-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WLji6N+zvkDExS5ME0w074efkTimu/vCjPlQavodt5L78mgSSaZQSS2BW+wIMqfX Iz74OAvdWhjswb7T8Wn5nQ== 0000929624-99-000844.txt : 19990510 0000929624-99-000844.hdr.sgml : 19990510 ACCESSION NUMBER: 0000929624-99-000844 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990505 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: URS CORP /NEW/ CENTRAL INDEX KEY: 0000102379 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 941381538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07567 FILM NUMBER: 99613753 BUSINESS ADDRESS: STREET 1: 100 CALIFORNIA ST STE 500 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4157742700 MAIL ADDRESS: STREET 1: 100 CALIFORNIA STREET STREET 2: SUITE 500 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FORMER COMPANY: FORMER CONFORMED NAME: THORTEC INTERNATIONAL INC DATE OF NAME CHANGE: 19900222 FORMER COMPANY: FORMER CONFORMED NAME: URS CORP /DE/ DATE OF NAME CHANGE: 19871214 8-K 1 FORM 8-K SECURITIES EXCHANGE AND COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 5, 1999 URS Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-7567 94-1381538 (Commission File No.) (I.R.S. Employer Identification No.) 100 California Street, Suite 500, San Francisco, California 94111-4529 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (415) 774-2700 1 Item 5. Other Events URS Corporation ("URS") and Dames & Moore Group ("Dames & Moore") announced on May 5, 1999 that they have signed a definitive agreement under which URS will acquire Dames & Moore for $16 per share in cash, or a total of approximately $300 million, plus the assumption of approximately $300 million of debt for a total transaction value of $600 million. URS expects to commence a tender offer for all of Dames & Moore's common shares on or before May 11, 1999. Following the close of the tender offer, Dames & Moore will merge with a subsidiary of URS. The transaction is subject to the expiration or early termination of the appropriate waiting period under the Hart-Scott-Rodino Act, the receipt of a majority of Dames & Moore's shares in the tender and typical funding conditions. URS has arranged for firm commitments to finance the transaction with a combination of $550 million of senior bank debt arranged by Wells Fargo Bank, N.A., $200 million of subordinated debt underwritten by Morgan Stanley Dean Witter and $100 million from a private placement of preferred stock with Richard C. Blum & Associates. Financing proceeds in excess of the purchase price will be used to repay existing URS and Dames & Moore debt and for working capital purposes. Item 7. Financial Statements and Exhibits (c) The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-K: Exhibit Number Exhibit 2.1 Agreement and Plan of Merger, dated May 5, 1999, among Dames & Moore Group, URS Corporation and Demeter Acquisition Corporation 2.2 Commitment Letter, dated May 3, 1999, from Wells Fargo Bank, N.A. to URS Corporation 2.3 Commitment Letter, dated May 3, 1999, from Morgan Stanley & Co. Incorporated to URS Corporation 2.4 Securities Purchase Agreement, dated May 5, 1999, by and between RCBA Strategic Partners, L.P. and URS Corporation 99.1 Press Release, dated May 5, 1999 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. URS Corporation Dated: May 6, 1999 By: /s/ Kent P. Ainsworth --------------------- Kent P. Ainsworth Executive Vice President Chief Financial Officer and Secretary 3 EXHIBIT INDEX Exhibit Number Description - ------- ----------- 2.1 Agreement and Plan of Merger, dated May 5, 1999, among Dames & Moore Group, URS Corporation and Demeter Acquisition Corporation 2.2 Commitment Letter, dated May 3, 1999, from Wells Fargo Bank, N.A. to URS Corporation 2.3 Commitment Letter, dated May 3, 1999, from Morgan Stanley & Co. Incorporated to URS Corporation 2.4 Securities Purchase Agreement, dated May 5, 1999, by and between RCBA Strategic Partners, L.P. and URS Corporation 99.1 Press Release, dated May 5, 1999 4 EX-2.1 2 AGREEMENT AND PLAN OF MERGER 05/05/99 AGREEMENT AND PLAN OF MERGER AMONG DAMES & MOORE GROUP, URS CORPORATION AND DEMETER ACQUISITION CORPORATION DATED AS OF MAY 5, 1999 TABLE OF CONTENTS
PAGE Article I The Offer......................................................................... 1 Section 1.1 The Offer......................................................................... 1 Section 1.2 Company Actions................................................................... 3 Article II The Merger........................................................................ 4 Section 2.1 The Merger........................................................................ 4 Section 2.2 Closing........................................................................... 5 Section 2.3 Effective Time.................................................................... 5 Section 2.4 Effects Of The Merger............................................................. 5 Section 2.5 Amended And Restated Articles Of Incorporation And Bylaws......................... 5 Section 2.6 Directors......................................................................... 5 Section 2.7 Officers.......................................................................... 5 Article III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES............................ 6 Section 3.1 Effect On Capital Stock........................................................... 6 Section 3.2 Exchange Of Certificates.......................................................... 7 Article IV REPRESENTATIONS AND WARRANTIES OF COMPANY......................................... 9 Section 4.1 Organization And Authority........................................................ 9 Section 4.2 Subsidiaries...................................................................... 9 Section 4.3 Capital Structure................................................................. 9 Section 4.4 Authorization..................................................................... 11 Section 4.5 No Conflicts; Consents............................................................ 11 Section 4.6 SEC Documents; Financial Statements............................................... 12 Section 4.7 Information Supplied.............................................................. 13 Section 4.8 Absence Of Certain Changes Or Events.............................................. 13 Section 4.9 Compliance With Laws; Litigation.................................................. 14 Section 4.10 Taxes............................................................................. 15 Section 4.11 Absence Of Changes In Benefit Plans; Labor Relations.............................. 16 Section 4.12 ERISA Compliance; Excess Parachute Payments....................................... 17 Section 4.13 Insurance......................................................................... 20
i. TABLE OF CONTENTS (CONTINUED)
PAGE Section 4.14 Environmental Matters............................................................. 20 Section 4.15 Certain Agreements................................................................ 22 Section 4.16 Properties........................................................................ 23 Section 4.17 Intellectual Property............................................................. 23 Section 4.18 Vote Required..................................................................... 24 Section 4.19 Certain Approvals................................................................. 24 Section 4.20 Brokers........................................................................... 24 Section 4.21 Opinion Of Financial Advisor...................................................... 24 Section 4.22 Year 2000 Compliance.............................................................. 24 Section 4.23 Company Rights Agreement.......................................................... 24 Section 4.24 Certain Business Practices........................................................ 25 Article V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY........................... 25 Section 5.1 Organization...................................................................... 25 Section 5.2 Authority......................................................................... 25 Section 5.3 Consents And Approvals; No Violations............................................. 26 Section 5.4 Information Supplied.............................................................. 26 Section 5.5 Interim Operations Of Subsidiary.................................................. 27 Section 5.6 Brokers........................................................................... 27 Section 5.7 Financing......................................................................... 27 Section 5.8 Solvency.......................................................................... 27 Article VI COVENANTS......................................................................... 28 Section 6.1 Conduct Of Business............................................................... 28 Section 6.2 No Solicitation................................................................... 30 Section 6.3 Certain Tax Matters............................................................... 32 Section 6.4 Other Actions..................................................................... 32 Section 6.5 Advice Of Changes; Filings........................................................ 32 Article VII ADDITIONAL AGREEMENTS............................................................. 32 Section 7.1 Company Stockholder Approval; Preparation Of Proxy Statement...................... 32
ii. TABLE OF CONTENTS (CONTINUED)
PAGE Section 7.2 Access To Information; Confidentiality............................................ 33 Section 7.3 Reasonable Efforts; Notification.................................................. 34 Section 7.4 Cooperation....................................................................... 34 Section 7.5 Stock Option Plans................................................................ 35 Section 7.6 Indemnification, Exculpation And Insurance........................................ 36 Section 7.7 Directors......................................................................... 36 Section 7.8 Fees And Expenses................................................................. 37 Section 7.9 FIRPTA Certificate................................................................ 37 Section 7.10 Public Announcements.............................................................. 37 Section 7.11 Information Agent................................................................. 38 Section 7.12 Company Benefit Plans............................................................. 38 Section 7.13 Solvency Matters.................................................................. 39 Article VIII CONDITIONS........................................................................ 39 Section 8.1 Conditions To Each Party's Obligation To Effect The Merger........................ 39 Section 8.2 Conditions To Subsidiary's And Parent's Obligation To Effect The Merger........... 39 Section 8.3 Conditions to the Company's Obligation to Effect the Merger....................... 40 Article IX TERMINATION AND AMENDMENT......................................................... 40 Section 9.1 Termination....................................................................... 40 Section 9.2 Effect Of Termination............................................................. 41 Section 9.3 Fees and Expenses................................................................. 41 Section 9.4 Amendment......................................................................... 42 Section 9.5 Extension; Waiver................................................................. 42 Section 9.6 Procedure For Termination, Amendment, Extension Or Waiver......................... 43 Article X MISCELLANEOUS..................................................................... 43 Section 10.1 Nonsurvival Of Representations, Warranties And Agreements......................... 43 Section 10.2 Notices........................................................................... 43 Section 10.3 Interpretation.................................................................... 44 Section 10.4 Counterparts...................................................................... 45
iii. TABLE OF CONTENTS (CONTINUED)
PAGE Section 10.5 Entire Agreement; Third Party Beneficiaries....................................... 45 Section 10.6 Governing Law..................................................................... 45 Section 10.7 Assignment........................................................................ 45 Section 10.8 Enforcement....................................................................... 45 Section 10.9 Severability...................................................................... 45 Section 10.10 Compliance With Law............................................................... 45 Section 10.11 Parent Guarantee.................................................................. 46
iv. THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is entered into as of May 5, 1999, by and among URS CORPORATION, a Delaware corporation ("Parent"), DEMETER ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Parent ("Subsidiary"), and DAMES & MOORE GROUP, a Delaware corporation (the "Company"). PRELIMINARY STATEMENT The respective Boards of Directors of Parent, Subsidiary and Company have approved and found advisable this Agreement and the acquisition of Company by Parent on the terms and subject to the conditions set forth in this Agreement. In furtherance of such acquisition, Parent proposes to cause Subsidiary to make a tender offer to purchase all the outstanding shares (the "Shares") of Common Stock, par value $0.01 per share, of Company (the "Company Common Stock") at a purchase price of $16.00 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement (as it may be amended from time to time as permitted under this Agreement, the "Offer"). The Board of Directors of Company has adopted resolutions approving the Offer and the Merger (as defined below), recommending that the Company's stockholders accept the Offer and approving the acquisition of Shares by Subsidiary pursuant to the Offer. The respective Boards of Directors of Parent, Subsidiary and Company have each approved the merger of Subsidiary into Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby each Share, other than Shares owned directly or indirectly by Parent, Subsidiary or Company and Dissenting Shares (as defined in Section 3.1(d)), will be converted into the right to receive the price per Share paid in the Offer. Parent, Subsidiary and Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. Each capitalized term used herein and not otherwise defined shall have the meaning accorded it under Section 10.3. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Subsidiary and Company hereby agree as follows: ARTICLE I THE OFFER Section 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Article IX, then (i) not later than the first Business Day after execution of this Agreement, Parent and Company shall issue a public announcement of the execution of this Agreement, and (ii) Subsidiary shall, as promptly as practicable, but in no event later than five business days after the date of such public announcement, and Parent shall cause Subsidiary to, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), the Offer. The Offer shall be made pursuant to the Offer to Purchase and 1. related Letter of Transmittal in form reasonably satisfactory to Company and containing the terms and conditions set forth in this Agreement. The obligation of Subsidiary to, and of Parent to cause Subsidiary to, commence the Offer, conduct and consummate the Offer and accept for payment, and pay for, any Shares tendered and not withdrawn pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer Conditions") (any of which may be waived in whole or in part by Subsidiary in its sole discretion, provided, however, that the Subsidiary shall not waive the Minimum Condition without the prior written consent of the Company). Subsidiary expressly reserves the right, subject to compliance with the Exchange Act, to modify the terms of the Offer, except that, without the express written consent of Company, neither Parent nor Subsidiary shall (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as provided in the next sentence, change the expiration date of the Offer, (v) change the form of consideration payable in the Offer or (vi) amend, alter, add or waive any term of the Offer in any manner adverse to the holders of the Shares. Notwithstanding the foregoing, if on any scheduled expiration date of the Offer, which shall initially be 20 Business Days after the commencement date of the Offer, all Offer Conditions have not been satisfied or waived, Subsidiary may, and at the request of the Company shall, from time to time, extend the expiration date of the Offer for up to 10 additional Business Days, and Subsidiary may, without the consent of Company, (A) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the SEC staff applicable to the Offer, and (B) extend the Offer for up to ten Business Days if there have been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares that would constitute at least 75% but less than 90% of the issued and outstanding Shares as of the date of determination. Subject only to the conditions set forth in Exhibit A, Subsidiary shall, and Parent shall cause Subsidiary to, as soon as practicable after the expiration of the Offer, accept for payment, and pay for all Shares validly tendered and not withdrawn that Subsidiary becomes obligated to accept for payment pursuant to the Offer. (b) On the date of commencement of the Offer, Parent and Subsidiary shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (as supplemented or amended from time to time, the "Schedule 14D-1") with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). Parent and Subsidiary agree that the Offer Documents shall comply as to form and content in all material respects with the Exchange Act and the rules and regulations promulgated thereunder, and the Offer Documents, on the date first published, sent or given to Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Parent or Subsidiary with respect to written information supplied by Company or any of its stockholders specifically for inclusion or incorporation by reference in the Offer Documents. Parent, Subsidiary and Company each agrees promptly to correct any written information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Parent and Subsidiary further agree to take all steps 2. 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 holders of Shares, in each case as and to the extent required by applicable Federal securities laws. Company shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the stockholders of Company, and Parent and Subsidiary shall consider such comments in good faith. Parent and Subsidiary agree to provide Company any comments Parent, Subsidiary or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. (c) Parent shall provide or cause to be provided to Subsidiary on a timely basis the funds sufficient to accept for payment, and pay for, any and all Shares that Subsidiary becomes obligated to accept for payment, and pay for, pursuant to the Offer. (d) Subsidiary shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Offer such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or under any provision of state, local or foreign tax law; provided, however, that Subsidiary shall promptly pay any amounts deducted and withheld hereunder to the applicable governmental authority, shall promptly file all tax returns and reports required to be filed in respect of such deductions and withholding, and shall promptly provide to Company proof of such payment and a copy of all such tax returns and reports. Section 1.2 Company Actions. (a) Company hereby approves of and consents to the Offer and represents that the Board of Directors of Company, at a meeting duly called and held, duly adopted resolutions (i) approving this Agreement, the Offer and the Merger, (ii) determining that the terms of the Offer and the Merger are fair to, and in the best interests of, Company's stockholders, (iii) recommending that Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt this Agreement (if required), and (iv) amending the Rights Plan (as defined in Section 4.23) in the manner contemplated by Section 4.23. Company represents that its Board of Directors has received the opinion of Prudential Securities, Inc. ("Prudential") that, as of such date and based upon and subject to the matters set forth therein, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders, and a complete and correct signed copy of such opinion has been delivered by Company to Parent. (b) On the date the Offer Documents are filed with the SEC, Company shall file with the SEC a Solicitation/ Recommendation Statement on Schedule 14D-9 with respect to the Offer (as supplemented or amended from time to time, the "Schedule 14D-9") containing the recommendation described in Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of Company. The Schedule 14D-9 shall comply as to form and content in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to Company's stockholders, shall not contain any untrue statement of a material fact or 3. omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Company with respect to written information supplied by Parent or Subsidiary specifically for inclusion in the Schedule 14D-9. Company, Parent and Subsidiary each agree promptly to correct any written information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. Parent shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to stockholders of Company, and Company shall consider such comments in good faith. Company agrees to provide Parent any comments Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer and the Merger, Company shall cause its transfer agent to furnish Subsidiary promptly with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Subsidiary such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Subsidiary and their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, promptly deliver, and will use their best efforts to cause their agents promptly to deliver, to Company all copies of such information (and all copies of information derived therefrom) then in their possession or control. ARTICLE II THE MERGER Section 2.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), Subsidiary shall be merged with and into Company at the Effective Time. Following the Effective Time, the separate corporate existence of Subsidiary shall cease and Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Subsidiary in accordance with the DGCL. At the election of Parent, any direct or indirect wholly-owned subsidiary (as defined in Section 10.3) of Parent may be substituted for Subsidiary as a constituent corporation in the Merger. In such 4. event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. Section 2.2 Closing. The closing of the Merger will take place at 10:00 a.m. (California time) on a date to be specified by Parent or Subsidiary, which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VIII (the "Closing Date"), at the offices of Cooley Godward LLP, One Maritime Plaza, San Francisco, California 94111, unless another date, time or place is agreed to in writing by the parties hereto. Section 2.3 Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the Closing Date, the parties shall file a certificate of merger (the "Certificate of Merger") with the Secretary of State of Delaware, or (ii) in the event Subsidiary shall have acquired 90% or more of the outstanding shares of each class of capital stock of Company, filing a certificate of ownership and merger (the "Certificate of Ownership") with the Secretary of State of the State of Delaware, in each case in such form as required by and executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL and other applicable law. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time specified in the Certificate of Merger as Subsidiary and Company shall agree (the time the Merger becomes effective being hereinafter referred to as the "Effective Time"). Section 2.4 Effects Of The Merger. The Merger shall have the effects set forth in the DGCL. Section 2.5 Amended And Restated Articles Of Incorporation And Bylaws. (a) The Certificate of Incorporation of Subsidiary (the "Certificate of Incorporation"), as in effect immediately prior to the Effective Time, and as amended to change the name to "Company Group", shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The bylaws of Subsidiary (the "Bylaws") as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law. Section 2.6 Directors. The directors of Subsidiary immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Section 2.7 Officers. The officers of both Subsidiary and Company immediately prior to the Effective Time shall be officers of the Surviving Corporation, each such officer to hold such office, subject to the applicable provisions of the Certificate of Incorporation and the Bylaws of the Surviving Corporation, as may be designated by, and at the pleasure of, the board of directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 5. ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Section 3.1 Effect On Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or any shares of capital stock of Subsidiary: (a) Capital Stock Of Subsidiary. Each issued and outstanding share of capital stock of Subsidiary shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation. (b) Cancellation Of Treasury Stock And Parent Owned Stock. Each Share that is owned by Company and each Share that is owned by Parent or Subsidiary shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. Each Share that is owned by any direct or indirect wholly-owned subsidiary of Parent (other than Subsidiary) or of Company shall remain outstanding without change. (c) Conversion Of Company Common Stock. Subject to Section 3.1(d), each issued and outstanding Share (other than Shares to be canceled or to remain outstanding in accordance with Section 3.1(b) and other than Dissenting Shares) shall be converted into the right to receive from the Surviving Corporation in cash, without interest, the Offer Price (the "Merger Consideration"). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) Shares Of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Shares held by a person (a "Dissenting Stockholder") who has neither voted in favor of the Merger nor consented in writing thereto and otherwise complies with all the applicable provisions of the DGCL concerning the right of holders of Company Common Stock to dissent from the Merger and require appraisal of their Shares ("Dissenting Shares") shall not be converted as described in Section 3.1(c) but shall be converted into the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the laws of the State of Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right to appraisal, in any case pursuant to the DGCL, his Shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. Company shall give Parent (i) prompt notice of any demands for appraisal of Shares received by Company and (ii) after Subsidiary shall have accepted for payment Shares pursuant to the Offer, the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. Company shall not, without the prior written consent of 6. Parent, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. Section 3.2 Exchange Of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company to act as paying agent in the Merger (the "Paying Agent"). Prior to the filing of the Certificate of Merger or Certificate of Ownership, as the case may be, with the Secretary of State of the State of Delaware, Parent or Subsidiary will deposit with the Paying Agent cash in an aggregate amount equal to the product of (i) the number of Shares outstanding (and not owned of record by Parent or Subsidiary) immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. The deposit made by Parent or Subsidiary pursuant to the preceding sentence is hereinafter referred to as the "Payment Fund." The Paying Agent shall cause the Payment Fund to be (i) held for the benefit of the holder of the Shares, and (ii) promptly applied to making the payments provided for in Section 3.1. The Payment Fund shall not be used for any purpose that is not provided for herein. Any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to the Parent upon request. (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented Shares (the "Certificates"), (i) 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 delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, and the Paying Agent shall pay pursuant to irrevocable instructions given by Subsidiary or Parent, the amount of cash into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.1, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.1. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. 7. (c) No Further Ownership Rights In Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, except notation thereon that a stockholder has elected to exercise his right to appraisal pursuant to the DGCL, they shall be canceled and exchanged as provided in this Article III. (d) No Liability. Any funds deposited with the Paying Agent that remain unclaimed by the former stockholders of Company for six months after the Effective Time shall be paid to the Surviving Corporation upon demand, and any former stockholders of Company who have not theretofore complied with the instructions for exchanging their Certificates provided herein shall thereafter look only to the Surviving Corporation for payment of their claims for the Merger Consideration set forth in Section 3.1 hereof for each Share held by such stockholder, without any interest thereon. None of Parent, Subsidiary, Company 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 prior to seven years after the Effective Time (or immediately prior to such earlier date on which any payment pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 4.5)), 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) Lost, Stolen Or Destroyed Certificates. In the event any Certificates evidencing Shares shall have been lost, stolen or destroyed, the Paying Agent shall pay to such holder the Merger Consideration required pursuant to Section 3.1, in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof with such assurances as the Paying Agent, in its discretion and as a condition precedent to the payment of the Merger Consideration, may require of the holder of such lost, stolen or destroyed Certificates, including delivery of a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent or the Paying Agent with respect to the Certificates alleged to have been lost, stolen or destroyed. (f) Withholding Rights. Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of state, local or foreign tax law. 8. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY Except as set forth in the corresponding enumerated section of the Disclosure Schedule delivered by Company to Parent prior to the execution of this Agreement (the "Company Disclosure Schedule"), Company represents and warrants to Parent and Subsidiary as follows: Section 4.1 Organization And Authority. Each of Company and its subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has all requisite corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except, in the case of clause (ii) or (iii) above, where the failure to have such power or authority, to possess such franchises, licenses, permits, authorizations or approvals or to be so qualified or in good standing, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Company. Company has delivered or made available to Parent true and complete copies of the certificate of incorporation of Company, as amended to the date of this Agreement (as so amended, the "Company Certificate of Incorporation"), and the by-laws of Company, as amended to the date of this Agreement (as so amended, the "Company By-laws"), and the comparable charter and organizational documents of each subsidiary of Company, in each case as amended through the date of this Agreement. Section 4.2 Subsidiaries. Section 4.2(i) of the Company Disclosure Schedule lists each subsidiary of Company and its jurisdiction of organization. All the outstanding shares of capital stock of each subsidiary of Company have been validly issued, are fully paid and nonassessable and are owned by Company or a wholly owned subsidiary of Company free and clear of all liens, charges, mortgages, encumbrances, pledges, security interests or other material restrictions or claims ("Liens"). Except as set forth in Section 4.2(ii) of Company Disclosure Schedule, Company does not own, directly or indirectly, any capital stock or other ownership interest in any person. Section 4.3 Capital Structure. The authorized capital stock of Company consists of 54,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock, par value $.01 per share, of Company ("Company Preferred Stock", and together with the Company Common Stock, the "Company Capital Stock"). At the close of business on April 30, 1999, (a) 18,595,311 shares of Company Common Stock were outstanding, of which 248,298 shares constituted shares of Company Restricted Stock, (b) no shares of Company Preferred Stock were outstanding, (c) 1,899,978 shares of Company Common Stock were reserved for issuance upon the exercise of outstanding Company Stock Options (997,273 of which shares were subject to Company Stock Options with an exercise price which is less than the Offer Price (the "In-the-Money Options")) and 425,690 additional shares of Company Common Stock were reserved for issuance pursuant to Company Stock Option Plans, (d) 4,346,024 Shares of Company Common 9. Stock were held by Company in its treasury and (e) 135,000 shares of Company Preferred Stock were reserved for issuance in connection with Company Rights (as defined in Section 4.23). Other than as set forth above, and except as set forth in Section 4.3 of the Company Disclosure Schedule, at the close of business on April 30, 1999, there were outstanding no shares of Company Capital Stock or options, warrants or other rights to acquire Company Capital Stock from Company. Since April 30, 1999, (x) there have been no issuances by Company of shares of Company Capital Stock other than issuances of shares of Company Common Stock pursuant to the exercise of Company Stock Options outstanding as of April 30, 1999, and (y) there have been no issuances by Company of options, warrants or other rights to acquire capital stock from Company. No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which stockholders of Company may vote are issued or outstanding ("Company Voting Debt"). All outstanding shares of Company Common Stock are, and any shares of Company Common Stock which may be issued upon the exercise of Company Stock Options when issued will be, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. All shares of Company Common Stock which may be issued upon the exercise of Company Stock Options will at the time issued by Company be free and clear of all Liens. Other than as set forth above, and except for this Agreement, Company Stock Plans and Company Stock Options, there are not any options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, contracts, arrangements or undertakings of any kind to which Company or any of its subsidiaries is a party or by which any of them is bound (i) obligating Company or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Company or of any of its subsidiaries or any Company Voting Debt, (ii) obligating Company or any of its subsidiaries to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights of holders of Company Common Stock. There are no outstanding contractual obligations of Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Company or any of its subsidiaries and, to Company's knowledge, there are no irrevocable proxies with respect to shares of Company Common Stock or shares of capital stock of any subsidiary of Company. Except as set forth in Section 4.3(i) of the Company Disclosure Schedule, all of the outstanding indebtedness for borrowed money of Company or its subsidiaries (other than indebtedness the aggregate principal amount of which does not exceed $1,000,000) is prepayable without prepayment penalty or premium (other than the payment of customary LIBOR breakage costs), and no indebtedness for borrowed money of Company or its subsidiaries (other than indebtedness the aggregate principal amount of which does not exceed $1,000,000) contains any restriction upon the incurrence of indebtedness for borrowed money by Company or any of its subsidiaries or restricts the ability of Company or any of its subsidiaries to grant any Liens on its properties or assets. The weighted average exercise price of the In-the-Money Options is $11.98. Except as set forth in Section 4.3(ii) of the Company Disclosure Schedule, there are no agreements or arrangements pursuant to which Company is or could be required to register shares of Company Common Stock or other securities under the Securities Act of 1933, as amended, and the rules and 10. regulations promulgated thereunder (the "Securities Act"), or other agreement or arrangements with or among any security holders of Company with respect to securities of Company. Company has delivered to Parent a complete and correct copy of the Company Rights Agreement, as amended to the date of this Agreement. Section 4.4 Authorization. Company has all requisite corporate power and authority to enter into this Agreement and, subject to obtaining Company Stockholders Approval with respect to the Merger, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Company, subject, in the case of the Merger, to obtaining the approval and adoption of this Agreement by the holders of a majority of the Shares if required by law (the "Company Stockholders Approval"). No vote of the holders of Company Capital Stock, other than Company Stockholders Approval, is necessary to approve or adopt this Agreement or the transactions contemplated hereby. The Board of Directors of Company (the "Company Board"), at a meeting duly called and held, duly and unanimously adopted resolutions (a) approving the Offer, the Merger, this Agreement and the transactions contemplated hereby, (b) determining that the terms of the Offer, the Merger, this Agreement and the transactions contemplated hereby are fair to and in the best interests of Company and its stockholders, (c) recommending that Company's stockholders accept the Offer, adopt this Agreement, approve the Merger and grant the Company Stockholders Approval and (d) declaring that this Agreement is advisable. This Agreement has been duly executed and delivered by Company and, assuming this Agreement constitutes a legal, valid and binding obligation of Parent and Subsidiary, constitutes a valid and binding obligation of Company, enforceable against Company in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. Section 4.5 No Conflicts; Consents. Except as set forth in Section 4.5 of the Company Disclosure Schedule, the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time or both) under, or result in the termination of, or accelerate the performance required by, or give rise to a right of termination, cancellation or acceleration of any obligation under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien on the properties or assets of Company or any of its subsidiaries pursuant to, (a) any provision of the Company Certificate of Incorporation or the Company By-laws or the comparable charter or organizational documents of any subsidiary of Company, (b) any contract, lease, license, Company Benefit Plan (as defined in Section 4.11), mortgage, indenture, credit agreement, loan, note, bond, agreement, permit, concession, franchise or other instrument (a "Contract") to which Company or any subsidiary of Company is a party or by which any of their respective properties or assets is bound, except for possible violations under this Section 4.5 which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company or (c) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Company or any subsidiary of Company or their respective properties or assets. No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local, or foreign government or any court, administrative agency, tribunal or 11. commission or other governmental authority or instrumentality, domestic, foreign or international (a "Governmental Entity") is required by or with respect to Company or any subsidiary of Company in connection with the execution and delivery of this Agreement by Company or the consummation by Company of the transactions contemplated hereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Company, and except for (i) the filing with the Securities and Exchange Commission (the "SEC") of (A) a Schedule 14D-9 of Company to be filed under the Exchange Act (as defined below) (the "Schedule 14D-9"), (B) a Proxy Statement relating to the consideration of the Company Stockholders Approval at a meeting (the "Company Stockholder Meeting") of the stockholders of Company duly called and convened to consider the adoption of this Agreement, and (C) such other reports under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act"), as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Company is qualified to do business, (iii) filings required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act"), (iv) filings necessary to satisfy the applicable requirements of state securities or "blue sky" laws, (v) those required under the rules and regulations of the New York Stock Exchange (the "NYSE"), (vi) any novations or consents required in connection with Government Contracts, (vii) any filings required under the DOD Industrial Security Manual for Safeguarding Classified Information, and (viii) any filings required under U.S. Export Control Laws (collectively, the "Required Filings"). "Government Contract" means (x) any contract with the U.S. government or foreign government or any department or agency of any such government, and (y) any subcontract under any prime contract described in clause (x). Section 4.6 SEC Documents; Financial Statements. Company has filed and provided or made available to Parent a true and complete copy of each report, schedule, registration statement and definitive proxy statement required to be filed by Company with the SEC since January 1, 1995 (the "Company SEC Documents"). As of its respective dates, each Company SEC Document complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, applicable to such Company SEC Document. None of Company SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised or superseded by a later filed Company SEC Document filed and publicly available prior to the date of this Agreement, none of the Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except as set forth on Section 4.6 of the Company Disclosure Schedule, the financial statements of Company included in the Company SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in 12. accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") during the periods involved (except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present the consolidated financial position of Company and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which are not material). Except as set forth in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed Company SEC Documents"), neither Company nor any subsidiary of Company has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of Company and its subsidiaries or in the notes thereto. None of the subsidiaries of Company is, or has at any time since January 1, 1997 been, subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act. Section 4.7 Information Supplied. None of the information supplied or to be supplied by Company for inclusion or incorporation by reference in (a) (i) the Offer Documents, (ii) the information to be filed by Company in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act (the "Information Statement"), or (iii) the Schedule 14D-9 will, at the time it is filed with the SEC, and at any time it is amended or supplemented, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) the Proxy Statement will, at the date it is first mailed to stockholders of Company or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that in each case no representation or warranty is made by Company with respect to statements made or incorporated by reference therein based on information supplied by Parent specifically for inclusion or incorporation by reference therein. Except as set forth in the Filed Company SEC Documents, at the date of the most recent audited financial statements of Company included in the Filed Company SEC Documents, neither Company nor any of its subsidiaries had, and since such date neither Company nor any of such subsidiaries has incurred, any claims, liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on Company. The Schedule 14D-9 and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act, except that in each case no representation or warranty is made by Company with respect to statements made or incorporated by reference therein based on information supplied by Parent specifically for inclusion or incorporation by reference therein. Section 4.8 Absence Of Certain Changes Or Events. Since March 27, 1998, there has not been any event, change, effect, condition or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on Company (other than any such Material Adverse Effect the existence of which is specifically disclosed in any report filed and publicly available on Form 10-Q or Form 8-K under the Exchange Act with the SEC by Company after March 27, 1998 and prior to the date hereof). 13. Except as set forth in Section 4.8 of the Company Disclosure Schedule, since December 25, 1998, Company and its subsidiaries have conducted their businesses in the ordinary course of business consistent with past practice and since such date there has not been: (a) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any Company Capital Stock or any repurchase, redemption or other acquisition by Company of any Company Capital Stock; (b) any adjustment, split, combination or reclassification of any Company Capital Stock or any issuance, authorization of any issuance or proposal for the issuance of any other securities in respect of, in lieu of or in substitution for shares of Company Capital Stock; (c) any event, action or occurrence that, had it taken place or arisen after the date hereof would have constituted a breach of any covenant of Company contained in Section 6.1 of this Agreement; (d) (i) any granting by Company or any subsidiary of Company to any director or executive officer of Company or of any subsidiary of Company of any increase in compensation, except in the ordinary course of business consistent with past practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, (ii) any granting by Company or any subsidiary of Company to any such director or executive officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, or (iii) any entry by Company or any subsidiary of Company into any employment, severance or termination agreement with any such director or executive officer; (e) any change in financial or tax accounting methods, principles or practices by Company or any subsidiary of Company except insofar as may have been required by a change in GAAP or applicable law; or (f) any material elections with respect to Taxes (as defined in Section 4.10) by Company or any subsidiary of Company or settlement or compromise by Company or any subsidiary of Company of any material Tax liability or refund. Section 4.9 Compliance With Laws; Litigation. Company and its subsidiaries hold all permits, licenses, variances, exemptions, authorizations, orders and approvals of all Governmental Entities (the "Company Permits") that are required for them to own, lease or operate their properties and assets and to carry on their businesses as presently conducted, except for those the failure of which to be so held, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Company, and there has occurred no default under any Company Permit except for such defaults as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company. Company and its subsidiaries are in compliance in all material respects with all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity ("Applicable Laws"). 