-9 promptly after receipt thereof. The Company further agrees that the
Schedule 14D-9 will, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, comply in all material
respects with all provisions of applicable federal securities laws and the rules
and regulations promulgated thereunder. The Company, Parent and Purchaser agree
promptly to correct any information provided by any of them for use
4
<PAGE>
in the Schedule 14D-9 that shall be or have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9, as so corrected, to be filed with the SEC and
disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws, except that no representation or
warranty is made by the Company with respect to information supplied by either
Parent or Purchaser or any of their stockholders in writing specifically for
inclusion or incorporation by reference in the Offer Documents.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each of a recent date,
and shall promptly furnish Purchaser with such additional information, including
updated lists of shareholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request in connection with communicating the Offer and any amendments or
supplements thereto to the Company's shareholders. Subject to the requirements
of applicable laws and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Purchaser (and their agents) shall hold in confidence the information
contained in any of such labels and lists and, if this Agreement shall be
terminated, will promptly deliver to the Company all copies, extracts, or
summaries of such information then in their possession or control or in the
possession of their agents.
Section 1.3. Directors.
---------
(a) Subject to compliance with applicable law, promptly upon the delivery
to ChaseMellon Shareholder Services, L.L.C., as the paying agent (the "Paying
------
Agent"), of Parent's notice of acceptance of Shares pursuant to the Offer (the
- -----
"Notice of Acceptance"), and from time to time thereafter, Parent shall be
--------------------
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of the total number of
directors on the Company Board (determined after giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Parent or its affiliates bears
to the total number of Shares then outstanding; provided, however, if Purchaser
shall have acquired at least 90% of the outstanding Shares in the Offer, Parent
shall be entitled to designate all of the members of the Company Board (the
"Parent Directors"). The Company shall, upon request of Parent, promptly take
----------------
all actions necessary to cause the Parent Directors to be so elected, including,
if necessary, increasing the size of the Company Board (to the extent permitted
by the Company's Articles of Incorporation and By-laws) and/or seeking the
resignations of one or more existing directors, provided, however, that if
Purchaser shall not have acquired at least 90% of the outstanding Shares prior
to the Effective Time (as defined in Section 2.2), the Company Board shall at
all times have at least two members who are members of the Company Board on the
date of this Agreement and are neither officers of the Company or any of its
subsidiaries, or officers or directors of Purchaser or any of its affiliates
("Independent Directors"). If the number of Independent Directors is reduced
---------------------
below two prior to the Effective Time, the remaining Independent Director shall
be entitled to designate a person to fill such vacancy who shall not be an
officer or affiliate of the Company or any of its subsidiaries or an officer,
director, or affiliate of Parent or any of its subsidiaries, and such person
5
<PAGE>
shall be deemed an Independent Director for all purposes of this Agreement. If
no Independent Directors then remain, the other directors of the Company on the
date hereof shall designate two persons to fill such vacancies who shall not be
officers or affiliates of the Company or any of its subsidiaries, or officers,
directors or affiliates of Parent or any of its subsidiaries, and such persons
shall be deemed to be Independent Directors for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The Company shall, at its expense, promptly take all actions
required pursuant to such Section and Rule in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
such Section and Rule in order to fulfill its obligations under this Section
1.3. Parent will supply any information with respect to itself, and its
officers, directors and affiliates required by such Section and Rule to the
Company.
(c) Following the election or appointment of the Parent Directors
pursuant to this Section 1.3 and prior to the Effective Time (as defined in
Section 2.2), any amendment or termination of this Agreement by the Company, any
extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or Purchaser or any waiver of any of the
Company's rights hereunder, shall require the concurrence of a majority of the
Independent Directors (or in the case where there is only one Independent
Director, the concurrence of such Independent Director).
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the satisfaction or
----------
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the CGCL, Purchaser shall be merged with and
into the Company. Following the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). At the election of Parent, to the
---------------------
extent that such action would not cause a failure of a condition to the Offer or
the Merger, the Merger may be structured so that the Company shall be merged
with and into Purchaser with the result that Purchaser shall become the
"Surviving Corporation." Parent, as the sole stockholder of Purchaser, hereby
---------------------
approves the Merger and this Agreement.
Section 2.2. Effective Time; Closing. As soon as practicable after the
-----------------------
satisfaction of the conditions set forth in Article VI, the Company shall duly
execute and file with the Secretary of State of the State of California a
certificate of ownership (the "Certificate of Ownership") or such other
------------------------
documents or certificates as may be required under the CGCL to effect the
Merger. In addition, the parties shall take such other and further actions as
may be required by law to make the Merger effective. Contemporaneous with such
filing, a closing (the "Closing") will be held at 9:00 a.m., Pacific time, at
-------
the offices of Gibson, Dunn & Crutcher LLP, 333 S. Grand Avenue, Los Angeles,
California 90071 or at such other location as the parties may establish for the
6
<PAGE>
purpose of confirming the foregoing. The time the Merger becomes effective in
accordance with applicable law is referred to herein as the "Effective Time."
--------------
Section 2.3. Effects of the Merger. The Merger shall have the effects set
---------------------
forth in the applicable provisions of the CGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and the Purchaser shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 2.4. Articles of Incorporation and By-Laws of the Surviving
------------------------------------------------------
Corporation.
- -----------
(a) The Articles of Incorporation (the "Articles") of the Company shall be
--------
amended and restated to contain the substantive provisions of the Articles of
Purchaser, as in effect immediately prior to the Effective Time, and, as so
amended and restated, shall be the Articles of the Surviving Corporation until
thereafter duly amended in accordance with the provisions thereof and applicable
law.
(b) Subject to the provisions of Section 5.6, the By-Laws (the "Bylaws")
------
of Purchaser, as in effect at the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter duly amended in accordance with the
provisions thereof and applicable law.
Section 2.5. Directors. Subject to applicable law, the directors of
---------
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal in accordance with the Articles and Bylaws of the Surviving
Corporation.
Section 2.6. Officers. The officers of Purchaser immediately prior to the
--------
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal in accordance with the
Articles and Bylaws of the Surviving Corporation.
Section 2.7. Conversion of Shares. At the Effective Time, by virtue of the
--------------------
Merger and without any action on the part of Parent, Purchaser, the Company or
the holders of the Shares:
(a) if Purchaser holds at least 90% of the Shares then outstanding, each
Share issued and outstanding immediately prior to the Effective Time, other than
Shares held by Parent, Purchaser, the Company or any of their wholly-owned
subsidiaries (collectively, the "Excluded Shares") and any Dissenting Shares (as
---------------
defined in Section 2.12)), shall automatically be canceled and extinguished and
shall be converted into the right to receive $6.75, or the greatest amount per
Share as is paid pursuant to the Offer (the "Cash Merger Consideration"), in
-------------------------
cash without interest thereon (in the event of any reclassification,
recapitalization, stock split, stock dividend or similar transaction with
respect to the Shares, appropriate and proportionate adjustments, if any, shall
be made to the amount of the Offer Price and Cash Merger Consideration, and all
references to the
7
<PAGE>
Offer Price or the Cash Merger Consideration in this Agreement shall be deemed
to be to the Offer Price or the Cash Merger Consideration as so adjusted).
(b) if Purchaser does not hold at least 90% of the Shares then
outstanding, each Share issued and outstanding immediately prior to the
Effective Time, other than Excluded Shares and any Dissenting Shares, shall
automatically be canceled and extinguished and shall be converted into the right
to receive that fraction of a fully paid and nonassessable share of the common
stock, $.01 par value, of Parent ("Parent Common Stock") equal to the Conversion
-------------------
Number (the "Stock Merger Consideration" and together with the Cash Merger
--------------------------
Consideration, the "Merger Consideration"). The "Conversion Number" shall be
-------------------- -----------------
equal to a fraction (rounded to the nearest third decimal point), (A) the
numerator of which shall be equal to the Cash Merger Consideration and (B) the
denominator of which shall be equal to the Parent Average Stock Price (as
defined in Section 8.10); provided, however, that if the Parent Average Stock
Price is equal to or less than $12.50, then the Conversion Number shall be
0.540.
(c) each Excluded Share shall be canceled and extinguished and cease to
exist, without any conversion thereof, and no payment shall be made with respect
thereto;
(d) each holder (other than holders referred to in Section 2.7(c)) of a
certificate representing any Shares shall after the Effective Time cease to have
any rights with respect to such Shares, except either to receive the Merger
Consideration upon surrender of such certificate, or to exercise such holder's
appraisal rights as provided in Section 2.12 and the CGCL; and
(e) each share of Common Stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and thereafter
represent one validly issued, fully paid and nonassessable share of Common Stock
of the Surviving Corporation.
Section 2.8. Options; Company Stock Plans. Parent shall not assume any
----------------------------
option to purchase shares of Company Common Stock (an "Option") outstanding
------
under any option plans of the Company, including the 1986 Incentive Stock Option
Plan, the 1988 Stock Option Plan or the 1998 Stock Option Plan (collectively the
"Company Stock Plans"). The parties hereto shall take all appropriate action to
-------------------
provide that, at or following the consummation of the Offer, each holder of an
outstanding Option shall be entitled to receive an amount in cash equal to the
product of (i) the excess, if any, of the Cash Merger Consideration over the per
share exercise price of each such Option and (ii) the number of Shares subject
to such Option which are exercisable immediately prior to the Effective Time.
Section 2.9. Shareholders' Meeting.
---------------------
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting
of its shareholders (the "Special Meeting") as soon as practicable after the
---------------
Proxy Statement (as defined below) is cleared by the SEC for the purpose of
considering and taking action to approve the adoption of this Agreement and the
principal terms of the Merger;
8
<PAGE>
(ii) prepare and file with the SEC a preliminary proxy statement,
and any amendment or supplement thereto (the "Proxy Statement") relating to the
---------------
Merger and this Agreement, and use its best efforts (A) to obtain and furnish
the information required to be included by the SEC in the Proxy Statement and,
after consultation with Parent, to respond as soon as practicable to any
comments made by the SEC with respect to the preliminary Proxy Statement and
cause a definitive Proxy Statement to be mailed to its shareholders and (B) to
obtain the necessary approvals of the principal terms of the Merger and adoption
of this Agreement by its shareholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that shareholders of the Company vote in favor of the approval of
the principal terms of the Merger and the adoption of this Agreement and the
written opinion of Raymond James that the terms of the Merger are fair, from a
financial point of view, to the shareholders of the Company.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of its other subsidiaries in favor of
the approval of the principal terms of the Merger and adoption of this
Agreement.
Section 2.10. Proxy Statement/Prospectus. If Parent is required to issue
--------------------------
shares of Parent Common Stock pursuant to Section 2.7(b), then Parent shall
prepare and file with the SEC a registration statement on Form S-4 pursuant to
which the issuance of the shares of Parent Common Stock in the Merger will be
registered under the Securities Act of 1933, as amended (the "Securities Act")
--------------
(the "Registration Statement"). The final prospectus included in the
----------------------
Registration Statement as declared effective by the SEC shall be part of the
Proxy Statement.
Section 2.11. Merger Without Meeting of Shareholders. Notwithstanding the
--------------------------------------
provisions of Section 2.9, in the event that Purchaser shall acquire at least
90% of the outstanding Shares pursuant to the Offer, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the Purchaser delivers to the Paying
Agent its Notice of Acceptance without a meeting of shareholders of the Company,
in accordance with the provisions of Section 1110 of the CGCL.