14. Except as set forth on Section 4.9 of the Company Disclosure Schedule, there is no suit, action or proceeding pending or, to the knowledge of the executive officers of Company or any subsidiary of Company, threatened against Company or any subsidiary of Company, nor is there any material judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Company or any subsidiary of Company, except for those which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Company. Except as set forth in the Filed Company SEC Documents, neither Company nor any subsidiary of Company has received any written communication during the past two years from a Governmental Entity that alleges that Company or a subsidiary of Company is not in compliance with any Applicable Law, except for any such noncompliance which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Company. Section 4.10 Taxes. (a) For purposes of this Agreement, "Tax" or "Taxes" shall mean all taxes, charges, levies, imposts, duties or other assessments or similar charges imposed by any Federal, state, local or foreign taxing authority, including income, property, sales, franchise, excise, transfer, payroll, withholding or other taxes, including any interest, penalties or additions with respect thereto. (b) Except as to any items that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company, and except as set forth in Section 4.10 of the Company Disclosure Schedule: (i) Company and each subsidiary of Company has (A) filed all Federal, state, local and foreign income and other Tax returns or reports (including declarations of estimated Tax) required to be filed by it, and all such returns are complete and accurate and (B) paid all Taxes required to be paid on or before the date hereof. (ii) There are no audits, examinations, proceedings, claims or assessments pending or threatened against Company or any subsidiary of Company for any alleged deficiency in Tax. (iii) Company and each subsidiary of Company has established adequate reserves for Taxes and for any liability for deferred Taxes in Company financial statements in accordance with GAAP. (iv) All Taxes required to be withheld, collected or deposited by or with respect to Company and each subsidiary of Company have been timely withheld, collected or deposited, as the case may be, and have been paid to the relevant taxing authority. (v) There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of Company or any subsidiary of Company. (vi) None of Company or any subsidiary of Company has in effect any extension of the period of limitations for the assessment of any Tax. 15. (vii) The United States Federal income Tax returns of the consolidated group for which Company is the common Parent either have been examined and settled with the Internal Revenue Service or closed by virtue of the expiration of the applicable statute of limitations for all Tax years through 1995. (viii) None of Company or any subsidiary of Company shall be required to include in a taxable period ending after the Effective Time an amount of taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or comparable provisions of state, local or foreign Tax law, and there is no application pending with any taxing authority requesting permission for any change in any accounting method of Company or any subsidiary of Company. (ix) None of Company or any subsidiary of Company may be held liable for, or may be required to make any contribution with respect to, Taxes of any person (other than members of the affiliated group of which Company is the common Parent) by reason of Treasury Regulation Section 1.1502-6 or any comparable provision of state, local or foreign law or under any Tax indemnity, Tax sharing or similar agreement. (x) No Tax authority in any jurisdiction in which Company or any subsidiary of Company does not file Tax returns has asserted that Company or its respective subsidiary, as the case may be, is or may be subject to Taxes in that jurisdiction. (xi) Company is not, and has not been during the past five years, a "United States real property holding corporation" within the meaning of Section 897(c) of the Code. Section 4.11 Absence Of Changes In Benefit Plans; Labor Relations. Section 4.11 of the Company Disclosure Schedule sets forth a true and complete list of all material "employee benefit plans" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all other material bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plans, arrangements or understandings (whether or not written and whether or not legally binding), providing benefits to any current or former employee, officer or director of Company or any of its subsidiaries or any other person or entity that, together with Company or its subsidiaries, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each of Company's subsidiaries and each such other person or entity, a "Commonly Controlled Entity") (collectively, the "Company Benefit Plans"). Except as disclosed in the Filed Company SEC Documents, there has not been any adoption or material amendment by Company or any Commonly Controlled Entity of any Company Benefit Plan. Except as set forth in Section 4.11 of the Company Disclosure Schedule or except as would not have a Material Adverse Effect on Company, (i) there are no collective bargaining or other labor union agreements to which Company or any of its Subsidiaries is a party or by which Company or any of its Subsidiaries is 16. bound, and (ii) during the past three years, neither Company nor any of its Subsidiaries had any actual employee strikes, work stoppages, slowdowns, lockouts or labor union organizing activity nor, to the best Company's knowledge, was it subject to any threatened employee strikes, work stoppages, slowdowns or lockouts, or labor union organizing activity. Section 4.12 ERISA Compliance; Excess Parachute Payments. (a) Section 4.12(a) of the Company Disclosure Schedule contains a list of all "employee pension benefit plans" (as defined in Section 3(2) of ERISA) (sometimes referred to herein as "Company Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(l) of ERISA) (sometimes referred to herein as "Company Welfare Plans") and all other Company Benefit Plans maintained, or contributed to, by Company or any Commonly Controlled Entity for the benefit of any current or former employees, officers or directors of Company or any Commonly Controlled Entity. Company has provided or made available to Parent true, complete and correct copies of (i) each Company Benefit Plan except for any Company Benefit Plan that is a "Company Multiemployer Pension Plan" (as defined below) and each Company Welfare Plan except for any Company Welfare Plan that is a "Multiemployer Plan" as defined in Section 3(3) of ERISA (a "Company Multiemployer Welfare Plan") (or, in the case of any such unwritten Company Benefit Plan, a description thereof), (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Company Benefit Plan that is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan (if any such report was required), (iii) the most recent summary plan description for each Company Benefit Plan which is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan for which such summary plan description is required, (iv) each trust agreement and group annuity contract relating to any Company Benefit Plan which is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan, (v) all rulings, determination letters, no-action letters or advisory opinions from the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental body that pertain to any Company Benefit Plan that is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan and open requests therefor, (vi) the most recent actuarial and financial reports (audited and/or unaudited) with respect to each Company Benefit Plan that is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan for the most recently completed year, (vii) all registration statements filed, and all related prospectuses, with respect to any Company Benefit Plan that is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan, and (viii) all contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that related to any Company Benefit Plan that is not a "Company Multiemployer Pension Plan" (as defined below) or a Company Multiemployer Welfare Plan. (b) Except as set forth in Section 4.12(b) of the Company Disclosure Schedule, each Company Pension Plan that is not a "Company Multiemployer Pension Plan" (as defined below) has been the subject of determination letters from the Internal Revenue Service to the effect that such Company Pension Plan is qualified and exempt from Federal income taxes 17. under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the knowledge of Company or of any Commonly Controlled Entity has revocation been threatened, nor has any such employee pension benefit plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs. (c) No Company Pension Plan other than any Company Pension Plan that is a "multiemployer plan" within the meaning of Section 4001 (a)(3) of ERISA (a "Company Multiemployer Pension Plan") had, as of the respective last annual valuation date for each such Company Pension Plan, an "unfunded benefit liability" (as such term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions that have been furnished to Parent, that would have a Material Adverse Effect on Company. None of the Company Pension Plans that is not a Company Multiemployer Pension Plan has an "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. None of Company, any Commonly Controlled Entity, any officer of Company or of any Commonly Controlled Entity or any of the Company Benefit Plans that are subject to ERISA, including the Company Pension Plans which are not Company Multiemployer Pension Plans, any trusts created thereunder or any trustee or administrator thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that could subject Company, any Commonly Controlled Entity or any officer of Company or of any Commonly Controlled Entity to any tax penalty on prohibited transactions imposed by such Section 4975 that would have a Material Adverse Effect on Company or to any liability under Section 502(i) or 502(l) of ERISA that would have a Material Adverse Effect on Company. None of such Company Pension Plans has been terminated, nor has there been any "reportable event" (as that term is defined in Section 4043 of ERISA, but excluding any reportable event as to which the provision of thirty days notice to the Pension Benefit Guaranty Corporation is waived under applicable regulations) with respect to any Company Pension Plan during the last five years. (d) With respect to any Company Benefit Plan that is an employee welfare benefit plan but not a Company Multiemployer Welfare Plan, except as disclosed in Section 4.12(d) of Company Disclosure Schedule, (i) no such Company Benefit Plan is funded through a "welfare benefits fund" (as such term is defined in Section 419(e) of the Code), and (ii) each such Company Benefit Plan (including any such Plan covering retirees or other former employees) may be amended or terminated without material liability to Company or any Commonly Controlled Entity on or at any time after the Effective Time. (e) Other than payments that may be made to the persons listed in Section 4.12(e) of the Company Disclosure Schedule (the "Primary Company Executives"), any amount that could be received (whether in cash or property or the vesting of property) as a result of the Offer, the Merger or any other transaction contemplated hereby by any employee, officer or director of Company or any Commonly Controlled Entity who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Company 18. Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as defined in Section 280G(b)(1) of the Code). (f) Each Company Benefit Plan is in form and substance, and has been operated, in full compliance with applicable law except where any non-compliance would not have a Material Adverse Effect on Company. (g) Except as set forth in Section 4.12(g) of the Company Disclosure Schedule, there are no pending or, to the knowledge of Company, threatened claims, suits, investigations or audits involving any Company Benefit Plan (other than claims for benefits in the ordinary course) except for such pending or threatened actions that would not have a Material Adverse Effect on Company. (h) With respect to each Company Benefit Plan mandated by a government other than the United States, subject to laws of a jurisdiction outside of the United States, or maintained or contributed to by any Commonly Controlled Entity that is not subject to United States law (collectively, "Foreign Benefit Plans"), the fair market value of the assets of each funded Foreign Benefit Plan, the liability of each insurer for any Foreign Benefit Plan funded through insurance or the book reserve established for any Foreign Benefit Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date of this Agreement, with respect to all current and former participants in such Foreign Benefit Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Foreign Benefit Plan, except where such insufficiency would not have a Material Adverse Effect on Company, and no transaction contemplated by this Agreement shall cause such assets or insurance obligations to be less than such benefit obligations, except where such insufficiency would not have a Material Adverse Effect on Company. (i) Neither Company nor any Commonly Controlled Entity has ceased operations at any facility or has withdrawn from any Company Pension Plan that is subject to Title IV of ERISA in a manner that would subject Company or any Commonly Controlled Entity to liability under any provision of Title IV of ERISA, except where such liability would not have a Material Adverse Effect on Company. (j) Except as disclosed on Section 4.12(j) of the Company Disclosure Schedule, neither Company nor any Commonly Controlled Entity is required to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such withdrawal has resulted or would result in any "withdrawal liability" (within the meaning of Section 4201 of ERISA) that has not been fully paid, except where such contribution or "withdrawal liability" would not have a Material Adverse Effect on Company. Not more than 600 employees of Company and any Commonly Controlled Entity are participants in any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). (k) Except to the extent required by Section 601 et seq. of ERISA and Section 4980B of the Code, neither Company nor any Commonly Controlled Entity provides health or welfare benefits to any retired or former employee or is obligated to provide health or 19. welfare benefits to any active employee following such employee's retirement or other termination of service except where provision of or obligation to provide such benefits, in the aggregate, would not have a Material Adverse Effect on Company. Section 4.13 Insurance. (a) All insurance policies, including professional liability, property, fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies, maintained by Company or any of its subsidiaries are with reputable insurance carriers, reasonably believed by Company to be of recognized financial responsibility and solvency, provide adequate coverage for risks incident to the respective businesses of Company and its subsidiaries and their respective properties and assets in character and amounts generally comparable with those carried by persons engaged in similar businesses that are subject to comparable perils or hazards, except as would not, individually or in the aggregate, have a Material Adverse effect on Company. All such policies are in full force and effect and no notice of cancellation, termination or default has been received with respect to any such policy, except as would not, individually or in the aggregate, have a material adverse effect on Company. All premiums due and payable on such policies covering all periods up to and including the Closing Date have been paid in full or accrued, except as would not, individually or in the aggregate, have a Material Adverse Effect on Company. There are no risks, claims, suits or losses that either have been (i) asserted by Company or its subsidiaries or (ii) incurred by Company or its subsidiaries, but not asserted against Company's or its subsidiaries' insurance carriers that, in either case, could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company. (b) Company's wholly owned subsidiary, Professional Insurance Limited, a Bermuda corporation, in combination with the Company, maintains reserves adequate to cover the risks and losses of the kind for which it provides insurance coverage and for the claims, suits or losses that have been asserted against it (other than any such risks, losses, claims or suits which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Company). Section 4.14 Environmental Matters. Except as would not, individually or in the aggregate, have a Material Adverse Effect on Company: (a) Compliance. Except as set forth in Section 4.14(a) of the Company Disclosure Schedule, Company and each of its subsidiaries is in compliance in all material respects with all applicable Environmental Laws (as defined in Section 4.14(e) below) and Environmental Permits, and neither Company nor any of its subsidiaries has received any communication (written or oral) from any person or Governmental Entity that alleges that Company or any of its subsidiaries is not in such compliance in all material respects with applicable Environmental Laws or Environmental Permits. (b) Environmental Permits. Except as set forth in Section 4.14(b) of the Company Disclosure Schedule, (i) Company and each of its subsidiaries has obtained or has timely applied for all material environmental, health and safety permits, licenses and 20. governmental authorizations (collectively, the "Environmental Permits") necessary for the construction of their facilities or the conduct of their operations, and (ii) all such Environmental Permits are in good standing or, where applicable, a renewal application has been timely filed and agency approval is pending. (c) Environmental Claims. Except as set forth in Section 4.14(c) of the Company Disclosure Schedule, there are no material Environmental Claims (as defined in Section 4.14(e) below) pending or, to the knowledge of Company, threatened, (i) against Company or any of its subsidiaries, (ii) to the knowledge of Company, against any person or entity whose liability for any Environmental Claim Company or any of its subsidiaries has or may have retained or assumed either contractually or by operation of law, or (iii) arising out of any currently owned, leased or managed, in whole or in part, real or personal property or operations of Company or any of its subsidiaries or, to the knowledge of Company, arising out of any formerly owned, leased or managed, in whole or in part real or personal property or operations of Company or any of its subsidiaries. (d) Releases. Except as set forth in Section 4.14(d) of the Company Disclosure Schedule, there have been no Releases (as defined in Section 4.14(e) below) or threatened Releases of any Hazardous Materials (as defined in Section 4.14(e) below) that would be reasonably likely to form the basis of any material Environmental Claim against Company or any of its subsidiaries, or, to the knowledge of Company, against any person or entity whose liability for any Environmental Claim Company or any of its subsidiaries has or may have retained or assumed either contractually or by operation of law. (e) Definitions. (i) "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation (written or oral) by any person or entity (including any Governmental Entity), alleging potential liability (including potential responsibility or liability for costs of enforcement, investigation, cleanup, governmental response, removal or remediation, for natural resources damages, property damages, personal injuries or penalties or for contribution, indemnification, cost recovery, compensation or injunctive relief) arising out of, based on or resulting from (A) the presence, Release or threatened Release of any Hazardous Materials at any location, whether or not owned, operated, leased or managed by Company or any of its subsidiaries; or (B) circumstances forming the basis of any violation or alleged violation of any Environmental Law or Environmental Permit. (ii) "Environmental Laws" means all foreign, Federal, state and local laws, rules, regulations, orders, decrees, common law, judgments or binding agreements issued, promulgated or entered into by or with any Governmental Entity, relating to pollution, the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or protection of human health as it relates to the environment including laws and regulations relating to noise levels, Releases or threatened Releases of Hazardous Materials, or 21. otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, transport, handling of or exposure to Hazardous Materials. (iii) "Hazardous Materials" means (A) any petroleum or petroleum products, radioactive materials or wastes, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and polychlorinated biphenyls ("PCBs"); and (B) any other chemical, material, substance or waste the generation, manufacture, processing, distribution, possession, use, treatment, storage or Release of which is prohibited, limited or regulated under any Environmental Law. (iv) "Release" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. Section 4.15 Certain Agreements. (a) Section 4.15(a) of the Company Disclosure Schedule contains a true and complete list of: (i) each contract for the employment of any officer, director or employee of Company or any of its subsidiaries which provides for an aggregate benefit in the event of any termination of employment of such person in excess of one year's salary of such person (other than, in the case of non-officer employee contracts, for part-time employment); (ii) each agreement containing any covenant restricting the ability of Company or any subsidiary to conduct any business; and (iii) each joint venture, partnership or similar agreement (other than single project joint ventures or agreements of a substantially similar nature entered into in the ordinary course of business). Complete and correct copies of any contracts, agreements or other instruments referred to in Section 4.15(a) of the Company Disclosure Schedule have been delivered to Parent prior to the date hereof. There are no employment contracts to which Company or any of its subsidiaries is a party which provides for any benefit upon or resulting from a "change in control" of Company or any of its subsidiaries or any similar event except for such contracts publicly filed as exhibits to the Filed Company SEC Documents. All contracts or agreements, including agreements relating to indebtedness of Company or any of its subsidiaries, required to be filed with the SEC under the Exchange Act have been filed with the SEC. Except as would not, individually or in the aggregate, have a Material Adverse Effect on Company, neither Company nor any of its subsidiaries is in default under any agreement, commitment, lease or other instrument to which it or any of its properties is subject, and there has not occurred any event that, with the giving of notice or the lapse of time or both, would constitute such a breach or default by Company or any of its subsidiaries or, to the knowledge of the executive officers of Company, a default thereunder by any other party thereto. (b) Set forth on Schedule 4.15(b) is a list as of the date hereof of (x) all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments (each an "indebtedness facility") pursuant to which any indebtedness of Company or any of its subsidiaries is outstanding (except for such indebtedness the aggregate principal amount of 22. which does not exceed $1,000,000) and (y) the approximate principal amounts outstanding under each such indebtedness facility. Section 4.16 Properties. (a) Owned Real Property. Except as would not, individually or in the aggregate have a Material Adverse Effect on Company, Company and each of its subsidiaries have good and clear record and marketable title to each of their owned properties ("Owned Real Property"), free and clear of any Liens. Except as set forth in Section 4.16(a) of the Company Disclosure Schedule, there are (i) no outstanding contracts for any improvements to the Owned Real Property which have not been fully paid, (ii) no expenses of any kind (including brokerage and leasing commissions) pertaining to the Owned Real Property which have not been fully paid and (iii) no outstanding contracts for the sale of any of the Owned Real Property, except those contracts value of the property in respect of which does not exceed $2,000,000 in the aggregate. (b) Leased Real Property. All leases or other agreements ("Real Property Leases") pursuant to which Company or any of its subsidiaries lease, sublease or otherwise occupy real property (the "Leased Real Property"; the Owned Real Property and the Leased Real Property, collectively, the "Real Property") are in full force and effect and grant in all respects the leasehold estates or rights of occupancy they purport to grant in accordance with their respective terms, and there is not under any of such leases any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default) on the part of Company or any subsidiary or, to Company's knowledge, on the part of any other party thereto, except where the lack of such good standing, validity and effectiveness or the existence of such default or event of default could not reasonably be expected to have Material Adverse Effect on Company. Company and its subsidiaries, as the case may be, have valid leasehold interests in all the Leased Real Property free and clear of all Liens, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company. The consummation of the Offer, the Merger and the other transactions contemplated hereby will not result in the occurrence of a default under any of the Real Property Leases (whether pursuant to a "change in control" or assignment provision in the Real Property Lease or otherwise), except as would not, individually or in the aggregate, have a Material Adverse Effect on Company. Section 4.17 Intellectual Property. Company and its subsidiaries own or possess adequate licenses or other valid rights to use all of the United States and foreign issued patents, registered trademarks, registered service marks, trade names, copyrights and software which are material to the business of Company and its subsidiaries taken as a whole (the "Intellectual Property"), except for such lack of or defects in ownership or possession as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company. As of the date of this Agreement, neither Company nor any of its subsidiaries has received any written notice that any Intellectual Property rights have been declared unenforceable or otherwise invalid by any court or governmental agency other than notices relating to Intellectual Property Rights the loss of which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse 23. Effect on Company. Except for matters that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company, the right, title or interest of Company and its subsidiaries in each item of Intellectual Property is free and clear of Liens. Except for matters that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company, neither Company nor any subsidiary has received written notice that is still pending to the effect that Company or any subsidiary has infringed any patent, trademark, service mark, tradename, copyright, brand name, logo, symbol or other intellectual property right of any third party, nor is there any action, pending or, to the knowledge of Company, threatened, against Company or any subsidiary claiming that Company or any subsidiary has, whether directly, contributorily or by inducement, infringed any trade secret or misappropriated any other Intellectual Property. Section 4.18 Vote Required. The Company Stockholders Approval is the only vote of the holders of any class or series of Company Capital Stock necessary to adopt this Agreement and approve the transactions contemplated hereby. Section 4.19 Certain Approvals. The Company Board has taken any and all necessary and appropriate action to render inapplicable to the Offer, the Merger and the other transactions contemplated hereby the provisions of Section 203 of the DGCL. No other state takeover statute or similar statute or regulation applies to the Offer, the Merger or the other transactions contemplated hereby. Section 4.20 Brokers. No broker, investment banker, financial advisor or other person, other than Prudential, the fees and expenses of which will be paid by Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Company. Section 4.21 Opinion Of Financial Advisor. The Board has received the written opinion of Prudential, dated as of the date hereof, that the consideration to be received in the Offer and the Merger by the holders of Company Common Stock is fair to such holders from a financial point of view, a signed copy of which opinion has been delivered to Parent. Section 4.22 Year 2000 Compliance. All computer software used by Company and/or any of its subsidiaries is capable (or will be capable by September 1, 1999) of operating consistently after December 31, 1999 to accurately process date data (including calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries, including leap year calculations, and is otherwise currently "Year 2000 compliant", except where the failure to operate consistently or be "Year 2000 compliant" could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Company. Section 4.23 Company Rights Agreement. Company and the Company Board have authorized all necessary action to amend, and Company has amended, the Company Rights Agreement dated as of March 28, 1997, between Company and ChaseMellon Shareholder Services LLC and the documents relating thereto (collectively, the "Rights Plan"), without redeeming the rights issued pursuant to the Rights Plan (the "Company Rights"), so that (a) none of the execution or delivery of this Agreement, or the consummation of Offer or the Merger, will cause any Company Rights to become exercisable or to separate from the stock certificates to which they are attached, (b) neither Parent nor any of its subsidiaries, affiliates or associates shall 24. be an Acquiring Person (as such terms are defined in the Rights Plan) and (c) no other provision of the Rights Plan will be triggered or affected by such execution, delivery or consummation, including provisions relating to the occurrence of a Distribution Date (as such term is defined in the Rights Plan), and such amendments shall be in full force and effect from and after the date hereof. Section 4.24 Certain Business Practices. Except as set forth in Section 4.24 of the Company Disclosure Schedule, and except as would not, individually or in the aggregate, have a Material Adverse Effect on Company, neither Company nor any of its subsidiaries nor any of their respective directors, officers, agents, employees or representatives (in their capacities as such) has: (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) directly or indirectly paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent or other party acting on behalf of or under the auspices of a government official or Governmental Entity, in the United States or any other country, which is in any manner related to the business or operations of Company or any of its subsidiaries, that was illegal under any federal, state or local laws of the United States or any other country having jurisdiction; (c) made any payment to any customer or supplier of Company or any of its subsidiaries, or to any officer, director, partner, employee or agent of any such customer or supplier, for the unlawful sharing of fees to any such customer or supplier or any such officer, director, partner, employee or agent for the unlawful rebating of charges; or (d) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer or supplier or any such officer, director, partner, employee or agent, in respect of the business of Company or its subsidiaries. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY Parent and Subsidiary hereby, jointly and severally represent and warrant to Company as follows: Section 5.1 Organization. Each of Parent and Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Subsidiary is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualifications or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate would not prevent or materially delay the consummation of the Offer or the Merger. Parent has made available to Company complete and correct copies of its certificate of incorporation and bylaws and the certificate of incorporation and bylaws of Subsidiary, in each case as amended to the date of this Agreement. 25. Section 5.2 Authority. Parent and Subsidiary have the requisite corporate power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of Parent and Subsidiary and no other corporate proceedings on the part of Parent and Subsidiary are necessary to authorize this Agreement or to consummate the transactions contemplated hereby or thereby. No vote of Parent stockholders is required to approve this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Subsidiary, and, assuming such agreement constitutes a valid and binding obligation of the other parties thereto, constitutes a valid and binding obligation of Parent and Subsidiary enforceable against Parent and Subsidiary in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. Section 5.3 Consents And Approvals; No Violations. Neither the execution, delivery and performance of this Agreement by Parent and Subsidiary, nor the consummation by Parent and Subsidiary of the transactions contemplated hereby and thereby will (i) conflict with or result in any breach of any provision of the respective certificate of incorporation or bylaws of Parent and Subsidiary, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of its Subsidiaries or any of their properties or assets, except in the case of clauses (ii), (iii) and (iv) for violations, breaches or defaults that individually or in the aggregate would not prevent or materially delay the consummation of the Offer or the Merger, except in the case of clause (ii) for (A) the filing with the SEC of the Offer Documents or such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (B) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (C) filings required pursuant to the HSR Act, (D) filings necessary to satisfy the applicable requirements of state securities or "blue sky" laws, (E) those required under the rules and regulations of the NYSE, (F) any novations or consents required in connection with Government Contracts, (G) any filings required under the DOD Industrial Security Manual for Safeguarding Classified Information, and (H) any filings required under U.S. Export Control Laws. Section 5.4 Information Supplied. None of the information supplied or to be supplied by Parent or Subsidiary in writing for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement, and (iv) the Proxy Statement will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. In the case of the Offer Documents, the Schedule 14D-9 and the Information Statement the foregoing representation and warranty 26. shall be effective at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC and when they are first published, sent or given to Company's stockholders. In the case of the Proxy Statement (as it may be amended or supplemented), the foregoing representation and warranty shall be effective at the time the Proxy Statement is first mailed to Company's stockholders and at the time of the Stockholders Meeting (as defined in Section 7.1). The Offer Documents, the Information Statement and the Proxy Statement will comply as to form and content in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent or Subsidiary with respect to statements made or incorporated by reference therein based on written information supplied by Company specifically for inclusion or incorporation by reference therein. Section 5.5 Interim Operations Of Subsidiary. Subsidiary (and any other wholly-owned subsidiary of Parent which may be used to effect the Offer and the Merger pursuant to Section 2.1) was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. Section 5.6 Brokers. No broker, investment banker, financial advisor or other person, other than Morgan Stanley Dean Witter, the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Subsidiary. Section 5.7 Financing. At the expiration of the Offer and at the Effective Time, Parent and Subsidiary will have available all the funds necessary to purchase all the Shares pursuant to the Offer and the Merger and to pay all fees and expenses payable by Parent or Subsidiary related to the transactions contemplated by this Agreement, subject only to the conditions (collectively, the "Funding Conditions") expressly specified in (i) that certain firm commitment letter addressed to Parent from Wells Fargo Bank, N.A. dated May 3, 1999 (the "Wells Fargo Commitment"), (ii) that certain firm commitment letter addressed to Parent from Morgan Stanley Dean Witter dated May 3, 1999 (the "Morgan Stanley Commitment"), and (iii) that certain Securities Purchase Agreement dated May 5, 1999 by and between Parent and RCBA Strategic Partners, L.P. (the "RCBA Commitment"). Parent has delivered to Company true and correct copies of the Wells Fargo Commitment, the Morgan Stanley Commitment and the RCBA Commitment (collectively, the "Funding Commitments"). The aggregate proceeds of the financing contemplated by the Funding Commitments will be in amount sufficient to acquire all the Shares in the Offer and the Merger, to effect all contemplated refinancings of existing indebtedness of the Company and to pay all related contemplated fees and expenses. Parent and Subsidiary have been advised by the parties providing the Funding Commitments that none of such parties knows of any fact or circumstance that is reasonably likely to result in any of the Funding Conditions not being satisfied, and Parent and Subsidiary know of no such fact or circumstance. 27. Section 5.8 Solvency. Parent has no reason to believe that the financing to be provided to Parent to effect the Offer and the Merger will cause (i) the fair salable value of the Surviving Corporation's assets to be less than the total amount of its existing liabilities, (ii) the fair salable value of the assets of the Surviving Corporation to be less than the amount that will be required to pay its probable liabilities on its existing debts as they mature, (iii) the Surviving Corporation not to be able to pay its existing debts as they mature or (iv) the Surviving Corporation to have an unreasonably small capital with which to engage in its business. ARTICLE VI COVENANTS Section 6.1 Conduct Of Business. During the period from the date of this Agreement to the Effective Time or termination of this Agreement pursuant to Section 9.1 hereof, except as otherwise contemplated hereby or to the extent that Parent shall otherwise consent in writing, Company shall, and shall cause each of its subsidiaries to, carry on its business in all material respects in the ordinary course consistent with past practice and, to the extent consistent therewith, use reasonable efforts to preserve, in all material respects, intact its current business organization, keep available the services of its current officers and employees, in all material respects, and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having significant business dealings with it. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, Company shall not, and shall not permit any of its subsidiaries to (except as expressly permitted by this Agreement or as set forth in Schedule 6.1 to the Company Disclosure Schedule or to the extent that Parent shall otherwise consent in writing): (i) (A) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than (1) dividends and distributions by a direct or indirect wholly-owned subsidiary of Company to its parent, (2) contractually required distributions to partners in joint ventures, and (3) earn-out payments in connection with acquisitions consummated prior to the date hereof as set forth in Section 6.1(i) of the Company Disclosure Schedule, (B) 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 (C) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of shares of Company Common Stock upon the exercise of Company Stock Options outstanding on the date of this Agreement in accordance with their present terms); (iii) amend the Company Certificate of Incorporation or the Company By-laws or other comparable charter or organizational documents; 28. (iv) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the assets or any stock of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (B) except as set forth on Schedule 6.1(iv) to Company Disclosure Schedule, any assets that are material, individually or in the aggregate, to Company, except purchases of supplies and inventory in the ordinary course of business consistent with past practice; (v) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except sales of inventory or sales or licenses of immaterial assets, in each case in the ordinary course of business consistent with past practice and except for sales of assets for consideration that does not exceed, individually or in the aggregate, $1,000,000; (vi) (A) incur or suffer to exist any new indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice, or (B) make any loans, advances (other than to employees of Company in the ordinary course of business) or capital contributions to, or investments in, any other person, except as permitted by Section 6.1(iv); (vii) except as set forth on Schedule 6.1(vii) to the Company Disclosure Schedule, make or agree to make any capital expenditure or expenditures with respect to property, plant or equipment except in the ordinary course of business and except for any capital expenditure that, individually, is in excess of $200,000 or, in the aggregate for the Company and such subsidiaries with respect to all capital expenditures after the date hereof, are in excess of $1,500,000; (viii) make any material tax election or settle or compromise any material income tax liability or make any change in accounting methods, principles or practices; (ix) pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), (other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of Company included in the Filed Company SEC Documents or incurred thereafter in the ordinary course of business consistent with past practice and other than settlements or compromises of claims, liabilities or obligations not involving any obligation of the Company other than the payment of money where the amount paid or to be paid in settlement or compromise does not exceed $500,000, provided that the aggregate amount paid in connection with the settlement or compromise of all such matters shall not exceed $1,000,000), or waive any material benefits of, 29. or agree to modify in any material respect, any confidentiality, standstill or similar agreements to which Company or any of its subsidiaries is a party; (x) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which Company or any of its subsidiaries is a party, or waive, release or assign any material rights or claims; (xi) enter into any material contracts or agreements relating to the distribution, sale or marketing by third parties of the services or products of, or the services or products licensed by, Company or any of its subsidiaries; (xii) except as required to comply with applicable law or agreements, plans or arrangements existing on the date hereof or as set forth in Schedule 6.1(xii) of the Company Disclosure Schedule, (A) adopt, enter into, terminate or amend any employment agreement or Company Benefit Plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (B) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or key employee except with respect to new hires and promotions, in the ordinary course of business, consistent with past practice, (C) pay any benefit not provided for under any Company Benefit Plan, (D) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Company Benefit Plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Company Benefit Plans or agreement or awards made thereunder), or (E) take any action other than in the ordinary course of business to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Company Benefit Plan; (xiii) obligate itself to pay fees and expenses for the services of Prudential described in Sections 4.20 or 4.21 in connection with the transactions contemplated hereby in excess of the amounts set forth in the Disclosure Schedule; or (xiv) authorize any of, or commit or agree to take any of, the foregoing actions. Section 6.2 No Solicitation. (a) Company shall not, and shall not authorize or permit any of its subsidiaries or any of its or their officers, directors or employees to, and shall use its reasonable efforts to cause any investment banker, financial advisor, attorney, accountant or other representative of Company or of any of its subsidiaries not to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate (including any action intended to neutralize the Rights Plan with respect to), any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal (as defined below) or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that prior to the acceptance for payment of the Minimum Shares pursuant to the Offer, Company may, if it is determined in good faith by the Board of Directors of Company after consultation with its legal and financial advisors, in 30. response to a Takeover Proposal from any person that was not solicited by the Company and did not otherwise result from a breach of this Section 6.2, that such Takeover Proposal is likely to result in the acquisition of more than 50% of the outstanding shares of Company Common Stock or of the assets of Company and its subsidiaries, taken as a whole and provide greater value to Company's stockholders than the transactions provided for in this Agreement (a "Superior Proposal"), (x) furnish information with respect to Company to such person pursuant to a customary confidentiality agreement, and (y) participate in discussions or negotiations with such person regarding any Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means any proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of Company and its subsidiaries, taken as a whole, or 20% or more of any class of outstanding equity securities of Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of 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 Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement. (b) Neither the Board of Directors of Company nor any committee thereof shall (i) withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such Board of Directors or such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend any Takeover Proposal or (iii) cause Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (an "Acquisition Agreement") with respect to any Takeover Proposal (other than a confidentiality agreement referred to in paragraph (a) above); provided, however, that prior to the acceptance for payment of the Minimum Shares pursuant to the Offer, the Company Board shall be permitted to terminate this Agreement if the Company Board shall have determined in good faith (based on the advice of the Company's financial advisor that a Takeover Proposal was a Superior Proposal and the advice of the Company's counsel) that failure to terminate this Agreement would constitute a breach of the Company Board's fiduciary duties under applicable law (provided that substantially concurrently with such termination the Company enters into a definitive agreement containing the terms of the Superior Proposal, and provided further that any termination pursuant to this Section 6.2(b) shall not be effective unless the Company shall have fully complied with the provision of Section 9.3). (c) In addition to the obligations of Company set forth in paragraphs (a) and (b) of this Section 6.2, Company shall immediately (and in any event within 24 hours) advise Parent orally and in writing of any Takeover Proposal, any request for information concerning Company or its Subsidiaries in relation to or any inquiry regarding the making of a Takeover Proposal, the material terms and conditions of such Takeover Proposal, request for information or inquiry and the identity of the person making such Takeover Proposal, request for information or inquiry. Company will keep Parent fully informed of the status and details (including amendments or proposed amendments) of any such Takeover Proposal, request for information or inquiry. 31. (d) Nothing contained in this Section 6.2 shall prohibit the Company from taking or disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act if, in the good faith judgment of the Company Board, after consultation with outside counsel, such actions are required under applicable law. Section 6.3 Certain Tax Matters. From the date hereof until the Effective Time, (i) Company and each of its subsidiaries will timely file all tax returns and reports ("Post-Signing Returns") required to be filed (in each case, at Company's own cost and expense and in a manner that is consistent with past practice and that is not likely to materially defer income to a tax period that ends after the Closing Date or to materially accelerate deductions to a tax period that ends on or before the Closing Date, except to the extent that any such deferral of income or acceleration of deductions is required by applicable law); (ii) Company and each of its subsidiaries will timely pay all taxes shown as due and payable on their Post-Signing Returns that are so filed; (iii) Company and each of its subsidiaries will make provision for all taxes payable by Company and each of its subsidiaries for which no Post-Signing Return is due prior to the Effective Time; and (iv) Company will promptly notify Parent of any action, suit, proceeding, claim or audit pending against or with respect to Company or any of its subsidiaries in respect of any tax where there is a possibility of a determination or decision which might have a significant adverse effect on the tax liabilities or tax attributes of Company or any of its subsidiaries. Section 6.4 Other Actions. Subject to the terms and conditions of this Agreement, neither Company nor any of its subsidiaries, on the one hand, nor Parent, Subsidiary nor any of their respective subsidiaries on the other hand, shall take any action that would reasonably be expected to result in (i) any of the representations and warranties of Company on the one hand, or of Parent or Subsidiary on the other hand, set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the Offer Conditions not being satisfied. Section 6.5 Advice Of Changes; Filings. Company shall confer with Parent on a regular and frequent basis as reasonably requested by Parent concerning operational matters and promptly advise Parent orally and in writing of any Material Adverse Change with respect to Company. Company shall promptly provide to Parent copies of all filings made by Company with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. ARTICLE VII ADDITIONAL AGREEMENTS Section 7.1 Company Stockholder Approval; Preparation Of Proxy Statement. (a) If Company Stockholder Approval is required by law, Company will, as soon as practicable following the acceptance for payment of, and payment for, Shares by Subsidiary pursuant to and subject to the Offer Conditions, duly call, give notice of, convene and 32. hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose of obtaining Company Stockholder Approval. Company will, through its Board of Directors, recommend to its stockholders that Company Stockholder Approval be given. Notwithstanding the foregoing, if Subsidiary or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a stockholders meeting in accordance with Section 253 of the DGCL. (b) If Company Stockholder Approval is required by law, Company will, at Parent's request, as soon as practicable following the expiration of the Offer, prepare and file a preliminary Proxy Statement with the SEC and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be mailed to Company's stockholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. Company will notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Stockholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, Company will promptly prepare and mail to its stockholders and file with the SEC such an amendment or supplement. (c) Parent agrees to cause all Shares purchased pursuant to the Offer and all other Shares owned by Parent or any subsidiary of Parent to be voted in favor of Company Stockholder Approval. Section 7.2 Access To Information; Confidentiality. Company shall, and shall cause each of its subsidiaries to, afford to Parent, and to Parent's officers, employees, accountants, counsel, financial advisers and other representatives, reasonable access during normal business to Parent during the period prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel (including consultants, legal counsel and independent public accountants) and records and, during such period, Company shall furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Parent will hold, and will cause its officers, employees, accountants, counsel, financial advisers and other representatives and affiliates to hold, any and all information received from Company or any of its Subsidiaries, directly or indirectly, in confidence, according to the terms of the confidentiality agreement dated April 14, 1999 between Company and Parent (the "Confidentiality Agreement"). 33. Section 7.3 Reasonable Efforts; Notification. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other transactions contemplated by this Agreement, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of any of the transactions contemplated hereby or thereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, Company and its Board of Directors shall (i) take all reasonable actions available to them to ensure that neither the Rights Plan nor any state takeover statute or similar statute or regulation is or becomes applicable to the Offer, the Merger, this Agreement or any of the other transactions contemplated by this Agreement and (ii) if the Rights Plan or any state takeover statute or similar statute or regulation becomes applicable to the Offer, the Merger, this Agreement or any other transaction contemplated by this Agreement, take all reasonable actions available to them to ensure that the Offer, the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger, this Agreement and the other transactions contemplated by this Agreement. Nothing in this Agreement shall be deemed to require Parent to agree to dispose of any significant assets or businesses of Company, Parent or any of their respective subsidiaries. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective all necessary filings required pursuant to the HSR Act no later than five Business Days from the date of this Agreement, (b) Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. (c) The parties hereto shall take all actions as may be reasonably necessary to fulfill the Funding Conditions set forth in the Funding Commitments. 34. Section 7.4 Cooperation. Without limiting the generality of Section 7.3, Parent, Subsidiary and Company shall together, or pursuant to an allocation of responsibility to be agreed between them, coordinate and cooperate (i) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required and (ii) in promptly seeking any such action or making any such filing, furnishing information required in connection therewith and seeking timely to obtain any such actions. Section 7.5 Stock Option Plans. (a) As soon as practicable following the date of this Agreement but in no event later than the consummation of the Offer, Company (or, if appropriate, the Board of Directors of Company or any committee administering the Stock Option Plans (as defined below)) shall take actions (which, in the case of the Company's 1995 Stock Option Plan for Non-Employee Directors, shall be to make reasonable efforts to obtain the consent of the option holders thereunder to permit actions) such that (including by adopting resolutions or taking any other actions) each outstanding option to purchase Shares (a "Company Stock Option") heretofore granted under any stock option, stock appreciation rights or stock purchase plan, program or arrangement of Company (collectively, the "Stock Option Plans") that is outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, shall be canceled immediately prior to the Effective Time in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (i) the number of Shares subject to such Company Stock Option immediately prior to the Effective Time and (ii) the excess, if any, of the price per Share to be paid in the Offer over the per Share exercise price of such Company Stock Option. Company (or, if appropriate, the Board of Directors of Company or any committee administering the Stock Option Plans) shall take actions such that immediately prior to the Effective Time the outstanding Company Stock Options are canceled as set forth above. Company shall not make, or agree to make, any payment of any kind to any holder of a Company Stock Option (except for the payment described above) without the consent of Parent. (b) Subject to Section 7.5(a), all Stock Option Plans shall terminate as of the Effective Time and the provisions in any other Company Benefit Plan providing for the issuance, transfer or grant of any capital stock of Company or any interest in respect of any capital stock of Company shall be deleted as of the Effective Time. Company shall use its reasonable best efforts to ensure that following the Effective Time, no holder of a Company Stock Option or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of Company, Parent or the Surviving Corporation. (c) The Company shall take all actions necessary to provide for the cancellation of all outstanding grants of Company Common Stock that are subject to a vesting requirement (the "Company Restricted Stock") immediately prior to the Effective Time in exchange for a per share cash payment equal to the Merger Consideration; provided that the Company shall have the right to waive any such vesting requirement and accelerate the vesting of any shares of Company Restricted Stock. 35. Section 7.6 Indemnification, Exculpation And Insurance. (a) Parent agrees that all rights to indemnification and exculpation (including the advancement of expenses) from liabilities for acts or omissions occurring at or prior to the Effective Time (including with respect to the transactions contemplated by this Agreement) existing now or at the Effective Time in favor of the current or former directors or officers of Company as provided in the Company Certificate of Incorporation, the Company By-Laws and any indemnification agreements (each as in effect on the date hereof) shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall continue in full force and effect without amendment, modification or repeal in accordance with their terms; provided, however, that if any claims are asserted or made during the continuance of such terms, all rights to indemnification (and to advancement of expenses) hereunder in respect of any such claims shall continue, without diminution, until disposition of any and all such claims. (b) In the event that Parent, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall expressly assume the obligations set forth in this Section 7.6. In the event the Surviving Corporation transfers any material portion of its assets, in a single transaction or in a series of transactions, Parent will either guarantee the indemnification obligations referred to in Section 7.6(a) or take such other action to insure that the ability of the Surviving Corporation, legal and financial, to satisfy such indemnification obligations will not be diminished in any material respect. (c) The Surviving Corporation shall (i) maintain for a period of not less than six years from the Effective Time the Company's current directors' and officers' insurance and indemnification policy to the extent that it provides coverage for events occurring prior to the Effective Time (the "D&O Insurance"), for all persons who are directors or officers of the Company on the date of this Agreement (the "Insured Parties") or (ii) cause to be provided coverage no less advantageous to the Insured Parties than the D&O Insurance, in each case so long as the annual premium therefor would not be in excess of 125% of the last annual premium paid for the D&O Insurance prior to the date of this Agreement (such 125% amount, the "Maximum Premium"). If the existing D&O Insurance expires, is terminated or canceled during such six-year period, the Surviving Corporation will use all reasonable efforts to cause to be obtained as much D&O Insurance as can be obtained for the remainder of such period for an annualized premium not in excess of the Maximum Premium. (d) The provisions of this Section 7.6 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. Section 7.7 Directors. Promptly upon the acceptance for payment of, and payment for, not less than a majority of the outstanding Shares pursuant to the Offer, Subsidiary shall be 36. entitled to designate such number of directors on the Board of Directors of Company as will give Subsidiary, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and Company shall, at such time, cause Subsidiary's designees to be so elected by its existing Board of Directors; provided, however, that in the event that Subsidiary's designees are elected to the Board of Directors of Company, until the Effective Time such Board of Directors shall have at least three directors who are directors of Company on the date of this Agreement (the "Continuing Directors") and; provided further that, in such event, if the number of Continuing Directors shall be reduced below three for any reason whatsoever, the remaining Continuing Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Continuing Directors then remain, the other directors of Company on the date hereof shall designate three persons to fill such vacancies who shall not be officers or affiliates of Company or any of its Subsidiaries, or officers or affiliates of Parent or any of its Subsidiaries, and such persons shall be deemed to be Continuing Directors for purposes of this Agreement. Subject to applicable law, Company shall take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Subsidiary shall have provided to Company on a timely basis in writing all information required to be included in the Information Statement with respect to Subsidiary's designees). In connection with the foregoing, Company will promptly, at the option of Parent, either increase the size of Company's Board of Directors or use its best efforts to obtain the resignation of such number of its current directors as is necessary to enable Subsidiary's designees to be elected or appointed to, and to constitute a majority of, Company's Board of Directors as provided above. Section 7.8 Fees And Expenses. Subject to the terms of Section 9.3, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated. Section 7.9 FIRPTA Certificate. Company shall deliver to Parent and Subsidiary a certificate in form and substance satisfactory to Parent, duly executed and acknowledged, certifying facts that would exempt the transactions contemplated hereby from withholding pursuant to the provisions of the Foreign Investment in Real Property Tax Act. Section 7.10 Public Announcements. Parent and Subsidiary, on the one hand, and Company, on the other hand, will consult with each other before issuing, and provide each other with a reasonable opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Offer and the Merger, and shall not issue, or permit any of their respective subsidiaries to issue, any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, in which case the party making such release will use reasonable efforts to obtain comments from the other party before issuance of such release or statement. The parties agree that the initial press release to be 37. issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties which shall contain among other matters disclosure regarding Company's rights to consider Superior Proposals under Section 6.2(a) and the Company's obligations to pay the Termination Fee and expenses in the circumstances contemplated by Sections 9.3(a) and (c). Section 7.11 Information Agent. At its option, Parent may engage an agent to provide information to stockholders of Company with respect to the Offer subsequent to its commencement and to encourage stockholders to deliver their shares to the designated depository for the Offer. The fees and expenses of such agent shall be borne by Parent. Section 7.12 Company Benefit Plans. Until October 31, 1999, Parent shall cause the Surviving Corporation to continue to provide to employees of the Company and its Subsidiaries (excluding employees covered by collective bargaining agreements), as a whole, Employee Benefits (as defined below) which, in the aggregate, are not materially less favorable to such employees than the Employee Benefits (as defined below) provided to such employees as of the date hereof. For all Employee Benefits (as defined below; including, without limitation, Employee Plans (as defined below) and other programs of Parent and its affiliates after the Effective Time), Parent will, to the extent permitted under the relevant Employee Plan (as defined below), cause all service with the Company or any of its Subsidiaries prior to the Effective Time of employees (excluding employees covered by collective bargaining agreements) to be treated as service with Parent and its affiliates for eligibility, vesting and benefit accrual purposes to the same extent that such service is taken into account by the Company and its Subsidiaries as of the date hereof, except to the extent such treatment will result in duplication of benefits. From and after the Effective Time, Parent shall, to the extent permitted under the relevant Employee Plan (as defined below), (i) cause any pre-existing condition or limitation and any eligibility waiting periods (to the extent such limitations or waiting periods did not apply to the employees of the Company under the Employee Plans (as defined below) in existence as of the date hereof) under any group health plans of Parent or any of its Subsidiaries to be waived with respect to employees of the Company and their eligible dependents and (ii) give each employee of the Company credit for the plan year in which the Effective Time occurs toward applicable deductions and annual out-of-pocket limits for expenses incurred prior to the Effective Time (or such later date on which participation commences) during the applicable plan year. "Employee Benefits" shall mean benefits provided under any of the following "Employee Plans": medical, health, dental, life insurance, long-term disability, severance, pension, retirement or savings plan, policy or arrangement, including those such plans for which coverage is generally limited to officers or a select group of highly compensated employees of the Company or any of its Subsidiaries. Nothing herein shall require the continued employment of any person or prevent the Company and/or the Surviving Corporation from taking any action or refraining from taking any action which the Company could take or refrain from taking prior to or after the Effective Time, including, without limitation, any action the Company or the Surviving Corporation could take to terminate, or change or reduce the benefits available under, any plan under its terms as in effect as of the date hereof. 38. Section 7.13 Solvency Matters. (a) Parent and the Company will jointly agree to retain a mutually satisfactory appraisal firm (the "Appraiser") to provide a letter to the Board of Directors of the Company and the Board of Directors of the Parent (the "Solvency Letter") to the effect that the financing to be provided to Parent to effect the Offer and the Merger and the other transactions contemplated hereby will not cause (i) the fair salable value of the Surviving Corporation's assets to be less than the total amount of its existing liabilities, (ii) the fair salable value of the assets of the Surviving Corporation to be less than the amount that will be required to pay its probable liabilities on its existing debts as they mature, (iii) the Surviving Corporation not to be able to pay its existing debts as they mature or (iv) the Surviving Corporation to have an unreasonably small capital with which to engage in its business. (b) The Appraiser will be requested to deliver a Solvency Letter as promptly as practicable. If the Appraiser is unable to deliver the Solvency Letter or the Solvency Letter is not reasonably acceptable to the Board of Directors of the Company, Parent and Subsidiary covenant and agree that, notwithstanding anything to the contrary in this Agreement, Subsidiary shall not accept for payment or pay for Shares pursuant to the Offer. ARTICLE VIII CONDITIONS Section 8.1 Conditions To Each Party's Obligation To Effect The Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction or waiver prior to the Closing Date of the following conditions: (a) Company Stockholder Approval. If required by applicable law, Company Stockholder Approval shall have been obtained. (b) No Injunctions Or Restraints. No statute, rule, decision, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Entity preventing the consummation of the Merger shall be in effect; provided, however, that the party seeking to invoke such condition shall have performed its obligations under Sections 7.3 and 7.4. (c) Purchase Of Shares. Subsidiary shall have (i) commenced the Offer pursuant to Article I hereof and (ii) purchased, pursuant to the terms and conditions of such Offer, all shares of Company Common Stock duly tendered and not withdrawn; provided, however, that neither Parent nor Subsidiary shall be entitled to rely on the condition in clause (ii) above if either of them shall have failed to purchase shares of Company Common Stock pursuant to the Offer in breach of their obligations under this Agreement. Section 8.2 Conditions To Subsidiary's And Parent's Obligation To Effect The Merger. The obligation of Subsidiary and Parent to effect the Merger shall be subject to the satisfaction or waiver prior to the Closing Date of the following additional conditions: 39. (a) Company having performed in all material respects its obligations under this Agreement required to be performed by it at or prior to the Effective Time pursuant to the terms hereof. Section 8.3 Conditions to the Company's Obligation to Effect the Merger. The obligation of Company to effect the Merger shall be subject to the satisfaction or waiver prior to the Closing Date of the following additional conditions: (a) Parent and Subsidiary having performed in all material respects each of its obligations under this Agreement required to be performed by it at or prior to the Effective Time pursuant to the terms hereof. ARTICLE IX TERMINATION AND AMENDMENT Section 9.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of this Agreement by the stockholders of Company: (a) by mutual written consent of Parent and Company; (b) by either Parent or Company: (i) if the Offer terminates or expires on account of the failure of any condition specified in Annex A without Subsidiary having purchased any shares of Company Common Stock thereunder; provided, however, that the right to terminate this Agreement pursuant to this Section 9.1(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of any Offer Condition; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that the Party seeking to terminate this Agreement pursuant to this Section 9.1(b)(ii) shall have performed its obligations under Section 7.3 and 7.4. (iii) if the Offer Conditions shall have not been satisfied or waived on or before September 30, 1999, or if the Effective Time shall not have occurred on or before November 30, 1999, provided that the right to terminate this Agreement pursuant to this Section 9.1(b)(iii) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Offer Conditions to be satisfied or of the Effective Time to occur, as the case may be; (c) by Parent or Subsidiary, prior to the acceptance for payment of the Minimum Shares pursuant to the Offer, in the event of a breach by Company of any 40. representation, warranty, covenant or other agreement contained in this Agreement which (i) would give rise to the failure of a condition set forth in paragraph (c) or (d) of Exhibit A and (ii) cannot be or has not been cured within 20 days after the giving of written notice to Company; or (d) by Company, if Subsidiary or Parent shall have (A) failed to commence the Offer within five business days of the public announcement (on the date hereof or the following Business Day) by Parent and Company of this Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with Section 1.1(a) hereof or (C) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform in respect of clause (C) is incapable of being cured or has not been cured within 20 days after the giving of written notice to Parent or Subsidiary, as applicable, except, in any case under clause (C), such breaches and failures which individually or in the aggregate are not reasonably likely to affect adversely Parent's or Subsidiary's ability to complete the Offer or the Merger subject to the terms and conditions of this Agreement. (e) By Company, in accordance with the terms of Section 6.2(b), provided that any termination pursuant to this Section 9.1(e) shall not be effective unless Company shall have complied with the provisions of Section 9.3. (f) By Parent or Subsidiary, if the Board of Directors of Company or any committee thereof shall (i) withdraw or modify, in any manner adverse to Parent or Subsidiary, the approval or recommendation by such Board of Directors or such committee of the Offer, this Agreement, or the Merger, (ii) approve or recommend any Takeover Proposal, or (iii) cause Company to enter into any Acquisition Agreement with respect to any Takeover Proposal. Section 9.2 Effect Of Termination. In the event of a termination of this Agreement by either Company or Parent as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Subsidiary or Company or their respective officers or directors, except with respect to the last sentence of Section 1.2(c), the last sentence of Section 7.2, Section 7.8, this Section 9.2, Section 9.3, and Article X; provided, however, that nothing herein shall relieve any party for liability for any willful and intentional breach hereof. Section 9.3 Fees and Expenses. (a) In addition to any other amounts which may be payable or become payable pursuant to any provision of this Agreement, if this Agreement shall have been terminated pursuant to Section 9.1(c), then the Company shall promptly reimburse Parent for all expenses and costs incurred by Parent in connection with the transactions contemplated by this Agreement up to a maximum of $2.5 million; provided further, that if this Agreement shall have been terminated pursuant to Section 9.1(c) as the result of a willful and intentional breach by Company of any representation, warranty, covenant or other agreement contained in this Agreement which (i) would give rise to the failure of a condition set forth in paragraph (c) or (d) of Exhibit A and (ii) cannot be or has not been cured within 20 days after the giving of written 41. notice to Company, then the Company shall promptly reimburse Parent for all expenses and costs incurred by Parent in connection with the transactions contemplated by this Agreement in an additional amount up to a maximum of $2.0 million (for an aggregate of $4.5 million). Parent shall provide the Company with notice of the relevant amounts and include copies of any related bill or receipts. (b) In addition to any other amounts which may be payable or become payable pursuant to any provision of this Agreement, if this Agreement shall have been terminated pursuant to Section 9.1(d), then Parent shall promptly reimburse the Company for all expenses and costs incurred by the Company in connection with the transactions contemplated by this Agreement up to a maximum of $2.5 million. The Company shall provide Parent with notice of the relevant amounts and include copies of any related bill or receipts. (c) The Company shall pay to Parent the Termination Fee if (i) this Agreement is terminated pursuant to Section 6.2(b), 9.1(e) or 9.1(f); or (ii)(A) any person makes a Takeover Proposal at any time on or after the date of this Agreement and prior to the acceptance for payment of the Minimum Shares pursuant to the Offer, (B) thereafter this Agreement is terminated pursuant to Section 9.1(c) or 9.1(b)(i) (due, in the case of Section 9.1(b)(i), solely to a failure of the Minimum Condition), and (C) within 12 months of such termination the Company enters into an agreement (other than a customary confidentiality agreement) with respect to, or consummates, a Takeover Proposal. The term "Termination Fee" shall mean $15 million less the aggregate amount of any expense reimbursements paid or payable under Section 9.3(a). The Termination Fee shall be liquidated damages and not a penalty. The parties agree that such amount is a reasonable estimate of the costs and expenses that would be incurred and the value of services consumed by and on behalf of Parent and Subsidiary if the transactions contemplated hereunder were not to go forward as a result of such a termination. Section 9.4 Amendment. Subject to Section 9.6, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after obtaining Company Stockholder Approval (if required by law), but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 9.5 Extension; Waiver. Subject to Section 9.6, at any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (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 of the other parties hereto contained herein or in any document delivered pursuant hereto or (iii) subject to Section 9.4, waive compliance with any of the agreements or conditions of the other parties hereto contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. 42. Section 9.6 Procedure For Termination, Amendment, Extension Or Waiver. A termination of this Agreement pursuant to Section 9.1, an amendment of this Agreement pursuant to Section 9.4 or an extension or waiver pursuant to Section 9.5 shall, in order to be effective, require in the case of Parent, Subsidiary or Company, action by its Board of Directors or the duly authorized designee of its Board of Directors; provided, however, that in the event that Subsidiary's designees are appointed or elected to the Board of Directors of Company as provided in Section 7.7, after the acceptance for payment and payment of Shares pursuant to and subject to the Offer Conditions of the Offer and prior to the Effective Time, the affirmative vote of a majority of the Continuing Directors shall be required by Company to (i) amend or terminate this Agreement by Company, (ii) exercise or waive any of Company's rights or remedies under this Agreement, (iii) extend the time for performance of Parent's and Subsidiary's respective obligations under this Agreement or (iv) take any action to amend or otherwise modify the Company Certificate of Incorporation or the Company By-Laws. ARTICLE X MISCELLANEOUS Section 10.1 Nonsurvival Of Representations, Warranties And Agreements. Except as otherwise provided in this Section 10.1, none of the representations, warranties or covenants in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, in the case of Company, shall survive the acceptance for payment of, and payment for, any Shares by Subsidiary pursuant to the Offer. This Section 10.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. Section 10.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, faxed (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses or fax numbers (or at such other address or fax number for a party as shall be specified by like notice): (a) if to Parent or Subsidiary, to URS 100 California Street, Suite 500 San Francisco, CA 94111 Attention: Chief Financial Officer Fax: (415) 951-3699 43. with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 Attention: Samuel M. Livermore Fax: (415) 951-3699 and (b) if to Company, to Dames & Moore Group 911 Wilshire Boulevard, Suite 700 Los Angeles, CA 90017 Attention: Chief Financial Officer Fax: (213) 996-2212 with a copy to: Latham & Watkins 633 West Fifth St., Suite 4000 Los Angeles, CA 90071 Attention: John M. Newell Fax: (213) 891-8763 Section 10.3 Interpretation. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, including Exhibit A, they shall be deemed to be followed by the words "without limitation". As used in this Agreement, including Exhibit A, the term "subsidiary" of any person means another person whether foreign or domestic, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, a majority of the equity interests of which) is owned directly or indirectly by such first person. As used in this Agreement, including Exhibit A, the term "affiliate" of any person means any person, whether foreign or domestic, that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person. As used in this Agreement, including Exhibit A, "Material Adverse Effect" means, when used in connection with Company or Parent, as the context requires, any effect that is materially adverse to the business, financial condition or results of operations of such person and its subsidiaries, taken as a whole, or would prevent or materially impede, interfere with, hinder or delay the consummation of the Offer, the Merger or any other transaction contemplated hereby. As used in this Agreement, including Exhibit A, "Material Adverse Change" means any change that is reasonably likely to have a 44. Material Adverse Effect. As used in this Agreement, including Exhibit A, "Business Day" shall have the meaning specified in Rule 14d-1(e)(6) of the Exchange Act. Section 10.4 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 10.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the Confidentiality Agreement (including the documents and the instruments referred to herein) (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the Subject matter hereof, and (b) except as provided in Sections 7.5 and 7.6, Articles II and III, are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 10.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. Section 10.7 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Subsidiary may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly-owned subsidiary of Parent. 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 10.8 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States having competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Section 10.9 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 are fulfilled to the extent possible. Section 10.10 Compliance With Law. Nothing in this Agreement, including Section 1.2 or 6.2, shall in any way prevent Company or the Board of Directors of Company from making any disclosure to the stockholders of Company, or taking any position, that is 45. required by Federal or state law. Nothing in this Agreement, including Section 6.1, shall require Company or any of its Subsidiaries to take any action prohibited by, or refrain from taking any action required by, the HSR Act. Section 10.11 Parent Guarantee. Parent hereby guarantees the due performance of any and all obligations and liabilities of Subsidiary under or arising out of this Agreement and the transactions contemplated hereby. [Remainder of page intentionally left blank.] 46. IN WITNESS WHEREOF, Parent, Subsidiary and Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. URS CORPORATION By: /s/ Kent Ainsworth ---------------------------- DEMETER ACQUISITION CORPORATION By: /s/ Kent Ainsworth ---------------------------- DAMES & MOORE GROUP By: /s/ Mark Snell ---------------------------- 47. EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, Subsidiary shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Subsidiary's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless: (i) the number of Shares tendered and not withdrawn shall equal more than 50% (the "Minimum Shares") of the Fully Diluted Shares (defined below) (the "Minimum Condition") prior to the date which is 20 Business Days following the commencement of the Offer in accordance with the terms hereof or such later date as the Offer may be extended by an amendment to this Agreement in accordance with the provisions of Section 9.4 or as provided in Section 1.1(a) of the Agreement; (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated; and (iii) the Funding Conditions shall have been satisfied or waived. For purposes of this Agreement, "Fully Diluted Shares" shall mean all outstanding securities entitled generally to vote in the election of directors of Company on a fully diluted basis, after giving effect to the exercise or conversion of all options, rights and securities exercisable or convertible into such voting securities. Furthermore, notwithstanding any other term of the Offer, Subsidiary shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer, subject to the terms and conditions of the Agreement and Subsidiary's obligation to extend the Offer pursuant to Section 1.1(a), if, at any time on or after the date of this Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists: (a) a Governmental Entity shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, injunction or other order which is in effect and has the effect of making the acquisition of Shares by Subsidiary illegal or prohibits or imposes material limitations on the ability of Subsidiary to acquire Shares or otherwise prohibiting (directly or indirectly) consummation of the transactions contemplated by this Agreement or prohibits or imposes material limitations on the ability of Parent to own or operate all or a material portion of the Company's and its subsidiaries' businesses or assets, taken as a whole, subject to Parent's and Subsidiary's obligations pursuant to Sections 1.1(a) and 7.3 of the Agreement and Parent's agreement not to terminate the Offer as long as any such injunction or order has not become final and non-appealable; (b) there shall have occurred any Material Adverse Change with respect to Company; (c) any of the representations and warranties of Company set forth in this Agreement that are qualified as to materiality shall not be true and correct, or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case at the date of the Agreement and at the scheduled or extended expiration of the Offer (unless a representation speaks as of an earlier date, in which case it shall 1. be deemed to have been made as of such earlier date), which breaches have not been cured within 10 Business Days after the giving of written notice to the Company; (d) Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of Company to be performed or complied with by it under this Agreement , which breaches have not been cured within 10 Business Days after the giving of written notice to the Company; or (e) this Agreement shall have been terminated in accordance with its terms; which, in the reasonable judgment of Parent or Subsidiary in any such case, and regardless of the circumstances (including any action or omission by Parent or Subsidiary) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payments therefor. The foregoing conditions in paragraphs (a) through (e) are for the sole benefit of Subsidiary and Parent and may, subject to the terms of this Agreement and except for the Minimum Condition, be waived by Subsidiary and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Subsidiary at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Terms used herein but not defined herein shall have the meanings assigned to such terms in the Agreement of which this Exhibit A is a part. 2. EX-2.2 3 COMMITMENT LETTER DATED 05/03/99 FROM WELLS FARGO [WELLS FARGO LETTERHEAD] May 3, 1999 CONFIDENTIAL - ------------ URS Corporation 100 California Street San Francisco, CA 94111 Attention: Mr. Kent P. Ainsworth Executive Vice President and Chief Financial Officer Re: Senior Facilities for Acquisition of Dames & Moore Group -------------------------------------------------------- Ladies and Gentlemen: You have advised us that URS Corporation (the "Company") would like to have $550,000,000 available for the purpose of acquiring (the "Acquisition") all of the outstanding capital stock (the "Shares") of Dames & Moore Group ("DMG"). We understand that the Acquisition will be accomplished through a tender offer (the "DMG Tender Offer") by a wholly-owned subsidiary of the Company ("Merger Sub") for up to 100% of the Shares at a price not to exceed $16 per Share followed by a merger (the "Merger") of Merger Sub with and into DMG in which DMG will be the surviving corporation. We further understand that in the Merger any Shares not tendered in the DMG Tender Offer will be converted into the right to receive the same amount of cash paid in the DMG Tender Offer. The aggregate purchase price of the Shares shall not exceed $305,000,000. We also understand that the DMG Tender Offer will be conditioned on, among other things, the tender and purchase of at least that number of Shares (the "Minimum Shares") required to permit Merger Sub to cause the Merger to occur as set forth in the Agreement and Plan of Merger dated May 5, 1999 among the Company, Merger Sub and DMG (said agreement, in the form delivered to Wells Fargo on the date hereof, the "Merger Agreement"). Upon the consummation of the Merger, DMG will be wholly-owned by the Company. Wells Fargo Bank, National Association ("Wells Fargo") is pleased to commit $550,000,000 of senior bank credit facilities described in Annex A attached hereto. Such senior bank credit facilities will consist of three term loan facilities, one in the amount of $250,000,000 ("Term Loan A"), another in the amount of $100,000,000 ("Term Loan B") and another in the amount of $100,000,000 ("Term Loan C" and, together with Term Loan A and Term Loan B, the "Term Loans"), and a revolving credit facility of $100,000,000 with a sublimit for letters of credit to be agreed upon (the "Revolving Credit Facility" and, together with the Term Loans, the "Senior Facilities"). Wells Fargo intends to arrange for other financial institutions and "accredited investors" (as defined in the SEC regulations; each such entity, including Wells Fargo, being a "Lender" and, collectively, the "Lenders") to provide a portion of the Senior Facilities. We are also pleased to advise you of our willingness to act as Arranger and Administrative Agent for the Senior Facilities. No additional agents for the Senior Facilities will be appointed without the prior approval of the Company and Wells Fargo. You have advised us that the proceeds of the Term Loans, up to $25,000,000 of the Revolving Credit Facility and a portion of the letter of credit sublimit of the Revolving Credit Facility (to be determined), together with (i) not less than $100,000,000 in cash preferred equity contributions to the Company by RCBA Strategic Partners, L.P. ("RCBA") and/or its affiliates pursuant to that certain Securities Purchase Agreement dated May 5, 1999 between the Company and RCBA (said agreement, in the form delivered to Wells Fargo on the date hereof, the "RCBA Agreement") and (ii) the proceeds of not less than $200,000,000 of subordinated bridge financing (the "Bridge Financing"; which term shall include the Rollover Notes described in the MS & Co. Letter (as defined below)) made available to the Company pursuant to that certain letter dated May 3, 1999 between the Company and Morgan Stanley & Co. Incorporated (said letter, in the form delivered to Wells Fargo on the date hereof, the "MS & Co. Letter") or, in lieu thereof, the proceeds of not less than $200,000,000 of new senior subordinated debt securities of Company (the "Permanent Financing"), will be used to (a) pay the consideration for the Shares, (b) refinance existing senior indebtedness of the Company and DMG in an aggregate maximum amount of not more than $450,000,000, and (c) pay fees and expenses in connection with the Acquisition and the related financings in an aggregate maximum amount of approximately $40,000,000. You have further advised us that the Revolving Credit Facility will also be used to provide for the working capital requirements and other corporate purposes of the Company and its subsidiaries. You agree to use your best efforts to assist Wells Fargo in forming the syndicate and ensure a syndication satisfactory to us. This assistance will be accomplished by a variety of means, including, but not limited to, direct contact prior to completion of the syndication between your senior management and prospective Lenders. You further agree to refrain from any activity in the bank loan syndication market, other than with respect to the Senior Facilities, for a period from the date you sign this letter until the Senior Facilities are closed and funded unless otherwise agreed to by Wells Fargo. Wells Fargo shall be entitled, after consultation with you, to change the structure, terms, tranching, pricing or amounts of any or all of the facilities comprising the Senior Facilities (so long as the aggregate amount of the Senior Facilities is not reduced) as set forth in Annex A if Wells Fargo determines that such changes are necessary in order to ensure a successful syndication. The agreement in this paragraph shall survive the closing of the Senior Facilities until a successful syndication of all of the Senior Facilities has occurred. We have reviewed certain historical and pro forma financial statements of the Company and DMG and their respective subsidiaries and have met with representatives of and members of the management of the Company and DMG regarding the transactions contemplated hereby. In the event that any information previously disclosed to us is inaccurate, incomplete or misleading in any material respect, or any new information or additional developments concerning previously disclosed information is disclosed to us which has or is likely to have (in our reasonable judgment) a material adverse effect on the business, operations, properties, assets, liabilities, financial condition or prospects of the Company and its subsidiaries, taken as a whole, or DMG and its subsidiaries, taken as a whole, we may, in our sole discretion, suggest alternative structures, terms, tranching, pricing or amounts of any or all of the facilities 2 comprising the Senior Facilities that ensure adequate protection for the Lenders or decline to participate in the proposed financing. In addition, Wells Fargo's commitment is subject to the accuracy and completeness of the Information (as defined below) and the absence of any adverse change in the Projections (as defined below) delivered to Wells Fargo on the date hereof, our satisfaction with the structure of the Acquisition (the structure of the Acquisition described in the Merger Agreement is hereby deemed satisfactory), and the satisfaction of the conditions set forth in Annex A which are to be set forth in the definitive documentation relating to the Senior Facilities. The Company hereby represents that, based on its review and analysis, to its knowledge (i) all information, other than Projections, which has been or is hereafter made available to Wells Fargo or the other Lenders by the Company or DMG or any of its representatives in connection with the transactions contemplated hereby (the "Information"), as supplemented as contemplated by the next sentence, is (or will be, in the case of Information made available after the date hereof) complete and correct in all material respects and does not (or will not, as the case may be) contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not materially misleading in light of the circumstances under which such statements were or are made, and (ii) all financial projections concerning the Company and DMG or any of their respective subsidiaries that have been or are hereafter made available to Wells Fargo or the other Lenders by the Company, DMG or any of their representatives in connection with the transactions contemplated hereby (the "Projections") have been (or will be, in the case of Projections made available after the date hereof) prepared in good faith based upon reasonable assumptions (it being understood that the Projections are subject to significant uncertainties and contingencies many of which are beyond the control of the Company and that no assurance can be given that the Projections will be realized). The Company agrees to supplement the Information and the Projections prior to the closing date so that the representation and warranty in the preceding sentence is correct on the closing date. In arranging and syndicating the Senior Facilities, Wells Fargo will be using and relying on the Information and the Projections without independent verification thereof. The representations and covenants contained in this paragraph shall remain effective until a definitive financing agreement is executed and thereafter the disclosure representations contained herein shall be superseded by those contained in such definitive financing agreement. The Company shall pay the reasonable costs and expenses (including the reasonable fees and expenses of counsel to Wells Fargo, reasonable professional fees of consultants and other experts and reasonable out-of-pocket expenses of Wells Fargo, including, without limitation, syndication expenses) arising in connection with the preparation, execution and delivery of this letter and the definitive financing agreements and the syndication of the Senior Facilities. The Company further agrees to indemnify and hold harmless each of the Lenders (including Wells Fargo) and each director, officer, employee, agent, attorney and affiliate thereof (each an "indemnified person") from and against any losses, claims, damages, liabilities or other expenses to which a Lender or such indemnified persons may become subject, insofar as such losses, claims, damages, liabilities (or actions or other proceedings commenced or threatened in respect thereof) or other expenses arise out of or in any way relate to or result from the actions of the Company, DMG or any of their respective affiliates in connection with the Acquisition, any of the statements contained in this letter or relating to the extension of the financing contemplated by this letter, or any use or intended use of the proceeds of any of the loans and 3 other extensions of credit contemplated by this letter, and to reimburse each of the Lenders and each indemnified person for any reasonable legal or other expenses incurred in connection with investigating, defending or participating in any such investigation, litigation or other proceeding (whether or not any such investigation, litigation or other proceeding involves claims made between the Company or any third party and such Lender or any such indemnified person, and whether or not such Lender or any such indemnified person is a party to any investigation, litigation or proceeding out of which any such expenses arise); provided, however, that the indemnity contained herein shall not apply to the - -------- ------- extent that such losses, claims, damages, liabilities or other expenses result from the bad faith, gross negligence or willful misconduct of such Lender or indemnified person. The obligations to pay reasonable fees, costs and expenses, to indemnify each Lender and such indemnified persons and to pay such legal and other expenses shall remain effective until the initial funding under a definitive financing agreement and thereafter the indemnification and expense reimbursement obligations contained herein shall be superseded by those contained in such definitive financing agreement. Neither Wells Fargo nor any other Lender shall be responsible or liable to any other party or any other person for consequential damages which may be alleged as a result of this letter. The foregoing provisions of this paragraph shall be in addition to any rights that any Lender or any indemnified person may have at common law or otherwise. This letter is confidential and shall not be disclosed by you to any person other than your accountants, attorneys and other advisors, and to Merger Sub, the other subsidiaries of the Company, DMG and its subsidiaries, RCBA, Morgan Stanley Dean Witter, the Securities and Exchange Commission, other parties or participants referenced in this letter or that are parties to the transactions contemplated hereby, and their respective accountants, attorneys and other advisors, and as appropriate in connection with any offering memorandum, proxy statement, rights book, or other similar document, and then, except with respect to public filings, only on a confidential basis and in connection with the Acquisition and the related transactions contemplated herein. Additionally, you may make such disclosures of this letter as are required by law or judicial process or as may be required or appropriate in response to any summons or subpoena or in connection with any litigation; provided that you will use your -------- best efforts to notify us of any such disclosure prior to making such disclosure. Our offer will terminate on May 7, 1999, unless on or before that date you sign and return an enclosed counterpart of this letter together with an executed copy of the accompanying letter concerning certain fee arrangements. The Senior Facilities referred to herein shall in no event be available unless the DMG Tender Offer has been consummated on or prior to September 30, 1999. This letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York. This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 4 We appreciate having been given the opportunity by you to be involved in this transaction. Very truly yours, WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Peter Gruebele ---------------------------------- Name: Peter Gruebele Title: Vice President AGREED AND ACCEPTED this 5th day of May, 1999. URS CORPORATION By: /s/ Kent Ainsworth --------------------------- Name: Kent P. Ainsworth Title: Executive Vice President and Chief Financial Officer 5 EXHIBIT A URS CORPORATION $550,000,000 SENIOR SECURED CREDIT FACILITIES SUMMARY OF TERMS AND CONDITIONS All terms defined in the financing letter to which this Summary of Terms is attached and not otherwise defined herein shall have the same meaning when used herein. BORROWER: URS Corporation ("Borrower"). GUARANTORS: All direct and indirect domestic subsidiaries of Borrower having $250,000 (or such higher figure as may be agreed to by Agent and Borrower) or more in income. FACILITIES: A $100,000,000 senior secured revolving credit facility ("Revolver"). A portion of the Revolver will be available as a subfacility for standby and commercial letters of credit and a portion of the Revolver will be available as a subfacility for loans denominated and payable in Sterling. A $250,000,000 senior secured term loan ("Term Loan A"). A $100,000,000 senior secured term loan ("Term Loan B"). A $100,000,000 senior secured term loan ("Term Loan C" and, together with Term Loan A and Term Loan B, the "Term Loans"). AGENT AND ARRANGER: Wells Fargo Bank, National Association ("Wells Fargo"). LENDERS: Wells Fargo and a group of financial institutions and other accredited investors mutually acceptable to Borrower and Wells Fargo. MATURITY: Revolver: Six years from the date of the satisfaction of the conditions precedent set forth below (the "Closing Date"). Term Loan A: Six years from the Closing Date. Term Loan B: Seven years from the Closing Date. Term Loan C: Eight years from the Closing Date. 1 AMORTIZATION: The Term Loans will be payable in quarterly principal installments, beginning with the first full fiscal quarter following the Closing Date, according to the following grid:
YEAR TERM LOAN A TERM LOAN B TERM LOAN C ------------------------------------------------------------------- 1 5% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 2 0% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 3 5% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 4 0% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 5 5% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 6 5% 1% of initial 1% of initial commitment commitment ------------------------------------------------------------------- 7 Remaining 1% of initial principal commitment ------------------------------------------------------------------- 8 Remaining principal -------------------------------------------------------------------