Section 2.12. Dissenting Shares. Notwithstanding any provision of this
-----------------
Agreement to the contrary, each outstanding share of Company Common Stock held
by a holder exercising dissenter's, appraisal or other similar rights
("Dissenter's Rights") with respect to such shares pursuant to Chapter 13 or
------------------
other applicable provisions of the CGCL, who has not effectively withdrawn or
lost such rights (a "Dissenting Share"), shall not be converted into or
----------------
represent a right to receive the Merger Consideration pursuant to this Article
II, but the holder thereof shall be entitled only to such rights as are granted
by the applicable provisions of the CGCL; provided, however, that each
Dissenting Share held by a person at the Effective Time who shall, after the
Effective Time, lose such Dissenter's Rights or withdraw such demand for
appraisal or payment of fair market value pursuant to the CGCL, shall be deemed
to be converted, as of the Effective Time, into the right to receive the Merger
Consideration pursuant to this Article II. The Company shall give Parent (A)
prompt notice and copies of all notices of dissent, demands for
9
<PAGE>
appraisal or payment of fair market value, withdrawals of demands for appraisal
or payment of fair market value, and other instruments received by the Company
relating to the exercise of Dissenter's Rights received by the Company and (B)
the opportunity to direct all negotiations and proceedings with respect thereto
under the CGCL. The Company will not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisal
or payment of fair market value and will not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
Section 2.13. Payment for Shares.
------------------
(a) Prior to the Effective Time, Purchaser shall select and appoint a
bank or trust company having net capital of not less than $100,000,000 to act as
Paying Agent to effect the payment of the Merger Consideration in respect of
certificates (the "Certificates") that, prior to the Effective Time, represented
------------
Shares entitled to payment of the Merger Consideration pursuant to Section 2.7.
At the Effective Time, Parent or Purchaser shall deposit, or cause to be
deposited, in trust with the Paying Agent for the benefit of the holders of
Shares the aggregate Merger Consideration to which holders of Shares shall be
entitled at the Effective Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, Purchaser or Parent shall cause
the Paying Agent to mail to each record holder of Certificates (other than the
holders of Certificates representing Excluded Shares) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use of such letter of transmittal in
surrendering the Certificates for payment. Upon the surrender of each
Certificate, together with a completed and duly executed letter of transmittal
and such other documents as may be requested in connection therewith, the Paying
Agent shall pay the holder of such Certificate the Cash Merger Consideration or
the Stock Merger Consideration, as the case may be, multiplied (after giving
effect to any required tax withholdings) by the number of Shares formerly
represented by such Certificate, in consideration therefor, and such Certificate
shall forthwith be canceled. Until so surrendered, each Certificate shall
represent solely the right to receive the aggregate Cash Merger Consideration or
Stock Merger Consideration, as the case may be, relating thereto. No interest or
dividends shall be paid or accrued on the Merger Consideration. All Merger
Consideration paid upon surrender for exchange of any Certificate in accordance
with the terms of this Agreement shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Certificate.
(c) In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, the Merger Consideration (or
any portion thereof) may be paid and delivered to any person other than the
person in whose name the Certificate surrendered is registered, so long as the
Certificate so surrendered is properly endorsed or otherwise is in proper form
for transfer and the person requesting such payment pays to the Paying Agent any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered, or establishes to the
satisfaction of the Paying Agent that such taxes have been paid or are not
applicable. In the event any Certificate shall have been lost, stolen or
10
<PAGE>
destroyed, the Paying Agent shall be required to pay the full Merger
Consideration in respect of any Shares represented by such Certificate;
provided, however, if required by Parent, the owner of such lost, stolen or
destroyed Certificate shall execute and deliver to the Paying Agent a form of
affidavit claiming such Certificate to be lost, stolen or destroyed in form and
substance satisfactory to Parent and the posting by such owner of a bond in such
amount as Parent may determine is necessary as indemnity against any claim that
may be made against Parent or the Paying Agent.
(d) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Parent Common Stock, Certificates and other documents in its possession relating
to the transactions described in this Agreement, and the Paying Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the aggregate
Merger Consideration relating thereto, without any interest thereon.
Notwithstanding the foregoing, none of Parent, Purchaser, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered immediately prior to such date on which any payment with respect
thereto would otherwise escheat to or become the property of any court,
administrative agency, commission, or other governmental authority or
instrumentality ("Governmental Entity"), the cash payment in respect of such
-------------------
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and canceled, and, in Parent's sole discretion, the
holders of such Certificates shall receive in return for the payment of the
aggregate Merger Consideration relating thereto, as provided in this Article II.
Section 2.14. Supplementary Action. If at any time after the Effective
---------------------
Time, any further assignments or assurances in law or any other things are
necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of either the Company
or Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to execute
and deliver any and all documents and instruments and to take all other action
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.
11
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that the
statements contained in this Article III are true and correct, except (i) as
disclosed in the Company SEC Reports (as defined in Section 3.5(a)) filed prior
to the date of this Agreement or (ii) as set forth in the written disclosure
schedules delivered by the Company to Parent on or before the date of this
Agreement (the "Disclosure Schedule").
-------------------
Section 3.1. Organization and Qualification of the Company and its
-----------------------------------------------------
Subsidiaries. Each of the Company and its Subsidiaries is a corporation duly
- ------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
could have a Material Adverse Effect on the Company. Except as set forth on the
Disclosure Schedule, neither the Company nor any of its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any such equity or similar interest in,
any corporation, limited liability company, partnership, joint venture or other
business association or entity, excluding securities of any publicly traded
company held for investment by the Company and comprising less than five percent
(5%) of the outstanding stock of such company.
Section 3.2. Subsidiaries.
------------
(a) Except as set forth in Section 3.2(a) of the Disclosure Schedule, all
of the issued and outstanding shares of capital stock of each Subsidiary are
owned by the Company or by a Subsidiary of the Company free and clear of all
liens or encumbrances, and are validly issued, fully paid, and nonassessable,
and there are no outstanding subscriptions, options, calls, contracts,
registration rights, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants with respect to
any such Subsidiary's capital stock, including any right obligating any such
Subsidiary to issue, deliver, or sell additional shares of its capital stock.
(b) Section 3.2(a) of the Disclosure Schedule sets forth all subsidiaries
of the Company.
Section 3.3. Capital Structure.
-----------------
(a) The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, no par value per share ("Company Common Stock") and
--------------------
5,000,000 shares of Preferred Stock ("Company Preferred Stock") no par value per
-----------------------
share. As of the date hereof, (i) 8,340,669 shares of Company Common Stock and
no shares of Company Preferred Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable; (ii) no shares of Company
Common Stock or Company Preferred Stock are held in the treasury of the Company
or by Subsidiaries of the Company; and (iii) 2,960,372 shares of Company Common
Stock are reserved for issuance under Company Stock Plans (including (A) no
shares reserved
12
<PAGE>
for issuance under the 1986 Incentive Stock Option Plan, (B) 1,628,333 shares of
Company Common Stock reserved for issuance under the 1988 Option Plan, 1,628,333
of which are subject to outstanding options and none of which are reserved for
future option grants, (C) 1,000,000 shares of Company Common Stock are reserved
for issuance under the 1998 Stock Option Plan, 554,500 of which are subject to
outstanding options and 445,500 of which are reserved for future option grants,
(D) 212,466 shares of Company Common Stock are reserved for future issuance
pursuant to the Employee Stock Purchase Plan (the "Company Purchase Plan"), none
---------------------
of which are subject to outstanding purchase rights, (E) 119,573 shares of
Company Common Stock are reserved for future issuance pursuant the Restricted
Stock Plan (the "Company Restricted Plan"), none of which are subject to the
-----------------------
outstanding purchase rights, (F) 264,136 shares of Company Common Stock are
reserved for future issuance pursuant to the conversion of all convertible notes
and all unfunded contractual obligations to pay created by that certain
Rescission and Reformation Agreement and that New Note Agreement each dated
effective November 1, 1996 by and among the Company, the Company's subsidiary,
Organic Waste Technologies, Inc. ("OWT") and certain of the former shareholders
---
and optionholders of OWT (the "OWT Debt"), and (G) 123,077 shares of Company
--------
Common Stock are reserved for future issuance pursuant to the conversion of the
Convertible Notes dated April 30, 1997 in the aggregate principal amount of
$800,000 ("NEP Notes"). Section 3.3(a) of the Disclosure Schedule contains a
---------
correct and complete list as of May 7, 1999 of each outstanding purchase right
or option (each a "Company Option") to purchase Shares including the holder,
--------------
date of grant, exercise price and number of Shares subject thereto. All shares
of Company Common Stock subject to issuance as specified above, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the capital stock of any Company Subsidiary or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity other than guarantees of bank obligations of
such Subsidiaries entered into in the ordinary course of business and disclosed
to the Parent prior to the date hereof. Except as set forth in Section 3.3(a) of
the Disclosure Schedule, all of the outstanding shares of capital stock of each
Subsidiary of the Company are duly authorized, validly issued, fully paid and
nonassessable, and all such shares (other than directors' qualifying shares in
the case of foreign Subsidiaries) are owned by the Company or another Company
Subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations on the Company's voting rights, charges or other
encumbrances of any nature.
(b) Except as set forth in Section 3.3(a), there are no equity securities
of any class of the Company or any of its Subsidiaries, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 3.3(a), there are no
options, warrants, equity securities, calls, rights, registration rights,
commitments, agreements or preemptive rights of any character to which the
Company or any of its Subsidiaries is a party or by which it is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered, registered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any
13
<PAGE>
such option, warrant, equity security, call, right, commitment or agreement,
and, except for the Support Agreements and related proxies contemplated by this
Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock of the Company.
Except as described in Section 3.3(a), the Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter ("Voting
------
Debt"). The Shares constitute the only class of securities of the Company or any
- ----
of its Subsidiaries registered or required to be registered under the Exchange
Act.
Section 3.4. Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company, subject (if required by law) only to approval of this Agreement by
the holders of a majority of the outstanding Shares (the "Company Requisite
-----------------
Vote"). This Agreement has been duly executed and delivered by the Company
----
and, assuming the due authorization, execution and delivery by Parent and
Purchaser, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
(b) The execution and delivery of this Agreement by the Company does not,
and the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with or violate any provision of the Articles or Bylaws of the
Company or any of its Subsidiaries (in each case as heretofore amended), (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or by which any of their respective properties is
bound or affected other than such conflict or violations which, individually or
in the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect on the Company or an adverse effect on the ability of the parties
hereto to consummate the Offer or the Merger, or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the rights of the Company or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of their respective properties
are bound or affected which has or could reasonably be expected to have a
Material Adverse Effect on the Company or an adverse effect on the ability of
the parties hereto to consummate the Offer or the Merger.
14
<PAGE>
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by the Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the Offer or the Merger,
except for (i) the filings referred to in Section 1.2(b), (ii) the filing of the
California Agreement of Merger and Certificate of Ownership with the Secretary
of State of the State of California in accordance with the CGCL to affect the
Merger or such other documents or forms as may be necessary to affect the
Merger, (iii) the filing of the Proxy Statement, if applicable, with the SEC in
accordance with the Exchange Act, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities (or related) laws and the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
-------
securities or antitrust laws of any foreign country, and (v) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made could not reasonably be expected to have a Material Adverse
Effect on the Company or a material adverse effect on the ability of the parties
hereto to consummate the Merger.
Section 3.5. SEC Filings; Financial Statements.
---------------------------------
(a) The Company has filed and made available to Parent all forms, reports
and documents required to be filed by the Company with the SEC (collectively,
the "Company SEC Reports"). The Company SEC Reports (i) at the time filed, (or
-------------------
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Company SEC Reports or necessary in
order to make the statements in such Company SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of the Company's
Subsidiaries is required to file any forms, reports or other documents (other
than those previously filed, except for those documents required to be filed as
a result of this Agreement and the transactions contemplated hereby) with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Company SEC Reports, including any
Company SEC Reports filed after the date of this Agreement until the Closing
(the "Company Financial Statements"), complied or will comply as to form in all
----------------------------
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was or will be prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis ("GAAP") throughout
----
the periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
promulgated by the SEC), and fairly presented or will fairly present the
consolidated financial position of the Company and its subsidiaries as of its
date. The Company has heretofore made available or promptly will make available
to Parent a complete and correct copy of all amendments or modifications (in
draft or final form) which are required to be filed with the SEC but have not
yet been filed with the SEC to the Company Financial Reports.