Any outstanding loans under the Revolver will be payable, and all letters of credit will expire, on the sixth anniversary of the Closing Date. PURPOSE: The proceeds of the Term Loans, up to $25,000,000 of the Revolver and a portion of the letter of credit sublimit of the Revolver (to be determined), together with (i) not less than $100,000,000 in cash preferred equity contributions to Borrower by RCBA Strategic Partners, L.P. ("RCBA") and/or its affiliates and (ii) the proceeds of not less than $200,000,000 of the Bridge Financing or the Permanent Financing, will be made available on the Closing Date and shall be used to (a) pay the consideration for the Shares pursuant to the DMG 2 Tender Offer and the Merger, including any appraisal rights (the "Acquisition Consideration"), in an aggregate maximum amount of approximately $305,00,000, (b) refinance existing senior indebtedness of Borrower and DMG in an aggregate maximum amount of not more than $450,000,000, and (c) pay fees and expenses in connection with the Acquisition and the related financings in an aggregate maximum amount of approximately $40,000,000. A portion of Term Loan A (such portion being the "Delayed-Draw Term Loan") will be available on a delayed-draw basis, for a period not to exceed 180 days after the Closing Date to pay that portion of the Acquisition Consideration that becomes due and payable upon the consummation of the Merger. The Revolver will also be available for the working capital requirements and general corporate purposes of Borrower and its subsidiaries, for the payment of amounts required to be paid to dissenting shareholders and, subject to a sublimit to be agreed upon, to issue commercial letters of credit and standby letters of credit to support workers' compensation contingencies and for other corporate purposes to be agreed upon. During the period from the Closing Date to the consummation of the Merger, outstanding loans under the Revolver will not exceed the sum of (i) the principal amount of the Revolver used to purchase shares on the Closing Date, (ii) $25,000,000, and (iii) letters of credit (in an amount to be determined). INTEREST RATES: Borrower will have the following initial pricing options: Term Loan A - Base Rate plus 1.75% LIBOR plus 2.75% Term Loan B - Base Rate plus 2.25% LIBOR plus 3.25% Term Loan C Base Rate plus 2.50% LIBOR plus 3.50% 3 Revolver - Base Rate plus 1.75% LIBOR plus 2.75% Adjusted Domestic Sterling Rate plus 2.75% Effective with the receipt of financial statements for the fiscal quarter ending twelve months after the Closing Date, interest rate margins shall be determined based upon the ratio of Funded Debt to four-quarter trailing pro-forma EBITDA according to a grid to be agreed upon. Base Rate on any day means the higher of (i) the Prime Rate in effect on that day, and (ii) the Federal Funds Rate in effect on that day as announced by the Federal Reserve Bank of New York, plus 0.50%. Prime Rate means at any time the rate of interest most recently announced within Wells Fargo at its principal office in San Francisco as its Prime Rate, with the understanding that Wells Fargo's Prime Rate is one of its base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. Each change in the Prime Rate will be effective on the day the change is announced within Wells Fargo. LIBOR for an interest period means the average of the rate of interest at which deposits (approximately equal to the amount of the requested loan and for the same term as the interest period) are offered to Agent in the London interbank Eurodollar market for delivery on the first day of the interest period, rounded upwards if necessary to the next higher 1/16%, as adjusted for reserve requirements. Adjusted Sterling Rate for an interest period means the rate per annum displayed by Reuters at which Sterling is offered to Agent in the London interbank market as determined by the British Bankers' Association rounded upwards if necessary to the next higher 1/16%. 4 Interest on Base Rate loans will be payable quarterly. Interest on LIBOR and Sterling loans will be payable at the end of each interest period selected by Borrower (one, two, three or six months), and at the end of three months in the case of a six-month interest period. Interest on all loans will also be payable upon their conversion to another pricing option, prepayment and maturity. All interest on Base Rate Loans will be computed on the basis of actual days elapsed in a 365/366- day year and all other interest will be computed on the basis of actual days elapsed in a 360-day year. INTEREST RATE PROTECTION: Borrower will enter into interest rate protection agreements satisfactory to Agent within 90 days after the Closing Date, such that the effective interest rate on at least 50% of the Term Loans is fixed for the lesser of three years or the extinguishment of the Term Loans. COMMITMENT FEE: Initially, 0.50% per annum on the unused portion of the Revolver and the Delayed Draw Term Loan, payable quarterly in arrears and accruing from the Closing Date. Effective with the receipt of financial statements for the fiscal quarter ending twelve months after the Closing Date, the commitment fee shall be determined based upon the ratio of Funded Debt to four-quarter trailing pro- forma EBITDA according to a grid to be agreed upon. All fees will be computed on the basis of actual days elapsed in a 365/366-day year. SECURITY: The Senior Facilities will be secured by a first priority, perfected security interest in all existing and after-acquired personal property of Borrower (including 100% of the stock of all domestic subsidiaries of Borrower having $250,000 (or such higher figure as may be agreed to by Agent and Borrower) or more in income and 65% of the stock of all foreign subsidiaries of Borrower having $250,000 (or such higher figure as may be agreed to by Agent and Borrower) or more in income unless the pledge of the stock of any such foreign 5 subsidiary is reasonably likely to create adverse tax consequences) and all after-acquired material fee interests in real property of Borrower. A negative pledge will apply to all other assets, subject to agreed upon exceptions. Each guaranty of a domestic subsidiary will be secured by a first priority, perfected security interest in all existing and after-acquired personal property of such subsidiary (including 100% of the stock of all its domestic subsidiaries having $250,000 (or such higher figure as may be agreed to by Agent and Borrower) or more in income and 65% of the stock of all its foreign subsidiaries having $250,000 (or such higher figure as may be agreed to by Agent and Borrower) or more in income unless the pledge of the stock of any such foreign subsidiary is reasonably likely to create adverse tax consequences) and all after-acquired material fee interests in real property of such subsidiary. A negative pledge will apply to all other assets, subject to agreed upon exceptions. Intercompany debt of guarantors shall be evidenced by notes which are subordinated to the Senior Facilities and pledged to Lenders. During the period from the Closing Date to the consummation of the Merger, the Senior Facilities will be secured by a first priority, perfected security interest in 100% of the stock of Merger Sub and, to the extent permitted by applicable law, including margin regulations, the stock of DMG acquired in the DMG Tender Offer. In addition, during such period the Senior Facilities will be secured by a first priority, perfected security interest in the promissory note executed by DMG in favor of Borrower and an assignment of the collateral securing such note. NOTICES OF BORROWING: Similar to existing credit agreement. MINIMUM BORROWING: Similar to existing credit agreement. COMMITMENT REDUCTION OR CANCELLATION: Similar to existing credit agreement. 6 OPTIONAL PREPAYMENT: Similar to existing credit agreement. REQUIRED PREPAYMENT FROM EXCESS CASH FLOW: Borrower will prepay a portion of the Term Loans within 105 days after the end of each fiscal year in an amount equal to (i) 50% of its Excess Cash Flow for any Fiscal Year for which the Leverage Ratio is less than 4.0x and (ii) 75% of its Excess Cash Flow for any other fiscal year. Excess Cash Flow shall be defined as EBITDA minus capital expenditures (net of related financing) , acquisition expenses (net of related financing), cash taxes, cash interest and scheduled debt maturities. These prepayments will be in addition to the scheduled periodic payments on the Term Loans described above, and will be applied to reduce all such scheduled payments pro rata. OTHER REQUIRED PREPAYMENTS: Similar to existing credit agreement; provided, however, that the proceeds of the Permanent Financing may be used to prepay the Bridge Financing; provided further that 50% of the proceeds of any equity issuance shall be used to prepay the Term Loans. APPLICATION OF REQUIRED PREPAYMENTS: All such amounts shall be applied first to the prepayment of the Term Loans and thereafter to the prepayment of the Revolver and the reduction of commitments thereunder. All such mandatory prepayments of the Term Loans shall be applied ratably to the Term Loans and shall be applied on a pro rata basis to all remaining scheduled installments thereof. Notwithstanding the foregoing, in the case of any mandatory prepayment to be applied to Term Loan B or Term Loan C, the holders thereof shall have the opportunity to waive the right to receive the amount of such mandatory prepayment. In the event any such holders elect to waive such right, the amount that would otherwise have been applied as a mandatory prepayment of Term Loan B 7 or Term Loan C, as the case may be, shall be applied to the prepayment of Term Loan A. INCREASED COSTS OR REDUCED RETURNS: Similar to existing credit agreement. CONDITIONS PRECEDENT TO CLOSING AND INITIAL BORROWING: The obligations of Lenders to make the initial loan will be subject to satisfaction of the following conditions precedent (with scope exceptions and qualifications to be agreed upon) and such others as are mutually agreeable to Agent and Borrower: 1) The definitive documentation evidencing the Senior Facilities shall be prepared by counsel to Agent and shall be customary for transactions of this type. 2) Lenders shall have received (i) audited financial statements for Borrower and its subsidiaries for the fiscal year ended October 31, 1998 and for DMG and its subsidiaries for the fiscal year ended March 26, 1999; (ii) unaudited financial statements of Borrower and its subsidiaries for the fiscal quarter ended January 31 and April 30, 1999; (iii) a statement of sources and uses of funds regarding the Acquisition; (v) final projected financial statements (including balance sheets and statements of operations, stockholders' equity and cash flow) of Borrower and its subsidiaries for the seven-year period after the Closing Date; and (vi) a pro forma opening balance sheet for Borrower and its subsidiaries as of the Closing Date, all of the foregoing to be in form and substance satisfactory to Agent. 3) Proforma combined trailing four-quarter EBITDA as of April 30, 1999, after giving effect to the Acquisition, of not less than $143,000,000. Proforma combined trailing four- quarter EBITDA means the sum of (i) actual URS EBITDA for the 12-month period ending April 30, 1999 plus (ii) actual 8 DMG EBITDA for the 6-month period ending March 26, 1999 multiplied by 2. 4) Since October 31, 1998, there shall have occurred no material adverse change in the business, operations, properties, assets, liabilities, financial condition or prospects of Borrower and its subsidiaries, taken as a whole. Since December 25, 1998, there shall have occurred no material adverse change in the business, operations, properties, assets, liabilities, financial condition or prospects of DMG and its subsidiaries, taken as a whole (except for those items included in the respective disclosure schedule to the Merger Agreement). 5) The corporate, capital and ownership structure of Borrower and the structure utilized to consummate the Acquisition (including the DMG Tender Offer and the Merger) shall be as set forth in the Merger Agreement, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of Agent and the Merger Agreement shall be in full force and effect. 6) On or prior to the Closing Date, Borrower shall have received not less than $100,000,000 in cash proceeds from the sale of preferred stock to RCBA and/or its affiliates (the "RCBA Equity") on the terms and conditions set forth in the RCBA Agreement. 7) On or prior to the Closing Date, Borrower shall have received not less than $200,000,000 of proceeds of the Bridge Financing in accordance with the MS & Co. Letter or the Permanent Financing, which Permanent Financing shall be in form and substance satisfactory to Agent. 9 8) Merger Sub shall have acquired not less than the Minimum Shares pursuant to the DMG Tender Offer, and all other aspects of the DMG Tender Offer shall have been consummated pursuant to the Merger Agreement, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of Agent. 9) The Shares purchased in the DMG Tender Offer shall have been purchased with the proceeds of first, the RCBA Equity, second, the Bridge Financing or the Permanent Financing, third, Term Loan C, fourth, Term Loan B, fifth, Term Loan A, and sixth, the Revolver. 10) Agent shall have received satisfactory evidence that the fees and expenses to be incurred in connection with the Acquisition and the related financings will not exceed $40,000,000. 11) All material governmental and third party approvals necessary or advisable in connection with the Acquisition, the financings contemplated thereby and the continuing operations of the business of Borrower and DMG and their respective subsidiaries shall have been obtained and be in full force and effect and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose material adverse conditions on the Acquisition or the financing thereof. 12) Agent, for the benefit of Lenders, shall have been granted a first priority perfected security interest in all assets to the extent described above under the heading "Security." 10 13) No violation of law, including Regulation U, shall occur as a result of the Closing. 14) Agent shall have received a certificate of the chief financial officer of Borrower, in form and substance satisfactory to Agent, supporting the conclusions that, after giving effect to the Acquisition, and the related transactions contemplated hereby, Borrower and its subsidiaries, taken as a whole, and DMG and its subsidiaries, taken as a whole, will not be insolvent or be rendered insolvent by the indebtedness incurred in connection therewith, or be left with unreasonably small capital with which to engage in its businesses, or have incurred debts beyond its ability to pay such debts as they mature. 15) DMG shall have repaid in full and terminated all commitments relating to its credit facility with CIBC/Oppenheimer and Borrower shall have repaid in full and terminated all commitments relating to its credit facility with Agent and Agent shall have received evidence that all liens on the assets of DMG and its subsidiaries related thereto have been terminated or released, in each case on terms satisfactory to Agent. 16) Receipt of customary certificates, charter documents, resolutions, insurance certificates, uniform commercial code searches and opinions of counsel. 17) All representations and warranties are true and correct in all material respects. 18) No event of default or potential default exists or will result from the loan. 19) Absence of any disruption or change in the financial, banking or capital markets or in the regulatory environment that in the good faith judgment of Agent could materially 11 and adversely affect the syndication of the Senior Facilities. CONDITIONS PRECEDENT TO FUNDING OF DELAYED-DRAW TERM LOAN: The obligations of Lenders to make the Delayed- Draw Term Loan will be subject to satisfaction of conditions precedent consistent with transactions of this type, including but not limited to 1) The initial loans shall have been made in accordance with the conditions precedent to the initial borrowing set forth above. 2) The Merger shall have been consummated pursuant to the Merger Agreement, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of Agent. Upon consummation of the Merger, all of the shares of DMG shall be owned Borrower. 3) After giving effect to the consummation of the Merger, the aggregate Acquisition Consideration shall not exceed $305,000,000. REPRESENTATIONS AND WARRANTIES: Similar to existing credit agreement. COVENANTS: Similar to existing credit agreement. The principal financial covenants expected to be included in the Credit Agreement are indicated below. Financial terms and calculations will be in accordance with generally accepted accounting principles. All covenants will apply to Borrower and its subsidiaries. Covenants will be tested at the end of each fiscal quarter unless otherwise stated and be certified as to correctness by the chief financial officer. Quick Ratio: Ratio to be determined. ----------- 12 Leverage Ratio: The ratio of Funded Debt to -------------- EBITDA shall at no time exceed a level to be negotiated with step downs to be negotiated. Fixed Charge Coverage Ratio: The ratio of (i) --------------------------- EBITDA less capital expenditures and cash taxes to (ii) interest plus principal shall at no time exceed a level to be negotiated. Minimum EBITDA: EBITDA shall at no time be less -------------- than a level to be negotiated with step ups to be negotiated. EVENTS OF DEFAULT: Similar to existing credit agreement. ASSIGNMENTS AND PARTICIPATIONS: A Lender may grant, to an Eligible Assignee, assignments or participations in all or any portion of its loans or commitments under the Senior Facilities. Assignments will be in minimum amounts of $5,000,000. FEES, EXPENSES AND INDEMNIFICATION: Whether or not the Credit Agreement is executed, Borrower will (i) pay all reasonable fees and expenses of Agent (including fees and expenses of outside counsel and allocated costs of internal counsel) relating to preparation of the loan documents or to the Senior Facilities, and (ii) indemnify Agent, prospective Lenders and their respective directors, officers and employees against all claims asserted and losses, liabilities and expenses incurred in connection with the Senior Facilities except to the extent resulting from the bad faith, gross negligence or willful misconduct of the indemnitee. REQUIRED LENDERS: Two or more Lenders holding at least 51% of outstanding loans and commitments under the Senior Facilities. GOVERNING LAW: State of New York. CONFIDENTIALITY: Agent and each Lender agrees not to disclose any non-public information obtained in connection with the transactions contemplated by this letter; provided, however, that disclosure of such information may be made to affiliates of such 13 Lender or Agent in connection with the transactions contemplated herein, to prospective Lenders and Eligible Assignee (provided that such Eligible Assignees shall have agreed by accepting and retaining such information to the terms of this confidentiality agreement) and to their respective accountants, attorneys and other advisors, or as required by any governmental agency having appropriate jurisdiction or pursuant to legal process; provided that, unless specifically prohibited by the applicable law or court order, Agent and each Lender shall notify Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Agent or Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall Agent or any Lender be obligated or required to return any material furnished by Borrower, DMG, or any of their subsidiaries. - ------------------------------------------------------------------------------- 14 EX-2.3 4 COMMITMENT LETTER 05/03/99 FROM MORGAN STANLEY MORGAN STANLEY & CO. INCORPORATED 1585 Broadway New York, New York 10036 May 3, 1999 URS Corporation 100 California Street, Suite 500 San Francisco, CA 94111-4529 Attention: Mr. Kent P. Ainsworth Executive Vice President and Chief Financial Officer Dear Mr. Ainsworth: We understand that URS Corporation, a Delaware corporation ("URS"), or one or its subsidiaries will acquire (the "Acquisition") all of the issued and outstanding shares of Dames & Moore Group, a Delaware corporation (the "Company"). As we understand the Acquisition, URS, together with its wholly- owned subsidiary ("Merger Sub") will, pursuant to an Agreement and Plan of Merger to be entered into with the Company (the "Acquisition Agreement"), offer to acquire through a tender offer (the "Tender Offer") all of the issued and outstanding shares of the Company's capital stock (the "Company Stock") for a price of $16 per share, in cash. The Acquisition will be financed through (i) a cash equity investment by Richard C. Blum & Associates, L.P. ("RCBA") in URS of not less than $100 million (the "Equity Contribution"), (ii) URS" issuance and sale on the date on which the Tender Offer is consummated (the "Closing Date") of senior subordinated increasing rate notes in an aggregate principal amount of $200 million (the "Bridge Notes") having substantially the terms set forth in Exhibit A hereto (such Exhibit, together with Exhibit B hereto, collectively, the "Term Sheet") (unless the Permanent Financing (as defined below) has been consummated in connection with the Acquisition), and (iii) an aggregate amount of $550 million in bank borrowings comprised of $450 million in term loans and $100 million in a revolving credit facility (the "Senior Bank Financing") with Wells Fargo Bank, N.A. ("Wells Fargo") and certain other financial institutions. As promptly as reasonably practicable after the closing of the Tender Offer, Merger Sub will consummate a merger with the Company in which the Company will be the surviving corporation and a wholly-owned subsidiary of URS (the "Merger"). As soon as reasonably practicable after the consummation of the Acquisition, URS will issue $200 million in long-term, fixed-rate, unsecured, subordinated debt securities (the "Permanent Financing"), the cash proceeds of which will be used to redeem the Bridge Notes or any outstanding Rollover Notes (as defined herein). If by the maturity date of the 2 Bridge Notes the Permanent Financing shall not have been issued, or shall not have been issued in an amount sufficient to repay the principal of and accrued and unpaid interest on the Bridge Notes, such unpaid principal will be satisfied by the issuance to the holders of the Bridge Notes of debt securities of URS having substantially those terms set forth in Exhibit B hereto (the "Rollover Notes"). The Acquisition, the refinancing of certain existing debt of URS and the Company, and the debt and equity financings thereof described above are hereinafter referred to as the "Transaction". Based upon and subject to the foregoing and as further provided below and in the Term Sheet, Morgan Stanley & Co. Incorporated ("MS") hereby commits to purchase, or to cause one or more of its affiliates to purchase, on the Closing Date up to $200 million of the Bridge Notes, in each case on the terms and subject to the conditions set forth in the Term Sheet. The term "Purchasers" as used in this Commitment Letter and the Term Sheet shall mean MS, one or more of MS's assignees and the financial institutions referred to in the succeeding paragraph who actually purchase or undertake the commitment to purchase the Bridge Notes referred to herein. Unless the Purchasers' commitment hereunder shall have been terminated in accordance with the terms of this Commitment Letter, the Purchasers shall have the exclusive right to purchase Bridge Notes or otherwise provide other bridge or interim financing in connection with the Acquisition and neither you nor the Company shall, directly or indirectly, enter into any bridge or other interim financing in connection with the Acquisition except for the sale of Bridge Notes to the Purchasers. You hereby represent and covenant that based on your review and analysis, to the best of your knowledge, (a) all information other than Projections (as defined below) that has been or is hereafter made available to the Purchasers by you or your representatives, advisors or affiliates in connection with the Transaction (the "Information") has been reviewed and analyzed by you in connection with the performance of your own due diligence and is, or in the case of Information made available after the date hereof will be, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact known to you and necessary to make the statements contained therein, in the light of the circumstances under which such statements were or are made, not misleading and (b) all financial projections concerning the Company that have been or are hereafter made available to the Purchasers by you or your representatives, advisors or affiliates in connection with the Transactions (the "Projections") have been or, in the case of Projections made available after the date hereof, will be prepared in good faith based upon reasonable assumptions (it being understood that the Projections are subject to significant uncertainties and contingencies, many of which are beyond your control, and that no assurance can be given that such Projections will be realized). You agree to supplement the Information and the Projections prior to the termination of the Purchasers' commitment hereunder so that the representation and warranty made in the preceding sentence is correct as of such date. The Purchasers will be using and relying on the Information and the Projections. The representations and covenants contained in this paragraph shall remain effective until a definitive financing agreement with respect to the Bridge Notes (the "Financing Documentation") is executed and thereafter the disclosure representations contained herein shall 3 be terminated and of no further force and effect. Those matters that are not covered or made clear herein or in the Term Sheet are subject to mutual agreement of the parties. This Commitment Letter may not be amended or modified, and no waiver will be effective, except by a writing duly executed by the parties hereto. Fees payable to MS in connection with the Bridge Notes and the Permanent Financing shall be payable as described in the fee letter (the "Fee Letter") executed simultaneously herewith. MS reserves the right, prior to or after execution of the definitive documentation for the Bridge Notes, to syndicate all or part of its commitment for the Bridge Notes to one or more financial institutions that will become parties to such definitive documentation pursuant to a syndication to be managed by MS, and the commitment of MS hereunder shall be reduced as and when binding commitments are received from such financial institutions; provided that (i) MS shall consult with you in identifying such financial institutions and (ii) the financial ability of any such institution to purchase the respective Bridge Notes shall be reasonably acceptable to you. MS may commence syndication efforts promptly after the execution of this letter by you and you agree actively to assist MS in achieving a syndication that is satisfactory to you and MS. Such syndication will be accomplished by a variety of means, including direct contact during the syndication between senior management and advisors of URS and the proposed syndicate members. To assist MS in its syndication efforts, you hereby agree (a) to provide and cause your advisors to provide MS and the other syndicate members upon request with all information reasonably deemed necessary by MS to complete syndication, including but not limited to information and evaluations prepared by you and your advisors or on your behalf relating to the Transaction, (b) to assist MS upon request in the preparation of an Information Memorandum to be used in connection with the syndication of the Bridge Notes and (c) to make available your senior officers and representatives, in each case from time to time and upon reasonable notice to attend and make presentations regarding the business and prospects of URS at a meeting or meetings of lenders or prospective lenders. In addition, you agree that, except for the Senior Bank Financing and any refinancing, renewal or increase thereof, no financing for you or any of your subsidiaries or affiliates shall be syndicated, privately placed or publicly offered to the extent that such financing could have an adverse effect on the syndication of the Bridge Notes (it being understood that lease financings in the ordinary course of business shall not be prohibited by this sentence). By your execution of this Commitment Letter, you hereby retain MS to act as exclusive agent or sole underwriter for the Permanent Financing (including any other financing that will refinance the Bridge Notes or Rollover Notes or other debt financing the proceeds of which are used to fund in part the Acquisition (excluding the Senior Bank Financing)), and MS agrees to act as such exclusive agent or sole underwriter pursuant to the terms of an underwriting or placement agreement and related transaction documents (collectively, the "Purchase Agreement"). Neither you nor the Company shall, directly or indirectly (except through MS or as otherwise approved by MS), sell or offer to sell any debt security for cash or property in 4 connection with the financing of the Acquisition or any related refinancings (other than (a) loans incurred under and pursuant to the Senior Bank Facility, (b) the Equity Contribution and (c) the Bridge Notes) during the term of our engagement for the Permanent Financing. Notwithstanding anything to the contrary contained herein or any oral representations or assurances previously or subsequently made by the parties, this Commitment Letter is not intended to be and does not constitute a commitment or obligation by MS to act as an underwriter or placement agent in connection with any offering or sale of securities (other than MS's obligation to purchase the Bridge Notes as provided herein); and no liability or obligation on the part of MS to proceed with or participate in an offering of securities by you or the Company shall be created or exist unless or until MS has executed and delivered a Purchase Agreement and then only in accordance with the terms and conditions set forth therein (other than MS's obligation to purchase the Bridge Notes as provided herein). The engagement of MS hereunder for the Permanent Financing may be terminated (i) by MS at any time, or (ii) by you after the earliest to occur of (1) the termination of the Acquisition Agreement in accordance with its terms, (2) the use of the proceeds of the sale of the Permanent Financing contemplated by this Commitment Letter or (3) 18 months after the consummation of the Acquisition, by prior written notice thereof to MS; provided, however, that any fees earned prior to the date of such termination shall survive such termination. Upon request from MS, URS shall take reasonable steps to assist MS in preparing an offering document and shall participate in due diligence and marketing efforts (including a road show) so that, as soon as reasonably practicable after such request, the Permanent Financing can be completed on such terms and conditions as are customary for similar high-yield financings in light of the then-prevailing market conditions. In partial consideration for our commitment hereunder URS hereby agrees to indemnify and hold harmless the Purchasers, each of the members or shareholders or other investors or holders of interests in, or other transferees of the Purchasers (collectively, "Additional Investors"), any affiliates of the Purchasers and the Additional Investors, and each other person, if any, controlling the Purchasers or any Additional Investors and any of their respective affiliates, and any of the directors, officers, agents and employees of any of the foregoing (each, an "Indemnified Person") from and against any losses, claims, damages or liabilities related to, arising out of or in connection with the matters that are the subject of the commitment made hereunder (including, without limitation, any use made or proposed to be made by URS of the proceeds from the Transaction) or in connection with any aspect of the Transaction (collectively, the "Subject Matter"), and will reimburse any Indemnified Person for all expenses (including fees and expenses of counsel) as they are incurred in connection with investigating, preparing, pursuing or defending any action, claim, suit, investigation or proceeding related to, arising out of or in connection with the Subject Matter, whether or not pending or threatened and whether or not such action, claim, suit or proceeding is brought by you, your subsidiaries, creditors or any Indemnified Person, or any Indemnified Person is otherwise a party thereto, and whether or not the Transaction is consummated. URS will not, however, be responsible for any 5 losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith, willful misconduct or gross negligence of any Indemnified Person. URS also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to URS for or in connection with the Subject Matter, except for any such liability for losses, claims, damages or liabilities incurred by you that are finally judicially determined to have resulted from the bad faith, willful misconduct or gross negligence of such Indemnified Person and except for direct damages (but not consequential or punitive damages) incurred by you that are finally judicially determined to have resulted from the Purchasers' wrongful failure to purchase the Bridge Notes. URS will not, without the prior written consent of the Purchasers, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any action, claim, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes a full and unconditional release of each Indemnified Person from any liabilities arising out of such action, claim, suit or proceeding. If the indemnification provided for in the second preceding paragraph of this Commitment Letter is judicially determined to be unavailable (other than in accordance with the terms hereof) to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to herein, then, in lieu of indemnifying such Indemnified Person hereunder, URS agrees to contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (and expenses relating thereto) (i) in such proportion as is appropriate to reflect the relative benefits to URS on the one hand, and the Purchasers, on the other hand, of the Transaction or (ii) if the allocation provided by clause (i) is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of URS and the Purchasers, as well as any other relevant equitable considerations; provided that in no event shall the Purchasers' aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by them under this Commitment Letter. URS agrees to pay all reasonable legal and other out-of-pocket expenses of the Purchasers in connection with this Commitment Letter, the Financing Documentation and the other matters referred to herein, including travel costs, document production and other expenses of this type, and the fees of outside counsel and fees of other professional advisors, whether or not the Acquisition is consummated or any Bridge Notes are actually issued. In addition, you hereby agree to pay when and as due the fees described in the Fee Letter. This commitment will expire at the earliest of (a) 5:00 p.m. New York City time on May 7, 1999 and (b) the execution of the Acquisition Agreement by all parties thereto, unless accepted prior to such time and, if accepted prior to such time, shall expire at the earliest of (i) 6 consummation of the Acquisition or another transaction or series of transactions in which URS or any of its affiliates acquires, directly or indirectly, any stock or assets of the Company, (ii) termination of the Acquisition Agreement, (iii) consummation of the Permanent Financing and (iv) 5:00 p.m. New York City time on September 30, 1999, if the closing of the Tender Offer shall not have occurred by such time. No such termination shall affect your obligations under each of the five immediately preceding paragraphs, including the obligation to pay all fees set forth in the Fee Letter, which shall remain in full force and effect regardless of any termination or the completion of the Transaction. This Commitment Letter shall be governed by the laws of the State of New York. Any right to trial by jury with respect to any claim, action, suit or proceeding arising out of or contemplated by this letter is hereby waived and the parties hereto hereby submit to the non-exclusive jurisdiction of the federal and New York State courts located in the City of New York in connection with any dispute related to this letter and/or any matters contemplated hereby. This Commitment Letter is not assignable by you to any other person. This Commitment Letter and the Term Sheet (and the contents thereof) may not be disclosed to any other person except your accountants and attorneys in connection with the Acquisition and then only on a confidential basis and in connection with the Transaction; provided that coincidental with your execution of the Acquisition Agreement and delivery to the Board of Directors of the Company you may disclose this Commitment Letter to the Company and its advisors, RCBA and its advisors and Wells Fargo and its advisors and (ii) after your acceptance of this Commitment Letter, you may reference the existence of, or file, this Commitment Letter to the extent required in connection with any law or regulation (including any securities law or regulation), order or decree. This Commitment Letter is not intended to confer upon any person, other than the parties hereto, their successors hereunder and MS and its affiliates, any benefit or any legal or equitable right, remedy or claim hereunder. [The remainder of this page intentionally left blank.] 7 Please confirm that the foregoing is in accordance with your understanding by signing and returning to us an executed duplicate of this letter. Upon your acceptance hereof, this letter will constitute a binding agreement between us. MORGAN STANLEY & CO. INCORPORATED By: /s/ William Kourakos ------------------------------------------- Name: William Kourakos Title: Managing Director Agreed to and Accepted this 5th day of May, 1999 URS CORPORATION By: /s/ Kent Ainsworth -------------------------------- Title: Vice President and Chief Financial Officer EXHIBIT A --------- SENIOR SUBORDINATED INCREASING RATE NOTES: SUMMARY OF TERMS AND CONDITIONS/1/ Issuer: URS. Issue: Unsecured Senior Subordinated Increasing Rate Notes (the "Bridge Notes") issued pursuant to a Securities Purchase Agreement (the "Securities Purchase Agreement") between the Issuer and the Purchasers. Use of Proceeds: The proceeds of the Bridge Notes, along with borrowings under the term loan and revolving loan portions of the Senior Bank Financing and proceeds from the Equity Contribution, will be used (i) to finance the purchase price of the Acquisition (including any appraisal rights in connection therewith), (ii) to refinance certain existing debt of the Issuer and the Company, and (iii) to pay costs and expenses in connection with the Transaction. Principal Amount: Up to $200.0 million. Price: 100% of the principal amount. Interest Rate: Interest on the Bridge Notes shall be paid at the Applicable Bridge Note Interest Rate (as defined below) and payable quarterly in arrears. "Applicable Bridge Note Interest Rate" means the higher of the following, as determined as of the beginning of each three-month period: (i) three-month U.S. Dollar LIBOR (as determined from specified sources) plus 650 basis points and (ii) the - -------------------- /1/ Capitalized terms used but not defined herein are used as defined in the Commitment Letter (the "Commitment Letter") to which this Summary of Terms and Conditions is attached. highest yield on any of the 1-, 3-, 5- and 10-year direct obligations issued by the United States plus 600 basis points; provided that if the Bridge Notes are not retired in whole by the end of the first six months following the issuance date, the Applicable Bridge Note Interest Rate otherwise in effect will increase by 100 basis points and shall thereafter increase by an additional 50 basis points at the end of each subsequent three-month period for so long as the Bridge Notes are outstanding (the aggregate number of basis points by which the Applicable Bridge Note Interest Rate has so increased during the term of the Bridge Notes being the "Incremental Spread"); and provided further that (A) in no event shall the Applicable Bridge Note Interest Rate exceed 17.0% and (B) the amount of cash interest paid will be subject to a cap of 15.0%, with the excess (if any) of the Applicable Bridge Note Interest Rate over such interest rate cap to be paid in additional Bridge Notes. Maturity: One year from the date of issuance. Ranking: The Bridge Notes will be unsecured and senior to all subordinated indebtedness of the Issuer and will be pari passu with all other unsubordinated indebtedness of the Issuer except that they will be subordinated to the Senior Bank Financing and any refinancing or renewal thereof. Guarantees: Same guarantees as are provided to the lenders under the Senior Bank Financing (the "Senior Lenders") but the guarantees will be unsecured and senior to all subordinated indebtedness of the guarantor and will be pari passu with all other unsubordinated indebtedness of the guarantor, except that they will be subordinated to the guarantor's guarantee of the Issuer's obligations under the Senior Bank Financing or any refinancing or renewal thereof. Upon a release by the Senior Lenders of the guarantee by any subsidiary guarantor under the Senior Bank Financing, any guarantee by such subsidiary hereunder shall also be released. Mandatory Redemption: The Issuer will redeem the Bridge Notes at 100% of their principal amount plus accrued interest to the redemption date with (i) the net proceeds from the Permanent Financing, (ii) to the extent not required to prepay the Senior Bank Financing, the net proceeds from the issuance of any other debt or equity securities (with exceptions to be determined) and (iii) to the extent not required to prepay the A-2 Senior Bank Financing, the net proceeds from asset sales (with exceptions to be determined). Change-of-Control: The Issuer will redeem the Bridge Notes upon any change-of-control (to be defined in a mutually acceptable manner) of the Issuer at a redemption price of 101% of par plus accrued interest. Optional Redemption: The Bridge Notes will be callable, in whole or in part, upon not less than 10 days written notice, at the option of the Issuer, at any time at 100% of par plus accrued interest to the redemption date. Mandatory Exchange: If the Bridge Notes have not been previously redeemed in full for cash on or prior to maturity, the principal of the Bridge Notes outstanding at maturity shall, subject to certain conditions precedent, be satisfied at maturity through the issuance and delivery of the Rollover Notes described below in the attached term sheet (Exhibit B). Right to Resell Bridge Notes: The Purchasers shall have the absolute and unconditional right, consistent with applicable securities laws, to resell the Bridge Notes to one or more third parties, whether by transfer, assignment or participation. Conditions to Funding: The execution and closing of the Securities Purchase Agreement and the funding of the Bridge Notes will be subject to satisfaction of the following conditions precedent and such others that are mutually agreeable to the Issuer and the Purchasers: 1. The Tender Offer shall have been consummated (or shall be consummated coincidentally with the funding of the Bridge Notes) in accordance with the terms of the Acquisition Agreement (which shall be in full force and effect), without any material waiver or amendment not consented to by Purchasers committed to purchase in the aggregate at least a majority of the principal amount of the Bridge Notes (the "Required Purchasers") of any term, provision or condition set forth therein, and in compliance with all applicable laws (provided that (a) in excess of 50% (on a fully diluted basis) of the Company Stock has been tendered and not withdrawn pursuant to the Tender Offer and (b) the price for the Company A-3 Stock in the Tender Offer shall not be in excess of $16 per share), and the Purchasers shall be satisfied in their reasonable discretion that the restrictions in Section 203 of the Delaware General Corporation Law are not applicable to the purchase of the Company Stock or the Acquisition or that any conditions to avoiding the restrictions contained therein have been satisfied. The structure of the Transaction, including the tax, ERISA, accounting and other consequences thereof, and corporate and legal structure of the Issuer and the Company shall be reasonably satisfactory to the Required Purchasers to the extent that any portion of the corporate and legal structure of the Issuer or the Company or of the legal structure of the Transaction are not set forth in, or are materially different from, the respective portions of any such structure set forth in the term sheet attached to the letter dated May 3, 1999 between Wells Fargo and the Issuer with respect to the Senior Bank Financing, the draft Securities Purchase Agreement with respect to the Equity Contribution delivered to MS on May 2, 1999, or the May 2, 1999 draft of the Agreement and Plan of Merger among the Issuer, Merger Sub and the Company; provided that the portions of the corporate and legal structure of the Issuer and the Company and the legal structure of the Transaction set forth in such documents shall be deemed approved by the Required Purchasers. The senior management of the Issuer as in place on the date of the Commitment Letter shall have continued in their respective management positions. 2. The Company's Board of Directors shall have taken such actions in connection with its Stockholder Rights Agreement so that the Purchasers are satisfied that the rights arising thereunder are not applicable to the Tender Offer or the Merger. The Company's Board of Directors shall have approved the Tender Offer and the Acquisition and recommended that its shareholders tender their Company Stock pursuant to the Tender Offer, and such recommendation shall not have been withdrawn or qualified. A-4 3. The other financings and transactions contemplated to be consummated on the Closing Date, including without limitation (i) the closing of the Senior Bank Financing (and the Issuer shall be in compliance with all material provisions thereof) and (ii) the Equity Contribution, shall have been consummated prior to (or shall be consummated simultaneously with) the issuance of the Bridge Notes, and each such financing and transaction shall be in compliance with applicable law and on terms and conditions (including interest rates and covenants), and in accordance with documentation, reasonably satisfactory to the Required Purchasers to the extent that the terms and conditions of the Senior Bank Financing, the Equity Contribution, the Tender Offer and the Merger are not set forth in, or are materially different from, the respective terms and conditions of the term sheet attached to the letter dated May 3, 1999 between Wells Fargo and the Issuer with respect to the Senior Bank Financing, the draft Securities Purchase Agreement with respect to the Equity Contribution delivered to MS on May 2, 1999, or the May 2, 1999 draft of the Agreement and Plan of Merger among the Issuer, Merger Sub and the Company; provided that the terms and conditions set forth in such documents shall be deemed approved by the Required Purchasers. 4. The Issuer and each Guarantor shall have delivered certificates in form and substance reasonably satisfactory to the Required Purchasers, attesting to the Solvency (as hereinafter defined) of the Issuer and each such Guarantor individually and together with its subsidiaries, taken as whole, immediately before and immediately after giving effect to the Transaction, from its chief financial officer. As used herein, the term "Solvency" of any person means (i) the fair value of the property of such person exceeds its total liabilities (including, without limitation, contingent liabilities), (ii) the present fair saleable value of the assets of such person is not less than the amount that will be required to pay its probable liability on its debts as they become absolute and matured, (iii) such person does not intend to, and does not believe that it will, incur debts or A-5 liabilities beyond its ability to pay as such debts and liabilities mature and (iv) such person is not engaged, and is not about to engage, in business or a transaction for which its property would constitute an unreasonably small capital. 5. Satisfactory completion of all loan documentation and other documentation relating to the Bridge Notes, Rollover Notes and the Warrants in form and substance reasonably satisfactory to the Purchasers, including issuance of appropriate subsidiary guarantees, and receipt by the Purchasers of reasonably satisfactory opinions of counsel to the Issuer and to the Purchasers as to the Transaction, together with customary closing documentation. 6. All material governmental and third party consents and approvals necessary in connection with the Transaction and the issuance of the Bridge Notes shall have been obtained (without the imposition of any material conditions that are not acceptable to the Purchasers) and shall remain in effect; all applicable waiting periods shall have expired without any adverse action being taken by any competent authority; and no law or regulation shall be applicable in the judgment of the Required Purchasers that restrains, prevents or imposes materially adverse conditions upon the Transaction or the issuance of the Bridge Notes. 7. Absence of any material adverse change in the business, financial condition, operations, performance, properties or prospects of the Issuer and its subsidiaries, taken as a whole, or the Company and its subsidiaries, taken as a whole, since the end of the most recent fiscal year (October 31, 1998) in the case of the Issuer and since the end of the third fiscal quarter (December 25, 1998) for fiscal 1998 in the case of the Company (except for those items included in the respective disclosure schedule to the Acquisition Agreement), and as determined in the reasonable judgment of the Purchasers. No additional facts or information (including the occurrence of any events or A-6 circumstances) shall have come to the attention of Purchasers that are inconsistent with the information disclosed to the Purchasers by or on behalf of the Issuer or the Company prior to the date of the Commitment Letter and that, either individually or in the aggregate, could reasonably be expected, in the reasonable judgment of the Purchasers, to have a material adverse effect on (a) the business, financial condition, operations, performance, properties or prospects of (i) the Issuer and its subsidiaries, taken as a whole, or (ii) the Company and its subsidiaries, taken as a whole, (b) the refinancing of the Bridge Notes or (c) the rights or remedies of the Purchasers or the ability of the Issuer and the Guarantors to perform their obligations to the Purchasers (collectively, a "Material Adverse Effect"). 8. There shall exist no action, suit, investigation, litigation or proceeding (including those pertaining to environmental matters) pending or threatened in any court or before any arbitrator or governmental or regulatory agency or authority that could reasonably be expected to have a Material Adverse Effect (except for such actions, suits, investigations, litigation and proceedings disclosed to the Purchasers prior to the date of the Commitment Letter). 9. Absence of any disruption or change in financial, banking or capital markets or in the regulatory environment that in the good faith judgment of the Purchasers could materially and adversely affect the sale of the Bridge Notes or the refinancing thereof. 10. Absence of any default or event of default and material accuracy of representations and warranties. 11. All costs, fees, expenses (including, without limitation, reasonable legal fees and expenses) and other compensation contemplated hereby payable to (or on behalf of) the Purchasers shall have been paid. Representations and A-7 Warranties: The Securities Purchase Agreement will contain the following representations and warranties and such others that are mutually agreeable to the Issuer and the Required Purchasers: 1. Corporate existence. 2. Corporate and governmental authorizations; no contravention; binding and enforceable agreements. 3. Financial information. 4. No material adverse change. 5. Environmental matters. 6. Compliance with laws, including ERISA and environmental laws. 7. No material litigation. 8. Existence, incorporation, etc., of subsidiaries. 9. Payment of taxes and other material obligations. 10. Full disclosure. Covenants: The Securities Purchase Agreement will contain the following covenants and such others that are mutually agreeable to the Issuer and the Required Purchasers: 1. Furnishing of information (including quarterly financial and operating reports). 2. Maintenance of property; insurance coverage. 3. Compliance with laws; conduct of business. 4. Use of proceeds. 5. Restrictions on indebtedness. 6. Negative pledge except for the Senior Bank Financing. 7. Additional guarantees from subsidiaries to the extent that such guarantees are delivered under the Senior Bank Financing. 8. Restrictions on dividends and other restricted payments (including redemptions and prepayment of junior or pari passu indebtedness). 9. Restrictions on asset sales. A-8 10. Restrictions on transactions with affiliates. 11. Restrictions on mergers and consolidations except for subsidiaries merging into other subsidiaries or the Issuer. 12. To prepare offering documents and participate in due diligence and marketing efforts (including a road show) and to effect refinancing of Bridge Notes through the Permanent Financing as soon as practicable. 13. Restrictions on investments. 14. Restrictions on absence of limitations on the ability of subsidiaries to upstream assets. 15. Restrictions on capital expenditures and acquisitions. 16. Availability of management to meet with holders of Bridge Notes or Rollover Notes upon request and upon reasonable notice. Events of Default: The Securities Purchase Agreement will contain the following events of default and such others that are mutually agreeable to the Issuer and the Required Purchasers: 1. Failure to pay any principal when due or any interest or fees payable within five days of when due. 2. Failure to meet covenants, with grace periods where appropriate. 3. Representations or warranties false in any material respect when made. 4. Cross acceleration to other debt of the Issuer, the Company and their subsidiaries that is triggered by a default of such other debt (with minimum dollar amounts to be agreed upon). 5. Judgment defaults (with minimum dollar amounts to be agreed upon). 6. Insolvency, bankruptcy and ERISA. Indemnification: The Issuer will indemnify the Purchasers against all losses, liabilities, claims, damages, or expenses relating to the Bridge Notes, the Securities Purchase Agreement and the use of the Bridge Note proceeds or the commitments, including but not limited to reasonable attorney"s fees and settlement costs, substantially on the terms set forth in the Commitment Letter. A-9 Expenses: The Issuer will pay all reasonable legal and other out-of- pocket expenses of the Purchasers as incurred, including travel costs, document production and other expenses of this type, and the fees of outside counsel and fees of other professional advisors engaged with the Issuer's consent. Governing Law: State of New York. Miscellaneous: Certain provisions of the Commitment Letter and Term Sheet will be superseded and replaced by the provisions of the Financing Documentation. The Securities Purchase Agreement will provide that each Purchaser agrees not to disclose any non-public information obtained from the Issuer thereunder; provided, however, that disclosure of such information may be made (a) to affiliates of such Purchaser and their respective accountants, attorneys and other advisors (each of whom will be bound by the confidentiality provisions hereof), (b) as required by any government agency having appropriate jurisdiction, (c) pursuant to legal process or (d) to prospective Purchasers and their respective accountants, attorneys and other advisors, provided that they have entered into a similar confidentiality agreement prior to the time they have received any confidential or non-public information and their respective accountants, attorneys and other advisors; provided further that, unless specifically prohibited by the applicable law or court order, each Purchaser shall reasonably notify the Issuer of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Purchaser by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided further that in no event shall any Purchaser be obligated or required to return any material furnished by the Issuer, the Company or any of their respective subsidiaries. A-10 EXHIBIT B --------- SENIOR SUBORDINATED ROLLOVER NOTES: SUMMARY OF TERMS AND CONDITIONS Issuer: The Issuer. Issue: Unsecured Senior Subordinated Rollover Notes (the "Rollover Notes"). Principal Amount: Up to the outstanding principal amount of the Bridge Notes plus an amount equal to 2.75% of such principal amount, representing a funding fee payable to the holders thereof. Purpose: The Rollover Notes will be used in their entirety to redeem 100% of the outstanding principal amount of the Bridge Notes. Maturity: 10 years after the issuance date of the Rollover Notes. Interest Rate: Interest on the Rollover Notes shall be paid at the Applicable Rollover Note Interest Rate (as defined below) and payable quarterly in arrears. "Applicable Rollover Note Interest Rate" means the sum of (A) the Incremental Spread (as defined in the Summary of Terms and Conditions for the Bridge Notes) as of the date of the issuance of the Rollover Notes, which shall increase by an additional 50 basis points at the end of each three-month period for so long as the Rollover Notes are outstanding, plus (B) ---- the higher of the following, as determined as of the beginning of each three-month period: (i) three months U.S. Dollar LIBOR (as determined from specified sources) plus 650 basis points and (ii) the highest yield on any of the 1-, 3-, 5- and 10-year direct obligations issued by the United States plus 600 basis points; and provided further that (A) in no event shall the Applicable Rollover Note Interest Rate exceed 17.0% and (B) the amount of cash interest paid will be subject to a cap of 15.0%, with the excess (if any) of the Applicable Rollover Note Interest Rate over such interest rate cap to be paid in additional Rollover Notes. Optional Redemption: The Rollover Notes will be redeemable at the option of the Issuer, in whole or in part, at any time upon not less than 10 days' written notice, at par plus accrued and unpaid interest to the redemption date; provided, however, that if any holder of a Rollover Note that was a holder on the date of issuance of the Rollover Notes sells Rollover Notes to third-party purchasers on a fixed rate basis no less favorable to the Issuer than the then-applicable rate of interest (it being understood that any such holders shall have the right unilaterally to fix the Interest Rate on the Rollover Notes in conjunction with such third-party sales and it also being understood that no such third-party sales shall take place unless the Issuer has been given 20 days' prior notice), the redemption price for any such Rollover Notes during the 5-year period commencing from the date of issuance of the Rollover Notes will include a make-whole premium calculated on the basis of a discount rate equal to the rate on U.S. Treasury securities with a maturity closest to the maturity of the Revolver Notes to be redeemed plus 0.5% and thereafter at par plus accrued interest plus a premium equal to 50% of the fixed-rate coupon for such Rollover Notes, declining ratably (on each yearly anniversary commencing on the sixth anniversary of the issuance of the Rollover Notes) to par one year prior to the maturity of the Rollover Notes. Mandatory Redemption: Same as Bridge Notes, except that (a) the redemption price for Rollover Notes that accrue interest at the floating rate shall be at par plus accrued interest and (b) the redemption price for Rollover Notes that accrue interest at a fixed rate shall be at par plus the respective premium set forth above in Section "Optional Redemption". Change-of-Control: The Issuer will redeem the Rollover Notes upon any change- of-control of the Issuer at a redemption price of 101% of par plus accrued interest. Ranking: Same as Bridge Notes. Guarantees: Same as Bridge Notes. Registration Rights: The Issuer will file, and will use its best efforts to cause to become effective, an exchange offer registration statement with respect to exchanging the Rollover Notes for identical securities that are registered under the Securities Act of 1933 as soon as practicable after the issuance of the Rollover Notes. If such exchange offer cannot be completed within 180 days from the date of issuance of the Rollover Notes, the Issuer will file and cause to become effective a B-2 "shelf" registration statement with respect to resales of the Rollover Notes. If an exchange offer registration statement for the Rollover Notes has either (i) not been filed within 60 days from the date of issuance of the Rollover Notes, or (ii) such exchange offer or a shelf registration has not been completed within 180 days from the date of issuance of the Rollover Notes, the Issuer will pay liquidated damages of $.192 per week per $1,000 principal amount of Rollover Notes until such time as such registration statement has been filed or such exchange offer has been completed, as the case may be. In addition, the holders of the Rollover Notes will have the right to "piggy back" in the registration of any debt securities that are registered by the Issuer unless all of the Rollover Notes will be redeemed from the proceeds of such securities. Equity Amount: Warrants ("Warrants"), representing in the aggregate 3% of the fully-diluted common stock of the Issuer (the "Warrant Amount") as of the date the Rollover Notes are issued, will be issued to the holders of the Rollover Notes (if any are issued) as follows: 1.5% at the time the Rollover Notes are issued and an additional 1.5% at the end of the first six-month period thereafter if the Rollover Notes are still outstanding. All Warrants will be exercisable at a nominal price for a period of five years from the date such warrants are issued and will have customary anti-dilution provisions and demand and "piggy back" registration rights and customary cut-back provisions. Right to Resell Rollover Notes and Warrants: The holders shall have the absolute and unconditional right to resell Rollover Notes and Warrants in compliance with applicable law to any third parties. Defeasance Provisions: None. Conditions to Issuance: The right to issue the Rollover Notes and the Purchasers' obligation to accept them in satisfaction of the Bridge Notes will be subject to satisfaction of the following conditions precedent: (i) at the time of issuance, there shall exist no event of default under the Securities Purchase Agreement, (ii) all fees, interest and other amounts owing to the holders shall have been paid in full, (iii) all Warrants required to be issued upon the issuance of the Rollover Notes shall have been B-3 issued and (iv) no injunction, decree, order or judgment enjoining such issuance shall be in effect. Representation, Warranties, Covenants, Events of Default, Indemnities and Expenses: As in the Securities Purchase Agreement (see above), except that the Rollover Notes will contain covenants customary for Rule 144A high-yield debt offerings. Governing Law: State of New York. B-4 EX-2.4 5 SECURITIES PURCHASE AGREEMENT 05/05/99 SECURITIES PURCHASE AGREEMENT Dated as of May 5, 1999 By and Between RCBA Strategic Partners, L.P., and URS Corporation Table of Contents ARTICLE I DEFINITIONS; CERTAIN REFERENCES........................................... 2 ARTICLE II CLOSING................................................................... 5 2.1 Time and Place of Closing.......................................... 5 2.2 Transactions at the Closing........................................ 5 2.3 Use of Proceeds.................................................... 6 ARTICLE III CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.......................... 6 3.1 Material Adverse Effect............................................ 6 3.2 Minimum Utopia EBITDA.............................................. 6 3.3 Certificate of Designation......................................... 6 3.4 Closing Deliveries................................................. 7 3.5 HSR................................................................ 7 3.6 Section 203........................................................ 7 3.7 Merger Agreement................................................... 7 3.8 Credit Facility.................................................... 7 3.9 Subordinated Notes Offering........................................ 8 3.10 Simultaneous Closing............................................... 8 3.11 Accuracy of Seller's Representations and Warranties................. 8 3.12 Compliance by Seller............................................... 8 3.13 No Legal Action.................................................... 8 ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER............................. 8 4.1 Closing Deliveries................................................. 8 4.2 HSR................................................................ 9 4.3 Simultaneous Closing............................................... 9 4.4 Accuracy of Purchaser's Representations and Warranties............. 9 4.5 Compliance by Purchaser............................................ 9 4.6 No Legal Action.................................................... 9 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER.................................. 9 5.1 Organization, Good Standing, Power, Authority, Etc................. 9 5.2 Capitalization of Seller........................................... 10 5.3 SEC Documents; Financial Statements................................ 11 5.4 Authority and Qualifications of Seller............................. 12 5.5 No Contravention, Conflict, Breach, Etc............................ 12 5.6 Consents........................................................... 12 5.7 Vote Required...................................................... 13 5.8 Certain Approvals.................................................. 13 5.9 Brokers............................................................ 13 5.10 Certain Agreements................................................. 13 5.11 No Material Adverse Change......................................... 13 5.12 Exemption from Registration........................................ 13 5.13 Opinion of Independent Investment Banking Firm..................... 14 5.14 Other Matters...................................................... 14 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER............................... 14 6.1 Organization, Good Standing, Power, Authority, Etc................. 14 6.2 Authority and Qualifications of Purchaser.......................... 14 6.3 No Contravention, Conflict, Breach, Etc............................ 15 6.4 Consents........................................................... 15 6.5 Brokers............................................................ 15 6.6 Investment Intent.................................................. 15 ARTICLE VII CORPORATE GOVERNANCE...................................................... 16 7.1 Board of Directors................................................. 16 7.2 Observer Rights for Purchaser Designee............................. 16 ARTICLE VIII COVENANTS OF THE PARTIES.................................................. 16 8.1 Restrictions....................................................... 16 8.2 Pre-Closing Activities............................................. 17 8.3 Filing with SEC.................................................... 17 8.4 Stockholder Meeting................................................ 17 8.5 Proxy Statement.................................................... 17 8.6 Stock Exchange Listing............................................. 17 8.7 HSR................................................................ 18 8.8 Equity Proposals................................................... 18 8.9 Publicity.......................................................... 18 8.10 Securities......................................................... 19 8.11 Access, Information and Confidentiality............................ 20 8.12 Maintenance of Business............................................ 21 8.13 Exchange........................................................... 22 8.14 Tax Matters........................................................ 23 8.15 Authorized Shares.................................................. 23 ARTICLE IX TERMINATION............................................................... 23 9.1 General............................................................ 23 9.2 Breach by Seller................................................... 23 9.3 Breach by Purchaser................................................ 24 9.4 Specific Remedies.................................................. 24 ARTICLE X SURVIVAL; INDEMNIFICATION................................................. 24 10.1 Survival of Representations and Warranties and Covenants.......... 24 10.2 Indemnification of Seller......................................... 24 10.3 Indemnification of Purchaser...................................... 25 ARTICLE XI MISCELLANEOUS............................................................. 25 11.1 Successors and Assigns............................................ 25 11.2 Performance; Waiver............................................... 25 11.3 Notices........................................................... 25 11.4 Expenses.......................................................... 26 11.5 Governing Law..................................................... 27 11.6 Severablity; Interpretation....................................... 27 11.7 Headings.......................................................... 27 11.8 Entire Agreement.................................................. 27 11.9 Counterparts...................................................... 27 11.10 Absence of Third Party Beneficiary Rights......................... 27 11.11 Mutual Drafting................................................... 27 11.12 Further Representations........................................... 27 11.13 Specific Performance; Remedies.................................... 28 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered into as of May 5, 1999, by and between RCBA Strategic Partners, L.P., a Delaware limited partnership ("Purchaser"), and URS Corporation, a Delaware corporation ("Seller"). WHEREAS, Seller wishes to sell, and Purchaser wishes to purchase, an aggregate of 46,082.95 newly issued shares of Series A Preferred Stock of Seller ("Series A Preferred Stock") and 450,000 newly issued shares of Series C Preferred Stock of Seller ("Series C Preferred Stock") (collectively, as to the Series A Preferred Stock and Series C Preferred Stock issued on the date hereof, the "Bridge Securities") for the consideration and upon the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Series A Preferred Stock and Series C Preferred Stock will not be convertible into common stock of Seller and will not have voting rights because such conversion and voting rights would require (i) prior stockholder approval by the stockholders of Seller pursuant to New York Stock Exchange ("NYSE") Rules and (ii) an amendment to Seller's Articles of Incorporation to increase the number of authorized common shares; and WHEREAS, Seller is using the funds raised by this Agreement to purchase all of the outstanding equity of the Dames & Moore Group, a Delaware corporation ("Utopia"), and such purchase is due to close before the approval of the stockholders of Seller referred to above could be sought or obtained; and WHEREAS, Seller has agreed to use its best efforts to obtain such stockholder approval and Purchaser has agreed to vote, and to cause all affiliated entities to vote, all voting securities they hold in the Seller in favor of such approval; and WHEREAS, Seller and Purchaser have agreed that upon receiving stockholder approval for the transactions contemplated hereby the Bridge Securities so purchased (and any additional shares of Series A Preferred Stock paid as dividends thereon) will automatically, and without any further action of either party, convert into shares of Series B Exchangeable Convertible Preferred Stock of Seller (the "Series B Preferred Stock"). NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, each of Purchaser and Seller (together "Parties") agree as follows: ARTICLE I DEFINITIONS; CERTAIN REFERENCES The terms defined in this Article I, whenever used in this Agreement, shall have the following meanings for all purposes of this Agreement: 1.1 "Act" means the Securities Act of 1933, as amended. 1 1.2 "Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act. 1.3 "Board" means the Board of Directors of Seller. 1.4 "Bridge Securities" has the meaning set forth in the second recital of this Agreement. 1.5 "Business Day" shall have the meaning specified in Rule 14d-1(e)(6) of the Exchange Act. 1.6 "Capital Stock" has the meaning given it in Section 5.2 of this Agreement. 1.7 "Certificates of Designation" means the Certificate of Designation of Seller classifying 300,000 shares as Series A Preferred Stock, the Certificate of Designation of Seller classifying 150,000 shares as Series B Exchangeable Convertible Preferred Stock, and the Certificate of Designation of Seller classifying 450,000 shares as Series C Preferred Stock, each to be filed by Seller with the Office of the Secretary of State for the State of Delaware on or prior to the date and time of the Closing, a true and correct copy of the text of each of which is attached as Exhibit 1.7 hereto. 1.8 "Certificate of Incorporation" means the Certificate of Incorporation of Seller as filed with the Office of the Secretary of State for the State of Delaware, as amended from time to time. 1.9 "Closing" has the meaning set forth in Section 2.1 of this Agreement of this Agreement. 1.10 "Closing Date" has the meaning set forth in Section 2.1 of this Agreement of this Agreement. 1.11 "Common Stock" means the common stock, par value $.01 per share, of Seller. 1.12 "Conversion Shares" means the shares of Common Stock issuable or issued upon conversion of the Series B Preferred Stock pursuant to the terms of this Agreement and the Certificate of Designation for the Series B Preferred Stock. 1.13 "DGCL" means the Delaware General Corporation Law, as amended. 1.14 "Equity Proposal" has the meaning set forth in Section 8.8 of this Agreement. 1.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.16 "Exchange Debentures" means the subordinated debentures into which the Series B Preferred Stock is exchangeable (at the option of Seller) and which will have substantially the same terms as the Series B Preferred Stock, the form of which will be agreed by the parties hereto prior to Closing if either party so requests. 2 1.17 "Filed SEC Documents" has the meaning given it in Section 5.3 of this Agreement. 1.18 "GAAP" has the meaning given it in Section 5.3 of this Agreement. 1.19 "Government Entity" means any foreign, federal, state, or local court or tribunal or administrative, governmental or regulatory body, agency, commission, division, department, public body or other authority. 1.20 "HSR" has the meaning given it in Section 3.5 of this Agreement. 1.21 "Indemnifiable Losses" shall mean any and all direct or indirect demands, claims, payments, obligations, actions, or causes of action, assessments, losses, liabilities, costs, or expenses paid or incurred, any kind or character (whether or not known or asserted before the date of this Agreement, fixed or unfixed, conditional or unconditional, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent, or otherwise). Indemnifiable Losses shall include penalties, interest, or any amount payable to a third party as a result of such Indemnifiable Losses. Indemnifiable Losses shall include legal or other expenses reasonably incurred in connection with investigating or defending any claims or actions, whether or not resulting in any liability, and all amounts paid in settlement of claims or actions in accordance with Article X. 1.22 "Issuable Securities" means the Series A Preferred Stock, the Series B Preferred Stock, the Conversion Shares, the Series C Preferred Stock, the Series C Redemption Shares and the Exchange Debentures. 1.23 "Knowledge of Seller" means to the actual or constructive knowledge of any executive officer or director of Seller. 1.24 "Liens" has the meaning given it in Section 5.2 of this Agreement. 1.25 "Material Adverse Effect" means any condition, event or development having, or likely to have a material adverse effect on the business, operations, properties, assets, liabilities, financial condition, or prospects of Seller and the Subsidiaries, taken as a whole, or of Purchaser, taken as a whole (as applicable). 1.26 "NYSE" has the meaning given it in the second recital of this Agreement. 1.27 "Person" means and includes an individual, a partnership, a joint venture, a corporation, a trust, limited liability company, an unincorporated organization and a Government Entity. 1.28 "Preferred Stock" has the meaning given it in Section 5.2 of this Agreement. 1.29 "Proxy Statement" means the proxy statement to be sent to the shareholders of Seller in connection with the Stockholder Meeting of Seller with respect to, among other matters, the Stockholder Meeting Matters. 3 1.30 "Purchase Price" means, for the Bridge Securities to be purchased by Purchaser, $100,000,000 in the aggregate. 1.31 "Purchaser" has the meaning set forth in the first recital of this Agreement. 1.32 "Registration Rights Agreement" means the Registration Rights Agreement to be dated as of the date of the Closing among Seller and Purchaser, in substantially the form attached as Exhibit 1.32 hereto, as amended, supplemented and modified from time to time in accordance with the terms thereof. 1.33 "Series C Redemption Shares" means the shares of Common Stock issuable or that may be issued upon redemption of the Series C Preferred Stock pursuant to the terms of this Agreement and the Certificate of Designation for the Series C Preferred Stock. 1.34 "Schedule 14D-9" has the meaning set forth in Section 5.6 of this Agreement. 1.35 "SEC" means the Securities and Exchange Commission. 1.36 "Significant Holder" means Purchaser and any transferee of Purchaser for so long any such person owns Issuable Securities in the aggregate equal to at least ten (10) percent of (a) prior to Stockholder Approval, the Issuable Securities purchased by Purchaser and issued on the Closing Date, or (b) at any other time, the Issuable Securities issued to Purchaser in exchange for the Series A Preferred Stock and the Series C Preferred Stock on the effective date of that Exchange. In determining the number of Issuable Securities held by any person or outstanding at any time, (i) each share of Series A Preferred Stock shall be deemed to be convertible into Common Stock (on the same terms and conditions as the Series B Preferred Stock) and to have been converted (to the fullest extent then determinable) and such calculation shall include the number of Conversion Shares that then would be deliverable upon the conversion of such stock (as if such stock were converted), and (ii) each share of Series C Preferred Stock shall be deemed to have been redeemed in exchange for Common Stock, and each share of Series B Preferred Stock shall be deemed to have been converted (in either case, to the fullest extent then determinable) and such calculation shall include the number of Series C Redemption Shares or Conversion Shares then deliverable upon the redemption of the Series C Preferred Stock or the conversion of the Series B Preferred Stock (to the fullest extent then determinable), as the case may be. 1.37 "Stockholder Meeting" has the meaning set forth in Section 8.4 of this Agreement. 1.38 "Stock Plans" has the meaning given it in Section 5.2 of this Agreement. 1.39 "Stock Purchase" means the purchase of Series A Preferred Stock and Series C Preferred Stock by Purchaser from Seller under this Agreement. 4 1.40 "Subsidiary" means, with respect to Seller, any corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization, or other entity analogous to any of the foregoing of which a majority of the equity ownership (whether voting stock or comparable interest) is, at the time, owned, directly or indirectly by Seller. 1.41 "Transaction Documents" means this Agreement, the Certificates of Designation, and the Registration Rights Agreement. 1.42 "Voting Debt" has the meaning given it in Section 5.2 of this Agreement. ARTICLE II CLOSING 2.1 Time and Place of the Closing. Seller shall as promptly as practicable notify Purchaser, and Purchaser shall as promptly as practicable notify Seller when the conditions, contained in Articles III and IV hereof, to such parties' respective obligations to effect the Stock Purchase have been satisfied. The closing of the Stock Purchase (the "Closing") shall take place at the offices of Cooley Godward LLP in San Francisco, California, or such other location as the parties may mutually agree, no later than November 30, 1999, and shall be effective as of 12:01 a.m. on the Closing Date, unless another date, effective time, or place is agreed to in writing by Purchaser and Seller. 2.2 Transactions at the Closing. At the Closing, subject to the terms and conditions of this Agreement, Seller shall issue and sell to Purchaser and Purchaser shall purchase the Bridge Securities. At the Closing, Seller shall deliver to Purchaser a certificate or certificates representing the number of the Bridge Securities to be purchased, each registered in the name of Purchaser or its nominee against payment of the Purchase Price with respect thereto by wire transfer of immediately available funds to an account or accounts previously designated by Seller. 2.3 Use of Proceeds. The proceeds from the purchase and sale of the Bridge Securities hereunder will be used simultaneously with the Closing of the Offer (as defined in the Merger Agreement by and among Utopia, Seller and one or more Affiliates of either or both, dated May 5, 1999 (the "Merger Agreement")), and shall not be used for any other purpose. ARTICLE III CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Purchaser at or prior to the Closing): 3.1 Material Adverse Effect. 5 (a) There shall not have occurred and there shall not otherwise exist any Material Adverse Effect on Seller. (b) There shall not have occurred (i) any suspension or limit of trading in securities generally on the NYSE (including automatic halt in trading pursuant to market-decline triggers other than those in which solely program trading is temporarily halted), (ii) the imposition generally of minimum or maximum prices on such exchange or on The NASDAQ Stock Market or additional material governmental restrictions, in either case not in force on the date of this Agreement, by such exchange or by order of the SEC or the NASD or any court or other governmental authority, (iii) the declaration of any general banking moratorium by either Federal or New York State authorities, or (iv) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis, the effect of any of which is such as to make it, in reasonable judgment of Purchaser, impracticable or inadvisable to acquire the Bridge Securities on the terms and in the manner contemplated by this Agreement. 3.2 Minimum Utopia EBITDA. Utopia EBITDA for the fiscal year ended March 26, 1999, before second quarter restructuring charges, as shown in the audit of Utopia for the fiscal year ended March 26, 1999, which such audit shall be completed prior to Closing, shall be no less than $65 million. 3.3 Certificates of Designation. The Certificates of Designation shall have been filed for record with the Office of the Secretary of State for the State of Delaware and shall have become effective. 3.4 Closing Deliveries. Seller shall have delivered to Purchaser on or before the Closing the following: (a) Opinion of Cooley Godward LLP, dated as of the Closing Date, in form reasonably satisfactory to Purchaser; (b) Registration Rights Agreement executed by Seller; (c) Certificate of the Secretary or Assistant Secretary of Seller dated as of the Closing Date certifying: (i) that attached thereto is a true and complete copy of the by-laws of Seller as in effect on the date of such certification; (ii) that attached thereto is a true and complete copy of all resolutions adopted by the Board authorizing the execution, delivery and performance of the Agreement, the issuance, sale and delivery of the Issuable Securities, and that all such resolutions are in full force in effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (iii) that attached thereto is a true and complete copy of the Certificate of Incorporation as in effect on the date of such certification; and (iv) to the incumbency and specimen signature of certain officers of Seller; (d) Certificate or certificates representing the number of the Bridge Securities to be purchased, as described in the first recital and Section 2.2; and 6 (e) Executed and conformed copies of such other certificates, letters and documents as Purchaser may reasonably request and as are customary for transactions such as those contemplated by this Agreement. 3.5 HSR. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been terminated, if applicable. 3.6 Section 203. The issuance of (a) the Bridge Securities to Seller hereunder, (b) additional shares of Series A Preferred Stock and Series B Preferred Stock as dividends, (c) the Series B Preferred Stock for which the Bridge Securities are exchangeable, (d) any securities of Seller into which such Series B Preferred Stock is convertible or exchangeable, and (e) the Series C Redemption Shares shall have been exempted from the provisions of Section 203 of the DGCL. 3.7 Merger Agreement. The Merger Agreement shall not have been modified between the date hereof and the Closing Date in any material respect (except with the prior written consent of Purchaser). 3.8 Credit Facility. The Credit Facility between Seller and Wells Fargo Bank, National Association, as agent, as contemplated by the commitment letter dated as of May 3, 1999 (the "Credit Facility"), shall not deviate from the terms of such commitment letter in any material respect (except with the prior written consent of Purchaser). 3.9 Subordinated Notes. Seller's issuance and sale on the date on which the Offer is consummated, of senior subordinated increasing rate notes, for permanent financing in replacement thereof, in an aggregate principal amount of $200 million (the "Bridge Notes"), as contemplated by the commitment letter between Seller and Morgan Stanley & Co. Incorporated, dated as of May 3, 1999, shall not deviate from the terms of such commitment letter in any material respect (except with the prior written consent of Purchaser). 3.10 Simultaneous Closing. (a) The Offer shall have been consummated and all shares tendered accepted for purchase by Seller or one or more of its Affiliates, (b) the Credit Facility shall have closed and (c) the Bridge Notes shall have closed, each of the foregoing substantially simultaneously with the Closing. 3.11 Accuracy of Seller's Representations and Warranties The representations and warranties of Seller contained in Article V hereof which are not subject to a qualification regarding materiality shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on such date, the representations and warranties of Seller contained in Article V hereof, which are subject to a qualification regarding materiality shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on such date, and Purchaser shall have received a certificate attesting thereto signed by the Chief Executive Officer of Seller, on behalf of Seller. 3.12 Compliance by Seller. Seller shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and 7 conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, and Purchaser shall have received a certificate attesting thereto signed by the Chief Executive Officer of Seller. 3.13 No Legal Action. No action, suit, investigation or other proceeding relating to the transactions contemplated hereby shall have been instituted before or threatened by any Government Entity which presents a substantial risk of the restraint or prohibition of the transactions contemplated hereby or the obtaining of material damages or other material relief in connection therewith. ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER The obligations of Seller to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Seller at or prior to the Closing): 4.1 Closing Deliveries. Purchaser shall have delivered to Seller on or before the Closing the following: (a) Opinion of Wilmer, Cutler & Pickering, dated as of the Closing Date, in form reasonably satisfactory to Seller; and (b) Immediately available funds in the amount of the Purchase Price. 4.2 HSR. The waiting period under the HSR Act shall have expired or been terminated, if applicable. 4.3 Simultaneous Closing. (a) The Offer shall have been consummated and all shares tendered accepted for purchase by Seller or one or more of its Affiliates, (b) the Credit Facility shall have closed and (c) the Bridge Notes shall have closed, each of the foregoing substantially simultaneously with the Closing. 4.4 Accuracy of Purchaser's Representations and Warranties. The representations and warranties of Purchaser contained in Article VI hereof which are not subject to a qualification regarding materiality shall be true and correct in all material respects as of the date when made and as of the Closing Date, as though made on such date, the representations and warranties of Purchaser contained in Article VI hereof, which are subject to a qualification regarding materiality shall be true and correct in all respects as of the date when made and as of the Closing Date, as though made on such date, and Seller shall have received a certificate attesting thereto signed by an officer of Purchaser, on behalf of Purchaser. 4.5 Compliance by Purchaser. Purchaser shall have performed, satisfied and complied with, in all material respects, all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with on or prior to the Closing Date, and Seller shall have received a certificate attesting thereto signed by an officer of Purchaser. 8 4.6 No Legal Action. No action, suit, investigation or other proceeding relating to the transactions contemplated hereby shall have been instituted before or threatened by any Government Entity which presents a substantial risk of the restraint or prohibition of the transactions contemplated hereby or the obtaining of material damages or other material relief in connection therewith. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER Except as set forth in the Filed SEC Documents, Seller hereby represents and warrants to Purchaser as follows: 5.1 Organization, Good Standing, Power, Authority, Etc. Each of Seller and the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has all requisite corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold and operate its properties and to carry on its business as now being conducted and (c) is duly qualified to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except, in the case of clause (b) or (c) above, where the failure to have such power or authority, to possess such franchises, licenses, permits, authorizations or approvals or to be so qualified or in good standing, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Seller. 5.2 Capitalization of Seller. (a) The authorized capital stock of Seller, the number of shares of Seller outstanding, the number of shares of Common Stock reserved for issuance upon the exercise of outstanding Seller stock options pursuant to stock option plans, the employee stock purchase plan and the director stock plan, each as described in the Filed SEC Documents (collectively, the "Stock Plans"), and the number of additional shares of Common Stock reserved for issuance pursuant to the Stock Plans, are all substantially as set forth in Seller's proxy statement for its annual meeting held March 23, 1999. Other than as set forth above, at the close of business on the date of Seller's proxy statement for its annual meeting held March 23, 1999 ("Proxy Statement Date"), there were outstanding no shares of Capital Stock or options, warrants or other rights to acquire Capital Stock from Seller. Since the Proxy Statement Date, there have been no issuances by Seller of shares of Capital Stock or of options, warrants or other rights to acquire Capital Stock from Seller, other than issuances and grants of shares of Common Stock and rights to acquire shares of Common Stock that were reserved for issuance as of the Proxy Statement Date and that were issued pursuant to the terms of the Stock Plans. (b) No bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exchangeable for securities having the 9 right to vote) on any matters on which stockholders of Seller may vote are issued or outstanding ("Voting Debt"). (c) All outstanding shares of Common Stock are, and any shares of Common Stock which may be issued upon the exercise of stock options when issued will be, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. All shares of Common Stock which may be issued upon the exercise of stock options will at the time issued by Seller be free and clear of all liens, claims, charges, pledges, mortgages, security interests or other encumbrances ("Liens"). Other than as set forth above, and except for this Agreement (and the securities being issued hereunder) and the Stock Plans, there are not any options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, commitments, contracts, arrangements or undertakings of any kind to which Seller or any of the Subsidiaries is a party or by which any of them is bound (i) obligating Seller or any of the Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Seller or of any of the Subsidiaries or any Voting Debt, (ii) obligating Seller or any of the Subsidiaries to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights of holders of Common Stock. (d) There are no outstanding contractual obligations of Seller or any of the Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Seller or any of the Subsidiaries and, to the Knowledge of Seller, there are no irrevocable proxies with respect to shares of Common Stock or shares of capital stock of any Subsidiary of Seller. 5.3 SEC Documents; Financial Statements. (a) Seller has filed and provided or made available to Purchaser a true and complete copy of each report, schedule, registration statement and definitive proxy statement required to be filed by Seller with the SEC since January 1, 1995 (the "Filed SEC Documents"). As of their respective dates, each Filed SEC Document complied in all material respects with the requirements of the Act or the Exchange Act, as the case may be, applicable to such Filed SEC Document. None of the Filed SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Filed SEC Document has been revised or superseded by a later Filed SEC Document filed and publicly available prior to the date of this Agreement, none of the Filed SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 10 (b) All contracts or agreements, including agreements relating to indebtedness of Seller or any of the Subsidiaries, required to be filed with the SEC under the Exchange Act have been filed with the SEC. (c) The financial statements of Seller included in the Filed SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis ("GAAP") during the periods involved (except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present the consolidated financial position of Seller and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which are not material). Except as set forth in the Filed SEC Documents, neither Seller nor any Subsidiary of Seller has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of Seller and the Subsidiaries or in the notes thereto. None of the Subsidiaries is, or has at any time since January 1, 1995 been, subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act. 5.4 Authority and Qualification of Seller. Seller has all requisite corporate power and authority to enter into this Agreement and the Merger Agreement, and, subject to obtaining the Stockholder Approval with respect to the matters set forth in Section 8.4, to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Merger Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of Seller subject, in the case of the Exchange, to obtaining the stockholders' approval and adoption of certain matters described in Section 8.4 hereof. The Board, at a meeting duly called and held, duly and unanimously adopted resolutions (a) approving this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby, (b) determining that the terms of this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby are fair to and in the best interests of Seller and its stockholders, (c) recommending that Seller's stockholders grant the Stockholder Approval and (d) declaring that this Agreement and the Merger Agreement are each advisable. Each of this Agreement and the Merger Agreement has been duly executed and delivered by Seller and, assuming such agreement constitutes a legal, valid and binding obligation of each of the other parties thereto, constitutes a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. 5.5 No Contravention, Conflict, Breach, Etc. The execution and delivery of this Agreement and the Merger Agreement do not, and the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time or both) under, or result in the termination of, or accelerate the performance required by, or give rise to a right of termination, cancellation or acceleration of any obligation under, or to increased, 11 additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien on the properties or assets of Seller or any of the Subsidiaries pursuant to, (a) any provision of the Certificate of Incorporation or the Seller's By-laws or the comparable charter or organizational documents of any Subsidiary, or (b) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller or any Subsidiary or their respective properties or assets. 5.6 Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, any Government Entity is required by or with respect to Seller or any Subsidiary in connection with the execution and delivery of this Agreement or the Merger Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby or thereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Seller, and except for: (i) the filing with the SEC of (A) a Schedule 14D-9 of Seller to be filed under the Exchange Act (the "Schedule 14D-9"), (B) a proxy statement relating to the consideration of Utopia's stockholders approval at a meeting of the stockholders of Utopia duly called and convened to consider the adoption of the Merger Agreement, and (C) such other reports under the Exchange Act, as may be required in connection with this Agreement or the Merger Agreement and the transactions contemplated hereby, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Utopia is qualified to do business, (iii) filings required pursuant to the HSR Act, and the rules and regulations promulgated thereunder, (iv) filings necessary to satisfy the applicable requirements of state securities or "blue sky" laws and (v) those filings required under the rules and regulations of the NYSE. 5.7 Vote Required. The Stockholder Approval is the only vote of the holders of any class or series of Capital Stock necessary to adopt this Agreement and approve the transactions contemplated hereby. No stockholder approval of any kind is required for the issuance of the Series A Preferred Stock and the Series C Preferred Stock. 5.8 Certain Approvals. The Board has taken any and all necessary and appropriate action to render inapplicable to Stock Purchase, the Exchange and the other transactions contemplated hereby the provisions of Section 203 of the DGCL. No other state takeover statute or similar statute or regulation applies to the Offer, the Merger Agreement or the other transactions contemplated hereby. 5.9 Brokers. No broker, investment banker, financial advisor or other person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of which will be paid by Seller, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller. 5.10 Certain Agreements. There are no employment contracts to which Seller or any of the Subsidiaries is a party which provides for any benefit 12 upon or resulting from a "change in control" of Seller or any of the Subsidiaries or any similar event. 5.11 No Material Adverse Change. Since October 31, 1998, there has not been any event, change, effect, condition or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on Seller (other than any such Material Adverse Effect on Seller the existence of which is specifically disclosed in any report filed and publicly available on Form 10-Q or Form 8-K under the Exchange Act with the SEC by Seller after October 31, 1998 and prior to the date hereof). 5.12 Exemption from Registration. Assuming the representations and warranties of Purchaser set forth in Article VI hereof are true and correct in all material respects, the offer and sale of the Series A Preferred Stock and the Series C Preferred Stock made pursuant to this Agreement will be exempt from the registration requirements of the Act. Neither Seller nor any Person acting on its behalf has, in connection with the offering of the Series A Preferred Stock or the Series C Preferred Stock, engaged in (a) any form of general solicitation or general advertising (as those terms are used within the meaning of Rule 502(c) under the Act), (b) any action involving a public offering within the meaning of Section 4(2) of the Act, or (c) any action which would require the registration of the offering and sale of the Series A Preferred Stock or the Series C Preferred Stock pursuant to this Agreement under the Act or which would violate applicable state securities or "blue sky" laws. Seller has not made and will not make, directly or indirectly, any offer or sale of the Series A Preferred Stock, the Series C Preferred Stock, or of securities of the same or a similar class as the Series A Preferred Stock or the Series C Preferred Stock if as a result the offer and sale of the Series A Preferred Stock and Series C Preferred Stock contemplated hereby could fail to be entitled to exemption from the registration requirements of the Act. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Act. 5.13 Opinion of Independent Investment Banking Firm. Seller has obtained advice from Morgan Stanley & Co. Incorporated that the financial terms of the transactions contemplated by this Agreement are reasonable. 5.14 Other Matters. The Parties agree that each of the representations and warranties made by Seller to the lenders pursuant to the Credit Facility will be incorporated herein by reference as if such representations and warranties had been made directly to Purchaser. By Closing on this Agreement, Seller agrees that Purchaser may rely on such representations as if set forth fully herein. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller that: 6.1 Organization, Good Standing, Power, Authority, Etc. Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. 13 6.2 Authority and Qualification of Purchaser. Purchaser has all requisite partnership power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Purchaser. No vote of the holders of partnership interests is necessary to approve or adopt this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and, assuming such agreement constitutes a legal, valid and binding obligation of each of the other parties thereto, constitutes a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. 6.3 No Contravention, Conflict, Breach, Etc. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time or both) under, or result in the termination of, or accelerate the performance required by, or give rise to a right of termination, cancellation or acceleration of any obligation under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien on the properties or assets of Purchaser or any of its subsidiaries pursuant to, (a) any provision of the Purchaser's organizational documents, or (b) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Purchaser or any subsidiary of Purchaser or their respective properties or assets. 6.4 Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local, or foreign government or any court, administrative agency, tribunal or commission or other Government Entity is required by or with respect to Purchaser in connection with the execution and delivery of this Agreement by Purchaser or the consummation by Purchaser of the transactions contemplated hereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser or (ii) filings required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 6.5 Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser. 6.6 Investment Intent. Purchaser is an "Accredited Investor" within the meaning of Rule 501(a) of Regulation D under the Act, and it is or will be acquiring the Issuable Securities for its own account and not with a view to, or for sale in connection with, any distribution thereof in violation of the Act. It understands that the Issuable Securities have not been registered under the Act by reason of a specific exemption from the registration provisions thereof which depends upon, among other things, the bona fide nature of their investment intent as expressed herein. 14 ARTICLE VII CORPORATE GOVERNANCE 7.1 Board of Directors. (a) At all times on and after the Closing Date, for so long as Purchaser and its Affiliates own or control at least 10% of the outstanding shares of Common Stock, and until Richard C. Blum no longer wishes to serve as a director, Seller shall take all such actions as may be necessary or appropriate to cause Mr. Blum to be elected or re-elected as a member of the Board and to be maintained in such position at all times. (b) In the event that a vacancy is created on the Board at any time by the death, disability, retirement, or resignation of Mr. Blum, Purchaser and Seller will take such actions as will result in the election or appointment of a new director designated by Purchaser, provided that such designee is acceptable to Seller. 