15
<PAGE>
(c) Section 3.5(c) of the Disclosure Schedule sets forth an accurate list
of all international letters of credit and bonds and all other letters of credit
and bonds issued for the benefit of the Company in an amount greater than
$100,000.
Section 3.6. Absence of Undisclosed Liabilities. The Company and its
----------------------------------
Subsidiaries do not have any liabilities, either accrued or contingent (whether
or not required to be reflected in financial statements in accordance with
GAAP), including liabilities arising under any Environmental Law, and whether
due or to become due, which individually or in the aggregate, are or could be
reasonably likely to have a Material Adverse Effect on the Company, other than
(i) liabilities reflected in the consolidated balance sheet of the Company as of
December 31, 1998 (the "Company Balance Sheet"), and (ii) normal or recurring
---------------------
liabilities incurred since December 31, 1998 in the ordinary course of business
consistent with past practices.
Section 3.7. Absence of Certain Changes or Events. Except as set forth in
------------------------------------
Section 3.7 of the Disclosure Schedule, since the date of the Company Balance
Sheet, the Company and its Subsidiaries have conducted their respective
businesses in all respects only in, and have not engaged in any transaction
other than according to, the ordinary and usual course of such businesses
consistent with past practices, and there has not been any Material Adverse
Effect on the Company or on the ability of the parties hereto to consummate the
Offer or the Merger.
Section 3.8. Taxes.
-----
(a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes"
--- -----
means any and all material federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) The Company and its Subsidiaries have accurately prepared and timely
filed all material federal, state, local and foreign returns, estimates,
information statements and reports required to be filed at or before the
Effective Time ("Returns") relating to any and all Taxes concerning or
-------
attributable to the Company or any of its Subsidiaries or to their operations,
and such Returns are true and correct in all material respects.
(c) The Company and its Subsidiaries as of the Effective Time: (i) will
have paid all Taxes it is required to pay prior to the Effective Time and (ii)
will have withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.
(d) There is no Tax deficiency outstanding, proposed or assessed against
the Company or any of its Subsidiaries that is not reflected as a liability on
the Company Balance Sheet nor has the Company or any of its Subsidiaries
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax (other than
16
<PAGE>
state Taxes in the ordinary course of business in an amount that is not material
to the Company and its Subsidiaries taken together as a whole).
(e) Neither the Company nor any of its Subsidiaries has any material
liability for unpaid federal, state, local or foreign Taxes that has not been
accrued for or reserved on the Company Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(f) Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement.
(g) Neither the Company nor any of its Subsidiaries has been a member of
an affiliated group of corporations, within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code"), or a member of a
----
combined, consolidated or unitary group for state, local or foreign Tax purposes
(other than the group the common parent of which is the Company), and neither
the Company nor any of its Subsidiaries has any liability for Taxes of any
person (other than the Company and its Subsidiaries), whether under Treasury
Regulations Section 1.1502-6 (or any corresponding provision of state, local or
foreign law), as transferee or successor, by reason of any tax sharing or tax
allocation agreement, or otherwise.
(h) Neither the Company nor any of its Subsidiaries has any excess loss
account (as defined in Treasury Regulations Section 1.1502-19) with respect to
the stock of any Subsidiary.
(i) Neither the Company nor any of its Subsidiaries has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the Code
(or any corresponding provision of state, local or foreign law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign law) apply to any disposition of any asset owned by any of
them.
(j) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code (or any similar
provision of state, local or foreign law) either as a result of the transaction
contemplated hereunder or otherwise.
Section 3.9. Properties. All real property leases of the Company or any of
----------
its Subsidiaries ("Real Property Lease(s)") are in good standing, valid and
----------------------
effective in accordance with their respective terms, and neither the Company nor
its Subsidiaries, nor, to the Company's knowledge, any other party, is in
default under any of such leases, other than defaults which, individually or in
the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect on the Company or an adverse effect on the ability of the parties
hereto to consummate the Offer or the Merger.
Section 3.10. Intellectual Property.
------------------------------------
(a) The Company and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights
17
<PAGE>
and mask works, any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material (collectively, the "Intellectual Property") that are
---------------------
necessary to conduct the business of the Company and its Subsidiaries as
currently conducted, or planned to be conducted, except where the absence of the
right to use such Intellectual Property has not had or could not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries is, or will as a
result of the execution and delivery of this Agreement or the performance of the
Company's obligations under this Agreement be, in breach of any license,
sublicense or other agreement relating to the Intellectual Property, or any
licenses, sublicenses and other agreements or arrangements as to which the
Company or any of its Subsidiaries is a party and pursuant to which the Company
or any of its Subsidiaries is authorized to use any third party patents,
trademarks or copyrights, including software which is used in the manufacture
of, incorporated in, or forms a part of any product of the Company or any of its
Subsidiaries the breach of which, individually or in the aggregate, has had or
could be reasonably likely to have a Material Adverse Effect on the Company.
(c) All of the patents and registered trademarks, service marks and
copyrights which are held by the Company or any of its Subsidiaries, and which
are material to the business of the Company and its Subsidiaries, taken as a
whole, as it is currently conducted, are valid and subsisting and are set forth
in Section 3.10 of the Disclosure Schedule. The Company is not named in any
pending suit, action or proceeding which involves a claim of infringement of any
rights relating to any Intellectual Property of any third party. The
manufacturing, marketing, licensing or sale of the Company's products do not
infringe any rights relating to any Intellectual Property of any third party
which infringement could reasonably be expected to have a Material Adverse
Effect on the Company.
Section 3.11. Agreements, Contracts and Commitments. Neither the Company
-------------------------------------
nor any of its Subsidiaries has breached, or to the Company's knowledge,
received any claim or threat, whether orally or in writing, that it has breached
any of the terms or conditions of any agreement, contract or commitment (that
has not expired or been terminated) filed as an exhibit to the Company SEC
Reports ("Company Material Contracts") in such a manner as could permit any
--------------------------
other party to cancel or terminate the same, or could permit any other party to
collect material damages from the Company or any of its Subsidiaries under any
Company Material Contract. The Company Material Contracts constitute all
contracts, documents, instruments and agreements required to be filed under the
Exchange Act and the Securities Act with the SEC. Each Company Material Contract
that has not expired or been terminated is in full force and effect and is not
subject to any material default thereunder of which the Company is aware by any
party obligated to the Company or any of its Subsidiaries pursuant to such
Company Material Contract. To the Company's knowledge, none of the parties to
the Company Material Contracts have terminated, or in any way expressed, whether
orally or in writing, an intent to reduce or terminate the amount of business
with the Company and its Subsidiaries in the future, whether as a result of the
Offer, the Merger or otherwise.
18
<PAGE>
Section 3.12. Litigation. To the Company's knowledge, except as set forth
----------
in Section 3.12 of the Disclosure Schedule, there is no action, suit or
proceeding, claim, arbitration or investigation against the Company or any of
its Subsidiaries pending or, to the Company's knowledge, threatened, or as to
which the Company or any of its Subsidiaries has received any notice of
assertion, whether orally or in writing, which, if decided adversely to the
Company or such Subsidiary, could have a Material Adverse Effect on the Company
or a material adverse effect on the ability of the Company to consummate the
transactions contemplated by this Agreement.
Section 3.13. Environmental Matters.
---------------------
(a) The Company and its Subsidiaries are and have been operated in
compliance with all Environmental Laws and have been and are in compliance with
all of their respective Environmental Permits, not including non-compliance with
Environmental Laws or Environmental Permits that would not constitute a Material
Adverse Effect on the Company. The Company and its Subsidiaries have obtained
all Environmental Permits necessary to the current conduct of their businesses
and such Environmental Permits are valid and in full force and effect, not
including those Environmental Permits where the absence, invalidity, or lack of
full force or effect of which would not constitute a Material Adverse Effect on
the Company.
(b) To the Company's knowledge, in connection with the Company, its
Subsidiaries and the conduct of the business of each, no written notice,
notification, demand, request for information, citation, summons or order has
been received, no complaint has been filed, no penalty has been assessed and no
investigation, action, claim, proceeding or review is pending or, threatened
relating to or arising out of the alleged violation of or alleged liability
under any Environmental Law by the Company or its Subsidiaries (collectively,
"Written Environmental Claims"), where such Written Environmental Claims are
----------------------------
currently outstanding, and would have a Material Adverse Effect on the Company.
(c) To the Company's knowledge, neither the Company nor any of its
Subsidiaries has exposed any employee or any other individual to any Hazardous
Material in violation of Environmental Laws, where such violation is not covered
by worker's compensation insurance, and that is currently outstanding, and that
would have a Material Adverse Effect on the Company.
(d) To the Company's knowledge, there have been no releases or spills of
any Hazardous Material directly caused by the acts or omissions of the Company
or its subsidiaries in reportable quantities under Environmental Law, and that
would have a Material Adverse Effect on the Company.
(e) Neither the Company nor any Subsidiary has entered into any indemnity
agreement or other contract in settlement of any claims against the Company or a
Subsidiary, in which it has agreed to assume the liabilities of any other party
under any Environmental Law, not including such indemnity agreements or such
other contracts in settlement of claims against the Company or a Subsidiary
where, if all or any of such liabilities have come or may come to
19
<PAGE>
fruition, such assumption of same does not, or would not be likely to,
constitute a Material Adverse Effect on the Company.
(f) Neither the Company nor any Subsidiary is currently engaged in the
business of owning or operating any treatment, storage or disposal facility, as
defined in Part 264 of Title 40 of the Code of Federal Regulations, involved in
the on-going commercial disposal of hazardous waste, as defined in RCRA Section
1004, and neither the Company nor any Subsidiary currently owns any site or
facility engaged in the foregoing.
(g) Section 3.13(g) of the Disclosure Schedule lists each site at which
the Company or any Subsidiary currently owns or operates any leachate treatment
system using the Company's proprietary leachate evaporation system (LES)
technology.
Section 3.14. Employee Benefit Plans.
----------------------
(a) The Company has made available to Parent all documents and governing
instruments or descriptions pertaining to all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and all employment, bonus, stock option, stock purchase,
-----
incentive, deferred compensation, supplemental retirement, severance and other
similar employee benefit plans, and all unexpired severance agreements (pursuant
to which payments are still payable by the Company), written or otherwise, for
the benefit of, or relating to, any current or former employee of the Company or
any of its Subsidiaries or any trade or business (whether or not incorporated)
which is a member or which is under common control with the Company within the
meaning of Section 414 of the Code (an "ERISA Affiliate") (together, the
---------------
"Company Employee Plans").
----------------------
(b) With respect to each Company Employee Plan, the Company has made
available to Parent, a true and correct copy of (i) the three most recent annual
reports (Form 5500) filed with the Internal Revenue Service ("IRS") with respect
---
to a Company Employee Plan subject to such filing requirement, and (ii) each
trust agreement and group annuity contract, if any, relating to such Company
Employee Plan.
(c) All Company Employee Plans intended to be qualified under Code
Section 401 have been the subject of determination letters from the Internal
Revenue Service to the effect that such plans are qualified and exempt from
Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor has any event
occurred since the date of its most recent determination letter or application
therefor that could adversely affect its qualification or materially increase
its costs. Each Company Employee Plan is in substantial compliance with all
reporting and disclosure requirements of ERISA and the Code and the Company and
each of its ERISA Affiliates is, in respect of each such plan, in substantial
compliance with the fiduciary responsibility provisions of ERISA, Code Sections
4980B, 9801, 9802, 9811 and 9812.
(d) Neither the company, nor any of its ERISA Affiliates has maintained,
contributed or been obligated to contribute to any plan that is subject to Title
IV of ERISA or Code
20
<PAGE>
Section 412 or to any plan providing welfare benefits to former employees other
than as required by Code Section 4980B.
(e) With respect to the Company Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with U.S. generally accepted accounting principles, on the Company
Financial Statements.
(f) Except as provided for in this Agreement or as set forth in Section
3.14(f) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any officer or
other key employee of the Company or any of its Subsidiaries, the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated by
this Agreement, (ii) agreement with any officer of the Company or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of one hundred thousand dollars ($100,000) per
annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 3.15. Compliance with Laws. Except as set forth in Section 3.15 of
--------------------
the Disclosure Schedule, each of the Company and its Subsidiaries has complied
in all material respects with all applicable federal, state, local and foreign
statutes, laws and regulations and to the Company's knowledge has not received
any notices, whether written or oral, of any material violation or potential
material violation with respect to any such statute, law or regulation, with
respect to the conduct of its business or the ownership or operation of its
business, including the federal Foreign Corrupt Practices Act. Except as set
forth in the Company SEC Reports filed prior to the date hereof, no
investigation or review of any court or other governmental or regulatory
authority, agency, commission, body or other governmental entity (each a
"Governmental Entity") with respect to the Company or any of its Subsidiaries is
-------------------
pending or, to the Company's knowledge, threatened, nor has any Governmental
Entity indicated an intention to conduct the same.
Section 3.16. Labor Matters. Except as set forth in Section 3.16 of the
-------------
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of any material proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization, nor is there pending or, to the Company's knowledge,
threatened, any material labor strike, dispute, walkout, work stoppage, slow-
down or lockout involving the Company or any of its Subsidiaries.
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Section 3.17. Interested Party Transactions. Since the date of the
-----------------------------
Company's most recent proxy statement to its shareholders, no event has occurred
that could be required to be reported by the Company as a Certain Relationship
or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by
the SEC.
Section 3.18. Information. None of the information supplied by the Company
-----------
for inclusion or incorporation by reference in the Offer Documents, the
Registration Statement (if applicable) or any other document to be filed with
the SEC or any other Governmental Entity in connection with the transactions
contemplated by this Agreement (the "Other Filings") will, at the respective
-------------
times such documents are filed with the SEC or other Governmental Entity,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
Section 3.19. Payments Resulting from Mergers. Except as set forth in
-------------------------------
Section 3.19 of the Disclosure Schedule, the consummation or announcement of any
transaction contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or further acts or events) result in any material
payment (whether of severance pay or otherwise) becoming due from the Company or
any of its Subsidiaries to any officer, employee, former employee or director
thereof under (i) any management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change in control),
bonus or other contract for personal services with any officer, director or
employee or any plan, agreement or understanding similar to any of the
foregoing, or any "rabbi trust" or similar arrangement, or (ii) material benefit
under any of the Company Employee Plans being established or becoming
accelerated, vested or payable.
Section 3.20. Opinion of Financial Advisor. Raymond James has delivered to
----------------------------
the Company a written opinion dated the date of this Agreement to the effect
that the terms of the Offer and the Merger are fair, from a financial point of
view, to the shareholders of the Company.
Section 3.21. Insurance. The Company maintains insurance policies (the
---------
"Insurance Policies") against all risks of a character and in such amounts as
------------------
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have complied
in all material respects with the provisions of each Insurance Policy under
which it is the insured party. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or, to the
Company's knowledge, indicated any intent to do so or not to renew any such
policy. All material claims under the Insurance Policies have been filed in a
timely fashion.
Section 3.22. Brokers and Finders. Neither the Company nor any of its
-------------------
Subsidiaries, officers, directors, or employees or other affiliates has employed
any broker or finder or incurred
22
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any liability for any brokerage fees, commissions or finders' fees in connection
with the Offer, the Merger or the other transactions contemplated by this
Agreement, except that the Company has employed Raymond James, the arrangements
with which have been disclosed to Parent prior to the date hereof.
Section 3.23. Certain Business Practices. Neither the Company, any of its
--------------------------
Subsidiaries nor any directors, officers, agents or employees of the Company or
any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity;
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii)
made any other payment prohibited by applicable Law.
Section 3.24. Customers. The written reports supplied by the Company to
---------
Parent in connection with this Agreement with respect to revenues by customer
for 1998 were accurate in all material respects.
Section 3.25. Projections. Management has no reason to believe that the
-----------
financial projections and forecasts included in the Company's 1999 business plan
and provided to Parent are incorrect or inaccurate, in any material respect;
provided, however, that these projections and forecasts did not take into
account the short term disruption to the business of the Company or other
potential adverse effects on revenues that may be attributable to the
transactions contemplated by this Agreement.
Section 3.26. Government Contracts. Except as set forth in Section 3.26 of
--------------------
the Disclosure Schedule:
(i) With respect to each Government Contract or Bid to
which the Company and/or any of its Subsidiaries is a party: (1) to the
Company's knowledge, all representations and certifications were current,
accurate and complete when made, and the Company and its Subsidiaries have fully
complied with all such representations and certifications; (2) since April 1,
1996, no allegation has been made by a representative of the U.S. Government,
either orally or in writing, that the Company or any of its Subsidiaries is in
breach or violation of any material statutory, regulatory or contractual
requirement; (3) since April 1, 1996, no termination for convenience,
termination for default, cure notice or show cause notice has been issued or to
the Company's knowledge, threatened; (4) since April 1, 1996, no cost in excess
of $200,000 incurred by the Company, any of its Subsidiaries or any of their
respective subcontractors has been questioned or disallowed by a representative
of the U.S. Government; and (5) since April 1, 1996, no money due to the Company
or any of its Subsidiaries under a Government Contract has been (or to the
Company's knowledge is presently threatened to be) withheld or set off.
(ii) To the Company's knowledge, neither the Company, any
of its Subsidiaries, any of their respective affiliates, nor any of the
Company's or any of its Subsidiaries' directors, officers, employees, agents or
consultants is (or for the last three years has been) (1) under administrative,
civil or criminal investigation, indictment or information,
23
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audit or internal investigation with respect to any alleged irregularity,
misstatement or omission regarding a Government Contract or Bid; or (2)
suspended or debarred from doing business with any governmental authority or
declared nonresponsible or ineligible for government contracting, nor to the
Company's knowledge, is there any valid basis for such an investigation,
suspension or debarment. Neither the Company, nor any of its Subsidiaries or any
of their respective affiliates have made a voluntary disclosure to any Federal
Governmental Entity with respect to any alleged material irregularity,
misstatement or omission arising under or relating to any Government Contract or
Bid.
(iii) Since April 1, 1996, no governmental authority or any
prime contractor, subcontractor or vendor has asserted any claim or initiated
any dispute proceeding against the Company or any of its Subsidiaries, nor has
the Company or any of its Subsidiaries asserted any claim or initiated any
dispute proceeding, directly or indirectly, against any such party, concerning
any Government Contract or Bid, in each case involving an amount in excess of
$100,000. There are no facts of which the executive officers of the Company are
aware upon which such a claim or dispute proceeding may be based in the future.
(iv) Definitions. The following terms, as used herein,
-----------
shall have the following meanings:
"Bid" means any quotation, bid or proposal by the Company, any of its
---
Subsidiaries or any of their respective affiliates which, if accepted or
awarded, could lead to a contract with a governmental authority or any other
entity, including a prime contractor or a higher tier subcontractor to a
governmental authority, for the design, manufacture or sale of products or the
provision of services by the Company or any of its Subsidiaries.
"Governmental Contract" means any prime contract, subcontract,
---------------------
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, Bid, change order, arrangement
or other commitment of any kind relating to the business of the Company or any
of its Subsidiaries between the Company and/or any of its Subsidiaries and (1)
any Federal Governmental Entity, (2) any prime contractor to a Federal
Governmental Entity or (3) any subcontractor with respect to any contract
described in clause (1) or (2).
Section 3.27. Material Disclosure. No statement, representation or warranty
-------------------
made by the Company in this Agreement, or in any certificate, statement, list,
schedule or other document furnished or to be furnished to Parent or Purchaser
hereunder, contains, or when so furnished will contain, any untrue statement of
a material fact, or fails to state, or when so furnished will fail to state, a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are or will be made, not
misleading.
Section 3.28. Y2K Compliance. The Company has established and is
--------------
implementing an enterprise-wide program to provide that the change of the year
from 1999 to the year 2000 would not have a Material Adverse Effect on the
Company.
24
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Section 3.29. Corporate Minutes. The copies of the minutes of the meetings
-----------------
of the Board of Directors of the Company from February 9, 1996 through April 12,
1999 which were provided to Parent were complete and accurate in all material
respects, except that matters pertaining to the potential acquisition of the
Company by third parties and potential acquisitions of third parties by the
Company that were not consummated were redacted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company as follows:
Section 4.1. Organization and Qualification of Parent and Purchaser. Each
------------------------------------------------------
of Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power to own, lease and operate its property and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on Parent.
Section 4.2. Authority.
---------
(a) Each of Parent and Purchaser has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by them of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Parent and Purchaser. This Agreement has been duly executed and
delivered by each of Parent and Purchaser and, assuming the due authorization,
execution and delivery by the Company, constitutes the valid and binding
obligation of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) The execution and delivery of this Agreement by each of Parent and
Purchaser does not, and the consummation of the transactions contemplated by
this Agreement will not, (i) conflict with or violate the charter documents or
Bylaws of Parent or Purchaser, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or Purchaser or by
which any of their respective properties is bound or affected, other than such
conflicts or violations which, individually or in the aggregate, do not and
could not reasonably be expected to have a Material Adverse Effect on Parent or
a material adverse effect on the ability of the parties hereto to consummate the
Offer or the Merger, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both could become a default)
under, or impair the rights of Parent or Purchaser or alter the rights or
obligations of any third
25
<PAGE>
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent or Purchaser pursuant
to, any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Purchaser is a party or by which Parent or Purchaser or any of their respective
properties are bound or affected, which would have or could be reasonably
expected to have a material adverse effect on the ability of the parties hereto
to consummate the Offer or the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Parent or Purchaser in connection with the execution and delivery of
this Agreement or the consummation of the Offer or the Merger, except for (i)
the filing of the Schedule 14D-1 with the SEC in accordance with the Exchange
Act, (ii) the filing of the Registration Statement, as required, with the SEC in
accordance with the Securities Act, (iii) the filing of the Certificate of
Merger and the Certificate of Ownership with the Secretary of State of the State
of California to affect the Merger, or such other documents or forms as may be
necessary to affect the Merger, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities (or related) laws and the HSR Act and
the securities or antitrust laws of any foreign country, and (v) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made could not reasonably be expected to have a Material Adverse
Effect on Parent or a material adverse effect on the ability of the parties
hereto to consummate the Merger.
Section 4.3. Information. Neither the Schedule 14D-1, the Offer Documents
-----------
and the Registration Statement, nor any of the information supplied by Parent or
Purchaser for inclusion in the Schedule 14D-9, shall at the respective times
they are filed with the SEC or are first published, sent or given to
shareholders or upon the expiration of the Offer, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading (except for information supplied by the Company for inclusion in the
Schedule 14D-1, the Offer Documents and the Registration Statement, as to which
Parent and Purchaser make no representation). None of the information supplied
by Parent or Purchaser for inclusion in the Proxy Statement shall, at the date
the Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to shareholders, at the time of the Special Meeting or at the Effective
Time, contain any untrue statement of a material fact required to be stated
therein or necessary in order to make the statements made therein in light of
the circumstances under which they were made, not misleading.
Section 4.4. Available Funds. Parent has or has available to it, and will
---------------
make available to Purchaser, all funds necessary to satisfy all of Parent's and
Purchaser's obligations under this Agreement and in connection with the
transaction contemplated hereby, including, without limitation, the obligation
to purchase all outstanding Shares pursuant to the Offer and the Merger and to
pay all related fees and expenses in connection with Offer and the Merger.