7.2 Observer Rights for Purchaser Designee. Seller shall, for so long as Purchaser and its Affiliates own or control at least 10% of the outstanding shares of Common Stock, permit an individual designated by Purchaser and acceptable to Seller to attend and observe meetings of the Board, and such designee shall have the right to receive all written information provided by Seller to the Board (but only if specifically requested by such designee). Such designee shall have no right to vote on any matter presented to the Board, but otherwise shall have all rights of a Director, including: (i) the right to examine books and records of Seller; (ii) the right to review and participate in all discussions of the Board including, without limitation, capital or equity programs; (iii) the right to receive, upon request, any information relating to Seller and the Subsidiaries, and to any Affiliates thereof; and (iv) the right to meet on a regular basis with the management personnel of Seller and the Subsidiaries, or any Affiliates thereof; provided that any such designee shall agree to be bound by all policies relating to confidentiality and material non- public information which are applicable to the Directors and senior executive officers of Seller. ARTICLE VIII COVENANTS OF THE PARTIES 8.1 Restrictions. Purchaser covenants and agrees with Seller that Purchaser will not dispose of any of Purchaser's shares of the Issuable Securities except pursuant to (a) an effective registration statement under the Act or (b) an applicable exemption from registration under the Act. In connection with any sale by Purchaser pursuant to clause (b) of the preceding sentence, Purchaser shall furnish to Seller, if requested by Seller, an opinion of counsel reasonably satisfactory to Seller to the effect that such exemption from registration is available in connection with such sale. 8.2 Pre-Closing Activities. From and after the date of this Agreement until the Closing, each of Seller and Purchaser shall act with good faith towards, and shall use all commercially reasonable efforts to consummate, the 15 transactions contemplated by this Agreement, and neither Seller nor Purchaser will take any action that would prohibit or impair its ability to consummate the transactions contemplated by the Merger Agreement and this Agreement. 8.3 Filing with SEC. So long as any of the Issuable Securities are outstanding, Seller shall file with the SEC the annual reports and quarterly reports and the information, documents and other reports that are required to be filed with the SEC pursuant to Sections 13 and 15 of the Exchange Act, so long as Seller has or is required to have a class of securities registered under the Exchange Act and is then subject to the reporting requirements of the Exchange Act, at the time Seller is required to file the same with the SEC and, promptly after Seller is required to file such reports, information or documents with the SEC, to mail copies of such reports, information and documents to the holders of the Series A Preferred Stock, Series B Preferred Stock, the Conversion Shares, Series C Preferred Stock and the Series C Redemption Shares at their addresses set forth in the register maintained by the transfer agent therefor. 8.4 Stockholder Meeting. Seller shall cause a special meeting of its common stockholders (the "Stockholder Meeting") to be held as soon as practicable but in no event later than six months after the Closing, for the purpose of approving (i) the issuance of the Series B Preferred Stock (pursuant to the Exchange contemplated by Section 8.13 hereof (the "Exchange Approval")) as required by NYSE Rule 312 and (ii) an amendment to the Certificate of Incorporation of Seller providing for an increase in the number of authorized common shares to such number as may be deemed appropriate by Seller (the "Charter Amendment Approval" and, together with the Exchange Approval, the "Stockholder Approval"), and transacting such other business as may properly come before the meeting or any adjournment thereof, (the "Stockholder Meeting Matters"). Seller shall use its best efforts to obtain the Stockholder Approval no later than six months after the Closing. Purchaser shall vote, and shall cause its Affiliates to vote, all shares of Seller voting securities which they may hold at the time of the Stockholder Meeting in favor of the Stockholder Approval. 8.5 Proxy Statement. Seller covenants that the Proxy Statement will not include any untrue statement of a material fact, or omit to state any material fact, necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, -------- ------- Seller's covenant shall not encompass any information in the Proxy Statement that was furnished in writing to Seller by or on behalf of Purchaser for use specifically in connection with the preparation of the Proxy Statement. 8.6 Stock Exchange Listing. Subsequent to consideration by the shareholders of Seller of the Stockholder Meeting Matters at the Shareholders Meeting and until such shares shall cease to be outstanding, Seller shall take all steps necessary to ensure that the Series A Preferred Stock (if still outstanding), Conversion Shares and Series C Preferred Stock (if still outstanding) and Series C Redemption Shares (if any) are approved for trading, subject to notice of issuance by the NYSE and any other securities exchange on which the Common Stock is listed. 8.7 HSR. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to take, or cause to be taken, all 16 actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective all necessary filings required pursuant to the HSR Act no later than five Business Days from the date of this Agreement, and shall use their best efforts to obtain the early termination of the waiting period thereunder, provided that neither Seller nor Purchaser shall be required to agree to dispose of or hold separate any portion of its business or assets. 8.8 Equity Proposals. (a) Prior to the Closing, Seller agrees that neither Seller nor any Subsidiary nor any of the respective officers and directors of Seller or any of the Subsidiaries shall, and Seller shall direct and use its best efforts to cause its employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by Seller or any Subsidiary) not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to stockholders of Seller) with respect to the offer, sale or issuance of Preferred Stock or other comparable equity securities as contemplated by this Agreement (any such proposal or offer being hereinafter referred to as an "Equity Proposal") or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Equity Proposal, or otherwise facilitate directly or indirectly any effort or attempt to make or implement an Equity Proposal; and (b) Seller will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Seller will take the necessary steps to inform the individuals or entities referred to in the first sentence hereof of the obligations undertaken in this subsection 8.8(b). Seller will notify Purchaser immediately if any such inquiries or proposals are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with Purchaser. 8.9 Publicity. Seller and Purchaser will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or by obligations pursuant to any listing agreement with any securities exchange. 8.10 Securities. Seller hereby covenants to Purchaser, that from and after the date hereof and so long as Purchaser owns any Issuable Securities: (a) Unissued Shares of Common Stock. (i) Reserve and keep available out of its authorized but unissued shares of Series B Preferred Stock and Common Stock (including any shares held by Seller in its corporate treasury), for the purpose of issuing any and all payment in kind dividends and effecting the Exchange and the exercise in full of conversion and other rights related to the Series B Preferred Stock and the Series C Preferred Stock, such number of its duly authorized shares of Series B Preferred Stock 17 and Common Stock as shall be sufficient to effect such exercise, and if at any time the number of authorized but unissued shares of Series B Preferred Stock or Common Stock shall not be sufficient to effect such exercise, subject to any required approval by the holders of the Common Stock and as may otherwise be required pursuant to the DGCL and applicable federal and state securities laws, Seller shall take all such corporate action as may be necessary (and desirable in the reasonable discretion of Purchaser) to increase its authorized but unissued shares of Series B Preferred Stock and Common Stock to such number of shares as shall be sufficient for such purposes, and (ii) reserve and keep available out of its authorized but unissued shares of Series A Preferred Stock, for the purpose of issuing any and all payment in kind dividends on the Series A Preferred Stock, such number of its duly authorized shares of Series A Preferred Stock as shall be sufficient to effect any such dividend contemplated by the Series A Preferred Stock, and if at any time the number of authorized but unissued Series A Preferred Stock shall not be sufficient to effect such dividends, subject to any required approval by the holders of the Common Stock and as may otherwise be required pursuant to the DGCL and applicable federal and state securities laws, Seller shall take all corporate action as may be necessary (and desirable in the reasonable discretion of Purchaser) to increase its authorized but unissued Series A Preferred Stock to such number of shares as shall be sufficient for such purposes. (b) Exchange of Certificates. Seller shall, upon surrender by the holder of any certificates representing the Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock (or securities issued upon exchange, conversion or redemption of any of the foregoing) for exchange or reissuance at the office of Seller, cause to be issued in exchange therefor new certificates in such denomination or denominations as may be requested for the same aggregate number of such securities (or securities issued upon exchange, conversion or redemption thereof) represented by the certificates so surrendered and registered as such holder may request, subject to the provisions hereof. (c) Replacement of Certificates. Upon receipt by Seller of evidence reasonably satisfactory to it of loss, theft, destruction or mutilation of any certificate evidencing any of the Series A Preferred Stock, the Series B Preferred Stock, or the Series C Preferred Stock (or securities issued upon exchange, conversion or redemption of any of the foregoing), and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to Seller, and upon the surrender and cancellation of such certificate, if mutilated, Seller shall make and deliver in lieu of such certificate a new certificate for the number of such securities (or securities issued upon exchange, conversion or redemption thereof), as the case may be, evidenced by such lost, stolen, destroyed or mutilated certificate which remains outstanding. Purchaser's agreement of indemnity shall constitute indemnity satisfactory to Seller for the purposes of this Section 8.10 without the need of any further surety or bond. (d) Government and Other Approvals. Seller shall promptly prepare, submit and file with all public and governmental authorities, all applications, notices, registrations, certificates, statements and such other information, documents and instruments as may be required pursuant to any federal, state, local or foreign law or rule or regulation of the NYSE, NASD 18 or any other securities exchange, in connection with the consummation of the transactions contemplated by this Agreement, including the effect of any dividends, exchange, conversion or redemption rights, anti-dilution provisions or Board control contemplated by the terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, or other securities of Seller which may be acquired by Purchaser pursuant to this Agreement and the Certificates of Designation. Seller shall use its best efforts to obtain any necessary consents or approvals from any Government Entity in connection with the consummation of the transactions contemplated by this Agreement, including the effect of any dividends, exchange, conversion or redemption rights or anti- dilution provisions contemplated by the terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or other securities of Seller which may be acquired by Purchaser pursuant to this Agreement and the Certificates of Designation. Purchaser shall provide all cooperation and support, and take all such actions as may be reasonably required to facilitate such filings and obtain such consents. 8.11 Access, Information and Confidentiality. (a) Pre-Closing Access. Upon reasonable notice prior to the Closing, Seller shall (and shall cause each of the Subsidiaries to) afford Purchaser and its representatives reasonable access to its properties, books, contracts and records and personnel and advisors and Seller shall (and shall cause each of the Subsidiaries to) furnish promptly to Purchaser all information concerning its business, properties and personnel as Purchaser or its representatives may reasonably request. (b) Post-Closing Access. From the date hereof until the Stockholder Meeting, Seller shall permit Purchaser (and its designated representatives) to visit and inspect any of the properties of Seller and the Subsidiaries, including the books and records of Seller and the Subsidiaries (and to make extracts and copies therefrom), and to consult with respect to and discuss the affairs, businesses, finances, operations and accounts of Seller and the Subsidiaries with the officers, directors and employees of such entities, all at such reasonable times and as often as Purchaser may reasonably request. (c) Information. Seller covenants that so long as Purchaser owns at least 10% of any Issuable Securities it will deliver to Purchaser the following: (i) As soon as practicable and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, (A) a consolidated statement of income and consolidated statements of changes in financial position and cash flows of Seller and the Subsidiaries for such quarterly period and for the period from the beginning of the current fiscal year to the end of such quarterly period, and (B) a consolidated balance sheet of Seller and the Subsidiaries as at the end of such quarterly period, setting forth in each case, in comparative form, figures for the corresponding periods in the preceding fiscal year and corresponding figures for the budget for such quarterly period, all in reasonable detail and certified by an authorized financial officer of Seller, subject to changes resulting from year- end adjustments; 19 (ii) As soon as practicable and in any event within 120 days after the end of each fiscal year, (A) a consolidated statement of income and consolidated statements of changes in financial position and cash flows of Seller and the Subsidiaries for such year, and (B) a consolidated balance sheet of Seller and the Subsidiaries as of the end of such year, setting forth in each case, in comparative form, corresponding consolidated figures from the preceding annual audit and corresponding figures for the budget for such fiscal year, all in reasonable detail together with an opinion directed to Seller of independent public accountants of recognized standing selected by Seller; (iii) Promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders and copies of all registration statements (without exhibits), other than on Form S-8 or any similar successor form, and all reports which it files with the Commission (or any governmental body or agency succeeding to the functions of the Commission); (iv) With reasonable promptness, such other financial data as any Purchaser may reasonably request. (d) Confidentiality. Purchaser recognizes and acknowledges that it has in the past, currently has, and in the future may possibly have, access to certain confidential information of Seller. Purchaser agrees that it will not disclose confidential information with respect to Seller to any Person for any purpose or reason whatsoever, except to authorized representatives of Seller and to counsel and other advisers, provided, however, that such advisers (other than counsel) -------- ------- agree to the confidentiality provisions of this subsection 8.11(d), unless (i) such information becomes known to the public generally through no fault of Purchaser, or (ii) disclosure is required by law or the order of any governmental authority under color of law; provided, however, that prior to -------- ------- disclosing any information pursuant to clauses (i) or (ii) above, Purchaser shall, if possible, give prior written notice thereof to Seller and provide Seller with the opportunity to contest such disclosure. 8.12 Maintenance of Business. Seller covenants that between the date of this Agreement and Closing, it shall and shall cause each of the Subsidiaries to: (a) conduct its business (including, but not limited to, making loans, paying directors, officers and employees, including any salary, bonus, or other compensation policy, disposing or acquiring assets, and incurring liabilities) only in the ordinary course, consistent with past practice; (b) use commercially reasonable efforts to preserve its business organizations intact, to retain the services of its present officers and employees and to preserve the good will of the suppliers and customers and others having business relations with it; (c) comply in all material respects with all laws that may be applicable to its business; (d) not make any distributions or dividends to its stockholders; and 20 (e) comply with its stated official accounting policies with respect to charge-offs and loss provisions. Subject to the foregoing, any transaction or action that is not in the ordinary course of business, consistent with Seller's past practice, shall be subject to the prior written consent of Purchaser. 8.13 Exchange. In the event Seller shall have obtained the Stockholder Approval, on the first Business Day following the last to occur of (a) delivery to Purchaser of a Certificate of the Chief Executive Officer or other executive officer of Seller certifying that the Stockholder Approval has been obtained, which Certificate shall be delivered within one Business Day of obtaining the Stockholder Approval and (b) termination of any applicable waiting period under the HSR Act, then the Bridge Securities and any additional shares of Series A Preferred Stock paid as dividends thereon shall, without any further action on the part of Seller or the holders thereof, be exchanged for shares of Series B Preferred Stock (the "Exchange"). If the Stockholder Approval has not been obtained prior to six months after the Closing, then the Exchange shall not take place without the prior written consent of the holders of at least 67% of the shares of Series A Preferred Stock and Series C Preferred Stock. In connection with the Exchange, the holders of the Bridge Securities or any additional shares of Series A Preferred Stock paid as dividends thereon shall receive the number of shares of Series B Preferred Stock equal to (x) 46,082.95 plus the number of any additional shares of Series A Preferred Stock paid as dividends thereon then owned by them on the date of the Exchange (after giving effect to any accrued dividends and interest), divided by (y) 2,170. From and after the date of the Exchange all of the Bridge Securities and any additional shares of Series A Preferred Stock paid as dividends thereon shall be deemed to have been exchanged for the Series B Preferred Stock into which they were exchangeable. Holders of Issuable Securities shall be entitled to obtain certificates representing the Series B Preferred Stock to which they are entitled pursuant to the Exchange by delivering to Seller certificates representing the Series A Preferred Stock and the Series C Preferred Stock. Seller shall not take any action between the date hereof and the date set for redemption of the Series A Preferred Stock that would cause the Conversion Price (as defined in the Series B Certificate of Designation) to be any amount other than $21.70 per share if shares of Series B Preferred Stock were outstanding on the date hereof without making appropriate adjustments thereof in the conversion price (which such adjustment or cumulative adjustments to the Series B Preferred Stock shall take effect immediately after the Exchange). 8.14 Tax Matters. Purchaser intends that no pay-in-kind dividends on the Series A Preferred Stock or the Series B Preferred Stock will, when paid or accrued, be includible in Purchaser's gross income for federal, state or local tax purposes. Accordingly, for so long as there are any shares of Series A Preferred Stock or Series B Preferred Stock outstanding then: (a) unless Seller concludes in good faith that there is no reasonable basis to make or file any tax return that is consistent with such intention, Seller shall not make or file any tax return that is inconsistent with such intention; (b) if by reason of any action taken by Seller over the objection of Purchaser the pay-in-kind dividends which accrue or are paid with respect to the Series A Preferred Stock or Series B Preferred Stock become taxable as 21 income for tax purposes when paid or accrued, Seller shall pay to the holders of such securities such additional amount (the "Gross Up Amount") as may be necessary to fund any federal, state or local income tax payable with respect to such dividend. Such Gross Up Amount shall also include an amount necessary to fund the payment of any such income tax payable with respect to the Gross Up Amount. Such Gross Up Amount shall be paid upon notice to Seller at least ten (10) days before the date on which the relevant income tax payment is due or made. Prior to receiving any taxable distribution from Seller, Purchaser shall provide Seller with such documentation as may be reasonably requested by Seller in order to make such distribution without withholding for tax purposes. All amounts paid or accrued on any Issuable Security shall be net of applicable withholding taxes. 8.15 Authorized Shares. If Seller is unable to obtain the Stockholder Approval, it will use its best efforts to obtain an amendment to the Certificate of Incorporation providing for an increase in the number of authorized shares of Common Stock to such number as is sufficient to permit the repurchase by Seller of the Series C Preferred Stock pursuant to the terms of the Certificate of Designation for the Series C Preferred Stock. ARTICLE IX TERMINATION 9.1 General. Except for the obligations in Article IX, Article XI and Section 8.11(a) and (d), this Agreement and the transactions contemplated hereby shall terminate without any action by the parties hereto if the Closing shall not have occurred on or before November 30, 1999. This Agreement may be terminated at any time prior to the Closing (i) by a written instrument executed and delivered by Seller and Purchaser; (ii) by Purchaser upon any material breach or default by Seller under this Agreement; or (iii) by Seller upon any material breach or default by Purchaser under this Agreement. 9.2 Breach By Seller. A material breach or default by Seller shall occur: (a) in the event that any representation or warranty of Seller set forth in Article V shall be false in any material respect; or (b) in the event that Seller (or any applicable Subsidiary) shall not perform in any material respect any covenant required of it in Article III or Article VIII not otherwise waived by Purchaser; or (c) breach of or default by Seller or any Subsidiary under any of the Transaction Documents. 9.3 Breach By Purchaser. A material breach or default by Purchaser shall occur (a) in the event that any representation or warranty of Purchaser set forth in Article VI shall be false in any material respect; or (b) in the event that Purchaser shall not perform in any material respect any covenant required of it in Article IV or VIII not otherwise waived by Seller; or 22 (c) breach of or default by Purchaser under any of the Transaction Documents. 9.4 Specific Remedies. In addition to the termination of this Agreement and the transactions contemplated herein prior to Closing, in the event of a material breach or default by a party (the "Breaching Party"), the Breaching Party shall indemnify the non-breaching party for any and all loss, cost, and expense caused by the breach of representation, warranty, or covenant. ARTICLE X SURVIVAL; INDEMNIFICATION 10.1 Survival of Representations and Warranties and Covenants. All representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement and the delivery of Bridge Securities for a period of two (2) years from the date of such delivery and any examination or investigation made by any party to this Agreement or any of their successors and assigns. All covenants shall survive for the periods specified therein or, if no period is specified, for a period of two (2) years. 10.2 Indemnification of Seller. From and after the Closing Purchaser shall indemnify Seller and its Affiliates, officers, directors, employees, partners (general or limited), shareholders, and shareholders of their partners (general or limited), for, and shall defend and hold harmless each of them from, against, and with respect to all Indemnifiable Losses as a result of, arising from, in connection with, or incident to (a) any breach or inaccuracy of any representation or warranty Purchaser makes in this Agreement; or (b) any failure of Purchaser to fulfill, satisfy, and discharge any of its obligations or covenants under this Agreement. 10.3 Indemnification of Purchaser. From and after the Closing Seller shall indemnify Purchaser and its Affiliates, officers, directors, employees, partners (general or limited) and shareholders of its partners (general or limited) for, and shall defend and hold harmless each of them from, against, and with respect to all Indemnifiable Losses as a result of, arising from, in connection with, or incident to (a) any breach or inaccuracy of any written representation or warranty made by Seller in this Agreement; or (b) any failure of Seller to fulfill, satisfy, and discharge any of its obligations or covenants under this Agreement. ARTICLE XI MISCELLANEOUS 11.1 Successors and Assigns. All covenants and agreements contained in this Agreement by or on behalf of the parties hereto shall bind, and inure to the benefit of, the respective successors and assigns of the parties hereto; PROVIDED, HOWEVER, that the rights granted to the parties hereto may not be assigned (except to wholly-owned subsidiaries of such parties) without the prior written consent of the other parties. Purchaser may assign to one or 23 more of its affiliated partnerships its obligations hereunder in whole or in part, but shall not be relieved of such obligations. 11.2 Performance; Waiver. The provisions of this Agreement (including this Section 11.2) may be modified or amended, and waivers and consents to the performance and observance of the terms hereof may be given by written instrument executed and delivered by Seller and (1) prior to the Closing, by Purchaser and (2) after the Closing, by the holder or holders of a majority of the Series A Preferred Stock and Series C Preferred Stock or, after the Exchange, of the Series B Preferred Stock. The failure at any time to require performance of any provision hereof shall in no way affect the full right to require such performance at any time thereafter (unless performance thereof has been waived in accordance with the terms hereof for all purposes and at all times by the parties to whom the benefit of such performance is to be rendered). The waiver by any party to this Agreement of a breach of any provision hereof shall not be taken or held to be a waiver of any succeeding breach of such provision or any other provision or as a waiver of the provision itself. 11.3 Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof). If to Seller: URS Corporation 100 California Street, Suite 500 San Francisco, California 94111 Attn: Kent P. Ainsworth Facsimile: (415) 398-2621 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, California 94111-3580 Attn: Samuel M. Livermore Facsimile: (415) 951-3699 If to Purchaser: RCBA Strategic Partners, L.P. 909 Montgomery Street, Suite 400 San Francisco, California 94133 Attn: Murray A. Indick Facsimile: (415) 434-3130 with a copy to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Michael R. Klein and Eric R. Markus Facsimile: (202) 663-6363 24 or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. 11.4 Expenses. (a) Seller shall reimburse Purchaser for all of Purchaser's reasonable out-of pocket costs and third party expenses (including professional fees), that Purchaser incurred in association with this Agreement including, but not limited to, conducting "due diligence" review of Seller, as and when such expenses are incurred; PROVIDED, HOWEVER, that if Purchaser has breached this Agreement as provided in Section 9.3, and Seller terminates this Agreement, each party shall bear its own expenses. (b) In addition to any other reimbursement to which Purchaser is entitled pursuant to this Section, Seller shall pay to Purchaser in cash at Closing the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00) as a transaction fee. 11.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware, without regard to principles of conflicts of law. 11.6 Severability; Interpretation. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, each of Seller and Purchaser directs that such court interpret and apply the remainder of this Agreement in the manner which it determines most closely effectuates their intent in entering into this Agreement, and in doing so particularly take into account the relative importance of the term, provision, covenant or restriction being held invalid, void or unenforceable. 11.7 Headings. The index and section headings herein are for convenience only and shall not affect the construction hereof. 11.8 Entire Agreement. This Agreement together with the other Transaction Documents embody the entire agreement between the Parties relating to the subject matter hereof and any and all prior oral or written agreements, representations or warranties, contracts, understandings, correspondence, conversations, and memoranda, whether written or oral, among Seller and Purchaser, or between or among any agents, representatives, parents, subsidiaries, Affiliates, predecessors in interest or successors in interest, with respect to the subject matter hereof. 11.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 11.10 Absence of Third Party Beneficiary Rights. No provision of this Agreement is intended, nor will be interpreted, to provide or to create any third party beneficiary rights or any other rights of any kind in any client, 25 customer, Affiliate, shareholder, employee, or partner of any party hereto or any other Person. 11.11 Mutual Drafting. This Agreement is the mutual product of the parties hereto, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the parties, and shall not be construed for or against any party hereto. 11.12 Further Representations. Each party to this Agreement acknowledges and represents that it has been represented by its own legal counsel in connection with the transactions contemplated by this Agreement, with the opportunity to seek advice as to its legal rights from such counsel. Each party further represents that it is being independently advised as to the tax consequences of the transactions contemplated by this Agreement and is not relying on any representation or statements made by the other party as to such tax consequences. 11.13 Specific Performance; Remedies. (a) Seller acknowledges that Purchaser will be irreparably harmed and that there will be no adequate remedy at law for any violation by Seller of the covenants or agreements contained in Sections 8.4 (Stockholder Meeting), 8.6 (Stock Exchange Listing), 8.8 (Equity Proposals), 8.9 (Publicity), 8.10 (Securities), 8.11(a), (b) and (c) (Pre-Closing Access; Post-Closing Access; Information), 8.13 (Exchange), and 8.14 (Tax Matters) of this Agreement. It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of any such covenants or agreements, Purchaser shall have the right to obtain injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, these covenants and agreements of Seller. (b) Purchaser acknowledges that Seller will be irreparably harmed and that there will be no adequate remedy at law for any violation by Purchaser of the covenants or agreements contained in Section 8.9 (Publicity) and subsection 8.11(d) (Confidentiality) of this Agreement. It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of any such covenants or agreements, Seller shall have the right to obtain injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, these covenants and agreements of Purchaser. [Remainder of page left intentionally blank.] 26 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. RCBA STRATEGIC PARTNERS, L.P. URS CORPORATION By: RCBA GP, L.L.C. By: /s/ Murray A. Indick By: /s/ Kent Ainsworth ------------------------- ------------------------- Name: Murray A. Indick Name: Kent Ainsworth Title: Member Title: Vice President and Chief Financial Officer 27 EXHIBIT 1.7 CERTIFICATE OF DESIGNATION of SERIES A PREFERRED STOCK of URS CORPORATION =================== Pursuant to Section 151 of the General Corporation Law of the State of Delaware =================== URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $.01 per share, designated as Series A Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $.01 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as the "Series A Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting such series shall be 300,000 shares of Series A Preferred Stock. Section 12 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. (a) The holders of shares of Series A Preferred Stock, in preference to the holders of shares of the Common Stock and of any other Capital Stock of the Corporation ranking junior to the Series A Preferred Stock as to payment of dividends, shall be entitled to receive on the last day of each calendar quarter, cumulative dividends on the Series A Preferred Stock accruing on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) at the rate per annum equal to the Dividend Rate (as defined herein) per share of Series A Preferred Stock calculated as a percentage of $2,170.00, compounded quarterly, from and including the date of issuance until the redemption of the Series A Preferred Stock. Such dividends shall be paid in kind as herein provided, and will be paid whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends on the Series A Preferred Stock shall be paid in additional shares of Series A Preferred Stock valued at $2,170.00 per share. For purposes hereof, the "Dividend Rate" shall mean eight percent (8%) per annum from the date of initial issuance of the Series A Preferred Stock until six (6) months after the date of issuance, and (ii) and fifteen percent (15%) thereafter (except as otherwise provided in the last sentence of Section 4(b)(ii)); PROVIDED, HOWEVER, that if Stockholder Approval (as such term is defined in the Securities Purchase Agreement) has not been obtained within six (6) months after the date of issuance, then the Dividend Rate shall be retroactively recalculated as if it were fifteen percent (15%) from the time of issuance and additional dividend shares shall be paid in respect of such retroactive increase. (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, other than any dividend or distribution of shares of Common Stock covered by paragraph (b)(i) of Section 7 hereof (a "Covered Distribution"), the holders of shares of Series A Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series A Preferred Stock held, in addition to the dividends payable under paragraph (a) of this Section 2, the same dividend or distribution received by a holder of the number of shares of Common Stock equal to the Common Liquidation Equivalent per share of Series A Preferred Stock on the record date for such dividend or distribution. Any such dividend or distribution shall be declared, ordered, paid or made on the Series A Preferred Stock at the same time such dividend or distribution is declared, ordered, paid or made on the Common Stock and shall be in addition to any dividends payable under paragraph (a) of this Section 2. Section 3. Voting Rights. So long as any shares of Series A Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series A Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series A Preferred Stock ("Parity Stock"); (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock, other than the exchange of Series B Exchangeable Convertible Preferred Stock of the Corporation (the "Series B Preferred Stock") for shares of Series A Preferred Stock and Series C Preferred Stock of the Corporation (the "Series C Preferred Stock"); (v) alter or change the rights, preferences or privileges of the Series A Preferred Stock; (vi) increase or decrease the authorized number of shares of Series A Preferred Stock or issue shares of Series A Preferred Stock other than to holders of Series A Preferred Stock pursuant to its terms; or (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series A Preferred Stock. Section 4. Mandatory Repurchase by the Corporation. (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall purchase for cash from each holder of shares of Series A Preferred Stock the number of shares of the Series A Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Liquidation Preference. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) (i) On the date fixed for repurchase, each holder of shares of Series A Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash therefor provided in this Section 4. Dividends with respect to the shares of Series A Preferred Stock so purchased shall cease to accrue after the date so purchased, such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be stockholders of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. (ii) If the funds legally available for such purchase are not sufficient to purchase all the shares of Series A Preferred Stock tendered to the Corporation for purchase, the Corporation shall purchase the greatest number of whole shares for which such funds are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series A Preferred Stock thereafter shall continue to be those of a holder of shares of the Series A Preferred Stock; PROVIDED, HOWEVER, the Corporation shall thereafter be required to repurchase all such remaining shares at the first date it has sufficient funds legally available for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent. Upon the failure to purchase all of the Series A Preferred Stock as required by this Section 4, the Dividend Rate on any such stock that has not been purchased shall automatically, pursuant to Section 2(a), increase to eighteen percent (18%). (c) Whenever the Corporation shall not have redeemed the shares of Series A Preferred Stock within five (5) Business Days of the date such redemption is required by Section 4(a), thereafter and until all redemption payments shall have been made, if and so long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, nor shall it permit any of its Subsidiaries to: (i) declare or pay dividends, or make any other distributions, on any shares of Common Stock or other capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Stock ("Junior Stock"), other than dividends or distribution payable in Junior Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of Parity Stock, other than dividends or distributions payable in Junior Stock, except dividends paid ratably on the Series A Preferred Stock and all Parity Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration (other than Junior Stock) any shares of Junior Stock or Parity Stock (other than, with respect to Parity Stock, ratably with the Series A Preferred Stock); or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, other than purchases ratably among all holders of the Series A Preferred Stock. (d) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to paragraph (c) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $.01 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in Section 3. Section 6. Liquidation, Dissolution or Winding Up. If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series A Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series A Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. A consolidation, merger, corporate reorganization, recapitalization or other similar transaction as a result of which the beneficial holders of the Corporation's Common Stock immediately prior to such transaction do not hold, directly or indirectly, in excess of 50% of the combined voting securities entitled to vote generally in the election of the directors of the surviving or resulting corporation immediately after such transaction, and a sale or other disposition of all or substantially all of the assets of the Corporation in one transaction or series of related transactions, each shall be deemed to be a "liquidation" within the meaning of this Section 6; provided that no such transaction shall be deemed to be a "liquidation" if first approved by the Board of Directors of the Corporation and the Requisite Holders. Section 7. Common Liquidation Equivalent. (a) Subject to the provisions for adjustment hereinafter set forth, the "Common Liquidation Equivalent" of each share of Series A Preferred Stock shall be equal to an amount that would be payable to the holder of such share upon the occurrence of an event described in Section 6 had such holder, immediately prior to such event, exchanged such shares for shares of Common Stock at the Applicable Exchange Rate. The Applicable Exchange Rate in effect at any time shall be the quotient obtained by dividing $2,170.00 by the Applicable Exchange Value, calculated as provided in Section 7(b). (b) The Applicable Exchange Value shall be $21.70, except that such amount shall be adjusted from time to time in accordance with this Section 7. The Applicable Exchange Value shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall at any time or from time to time after the original issuance of the Series A Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Applicable Exchange Value in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Applicable Exchange Value by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In addition to the foregoing adjustments in subSection (i) above, the Corporation will be permitted to make such reductions in the Applicable Exchange Value as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the shares of Common Stock. (iii) No adjustment in the Applicable Exchange Value shall be required unless such adjustment would require an increase or decrease of at least 0.1% of the Applicable Exchange Value; provided, that any adjustments which by reason of this subSection (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (iv) In each case of an adjustment or readjustment of the Applicable Exchange Rate, the Corporation at its expense will furnish each holder of Series A Preferred Stock with a certificate, executed by the president and chief financial officer (or in the absence of a person designated as the chief financial officer, by the treasurer) showing such adjustment or readjustment, and stating in detail the facts upon which such adjustment or readjustment is based. Section 8. Rank. The Series A Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series A Preferred Stock (other than the Series C Preferred Stock, which shall rank on a par with the Series A Preferred Stock) and prior to all classes of Common Stock. Section 9. Other Covenants. (a) Transfer Taxes. The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Series B Preferred Stock on exchange of the Series A Preferred Stock and other securities. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Series A Preferred Stock (or other securities or assets) in a name other than that in which the shares of Series A Preferred Stock so exchanged were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Series A Preferred Stock, and shall cause to be mailed to the holders of record of the Series A Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 10. Remedies. (a) The Corporation stipulates that the remedies at law of each holder of Series A Preferred Stock in the event of any failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series A Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with the enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series A Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 11. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 12. Definitions. For the purposes of the Certificate of Designation of Series A Preferred Stock which embodies this resolution: (a) "Accrued Dividends" to a particular date (the "Applicable Date") shall mean (i) all dividends accrued but not paid on the Series A Preferred Stock pursuant to paragraph (a) of Section 2, whether or not declared, accrued to the Applicable Date, plus (ii) all dividends or distributions payable pursuant to paragraph (b) of Section 2 for which the Covered Distribution was declared, ordered, paid or made on or prior to the Applicable Date. (b) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (c) "capital stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (d) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (e) "Common Liquidation Equivalent" shall have the meaning set forth in Section 7. (f) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (h) "Liquidation Preference" shall mean an amount per share of Series A Preferred Stock equal to the greater of (i) the Common Liquidation Equivalent and (ii) the Preferred Liquidation Amount. (i) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (j) "Preferred Liquidation Amount" per share of Series A Preferred Stock shall be an amount equal to $2,170.00 plus all Accrued Dividends thereon to the date of determination. (k) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series A Preferred Stock. (l) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series A Preferred Stock party thereto. (m) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (n) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series A Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this [ ] day of [ ], 1999. URS CORPORATION By: --------------------------- EXHIBIT 1.7 CERTIFICATE OF DESIGNATION of SERIES B EXCHANGEABLE CONVERTIBLE PREFERRED STOCK of URS CORPORATION =================== Pursuant to Section 151 of the General Corporation Law of the State of Delaware =================== URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $.01 per share, designated as Series B Exchangeable Convertible Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $.01 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as the "Series B Exchangeable Convertible Preferred Stock" (the "Series B Preferred Stock") and the number of shares constituting such series shall be 150,000 shares of Series B Preferred Stock. Section 14 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. (a) The holders of shares of Series B Preferred Stock, in preference to the holders of shares of the Common Stock and of any other capital stock of the Corporation ranking junior to the Series B Preferred Stock as to payment of dividends, shall be entitled to receive on the last day of each calendar quarter, cumulative dividends on the Series B Preferred Stock accruing on a daily basis (computed on the basis of a 360-day year of twelve 30-day months) at the rate per annum equal to the Dividend Rate (as defined herein) per share of Series B Preferred Stock calculated as a percentage of $2,170.00, compounded quarterly, from and including the date of issuance of the Series B Preferred Stock until the conversion or exchange of the Series B Preferred Stock. Such dividends shall be paid in kind as herein provided, and will be paid whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends on the Series B Preferred Stock shall be paid in additional shares of Series B Preferred Stock valued at $2,170.00 per share. For purposes hereof, the "Dividend Rate" shall mean eight percent (8%) per annum from the date of initial issuance of the Series B Preferred Stock(except as otherwise provided in the last sentence of Section 4(b)(ii)). (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, other than any dividend or distribution of shares of Common Stock covered by paragraph (b)(i) of Section 8 hereof (a "Covered Distribution"), the holders of shares of Series B Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series B Preferred Stock held, in addition to the dividends payable under paragraph (a) of this Section 2, the same dividend or distribution received by a holder of the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible on the record date for such dividend or distribution. Any such dividend or distribution shall be declared, ordered, paid or made on the Series B Preferred Stock at the same time such dividend or distribution is declared, ordered, paid or made on the Common Stock and shall be in addition to any dividends payable under paragraph (a) of this Section 2. Section 3. Voting Rights. In addition to any voting rights provided elsewhere herein, and any voting rights provided by law, the holders of shares of Series B Preferred Stock shall have the following voting rights: (a) So long as the Series B Preferred Stock is outstanding, each share of Series B Preferred Stock shall entitle the holder thereof to vote on all matters voted on by holders of the capital stock of the Corporation into which such share of Series B Preferred Stock is convertible, voting together as a single class with the other shares entitled to vote, at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Series B Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the shares of capital stock of the Corporation into which such share of Series B Preferred Stock is convertible on the record date for such vote or, if no such record date is established, on the date any written consent of stockholders is solicited. (b) So long as any shares of Series B Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series B Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series B Preferred Stock ("Parity Stock"); (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock; (v) alter or change the rights, preferences or privileges of the Series B Preferred Stock; (vi) increase or decrease the authorized number of shares of Series B Preferred Stock or issue shares of Series B Preferred Stock other than to holders of Series B Preferred Stock pursuant to its terms; (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series B Preferred Stock; (viii) authorize or pay any cash dividend on Common Stock or any other class or series of stock over which the Series B Preferred Stock has any preference or priority as to voting, dividends or upon liquidation, dissolution or winding-up ("Junior Stock"); or (ix) redeem, repurchase, retire or otherwise acquire Common Stock or any other Junior Stock (other than by conversion into or exchange for shares of Junior Stock and other than any redemptions, repurchases or acquisitions made pursuant to and as required by the terms of any employee incentive or benefit plan of the Corporation as in effect from time to time). Section 4. Mandatory Repurchase by the Corporation. (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall purchase for cash from each holder of shares of Series B Preferred Stock the number of shares of the Series B Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Conversion Value. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) (i) On the date fixed for repurchase, each holder of shares of Series B Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash therefor provided in this Section 4. Dividends with respect to the shares of Series B Preferred Stock so purchased shall cease to accrue after the date so purchased, such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be stockholders of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. (ii) If the funds legally available for such purchase are not sufficient to purchase all the shares of Series B Preferred Stock tendered to the Corporation for purchase, the Corporation shall purchase the greatest number of whole shares for which such funds are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series B Preferred Stock thereafter shall continue to be those of a holder of shares of the Series B Preferred Stock; PROVIDED, HOWEVER, the Corporation shall thereafter be required to repurchase all such remaining shares at the first date it has sufficient funds legally available for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent. Upon the failure to purchase all of the Series B Preferred Stock as required by this Section 4, the Dividend Rate on any such stock that has not been purchased shall automatically, pursuant to Section 2(a), increase to twelve percent (12%). If any part of the Series B Preferred Stock has not been purchased pursuant to this Section 4 three (3) months after the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Dividend Rate shall thereafter increase to fifteen percent (15%). Section 5. Conversion at Option of the Corporation. (a) On or after the third anniversary of the Closing Date of the Securities Purchase Agreement (the "Third Anniversary"), so long as shares of Common Stock shall have traded on the Primary Exchange for at least thirty (30) of the forty-five (45) trading days immediately preceding the Determination Date (defined below), at a Closing Price in excess of the Hurdle Percentage of the Conversion Price then in effect for the Series B Preferred Stock for each such trading day, all, but not less than all, of the shares of Series B Preferred Stock may, at the option of the Corporation, be converted into shares of Common Stock. The Corporation shall send notice of mandatory conversion to each of the holders of the Series B Preferred Stock at such holder's address as it appears on the transfer books of the Corporation. (b) Subject to the provisions for adjustment set forth in Section 8, each share of Series B Preferred Stock shall be -- if the Corporation so elects as provided in Section 5(a) -- converted into a number of fully paid and nonassessable shares of Common Stock equal to the product obtained by multiplying the Applicable Conversion Rate by the number of shares of Series B Preferred Stock being converted. The Applicable Conversion Rate shall be the quotient obtained by dividing the Conversion Value on the date of conversion by the applicable Conversion Price. Section 6. Reacquired Shares. Any shares of Series B Preferred Stock converted, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $.01 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in paragraph (b) of Section 3. Section 7. Liquidation, Dissolution or Winding Up. If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series B Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series B Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. Section 8. Conversion. Each share of Series B Preferred Stock may, at the option of the holder thereof, be converted into shares of Common Stock at any time, whether or not the Corporation has given notice of exchange under Section 9, on the terms and conditions set forth in this Section 8. In addition: (a) Subject to the provisions for adjustment hereinafter set forth, each share of Series B Preferred Stock shall be convertible in the manner hereinafter set forth into a number of fully paid and nonassessable shares of Common Stock equal to the product obtained by multiplying the Applicable Conversion Rate by the number of shares of Series B Preferred Stock being converted. The Applicable Conversion Rate shall be the quotient obtained by dividing the Conversion Value on the date of conversion by the applicable Conversion Price. (b) The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall at any time or from time to time after the original issuance of the Series B Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Conversion Price in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Conversion Price by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In addition to the foregoing adjustments in subsections (i), the Corporation will be permitted to make such reductions in the Conversion Price as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the shares of Common Stock. (iii) In any case in which this Section 8 shall require that an adjustment (including by reason of the last sentence of subsection (i) above) be made immediately following a record date, the Corporation may elect to defer the effectiveness of such adjustment (but in no event until a date later than the effective time of the event giving rise to such adjustment), in which case the Corporation shall, with respect to any share of Series B Preferred Stock converted after such record date and on and before such adjustment shall have become effective (x) defer paying any cash payment pursuant to Section 8(f) hereof or issuing to the holder of such shares of Series B Preferred Stock the number of shares of Common Stock and other capital stock of the Corporation (or other assets or securities) issuable upon such conversion in excess of the number of shares of Common Stock and other capital stock of the Corporation issuable thereupon only on the basis of the Conversion Price prior to adjustment, and (y) not later than five Business Days after such adjustment shall have become effective, pay to such holder the appropriate cash payment pursuant to Section 8(f) hereof and issue to such holder the additional shares of Common Stock and other capital stock of the Corporation issuable on such conversion. (iv) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 0.1% of the Conversion Price; provided, that any adjustments which by reason of this subsection (iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (c) (i) In case of any capital reorganization or reclassification of outstanding shares of Common Stock (other than a reclassification covered by paragraph (b) (i) of this Section 8), or in case of any consolidation or merger of the Corporation with or into another corporation, or in case of any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety (each of the foregoing being referred to as a "Transaction"), (x) if such Transaction occurs prior to the Third Anniversary and constitutes or leads to a Change in Control, each holder of Series B Preferred Stock shall then be entitled to the acceleration and immediate vesting of all dividends such holder would have accrued on and prior to the Third Anniversary, and (y) each share of Series B Preferred Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to the consummation of such Transaction, the kind and amount of shares of stock and other securities and property (including cash) receivable upon the consummation of such transaction by a holder of that number of shares of Common Stock into which one share of Series B Preferred Stock was convertible immediately prior to such Transaction (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Transaction). In any such case, if necessary, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions set forth in this Section 8 with respect to rights and interests thereafter of the holders of shares of Series B Preferred Stock to the end that the provisions set forth herein for the protection of the conversion rights of the Series B Preferred Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Series B Preferred Stock remaining outstanding (with such adjustments in the conversion price and number of shares issuable upon conversion and such other adjustments in the provisions hereof as the Board of Directors shall determine to be appropriate). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. (ii) Notwithstanding anything contained herein to the contrary, the Corporation will not effect any Transaction unless, prior to the consummation thereof, the Surviving Person (as defined in Section 14) thereof shall assume, by written instrument mailed to each record holder of shares of Series B Preferred Stock, at such holder's address as it appears on the transfer books of the Corporation, the obligation to deliver to such holder such cash and such securities to which, in accordance with the foregoing provisions, such holder is entitled. Nothing contained in this paragraph (c) shall limit the rights of holders of the Series B Preferred Stock to convert the Series B Preferred Stock in connection with the Transaction. (d) The holder of any shares of Series B Preferred Stock may exercise its right to convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series B Preferred Stock to be converted duly endorsed to the Corporation in blank accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8. The Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock pursuant hereto. As promptly as practicable, and in any event within three Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates registered in the name of such holder representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series B Preferred Stock so converted shall be entitled and (ii) if less than the full number of shares of Series B Preferred Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversion shall be deemed to have been made at the close of business on the date of receipt of such notice and of such surrender of the certificate or certificates representing the shares of Series B Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock and any declared but unpaid dividends in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (e) Notwithstanding any other provisions of this Certificate of Designation, shares of Series B Preferred Stock may be converted at any time and, if subject to exchange, up to the close of business on the last Business Day immediately preceding the date fixed for such exchange of such shares. (f) In connection with the conversion of any shares of Series B Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the day on which such shares of Series B Preferred Stock are deemed to have been converted. (g) In case at any time or from time to time the Corporation shall pay any dividend or make any other distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or consolidation or merger of the Corporation with or into another corporation, or any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then, in any one or more of said cases the Corporation shall give at least twenty (20) days' prior written notice (the time of mailing of such notice shall be deemed to be the time of giving thereof) to the registered holders of the Series B Preferred Stock at the addresses of each as shown on the books of the Corporation of the date on which (i) the books of the corporation shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be, provided that in the case of any Transaction to which paragraph (c) applies the Corporation shall give at least thirty (30) days' prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock and of the Series B Preferred Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock or Series B Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance, or participate in such dissolution, liquidation or winding up, as the case may be. (h) Whenever the number of shares of Common Stock into which each share of Series B Preferred Stock is convertible (or the number of votes to which each share of Series B Preferred Stock is entitled) is adjusted as provided in Section 8 hereof, the Corporation shall promptly mail to the holders of record of the outstanding shares of Series B Preferred Stock at their respective addresses as the same shall appear in the Corporation's stock records a notice stating that the number of shares of Common Stock into which the shares of Series B Preferred Stock are convertible has been adjusted and setting forth the new number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of Series B Preferred Stock is convertible, as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective. Section 9. Exchange at the Option of the Corporation. (a) The Corporation may, at its option, exchange the Series B Preferred Stock, in whole but not in part, at any time, for Exchange Debentures; PROVIDED, HOWEVER, that (i) on the date of such exchange there are no accumulated and unpaid dividends on the Series B Preferred Stock (including the dividend payable on such date) that are not paid contemporaneously with such exchange or other contractual impediments to such exchange; (ii) such exchange is permitted under applicable law; and (iii) the Corporation shall have delivered to the Trustee under the Exchange Indenture, an opinion of counsel with respect to the due authorization and issuance of the Exchange Debentures. (b) Upon any exchange of Series B Preferred Stock for Exchange Debentures pursuant to this Section 9, each Holder of Series B Preferred Stock will be entitled to receive, subject to the second succeeding sentence, $1.00 principal amount of Exchange Debentures for each $1.00 of Conversion Value of Series B Preferred Stock so exchanged. The Exchange Debentures will be issued in registered form without coupons. Exchange Debentures issued in exchange for Preferred Stock will be issued in principal amounts of $1,000 and integral multiples thereof to the extent possible, and will also be issued in principal amounts less than $1,000 so that each Holder of Series Preferred Stock will receive certificates representing the entire amount of Exchange Debentures to which such Holder's shares of Preferred Stock entitle such Holder; PROVIDED, HOWEVER, that the Corporation may pay cash in lieu of issuing a Exchange Debenture in a principal amount less than $1,000. (c) The Corporation will send a written notice of exchange (the "Exchange Notice") by first-class mail to each Holder of record of shares of Series B Preferred Stock not fewer than thirty (30), nor more than sixty (60), days before the date fixed for any exchange (the "Exchange Date") at its registered address and notice, if mailed in the manner herein provided, shall conclusively be presumed to have been given, whether or not the Holder receives such notice; PROVIDED, HOWEVER, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of any shares of Series B Preferred Stock to be exchanged except as to the Holder or Holders to whom the Corporation has failed to give said notice or except as to the Holder or Holders whose notice was defective. The Exchange Notice shall state: (1) the Exchange Date; (2) that the Holder is to surrender to the Corporation, in the manner and at the place or places designated, his certificate or certificates representing the shares of Preferred Stock to be exchanged; (3) that dividends on the shares of Series B Preferred Stock to be exchanged shall cease to accrue on such Exchange Date whether or not certificates representing shares of Series B Preferred Stock are surrendered for exchange on such Exchange Date unless the Corporation shall default in the delivery of the Exchange Debentures to Holders of the Preferred Stock who have duly surrendered their certificates for exchange in accordance with Section 9(c) on or before the Exchange Date; and (4) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Series B Preferred Stock are surrendered for exchange on such Exchange Date. (d) On and after the Exchange Date, dividends will cease to accrue on the outstanding shares of Series B Preferred Stock, and all rights of the Holders of Series B Preferred Stock (except the right to receive the Exchange Debentures or an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and, if the Corporation so elects, cash in lieu of any Exchange Debenture that is in a principal amount that is not an integral multiple of $1,000) will terminate. From and after the Exchange Date, the person entitled to receive the Exchange Debentures issuable upon such exchange will be treated for all purposes as the registered holder of such Exchange Debentures. (e) On or before the Exchange Date, each Holder of Series B Preferred Stock shall surrender the certificate or certificates representing such shares of Preferred Stock, in the manner and at the place designated in the Exchange Notice. Upon surrender in accordance with the Exchange Notice of the certificates representing any shares of Series B Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Company), such shares shall be exchanged by the Company for Exchange Debentures in accordance with Section 9(b). The Corporation shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date. (f) Notwithstanding the foregoing provisions of this Section 9, the Corporation shall not be entitled to exchange the Series B Preferred Stock for Exchange Debentures if such exchange, or any term or provision of the Exchange Indenture or the Exchange Debentures, or the performance of the Company's obligations under this Certificate of Designation, the Preferred Stock, the Exchange Indenture or the Exchange Debentures, shall violate or conflict with any applicable law or agreement or instrument then binding on the Company or if, at the time of such exchange, the Company is insolvent or would be rendered insolvent by such exchange. (g) Notwithstanding the foregoing, if notice of exchange has been given pursuant to this Section 9 and any holder of shares of Preferred Stock shall, prior to the close of business on the Exchange Date, give written notice to the Corporation pursuant to Section 8 of the conversion of any or all of the shares held by the holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation), then the exchange shall not become effective as to the shares to be converted and the conversion shall become effective as provided in Section 8. (h) Prior to the Exchange Date, the Corporation will comply with any applicable securities and blue sky laws with respect to the exchange of the Series B Preferred Stock for the Debentures. Section 10. Rank. The Series B Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series B Preferred Stock and prior to all classes of Common Stock. Section 11. Other Covenants. (a) Reservation of Shares; Transfer Taxes; Etc. (i) The Corporation shall at all times reserve and keep available, out of its authorized and unissued stock, solely for the purpose of effecting the conversion of the Series B Preferred Stock, such number of shares of its Common Stock or Common Stock free of preemptive rights as shall from time to time be sufficient to effect the conversion of all shares of Series B Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of the State of Delaware, increase the number of authorized shares of Common Stock if at any time the number of shares of authorized and unissued Common Stock shall not be sufficient to permit the conversion of all the then outstanding shares of Series B Preferred Stock. (ii) If any shares of Common Stock required to be reserved for purposes of conversion of the Series B Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon conversion, the Corporation will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered or approved, as the case may be. If the Common Stock is listed on the New York Stock Exchange or any other national securities exchange or national quotation service, the Corporation will list and keep listed on such exchange, upon official notice of issuance, all shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock. (iii) The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion or exchange of the Series B Preferred Stock. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Common Stock (or other securities or assets) in a name other than that in which the shares of Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Series B Preferred Stock, and shall cause to be mailed to the holders of record of the Series B Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 12. Remedies. (a) The Corporation stipulates that the remedies at law of each holder of Series B Preferred Stock in the event of any Triggering Event or threatened Triggering Event or otherwise or other failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series B Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with any Triggering Event or enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series B Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 13. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 14. Definitions. For the purposes of the Certificate of Designation of Series B Exchangeable Convertible Preferred Stock which embodies this resolution: (a) "Acceleration Amount" per share of Series B Preferred Stock shall mean, as of the date of conversion or exchange of the Series B Preferred Stock under Section 5, 8 or 9 hereof, or the date of any payments on the Series B Preferred Stock under Section 7 hereof, or as of any other date on which it is necessary to determine the number of shares of Common Stock into which a share of Series B Preferred Stock is then convertible: (i) following a Change in Control and prior to the Third Anniversary, an amount calculated to provide the holder of a share of Series B Preferred Stock, as of such date, with a gross amount of accretion calculated at the rate of eight percent (8%) on $2,170.00 per share of Series B Preferred Stock, compounded quarterly, from the date of conversion or exchange of the Series B Preferred Stock under Section 5, 8 or 9 hereof, or the date of any payments on the Series B Preferred Stock under Section 7 hereof, or the date of any other determination, as the case may be, to and including the Third Anniversary, or (ii) other than as specified in clause (i), zero. (b) "Accrued Dividends" to a particular date (the "Applicable Date") shall mean (i) all dividends accrued but not paid on the Series B Preferred Stock pursuant to paragraph (a) of Section 2, whether or not declared, accrued to the Applicable Date, plus (ii) all dividends or distributions payable pursuant to paragraph (b) of Section 2 for which the Covered Distribution was declared, ordered, paid or made on or prior to the Applicable Date. (c) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Exchange Act. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (e) "capital stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (f) "Change in Control" shall mean any of the following: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Corporation, or any of its Subsidiaries, or any employee benefit plan or related trust of the Corporation or any of its Subsidiaries or any Excluded Person or Excluded Group (an "Acquiring Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors; or (ii) the approval by the stockholders of the Corporation, other than any Excluded Person or Excluded Group, of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Corporation resulting from such reorganization, merger or consolidation; or (iii) the sale or other disposition of all or any substantial part of the assets of the Corporation, other than to any Excluded Person or Excluded Group, in one transaction or series of related transactions; provided that the occurrence of any event identified in subparagraphs (i) through (iii) above that would otherwise be treated as a Change in Control shall not constitute a Change in Control hereunder if (x) the Board of Directors of the Corporation, by vote duly taken, and (y) the Requisite Holders of Series B Preferred Stock, by written consent, shall so determine. (g) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the- counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (h) "Conversion Price" shall mean initially $21.70 per share, as adjusted from time to time in accordance with Section 8. (i) "Conversion Value" per share of Series B Preferred Stock shall mean an amount equal to the sum of (x) $2,170.00, (y) all Accrued Dividends thereon to the date of conversion and (z) the Acceleration Amount. (j) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (l) "Exchange Debenture" shall mean the Subordinated Exchange Debentures of the Corporation, issuable in exchange for the Series B Preferred Stock. (m) "Excluded Group" shall mean a "group" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that includes one or more Excluded Persons; provided that the voting securities of the Corporation "beneficially owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act) by such Excluded Persons represents a majority of the voting securities "beneficially owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act) by such group. (n) "Excluded Person" shall mean each of RCBA Strategic Partners, L.P., Richard C. Blum & Associates, L.P. and any affiliate (as defined in the Exchange Act) of any of the foregoing. (o) "Hurdle Percentage" shall mean 135%. (p) "Liquidation Preference" shall mean an amount per share of Series B Preferred Stock equal to the greater of (i) the Conversion Value or (ii) in the event of any liquidation or winding up of the Corporation, the amount the holders of the Series B Preferred Stock would have received had they converted into Common Stock immediately prior to such liquidation or winding up and, if such liquidation or winding up occurs prior to the Third Anniversary of the Closing Date of the Securities Purchase Agreement, the amount such holders would have received had they received the additional dividends that would have been paid from the date of liquidation or winding up through such Third Anniversary, and such additional shares were also converted into Common Stock immediately prior to such liquidation or winding up. (q) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (r) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series B Preferred Stock. (s) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series B Preferred Stock party thereto. (t) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (u) "Surviving Person" shall mean the continuing or surviving Person of a merger, consolidation or other corporate combination, the Person receiving a transfer of all or a substantial part of the properties and assets of the Corporation, or the Person consolidating with or merging into the Corporation in a merger, consolidation or other corporate combination in which the Corporation is the continuing or surviving Person, but in connection with which the Series B Preferred Stock or Common Stock of the Corporation is exchanged, converted or reinstated into the securities of any other Person or cash or any other property; provided, however, if such Surviving Person is a direct or indirect -------- ------- Subsidiary of a Person, the parent entity also shall be deemed to be a Surviving Person. (v) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (w) "Triggering Event" shall mean any one or more of the following: (i) The Corporation shall fail to redeem any part or all of the Series B Preferred Stock in accordance with Section 4. (ii) The Corporation shall fail to pay any dividend on any Series B Preferred Stock on any dividend payment date in accordance with Section 2 for any reason, including but not limited to, that such payment is prohibited by applicable law or the Board of Directors elect not to pay such dividend, or shall otherwise violate any term of Section 2 and such failure shall not be cured within a period of 30 days after such dividend payment date or violation (which cure shall be effected in a manner ensuring the holders the same yield as if such violation had not occurred). (iii) The Corporation shall enter into any transaction or take any action required to be approved by any holders of Series B Preferred Stock without obtaining the requisite approval of the holders of the Series B Preferred Stock. (iv) The Corporation shall (A) fail for any reason to issue Common Stock as required under Section 8 upon the request of any holder of Series B Preferred Stock; or (B) so long as any shares of the Series B Preferred Stock are outstanding, fail to make any anti-dilution adjustment thereunder, and, in each case, such failure to issue Common Stock or to make such adjustment shall continue for 30 days after notice. (v) The Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs. (x) "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series B Exchangeable Convertible Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this [ ] day of [ ], 1999. URS CORPORATION By: ------------------------- EXHIBIT 1.7 CERTIFICATE OF DESIGNATION of SERIES C PREFERRED STOCK of URS CORPORATION =================== Pursuant to Section 151 of the General Corporation Law of the State of Delaware =================== URS Corporation, a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in its Certificate of Incorporation, as amended, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors (the "Board of Directors") has adopted the following resolution creating a series of its Preferred Stock, par value $.01 per share, designated as Series C Preferred Stock: RESOLVED, that a series of authorized Preferred Stock, par value $.01 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as the "Series C Preferred Stock" (the "Series C Preferred Stock") and the number of shares constituting such series shall be 450,000 shares of Series C Preferred Stock. Section 11 below contains the definitions of certain defined terms used herein. Section 2. Dividends and Distributions. (a) The holders of shares of Series C Preferred Stock shall not be entitled to any dividends or distributions except as provided in Section 2(b). (b) In case the Corporation or any Subsidiary of the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spin off) on the Common Stock, the holders of shares of Series C Preferred Stock shall be entitled to receive from the Corporation, with respect to each share of Series C Preferred Stock held, the same dividend or distribution received by a holder of the number of shares of Common Stock equal to one share multiplied by the Liquidation Multiplier. Section 3. Voting Rights. So long as any shares of Series C Preferred Stock shall be outstanding and unless the consent or approval of a greater number of shares shall then be required by law, without first obtaining the consent or approval of the Requisite Holders, voting as a single class, given in person or by proxy at a meeting at which the holders of such shares shall be entitled to vote separately as a class, or by written consent, the Corporation shall not (and shall not permit or authorize any subsidiary to): (i) authorize, create or issue any class or series, or any shares of any class or series, of stock having any preference or priority as to voting, dividends or upon liquidation, dissolution or winding up over the Series C Preferred Stock ("Senior Stock"); (ii) authorize, create or issue any class or series, or any shares of any class or series, of stock ranking on a parity as to voting, dividends or upon liquidation, dissolution or winding up with the Series C Preferred Stock ("Parity Stock") other than the issuance of shares of Series A Preferred Stock of the Corporation (the "Series A Preferred Stock") as dividends in accordance with such stock's terms; (iii) reclassify any shares of stock of the Corporation into shares of Senior Stock or Parity Stock; (iv) authorize any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock or Parity Stock other than the exchange of Series B Exchangeable Convertible Preferred Stock of the Corporation (the "Series B Preferred Stock") for shares of Series A Preferred Stock and Series C Preferred Stock; (v) alter or change the rights, preferences or privileges of the Series C Preferred Stock; (vi) increase or decrease the authorized number of shares of Series C Preferred Stock or issue shares of Series C Preferred Stock other than to holders of Series C Preferred Stock pursuant to its terms; or (vii) amend or waive any provision of the Corporation's Certification of Incorporation or bylaws in a manner adverse in any respect to the holders of Series C Preferred Stock. Section 4. Mandatory Repurchase by the Corporation. (a) On the twelfth anniversary of the Closing Date of the Securities Purchase Agreement, the Corporation shall repurchase from each holder of shares of Series C Preferred Stock the number of shares of the Series C Preferred Stock held by such holder on such twelfth anniversary. Repurchases made pursuant to this Section 4(a) shall be effected on such anniversary date (or such other day as the holder and the Corporation may agree) and shall be for the Liquidation Preference. The Corporation, at its election, may pay the Liquidation Preference in cash, in Common Stock valued at the Current Market Price on the date of repurchase, or any combination thereof. The place of payment shall be at an office or agency fixed therefor by the Corporation or, if not fixed, at the principal executive office of the Corporation. (b) On or after the sixth anniversary of the Closing Date of the Securities Purchase Agreement or, if earlier, the fifth Business Day after the Corporation has sufficient shares of Common Stock authorized to permit the repurchase of the outstanding Series C Preferred Stock, any holder of shares of Series C Preferred Stock shall have the right (a person exercising such right, an "Electing Holder") to require the Corporation to repurchase all, but not less than all, of the shares of Series C Preferred Stock owned by such Electing Holder by giving the Corporation at least one-hundred twenty (120) days prior written notice of his/her/its intent to have the Corporation repurchase his/her/its shares of Series C Preferred Stock in exchange for the Liquidation Preference. The notice shall set forth the date set for repurchase, which date shall be a Business Day, and the number of shares owned by the Electing Holder. The Corporation, at its election, may choose to pay the Liquidation Preference in cash, in Common Stock valued at the Current Market Price on the date of the written notice to the Corporation, or any combination of thereof. (c) (i) On the date fixed for repurchase, each holder of shares of Series C Preferred Stock shall surrender the certificate representing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment in cash and/or Common Stock therefor provided in this Section 4. Such shares shall no longer be deemed outstanding after such date and the holders thereof shall cease to be holders of Series C Preferred Stock of the Corporation and all rights whatsoever with respect to the shares so purchased shall terminate. As promptly as practicable, and in any event within three Business Days after the surrender of such certificate or certificates, the Corporation shall deliver or cause to be delivered cash, Common Stock, or any combination thereof as specified above. To the extent Common Stock is issued, certificates therefore shall be registered in the name of such holder representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series C Preferred Stock so repurchased shall be entitled. Such repurchase shall be deemed to have been made at the close of business on the date of surrender of the certificate or certificates representing the shares of Series C Preferred Stock to be repurchased so that the rights of the Electing Holder as to the shares being repurchased shall cease except for the right to receive cash and/or shares of Common Stock (and, to the extent the person received the shares of Common Stock, such person shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time). (ii) If the cash legally available and Common Stock authorized by the board of directors of the Corporation for such purchase are not sufficient to purchase all the shares of Series C Preferred Stock tendered to the Corporation for purchase pursuant to paragraph (a) or (b) of this Section 4, the Corporation shall purchase the greatest number of whole shares for which such funds and stock are so available on a pro rata basis among all tendering holders based on the ratio of the number of shares tendered by each of them to the aggregate amount of all shares so tendered, and the certificates representing the unpurchased shares shall be deemed not to be surrendered for repurchase, such unpurchased shares shall remain outstanding and the rights of the holders of shares of Series C Preferred Stock thereafter shall continue to be those of a holder of shares of the Series C Preferred Stock; PROVIDED, HOWEVER, the Corporation shall thereafter be required to repurchase all such remaining shares at the first date it has sufficient funds legally available and Common Stock authorized for such purpose at the price it would have paid at the date such shares were actually tendered and the Corporation shall give notice as aforesaid to each holder whose shares were not repurchased for such reason and such holder shall thereafter have the right to elect to have such shares repurchased, such election to be made within 30 days of receipt of such notice. For purposes of this Section, the Corporation shall be deemed not to have sufficient funds legally available for any such purchase if the Board of Directors reasonably determines that immediately after such repurchase the Corporation would be insolvent or if such repurchase would conflict with the terms or conditions of, or result in a default under, any instrument or agreement applicable to or binding upon the Corporation, pursuant to which the Corporation has incurred indebtedness for borrowed money in an aggregate principal amount in excess of $50 million. (d) Whenever the Corporation shall not have redeemed the shares of Series C Preferred Stock within five (5) Business Days of the date such redemption is required by Section 4(a) or 4(b), thereafter and until all redemption payments shall have been made, if and so long as any shares of Series C Preferred Stock remain outstanding, the Corporation shall not, nor shall it permit any of its Subsidiaries to: (i) declare or pay dividends, or make any other distributions, on any shares of Common Stock or other capital stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Stock ("Junior Stock"), other than dividends or distribution payable in Junior Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of Parity Stock (other than Series A Preferred Stock), other than dividends or distributions payable in Junior Stock, except dividends paid ratably on the Series C Preferred Stock and all Parity Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration (other than Junior Stock) any shares of Junior Stock or Parity Stock (other than, with respect to Parity Stock, ratably with the Series C Preferred Stock); or (iv) purchase or otherwise acquire for consideration any shares of Series C Preferred Stock, other than purchases ratably among all holders of the Series C Preferred Stock. (e) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to paragraph (d) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series C Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof, and, if necessary to provide for the lawful purchase of such shares, the capital represented by such shares shall be reduced in accordance with the General Corporation Law of the State of Delaware. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, par value $.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $.01 per share, of the Corporation subject to the conditions or restrictions on authorizing, or creating or issuing any class or series, or any shares of any class or series, set forth in Section 3. Section 6. Liquidation, Dissolution or Winding Up. If the Corporation shall adopt a plan of liquidation or of dissolution, or commence a voluntary case under the Federal bankruptcy laws or any other applicable state or Federal bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in any involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety (90) consecutive days and on account of such event the Corporation shall liquidate, dissolve or wind up, or upon any other liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of Junior Stock, unless prior thereto, the holders of shares of Series C Preferred Stock shall have received in cash the Liquidation Preference, or (ii) to the holders of shares of Parity Stock, except distributions made ratably on the Series C Preferred Stock and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up of the Corporation. A consolidation, merger, corporate reorganization, recapitalization or other similar transaction as a result of which the beneficial holders of the Corporation's Common Stock immediately prior to such transaction do not hold, directly or indirectly, in excess of 50% of the combined voting securities entitled to vote generally in the election of the directors of the surviving or resulting corporation immediately after such transaction, and a sale or other disposition of all or substantially all of the assets of the Corporation in one transaction or series of related transactions, each shall be deemed to be a "liquidation" within the meaning of this Section 6; provided that no such transaction shall be deemed to be a "liquidation" if first approved by the Board of Directors of the Corporation and the Requisite Holders. Section 7. Rank. The Series C Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, winding up and dissolution, prior to all classes and series of the Corporation's preferred stock authorized or outstanding on the date of initial issuance of the Series C Preferred Stock (other than the Series A Preferred Stock, which shall rank on a par with the Series C Preferred Stock) and prior to all classes of Common Stock. Section 8. Other Covenants. ---------------- (a) Transfer Taxes. The Corporation shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Series B Preferred Stock on exchange of the Series C Preferred Stock and other securities. The Corporation shall not, however, be required to pay any income tax or tax which may be payable in respect of any transfer involved in the issue or delivery of Series C Preferred Stock (or other securities or assets) in a name other than that in which the shares of Series C Preferred Stock so exchanged were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (b) Prior Notice of Certain Events. In case: (i) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (ii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Series C Preferred Stock, and shall cause to be mailed to the holders of record of the Series C Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating, as the case may be, (x) the record date (if any) for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if no record date is to be set, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date, if any, as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). Section 9. Remedies. (a) The Corporation stipulates that the remedies at law of each holder of Series C Preferred Stock in the event of any failure in the performance of or compliance with any of the terms hereof are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (b) Any holder of Series C Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with the enforcement by such holder of any obligation of the Corporation hereunder. (c) No failure or delay on the part of any holder of Series C Preferred Stock in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. Section 10. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Section 11. Definitions. For the purposes of the Certificate of Designation of Series C Preferred Stock which embodies this resolution: (a) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the City of New York are authorized or obligated by law or executive order to close. (b) "capital stock" shall mean (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. (c) "Closing Price" per share of Common Stock on any date shall mean the last sale price, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported on the Nasdaq National Market or in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, as the case may be, or, if the Common Stock is listed or admitted to trading on the New York Stock Exchange or American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the Closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors and reasonably acceptable to the Requisite Holders. (d) "Current Market Price" per share of Common Stock on any date shall mean the average of the Closing Prices of a share of Common Stock for the twenty (20) consecutive Trading Days ending on the date in question. If on any such Trading Day the Common Stock is not quoted by any organization referred to in the definition of Closing Price, the fair value of the Common Stock on such day, as reasonably determined in good faith by the Board of Directors of the Corporation, shall be used. (e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (f) "Liquidation Base Amount" shall mean $21.70; PROVIDED, HOWEVER, that in case the Corporation shall at any time or from time to time after the original issuance of the Series C Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Liquidation Base Amount in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by multiplying the Liquidation Base Amount by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this definition shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. (g) "Liquidation Multiplier" shall mean eight (8); PROVIDED, HOWEVER, that in case the Corporation shall at any time or from time to time after the original issuance of the Series C Preferred Stock declare a dividend, or make a distribution, on the outstanding shares of Common Stock in either case, in shares of Common Stock, or effect a subdivision, combination, consolidation or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, and in each such case, the Liquidation Multiplier in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted by dividing the Liquidation Multiplier by a fraction, the numerator of which is the number of shares of Common Stock that were outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this definition shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of any such subdivision, reclassification, consolidation or combination, at the close of business on the day upon which such corporate action becomes effective. In addition to the foregoing, (I) if the Corporation fails to authorize sufficient common shares to permit the repurchase of the Series C Preferred Stock on or prior to the sixth anniversary or if the Corporation fails to repurchase the Series C Preferred Stock as requested by an Electing Holder pursuant to Section 4(b) on or prior to the sixth anniversary of the Closing Date (whether or not such repurchase is permitted under the terms of the Corporation's debt facilities), then immediately following the sixth anniversary the Liquidation Multiplier shall be 1.25 times the Liquidation Multiplier in effect immediately prior to such date for purposes of the repurchase pursuant to Section 4(a) and 4(b) for repurchases after that time; and (II) if the Corporation fails to repurchase the shares requested by an Electing Holder pursuant to Section 4(b) on or prior to the eighth anniversary (whether or not such repurchase is permitted under the terms of the Corporation's debt facilities), then immediately following the eighth anniversary the Liquidation Multiplier shall be 1.6 times the Liquidation Multiplier in effect immediately prior to the eighth anniversary for repurchases after that time. The adjustment specified in clause (II) shall be cumulative to, and not in place of, the adjustment specified in clause (I). (h) "Liquidation Preference" shall mean an amount per share of Series C Preferred Stock equal to the sum of (i) $50.00 plus (ii) the greater of (y) zero or (z) the product of the Liquidation Multiplier times the excess, if any, of the Current Market Price on the date set for repurchase pursuant to Section 4(a) or the date of the written notice pursuant to Section 4(b), as the case may be, over the Liquidation Base Amount. (i) "Person" shall mean an individual, partnership, corporation, limited liability company or partnership, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof, or other entity of any kind. (j) "Requisite Holders" shall mean the holders of sixty-seven percent (67%) of the then-outstanding shares of Series C Preferred Stock. (k) "Securities Purchase Agreement" shall mean that certain agreement dated as of May 5, 1999 by and among the Corporation and certain purchasers of the Series C Preferred Stock party thereto. (l) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. (m) "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is quoted, listed or admitted to trading is open for the transaction of business or, if the Common Stock is not quoted, listed or admitted to trading on any national securities exchange (including the Nasdaq Stock Market), any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation of Series C Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this [ ] day of [ ], 1999. URS CORPORATION By: --------------------------- EXHIBIT 1.32 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June [ ], 1999, among URS Corporation, a Delaware corporation (the "Corporation"), and RCBA Strategic Partners, L.P., a Delaware limited partnership (the "Purchaser"). WHEREAS, the Corporation is a party to a Securities Purchase Agreement, dated as of May 5, 1999 (as amended, the "Securities Purchase Agreement"), with the Purchaser, pursuant to which the Corporation agreed to sell to the Purchaser and the Purchaser agreed to purchase from the Corporation for an aggregate purchase price of $100 million, upon the terms and subject to the conditions set forth therein, (x) 46,082.95 shares of Series A Preferred Stock of the Corporation (the "Series A Preferred Stock") and (y) 450,000 shares of Series C Preferred Stock of the Corporation (the "Series C Preferred Stock"); WHEREAS, pursuant to the Securities Purchase Agreement, the Corporation and Purchaser agreed that, upon receipt of stockholder approval of (x) certain amendments to the Corporation's charter and (y) the issuance of convertible preferred stock to Purchaser, the Series A Preferred Stock and Series C Preferred Stock would be converted into Series B Convertible Exchangeable Preferred Stock of the Corporation (the "Series B Preferred Stock"); WHEREAS, in order to induce the Purchaser to enter into the Securities Purchase Agreement, the Corporation has agreed to provide the registration rights set forth in this Agreement for the benefit of the Purchaser and its direct and indirect transferees; WHEREAS, the execution and delivery of this Agreement is a condition to the Purchaser's obligations pursuant to the Securities Purchase Agreement. NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, each of Purchaser and the Corporation (together "Parties") agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms have the following respective meanings: 1.1 "Affiliate" means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by or under common Control with such first Person. "Control" means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. Any director, member of management or other employee of the Corporation or any of its Subsidiaries who would not otherwise be an Affiliate of the Purchaser shall not be deemed to be an Affiliate of the Purchaser. 1.2 "Agreement" is defined in the first paragraph of this Agreement. 1.3 "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close. 1.4 "Closing Date" means the date the closing of the securities purchase under the Securities Purchase Agreement. 1.5 "Common Stock" means the Common Stock, par value of $.01 per share, of the Corporation. 1.6 "Conversion Shares" means the shares of Common Stock issued to a holder upon the conversion of the Series B Preferred Stock. 1.7 "Corporation" is defined in the first paragraph of this Agreement. 1.8 "DTC" means the Depository Trust Company. 1.9 "Distributee" means any person that is a member, stockholder or partner of Purchaser, or any person that is a member, stockholder or partner of a Distributee to which Registrable Securities are transferred or distributed by Purchaser or Distributee. 1.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor federal statute, and the rules and regulations thereunder. 