26
<PAGE>
Section 4.5. Litigation. There is no action or suit pending or, to
----------
Parent's knowledge, threatened against Parent or Purchaser or any of their
directors or officers or any judgment decree or order issued against Parent or
Purchaser or any of their directors or officers that has had or could be
reasonably expected to have a material adverse effect on the consummation of the
Offer or the Merger.
Section 4.6. Valid Issuance. The Parent Common Stock to be issued in the
--------------
Merger pursuant to Section 2.7(b), if applicable, will when issued in accordance
with the provisions of this Agreement, be validly issued, fully paid and
nonassessable.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business by the Company. Except as expressly
----------------------------------
contemplated by this Agreement, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company agrees as to itself and its Subsidiaries,
except to the extent that Parent shall otherwise consent in writing (which
consent shall not be unreasonably withheld), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and Taxes when due, subject to good faith
disputes over such debts or Taxes, to pay or perform its other obligations when
due, and to use all reasonable efforts to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and key employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others having business
dealings with it. Without limiting the generality of the foregoing, the Company
shall not (and shall not permit any of its Subsidiaries, directors or officers
to), without the prior written consent of Parent (which consent shall not be
unreasonably withheld):
(a) accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of the Company or
authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement, except as expressly contemplated by
this Agreement;
(b) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property Rights other
than in the ordinary course of business consistent with past practices;
(c) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock
(other than distributions declared with respect to the capital stock of any
Subsidiary in the ordinary course of business consistent with past practice), or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
27
<PAGE>
(d) issue, deliver or sell, subject to any lien or authorize or propose
any of the foregoing with respect to any shares of its capital stock or
securities convertible into shares of its capital stock, Voting Debt or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities other than (i) the issuance of rights to purchase shares
of Company Common Stock as and to the extent required under the Company Option
Plans as in effect as of the date hereof; and (ii) the issuance of Company
Common Stock upon the exercise of Company Stock Options outstanding on the date
of this Agreement in accordance with their present terms or pursuant to the
Company Purchase Plan or Company Restricted Plan in accordance with their
present terms, and (iii) the granting, in the ordinary course of business
consistent with past practice, pursuant to Company Stock Plans in effect on the
date of this Agreement, of Company Options to purchase up to a number of shares
of Company Common Stock as shall be agreed to by the Company and Parent, and the
issuance of Company Common Stock upon exercise thereof;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership or
other business organization or division;
(f) adopt a plan of complete or partial liquidation or dissolution,
merger or otherwise restructure or recapitalize or consolidate with any Person
other than Purchaser or another wholly owned Subsidiary of Parent;
(g) sell, lease, license or otherwise dispose of any of its properties or
assets except for transactions entered into in the ordinary course of business;
(h) take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees, except
for increases in salary or wages of employees in accordance with agreements
entered into before the date of this Agreement and previously provided to
Parent, (ii) grant any additional severance or termination pay to, or enter into
any employment or severance agreements with, officers, (iii) grant any severance
or termination pay to, or enter into any employment or severance agreement, with
any employee, except in accordance with agreements entered into before the date
of this Agreement and previously provided to Parent, (iv) enter into any
collective bargaining agreement, or (v) establish, adopt, enter into or amend in
any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(i) amend or propose to amend its Articles or Bylaws, except as
contemplated by this Agreement;
(j) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person except in the ordinary course of business consistent with past practices
and except for obligations of the Company or its Subsidiaries incurred in the
ordinary course of business and in an amount not to exceed $250,000;
28
<PAGE>
(k) make any loans to any other Person (other than to Subsidiaries of the
Company or, customary loans or advances to employees in connection with
business-related travel in the ordinary course of business consistent with past
practices);
(l) make, authorize or commit to make any capital expenditures except for
capital expenditures in the ordinary course of business and consistent with past
practice or in amounts less than $150,000 individually and $750,000 in the
aggregate;
(m) by any means, make any acquisition of, or investment in, assets or
stock of any other Person;
(n) except as may be required as a result of a change in law or in GAAP,
change any of the accounting principles or practices used by it or revalue in
any respect any of its material assets, including writing down the value of
inventory or writing-off notes or accounts receivable, other than in the
ordinary course of business consistent with past practices;
(o) settle or compromise any material claims or litigation or terminate
or materially amend or modify any of its Material Contracts or waive, release or
assign any material rights or claims;
(p) make, revoke or amend any Tax election;
(q) enter into or amend any agreement or settlement with any Tax
authority; or
(r) take, or agree in writing or otherwise to take, any of the actions
described in the foregoing clauses (a) through (q), or any action which is
reasonably likely to make any of the Company's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on the
date made (to the extent so limited) or as of the Effective Time.
Section 5.2. Access to Information.
---------------------
(a) From the date of this Agreement until the Effective Time, the Company
will give, and will cause its subsidiaries, and each of their respective
officers, directors, employees, counsel, advisors and representatives
(collectively, the "Company Representatives") to give Parent and Purchaser and
-----------------------
their respective officers, employees, counsel, advisors and representatives
(collectively, the "Parent Representatives") access, upon reasonable notice and
----------------------
during normal business hours, to the offices and other facilities and to the
books and records of the Company and its Subsidiaries and will cause the Company
Representatives and the Company's subsidiaries to furnish Parent, Purchaser and
Parent Representatives, to the extent available, with such financial and
operating data and such other information with respect to the business and
operations of the Company and its subsidiaries as Parent and Purchaser may from
time to time reasonably request subject, in each case, to the continuing
obligations of the parties under the Confidentiality Agreement between Parent
and the Company dated February 10, 1999 (the "Confidentiality Agreement"), which
-------------------------
agreement shall survive until termination pursuant to the terms thereof. The
Company shall furnish promptly to Parent and Purchaser a copy of each
29
<PAGE>
report, schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of federal, state
or foreign securities laws.
(b) No investigation made by Parent, Purchaser or any Parent
Representative pursuant to this Section 5.2 shall affect any representations or
warranties of the parties contained in this Agreement or any conditions to their
obligations hereunder.
Section 5.3. Efforts.
-------
(a) Subject to the terms and conditions hereof, each of the Company,
Parent and Purchaser shall, and the Company shall cause each of its subsidiaries
to, cooperate and use their respective reasonable commercial efforts to take, or
cause to be taken, all actions reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as is practicable,
including but not limited to cooperation in the preparation and filing of the
Offer Documents, the Schedule 14D-9, the Proxy Statement, the Registration
Statement, any required filings under the HSR Act, or other foreign filings and
any amendments to any of the foregoing.
(b) If at any time prior to the Effective Time any event or circumstance
relating to the Company, Parent or Purchaser, or any of their respective
subsidiaries, should be discovered by the Company or Parent, as the case may be,
which is required to be set forth in an amendment to the Offer Documents, the
Schedule 14D-9 or the Registration Statement, the discovering party will
promptly, but in no event more than two (2) days, inform the other party of such
event or circumstance.
(c) Each of the parties will use its reasonable commercial efforts to
obtain as promptly as practicable all consents of any Governmental Entity or any
other person required in connection with, and waivers of any violations that may
be caused by, the consummation of the transactions contemplated by the Offer,
the Merger and this Agreement.
Section 5.4. Public Announcements. The Company, on the one hand, and
--------------------
Parent and the Purchaser, on the other hand, agree to consult with each other
prior to issuing any press release or otherwise making any public statement with
respect to this Agreement, the Offer, the Merger or the other transactions
contemplated hereby, agree to provide to the other party for review prior to
filing a copy of any such press release or statement, and shall not issue any
such press release or make any such public statement prior to attempting in good
faith such consultation and review, unless required by applicable law or any
listing agreement with a securities exchange. This Section 5.4 shall supersede
any conflicting provisions of the Confidentiality Agreement.
Section 5.5. Employee Benefit Arrangements.
-----------------------------
(a) The Company shall, and from and after consummation of the Offer
Parent agrees to cause the Company to, honor and, from and after the Effective
Time, the Surviving Corporation to honor, all obligations under the employment
and severance agreements and the Change of Control Policy to which the Company
or any of its subsidiaries is presently a party all
30
<PAGE>
of which are listed in the Disclosure Schedule. Notwithstanding the foregoing,
from and after the Effective Time, the Surviving Corporation shall have the
right to amend, modify, alter or terminate any Company Employee Plan, provided
that any such action shall not affect any rights for which the agreement or
consent of the other party or a beneficiary is required; provided further that,
except as prohibited by the Company's 401(k) plan or Organic Waste Technologies,
Inc. 401(k) Profit Sharing Plan (collectively the "Company 401(k) Plans") or
--------------------
applicable law, the Company will promptly take any and all actions necessary and
appropriate to terminate the Company 401(k) Plans, including without limitation
(i) adoption of resolutions by the Company Board terminating the Company 401(k)
Plans immediately prior to consummation of the Offer and (ii) timely delivery of
any notices required under the terms of the Company 401(k) Plans. Participants
with loans under the Company 401(k) Plans (other than loans that are in default
under the terms of the Company 401(k) Plans) who continue employment with Parent
or Surviving Corporation shall be permitted to continue making payments on such
loans notwithstanding the terms of the loan or the terms of the Company 401(k)
Plans until such date that the loan is due and payable under the terms of the
loan. Further, such participants will be given the option of rolling over any
outstanding loans under Company 401(k) Plans at the same time that they roll
over their Company 401(k) Plans' accounts to Parent's 401(k) Plan. Parent agrees
to continue the EMCON Deferred Compensation Plan until at least January 2, 2000
and shall not amend such plan so as to accelerate the distribution of any
participant's plan benefits prior to January 2, 2000.
(b) Any pre-existing condition exclusion under a benefit plan of Parent
providing medical or dental benefits shall be waived for any Company
employee who becomes an employee of Surviving Corporation or Parent (each
such employee a "Continuing Employee"), and who immediately prior to
-------------------
commencing participation in such Parent benefit plan, was participating in a
Company Employee Plan providing medical or dental benefits and had satisfied any
pre-existing condition under such Company Employee Plan. Any medical or dental
expenses that were taken into account under a Company Employee Plan providing
medical or dental benefits in which the Continuing Employee participated
immediately prior to commencing participation in a Parent benefit plan providing
medical or dental benefits shall be taken into account to the same extent under
such Parent benefit plan, in accordance with the terms of such Parent benefit
plan, for purposes of satisfying applicable deductible, coinsurance maximum out-
of-pocket provisions and life-time benefit limits. No Continuing Employee will
experience a gap in medical or dental coverage under any Parent benefit plan
providing medical or dental benefits as a result of the transaction contemplated
by this Agreement.
(c) Parent agrees that from and after the Effective Time, any Continuing
Employee shall become eligible to participate in the employee benefit plans and
arrangements maintained by Parent or Surviving Corporation including, without
limitation, severance plans, which are at least as favorable as those provided
by Parent to similarly situated employees of Parent. Parent, or Surviving
Corporation shall grant the Continuing Employees credit for all service credited
by the Company for purposes of eligibility, vesting and the determination of the
level of benefits (but not benefit accrual under any defined benefit plan) under
any benefit plan of Parent or Surviving Corporation including, without
limitation, vacation, severance and 401(k) plan. Continuing Employees will be
eligible to participate in Parent's 401(k) Plan as soon as
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<PAGE>
administratively feasible following the Effective Time. Parent shall, and shall
cause Surviving Corporation to, honor in accordance with their terms all
employee benefit obligations to current and former employees under the Company
Employee Plans, including, without limitation, obligations under the
Consolidated Omnibus Reconciliation Act ("COBRA"), in existence on the date
-----
hereof.
(d) Parent shall only be required to afford employees of the Company and
its subsidiaries who are terminated within sixty (60) days after consummation of
the Offer with severance benefits provided for under the Company Employee Plans
(including but not limited to those rights contemplated in Section 3.14(f)).
Thereafter, any Continuing Employee will be eligible to receive severance
benefits under the severance plan of Parent and in accordance with Section
5.5(c), service with the Company will be counted in determining the amount of
severance benefits to which the Continuing Employee is entitled under the
Parent's severance plan.
Section 5.6. Indemnification.
---------------
(a) Parent agrees that all rights to indemnification now existing in
favor of any of the current or former directors and officers of the Company (the
"Indemnified Parties") as provided in its Articles or By-Laws, in each case as
-------------------
of the date of this Agreement, and all indemnification agreements between the
Company and the Indemnified Parties described in Section 5.6 of the Disclosure
Schedule shall survive the Merger and shall continue in full force and effect
from and after consummation of the Offer in accordance with their terms, as such
terms exist on the date hereof. After the Effective Time, Parent agrees to cause
the Surviving Corporation to honor all rights to indemnification referred to in
the preceding sentence.
(b) Parent agrees to cause the Company, and from and after the Effective
Time, the Surviving Corporation, to purchase a six year extended reporting
period endorsement under the current policy of directors' and officers'
liability insurance maintained by the Company; provided that (i) the Surviving
Corporation may substitute therefor other policies not less advantageous (other
than to a de minimus extent) to the beneficiaries of the current policies, (ii)
such substitution shall not result in any gaps or lapses in coverage with
respect to matters occurring prior to the Effective Time and (iii) the Surviving
Corporation shall not be required to pay an annual premium for such coverage in
excess of 150% of the last annual premium paid (the "Maximum Premium") by the
---------------
Company prior to the date hereof (which the Company represents to be $58,000 for
the 12-month period ending January 1, 2000). If the Surviving Corporation is
unable to obtain the insurance required by this Section 5.6(b) for the Maximum
Premium it shall obtain as much comparable insurance as possible for an annual
premium equal to the Maximum Premium.
Section 5.7. Notification of Certain Matters.
-------------------------------
(a) Parent and the Company shall give prompt notice, but in no event more
than two (2) business days, in writing to the other of the occurrence or non-
occurrence of any fact or event which causes or could be reasonably likely to
(i) cause any representation or warranty made by such party in this Agreement to
be untrue or inaccurate in any material respect at any time from
32
<PAGE>
the date hereof to the Effective Time or (ii) cause any covenant or agreement
made by such party under this Agreement not to be complied with or satisfied in
any material respect.
(b) Each of the Company, Parent and Purchaser shall give prompt notice,
but in no event more than two (2) business days, in writing to the other parties
hereto of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
(c) The Company shall give prompt notice, but in no event more than two
(2) business days, in writing to Parent of any act, omission to act, event or
occurrence which has or, with the passage of time or otherwise, could be
reasonably expected to have a Material Adverse Effect on the Company; provided,
however, that no such notification shall affect the representations or
warranties of any party or the conditions to the obligations of any party
hereunder.
Section 5.8. State Takeover Laws. The Company shall, upon the request of
-------------------
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
Section 5.9. No Solicitation.
---------------
(a) For purposes of this Agreement:
(i) "Alternative Proposal" means any inquiry, proposal or offer,
--------------------
whether written or oral, from any person or Group relating to any direct or
indirect acquisition or purchase of any product line or other material portion
of the assets of the Company and its subsidiaries taken as a whole (other than
the purchase of the Company's products or used equipment in the ordinary course
of business), or more than a 20% interest in the total outstanding voting
securities of the Company or any of its subsidiaries, or any tender offer or
exchange offer that if consummated could result in any person or Group
beneficially owning 10% or more of the total outstanding voting securities of
the Company or any of its subsidiaries, or any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries, other than the transactions contemplated by this Agreement.
(ii) "Superior Proposal" means a bona fide offer, whether written
-----------------
or oral, made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
total outstanding voting securities of the Company or all or substantially all
the assets of the Company, which offer is otherwise on terms which the Company
Board determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation) to be reasonably capable of being
completed (taking into account all material legal, financial, regulatory and
other aspects of the proposal) and more favorable to the Company's shareholders
from a financial point of view than the Offer and the Merger, and for which
33
<PAGE>
financing, to the extent required, is then committed or which, in the good faith
judgment of the Company Board is capable of being obtained by such third party.
(iii) "Representative" means the officers, directors or employees
--------------
or any investment banker, attorney, accountant or other advisor or
representative retained by the Company or its subsidiaries.
(iv) "Group" means any group as defined under Section 13(d) of the
-----
Exchange Act and the rules and regulations thereunder.
(b) (i) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
the Company and its subsidiaries will not, and they will direct their respective
Representatives not to, directly or indirectly, (A) solicit, initiate or
encourage the submission of any Alternative Proposal or (B) participate in any
discussions or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action to facilitate the making
of any proposal that constitutes or may reasonably be expected to lead to, an
Alternative Proposal. The Company and its subsidiaries will immediately cease,
and will instruct and cause their respective Representatives to immediately
cease, any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Alternative Proposal. Any
violation of the restrictions set forth in this Section 5.9(b)(i) by any
Representative of the Company or any of its subsidiaries will be deemed to be a
material breach of this Agreement by the Company.
(ii) Notwithstanding the provisions of Section 5.9(b)(i), if, at
any time prior to the consummation of the Offer, the Company Board reasonably
determines in good faith, after taking into account the advice of its outside
legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Company
and its Representatives may, in response to a Superior Proposal that was
unsolicited or that did not otherwise result from a breach of this Section 5.9,
and subject to compliance with Sections 5.9(d) and 5.9(f), furnish non-public
information with respect to the Company and participate in discussions and
negotiations regarding such Superior Proposal.
(c) (i) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
including the payment of the fees set forth in Section 7.3, neither the Company
Board nor any committee thereof shall (A) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Purchaser,
their approval or recommendation to the Company's shareholders of the Offer,
this Agreement or the Merger or (B) cause the Company to enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement (an "Acquisition Agreement") with respect to any Alternative Proposal.
---------------------
In addition, from and after the date of this Agreement until the earlier of the
Effective Time and termination of this Agreement pursuant to its terms, the
Company and its subsidiaries will not, and they will direct their
Representatives not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Alternative
Proposal.
(ii) Notwithstanding the provisions of Section 5.9(c)(i), if, at
any time prior to
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<PAGE>
the consummation of the Offer, the Company Board reasonably determines in good
faith, after taking into account the advice of its outside legal counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, after terminating this Agreement
pursuant to its terms, including the payment of the fees set forth in Section
7.3, the Company Board may withdraw or modify its approval or recommendation of
the Offer, this Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an Acquisition Agreement with respect to a Superior
Proposal, provided, that the Company shall have given Parent written notice (a
"Notice of Superior Proposal") at least two business days prior to entering into
---------------------------
any such Acquisition Agreement and at least two business days prior to public
disclosure by the Company Board of such withdrawal, modification, approval or
recommendation, advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of the Superior Proposal
(including the proposed financing) and identifying the person making such
Superior Proposal. Any amendment to the price or material terms of a Superior
Proposal shall require an additional Notice of Superior Proposal and an
additional two business day period thereafter, to the extent permitted under
applicable law, prior to public disclosure by the Company Board of its
recommendation with respect thereto.
(d) In addition to the obligations of the Company set forth in Sections
5.9(b) and 5.9(c), the Company as promptly as practicable, and in any event
within 24 hours, shall advise Parent orally and in writing of (i) any request
for non-public information which the Company reasonably believes may lead to an
Alternative Proposal, or of any Alternative Proposal, (ii) the material terms
and conditions of such information request or Alternative Proposal, and (iii)
the identity of the person making any such information request or Alternative
Proposal. The Company will keep Parent informed in all material respects of the
status and details (including material amendments) of any such request or
Alternative Proposal.
(e) Nothing contained in this Section 5.9 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its shareholders a
position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or (ii)
making any disclosure to the Company's shareholders if, in the good faith
judgment of the Company Board, after taking into account the advice of its
outside legal counsel, failure to so disclose would be inconsistent with
applicable laws; provided, that neither the Company nor the Company Board nor
any committee thereof shall, except in accordance with the provisions of Section
5.9(c)(ii), withdraw or modify, or publicly propose to withdraw or modify, its
position with respect to the Offer, this Agreement or the Merger or approve or
recommend, or propose to approve or recommend, an Alternative Proposal.
(f) Notwithstanding anything to the contrary in this Section 5.9, the
Company will not provide any non-public information to a third party unless: (i)
the Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (ii)
such non-public information has been previously or is contemporaneously
delivered to Parent.
35
<PAGE>
ARTICLE VI
MERGER CONDITIONS
Section 6.1. Conditions. The respective obligations of Parent, the
----------
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Shareholder Approval. The shareholders of the Company shall have duly
--------------------
approved and adopted this Agreement, if required by applicable law.
(b) Acceptance for Payment of Shares. The Purchaser shall have delivered
--------------------------------
the Notice of Acceptance for the Shares to the Paying Agent pursuant to the
Offer in accordance with the terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall not be
-----------------------
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a Governmental Entity of competent jurisdiction, there shall not have
been any statute, rule or regulation enacted, promulgated or issued by any
Governmental Entity which prevents the consummation of the Merger or has the
effect of making the purchase of Shares illegal, and no Governmental Entity
shall have instituted any proceeding seeking any such Order and such proceeding
remains unresolved.
(d) Regulatory Consents. The waiting period applicable to the
-------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than filing the Certificate of Merger or Certificate of
Ownership in the State of California, all filings with any governmental entity
required to be made prior to the Effective Time by the Company or Parent or any
of their respective Subsidiaries, with, and all government consents required to
be obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by the
Company, Parent and Purchaser shall have been made or obtained (as the case may
be), except where the failure to so make or obtain will not result in either a
Material Adverse Effect on the Company or have, or be reasonably likely to have,
a material adverse effect on the ability of the parties hereto to consummate the
transactions contemplated by this Agreement.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Merger
-----------
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of the Company (with any
termination by Parent also being an effective termination by Purchaser):
36
<PAGE>
(a) by mutual written consent duly authorized by the Board of Directors
of Parent and the Company Board, subject to the concurrence of the Independent
Directors to the extent required by Section 1.3;
(b) by either Parent or the Company if:
(i) the Offer is terminated, withdrawn or expires pursuant to its
terms without any Shares having been purchased thereunder; provided, however,
that neither Parent nor the Company may terminate this Agreement pursuant to
this Section 7.1(b)(i) if such party is in material breach of this Agreement
(including if Parent or Purchaser is in breach of Section 1.1 of this Agreement)
or, in the case of Parent, if Parent or Purchaser is in material violation of
the terms of the Offer;
(ii) a Governmental Entity shall have issued an order, decree or
ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Offer or the Merger, which
order, decree, ruling or other action is final and nonappealable; provided, that
the party seeking to terminate this Agreement shall have used its reasonable
efforts to remove or lift such order, decree or ruling; or
(iii) prior to the purchase of Shares pursuant to the Offer, the
Company Board has recommended, or the Company has entered into an Acquisition
Agreement with respect to, a Superior Proposal after fully complying with the
procedures set forth in Section 5.9; provided, however, that termination by the
Company pursuant to this Section 7.1(b)(iii) shall be conditioned upon
concurrent payment by the Company in immediately available funds of the
Transaction Expenses and the Termination Fee pursuant to Section 7.3.
(c) by Parent prior to the purchase of Shares pursuant to the Offer if:
(i) the Company shall have failed to include in the Schedule 14D-
9 the recommendation of the Company Board that the shareholders of the Company
accept the Offer;
(ii) the Company Board or any committee thereof shall have (A)
withdrawn or modified (including but not limited to by amendment of the Schedule
14D-9) in a manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger, (B) approved or recommended, taken
no position with respect to, or failed to recommend against any Alternative
Proposal, or (C) resolved to do any of the foregoing;
(iii) the Company or any of its subsidiaries or any of their
respective Representatives participate in any discussions or negotiations with
or provide any non-public information to any third party in breach of the
provisions of Section 5.9; or
(iv) the Company is in material breach of any of its covenants or
obligations under this Agreement; provided that if such breach is curable
through the exercise of the Company's commercially reasonable efforts, Parent
may not terminate this Agreement under this Section 7.1(c)(iv) unless such
breach is not cured on or prior to the earlier of (i) twenty (20) days
37
<PAGE>
after written notice of such breach is given by Parent to the Company and (ii)
two (2) business days before the date on which the Offer expires.