1.11 "Holder" means Purchaser and any other holder of Registrable Securities under this Agreement, including an Affiliate, a Distributee or other successors, assigns and transferees of Purchaser or a Holder that has received Registrable Securities pursuant to Section 3.4 and agree to be bound by the terms of this Agreement as contemplated by Section 3.4. 1.12 "NASD" means the National Association of Securities Dealers. 1.13 "NYSE" means the New York Stock Exchange. 1.14 "Person" means any natural person, firm, partnership, association, corporation, company, trust, business trust, governmental entity or other entity. 1.15 "Postponement Period" is defined in Section 2.3(n). 1.16 "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. 1.17 "Purchaser" is defined in the introduction to this Agreement. 1.18 "Registrable Securities" means (i) the Series A Preferred Stock, (ii) the Series C Preferred Stock; (iii) the Conversion Shares and the Repurchase Shares, and (iv) any securities issued or issuable with respect to any of the foregoing clauses (i) through (iii), (x) upon any conversion or exchange thereof, (y) by way of stock dividend or other distribution, stock split or reverse stock split or (z) in connection with a combination of shares, recapitalization, merger, consolidation, exchange offer or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (B) such securities shall have been distributed to the public in reliance upon Rule 144 or may be so distributed pursuant to Rule 144(k), (C) subject to the provisions of Section 2.1(b)(ii), such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Corporation and subsequent disposition of such securities shall not require registration or qualification of such securities under the Securities Act or any similar state law then in force, (D) such securities shall have been acquired by the Corporation or (E) sold in a private transaction in which the transferor's rights under this Agreement were not assigned. In determining the number of Registrable Securities outstanding at any time or whether the Holders of the requisite number of Registrable Securities have taken any action hereunder and in calculating the number of Registrable Securities for all other purposes under this Agreement, each share of Series A Preferred Stock shall be deemed to have been convertible into Common Stock (on the same terms and conditions as the Series B Preferred Stock) and to have converted (to the fullest extent then determinable) and such calculation shall include the number of Conversion Shares that then would be deliverable upon the conversion of such stock (as if such stock were convertible), and each share of Series C Preferred Stock shall be deemed to have been repurchased by the Corporation (to the fullest extent then determinable) and such calculation shall include the number of Repurchase Shares then deliverable upon the repurchase of such Series C Preferred Stock (to the fullest extent then determinable). 1.19 "Registration Expenses" means all fees and expenses incident to the performance of or compliance with the provisions of this Agreement, whether or not any registration statement is filed or becomes effective, including, without limitation, all (i) registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering, (B) fees and expenses of compliance with state securities or blue sky laws, and (C) fees and other expenses associated with admitting for trading on the NYSE or any other applicable exchange or automated dealer system) the Series A Preferred Stock, the Series C Preferred Stock, Conversion Shares and Repurchase Shares, (ii) printing expenses, (iii) fees and disbursements of all independent certified public accountants referred to in Section 2.3 (including, without limitation, the reasonable expenses of any special audit and "cold comfort" letters required by or incident to such performance), (iv) the fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to Rule 2720 of the NASD Rules of Conduct, (v) fees and expenses of all attorneys, advisers, appraisers and other persons retained by the Corporation or any Subsidiary of the Corporation, (vi) internal expenses of the Corporation and its Subsidiaries, (vii) the expense of any annual audit, (viii) the expenses relating to printing, word processing and distributing all registration statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement, and (ix) the reasonable out-of-pocket expenses and, as to in-house counsel, allocated costs of the Holders of the Registrable Securities being registered in such registration incurred in connection therewith including, without limitation, the reasonable fees and disbursements of not more than one outside counsel and one in-house counsel (who may be employed by an Affiliate of a Holder) chosen by the Holders of a majority of the Registrable Securities to be included in such Registration Statement. "Registration Expenses" shall not include any underwriting discounts or commissions or any transfer taxes payable in respect of the sale of Registrable Securities, which such expenses shall be paid or borne by the Holders thereof. Nor shall "Registration Expenses" include any fees or expenses incurred by or on behalf of any Holder who, without cause, either withdraws a request for registration or withdraws from a registration. 1.20 "Registration Statement" means any registration statement of the Corporation that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. 1.21 "Repurchase Shares" means the shares of Common Stock issued to a holder upon the repurchase of the Series C Preferred Stock. 1.22 "Rule 144" means Rule 144 (or any successor provision) under the Securities Act. 1.23 "Rule 145" means Rule 145 (or any successor provision) under the Securities Act. 1.24 "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor federal statute, and the rules and regulations thereunder. 1.25 "SEC" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act. 1.26 "Series A Preferred Stock" has the meaning given it in the first recital. 1.27 "Series B Preferred Stock" has the meaning given it in second recital. 1.28 "Special Registration" means the registration of shares of equity securities and/or options or other rights in respect thereof to be offered solely to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Corporation or its direct or indirect Subsidiaries, solely on Form S-8 or any successor form. 1.29 "Subsidiary" means, with respect to any Person, any corporation or Person, a majority of the outstanding voting stock or other equity interests of which is owned, directly or indirectly, by that Person. 1.30 "underwritten registration" or "underwritten offering" means a registration in which securities of the Corporation (including Registrable Securities) are sold to an underwriter for reoffering to the public. ARTICLE II REGISTRATION 1.31 Demand Registration. (1) Requests. Subject to the provisions of Section 2.6, at any time or from time to time after 12 months from the date of this Agreement, Holders of not less than 50% of the then outstanding Registrable Securities shall have the right to make written requests that the Corporation effect up to two registrations under the Securities Act of all or part of the Registrable Securities of the Holders making such request, which requests shall specify the intended method of disposition thereof by such Holders, including whether the registration requested is for an underwritten offering. For a registration to be underwritten, a majority of the Holders requesting registration (as measured by ownership of Registrable Securities) must so request. The Corporation shall not be required to effect more than two registrations under this Section 2.1. (2) Obligation to Effect Registration. (1) Within 10 business days after receipt by the Corporation of any request for registration pursuant to Section 2.1, the Corporation shall promptly give written notice of such requested registration to all Holders, and as soon as practicable will use its best efforts to effect the registration under the Securities Act of (1) the Registrable Securities which the Corporation has been so requested to register pursuant to Section 2.1, and (2) all other Registrable Securities which the Corporation has been requested to register by the Holders thereof by written request given to the Corporation within 10 days after the Corporation has given such written notice (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered. (2) The Corporation's obligations under Section 2.1(a)(i) shall be subject to the following limitations: (1) the Corporation shall not be required to effect a registration pursuant to this Section 2.1 during the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of, the registration statement pertaining to a public offering by the Corporation; PROVIDED, HOWEVER, that unless the Holders are permitted to register and sell in such offering all such Registrable Securities as they have requested be included in such offering without cutback under Section 2.2(b)(ii), then the Corporation may not decline to register shares pursuant to this clause (1) more than once every two years (such time period to commence upon the expiration of the end of the one hundred eighty (180) day period referred to above); and (2) the Corporation shall not be required to effect a registration on Form S-1 if it has filed and has maintained an effective "shelf" Registration Statement on Form S-3 pursuant to Section 2.1(c) and such Form S-3 is permitted to be used by the Holders demanding registration. (3) Shelf Registration. If requested by Holders of a majority of the Registrable Securities as to which registration has been requested pursuant to this Section 2.1, and if the Corporation is eligible to file such Registration Statement on Form S-3, the Registration Statement covering such Registrable Securities shall provide for the sale by the Holders thereof of the Registrable Securities from time to time on a delayed or a continuous basis under Rule 415 under the Securities Act. If more than one underwritten offering is requested under any particular shelf registration, each such additional underwritten offering shall constitute a separate "demand" registration for purposes of Section 2.1. (4) Effective Registration Statement. A registration requested pursuant to Section 2.1 shall not be deemed to have been effected unless it is declared effective by the SEC and remains effective for the period specified in Section 2.3(b). Notwithstanding the preceding sentence, a registration requested pursuant to Section 2.1 that does not become effective after the Corporation has filed a Registration Statement with respect thereto by reason of the refusal to proceed of the Holders of Registrable Securities requesting the registration, or by reason of a request by a majority of the Selling Holders participating in such registration that such registration be withdrawn, shall be deemed to have been effected by the Corporation at the request of such Holders. (5) Pro Rata Allocation. If the Corporation determines, based on consultation with the managing underwriters or, in an offering which is not underwritten, with an investment banker, that the number of securities to be sold in any such offering should be limited due to market conditions or otherwise, Holders of Registrable Securities proposing to sell their securities in such registration shall share pro rata in the number of securities being offered (as determined by the Holders holding a majority of the Registrable Securities for which registration is being requested in consultation with the managing underwriters or investment banker, as the case may be) and registered for their account, such sharing to be based on the number of Registrable Securities as to which registration was requested by such Holders. (6) Inclusion of Other Securities in Demand Registration. Notwithstanding any other provision of this Section 2.1, and subject to the Registration Rights Agreement dated February 21, 1990 (the "1990 Registration Rights Agreement") by and among the Corporation, Wells Fargo Bank, N.A., a national banking association, BK Capital Partners I, BK Capital Partners II, BK Capital Partners III, Executive Life Insurance Company, Novato Partners, the Common Fund, Richard C. Blum & Associates I, and the Management Holders (as defined therein): (1) The Corporation may, subject to the remainder of this Section 2.1(f), elect to include in any Registration Statement made pursuant to Section 2.1(a), authorized but unissued shares of Common Stock or shares of Common Stock held as treasury stock; (2) The Corporation shall not register securities (other than Registrable Securities) for sale for the account of any Person (other than the Corporation) in any registration requested pursuant to Section 2.1(a); and (3) If any Registration Statement made pursuant to Section 2.1(a) involves an underwritten offering and the managing underwriter of such offering (or, in connection with an offering that is not underwritten, an investment banker) shall advise the Corporation that, in its view, the number of securities requested to be included in such Registration exceeds the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the selling Holders, the Corporation shall include in such Registration: (1) first, all shares of Common Stock requested to be included in such Registration by the selling Holders as provided in Section 2.1(e); and (2) second, to the extent that the number of securities to be registered pursuant to clause (1) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the selling Holders, securities that the Corporation proposes to register. 1.32 Piggyback Registration. If the Corporation at any time proposes to register any of its common stock under the Securities Act (other than a Registration relating solely to the sale of securities to participants in a Company stock plan, on Form S-4 with respect to any merger, consolidation or acquisition, pursuant to Section 2.1 or pursuant to a Special Registration), whether or not for sale for its own account, and the registration form to be used may be used for the registration of Registrable Securities, it shall each such time give prompt written notice to all Holders of Registrable Securities of its intention to do so and, upon the written request of any Holder of Registrable Securities given to the Corporation within 10 days after the Corporation has given any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Corporation will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Corporation has been so requested to register by the Holders thereof, to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, provided that: (1) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Corporation shall determine for any reason not to register such securities, the Corporation may, at its election, give written notice of such determination to each Holder that was previously notified of such registration and, thereupon, shall not register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holders to request that a registration be effected under Section 2.1; and (2) if the Corporation shall be advised in writing by the managing underwriters (or, in connection with an offering which is not underwritten, by an investment banker) that in their or its opinion the number of securities requested to be included in such registration (whether by the Corporation, pursuant to this Section 2.2 or pursuant to any other rights granted by the Corporation to a holder or holders of its securities to request or demand such registration or inclusion of any such securities in any such registration) exceeds the number of such securities which can be sold in such offering in an orderly manner within a price range that is acceptable to the Corporation, the Corporation shall include in such Registration: (1) first, all shares of Common Stock that the Company proposes to register for its own account; and (2) subject to the 1990 Registration Rights Agreement: (1) second, to the extent that the number of shares registered pursuant to clause (i) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Corporation, the Registrable Securities requested to be included by the Holders; and (2) third, to the extent that the number of shares registered pursuant to clauses (i) and (ii) is less than the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Corporation, the securities requested to be included by any other holders, and the Corporation shall so provide in any registration agreement hereinafter entered into with respect to any of its securities. The securities to be included in any such registration pursuant to clause (ii) or (iii) shall be allocated on a pro rata basis among all holders requesting that securities be included in such registration pursuant to such clause on the basis of the number of securities requested to be included by such holders. No registration effected under this Section 2.2 shall relieve the Corporation from its obligation to effect registrations upon request under Section 2.1. The Corporation shall not be obligated to cause any "piggyback" registration to be underwritten. 1.33 Registration Procedures. If and whenever the Corporation is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Corporation shall: (1) prepare and file with the SEC, as soon as practicable, a Registration Statement with respect to such securities, make all required filings with the NYSE and use best efforts to cause such Registration Statement to become effective at the earliest possible date; (2) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith and such other documents as may be necessary to keep such Registration Statement effective until the earlier of (i) 30 days after the effective date of such Registration Statement (360 days in the case of a Shelf Registration pursuant to Section 2.1(c)) or (ii) the consummation of the disposition by the Holders of all the Registrable Securities covered by such Registration Statement and otherwise comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (3) furnish to counsel (if any) selected by the Holders of a majority of the Registrable Securities covered by such Registration Statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the SEC in connection with such registration a reasonable time prior to the proposed filing thereof and give reasonable consideration in good faith to any comments of such Holders, counsel and underwriters. The Corporation shall not file any Registration Statement or Prospectus or any amendments or supplements thereto pursuant to a registration under Section 2.1(a) if the Holders of a majority of the Registrable Securities covered by such Registration Statement, their counsel, or the underwriters, if any, shall reasonably object in writing; (4) furnish to each seller of Registrable Securities, without charge, such reasonable number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case, including all exhibits (including exhibits incorporated by reference), financial statements, schedules and all documents incorporated therein, deemed to be incorporated therein by reference or filed therewith, except that the Corporation shall not be obligated to furnish any seller of securities with more than two copies of such exhibits and documents), such number of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus and any summary prospectus) in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the securities owned by such seller; (5) use its best efforts to register or qualify and cooperate with the Holders of Registrable Securities, the underwriters and their respective counsels in connection with the registration or qualification (or exemption from such registration or qualification) of the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as each seller shall request; provided, however, that where Registrable Securities are offered other than through an underwritten offering, the Corporation agrees to cause its counsel to perform blue sky investigations and file registrations and qualifications required to be filed pursuant to this Section 2.3(e); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be effective hereunder and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Corporation shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of process in any jurisdiction wherein it is not so subject; (6) (i) notify each Holder of Registrable Securities subject to such Registration Statement if such Registration Statement, at the time it or any amendment thereto became effective, (x) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading upon discovery by the Corporation of such material misstatement or omission or (y) upon discovery by the Corporation of the happening of any event as a result of which the Corporation believes there would be such a material misstatement or omission, and, as promptly as practicable, prepare and file with the SEC a post-effective amendment to such registration statement and use best efforts to cause such post-effective amendment to become effective such that such registration statement, as so amended, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) notify each Holder of Registrable Securities subject to such Registration Statement, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, if the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in each case upon discovery by the Company of such material misstatement or omission or upon discovery by the Corporation of the happening of any event as a result of which the Company believes there would be a material misstatement or omission, and, as promptly as is practicable, prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (7) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Corporation complying with the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to an underwriter or to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to an underwriter or to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Corporation after the effective date of the relevant Registration Statement, which statements shall cover said 12-month periods; (8) promptly notify each Holder of any Registrable Securities covered by such Registration Statement, their counsel and the underwriters (i) when such Registration Statement, or any post-effective amendment to such Registration Statement, shall have become effective, or any amendment of or supplement to the Prospectus used in connection therewith shall have been filed, (ii) of any request by the SEC to amend such Registration Statement or to amend or supplement such Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation or threatening of any proceedings for any of such purposes, (iv) of the suspension of the qualification of such securities for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes and (v) if at any time when a Prospectus is to be required by the Securities Act to be delivered in connection with the sale of the Registrable Securities, the representations and warranties of the Company contained in the underwriting agreement contemplated in Section 2.4(b) below, to the knowledge of the Corporation, cease to be true and correct in any material respect; (9) use its best efforts to prevent the issuance of any order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities covered thereby for sale in any jurisdiction, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (10) if requested by the managing underwriter, if any, or the Holders of a majority of the Registrable Securities being sold in connection with an underwriting offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter, if any, or such Holders reasonably request to be included therein to comply with applicable law and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Corporation has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (11) cooperate with the Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of new certificates representing Registrable Securities to be sold against delivery by the Holders of any old certificates representing such Registrable Securities, which new certificates shall not bear any restrictive legends whatsoever and shall be in a form eligible for deposit with DTC, and enable such Registrable Securities to be in such denominations and registered in such names as the underwriters, if any, or Holders may reasonably request at least two business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering; (12) prior to the effective date of the Registration Statement, (i) provide the registrar for the Common Stock or such other Registrable Securities with printed certificates for such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for such securities; (13) cause the Conversion Shares and Repurchase Shares, and use its best efforts to cause the Series A Preferred Stock and Series C Preferred Stock, to be admitted for trading on the NYSE (or such other exchange or automated trading system as shall be the primary trading system or exchange for the Common Stock) in the event that the Registrable Securities covered by such Registration Statement include any Series A Preferred Stock, Series C Preferred Stock, Conversion Shares and Repurchase Shares not already so listed; and (14) have the right -- if the Board of Directors of the Company, in its good faith judgment, determines that any Registration of shares of Common Stock should not be made or continued because it would materially interfere with any material financing, acquisition, corporation reorganization, merger, or other transaction involving the Company or any of its subsidiaries, or would require premature disclosure of material non-public information (a "Valid Business Reason") -- (i) to postpone filing a Registration Statement until such Valid Business Reason no longer exists, but in no event for more than 180 days, and (ii) to cause any Registration Statement that has already been filed to be withdrawn and its effectiveness terminated or to postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than 90 days (the "Postponement Period"); provided, however, that in no event shall the Company be permitted to postpone or withdraw a Registration Statement within 180 days after the expiration of the Postponement Period; and (15) have the right to require each Holder of any Registrable Securities as to which any registration is being effected to furnish to the Corporation such information regarding such Holder and the distribution of such securities as the Corporation may from time to time reasonably request in writing and as shall be required by law in connection therewith. Each such Holder agrees to furnish promptly to the Corporation all information required to be disclosed in order to make the information previously furnished to the Corporation by such Holder not materially misleading. The Corporation agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the Prospectus used in connection therewith, which refers to any seller of any securities covered thereby by name, or otherwise identifies such seller as the holder of any securities of the Corporation, without the consent of such seller, such consent not to be unreasonably withheld, except that no such consent shall be required for any disclosure that is required by law. By the acquisition of Registrable Securities, each Holder shall be deemed to have agreed that upon receipt of any notice from the Corporation pursuant to Section 2.3(f) or (n), such Holder will promptly discontinue such Holder's disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder shall have received, in the case of clause (i) of Section 2.3(f), notice from the Corporation that such Registration Statement has been amended, as contemplated by Section 2.3(f); in the case of clause (ii) of Section 2.3(f), copies of the supplemented or amended Prospectus contemplated by Section 2.3(f); or, in the case of Section 2.3(n), the time period specified has elapsed or such Holder has received notice from the Corporation that the Postponement Period has been terminated. If so directed by the Corporation, each Holder will deliver to the Corporation (at the Corporation's expense) all copies, other than permanent file copies, in such Holder's possession of the Prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Corporation shall give any such notice, the period mentioned in Section 2.3(b) shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 2.3(f). 1.34 Underwritten Offerings. The provisions of this Section 2.4 do not establish additional registration rights but instead set forth procedures applicable, in addition to those set forth in Sections 2.1 through 2.3, to any registration that is an underwritten offering. (1) Underwritten Offerings Exclusive. Whenever a registration requested pursuant to Section 2.1 is for an underwritten offering, only securities that are to be distributed by the underwriters may be included in the registration. (2) Underwriting Agreement. If requested by the underwriters for any underwritten offering by Holders pursuant to a registration requested under Section 2.1, the Corporation shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Holders of a majority of the Registrable Securities to be covered by such registration and to the underwriters and to contain such representations and warranties by the Corporation and such other terms and provisions as are customarily contained in agreements of this type, including, but not limited to, indemnities to the effect and to the extent provided in Section 2.7, provisions for the delivery of officers' certificates, opinions of counsel and accountants' "cold comfort" letters, and hold-back arrangements. The Holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement. (3) Selection of Underwriters. Whenever a registration requested pursuant to Section 2.1 is for an underwritten offering, the Holders of a majority of the Registrable Securities to be registered pursuant to such offering shall have the right to select one or more underwriters to administer the offering, subject to the consent of the Corporation, which shall not be unreasonably withheld. If the Corporation at any time proposes to register any of its securities under the Securities Act for sale for its own account and such securities are to be distributed by or through one or more underwriters, the Corporation shall have the right to select one or more underwriters to administer the offering, subject to the consent of the Holders of a majority of Registrable Securities to be registered pursuant to such offering, which shall not be unreasonably withheld. In all cases in this Section 2.4(c), at least one of the underwriters chosen by the Holders or the Corporation shall be an underwriter of nationally recognized standing. (4) Hold Back Agreements. If and whenever the Corporation proposes to register any of its equity securities under the Securities Act, whether or not for its own account (other than pursuant to a Special Registration), or is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, each Holder, if required by the managing underwriter in an underwritten offering, agrees by acquisition of such Registrable Securities not to effect (other than pursuant to such registration) any public sale or distribution, including, but not limited to, any sale pursuant to Rule 144, of any Registrable Securities, any other equity securities of the Corporation or any securities convertible into or exchangeable or exercisable for any equity securities of the Corporation during the 10 days prior to, and for 180 days after, the effective date of such registration, to the extent timely notified in writing by the Corporation or the managing underwriter, and the Corporation agrees to cause each holder of any equity security, or of any security convertible into or exchangeable or exercisable for any equity security, of the Corporation purchased from the Corporation at any time other than in a public offering to enter into a similar agreement with the Corporation. The foregoing provisions shall not apply to any Holder if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such Holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of any applicable class of Registrable Securities commencing on the date of sale of such applicable class of Registrable Securities unless it has provided 45 days prior written notice of such sale or distribution to the underwriter or underwriters. The Corporation further agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Registration Statement (other than such registration or a Special Registration) covering any, of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 10 days prior to, and for 90 days after, the effective date of such registration if required by the managing underwriter. (5) in connection with an underwritten public offering only, furnish to each underwriter (1) an opinion of counsel for the Corporation experienced in securities law matters, dated the effective date of the Registration Statement, and (2) a "cold comfort" letter signed by the independent public accountants who have issued an audit report on the Corporation's financial statements included in the Registration Statement, subject to each seller having executed and delivered to the independent public accountants such certificates and documents as such accountants shall reasonably request, covering substantially the same matters with respect to the Registration Statement (and the Prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities. 1.35 Preparation; Reasonable Investigation. In connection with the preparation and filing of each Registration Statement registering Registrable Securities under the Securities Act, the Corporation shall give the Holders of such Registrable Securities so to be registered and their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such Registration Statement, each Prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and shall give each of them such access to all pertinent financial, corporate and other documents and properties of the Corporation and its Subsidiaries, and such opportunities to discuss the business of the Corporation with its officers, directors, employees and the independent public accountants who have issued audit reports on its financial statements as shall be necessary, in the reasonable opinion of such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 1.36 Other Registrations. If and whenever the Corporation is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, and if such registration shall not have been withdrawn or abandoned, the Corporation shall not be obligated to and shall not file any Registration Statement with respect to any of its securities (including Registrable Securities) under the Securities Act (other than a Special Registration), whether of its own accord or at the request or demand of any holder or holders of such securities, until a period of 180 days shall have elapsed from the effective date of such previous registration, provided that the Corporation shall not be excused from filing a registration statement by virtue of this Section 2.6 more than once in a 360 day period. 1.37 Indemnification. (1) Indemnification by the Corporation. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, the Corporation shall indemnify and hold harmless the seller of such securities, its directors, officers, and employees, each other person who participates as an underwriter, broker or dealer in the offering or sale of such securities and each other person, if any, who controls such seller or any such participating person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which such seller or any such director, officer, employee, participating person or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act, any Prospectus or preliminary prospectus included therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state a material fact required to be stated in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement or necessary to make the statements therein not misleading; and the Corporation shall reimburse such seller and each such director, officer, employee, participating person and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding as such expenses are incurred; provided that the Corporation shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or omission made in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Corporation by such seller or participating person expressly for use in the preparation thereof; provided further that the Corporation shall not be liable and indemnification shall not apply to amounts paid in any settlement effected without the consent of the Corporation. (2) Indemnification by the Sellers. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2.1 or 2.2, each of the prospective sellers of such securities, will indemnify and hold harmless the Corporation, each director of the Corporation, each officer of the Corporation who shall sign such Registration Statement, and each other person, if any, who controls the Corporation or any such participating person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Corporation or any such director, officer, employee, participating person or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act, any Prospectus or preliminary prospectus included therein, or any amendment or supplement thereto, or any omission or alleged omission to state a material fact with respect to such seller required to be stated in any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and in conformity with written information furnished to the Corporation by such seller expressly for use in the preparation of any such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement; provided that the liability of each such seller shall be in proportion to and limited to the gross amount received by such seller from the sale of Registrable Securities pursuant to such Registration Statement; provided further that any Seller shall not be liable and indemnification shall not apply to amounts paid in any settlement effected without the consent of that Seller. (3) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 2.7, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party hereunder, give prompt written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided therein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.7 unless the failure to provide prompt written notice shall cause actual prejudice to the indemnifying party. In case any such action is brought against an indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to retain counsel reasonably satisfactory to such indemnified party to defend against such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel and the payment of such fees by the indemnifying party or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party has not retained counsel to defend such proceeding, in which case (under any of such clauses (i), (ii) or (iii)) it is understood that (x) the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties and (y) such firm shall be designated in writing by the Holders of a majority of the Registrable Securities included in such Registration Statement in the case of parties indemnified pursuant to Section 2.7(a) and by the Corporation in the case of parties indemnified pursuant to Section 2.7(b). All fees and expenses that an indemnified party is entitled to receive from an indemnifying party under this Section 2.7 shall be reimbursed as they are incurred, provided that each such indemnified party shall promptly repay such fees and expenses if it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (4) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 2.7 (with appropriate modifications) shall be given by the Corporation and each seller of Registrable Securities with respect to any required registration or other qualification of such Registrable Securities under any federal or state law or regulation of governmental authority other than the Securities Act. (5) Other Remedies. If for any reason the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, other than by reason of the exceptions provided therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Corporation or the Holders of Registrable Securities covered by the Registration Statement in question and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Corporation and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph of this Section 2.7 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this Section 2.7(e) except to the extent and under such circumstances as such party would have been liable to indemnify under this Section 2.7 if such indemnification were enforceable under applicable law. (6) Officers and Directors. As used in this Section 2.7, the terms "officers" and "directors" shall include the partners of Holders which are partnerships and the members of Holders which are limited liability companies. 1.38 Expenses. The Corporation shall pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this Section 2, as provided in this Agreement. ARTICLE III MISCELLANEOUS 1.39 Legended Securities; etc. The Corporation shall issue new certificates for Registrable Securities without a legend restricting further transfer if (I) such securities have been sold to the public pursuant to an effective Registration Statement under the Securities Act (other than Form S-8 if the Holder of such Registrable Securities is an Affiliate) or Rule 144, or (ii) (x) such issuance is otherwise permitted under the Securities Act, (y) the Holder of such shares has delivered to the Corporation an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Corporation, to such effect and (z) the Holder of such shares expressly requests the issuance of such certificates in writing. 1.40 Amendments and Waivers. This Agreement may be amended, modified or supplemented, and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Corporation shall have obtained the written consent to such amendment, action or omission to act, of the Holder or Holders of at least a majority of the Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; PROVIDED, HOWEVER, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party or parties granting such waiver in any other respect or at any other time. 1.41 Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election and unless notice is otherwise given to the Corporation by the record owner, be treated as the holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Corporation may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 1.42 Successors, Assigns and Transferees. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors assign and transferees. Purchaser or a Holder may assign its rights hereunder in whole or in part to an Affiliate or to a Distributee or to other successors, assigns and transferees of Purchaser or such Holder; provided that such Affiliate, Distributee or successor, assignee or transferee expressly agrees to be bound by this Agreement by written supplement. This Agreement shall survive any transfer of Registrable Securities to and shall inure to the benefit of an Affiliate, a Distributee or such other successors, assigns and transferees of Purchaser or such Holder. 1.43 Notices. All notices or other communications given or made under this Agreement shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by overnight courier to, the following addresses (and shall be deemed effective at the time of receipt thereof): If to Seller: URS Corporation 100 California Street, Suite 500 San Francisco, California 94111 Attn: Kent P. Ainsworth Facsimile: (415) 398-2621 with a copy to: Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, California 94111-3580 Attn: Samuel M. Livermore Facsimile: (415) 951-3699 If to Purchaser: RCBA Strategic Partners, L.P. 909 Montgomery Street, Suite 400 San Francisco, California 94133 Attn: Murray A. Indick Facsimile: (415) 434-3130 with a copy to: Wilmer, Cutler & Pickering 2445 M Street, N.W. Washington, D.C. 20037 Attn: Michael R. Klein and Eric R. Markus Facsimile: (202) 663-6363 or to such other address as the party to whom notice is to be given may have previously furnished notices to the other in the manner set forth above. 1.44 No Inconsistent Agreements. The Corporation shall not hereafter enter into any agreement, or amend any existing agreement, with respect to its securities if such agreement would be inconsistent with the rights granted to the Holders by this Agreement. 1.45 Remedies; Attorneys' Fees. Each Holder of Registrable Securities, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Corporation agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any provision of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. As between the parties to this Agreement, in any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorney's fees in addition to its costs and expenses and any other available remedy. 1.46 Severability. If any clause, provision or section of this Agreement shall be invalid, illegal or unenforceable, the invalidity, illegality or unenforceability of such clause, provision or section shall not affect the enforceability or validity of any of the remaining clauses, provisions or sections hereof to the extent permitted by applicable law. The invalidity of any one or more phrases, sentences, clauses, Sections or subsections of this Agreement shall not affect the remaining portions of this Agreement. 1.47 Headings. The headings contained in this Agreement are for purposes of convenience only and shall not affect the meaning or interpretation of this Agreement. 1.48 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which together constitute one and the same instrument. 1.49 No Third Party Beneficiaries. Except as provided in Sections 2.7 and 3.4, nothing in this Agreement shall confer any rights upon any person or entity other than the parties hereto, each such party's respective successors and permitted assigns. 1.50 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts made and performed within the State of Delaware, without regard to principles of conflicts of law. IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above. RCBA STRATEGIC PARTNERS, L.P. URS CORPORATION By: By: ------------------------- ------------------------- Name: Name: Title: Title: EX-99.1 6 PRESS RELEASE DATED 05/05/99 EXHIBIT 99.1 [URS Corporation Letterhead] FOR IMMEDIATE RELEASE Contact: URS Dames & Moore Sard Verbinnen & Co. Kent Ainsworth Mark Snell Andrew Merrill/ EVP & CFO EVP & CFO Christina Johnson 415-774-2700 213-996-2224 212/687-8080 URS CORPORATION TO ACQUIRE DAMES & MOORE GROUP FOR $16 PER SHARE IN CASH Creates First Tier Global Engineering and Design Company San Francisco and Los Angeles, California, May 5, 1999 - URS Corporation (NYSE: URS) and Dames & Moore Group (NYSE: DM) today announced that they have signed a definitive agreement under which URS will acquire Dames & Moore for $16 per share in cash, or a total of approximately $300 million, plus the assumption of approximately $300 million of debt for a total transaction value of $600 million. The transaction has been approved unanimously by the boards of both companies. The proposed combination will create a global engineering company with revenues of approximately $2 billion and over 15,000 employees in more than 30 countries around the world. The combined company's services will include planning and analysis, design, and program and construction management for transportation, environmental, commercial/industrial, facilities and water/wastewater projects. URS expects to commence a tender offer for all Dames & Moore's common shares on or before May 11, 1999. The price for Dames & Moore's shares represents a premium of 30%, based on the closing price as of May 5, 1999. The transaction is subject to the expiration or early termination of the appropriate waiting period under the Hart-Scott-Rodino Act, the receipt of a majority of Dames & Moore's shares in the tender and typical funding conditions. Following the close of the tender offer, Dames & Moore will merge with a subsidiary of URS. URS has arranged for firm commitments to finance the transaction with a combination of $550 million of senior bank debt arranged by Wells Fargo Bank, N.A., $200 million of subordinated debt underwritten by Morgan Stanley Dean Witter and $100 million from a private placement of preferred stock with Richard C. Blum & Associates. Financing proceeds in excess of the purchase price will be used to repay existing URS and Dames & Moore debt and for working capital purposes. The transaction is expected to be accretive to URS's earnings in the first full year after closing. Said Martin M. Koffel, Chairman and CEO of URS, "Our clients are increasingly demanding a comprehensive range of services and worldwide capabilities. The combination of the complementary technical and geographic strengths of URS and Dames & Moore will propel the new firm into the top tier of global engineering companies, and will enhance our ability to compete with the largest firms, both in the U.S. and internationally, for major infrastructure, commercial and industrial projects." Continued Koffel, "The strategic and operational synergies between our two organizations are considerable. The addition of Dames & Moore and its many highly talented engineers, scientists and project managers around the world will broaden our capabilities to include special expertise in program and construction management, process and chemical engineering, and multimodal transportation, particularly transit systems." Added Koffel, "With Dames & Moore, we will have a more balanced proportion of private-and public-sector business and a stronger presence in Europe and Australasia. This client mix and increased geographic diversity should enhance earnings predictability and consistency over the long term." Noting that the Dames & Moore acquisition would increase URS's debt load, Koffel concluded: "URS will be in a strong financial position and will continue to generate substantial free cash flow for reinvestment in the business." Said Arthur Darrow, Chairman and CEO of Dames & Moore, "This is an excellent opportunity for our shareholders as well as our employees who, as part of an even stronger and more competitive global organization, will enjoy enhanced career and professional development opportunities." Dames & Moore's board has recommended that Dames & Moore's shareholders tender their shares into the tender offer. The Merger Agreement permits Dames & Moore to respond to unsolicited third party proposals if the Dames & Moore Board of Directors determines in good faith that such a proposal is likely to provide greater value to Dames & Moore's shareholders, but requires Dames & Moore to pay URS certain fees aggregating up to $15 million if Dames & Moore withdraws its support for the URS acquisition or decides to enter into an alternative transaction. Morgan Stanley Dean Witter acted as financial advisor to URS in this transaction. Prudential Securities represented Dames & Moore and provided a fairness opinion. Headquartered in San Francisco, URS offers a broad range of planning and design services through 140 offices located in 16 countries, including Europe and Asia/Pacific. URS provides services for infrastructure projects involving air and surface transportation systems; institutional, industrial and commercial facilities; and pollution control, water resources and hazardous waste management programs. URS serves local, state and federal government agencies as well as private clients in the chemical, manufacturing, pharmaceutical, forest product, mining, water supply, commercial development and utilities industries. Dames & Moore is a worldwide engineering and construction services firm, whose capabilities include general engineering and consulting, process and chemical engineering, transportation planning and design, and construction services. Headquartered in Los Angeles, Dames & Moore has over 7,800 employees, and offices in over 30 countries. *** This press release contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from those discussed here. Factors that might cause such a difference include, but are not limited to, those discussed in the Company's Form 10-K for the fiscal year ended October 31, 1998, and the Company's Registration Statement on Form S-4 (File No. 33-37531) filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----