(d) by the Company prior to the purchase of Shares pursuant to the Offer
if:
(i) the Offer shall not have been commenced in accordance with
Section 1.1, or Parent or Purchaser shall have failed to purchase validly
tendered Shares in violation of the terms of the Offer within 10 business days
after the expiration of the Offer; provided, however, that the Company shall not
be entitled to terminate this Agreement pursuant to this Section 7.1(d)(i) if it
in material breach of this Agreement; or
(ii) Parent or Purchaser is in material breach of any of its
covenants or obligations under this Agreement; provided that if such breach is
curable through exercise of Parent's or Purchaser's commercially reasonable
efforts, the Company may not terminate this Agreement under this Section
7.1(d)(ii) unless such breach is not cured within the earlier of (i) twenty (20)
days after written notice of such breach is given by the Company to Parent and
(ii) two (2) business days before the date on which the Offer expires.
Section 7.2. Notice of Termination; Effect of Termination.
--------------------------------------------
(a) Any termination of this Agreement under Section 7.1 above will be
effective immediately upon the delivery of written notice by the terminating
party to the other parties hereto.
(b) In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article VIII (miscellaneous),
each of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any willful breach of this
Agreement.
(c) Except as provided in Section 7.2(d), no termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
(d) In the event this Agreement is terminated pursuant to Section
7.1(b)(iii) or Section 7.1(c)(i), (ii) or (iii), the Company irrevocably waives
any otherwise applicable standstill or other agreement or restrictions in favor
of the Company (contractual or otherwise) on the ability and right of Parent,
Purchaser or any of their affiliates to acquire Shares.
Section 7.3. Fees and Expenses.
-----------------
(a) The Company shall reimburse Parent in the amount of $500,000 as
reimbursement for all of its costs and expenses in connection with this
Agreement, the Offer and the Merger ("Transaction Expenses") if the Agreement
--------------------
has been terminated by the parties pursuant to Section 7.1(b)(iii) or Section
7.1(c) and Parent shall reimburse the Company in an
38
<PAGE>
amount of $500,000 as reimbursement for Transaction Expenses if the Company has
terminated this Agreement pursuant to Section 7.1(d)(ii).
(b) In addition to the Company's obligations under Section 7.3(a), in the
event that this Agreement is terminated pursuant to Section 7.1(b)(iii) or
Section 7.1(c)(ii), the Company shall, concurrently with such termination, pay
Parent a termination fee of $1,750,000 (the "Termination Fee") in immediately
---------------
available funds by wire transfer to an account designated by Parent. In the
event that this Agreement is terminated pursuant to Section 7.1(c)(i), (iii), or
(iv), and, within 12 months following such termination, any person other than
Parent or any affiliate of Parent effects an acquisition relating to an
Alternative Proposal, or enters into an agreement relating to an Alternative
Proposal with the Company or commences a tender offer for a transaction relating
to an Alternative Proposal and the transactions contemplated thereby are
subsequently consummated at any time, the Company shall pay Parent the
Termination Fee at or prior to the consummation of such transaction in
immediately available funds by wire transfer to an account designated by Parent.
(c) The Company acknowledges that the agreements contained in Section
7.3(a) and (b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay any amount due
pursuant to Section 7.3(a) and (b), and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company or its
Successor for the amounts set forth in Section 7.3(a) or (b), the Company or its
Successor shall pay to Parent its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in Section 7.3(a) and (b) at the prime rate of
Citibank, N.A., in effect on the date such payment was required to be made.
(d) The Transaction Expenses and the Termination Fee shall not be deemed
to be liquidated damages, and the right to the payment of the Transaction
Expenses and the Termination Fee shall be in addition to (and not a maximum
payment in respect of) any other damages or remedies at law or in equity to
which Parent or Purchaser may be entitled as a result of the willful violation
or willful breach of any term or provision of this Agreement or any Support
Agreement.
Section 7.4. Amendment. Subject to applicable law, this Agreement may be
---------
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and Company.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time
-----------------
any party hereto may, to the extent legally allowed and subject to the terms and
conditions of Section 1.3 hereof, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set
39
<PAGE>
forth in an instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of such
right.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties by the Company made in Article III shall not
survive beyond the consummation of the Offer, and the representations and
warranties made by Parent and Purchaser in Article IV shall not survive beyond
the Effective Time.
Section 8.2. Entire Agreement; Assignment.
----------------------------
(a) This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, and simultaneous oral agreements and
understandings, among the parties with respect to the subject matter hereof and
thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of each other
party (except that Parent may assign its rights and Purchaser may assign its
rights, interest and obligations to any wholly owned subsidiary of Parent
without the consent of the Company provided that no such assignment shall
relieve Parent of any liability for any breach by such assignee). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
Section 8.3. Validity. The invalidity or unenforceability of any provision
--------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
Section 8.4. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Parent or the Purchaser:
The IT Group, Inc.
2790 Mosside Blvd.
Monroeville, PA 15146-2792
Attn: Anthony J. DeLuca, President
Fax: (412) 858-3311
40
<PAGE>
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Attn: Peter F. Ziegler, Esq.
Fax: (213) 229-6595
If to the Company:
EMCON
400 South El Camino Real, Suite 1200
San Mateo, California 94402
Attention: Eugene M. Herson, Chief Executive Officer
R. Michael Momboisse, Chief Financial Officer
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Paul Blumenstein, Esq.
Gerald S. Walters, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 8.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.6. Interpretation. The headings contained in this Agreement are
--------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made in this Agreement to a
Section or Article, such reference shall be to a Section or Article of this
Agreement, unless otherwise indicated. Whenever the words "include," "includes,"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." The words "herein," "hereby," "hereof,"
"hereto," "hereunder" and words of similar import refer to this Agreement.
Section 8.7. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
41
<PAGE>
Section 8.8. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby, subject to the terms and conditions hereof,
are fulfilled to the fullest extent possible.
Section 8.9. Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and, except with respect
to Sections 5.5 and 5.6 and the obligations of the parties following
consummation of the Offer which are intended for the benefit of the Company's
shareholders, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.10. Certain Definitions. As used in this Agreement:
-------------------
(a) the term "affiliate", as applied to any Person, shall mean any other
---------
person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
-------
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) "Environmental Law" means all applicable federal, state, local or
-----------------
foreign laws, statutes, ordinances, rules, or regulations pertaining to air and
water quality, Hazardous Materials, waste disposal, or the protection of the
environment, including without limitation the Clean Water Act, the Clean Air
Act, the Solid Waste Disposal Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Occupational Safety and Health Act, and the
Price-Anderson Act.
(c) "Environmental Permits" means all approvals, permits, licenses,
---------------------
certificates, consents, and similar authorizations required by any
Environmental Law.
(d) "Hazardous Material" means any substance that has been designated by
------------------
any Governmental Entity or by applicable Environmental Law to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws.
(e) the term "Material Adverse Effect" when used in connection with an
-----------------------
entity means any change, event or effect that is materially adverse to the
business, assets (including intangible
42
<PAGE>
assets), liabilities, financial condition, operations or results of operations
of the such entity and its subsidiaries taken as a whole; provided, however,
that the following shall not be deemed to constitute a "Material Adverse Effect"
an adverse change in or effect on the revenues or gross margins of such entity
(or the direct consequences thereof) following the date of this Agreement to the
extent attributable to a delay of, reduction in or cancellation or change in a
material contract which is directly and primarily attributable to the
transactions contemplated by this Agreement.
(f) "Parent Average Stock Price" means the average of the closing sales
--------------------------
price of a share of Parent Common Stock as reported on the New York Stock
Exchange for each of the ten consecutive trading days ending on and including
the second trading day immediately preceding the date on which a final vote of
the stockholders of the Company on the adoption and approval of the Merger shall
have been held.
(g) the term "Person" or "person" shall include individuals,
------ ------
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act);
(h) the term "Subsidiary" or "Subsidiaries" or "subsidiary" or
---------- ------------
"subsidiaries" means, with respect to Parent, the Company or any other person,
any corporation, partnership, joint venture or other legal entity of which
Parent, the Company or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
stock or other equity interests the holders of which are generally entitled to
50% or more of the vote for the election of the board of directors or other
governing body of such corporation or other legal entity;
(i) the phrase "to the Company's knowledge" refers to the actual
--------------------------
knowledge of any of the following officers and employees of the Company: Eugene
M. Herson, R. Michael Momboisse, Richard A. Peluso, Mark H. Shipps and Nat
Chang.
Specific Performance. The parties hereto agree that irreparable damage
--------------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity, without posting any bond or proving that
damages would be inadequate.
43
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
The IT Group, Inc.
By: /s/ Anthony J. DeLuca
-----------------------------------------
Name: Anthony J. DeLuca
Title: President and Chief Executive Officer
Seismic Acquisition Corporation
By: /s/ James G. Kirk
-----------------------------------------
Name: James G. Kirk
Title: President
EMCON
By: /s/ Douglas P. Crane
-----------------------------------------
Name: Douglas P. Crane
Title: Chairman of the Board
By: /s/ Eugene M. Herson
-----------------------------------------
Name: Eugene M. Herson
Title: President and Chief Executive Officer
<PAGE>
Annex I
TENDER OFFER CONDITIONS
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
----------------
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment or pay for any tendered Shares, if at the
Expiration Date (i) the Minimum Condition is not satisfied, (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated, or
(iii) any of the following exist:
(a) any statute, rule, regulation, legislation, ruling, judgment, order
or injunction enacted, enforced, promulgated, amended, issued or deemed
applicable to the Offer or the Merger, by any Governmental Entity of competent
jurisdiction that (1) makes illegal or otherwise prohibits consummation of the
Offer or the Merger, (2) prohibits or materially limits the ownership or
operation by Parent or Purchaser of all or any substantial portion of the
business or assets of the Company (or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole), or compels Parent or
Purchaser to dispose of, divest or hold separately all or any substantial
portion of the business or assets of Parent, Purchaser or the Company or its
subsidiaries, individually or taken as a whole, or imposes any material
limitation on the ability of Parent or Purchaser to conduct its business or own
such assets, (3) imposes any material limitation on the ability of Parent or
Purchaser effectively to acquire, hold or exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares acquired
or owned by Purchaser or Parent on the adoption of the Merger Agreement and all
other matters properly presented to the Company's shareholders, (4) requires
divestiture by Parent or Purchaser of any Shares, or (5) results in a Material
Adverse Effect on the Company;
(b) there shall be instituted and pending any action or proceeding by any
Governmental Entity that could reasonably be expected to result in any of the
consequences referred to in clauses (1) through (5) of paragraph (a) above;
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) any of the representations and warranties of the Company set forth in
the Merger Agreement, when read without any exception or qualification as to
materiality or Material Adverse Effect, shall not be true and correct, as if
such representations and warranties were made immediately prior to the
consummation of the Offer (except as to any such representation or warranty
which speaks as of a specific date, which must be untrue or incorrect as of such
specific date), except where the failure or failures to be so true and correct,
individually or in the aggregate, do not and could reasonably be expected to
have a Material Adverse Effect on the Company;
1
<PAGE>
(e) the Company shall have failed to perform or to comply with any of its
obligations, covenants or agreements under the Merger Agreement in any material
respect;
(f) there shall have occurred any events or changes which have had or
which are likely to have a Material Adverse Effect on the Company; or
(g) the Company Board shall have withdrawn, or modified or changed in a
manner adverse to Parent (including by amendment of the Schedule 14D-9), its
recommendation of the Offer, this Agreement or the Merger, or recommended
another proposal or offer for the acquisition of the Company, or the Company
Board shall have resolved to do any of the foregoing.
The foregoing conditions (including those set forth in clauses (i) and (ii)
of the initial paragraph) are for the benefit of Parent and Purchaser and may be
asserted by Parent or Purchaser regardless of the circumstances giving rise to
any such conditions (except for any action or inaction in material breach of the
Merger Agreement by Parent or Purchaser) and, except for the Minimum Condition,
may be waived by Parent or Purchaser, in whole or in part, at any time and from
time to time in their sole discretion, in each case, subject to the terms of the
Merger Agreement. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
2
<PAGE>
EXHIBIT(c)(2)
[Raymond James & Associates, Inc. Logo]
[RAYMOND JAMES & ASSOCIATES, INC. LETTERHEAD]
MUTUAL NONDISCLOSURE AND CONFIDENTIALITY AGREEMENT
--------------------------------------------------
CONFIDENTIAL
February 10, 1999
Mr. David Igata
The IT Group, Inc.
16775 Von Karman Avenue, Suite 100
Irvine, California 92606
Dear Mr. Igata:
To facilitate discussions relating to a potential acquisition (the
"Transaction") between our client (the "Client") and your company (the
"Company"), our Client and the Company will each be expected to make available
to each other certain nonpublic information concerning their respective
businesses, financial condition, operations, assets, properties, liabilities,
and prospects. As a condition to such information being made available by our
client, the Company agrees, and as a condition to such information being made
available by our Company, our Client agrees, that all Evaluation Material (as
hereinafter defined) received from the other party or any of its directors,
officers, employees, agents or advisors (including, without limitation,
attorneys, accountants, investment bankers, and other consultants and advisors)
(collectively, "Representatives") shall be treated in accordance with this
Agreement. As used in this Agreement, the term "Receiving Party" means the
party receiving Evaluation Material and the term "Furnishing Party" means the
party providing Evaluation Material or causing Evaluation Material to be
provided.
1. Definition of "Evaluation Material". The term "Evaluation Material"
-----------------------------------
shall mean all information concerning the Furnishing Party or any of its
subsidiaries or affiliates, whether in verbal, visual, written,
electronic or other form, which is made available by the Furnishing
Party or any of its Representatives to the Receiving Party or any of its
Representatives ("Primary Evaluation Material"), together, in each case,
with all notes, memoranda, summaries, analyses, studies, compilations
and other writings relating thereto or based thereon prepared by the
Receiving Party or any of its Representatives ("Derivative Evaluation
Material"). Notwithstanding the foregoing, the term "Evaluation
Material" shall not include, and the parties' obligations herein (other
than their obligations under Paragraph 5 of this Agreement) shall not
extent to, information which the Receiving Party can demonstrate (a) was
rightfully in the possession of the Receiving Party prior to disclosures
by the Furnishing Party; (b) was or is independently developed by the
Receiving Party without use of the Evaluation Material; (c) is now or
hereafter becomes available to the public other than as a result of
disclosure by the Receiving Party or any of the Receiving Party's
Representatives in violation of this Agreement; or (d) becomes available
to the Receiving Party or any of its Representatives on a non-
confidential basis from a source other than the Furnishing Party or any
of its Representatives and such source is not, to the knowledge of the
<PAGE>
Mr. David Igata CONFIDENTIAL February 10, 1999
IT Group, Inc. Page 2
Receiving Party, under any obligation to the Furnishing Party or any of
its Representatives (whether contractual, legal or fiduciary) to keep
such information confidential.
2. Confidentiality and Use of Evaluation Material.
----------------------------------------------
(a) Confidentiality of Evaluation Material. All Evaluation Material (i)
--------------------------------------
shall be used solely for the purpose of evaluating and considering
the Transaction; (ii) shall be kept strictly confidential by the
Receiving Party; and (iii) shall be provided by the Receiving Party
solely to those of its Representatives to whom disclosure is
reasonably deemed to be required to facilitate the Receiving Party's
evaluation or consideration of the Transaction. The parties agree
that all Evaluation Material is and shall remain the property of the
Furnishing Party. Before providing access to Evaluation Material to
any Representative, the Receiving Party shall inform such
Representative of the contents of this Agreement and the
confidentiality of the Evaluation Material, and shall advise such
Representative that, by accepting possession of or access to such
information, such Representative is agreeing to be bound by this
Agreement. Each party shall instruct its Representatives to observe
the terms of this Agreement and shall be responsible for any breach
of this Agreement by any of its Representatives.
(b) Compulsory Disclosure of Evaluation Material. If the Receiving Party
--------------------------------------------
is requested in any judicial or administrative proceeding or by any
governmental or regulatory authority to disclose any Evaluation
Material (whether by deposition, interrogatory, request for
documents, subpoena, civil investigative demand, or otherwise), the
Receiving Party shall give the Furnishing Party prompt notice of such
request so that the Furnishing Party may seek an appropriate
protective order, and, upon the Furnishing Party's request and at the
Furnishing Party's expense, shall cooperate with the Furnishing Party
in seeking such an order. If the Receiving Party is nonetheless
compelled to disclose Evaluation Material, the Receiving Party shall
disclose only that portion of the Evaluation Material which the
Receiving Party is legally required to disclose and, upon the
Furnishing Party's request and at the Furnishing Party's expense,
shall use its reasonable best efforts to obtain assurances that
confidential treatment will be accorded to such Evaluation Material
to the extent such assurances are available. Subject to the
foregoing conditions and limitations, the Receiving Party may
disclose Evaluation Material without liability hereunder.
(c) Other Public Disclosure. Except (i) for such public disclosure as
-----------------------
may be necessary, in the good faith judgment of the disclosing party
following consultation with outside counsel, for the disclosing party
not to be in violation of any applicable law, regulation or order, or
(ii) with the prior written consent of the other party, neither party
shall:
(x) make any disclosure (and each party shall direct its
Representatives not to make any disclosure) to any person of (A)
the fact that discussions, negotiations or investigations are
taking or have taken place concerning a Transaction, (B) the
<PAGE>
Mr. David Igata CONFIDENTIAL February 10, 1999
IT Group, Inc. Page 3
existence or covenants of this Agreement, or the fact that either
party has requested or received Evaluation Material from the other
party, or (C) any of the terms, conditions or other facts with
respect to any proposal Transactions, including the status thereof,
or
(y) make any public statement concerning a proposed Transaction.
If either party proposes to make any disclosure in reliance on clause (i)
above, the disclosing party shall, if practicable, provide the other party
with the text of the proposed disclosure as far in advance of its
disclosure as is practicable and shall in good faith consult with and
consider the suggestions of the other party concerning the nature and scope
of the information it proposes to disclose.
3. Accuracy of Evaluation Material; No Representations of Warranties. Each
-----------------------------------------------------------------
party acknowledges and agrees (a) that no representation of warranty,
express or implied, is made by either party or any of its respective
Representatives as to the accuracy or completeness of the Evaluation
Material, and (b) that the parties shall be entitled to rely only on
those representations and warranties (if any) that may be made in a
definitive written Transaction agreement, signed and delivered by both
parties, and then only to the extent, and subject to the limitations,
provided therein. Unless otherwise provided in the definitive written
Transaction Agreement, neither the Furnishing Party nor any of its
Representatives shall have any liability to the Receiving Party or any
of its Representatives on account of the use of any Evaluation Material
by the Receiving Party or any of its Representatives or any inaccuracy
therein or omission therefrom.
4. No Solicitation. For a period of two years subsequent to the
---------------
termination of discussions regarding a Transaction, the Company shall
not directly or indirectly solicit for hire any employee of the Client
or any person who was an employee of the Client within six months of the
date of such solicitation with whom it has first had contact or who
first became known to it in connection with its consideration of a
Transaction; provided, however, that the foregoing provision shall not
prevent the Company from employing any employee or former employee of
the Client who contacts the Company, directly or indirectly through an
intermediary, at his or her own initiative without any direct or
indirect solicitation by or encouragement from the Company.
5. Return and Destruction of Evaluation Material. At any time after
---------------------------------------------
termination of discussions by either party to this Agreement with
respect to the Transaction, upon the request of the Furnishing Party,
the Receiving Party shall promptly (and in no event later than five (5)
business days after such request) (a) redeliver or cause to be
redelivered to the Furnishing Party all copies of all Primary Evaluation
Material in the possession or control of the Receiving Party or its
Representatives which is in a visual or written format and erase or
destroy all copies of such Primary Evaluation Material which is stored
in electronic format, and (b) destroy or cause to be destroyed all
Derivative Evaluation Material in the
<PAGE>
Mr. David Igata CONFIDENTIAL February 10, 1999
IT Group, Inc. Page 4
possession or control of the Receiving Party or any of its
Representatives. Nothing herein shall obligate the Receiving Party to
provide any Derivative Evaluation Material to the Furnishing Party.
Notwithstanding the return, destruction or erasure of Evaluation
Material hereunder, the Receiving Party and its Representatives shall
continue to be bound by their confidentiality or other obligations
hereunder.
6. Remedies. Each party agrees that money damages would not be a
--------
sufficient remedy for any breach of any provision of this Agreement by
the other party or any of its Representatives, and that in addition to
all other remedies which any party hereto may have, each party shall be
entitled to specific performance and injunctive or other equitable
relief as a remedy for any such breach. Such remedies shall not be
deemed to be the exclusive remedies for a breach of this Agreement but
shall be in addition to all other remedies available at law or in
equity. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or
privilege hereunder.
7. Miscellaneous.
-------------
(a) Neither party grants a license, by implication or otherwise, under
any of its trade secrets or other intellectual property rights to
the Receiving Party.
(b) This Agreement contains the sole and entire agreement between the
parties with respect to the confidentiality of the Evaluation
Material and the confidentiality of their discussions, negotiations
and investigations concerning a Transaction.
(c) This Agreement may be amended, modified or waived only by a separate
written instrument duly signed and delivered by or on behalf of both
parties.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not impair or affect the validity or enforceability
of any other provision of this Agreement unless the enforcement of
such provision in such circumstances would be inequitable.
(e) It is expressly understood that this Agreement is not intended to,
and does not, constitute an agreement to consummate a Transaction,
to conduct or continue negotiations with respect to a Transaction,
or to enter into a definitive Transaction agreement, and neither
party shall have any rights or obligations of any kind whatsoever
with respect to such a Transaction by virtue of this Agreement or by
virtue of any other written or oral expression by the parties'
respect Representatives unless and until a definitive Transaction
agreement between the parties is executed and delivered by both
parties, other than for the matters specifically agreed to herein.
Both parties further acknowledge
<PAGE>
Mr. David Igata CONFIDENTIAL February 10, 1999
IT Group, Inc. Page 5
and agree that each party reserves the right, in its sole discretion,
to provide or not to provide Evaluation Material to the Receiving
Party under this Agreement, to reject any and all proposals made by
the other party or any of its Representatives with regard to a
Transaction, and to terminate discussions and negotiations at any
time.
(f) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California without giving effect to
the conflicts of laws principles thereof. Each party hereto consents
and submits to the jurisdiction of the courts of the State of
California and the courts of the United States located in the
Northern District of California for the adjudication of any action,
suit, or proceeding arising out of or otherwise relating to this
Agreement.
If the foregoing correctly sets forth our agreement with respect to the
matters set forth herein, please so indicate by signing two copies of this
Agreement and returning one signed copy to me, whereupon this Agreement shall
constitute our binding agreement with respect to the matters set forth herein.
Sincerely,
RAYMOND JAMES & ASSOCIATES, INC.
On behalf of our Client
By: /s/ J. Davenport Mosby, III
---------------------------
J. Davenport Mosby, III
Managing Director
CONFIRMED AND AGREED TO AS OF THE
DATE FIRST ABOVE WRITTEN
THE IT GROUP, INC.
By: /s/ James M. Redwine
----------------------------
Name: James M. Redwine
Title: Sr. Corp. Counsel; Ass't Secretary
